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The Investment Climate and the Dollar

The Investment Climate and the Dollar

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We have all been hopeful that a vaccine could be developed for the coronavirus, and these hopes were not vain.  Pfizer and Moderna's promising results are just the tip of the iceberg, and in the coming weeks, more results from other companies are expected.  Make no mistake about it.  There is a several-month slog in front of us as the virus surge has yet to be convincingly turned in Europe, let alone the US, which seems to lag behind a couple of weeks.   The data highlight of the week, the preliminary November PMIs will likely underscore the adverse economic impact.   

There is more stimulus to come.  The ECB is the obvious candidate.  It has all but promised to increase and extend its emergency bond-buying program and new low-rate loans.  It appears to have ruled out a rate cut (deposit rate at minus 50 bp), but a key funding rate (three-month Euribor) fell to new record lows as the Eurosystem is awash with liquidity.  The EU's budget and the 750 bln euro Recovery Plan has been stymied by a contradiction.  On the one hand, the decision requires unanimity, and on the other, it seeks to use it as a force a certain behavior (as admirable as it may be, the rule of law) that is clearly aimed at two of its members.  

The political elites and apparently a large part of Poland and Hungary do not accept some of the premises of Brussels' liberal, progressive, secular worldview.  This seems vaguely similar to the so-called culture war in the US, where the vast majority of Americans in rural counties voted for Trump in higher numbers than in 2016.  The fact that presidents who lacked a majority popular vote appointed a majority to the US Supreme Court or the demonization of the traditional media strike many as parallel developments.  

With the surge of Covid cases and social restrictions biting, economists have begun forecasting a contraction in the eurozone in Q4.  The US economy has lost some momentum.   This was driven home last week by the weakness in October retail sales.  The increase was considerably less than economists had anticipated, and the September series was revised lower.  Indeed, core retail sales, which exclude auto, gasoline, and building materials used in GDP calculations, nearly stagnated (0.1%).  

Fiscal stimulus in the US was never particularly likely during the lame-duck session.  And much rests on the outcome of two run-off elections in Georgia in early January.  The Treasury Department's Office of Financial Research warned last week that the inability of many households and businesses to recover without more government assistance puts the financial system at risk.  

Despite the rancor,  Congress is coming together and appears near an agreement on each of the 12 federal departments' spending.  This brings them closer to passing an omnibus appropriations bill by the December 11 deadline.  The details are what will be negotiated over the next three weeks.  There is another element of uncertainty. President Trump opposes omnibus appropriations bills and could refuse to sign.  In the past, such uncertainty around the deadline has sometimes been reflected in the short-dated T-bill market.  

After the election results were clear enough for market participants, the reflation trade lifted US rates and steepened the curve (bearish steepener).  The 10-year yield rose to new highs since March of almost 1.0%.  However, more recently, the yield has softened. The curve flattened a bit on strengthening ideas that the Federal Reserve will shift its buying to the longer-term securities, ostensibly providing more stimulus.  Without committing to it, Fed officials, including Powell, have suggested the possibility. Many recognize that the lack of additional fiscal stimulus, the weakening data, and surging Covid boosts the chances of Fed action.     

The Federal Reserve is buying $80 a month of Treasuries and $40 bln a month of MBS from the Agencies.   The Fed could increase its purchases, but this seems unlikely primarily because it is unnecessary if it focuses its buying at the long-end.  Fiscal stimulus is still the most likely scenario early next year.  The vaccine news is also favorable even if not immediately helpful for the economy.  Some have tried linking the possible expiration of most of the Fed's lending facilities to boosting bond purchases. Still, they are hardly fungible, work on different channels, and officials have tried to keep them distinct from monetary policy proper.  

Still, a more challenging turn of events is possible. The failure of Congress to approve or the President does the appropriations bill forces the government is forced to shut.  And it comes during this horrible pandemic when the government's resources are in greater use.  At the same time, President Trump continues to challenge the election results.  Consider the key dates. December 8 is the deadline for resolving all election disputes at the state level.  December 11, the federal government's spending authorization ends, and on December 14, the Electoral College votes.  The Federal Reserve's two-day meeting concludes on December 16.   A major disruption is not the most likely scenario, but at the same time, the unthinkable must now be thought about.  

The prospect of a vaccine and a more robust recovery by the second half of next year has persuaded many economists or deepened their conviction that the dollar will fall next year.  Stephen Roach, former Chair of Morgan Stanley Asia and the bank's chief economist, has warned that the dollar may lose more than a third of its value against the euro next year.  While it is theoretically possible, it would be unprecedented.  The strategists at one of the US largest banks look for a 20% decline in the dollar next year.  The euro's largest annual increase since it was launched in 1999 was in 2003 when it rose by a fifth.  Europe's negative interests and the record excess liquidity (three-month Euribor, which acts as a funding benchmark, fell to record lows last week, a little further below the minus 50 bp deposit rate) seems to argue against a repeat, let alone an unprecedented euro surge.  

On the other hand, the Bloomberg survey's median forecasts for the end of next year seem too mild.  The current projection of the end of 2021 is $1.2150 for the euro, $1.3550 for sterling.  The median projection of the dollar at JPY106 and CNY6.60, both of which are higher than the current spot.  However, it does raise two issues.   The first is about the volatility.  Before the pandemic hit, low volatility had characterized the foreign exchange market, like many other asset classes.  

There were two periods of volatility this year--one in March and one in July--, and since then, the European-biased Dollar Index has mostly traded between 92.00 and 94.00.  With a couple of exceptions, the euro has been chopping between $1.16 and a little more than $1.19 for nearly four months.  The dollar has been JPY103-JPY107. since mid-July, and most of the time, JPY104-JPY106.  For the Australian dollar, the range has been $0.7000 to $0.7400.   With Brexit looming, sterling has to be given slightly wider berth, but it has spent hardly any time below $1.27 or $1.34 for nearly four months. The greenback has mostly been between CAD1.30 and CAD1.34 over the same period.  We can debate the macro and micro forces that make for relatively low volatility among the major currencies, but there may be good reasons to expect it to persist.  

The median forecast in the Bloomberg survey projects the yen and yuan to underperform the euro and sterling.  This raises the traditional greater sensitivity to exchange rate movement relatively open (exports+imports as a percentage of GDP) Asian economies.  Several are already protesting, including Thailand and South Korea.  South Korea's finance minister threatened intervention and spurred a 1% sell-off of the won, giving back the week's gains on November 19.   In the middle of last week, the Bank of Thailand expressed concern about the "rapid appreciation of the baht as this affected the fragile economic recovery."  The baht was approaching its best level of the year set in January, which was also the highest in seven years.  The central comments sparked a bout of profit-taking.  

It is not just emerging markets.  Japan's prime minister and central bank governor warned of excess volatility when the dollar broke below JPY104 earlier this month.  And President Trump's repeated attempts to talk the dollar down are not forgotten because there will be a new president. The US currency policy is in disrepair.  Belatedly, the US cited China as a currency manipulator and reversed itself a few months later.  More recently, Treasury created its own currency valuation model, and the Commerce Department has been empowered to use it to assess countervailing duties and apply it to a country (Vietnam) whose GDP per capita is 1/25 of the US and intervened to slow the dong's appreciation. Last week, without even citing its model, the Treasury Department reportedly informed Commerce that the yuan was 5% overvalued.  

There are some calls that the new US administration should look to rejoin the Trans-Pacific Partnership  (now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership).  These and other attempts to simply reverse what Trump did to reverse what Obama did does not sound like a compelling way forward.  Nor is the way to demonstrate US leadership to become the demandeur, the applicant, of a free-trade agreement.  It can begin by hosting a G20 summit and getting its own currency policy straight.  



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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

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

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

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

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

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

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

(Shutterstock)

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

Long COVID Patients Have Low Iron Levels

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

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

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

But it can jeopardize a person’s recovery.

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

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

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

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

1 in 5 Still Affected by Long COVID

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

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

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