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This Is Worse Than Anyone Realizes: A Dire Outlook From Wall Street’s Biggest Bear

This Is Worse Than Anyone Realizes: A Dire Outlook From Wall Street’s Biggest Bear

There was a (very) brief period in which BofA’s Michael…

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This Is Worse Than Anyone Realizes: A Dire Outlook From Wall Street's Biggest Bear

There was a (very) brief period in which BofA's Michael Hartnett - whom we long ago dubbed Wall Street's biggest bear - turned ever slightly more bullish, when he told clients that while the bear market is far from over (recall he expects that to end some time in October with the S&P plunging down to 3,000) a powerful bear market rally had taken hold around the time we saw the biggest equity inflow in 10 weeks; even so, his advice to clients was simple: "fade all rallies."

All that's over, and in his latest Flow Show note (available to ZH pro subscribers), Hartnett asks "Where's my bear market rally gone" and for good reason: both credit and stocks are massively oversold, BofA's Bull & Bear Indicator is in deep "contrarian bullish" territory  - falling to 0.3 from 0.4, more deeply in "extreme bearish" territory, and just shy off all time lows - and yet, despite this latest buy signal for risk assets having been triggered almost one month ago on May 18th, the S&P has gone from 3800 to 4200 and now back again to 3900.

But before we answer Hartnett's rhetorical question, a quick look back two years ago to June 8, 2020, when as Hartnett notes, NYC announced stage 1 "reopening" after 13-week COVID lockdown, permitting curbside pickup from retail outlets. As the BofA strategist puts it, "if you had said then that two years later US retail sales would be up 67%, unemployment would fall by 17 million, inflation would surge from 0.1% to 8.3%, oil would soar from $12/b to $120/b, that a pandemic would be followed by war & famine, you would have been thought utterly mad; but that’s what happened." 

For those looking for catchy Wall Street soundbites, here is from Hartnett: "2020 marked a secular low in inflation & yields, the beginning of regime change and a decade of social, political, economic & financial volatility."

And speaking of regime change, there have been few clearer examples of that then the “inflation shock” we have now:

  • natural gas 141%
  • gasoline 91%
  • oil 61%
  • iron ore 45%
  • wheat 39%
  • nickel 39%
  • soybean 33%
  • corn 30%
  • cotton 30% YTD

And with the triple whammy of COVID, monetary & fiscal stimulus, and war, we have seen "massive 18-month outperformance of inflation assets" but watch for low in biotech (deflation) vs real estate for a trend reversal, according to the BofA strategist.

Which is not to say that everyone is fighting a war with inflation: there is always Japan, the perpetual outlier. According to Hartnett, the BoJ is the last central bank left fighting the last deflation war (i.e., the "Shoichi Yokoi" trade), which has sent the yen plunging 14% YTD as Kuroda repeatedly vows unlimited bond buying to defend YCC policy which in the past 6 years has led to… wait… 0.0% Japan GDP growth & 0.2% CPI. That dismal math then leads us to another even scarier equality from Hartnett, one which has anything but a happy ending:

investor "policy incredulity" = yen collapse = (Asia FX war) = BoJ FX intervention = capital repatriation to Japan = potential catalyst for summer global risk-off trade.

Meanwhile, turning attention to Europe, we find one currency but with many interest rates:

As we noted earlier this week, with EU CPI at 8.1% and PPI at 37.2%...

... the ECB boldly decided to…not raise rates, leaving policy rate at -0.5%, and to continue QE until July 1st. Yet despite the ECB's failure to "wake up" and "go-go", Greece 10-year yields exploded above 4%, and Italy 5-year yields shot to fresh 8 years highs, above 3% and blowing away the March 2020 highs as BTP-Bund spreads soar wider than 200bps.

Meanwhile, as we also said earlier today...

... and as Hartnett echoed "markets stop panicking when policy makers start panicking"... but the reason why there is still no bid for risk assets is that "there is not enough inflation panic yet, policy credibility waning, higher risk premium required."

One final observation on the Bear Market: one third, or 33% (952 of 2910 stocks) of the MSCI All World ACWI index currently trades below their 2018 highs, 40% of Nasdaq (1496 of 3760 stocks) trading below their 2018 highs; and some more staggering math: global equity market cap peak to trough down $23.4tn since Nov'21 = 1 US economy (US GDP $24.4tn); meanwhile, in a sign that things are indeed about to snap, distressed EM bonds trading at the Lehman/GFC lows of 2008, almost as if EMs are competing with Europe who blows up first.

Which brings us back to answering the key question posed by Hartnett: "Where my Bear Market Rally gone", and why despite massively oversold conditions and record revulsion, are stocks unable to bounce? His answer:

  • In short, inflation shock not over, rates shock just starting, growth shock coming, no release valve from peak in yields, bear market ralliy too consensus.

  • Inflation: geopolitics, end of globalization, extraordinarily misguided G7 energy policies across the G7 = 2 standard deviation commodity shock unlike any other since 1973/74.
  • Recession: we’re in technical recession but just don't realize it; US Q1 GDP -1.5%, Atlanta Fed GDPNow forecast for Q2 just 0.9%, a couple of bad data points away from “recession”; consumer data getting murkier.

  • Household and consumer balance sheets point to shallow recession, what can turn shallow into deep is the great unknown of the shadow banking system.
  • Stagflation: Hartnett says growth is returning to trend, but inflation won’t as stagflation is incompatible with “goldilocks” SPX PE of 20x past 20 years, and should be closer to 20th century PE of 15x.
  • Events: the occasions (all of which saw BofA Bull & Bear Indicator at 0) when very bearish sentiment not enough to turn markets were 2 standard deviation events caused “liquidations”: WorldCom Jul'02, Lehman Sep'08, US debt downgrade Aug'11, China devaluation Aug'15;
  • Nagging worries that QT just beginning: to expose fragilities in EM, crypto, tech, VC/PE, risk parity, CTAs.

As a result of the above, Hartnett is convinced that no matter how strong the intervening bear market rallies - whether it is a benign CPI print (clearly not todays') or something else, and narrative flips back to peak inflation - his ultimate bear market targets remain 30Y TSY at 4% and SPX at  3600 (markets always overshoot/undershoot, and we assume no systemic crisis).

And with the market on its way to said lows, the BofA strategist warns that the most vulnerable assets to own are Big Tech (positioning, secular loser), REITs (inflation hedge), resources (they are in secular bull but at lows investors forced to sell winners), and US dollar (will discount peak yields).

Finally, once we finally do hit the lows, these are the assets that will be bought: long-duration Treasuries (for obvious deflationary reasons), HY bonds (where risk deployed first)...

... EM bonds & stocks (distressed, weak dollar beneficiaries), small cap (the surprise bull coming), industrials (according to Hartnett the next policy stimulus will be fiscal not monetary, but we disagree: after November, the US will have a Dem President and Republican Congress, and the two sides will not reach a bipartisan agreement on a stimulus, leaving only the Fed) and of course the widely lamented 60-40 strategy: all these will be the most likely winners at end of bear market, some time in late 2022.

More in the full note available to professional subs.

Tyler Durden Sun, 06/12/2022 - 07:51

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Part 1: Current State of the Housing Market; Overview for mid-March 2024

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-March 2024
A brief excerpt: This 2-part overview for mid-March provides a snapshot of the current housing market.

I always like to star…

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Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-March 2024

A brief excerpt:
This 2-part overview for mid-March provides a snapshot of the current housing market.

I always like to start with inventory, since inventory usually tells the tale!
...
Here is a graph of new listing from Realtor.com’s February 2024 Monthly Housing Market Trends Report showing new listings were up 11.3% year-over-year in February. This is still well below pre-pandemic levels. From Realtor.com:

However, providing a boost to overall inventory, sellers turned out in higher numbers this February as newly listed homes were 11.3% above last year’s levels. This marked the fourth month of increasing listing activity after a 17-month streak of decline.
Note the seasonality for new listings. December and January are seasonally the weakest months of the year for new listings, followed by February and November. New listings will be up year-over-year in 2024, but we will have to wait for the March and April data to see how close new listings are to normal levels.

There are always people that need to sell due to the so-called 3 D’s: Death, Divorce, and Disease. Also, in certain times, some homeowners will need to sell due to unemployment or excessive debt (neither is much of an issue right now).

And there are homeowners who want to sell for a number of reasons: upsizing (more babies), downsizing, moving for a new job, or moving to a nicer home or location (move-up buyers). It is some of the “want to sell” group that has been locked in with the golden handcuffs over the last couple of years, since it is financially difficult to move when your current mortgage rate is around 3%, and your new mortgage rate will be in the 6 1/2% to 7% range.

But time is a factor for this “want to sell” group, and eventually some of them will take the plunge. That is probably why we are seeing more new listings now.
There is much more in the article.

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RFK Jr. Reveals Vice President Contenders

RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former…

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RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former Minnesota governor and professional wrestler Jesse Ventura are among the potential running mates for independent presidential candidate Robert F. Kennedy Jr., the New York Times reported on March 12.

Citing “two people familiar with the discussions,” the New York Times wrote that Mr. Kennedy “recently approached” Mr. Rodgers and Mr. Ventura about the vice president’s role, “and both have welcomed the overtures.”

Mr. Kennedy has talked to Mr. Rodgers “pretty continuously” over the last month, according to the story. The candidate has kept in touch with Mr. Ventura since the former governor introduced him at a February voter rally in Tucson, Arizona.

Stefanie Spear, who is the campaign press secretary, told The Epoch Times on March 12 that “Mr. Kennedy did share with the New York Times that he’s considering Aaron Rodgers and Jesse Ventura as running mates along with others on a short list.”

Ms. Spear added that Mr. Kennedy will name his running mate in the upcoming weeks.

Former Democrat presidential candidates Andrew Yang and Tulsi Gabbard declined the opportunity to join Mr. Kennedy’s ticket, according to the New York Times.

Mr. Kennedy has also reportedly talked to Sen. Rand Paul (R-Ky.) about becoming his running mate.

Last week, Mr. Kennedy endorsed Mr. Paul to replace Sen. Mitch McConnell (R-Ky.) as the Senate Minority Leader after Mr. McConnell announced he would step down from the post at the end of the year.

CNN reported early on March 13 that Mr. Kennedy’s shortlist also includes motivational speaker Tony Robbins, Discovery Channel Host Mike Rowe, and civil rights attorney Tricia Lindsay. The Washington Post included the aforementioned names plus former Republican Massachusetts senator and U.S. Ambassador to New Zealand and Samoa, Scott Brown.

In April 2023, Mr. Kennedy entered the Democrat presidential primary to challenge President Joe Biden for the party’s 2024 nomination. Claiming that the Democrat National Committee was “rigging the primary” to stop candidates from opposing President Biden, Mr. Kennedy said last October that he would run as an independent.

This year, Mr. Kennedy’s campaign has shifted its focus to ballot access. He currently has qualified for the ballot as an independent in New Hampshire, Utah, and Nevada.

Mr. Kennedy also qualified for the ballot in Hawaii under the “We the People” party.

In January, Mr. Kennedy’s campaign said it had filed paperwork in six states to create a political party. The move was made to get his name on the ballots with fewer voter signatures than those states require for candidates not affiliated with a party.

The “We the People” party was established in five states: California, Delaware, Hawaii, Mississippi, and North Carolina. The “Texas Independent Party” was also formed.

A statement by Mr. Kennedy’s campaign reported that filing for political party status in the six states reduced the number of signatures required for him to gain ballot access by about 330,000.

Ballot access guidelines have created a sense of urgency to name a running mate. More than 20 states require independent and third-party candidates to have a vice presidential pick before collecting and submitting signatures.

Like Mr. Kennedy, Mr. Ventura is an outspoken critic of COVID-19 vaccine mandates and safety.

Mr. Ventura, 72, gained acclaim in the 1970s and 1980s as a professional wrestler known as Jesse “the Body” Ventura. He appeared in movies and television shows before entering the Minnesota gubernatorial race as a Reform Party headliner. He was a longshot candidate but prevailed and served one term.

Former pro wrestler Jesse Ventura in Washington on Oct. 4, 2013. (Brendan Smialowski/AFP via Getty Images)

In an interview on a YouTube podcast last December, Mr. Ventura was asked if he would accept an offer to run on Mr. Kennedy’s ticket.

“I would give it serious consideration. I won’t tell you yes or no. It will depend on my personal life. Would I want to commit myself at 72 for one year of hell (campaigning) and then four years (in office)?” Mr. Ventura said with a grin.

Mr. Rodgers, who spent his entire career as a quarterback for the Green Bay Packers before joining the New York Jets last season, remains under contract with the Jets. He has not publicly commented about joining Mr. Kennedy’s ticket, but the four-time NFL MVP endorsed him earlier this year and has stumped for him on podcasts.

The 40-year-old Rodgers is still under contract with the Jets after tearing his Achilles tendon in the 2023 season opener and being sidelined the rest of the year. The Jets are owned by Woody Johnson, a prominent donor to former President Donald Trump who served as U.S. Ambassador to Britain under President Trump.

Since the COVID-19 vaccine was introduced, Mr. Rodgers has been outspoken about health issues that can result from taking the shot. He told podcaster Joe Rogan that he has lost friends and sponsorship deals because of his decision not to get vaccinated.

Quarterback Aaron Rodgers of the New York Jets talks to reporters after training camp at Atlantic Health Jets Training Center in Florham Park, N.J., on July 26, 2023. (Rich Schultz/Getty Images)

Earlier this year, Mr. Rodgers challenged Kansas City Chiefs tight end Travis Kelce and Dr. Anthony Fauci to a debate.

Mr. Rodgers referred to Mr. Kelce, who signed an endorsement deal with vaccine manufacturer Pfizer, as “Mr. Pfizer.”

Dr. Fauci served as director of the National Institute of Allergy and Infectious Diseases from 1984 to 2022 and was chief medical adviser to the president from 2021 to 2022.

When Mr. Kennedy announces his running mate, it will mark another challenge met to help gain ballot access.

“In some states, the signature gathering window is not open. New York is one of those and is one of the most difficult with ballot access requirements,” Ms. Spear told The Epoch Times.

“We need our VP pick and our electors, and we have to gather 45,000 valid signatures. That means we will collect 72,000 since we have a 60 percent buffer in every state,” she added.

The window for gathering signatures in New York opens on April 16 and closes on May 28, Ms. Spear noted.

“Mississippi, North Carolina, and Oklahoma are the next three states we will most likely check off our list,” Ms. Spear added. “We are confident that Mr. Kennedy will be on the ballot in all 50 states and the District of Columbia. We have a strategist, petitioners, attorneys, and the overall momentum of the campaign.”

Tyler Durden Wed, 03/13/2024 - 15:45

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Pharma industry reputation remains steady at a ‘new normal’ after Covid, Harris Poll finds

The pharma industry is hanging on to reputation gains notched during the Covid-19 pandemic. Positive perception of the pharma industry is steady at 45%…

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The pharma industry is hanging on to reputation gains notched during the Covid-19 pandemic. Positive perception of the pharma industry is steady at 45% of US respondents in 2023, according to the latest Harris Poll data. That’s exactly the same as the previous year.

Pharma’s highest point was in February 2021 — as Covid vaccines began to roll out — with a 62% positive US perception, and helping the industry land at an average 55% positive sentiment at the end of the year in Harris’ 2021 annual assessment of industries. The pharma industry’s reputation hit its most recent low at 32% in 2019, but it had hovered around 30% for more than a decade prior.

Rob Jekielek

“Pharma has sustained a lot of the gains, now basically one and half times higher than pre-Covid,” said Harris Poll managing director Rob Jekielek. “There is a question mark around how sustained it will be, but right now it feels like a new normal.”

The Harris survey spans 11 global markets and covers 13 industries. Pharma perception is even better abroad, with an average 58% of respondents notching favorable sentiments in 2023, just a slight slip from 60% in each of the two previous years.

Pharma’s solid global reputation puts it in the middle of the pack among international industries, ranking higher than government at 37% positive, insurance at 48%, financial services at 51% and health insurance at 52%. Pharma ranks just behind automotive (62%), manufacturing (63%) and consumer products (63%), although it lags behind leading industries like tech at 75% positive in the first spot, followed by grocery at 67%.

The bright spotlight on the pharma industry during Covid vaccine and drug development boosted its reputation, but Jekielek said there’s maybe an argument to be made that pharma is continuing to develop innovative drugs outside that spotlight.

“When you look at pharma reputation during Covid, you have clear sense of a very dynamic industry working very quickly and getting therapies and products to market. If you’re looking at things happening now, you could argue that pharma still probably doesn’t get enough credit for its advances, for example, in oncology treatments,” he said.

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