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We Are In Mass ‘Jonestown’ Delusion Territory

We Are In Mass ‘Jonestown’ Delusion Territory

Submitted by Larry McDonalds, author of The Bear Traps Report

In April, Goldman Sachs was looking for tame CPI inflation by December 2021. That’s right, the best and brightest told us core would.

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We Are In Mass 'Jonestown' Delusion Territory

Submitted by Larry McDonalds, author of The Bear Traps Report

In April, Goldman Sachs was looking for tame CPI inflation by December 2021. That's right, the best and brightest told us core would be 2.20% and headline data of 2.77% was coming. Today, they brought out the eraser with a forecast of 5.19% and 6.31%.

Over the last 30 years looking at markets, there are periods when things happen so fast millions are left in a previous mindset, not fully comprehending the world has changed in a secular fashion, NOT cyclically.

"There are decades where nothing happens, and there are weeks where decades happen” Vladimir Ilyich Lenin reminds us. Years and years of inflation without a pulse has changed human behavior in such a profound way, a true complacency overdose took over.

Over the last 18 months, from Beijing to Tokyo, to Berlin to Washington no amount of fiscal spending has been unacceptable. Debt monetization via central banks, MMT (modern monetary theory) has moved from “taboo” to “bring it on” territory.

Looking forward, every hour, minute and second of each day more and more market participants are waking up to the new reality of sustained inflation. On the Sunday talk shows, U.S. Treasury Secretary Janet Yellen threw the inflation blame on the pandemic and is essentially making the point that rate hikes are NOT needed once the pandemic is over inflation will disappear is the argument.

This is HIGHLY BULLISH gold and silver miners. In our view, Yellen is using public forums to lay out the future Fed policy path. There is NO QUESTION Yellen has President Biden's ear and if Fed Chair Powell wants the job, he must fall in line.

Interest costs to taxpayers have nearly doubled ($562B) since 2000 with interest rates/bond yields falling from near 7.0 % to 1.5%. How much pressure is on the Fed to further monetize debt 2022-2030??

Extreme measures. CPI is normalizing at a much higher trajectory, that’s all that matters for consumers.

We are in mass "Jonestown" delusion territory. Over $100T of the planet's wealth is positioned in bonds sub 2% in yield with inflation normalizing this cycle at 3-4% vs 1-2% post Lehman.

It’s mind boggling that people are focused on YoY inflation coming down, of course, it will, that's irrelevant . All that matters is when does inflation come back to the 2010-2020 norm? If that is 5 years from now, trillions of dollars of assets are in the wrong place.

Corporations are making more money than ever while inflation is at multi decade highs which in turn is causing a sharp decline in real wages. Hard to imagine a better recipe for coast to coast labor strikes.

The Fourth Turning will be characterized by open conflict between the management class and labor. Unions will grow their ranks. The strike at Deere has farmers scrambling for used tractors and tractor parts.

Prices increased by 9.5% in the 3rd quarter, as per The Machinery Pete Used Values Index, the keepers of which predict higher increases 4th quarter. As a result the planting season will be more expensive. Those increased costs will be passed on to the consumer. This will cause the price of food to be higher.

There is no greater exercise of the power of labor than a work strike. And we see here how it causes inflation. Worse than 2008-2009, UMich Buying Conditions for large Household Durables , “furniture, a refrigerator, stove, television, and things like that “ printed at 78 last week vs. 112 last year and as low as 98 during the 2008 financial crisis. U.S. demand destruction from inflation is near unprecedented levels.

Bullish gold and silver yields on 10 year inflation indexed Treasuries are at their most negative in twenty+ years as investors expect the economy to continue shrinking in real terms. The last time the Fed hiked rates 2015-2018, these yields ranged from a positive +0.05% to +1.2% vs today at -1.2%.

S&P 500 earnings growth expectations do not jive with real evidence of demand destruction; discussing the record PEG level, BofA says that "today’s level would suggest losses of -20% over the next 12 months based on the historical relationship."

It is a "deer in the headlights" moment for the Street. After buying the Fed's "transitory" narrative for nine months, the Street still has 2021, 2022, and 2023 S&P 500 earnings growth per share up in the clouds. Bonds are screaming growth is plunging as demand destruction is taxing consumers and profits, but the Street just took up their numbers bigly! They missed 2020 by a country mile on covid (understandable), and then lowballed their 2021 outlook in Q1 this year, then they took 2021, 2022, and 2023 numbers UP 20% 25% higher over the summer. Then inflation becomes NOT transitory.

This is a screaming sell signal.

As inflation has proved more sustainable, U.S. tech stocks have a near term date with an elevator shaft. Hard assets > financial assets 2020-2030.

Tyler Durden Sat, 11/20/2021 - 20:30

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Economics

FT-IGM US Macroeconomists Survey for December

The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results. For GDP, assuming Q4 is as predicted in the November Survey of Professional…

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The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results.

For GDP, assuming Q4 is as predicted in the November Survey of Professional Forecasters, we have the following picture.

Figure 1: GDP (black), potential GDP (gray), November Survey of Professional Forecasters (red), November SPF subtracting 1.5ppts in Q1, 05ppts in Q2 (blue), FT-IGM December survey (sky blue squares), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

In the figure above, I’ve used the SPF forecast of 4.6% SAAR in 2021Q4; the Atlanta Fed’s nowcast as of yesterday (12/7) was 8.6% SAAR. A new nowcast comes out tomorrow.

Interestingly, q4/q4 median forecasted growth equals that implied by the Survey of Professional Forecasters November survey (which was taken nearly a month before news of the omicron variant came out).

The q4/q4 forecast distribution for 2022 is skewed, with the 90th percentile at 5% growth, the 10th percentile at 2.5%, and median at 3.5%. I show the corresponding implied levels of GDP (once again assuming 2021Q4 growth equals the SPF ).

Figure 2: GDP (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue squares), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

On unemployment, the median forecast is for a deceleration in recovery,

Figure 3: Unemployment rate (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue square), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle). NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

The survey respondents also think that the participation rate will take a long time to return to pre-pandemic levels.

Source: FT-IGM, December 2021 survey.

On inflation, the median is higher than the November SPF mean estimate for 2022 of 2.3% (and Goldman Sachs’ current estimate).

Source: FT-IGM, December 2021 survey.

The entire survey results are here.

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Over 170 companies delisted from major U.S. stock exchanges in 12 months

  Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies….

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Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies.

According to data acquired by Finbold, a total of 179 companies have been delisted from the major United States exchanges between 2020 and 2021. In 2021, the number of companies on Nasdaq and the New York Stock Exchange (NYSE) stands at 6,000, dropping 2.89% from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

NYSE recorded the highest delisting with companies on the platform, dropping 15.28% year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86% from 3,306 to 3,566. Data on the number of listed companies on NASDAQ and NYSE is provided by The World Federation of Exchanges.

The delisting of the companies is potentially guided by basic factors such as violating listing regulations and failing to meet minimum financial standards like the inability to maintain a minimum share price, financial ratios, and sales levels. Additionally, some companies might opt for voluntary delisting motivated by the desire to trade on other exchanges.

Furthermore, the delisting on U.S. major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by U.S. equity markets. As per a previous report, the U.S. controls 56% of the global stock market value.

A significant portion of the delisted companies also stems from the regulatory perspective pitting U.S. agencies and their Chinese counterparts. For instance, China Mobile Ltd, China Unicom, and China Telecom Corp announced their delisting from NYSE, citing investment restrictions dating from 2020.

Worth noting is that the delisting of firms was initiated due to strict measures put in place by the Trump administration. The current administration has left the regulations in place while proposing additional regulations. For instance, a recent regulation update by the Securities Exchange Commission requiring US-listed Chinese companies to disclose their ownership structure has led to the exit of cab-hailing company Didi from the NYSE.

Impact of pandemic on the listing of companies

The delisting also comes in the wake of the Covid-19 pandemic that resulted in economic turmoil. With the shutdown of the economy, most companies entered into bankruptcies as the stock market crashed to historical lows.

Lower stock prices translate to less wealth for businesses, pension funds, and individual investors, and listed companies could not get the much-needed funding for their normal operations.

At the same time, the focus on more companies going public over the last year can be highlighted by firms on the Nasdaq exchange. Worth noting is that in 2020, there was tremendous growth in special purpose acquisition companies (SPACs), mainly driven by the impact of the coronavirus pandemic. With the uncertainty of raising money through the traditional means, SPACs found a perfect role to inject more funds into capital-starving companies to go public.

From the data, foreign companies listing in the United States have grown steadily, with the business aiming to leverage the benefits of operating in the country. Notably, listing on U.S. exchanges guarantees companies liquidity and high potential to raise capital. Furthermore, listing on either NYSE or Nasdaq comes with the needed credibility to attract more investors. The companies are generally viewed as a home for established, respected, and successful global companies.

In general, over the past year, factors like the pandemic have altered the face of stock exchanges to some point threatening the continued dominance of major U.S. exchanges. Tensions between the US and China are contributing to the crisis which will eventually impact the number of listed companies.

 

Courtesy of Finbold.

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Economics

Stock futures open flat as Omicron concerns ease

Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%…
The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%

Stock futures opened relatively flat on Wednesday evening, though sustaining gains posted by a three-day recovery rally that was led by cooled investor concerns around the Omicron variant of the coronavirus.

Dow futures edged up 0.02%, while contracts on the tech-focused Nasdaq Composite inched up 0.10%. All major indexes closed up, with the S&P 500 adding 14.46 points to end the session at 4,701.21, just 0.5% short of the trading session on Nov. 24, a day before the latest COVID-19 variant was announced by the World Health Organization (WHO).

The moves were supported by eased virus fears after Pfizer Inc. and BioNTech reported that early lab studies show a third dose of their coronavirus vaccine mitigates the Omicron variant.

The vaccine makers had indicated the initial two doses may not be enough to protect against infection from Omicron. Shares of Pfizer (PFE) traded 0.62% lower on Wednesday, closing at $51.40.

With virus concerns diminishing, investors are pivoting their attention back to economic data, awaiting Consumer Price Index (CPI) figures on Friday to assess the extent inflationary pressures will persist.

If the Omicron variant was to lead to a resurgence in goods spending at the expense of services or to further complicate supply disruptions, there could be a clear inflationary impact, too, HSBC economist James Pomeroy wrote earlier this week in a research note to clients.

He stated: The inflation news in the past few weeks has been decidedly mixed — with upside surprises in both the U.S. and eurozone being offset by the possibility of some of the supply chain issues starting to alleviate, while energy prices have fallen sharply in recent days.

The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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