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What exactly is stagflation, have we entered it and can you invest your way out of it?

We’ve heard a lot about inflation over the past year and with good reason.…
The post What exactly is stagflation, have we entered it and can you invest…



We’ve heard a lot about inflation over the past year and with good reason. In the UK it reached 7% over the year to March and is expected to average 7.4% this year. The prices we are paying for goods and services have leapt noticeably over a relatively short period of time in a way that hasn’t been seen in a generation. And the expectation is that we can expect more price rises to come with the war in Ukraine contributing to higher energy, commodity and food prices.

At the same time, global growth is slowing. In its half-yearly update issued last week, the IMF said prospects had worsened “significantly” in the past three months and revised its growth estimate for 2022 down from 4.4% to 3.6%.

The fund said every single G7 member and the bigger developing countries would have less economic growth this year than previously expected. And that there was a strong risk of an even worse outcome. Pierre-Olivier Gourinchas, the IMF’s director of research and economic counsellor stated:

“In the matter of a few weeks, the world has yet again experienced a major, transformative shock. Just as a durable recovery from the pandemic-induced global economic collapse appeared in sight, the war has created the very real prospect that a large part of the recent gains will be erased.”

This year the UK economy is expected to be among the least badly hit with the IMF  forecasting 3.7% growth down from a pre-war estimate of 4.7%. The USA is expected to experience a similar level of growth. However, the situation in the UK is tipped to deteriorate next year when GDP is expected to grow at a rate of just 1.2%.

While that is still growth, it is growth with a weak pulse and would leave the UK economy vulnerable to slipping into recession in the event of any further shocks. Such a shock could quite conceivably come from the need to raise interest rates faster and further than there is recent experience of in a bid to control inflation.

This week The Economist argues that the U.S. Federal Reserve left raising interest rates too late because it was determined to wait until unemployment rates had reached optimal post-pandemic lows. The result, the publication argues, is likely to be that the staggered 2.5% rise in the base rate currently pencilled in for the year will prove insufficient to rein in inflation.

Unless average salary levels rise quickly and sufficiently enough to offset the highest levels of inflation since the late 1980s, which looks very unlikely as spiralling overheads squeeze businesses, further rate rises may be necessary. Even if inflation has now peaked, as some of the more optimistic economists believe it probably has, it is almost certain to remain significantly above the 2% target set by the Fed for a long time to come.

Roughly the same can be said of the UK but our economy doesn’t have the same global influence as the world’s largest, which has historically been shown to give the rest a cold when it sneezes. Having recognised that inflation was spiralling out of control late the Fed looks like it will now have to bring in more severe measures to put the breaks on a U.S. economy hopped-up by the huge $1.9 trillion stimulus package introduced last spring to boost the pandemic recovery.

The historical evidence suggests the Fed will struggle to apply the economic breaks without catalysing some level of recession. It has only thrice managed to slow the economy without instigating a downturn in 60 years and never after a period of rapid inflation comparable to that we’ve just had.

Inflation remaining heightened and limp or negative economic growth would meet most definitions of the term stagflation.

What exactly is stagflation?

There is no technical economic definition for stagflation in the same way there is for recession. However, it is generally accepted to refer to a period during which inflation levels are high and economic growth weak or unemployment rates high.

Unemployment rates in developed economies are currently very low and aren’t expected to rise dangerously any time soon. But inflation levels are high, are likely to remain elevated for at least 2-3 years, and economic growth sluggish to the point of vulnerability.

The term stagflation is believed to have been coined in 1965 by the Conservative politician Iain Macleod. Addressing parliament he told MPs that the UK was facing

“the worst of both worlds. Not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of stagflation situation”.

At the time Mr Macleod was speaking, the UK’s inflation rate was 4.66% and growth had dropped from 5.5% the previous year to 2.2%. This year, British and US growth rates are expected to be better than that but inflation also higher than it was back in 1965. And next year it is more than possible that growth on both sides of the Atlantic drops below 2.2% with inflation at around or higher levels at the time of the “sort of stagflation situation” outlined in parliament almost sixty years ago.

There’s a strong argument we’re already in a period of stagflation and it could potentially continue for another couple of years or longer.

Can you invest your way out of stagflation or at least minimise its impact on your finances?

When the economics of our day-to-day lives change, investors can adjust their portfolios to compensate. As the cost of energy commodities like oil and gas have leapt in the last year, so have the valuations of the companies selling oil and gas. The same can be said of agricultural commodities and food prices and the valuations of the companies selling those products.

That means investors can potentially offset paying more for fuel, energy and groceries by earning more from investments in these sectors. But does that still work when, as Mr Macleod said back in 1965, we “face the worst of both worlds” and stagflation?

Hoping to make significant gains without taking on high levels of risk that could go badly wrong during a period of stagflation is unrealistic. But there are ways to adjust an investment portfolio for stagflation that should limit the downside and could even maintain a level of growth.

If you are ten years or longer from needing to draw down investments you could choose to do absolutely nothing. If you are confident your portfolio is well balanced for the long term there is nothing wrong with sitting tight, taking a hit now and remaining confident the years ahead will see your holdings recover and prosper.

But if your timeline is shorter or you would like to make some damage limitation adjustments, what can you do?

Equities investment for stagflation

It probably comes as little surprise that stagflation is not generally positive for equities. A Schroders study shows Wall Street equities have lost an average of 7.1% during periods considered to represent stagflation since 1988. UK equities were down an average of 2.9% over the same periods.

However, growth stocks and companies selling discretionary goods and services are worst affected, explaining why U.S. stocks have been historically poorer performers than London-listed companies during periods of stagflation. Wall Street has far more growth stocks than London, which is heavily weighted towards energy, finance and mining stocks. And exactly those are the sectors that typically do well during periods of higher inflation.

The same stocks that would be invested in to combat inflation, like energy companies, agriculture companies, miners and banks, make sense for stagflation.

Bonds for stagflation

Fixed income investments like bonds usually do well when stock markets are struggling and interest rates rising. But if inflation rates are also heightened as they are now, investing in bonds becomes problematic as even higher interest rates can still run at a significant loss to inflation.

But bonds to offer a level of security and diversification to a portfolio so shouldn’t necessarily be rejected altogether. An option is for investors to be a little more aggressive and go for short term higher interest bonds such as emerging markets debt.

Schroders says U.S. ten-year government bonds have returned an annual average of 6.3% during periods of stagflation while UK equivalents have returned just 0.4%. So there could be an argument for buying U.S. debt rather than investing in British gilts.

Commodities and property

Periods of stagflation have historically been good for “tangible” assets like commodities and property, which are seen as a safe and effective way to preserve capital.  Schroders says commodities have returned 18.1%during times of stagflation since 1988, gold 14.1% and REITs (real estate investment trusts, which mainly invest in commercial property) 9.5%.

So if you do decide you want to make stagflation-proofing adjustments to your investment portfolio, history says it may be wise to dump growth stocks in favour of those of companies selling essentials like energy and food. Go for shorter-term, higher risk but higher reward emerging market bonds or mid-term U.S. treasuries for fixed income security. And consider commodities, gold and property too.

Or if you have time on your hands you could always do nothing and wait for recovery while potentially buying up bargain growth stocks you consider to have been oversold.

The post What exactly is stagflation, have we entered it and can you invest your way out of it? first appeared on Trading and Investment News.

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Repeated COVID-19 Vaccination Weakens Immune System: Study

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

Repeated COVID-19…



Repeated COVID-19 Vaccination Weakens Immune System: Study

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

Repeated COVID-19 vaccination weakens the immune system, potentially making people susceptible to life-threatening conditions such as cancer, according to a new study.

A man is given a COVID-19 vaccine in Chelsea, Mass., on Feb. 16, 2021. (Joseph Prezioso/AFP via Getty Images)

Multiple doses of the Pfizer or Moderna COVID-19 vaccines lead to higher levels of antibodies called IgG4, which can provide a protective effect. But a growing body of evidence indicates that the “abnormally high levels” of the immunoglobulin subclass actually make the immune system more susceptible to the COVID-19 spike protein in the vaccines, researchers said in the paper.

They pointed to experiments performed on mice that found multiple boosters on top of the initial COVID-19 vaccination “significantly decreased” protection against both the Delta and Omicron virus variants and testing that found a spike in IgG4 levels after repeat Pfizer vaccination, suggesting immune exhaustion.

Studies have detected higher levels of IgG4 in people who died with COVID-19 when compared to those who recovered and linked the levels with another known determinant of COVID-19-related mortality, the researchers also noted.

A review of the literature also showed that vaccines against HIV, malaria, and pertussis also induce the production of IgG4.

“In sum, COVID-19 epidemiological studies cited in our work plus the failure of HIV, Malaria, and Pertussis vaccines constitute irrefutable evidence demonstrating that an increase in IgG4 levels impairs immune responses,” Alberto Rubio Casillas, a researcher with the biology laboratory at the University of Guadalajara in Mexico and one of the authors of the new paper, told The Epoch Times via email.

The paper was published by the journal Vaccines in May.

Pfizer and Moderna officials didn’t respond to requests for comment.

Both companies utilize messenger RNA (mRNA) technology in their vaccines.

Dr. Robert Malone, who helped invent the technology, said the paper illustrates why he’s been warning about the negative effects of repeated vaccination.

“I warned that more jabs can result in what’s called high zone tolerance, of which the switch to IgG4 is one of the mechanisms. And now we have data that clearly demonstrate that’s occurring in the case of this as well as some other vaccines,” Malone, who wasn’t involved with the study, told The Epoch Times.

So it’s basically validating that this rush to administer and re-administer without having solid data to back those decisions was highly counterproductive and appears to have resulted in a cohort of people that are actually more susceptible to the disease.”

Possible Problems

The weakened immune systems brought about by repeated vaccination could lead to serious problems, including cancer, the researchers said.

Read more here...

Tyler Durden Sat, 06/03/2023 - 22:30

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Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Authored by Jessie Zhang via Thje Epoch…



Study Falsely Linking Hydroxychloroquine To Increased Deaths Frequently Cited Even After Retraction

Authored by Jessie Zhang via Thje Epoch Times (emphasis ours),

An Australian and Swedish investigation has found that among the hundreds of COVID-19 research papers that have been withdrawn, a retracted study linking the drug hydroxychloroquine to increased mortality was the most cited paper.

Hydroxychloroquine sulphate tablets. (Memories Over Mocha/Shutterstock)

With 1,360 citations at the time of data extraction, researchers in the field were still referring to the paper “Hydroxychloroquine or chloroquine with or without a macrolide for treatment of COVID-19: a multinational registry analysis” long after it was retracted.

Authors of the analysis involving the University of Wollongong, Linköping University, and Western Sydney Local Health District wrote (pdf) that “most researchers who cite retracted research do not identify that the paper is retracted, even when submitting long after the paper has been withdrawn.”

“This has serious implications for the reliability of published research and the academic literature, which need to be addressed,” they said.

Retraction is the final safeguard against academic error and misconduct, and thus a cornerstone of the entire process of knowledge generation.”

Scientists Question Findings

Over 100 medical professionals wrote an open letter, raising ten major issues with the paper.

These included the fact that there was “no ethics review” and “unusually small reported variances in baseline variables, interventions and outcomes,” as well as “no mention of the countries or hospitals that contributed to the data source and no acknowledgments to their contributions.”

A bottle of Hydroxychloroquine at the Medicine Shoppe in Wilkes-Barre, Pa on March 31, 2020. Some politicians and doctors were sparring over whether to use hydroxychloroquine against the new coronavirus, with many scientists saying the evidence is too thin to recommend it yet. (Mark Moran/The Citizens’ Voice via AP)

Other concerns were that the average daily doses of hydroxychloroquine were higher than the FDA-recommended amounts, which would present skewed results.

They also found that the data that was reportedly from Australian patients did not seem to match data from the Australian government.

Eventually, the study led the World Health Organization to temporarily suspend the trial of hydroxychloroquine on COVID-19 patients and to the UK regulatory body, MHRA, requesting the temporary pause of recruitment into all hydroxychloroquine trials in the UK.

France also changed its national recommendation of the drug in COVID-19 treatments and halted all trials.

Currently, a total of 337 research papers on COVID-19 have been retracted, according to Retraction Watch.

Further retractions are expected as the investigation of proceeds.

Tyler Durden Sat, 06/03/2023 - 17:30

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Complying, Not Defying: Twitter And The EU Censorship Code

Complying, Not Defying: Twitter And The EU Censorship Code

Authored by ‘Robert Kogon’ via The Brownstone Institute,

So, word has it that…



Complying, Not Defying: Twitter And The EU Censorship Code

Authored by 'Robert Kogon' via The Brownstone Institute,

So, word has it that Twitter has withdrawn from the EU’s Code of Practice on Disinformation, a fact that appears only to be known thanks to a couple of pissy tweets from EU officials. I cannot help but wonder if this is not finally Elon Musk’s response to the question I asked in my article here several weeks ago: namely, how can a self-styled “free-speech absolutist” be part of a “Permanent Task-Force on Disinformation” that is precisely a creation of the EU’s Code?

But does it matter? The answer is no. The withdrawal of Twitter’s signature from the Code is a highly theatrical, but essentially empty gesture, which will undoubtedly serve to shore up Musk’s free speech bad-boy bona fides, but has virtually no practical consequences. 

This is because: (1) as I have discussed in various articles (for instance, here and here), the effect of the EU’s Digital Services Act (DSA) is to render the hitherto ostensibly voluntary commitments undertaken in the Code obligatory for all so-called Very Large Online Platforms (VLOPs) and (2) as discussed here, the European Commission just designated a whole series of entities as VLOPs that were never signatories of the Code.

Twitter is thus in no different a position than Amazon, Apple and Wikipedia, none of which were ever signatories of the Code, but all of which will be expected by the EU to comply with its censorship requirements on the pain of ruinous fines. 

As EU officials like to put it, the DSA transformed the “code of practice” into a code of conduct: i.e. you had better do it or else.

Compliance is thus not a matter of a signature. The proof of the pudding is in the eating. And the fact of the matter is that Musk and Twitter are complying with the EU’s censorship requirements. Much of the programming that has gone into the Twitter algorithm is obviously designed for this very purpose.

What, for instance, are the below lines of code?

They are “safety labels” that have been included in the algorithm to restrict the visibility of alleged “misinformation.” Furthermore – leaving aside the handy “generic misinfo” catch-all – the general categories of “misinformation” used exactly mirror the main areas of concern targeted by the EU in its efforts to “regulate” online speech: “medical misinfo” in the context of the COVID-19 pandemic, “civic misinfo” in the context of issues of electoral integrity, and “crisis misinfo” in the context of the war in Ukraine.

Indeed, as Elon Musk and his lawyers certainly know, the final version of the DSA includes a “crisis response mechanism,” (Art. 36) which is clearly modeled on the European Commission’s initially ad hoc response to the Ukraine crisis and which requires platforms to take special measures to mitigate crisis-related “misinformation.” 

In its January submission to the EU (see reports archive here), in the section devoted precisely to its efforts to combat Ukraine-war-related “misinformation,” Twitter writes (pp. 70-71): 

“We … use a combination of technology and human review to proactively identify misleading information. More than 65% of violative content is surfaced by our automated systems, and the majority of remaining content we enforce on is surfaced through regular monitoring by our internal teams and our work with trusted partners.”

How is this not compliance? Or at least a very vigorous effort to achieve it? And the methodology outlined is presumably used to “enforce on” other types of “mis-“ or “disinformation” as well.

Finally, what is the below notice, which many Twitter users recently received informing them that they are not eligible to participate in Twitter Ads because their account as such has been labeled “organic misinformation?”

Why in the world would Twitter turn away advertising business? The answer is simple and straightforward: because none other than the EU’s Code of Practice on Disinformation requires it to do so in connection with the so-called “demonetization of disinformation.” 

Thus, section II(d-f) of the Code reads:

(d) The Signatories recognise the need to combat the dissemination of harmful Disinformation via advertising messages and services.

(e) Relevant Signatories recognise the need to take granular and tailored action to address Disinformation risks linked to the distribution of online advertising. Actions will be applicable to all online advertising.

(f) Relevant Signatories recognise the importance of implementing policies and processes not to accept remuneration from Disinformation actors, or otherwise promote such accounts and websites.

So, in short, vis-à-vis the EU and its Code, Twitter is complying, not defying. Removing Twitter’s signature from the Code when its signature is no longer required on the Code anyway is not defiance. Among other things, not labeling content and/or users as “misinformation,” not restricting the visibility of content and/or users so labeled, and accepting advertising from whomever has the money to pay would be defiance.

But the EU’s response to such defiance would undoubtedly be something more than tweets. It would be the mobilization of the entire punitive arsenal contained in the DSA and, in particular, the threat or application of the DSA fines of 6 percent of the company’s global turnover.

It is not enough to (symbolically) withdraw from the Code of Practice to defy the EU. Defying the EU would require Twitter to withdraw from the EU altogether.

Tyler Durden Sat, 06/03/2023 - 10:30

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