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World Gov’ts Eye Blockchain As Dollar’s Power Wanes, Says Ripple CEO

World Gov’ts Eye Blockchain As Dollar’s Power Wanes, Says Ripple CEO

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World Gov'ts Eye Blockchain As Dollar's Power Wanes, Says Ripple CEO Tyler Durden Wed, 08/05/2020 - 06:00

Authored by Marie Huillet via CoinTelegraph.com,

Blockchain is offering global governments a serious alternative to a strained financial system, Ripple CEO Brad Garlinghouse says.

image courtesy of CoinTelegraph

Cryptocurrency advocates have long been keen to point to the weaknesses of fiat currency. Now an uncertain world rocked by a global health crisis and geopolitical flare-ups is bringing them into dialogue with the mainstream more than ever. 

In a tweet thread published on Aug. 3, Ripple CEO Brad Garlinghouse engaged with a recent article in Bloomberg, which had surveyed the gamut of potential alternatives to the dollar as the world’s reserve currency. 

The article spanned gold, several major fiat currencies — the yen, yuan and euro —  the Special Drawing Rights issued by the IMF, and ended with cryptocurrencies. 

Majority of governments are "looking seriously at blockchain" 

Garlinghouse said the momentum behind digital currencies on the cusp of the 2020s was a question of “trust in the financial system at the end of the day.”

“As global populations continue to lose confidence in fiat currencies (as we’re seeing with USD), they will choose to diversify. Our future global financial system will do the same,” he argued.

His argument held a line close to Fundstrat’s Tom Lee, who had told Bloomberg that:

trust is really getting broken in the traditional financial system—that’s the theme. The less trust you have in the dollar, the more you want alternatives.”  

Against this backdrop of economic upheaval, cracks in the post-1989 geopolitical order, and strains to global trade and investment, Garlinghouse argued that the intrinsic benefits of cryptocurrencies are more apparent than ever before:

A year ago, many decried crypto as a scam, and now a majority of govts are looking seriously at blockchain. It addresses frictions (i.e. settlement, transparency, etc) that were assumed VERY hard to solve before. Crypto is up 80% while USD is down 3% YTD [year-to-date].”

China’s development of a central bank digital currency is the key example of the rising power’s turn to innovative technologies to raise its game in the new century’s geopolitical, monetary and technological contests. 

Dollar strains

The COVID-19 economic crisis began bullishly for the U.S. dollar, with investors fleeing to its “refuge” early on — spurring an exceptional 9% rally. 

But this familiar pattern has been upended as the crisis wears on. July was the greenback’s worst month in a decade. Its recent dip reflects mounting diplomatic tensions between the U.S. and China and the uneasy settlement that the dollar’s dominance represents in a tumultuous and multipolar world, thrown into sharp relief by the pandemic. 

Analysts — as Garlinghouse notes — all agree that we’re unlikely to see the immediate demise of dollar hegemony. 

The dollar’s position as the “backbone” of global financial infrastructure “isn’t going to disappear in favor of gold/the yuan/crypto/any other asset any time soon,” Garlinghouse wrote.

“But is it weaker today? Yes.”

The United States’ faltering response to the public health crisis and internal political polarizations have arguably contributed to a loss in its soft power, and investors in the U.S. bond market appear to be pricing-in a disappointing U.S. economic recovery.

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Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets’ Dependency On Fed Liquidity

Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets’ Dependency On Fed Liquidity

By Eric Peters, CIO of One River Asset…

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Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets' Dependency On Fed Liquidity

By Eric Peters, CIO of One River Asset Management

“The Fed is “all in” on re-establishing price stability,” Fed Governor Waller pronounced in pleasantly direct language. “Experience has shown that markets need time to adjust to a turn from accommodation to tightening.”

In response to questions, Waller spoke with blunt determination: “I don’t care what’s causing inflation, it’s too high, it’s my job to get it down. The higher rates and the path that we’re putting them on, it’s going to put downward pressure on demand across all sectors.”

Powell offered his own sober message, “A soft landing is our goal. It is going to be very challenging. It has been made significantly more challenging by the events of the last few months – thinking of the war and of commodities prices and further problems with supply chains.”

New York Fed economists provide a bit more precision, arguing that “the chances of a hard landing are about 80%,” starting in Q4 2022.

Something will break. Something always does.

Digital did and the regulatory landgrab has started in full force. Lagarde, with plenty of serious policy decisions ahead, observed that “crypto assets and DeFi have the potential to pose real risk to financial stability.”

Spain’s Minister of Finance, Montero, announced digital asset owners would need to declare holdings and trading “in anticipation of regulations that would soon be carried out throughout the European Union.”

The East-West divide is clear in policy focus. President Xi is focused on growth, vowing to “strengthen macro-policy adjustment and adopt more effective measures to strive to meet the social and economic development targets for 2022 and minimize the impacts of Covid-19.”

Strains in emerging markets are being managed from within. Sri Lanka’s 22mm people are in the most severe economic crisis in nearly a century and India’s Foreign Secretary Kwatra underlined, “India stands ready to help Sri Lanka through promoting investments, connectivity and strengthening economic linkages,” beyond the $4bln aid already provided.

The East-West center of gravity between global war and peace sits in Kaliningrad, a tiny Russian province pressed between NATO countries. Lithuanian President Nauseda offered that “Russia cannot be stopped by persuasion, cooperation, appeasement or concessions.”

Elevated rhetoric continued when Russia’s Foreign Minister Lavrov drew comparison to Hitler’s war against the Soviet Union. “The EU and NATO are bringing together a contemporary coalition to fight and, to a large extent, wage war against Russia.”

* * *

Liquidity Unknowns I: How much QT is too much QT? We don’t know. There is no tidy math formula, no general equilibrium model, no linear approximation that will tell you. The trouble is, in a world of false precision, everyone wants a number. And policymakers have a hard time saying, “we don’t know,” especially when it’s true. Through the week ending June 22, balances with Federal Reserve Banks – previously known as ‘excess reserves’ – stood at $3.115trln. Powell guided the market that the end point for the Fed balance sheet would shrink another $2.5trln to $3trln. How does that math work?

Unknowns II: Yet again new tools were needed in this cycle. To make sure rates didn’t fall below the Fed’s floor, they needed a broader mechanism to absorb excess liquidity. That mechanism was private sector access to the reverse repo facility. Remember the 2018 period of QT. Excess reserves were $1.9trln before liquidity conditions started to bite in September. Private sector reverse repos were basically zero. Today? $2.5trln. The Fed’s liabilities are acting as the riskless asset to private money funds in a way. The Fed clearly thinks reverse repos will decline. We don’t know. Behavior could drive it up if everyone wants liquidity and wants to face the Fed. As reverse repos rise, excess reserves decline. QT has more liquidity plumbing risk today – tools can turn into weapons.

Unknown III: The risks are different but the strategy with QT is the same – start small, increase gradually, and then let it run. It isn’t the obvious choice. Reducing the pace as liquidity is withdrawn is a more natural path – you typically slow as you approach a stop sign, after all. We will know when the tightening – both in liquidity and interest rates – has gone too far. Weak links will break. Digital plays the role of EM in this cycle – big enough to be noticed, not enough to get policy to stop. Asset deflation, a USD credit crunch, and risks from maturity transformation has led to capital controls with 11 digital intermediaries. As in the Asia Crisis, the ecosystem will respond to gain independence and resilience.

Unknown IV: Digital is the warning sign, not the circuit-breaker. Typical candidates – a rapid rise in the US dollar, EM currency and debt crisis, and banking strain – are just not applicable. After each crisis is a response, and those responses act like a vaccine against future ‘shocks.’ Emerging markets have insulated themselves with large holdings in the US dollar. Currency depreciation forced EM central banks into more orthodox positions well ahead of the Fed, ECB, and BOJ. Banks don’t have the space to make the mistakes of the GFC, with leverage financing pushed to capital markets. But markets have not been weaned from liquidity. To the contrary, each crisis has increased dependency on Fed liquidity.

Unknown V: The adjustment in broader markets is orderly. How else would it be? Disorder is how it ends, not how it starts. “It is like jumping from the 100th floor of a building and saying, ‘so far, so good’ halfway into the drop,” a prolific investor remarked when confronted with “contained” language head of the GFC. Liquidity transformation in traditional markets, the driver of digital weakness, is everywhere. And it is a so-far, so-good story. ETF discounts make the point emphatically. An illiquidity pocket means that ETFs would clear the way closed-end funds do – hunting for a price where a buyer is willing to absorb the liquidity risk. Mortgage ETFs are down 9.7% for the year and trade exactly on net asset value. So far, so good.

Unknown VI: What we can see is rarely the problem. The grandest mismatch resides in private markets. “Prior to the pandemic, many had already grown concerned about public market valuations and were exploring private capital markets in the hopes of addressing lower return projections for their traditional 60/40 portfolios.” Pronouncements like these became the norm. A generation of “J-curve” investors – the pattern of private investments to draw capital and then deliver rapid returns – was born. Everyone wants a liquidity buffer. Nobody has one. And in the everything bubble, to get one you are selling assets in the hole. You sell what you can. You promise never again, even if enticed by the Fed toolkit. Until it happens again.

Tyler Durden Sun, 06/26/2022 - 21:13

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Looking Ahead In The Macro Market—Stock Market Preview For The Week Of June 27, 2022

A weekly stock market preview and the data that will impact the tape. Early Futures Open (6:24pm, June 26, 2022) – Stock Market Preview Weekend News…

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A weekly stock market preview and the data that will impact the tape.

Early Futures Open (6:24pm, June 26, 2022) – Stock Market Preview

Weekend News And Developments

Canadian Prime Minister drives action on food security, climate change and gender equality at Commonwealth Heads of Government Meeting.

Carvana (NYSE:CVNA) Sought to Disrupt Auto Sales. It Delivered Undriveable Cars—OpEd Barron’s

Honourable Jean-Yves Duclos, Minister of Health, and Member of Parliament for Bourassa, Emmanuel Dubourg, will make an important funding announcement supporting long-term care in Quebec; June 27, 11:15am.

Ionis Pharmaceuticals, Inc. (Nasdaq: IONS), announced that GSK presented positive results from an interim analysis of the Phase 2b B-Clear clinical study of bepirovirsen (formerly IONIS-HBVRx), an investigational antisense medicine for the treatment of patients with chronic hepatitis B virus (CHB).

Madrigal Pharmaceuticals, Inc. announced data from multiple resmetirom abstracts presented at the European Association for the Study of the Liver’s International Liver Congress (EASL 2022), including a late-breaking presentation of data from the Phase 3 MAESTRO-NAFLD-1 study and three additional oral presentations from the resmetirom clinical development program.

Pfizer Inc. (NYSE: PFE) and BioNTech SE (Nasdaq: BNTX) announced positive data evaluating the safety, tolerability, and immunogenicity of two Omicron-adapted COVID-19 vaccine candidates: one monovalent and the other bivalent, a combination of the Pfizer-BioNTech COVID-19 Vaccine and a vaccine candidate targeting the spike protein of the Omicron BA.1 variant of concern. 

President Joe Biden and Western allies opened a three-day summit in the Bavarian Alps on Sunday intent on keeping economic fallout from the war in Ukraine from fracturing the global coalition working to punish Russia’s aggression.

Saudi Exchange announces its intention to launch Single Stock Futures Contracts on the 4th of July 2022.

United States: The Biden admin alongside the G-7 announced that they will ban Russian gold imports to “further impose financial costs on Moscow for its invasion of Ukraine.”

What We’re Watching

U.S. Economic Calendar

TIME (ET)REPORTPERIODACTUALMEDIAN FORECASTPREVIOUS
Monday, June 27
8:30 AMDurable goods ordersMay0.20%0.50%
8:30 AMCore capital goods ordersMay0.80%
10:00 AMPending home sales indexMay-4.00%-3.90%
Tuesday, June 28
8:30 AMTrade in goods (advance)May-$105.9 billion
9:00 AMS&P Case-Shiller U.S. home price index (year-over-year)April20.60%
10:00 AMConsumer confidence indexJune101.1106.4
Wednesday, June 29
8:30 AMGross domestic product revision (SAAR)Q1-1.50%-1.50%
8:30 AMFinal domestic demand revision (SAAR)Q12.70%
8:30 AMGross domestic income revision (SAAR)Q12.10%
Thursday, June 30
8:30 AMPCE inflation (monthly)May0.20%
8:30 AMCore PCE inflation (monthly)May0.40%0.30%
8:30 AMPCE inflation (year-over-year)May6.30%
8:30 AMCore PCE inflation (year-over-year)May4.70%4.90%
8:30 AMReal disposable incomeMay0.00%
8:30 AMReal consumer spendingMay0.70%
8:30 AMNominal personal incomeMay0.50%0.40%
8:30 AMNominal consumer spendingMay0.40%0.90%
8:30 AMInitial jobless claimsJune 25227,000229,000
8:30 AMContinuing jobless claimsJune 181.32 million
9:45 AMChicago PMIJune60.3
Friday, July 1
9:45 AMS&P Global U.S. manufacturing PMI (final)June52.4
10:00 AMISM manufacturing indexJune54.90%56.10%
10:00 AMConstruction spendingJune0.40%0.20%

Meme Of The Week

Key Upcoming Earnings (US Markets)

DaySymbolCompanyEarnings Call TimeEPS Estimate
KPRXKiora Pharmaceuticals IncAfter Market Close-0.23
BYSIBeyondSpring IncTime Not Supplied-0.23
Monday, June 27KLDOKaleido Biosciences IncBefore Market Open-0.51
BMTXBm Technologies IncAfter Market Close0.08
CNTGCentogene NVBefore Market Open-0.53
CGRNCapstone Green Energy CorpAfter Market Close-0.28
CNXCConcentrix CorpAfter Market Close2.84
GPGreenPower Motor Company IncBefore Market Open-0.08
CTKYYCooTek (Cayman) IncBefore Market Open0.13
DLNGDynagas LNG Partners LPAfter Market Close0.17
TALTAL Education GroupBefore Market Open-0.05
EXPIeXp World Holdings IncTime Not Supplied0.01
JEFJefferies Financial Group IncAfter Market Close0.51
TCOMTrip.com Group LtdAfter Market Close-0.08
LVOLiveOne IncTime Not Supplied-0.13
NKENike IncTAS0.81
Tuesday, June 28AEMDAethlon Medical IncTAS-0.14
XAIRBeyond Air IncAfter Market Close-0.27
AVAVAeroVironment IncAfter Market Close0.39
FIZZNational Beverage CorpTime Not Supplied0.43
SJRShaw Communications IncTime Not Supplied0.3
SNXTD Synnex CorpBefore Market Open2.65
EPACEnerpac Tool Group CorpBefore Market Open0.28
PRGSProgress Software CorpAfter Market Close0.95
Wednesday, June 29CDMOAvid Bioservices IncAfter Market Close0.01
BSETBassett Furniture Industries IncTime Not Supplied0.45
BNEDBarnes & Noble Education IncBefore Market Open-0.17
BBBYBed Bath & Beyond IncBefore Market Open-1.37
CULPCulp IncAfter Market Close-0.35
CJREFCorus Entertainment IncBefore Market Open0.15
PDCOPatterson Companies IncBefore Market Open0.55
MKCMcCormick & Company IncBefore Market Open0.65
UNFUniFirst CorpBefore Market Open1.9
FCFranklin Covey CoAfter Market Close0.18
MSMMSC Industrial Direct Co IncBefore Market Open1.74
FTRPField Trip Health LtdAfter Market Close-0.18
SGHSMART Global Holdings Inc.After Market Close0.75
GISGeneral Mills IncBefore Market Open1.01
SCHNSchnitzer Steel Industries IncBefore Market Open2.3
NGNovaGold Resources IncAfter Market Close-0.03
PAYXPaychex IncBefore Market Open0.79
MLKNMillerKnoll IncAfter Market Close0.47
Thursday, June 30ACCDAccolade IncAfter Market Close-0.66
AYIAcuity Brands IncTAS2.95
WBAWalgreens Boots Alliance IncTAS0.92
WTERAlkaline Water Company IncBefore Market Open-0.1
STZConstellation Brands IncBefore Market Open2.52
LNNLindsay CorpBefore Market Open1.6
SMPLSimply Good Foods CoBefore Market Open0.35
TNPTsakos Energy Navigation LtdBefore Market Open-0.21
MUMicron Technology IncAfter Market Close2.44
Frdiay, July 1None

FDA Calendar

Spero Therapeutics, Inc. (Nasdaq: SPRO): The FDA is planning to hold an Advisory Committee meeting to discuss this application and has also set a Prescription Drug User Fee Act (PDUFA) target action date of June 27, 2022.

Short Interest Gainers

Carvana (CVNA) +33%: Short interest increased from 33.3% to just shy of the 35% mark—the highest level since December of 2020. Days to cover on Carvana rose from 1.3 to 1.6.

Chewy (CHWY) +32.96%: Short interest increased two percentage point increase to 28% to a two-month high. In the four-day period covered through Thursday, shares of Chewy are up 14.7%, though the stock remains down nearly 40% year-to-date.

Lemonade (LMND) +13.95% : Estimated short interest on the stock rose for the third consecutive week from 30.5% to 32.0%. Days to cover on Lemonade was also up nearly two points from 12.2 to 14.1- an all-times high.

Short Interest Decliners

Canoo (GOEV) -7.46%: Estimates short interest was down for the fourth consecutive week this week, slipping from 25.1% to 22.3%. Trading volume in the name has been particularly heavy this week with 5.5M-7.1M shares exchanging hands despite the absence of any meaningful news.

Citi Trends (CTRN) +3.58%: Estimated short interest peaked at an all-time high above 55% in mid-May, but has declined to just 30.1% since then as shorts cover on declining price action.

Tags: stock market preview, stock market preview June 27, 2022.

The post Looking Ahead In The Macro Market—Stock Market Preview For The Week Of June 27, 2022 appeared first on The Dales Report.

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Economics

Diesel Demand Set To Drop As Economies Enter Recession: Kemp

Diesel Demand Set To Drop As Economies Enter Recession: Kemp

By John Kemp, senior energy analyst

U.S. diesel consumption is likely to decline…

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Diesel Demand Set To Drop As Economies Enter Recession: Kemp

By John Kemp, senior energy analyst

U.S. diesel consumption is likely to decline by 200,000 to 600,000 barrels per day (5%-15%) over the next year as the economy slows in response to rising interest rates.

The Federal Reserve is not deliberately trying to induce a recession to bring inflation under control, central bank chief Jerome Powell told legislators on Wednesday. But he said that was a possible and foreseeable outcome of rapid rate rises – an interesting application of the doctrine of double effect.

The central bank hopes for soft landing but feels it must risk a hard one to reduce inflation running at the fastest rate for 40 years. Distillate fuel oil, a category that includes diesel, gas oil and heating oil, are the petroleum products most sensitive to changes in the business cycle so they will be impacted most as the rate of growth slows.

Even if the central bank can engineer a mid-cycle slowdown, rather than a cycle-ending recession, consumption of distillates is very likely to decline over the next year.

Both recessions and mid-cycle slowdowns have tended to reduce consumption of distillates by between 5% and 15% compared with the previous year.

With the volume of distillates supplied to domestic customers in the United States running at a little over 4 million barrels per day, the expected decline is equivalent to between 200,000 and 600,000 bpd.

Eurozone Recession

Europe’s distillate consumption is likely to see a similar or greater fall as the region’s economy enters a recession in response to Russia’s invasion of Ukraine and the impact of sanctions.

Eurozone manufacturers are already on the leading edge of a recession, according to preliminary data from purchasing managers’ surveys for the first part of June.

The eurozone composite manufacturing activity index slumped to 52.0 (47th percentile for all months since 2006) in early June, down from 54.6 (65th percentile) in May and 63.4 (100th percentile) in June 2021.

Rapidly escalating prices for crude, diesel, gasoline, gas and electricity as well as food are likely to force households and businesses to reduce spending over the next few months, pushing the economy into recession.

Lower volumes of manufacturing, construction and freight transportation activity will in turn cut diesel and gas oil consumption in the region, likely by a similar amount to the United States.

Lower distillate consumption is the only way to resolve shortages caused by the rapid rebound in economic activity after pandemic lockdowns, Russia’s invasion of Ukraine, and sanctions imposed by the United States, the EU and their allies in response on Russia’s oil exports.

In time, reduced distillate consumption will give the global refiners a chance to replenish severely depleted inventories and take some of the heat out of diesel crack spreads and prices.

Ultimately, reduced distillate consumption will stabilize and then lower fuel prices and transportation costs, which will flow through into slower inflation later in 2022 and 2023.

But the transition to lower oil prices and slower inflation is likely to involve a painful contraction in manufacturing and construction activity and employment first.

The Fed and the other major central banks may not intend to induce a recession or a significant mid-cycle slowdown, but that is the logical effect of sharply higher interest rates and tighter financial conditions.

Tyler Durden Sat, 06/25/2022 - 14:30

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