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As you were handing out candy to – or walking the ghostly neighborhood among – the Nemos, Princess Ariels and Lightning McQueens, the Gouls and Goblins were scheming.
In fact, the fix is in – for another 75-basis point hike in the Fed Funds interest rate, that is. The horror of it all!
Even though 11% of Fed futures traders believe the Fed will raise its target rate by a mere 50 basis points on Wednesday, a 4th-straight increase of 0.75 percentage points is locked in.
The Federal Reserve just can’t help itself.
But Courtenay Brown and Neil Irwin say the more important thing to watch is what Fed Head Jerome Powell says at his post-meeting presser about what comes next.
They add that Powell and Co. face “a delicate balance” between signaling to Wall Street on the one hand that they will eventually slow down to “a more cautious pace of tightening” – without appearing to no longer being as committed to bringing down inflation on the other.
Just 12 trading sessions ago, the DOW was at a day low of 28,660. By 3 pm on Friday, it was at 32,834. A quick look at my calculator says that this means the DOW gained 4174 points. In 12 trading days.
For months on end, the market did a bunch of herky-jerky up and down chop, with a trend toward lower. But for “some” reason, it decided to run 4K points in just 12 days.
Now the point gain isn’t that impressive to me. For instance earlier this year the DOW ran from 29,653 to 34,281. That run was 4,600 points. But the difference is/was that it took 2 MONTHS to make that sort of move, not 12 days.
So, what’s up with this one? Where’d we get all this fire power from? Several things, so let’s chat about them.
On February 14, 1945 aboard the USS Quincy in the Suez Canal, Franklin Roosevelt met with Saudi king Abdul Aziz Ibn Saud — what began a near-78-year relationship between both countries.
In return for what the State Department cal access to a “stupendous source of strategic power, and one of the greatest material prizes in world history” — immense Saudi oil reserves — US ruling authorities guaranteed the Arab state’s security since that time.
Crude oil remains the main source of energy, including for fuel.
The US today is the world’s largest oil producer and consumer — while ranking 9th in known reserves.
Nations with the largest reserves include:
Venezuela with around 304 billion.
Saudi Arabia ranks a close second with 298 billion — followed by Canada at 168, Iran with 158, Iraq with 145, Russia with 108 and Kuwait with 102.
US reserves are around 68 billion — and because of strategic power afforded nations with large-scale amounts of oil — the empire of lies and forever wars seeks control over maximum amounts worldwide by whatever it takes to achieve its aim.
The bulk of this past week was truly boring. Yes we had stock market volatility and the almost "now-normal" gigantic swings, but overall there wasn't a lot new.
But then Friday happened and things became very interesting very quickly. So, what was it? All week the yield on the ten year had been flirting with 4%. It might do 4.1, then fade to 3.96, back to 4.00 etc. But Thursday night it really got moving again, and I think I saw 4.33 overnight. This is not supposed to be folks. Bonds are supposed to be stable. A place to park money and feel safe. Instead, the debt market has felt like it was on the verge of literally breaking.
So, Friday morning the futures were grumpy and we opened red. But then, out of the blue, we started racing higher. Obviously something was said or done somewhere, but where? Then "it" hit. The Wall Street Journal supposedly "leaked" from a source that the Fed's would indeed do 75 basis points in November, but then might only do 50 or even 25 in December. Thus, all those looking for the fed "pivot" were dancing like they were on Happy days.
Then we started to get some confirmation by no less than fed head Daly:
Well, last week’s meetings of the IMF and World Bank weren’t exactly the equivalent of an Inaugural Ball.
In fact, there apparently wasn’t much festiveness at all. Instead, Neil Irwin and Courtenay Brown report, there was – and is – “a deep sense of foreboding among the world's financial elite.”
One Near East financial official said at a Group of 30 event on Saturday, we have entered "an era of enduring uncertainty and fragility."
Irwin and Brown warn that leaders around the globe “face a situation in which the policy toolkit of the 2010s is no longer readily available.
“Fiscal and monetary policy is constrained by the pandemic, war and climate change.”
On the one hand, things in the nation’s capital appeared on the surface similar to how they looked before the pandemic was unleashed:
Limos lining up at luxury hotels and crowded gates at Dulles International Airport for the Saturday night Lufthansa flights to Frankfurt; too big to fail banks throwing top-shelf receptions attended by badge-wearing people in dark suits. You get the picture.
But the challenges that now lie beneath that growingly unstable surface have changed in a profound way since then.
The Federal Reserve and their international peers are aggressively – some say obsessively – raising interest rates to try to bring down inflation, after a decade that saw central banks trying novel and, in many instances, untested, methods to goad prices higher.
Boy, did that ever work!
Emily Peck writes that “inflation adjustments are kind of sexy again.” I’m not sure I agree with that specific characterization, but I definitely get her point.
After decades of underwhelming relevance, cost of living adjustments (aka COLAs) for 2023 will likely be higher than they've been in many years and could actually lower the income taxes many Americans owe in 2023.
As Peck observes, COLAs on certain taxes, social security payments and wages have hardly been noticed since the late 1970s and early 80s.
For example, social security COLAs from 1979-1982 were 9.9%, 14.3%, 11.2% and 7.4%, respectively (an average of 10.7% – reflecting that high CPI).
But they’re critical now, especially for less well-off Americans coping with the effect of the highest inflation in over 40 years.
Take social security again. Over the 20-year period of 2000-2019, the average annual COLA was about 2.2% (including no COLA adjustment in 2010, 2011 and 2016 and a 0.3% increase in 2017).
Granted, not all salaries – particularly in the private sector – are subject to COLAs; those workers have to depend on promotions, bonuses or new, higher-paying jobs at other companies to keep up with rising prices.
And many taxes and deductions aren’t adjusted for inflation at all (the U.S. tax code is a bit of a hodgepodge).
In fact, the Wall St. Journal recently remarked, "These inflation adjustments can hardly be called a silver lining, as Americans are paying more for everything from housing to food and energy.”
So, another day, another government report, another drama, right?
The Labor Department’s highly anticipated jobs report for September is out, and it’s somewhat revealing.
Private-sector job growth fell short of analysts’ expectations as efforts by the Federal Reserve to slow inflation appear to be taking their toll on hiring.
The government report shows that nonfarm payrolls increased 263,000 for the month, compared to one consensus estimate of 275,000.
The DOL says the headline U-3 unemployment rate fell 0.2 percentage points to 3.5% – as the labor force participation rate edged slightly lower to 62.3% (1.1 percentage points lower than the pandemic’s start).
But the U-6 rate, which includes discouraged (longer-term) job hunters and those working part-time who’d like full-time jobs, was almost double the headline rate at 6.7% (down from 7.0% in August).
And John Williams of Shadow Government Statistics (SGS) believes the rate is actually closer to 25%.
The seasonally-adjusted SGS rate “reflects current [government] unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994…” That estimate is then added to the BLS’ U-6 estimate.
Jeff Cox reports, “September’s payroll figure marked a deceleration from the 315,000 gain in August and tied for the lowest monthly increase since April 2021.”
Average hourly earnings rose 0.3% on the month and 5.0% from a year ago to $32.46 an hour – an increase that’s still well above the pre-pandemic level (for example, it was 3.0% annually in February 2020).
Pending home sales dropped for the 3rd straight month in August and the 7th drop of 2022.
It’s another sign that the Fed’s campaign to rein in the effects of high inflation appear to be sending a critical industry into recession. https://www.axios.com/2022/09/29/housing-affordability-income-sales-decline
According to the National Association of Realtors, 3 out of the 4 major regions across the country experienced month-over-month decreases in sales (the West saw a minor gain). All 4 regions saw double-digit declines.
The NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, fell 2.0% to 88.4 in August. Year-over-year, pending transactions dwindled by 24.2%.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined.
The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes.
A sale is pending when a contract has been signed, but the transaction has not closed (the sale usually is finalized within one or two months of signing).
According to NAR, pending contracts are considered good early indicators of upcoming sales closings.
Variations in the length of that process – from pending contract to closed sale – are caused by difficulties with buyers getting a mortgage, home inspection issues, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month.
In developing the model for the index over 20 years ago, it was shown that the level of monthly sales-contract activity matches the level of closed existing-home sales in the following two months.
Coincidentally, the volume of existing-home sales in 2001 fell in the range of 5.0-5.5 million, which is considered normal for the nation’s current population.
China, Russia, India, Iran and other independent nations are rising in prominence on the world stage — while decadent US/Western ones are declining.
Their imperial arrogance has been hastening it for years, their unipolar moment fading in plain sight, multilateralism replacing it. See below.
What’s going on has been most apparent since the 9/11 mother of all state-sponsored false flags to that time.
Leaders of 15 nations are attending this month’s SCO summit in Samarkand, Uzbekistan — including from China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan, its 8 member-states.
At this year’s summit, Iran signed a memorandum to become its 9th member before next year’s SCO gathering in India.
Observer nation Belarus also began the process for full membership.
Egypt, Qatar and Saudi Arabia are expected to be formally introduced as dialogue partners ahead of full membership at a later time.
And Turkey’s position as a dialogue partner may be elevated to observer status — while Armenia, Azerbaijan, Afghanistan, Mongolia, Cambodia, Nepal, Bahrain, Kuwait, the UAE, Myanmar, and the Maldives are expected to begin process for becoming SCO member-states.
The SCO is the world’s largest regional organization in terms of geographic and population size.
Its member-states comprise around 60% of Eurasia — with 40% of world population and over 30% of global GDP.
As new member states are added to the organization, so will its size in land mass, population, GDP and global prominence.
Established in 2001 as an intra-governmental forum to foster mutual trust and economic development, the SCO also focuses on security-related issues — notably because of hegemon USA-led NATO’s rage to dominate the world community of nations by brute force if lesser tactics fall short.
There's an encouraging sign that Americans view painfully high inflation as a temporary phenomenon, according to Courtenay Brown and Neil Irwin.
It comes in the form of another sharp drop last month in how steep consumers expect inflation to be in the upcoming years, as shown in the New York Fed's latest Survey of Consumer Expectations.
Expectations for the level of inflation over the next year fell by about half a percentage point in August – a historic monthly decline in the survey's nine-year history and second only to July's record-breaking drop.
Consumers' expectations for year-ahead price increases for gasoline also saw another sharp drop. Now, consumers expect gas prices to be roughly the same a year from now.
The Fed's huge fear is that consumer expectations for steep inflation will become a mainstay of the economy, which could force them to act in ways that would help inflation spiral upward.
For what it's worth, that worst-case scenario doesn't appear to be materializing.
Respondents also aren't nudging up expectations for higher wages in the future. For the eighth straight month, earnings growth expectations held at 3%.
Even as inflation expectations move in the right direction, the survey shows consumers expect inflation to be much higher than the Fed's 2% target in the years to come.
Economists expect that the CPI – out tomorrow – will show that prices fell by -0.1% in August.
Core inflation – which strips out more volatile food and energy prices – is expected to have risen by 0.3%, matching July’s pace.
“Big Short” big shot Michael Burry is repeating his warning that the U.S. stock market is in the midst of a major crash.
Burry, who’s famous mainly for his bet against subprime mortgages during the Great Recession, is equating current market conditions to the crashes in 2008 and 2000.
Burry tweeted yesterday, “Crypto crash. Check. Meme crash. Check. SPAC crash. Check. Inflation. Check. 2000. Check. 2008. Check. 2022. Check.”
The Scion Capital Management chief’s latest pronouncement comes during a period of prolonged pain for especially paper market investors.
The S&P 500 is down about 18% since January 1st (it hit -24% in mid-June), while the Dow Jones Industrial Average has plummeted about 15% (its 2022 low is -19.8%).
And the techy Nasdaq has fallen about 9% (it’s been as low as -35%) over the same period – all at or into bear territory.
Popular “meme stocks” have struggled during this virtually all-encompassing downturn.
Bed Bath & Beyond shares are down more than 51%, AMC shares have plunged nearly 70% and GameStop shares have fallen about 37% this year.
Burry has also called out weakness in SPACS – special purpose acquisition companies – which boomed during the stock market’s surge after its plunge in March 2020 but have cooled considerably over the last year.
Meanwhile, bitcoin is down more than 60% this year and has dived below $19,000.
One of the economy’s many enigmas in 2022 has been “blockbuster jobs growth during a time of very low unemployment vs. complaints of a labor shortage,” according to Courtenay Brown and Neil Irwin.
They add that since earlier in the year, it’s seemed like something has had to give. Now, new evidence suggests that "something" may have arrived.
ADP, the nation's largest payroll processor, rolled out its new measure of private-sector payrolls on Wednesday.
In partnership with Stanford University’s Digital Economy Lab, the ADP Research Institute indicator infers data based on workers added or cut and paychecks sent by its own massive client base.
The other day, it showed private employers added 132,000 jobs in August — less than half from the 270,000 in July, and the lowest reading since January last year.
The newly designed ADP report aims to capture underlying employment trends compared to its older version that essentially represented little more than a prediction of what the BLS would report two days later.
Well…today’s job report shows that 318,000 jobs were added to private payrolls last month, the lowest gain since April 2021 and well below July's 526,000, but just slightly below economists' estimate of 318,000.
The duo’s historic cross-country expedition began in 1804, when President Thomas Jefferson directed Meriwether Lewis to explore lands west of the Mississippi included in the Louisiana Purchase.
Lewis chose William Clark as his co-leader for the mission. Their treacherous adventure lasted over two years.
Along the way, they faced hostile weather, unforgiving terrain, perilous waters, bodily injury, persistent hunger, disease and both friendly and unwelcoming Native Americans.
Nevertheless, their roughly 8,000-mile trek was deemed a big success and provided new geographic, ecological and cultural information about previously unmapped areas of North America.
It was all about slow and steady.
Fast Forward 400 Years.......
And oh what a week it’s been. Let’s go back to last week for a minute. Last Tuesday the market capped off a blistering to week run, by having the S&P run “smack dab” into its 200 day moving average. Now a lot of people will tell you that the 50 and 200 day moving averages don’t carry as much weight as they used to, but they still carry some clout.
When the S&P hit that 200 day, that whole two week climb came to a screeching halt and we started heading down a bit, but nothing major. Until Friday. Friday the wheels fell off and we plunged. That carried into Monday of this week as the market puked for another big drop. Tuesday and Wednesday the market sort of “ran in place” trying to figure out if they had over reacted on the big sell down.
Meanwhile over in Wyoming at the Jackson Hole economic meeting, all the movers and shakers were talking about the economy, inflation, and interest rates. Despite several fed heads telling folks that they think rates must go higher, most of the talking heads began to tell folks that it seemed the Fed might only do a 50 basis point hike at its next meeting. (Hogwash, you’ll see why)