Pubblicato in: Banche Centrali, Devoluzione socialismo, Stati Uniti

Usa. Maggio21. Inflazione in rapida salita. – Il commento di Bloomberg.

Giuseppe Sandro Mela.

2021-06-16.

FED 001

Tranne Bloomberg, al momento in cui si scrive nessuna testata liberal ha riportato o commentato il dato relativo ai prezzi alla produzione. Sarebbe stato indelicato farlo poco tempo prima dell’incontro di Mr Putin con Biden.

Tuttavia il Cpi al 5% ed il Ppi al 6.6% sono dati sicuramente presenti al Kremlin.

* * * * * * *

«The annual advance in the overall PPI rose to a 6.6% gain»

«The increase was the largest in data going back to 2010»

«Almost 60% of the May increase in the index for final demand can be traced to a 1.5% advance in prices of goods»

«The costs of nonferrous metals, motor vehicles, and beef and veal all climbed»

«Prices for services rose for a fifth straight month, with more than 40% of the increase attributable to automobile-retailing margins, which surged 27.3%»

«Producer prices excluding food, energy, and trade services …. advanced 0.7% from the prior month and rose 5.3% from a year earlier.»

«Federal Reserve officials have said the upward pressure on prices will likely prove temporary, but others worry recent price gains will lead to a more sustained pickup in inflation»

* * * * * * *

È un report inusitatamente scarno, anche se tecnicamente corretto.

Notiamo come alla fine si menzioni anche la prima innominabile ‘inflazione’.

La Fed ripete che questo processo dovrebbe essere temporaneo, ma si potrebbe dubitare che il rialzo dei metalli non ferrosi, dei veicoli a motore e delle carni bovine, solo per citarne alcuni, siano temporanei.

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U.S. Producer Prices Rose Strongly in May, Adding to Inflation Pressures

Prices paid to U.S. producers rose more than expected in May, fueling companies to raise prices on American consumers. The producer price index for final demand increased 0.8% from the prior month after a 0.6% gain in April, according to data from the Labor Department Tuesday. Excluding volatile food and energy components, the so-called core PPI rose 0.7%. The PPI, which tracks changes in production costs, has surged in recent months. Elevated materials prices and shortages paired with shipping bottlenecks and rising labor expenses have enlarged production costs. Meantime, a burst of pent-up demand has outstripped capacity, stoking further price gains.

Federal Reserve officials have said the upward pressure on prices will likely prove temporary, but others worry recent price gains will lead to a more sustained pickup in inflation. A Bloomberg survey of economists called for a 0.5% monthly gain in the overall measure and the same advance in the core figure. Data out last week signaled businesses are successfully passing along at least some of the burden of higher costs along to consumers. The consumer price index advanced more than expected for a third straight month in May, extending a months-long buildup in inflation.

The annual advance in the overall PPI rose to a 6.6% gain, a figure biased higher by the fact that it was compared to the soft reading seen in May of last year. The increase was the largest in data going back to 2010. Almost 60% of the May increase in the index for final demand can be traced to a 1.5% advance in prices of goods. The costs of nonferrous metals, motor vehicles, and beef and veal all climbed.

Prices for services rose for a fifth straight month, with more than 40% of the increase attributable to automobile-retailing margins, which surged 27.3%.

Producer prices excluding food, energy, and trade services — a measure often preferred by economists because it strips out the most volatile components — advanced 0.7% from the prior month and rose 5.3% from a year earlier.

Pubblicato in: Banche Centrali, Devoluzione socialismo, Stati Uniti

Fed. Che l’inflazione alta sia temporanea è un ‘article of faith’. – Bloomberg.

Giuseppe Sandro Mela.

2021-05-18.

2021-05-15__ Raffello Vitello di Oro 001

Nota preliminare.

Comme d’habitude, Bloomberg persevera nel voler considerare l’enclave liberal socialista occidentale come se fosse il “mondo“: tutto il mondo.

Ma ciò che quaranta anni fa era ragionevolmente vero, oggi è un clamoroso falso: l’occidente rende ragione di circa un 35% della economia mondiale. Troppo poco per poter rappresentare e per poter condizionare l’intero l’orbe terracqueo.

Il termine ‘Tip’ indica le obbligazioni legate alla inflazione.

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«The real reason why U.S. Bond Yields are stuck»

«Don’t think it’s because inflation is temporary. It’s more to do with the returns on U.S. debt being far better than what’s on offer in Europe and Japan»

«Here’s a conundrum»

«Why, when growth and inflation are picking up sharply, are U.S. bond yields stuck at modest levels?»

«The Federal Reserve wants you to believe this is because the inflationary spurt is temporary. It’s got nothing to do with that»

«The reason bond prices are stuck is much more to do with the fact that monetary policy is global and that the hedged returns available on U.S. debt are much higher than the insults that pass for bond yields in Europe and Japan»

«This trade works for three reasons»

«The first is the simplest: Treasury yields are a lot higher than those in Europe and Japan»

«The second is that the Fed has sat remorselessly on short dollar rates, which makes swapping from, say, euros into dollars much cheaper»

«The third and slightly more complex reason why international investors are buying Treasuries is that the Fed flooded the world with dollars and thus caused the cross-currency basis swap — essentially, the cost of borrowing dollars abroad — to fall precipitously»

«The yield on a conventional bond minus the yield of an equivalent maturity TIP gives you the breakeven rate: essentially, the expected inflation over the life of the bond»

«U.S. five-year real yields are now minus 1.9%, close to a record low»

«Let’s think about that for a moment. The U.S. economy is likely to register growth in the current quarter of about 15% compared with last year, but yields have pretty much never been lower»

«But stock markets are still not far from record highs and the government has announced that it wants to throw $6 trillion at the economy in coming years»

«The Fed claims that inflation will eventually come down again because people haven’t adapted their behaviour. Are these, I wonder, the same people surveyed by the University of Michigan who now expect inflation to average a little under 3% over the next five years? And how on earth could it know? »

«the Fed is in effect relaxing monetary policy by allowing real rates to collapse and financial conditions to loosen»

«And it is doing so at a time when inflation is rising very rapidly indeed. Demand is up, supply is not and inventories are very low»

«If you believed the inflation target was credible, an inflation print of 4.2% (assuming that inflationary pressures continue to mount and PCE inflation is almost as high) would bring the Fed closer to a rate rise»

«In contrast, the recent claims that higher inflation is temporary are an article of faith»

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Bloomberg è liberal fin sotto le unghie dei piedi: infatti, con la sua innata modestia ed umiltà, considera l’occidente come se fosse tutto il mondo, lo rappresentasse e lo condizionasse. Cina e tutti gli altri sembrerebbero non esistere nel loro modo di pensare.

Tuttavia alla fine ammette una verità

«the recent claims that higher inflation is temporary are an article of faith»

*


The Real Reason Why U.S. Bond Yields Are Stuck.

Don’t think it’s because inflation is temporary. It’s more to do with the returns on U.S. debt being far better than what’s on offer in Europe and Japan. 

Here’s a conundrum. Why, when growth and inflation are picking up sharply, are U.S. bond yields stuck at modest levels? Yields on 10-year Treasuries are lower now than at the end of March, despite this week’s blowout inflation numbers and accelerating growth. The Federal Reserve wants you to believe this is because the inflationary spurt is temporary. It’s got nothing to do with that.

The reason bond prices are stuck is much more to do with the fact that monetary policy is global and that the hedged returns available on U.S. debt are much higher than the insults that pass for bond yields in Europe and Japan.

This trade works for three reasons. The first is the simplest: Treasury yields are a lot higher than those in Europe and Japan. The second is that the Fed has sat remorselessly on short dollar rates, which makes swapping from, say, euros into dollars much cheaper. The third and slightly more complex reason why international investors are buying Treasuries is that the Fed flooded the world with dollars and thus caused the cross-currency basis swap — essentially, the cost of borrowing dollars abroad — to fall precipitously, having spiked at the start of the pandemic. The chart below shows the 10-year returns in dollars relative to the 10-year returns in Germany and Japan.

It’s also instructive to look at the remarkable stickiness of U.S. bond yields by splitting the yield into its real yield and inflation components. This is easy to do using TIPs (inflation-linked bonds). The yield on a conventional bond minus the yield of an equivalent maturity TIP gives you the breakeven rate: essentially, the expected inflation over the life of the bond. And what this shows is that even as overall bond yields have stayed constant of late, expected inflation has continued to rise. Over the past 12 months, five-year breakevens have risen almost two percentage points, to a touch less than 2.7%. Some 15bps of that rise has come since the end of March.

The eagle-eyed among you will also have twigged that if overall yields haven’t moved lately, and expected inflation has risen, then real yields (the yield on the TIPs bond) must have fallen. Have a gold star. U.S. five-year real yields are now minus 1.9%, close to a record low.

Let’s think about that for a moment. The U.S. economy is likely to register growth in the current quarter of about 15% compared with last year, but yields have pretty much never been lower. Admittedly, there are favorable base effects since the economy last year was so depressed. But stock markets are still not far from record highs and the government has announced that it wants to throw $6 trillion at the economy in coming years. Rather than lean into the wind, the Fed is in effect relaxing monetary policy by allowing real rates to collapse and financial conditions to loosen.

And it is doing so at a time when inflation is rising very rapidly indeed. Demand is up, supply is not and inventories are very low. In the dim and distant past of a few months ago the Fed said it would target inflation over the whole cycle. Now every Fed member says its inaction is justified because inflation will be temporary. These two positions are conflicting. 

If you believed the inflation target was credible, an inflation print of 4.2% (assuming that inflationary pressures continue to mount and PCE inflation is almost as high) would bring the Fed closer to a rate rise. In contrast, the recent claims that higher inflation is temporary are an article of faith. It doesn’t force the Fed to do anything at all if it continues to cling to this view. 

The Fed claims that inflation will eventually come down again because people haven’t adapted their behaviour. Are these, I wonder, the same people surveyed by the University of Michigan who now expect inflation to average a little under 3% over the next five years? And how on earth could it know?

Central banks around the world are conducting untried monetary policy on a huge scale, the Fed not least. In effect, it’s saying that the combination of huge and unprecedented monetary and fiscal policy hasn’t had and won’t have the slightest long-term effect on inflation or behavior. 

The current Fed regime makes the Greenspan one, which allowed the inflation of the late 1990s stock bubble and encouraged the subsequent housing bubble, look like a model of sober reflection. At some stage the Fed will have to recognize reality. And bond prices of all stripes will fall with a resounding thud. In the meantime, inflation and breakevens will keep rising.

Pubblicato in: Cina

Shanghai. Governo chiede ad H&M di ritrattare. – La mutazione di Reuters.

Giuseppe Sandro Mela.

2021-04-08.

Harris-Biden Administration 001

«In the statement, the world’s second-biggest fashion retailer expressed concern about the allegations of forced labour in Xinjiang province and said it would no longer source cotton from there»

«The company, based in Sweden, has faced a backlash in China in recent days after it voiced concerns last year about alleged human rights abuses in Xinjiang province»

«ABC News reported that the city government of Shanghai had asked H&M to correct a ‘problematic map of China’»

«ABC said Internet users reported the problem to the management of H&M’s website and the Shanghai municipal bureau of planning and natural resources ordered it to be changed»

* * * * * * *

H&M è scomparsa dalla Cina. Cerca di andare a Canossa, ma sarà dura. Se mai sarà.

Burberry. Prima luxury fashion house occidentale ostracizzata dai cinesi.

Hugo Boss China continuerebbe ad usare il cotone dello Xinjiang.

H&M, Nike ed Adidas offendono la Cina ed i cinesi non comprano più i loro prodotti.

Hollywood. Sta perdendo il grande mercato cinese. Troppo liberal.

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Bbc. Bandita dalla Cina perché propala fake news. – Xinhua e Bbc.

China pulls BBC World News off the air for serious content violation

China bans BBC World News from broadcasting

* * * * * * *


Tre sono gli elementi degni di essere commentati.

Il primo consiste nel fatto che all’ostracismo dimostrato dal popolo cinese nei confronti delle ditte occidentali che operano in Cina, ma che propalano false notizie su di essa, si associa adesso anche all’azione governativa, sia pure a livello di regioni periferiche: in questo caso, Shanghai.

Il secondo, forse ancora più importante del primo, consiste nel fatto che da circa un mese i media libera occidentali hanno iniziato a prendere le distanze dalla retorica ufficiale della ideologia. Le accuse alla Cina non son più fatte come se tali accuse fossero vere: “the allegations of forced labour in Xinjiang province” oppure “alleged human rights abuses in Xinjiang province”. Reuters, Bloomberg, Cnn etc. sembrerebbero aver capito che avrebbero potuto seguire il destino della Bbc se avessero proseguito con il loro tono di giudici saccenti, depositari di verità assolute.

Il terzo è la evidenza di quanto avventata sia stata l’iniziativa accusatoria della Harris-Biden Administration, che aveva promesso severissime sanzioni alla Cina, e che adesso constata invece non solo di esserne incapace, ma anche nel constatare quanto le realtà produttive occidentali si siano dissociate da quella azione governativa. Un vero e proprio boomerang. La Cina ha dimostrato di essere ben più coesa e determinata, oltre che più potente.

*


Chinese authorities tell H&M to change the ‘problematic map’.

Stockholm (Reuters) – Chinese authorities have asked H&M to change a map on its website in the latest clash between the clothing giant and officialdom there, media reported on Friday.

The company, based in Sweden, has faced a backlash in China in recent days after it voiced concerns last year about alleged human rights abuses in Xinjiang province.

ABC News reported that the city government of Shanghai had asked H&M to correct a ‘problematic map of China’.

H&M did not immediately respond to telephone calls or an emailed request for a comment.

Citing a statement by the Shanghai government, ABC said Internet users reported the problem to the management of H&M’s website and the Shanghai municipal bureau of planning and natural resources ordered it to be changed.

The Wall Street Journal cited the Shanghai arm of the Cyberspace Administration of China as saying that H&M’s website operator had taken actions to address the issue.

Last week, H&M said it would work to win back trust in China after a statement it had made in 2020 about sourcing cotton there resurfaced on social media.

In the statement, the world’s second-biggest fashion retailer expressed concern about the allegations of forced labour in Xinjiang province and said it would no longer source cotton from there.

Pubblicato in: Banche Centrali, Devoluzione socialismo, Stati Uniti

Cigni Neri. Non si vedono perché hanno nidificato sopra le nostre teste.

Giuseppe Sandro Mela.

2021-03-22.

Cigni Bianchi e Cigni neri 001

«New-era investments are at a significant crossroads. After a prolonged period of extensive outperformance by the Nasdaq and tech stocks, it is not unreasonable to foresee a phase of underperformance, consolidation or even an outright collapse»

«if 10-year Treasury yields rise to 2% this year …. a scenario where the Nasdaq 100 would have to drop as much as 20% to stay attractive»


L’affermazione che dopo un periodo di crescita subentra un periodo di decremento dovrebbe essere lapalissiana. Il vero problema consiste nel preconizzare il timing di un simile evento.

Operazione molto difficile, anche perché le banche centrali possono condizionare i mercati, sia pure per tempi non lunghi.

Non è il mondo ad essere ipervalutato, bensì il sistema economico occidentale: l’occidente da tempo non rappresenta più il mondo, anche se i media liberal ritengono, nella loro innata modestia, di essere tutto il mondo.

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Regno Unito. 2020. Pil -9.9% anno 2020 su anno 2019. – ONS.

Italia. 2020. Regioni. Export nazionale -9.7% anno 2020 su anno 2019. – Istat.

Giappone. 2020. pil Q4 su Q3, annualizzato +11.7%. Reale -4.0%, anno su anno. Caveat.

Eurostat. Pil -6.6% nella eurozona, -6.2% nella Eu, anno su anno.

Giappone. Gennaio 2021. Spesa delle Famiglie -6.1% anno su anno. Entrate -3.2%.

Germania. Gennaio 2021. Exports -8.0%, Imports -9.8%, anno su anno. Cina +60.6%.

Germania. Gennaio. Vendite al Dettaglio -8.7% gennaio 2021 vs gennaio 2020.

Eurostat. Gennaio. Vendite Dettaglio su gennaio 2020: -6.4% eurozona e -5.4% EU. 2021-03-05

Italia. Gennaio. Commercio estero extra Ue. Export -12.75, Import -18.%, gen21 su gen 20.

Paesi Bassi. Consumi delle famiglie -11.9% dicembre 2020 su dicembre 2019.

Germania. 2020. Produzione Industriale -10.8% anno 2020 su anno 2019.

Mondo. 2020. GDP PPP aggiornato al 2020Q4 annualizzato. Sorprese.

Usa. Buffett Indicator 224%. Strongly Overvalued.

Nouriel Roubini. Una depressione epocale. Cigni neri e cigni bianchi.

Eurozona. Il cigno nero della stagflazione volteggia come un avvoltoio.

Romania. Il Green Deal è una ‘true religion’. Il gesto del dito.

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Cina. Febbraio 2021. Export +60.6%, Import +22.2% anno su anno, Saldo +103.25 mld Usd.

Singapore. Gennaio. Produzione Industriale (Annuale) +8.6%.

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“We Are Sitting On An Incredibly Important Turning Point”

Last week in his latest Doubleline webcast, Jeff Gundlach presented a remarkable chart, one showing that the ratio of the Nasdaq to the S&P 500 has been pulled lower (due to Nasdaq underperformance coupled with strength in value stocks) and is now right on its dot com bubble peak levels.

2026-03-18. Crasch 001

Picking up on this chart, over the weekend in his latest Bear Traps Report, Larry McDonald wrote that “we are sitting on an incredibly important turning point” adding that “the world’s first and second most liquid and arguably most important stock indices are sending important rotation signals. In our view, both tech and growth equities outperformance run is over and the rotation to value and commodity exposed equities has begun.”

As Bloomberg notes, while recent single-day rallies (4% on Tuesday and 2.4% on Thursday) lifted the Nasdaq 100 to its first gain in four weeks, they’re not calming nerves. After all, big up days are not uncommon during a downtrend. In 2000, when the market started a three-year crash, the index had 27 sessions where it rose at least 4%. That compared with six such days in 1999, when prices doubled.

“The early stages of a bear market is typically punctuated by ferocious rallies, and what matters in the end is how far the rallies extend and not how quickly they move within a single session,” said Michael Shaoul, chief executive officer at Marketfield Asset Management LLC. “Evidence continues to mount that the technology sector has finally relinquished its position as key global leadership.”

That’s raising alarms for anyone who lived through the dot-com crash. Back then, when the Nasdaq 100 started falling in March 2000, the equal-weighted S&P 500 kept marching forward and didn’t peak until 14 months later — a sign that money was being shifted away from the tech behemoths that soared in the internet bubble. Ultimately, the Nasdaq 100 lost half of its value.

    “People should not take solace in the fact that almost everything else besides the tech group is acting well,” said Matt Maley, chief market strategist at Miller Tabak + Co. “If the tech group continues to underperform, it’s going to weigh on the rest of the stock market eventually.”

A rotation out of growth and tech will only accelerate depending on what Powell says on Thursday, especially if he doesn’t sound sufficient dovish and spooks markets again, triggering another bond rout, which by extension means a selloff in growth stocks which – as we have noted on many previous occasions – have near record high duration and are thus merely bond proxies to which hedge funds have never been more exposed.

2026-03-18. Crasch 002

However, while all eyes were on the 10-Year during the late February “reflation panic” selloff which was sparked by a liquidation cascade in bonds once the 10Y breached 1.50%, the place on the Treasury curve where the next liquidation cascade could begin is now the belly, because as Bloomberg writes whereas back in December the thought was that the Federal Reserve might tamp down long-term Treasury yields, the issue now lies with shorter-dated ones, and specifically 5-year rates.

Yields on that maturity have become unanchored in recent weeks, surging above the previous “red line” of 0.75% amid speculation that the Fed will need to start a cycle of rate hikes perhaps a full year earlier than officials have indicated. That shift has also roiled the outlook for a classic iteration of the reflation wager, a widening gap between 5- and 30-year yields, even as the narrative of a stimulus-fueled recovery has only gained momentum.

2026-03-18. Crasch 003

“The Fed next week will have to walk a fine line between either pushing back against market expectations or allowing them to stand,” said Kevin Walter, co-head of global Treasuries trading for Barclays. Without Fed pushback “there might be more pressure on the belly of the curve,” in which case the best steepeners would be the spreads between 2-year yields versus 5- and 7-year rates that have room to rise as traders price in tightening.

And while most investment bank research divisions, and certainly the Fed, do not expect any liftoff until at least 2023, the swaps market has been reflecting a roughly 75% chance the Fed lifts rates from near zero by around the end of 2022. Indeed, Walter expects no major policy changes next week and anticipates that officials will continue to project rates on hold through 2023, however even doing nothing may force another round of selling amid the recent bout of soaring inflation, one seen as a push by the market to force Powell into some form of Yield Curve Control.

2026-03-18. Crasch 004

On the remote chance that the Fed does signal some 2023 hikes next week, the market will probably bring expectations for rate increases into the first half of 2022 and the 1-year-forward 5-year rate could increase 50 basis points, Peter Chatwell, head of multi-asset strategy for Mizuho International Plc, said in an emailed note. It would also lead to renewed rotation out of growth and into value, further depressing the Nasdaq to SPX chart shown above.

That said, most don’t expect Powell to address the continued selling in either the long-end or more recently, the belly – the Fed chair gave only a minor reference to the bond-market slump that drove 10-year yields above 1.6%. He emphasized the importance of financial conditions, which remain accommodative, although tech stocks did sink on Friday as yields surged.

None of this will help ease inflation fears as the market fears the Fed is rapidly falling behind the curve. As we noted last week, 5Y inflation expectations at the highest since 2008 and robust jobs data have only reinforced bets that the Fed will need to tighten more quickly than it’s been forecasting. The speculation has squeezed wagers on a steeper curve from 5 to 30 years, shrinking that spread to a bit above 150 basis points, from a more than 6-year high of 167 in February. The 5-year yield at 0.84% isn’t far below its highest level since last year. But at the same time, the 2-year has remained near historic lows on the view that the Fed will hold rates near zero for the immediate future. That’s kept bets on the widely watched spread to the 10-year rate in play, as well as versus other maturities, such as the 5- and 7-year.

And with the front-end anchored for a long, long time, the question then becomes what is the most lucrative steepener trade. “Some steepeners are better than others,” said Patrick Leary, senior trader and chief market strategist for Incapital. He expects the 2s10s to keep widening, but has taken profits on steepeners and is looking for a better point to re-enter. Other see potential in the 5- to 30-year steepener. TD Securities has recommended entering that bet at 146.5 basis points, targeting 170, based on what it said was a high bar for hikes and the prospect of elevated coupon supply.

Taking a step back, the reason why traders have been so focused on the 5-year part of the curve, i.e., “the belly”, is because it’s seen as one place that may bear the brunt of any subsequent selloff should rate-hike speculation mount further, since the bulk of the liftoff regime is expected to take place within the maturity of a 5 Year note issued now.

Furthermore, as Bloomberg notes already certain corners of the market are turning their attention to the potential for multiple rate hikes. In swaptions, a position has emerged targeting the Fed to hike seven to eight times by March 2025, according to a Barclays analysis.

There is, of course, the risk that markets have gotten ahead of themselves – the whole point of a recent RIC report from BofA, which does not see anywhere nearly enough sustained inflation to justify a 2022 rate hike, let alone 7 by 2025: “it’s possible the market may have gotten a little ahead of itself in the belly,” causing the 5-year rate to rise too much, said Jamie Anderson, head of U.S. trading for Insight Investment. If the data come in weak or the Fed is on hold for longer than expected, “the belly should rally and the curve re-steepen,” he said.

For Incapital’s Leary, the narrowing in the 5s30s gap came on the view that officials may discuss – or even announce – a twist next week. Such an operation, involving the sale of shorter-dated holdings and purchase of longer maturities to control yields, would put more pressure on the belly, he says. That would follow the European Central Bank’s decision to ramp up its bond-buying pace.

“All these trades are highly dependent on the Fed being on the sidelines and not changing its policy stance,” Leary said. “The market is definitely playing a game of chicken with the Fed, by testing how high yields can get before tightening financial conditions and forcing the Fed to step in.”

Meanwhile, even as some strategists have brushed aside the yield risk for growth stocks, claiming that tech has shown a fickle relationship with Treasuries over time, Joe Kalish, chief global macro strategist at Ned Davis Research, found that since 2014, the Nasdaq 100’s forward earnings yield – the inverse of its price-earnings ratio where the higher it is, the cheaper stocks are – has moved almost in lockstep with forecast corporate bond rates.

In his model, if 10-year Treasury yields rise to 2% this year, that in turn could drive long-term Baa-rated bond rates to 4.5%, a scenario where the Nasdaq 100 would have to drop as much as 20% to stay attractive, all else equal. If yields climbed but the Nasdaq didn’t move, this would indicate over-valuation, Kalish said, adding his model correctly flashed warnings in 1987 and 2000.

2026-03-18. Crasch 0054

Also keep in mind that even after the recent drop, the price-earnings ratio of the Nasdaq 100 – at 28 – is nowhere near cheap relative to other stocks, and is a 7% premium over the S&P 500.

Finally, the growth advantage that has sustained tech’s outperformance in all but one year since 2009 is poised to disappear – at least for the next two years – as pandemic-beaten firms like airlines and automakers roar back. Profits from software and internet companies are expected to expand 22% this year and 12% in 2022. Both lag behind the broad S&P 500, where earnings are forecast to increase 24% and 15%, respectively.

So going back to the top chart, and with Nasdaq 100 knocking on the door of its relative peak, it’d be a mistake not to consider the downside risk, according to Jim Paulsen, chief investment strategist at Leuthold Group.

“New-era investments are at a significant crossroads,” he said. “After a prolonged period of extensive outperformance by the Nasdaq and tech stocks, it is not unreasonable to foresee a phase of underperformance, consolidation or even an outright collapse.”

If all this sounds unnecessarily convoluted, we remind you of what Rabobank’s Michael Every said overnight, in what may be the best summary of the Fed’s options:

    “If Powell does nothing, we could perhaps be on the verge of a 2013-style Taper Tantrum. That would send Godzilla-sized shockwaves through markets everywhere, including Tokyo. (And I now think of 1970/80’s British TV ads where a Mock-zilla would eat famous global landmarks before deciding he preferred a certain candy “even chewier than a Barrow-in-Furness bus depot.”) “

    “Of course, Powell could say something or do something: Operation Twist and Shout; or YCC. First of all, this would then show that there is a disconnect between the Treasury and the Fed, which is hardly ideal. Moreover, such steps would prompt a major market flattening, but of two different kinds (short end up and long end down; or just long end down). As I keep repeating here, YCC would also open the door for some seriously new epic adventures, like opening the mysterious giant gate behind which King Kong is found on his remote island.”

In short, brace for a burst of volatility on Thursday when Powell (and tech stock bulls) will be damned if the Fed Chair doesn’t do anything, and damned if he does..

Pubblicato in: Banche Centrali, Cina, India, Stati Uniti, Unione Europea

Mondo. Bond a tassi negativi ammontano a 18 Usd trilioni. Non mondo, bensì occidente.

Giuseppe Sandro Mela.

2020-12-31.

2020-12-21__Tassi Negativi 013

«World’s negative-yield debt pile at $18 trillion for first time»

«Increase has coincided with a broadly-weaker dollar in 2020»

«The world’s stockpile of negative-yielding debt has swelled to a fresh record in a sign that demand for havens is just as intense as that for riskier assets»

«The market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to $18.04 trillion on Thursday, the highest level ever recorded»

«About $1 trillion of bonds have seen their yields turn negative this week, meaning 27% of the world’s investment-grade debt is now sub-zero»

«Despite optimism about a global economic recovery next year sparking a rush to riskier assets like stocks and corporate debt, continued monetary support from central banks and concern about the relentless spread of the coronavirus has maintained investor interest in sovereign bonds»

«The rise in negative-yielding debt since March has coincided with a broadly weaker dollar»

«Bond bulls got a boost on Thursday when the European Central Bank boosted its asset purchase program by an additional 500 billion euros ($607 billion) in a bid to support the region’s economic recovery»

«In the euro area’s main debt markets in 10-year instruments, only Italian and Greek securities are trading in positive territory»

* * * * * * *

Nella loro riservata, umile e discreta modestia, i liberal occidentali definiscono sé stessi come “il mondo“.

Ma secondo le statistiche dell’IMF i Brics hanno nel 2019 un PIL ppa di 46,620 miliardi Usd, contro i 20,290 degli Stati Uniti e 18,377 dell’Unione Europea. Occidente e paesi occidentalizzati hanno sistemi economici oramai nettamente inferiori a quelli dei Brics: considerarsi come fossero “il mondo” è del tutto inappropriato e fuorviante. Contano meno della metà.

Diciotto trilioni di titoli con interessi negativi sorpassa il PIL ppa dell’Unione Europea.

I titoli di stato ad interessi negativi sono sostenuti quasi esclusivamente dagli acquisti fatti dalle banche centrali occidentali Le Tabelle riportate in fotocopia dovrebbero essere più che eloquenti.

«Bond bulls got a boost on Thursday when the European Central Bank boosted its asset purchase program by an additional 500 billion euros ($607 billion) in a bid to support the region’s economic recovery»

Ma senza interventi strutturali e politici l’occidente non può continuare a stampare carta moneta a tempo indefinito, e più il tempo passa peggiore sarà l’epilogo.

*


World’s Negative-Yield Debt Pile at $18 Trillion for First Time.  

– Spanish 10-year bond yields fall below 0%, following Portugal

– Increase has coincided with a broadly-weaker dollar in 2020

*

The world’s stockpile of negative-yielding debt has swelled to a fresh record in a sign that demand for havens is just as intense as that for riskier assets.

The market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to $18.04 trillion on Thursday, the highest level ever recorded. Spanish 10-year bonds were the latest to join the club, with rates sliding below 0% for the first time Friday.

About $1 trillion of bonds have seen their yields turn negative this week, meaning 27% of the world’s investment-grade debt is now sub-zero. Thanks to the slew of global issuance in 2020 as governments and companies wrestle with the impact of the coronavirus, that remains below the 30% peak reached last year.

Despite optimism about a global economic recovery next year sparking a rush to riskier assets like stocks and corporate debt, continued monetary support from central banks and concern about the relentless spread of the coronavirus has maintained investor interest in sovereign bonds. The rise in negative-yielding debt since March has coincided with a broadly weaker dollar.

Bond bulls got a boost on Thursday when the European Central Bank boosted its asset purchase program by an additional 500 billion euros ($607 billion) in a bid to support the region’s economic recovery. Meanwhile, both Australian bills saw sub-zero yields at auction for the first time, while Portuguese 10-year bond yields also dropped below 0% this week.

U.S. Treasury yields remain some of the few developed bonds still holding above 0%. In the euro area’s main debt markets in 10-year instruments, only Italian and Greek securities are trading in positive territory.

Pubblicato in: Devoluzione socialismo, Giustizia, Stati Uniti

Trump vince in appello e può stornare 3.6 Usd miliardi dai fondi militari al muro.

Giuseppe Sandro Mela.

2020-12-06.

2020-12-06__ Trump Causa Appello. 19-51144-CV0



La United States Court of Appeals of the Fifth Circuit ha emesso sentenza sul caso El Paso County, Texas, et al v. Donald Trump, et a. 19-51144.

Una corte distrettuale aveva sentenziato bloccando lo storno fatto dal Presidente Trump di fondi militari a quelli per la costruzione del fence tra Stati Uniti e Messico.

Questa è la sentenza della Corte di Appello Federale.

«Because El Paso County and BNHR do not have standing to challenge the Government’s § 2808 or § 284 expenditures, we AFFIRM the district court’s denial of an injunction that would enjoin the § 284 expenditures, REVERSE the district court’s grant of summary judgment for the plaintiffs, VACATE the district court’s injunction enjoining the § 2808 expenditures, and REMAND for dismissal of all claims for lack of jurisdiction.»

* * * * * * *

Una sentenza severa: «lack of jurisdiction».

Ma a seguito riportiamo il commento dell’articolista di Bloomberg.

«A three-judge panel, in a split decision, ruled that El Paso County and a group of border-community activists didn’t prove they’ve been sufficiently harmed by Trump’s wall to challenge the funding shift.

The local community may have lost tourism and economic activity because of Trump’s rhetoric alleging the area is dangerous and crime-ridden because of an “invasion” of undocumented immigrants but that harm can’t be tied directly to the Pentagon’s funding shift, the majority ruled.»

Servirebbe davvero avere molto senso dello humour.

Bloomberg ha tramutato la «lack of jurisdiction» in ‘prove insufficienti‘.

E si smentisce anche, perché altrove ha scritto:

«President Donald Trump can redirect $3.6 billion in U.S. military funds to build a wall along the Mexican border because Texas groups that challenged the decision have no legal right to complain»

Non solo.

La tesi vincente in appello è etichettata da Bloomberg come «rethoric».

Orbene: codesta è una prova ulteriore di quanto bigotta sia Bloomberg nel professare la propria religione liberal. Le cinque dita della mano sono tante quante il partito ordina che siano.

*


Trump Wins Court Ruling Allowing Money to Be Shifted for Wall.

President Donald Trump can redirect $3.6 billion in U.S. military funds to build a wall along the Mexican border because Texas groups that challenged the decision have no legal right to complain, a federal appeals court said.

The ruling late Friday from the appeals court in New Orleans overturns a decision by a judge in El Paso, Texas, who said Trump broke the law by declaring a national emergency to redirect military money to the wall project after Congress specifically refused to pay for it.

A three-judge panel, in a split decision, ruled that El Paso County and a group of border-community activists didn’t prove they’ve been sufficiently harmed by Trump’s wall to challenge the funding shift.

The local community may have lost tourism and economic activity because of Trump’s rhetoric alleging the area is dangerous and crime-ridden because of an “invasion” of undocumented immigrants but that harm can’t be tied directly to the Pentagon’s funding shift, the majority ruled.

“A direct link, such as the loss of a specific tax revenue, is necessary to demonstrate standing,” wrote the majority, both of whom appointed by President George W. Bush. “Holding otherwise might spark a wave of unwarranted litigation against the federal government.”

Opponents of the wall, including a bipartisan group of constitutional scholars and former government officials, claim Trump’s funding shift is an abuse of executive power that usurps Congress’s authority to control federal spending. Lawmakers refused to give Trump more than $1.37 billion of the $5.7 billion he sought for the border wall, leading to a standoff that shut down the government for 35 days in early 2019.

U.S. District Judge James Dennis, appointed by President Bill Clinton, dissented, writing that the region’s economic loss of military spending earmarked for nearby Fort Bliss — the second-largest domestic U.S. Army base — and damage to El Paso’s reputation as a safe place for tourists and investors provided sufficient grounds for local officials to sue.

Dennis also chided his colleagues for letting Trump make an end run around Congress’s “power of the purse” and for setting the bar too high in defining conditions under which communities wronged by federal actions can legally sue.

The majority acknowledged it reached the opposite decision than did the San Francisco appellate court, which blocked the Pentagon from shifting a different pot of military funds to border wall construction. The U.S. Supreme Court has agreed to hear the administration’s appeal in that related case, and the Texas border wall opponents are expected to also appeal to the high court.

The case is El Paso County, Texas, et al v Donald Trump et al, 19-51144, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

Pubblicato in: Devoluzione socialismo

Mondo. Ci si rassegni ad una decrescita infelice. – Bloomberg

Giuseppe Sandro Mela.

2020-11-03.

2020-10-28__ Decrescita infelice

Al mondo ci sono anche gli “altri”.

*


«Time to reset expectations for world economy with virus untamed»

«New wave of pandemic means rising health fears, restrictions»

«scientists increasingly warn of a long and difficult road ahead»

«While drug companies are making progress in the quest to find a cure for a disease that triggered the worst recession since the Great Depression, questions remain about how effective the first wave of vaccines would be»

«While drug companies are making progress in the quest to find a cure for a disease that triggered the worst recession since the Great Depression, questions remain about how effective the first wave of vaccines would be»

«In terms of actually getting back to pre-Covid or trend growth, ….  it could take more than a year, …. The timing of the recovery will be delayed»

«This time is different, as investors look to scientists and data from vaccine and treatment trials for signs of hope just as much as they pore over stimulus plans coming out of Washington, Beijing or European capitals»

«Effective treatments that would also help the economic recovery are also a mixed picture. Disappointing trial results this month for the much-hailed drug remdesivir from Gilead Sciences Inc. showed the antiviral treatment doesn’t save the lives of Covid-19 patients»

«That all spells trouble for global growth, even as data in the U.S. and euro-area are likely to show this week that it rebounded smartly in the third quarter and didn’t collapse as much as once feared»

«That all spells trouble for global growth»

«The virus is creating a major element of uncertainty, …. Forecasting it is very precarious»

* * * * * * *


Dal nostro sommesso punto di vista, questo articolo è condivisibile solo in parte.

Se è vero che il Covid-19 abbia generato situazioni inibenti lo sviluppo economico ed i lockdown siano per definizione depressivi, sarebbe altrettanto vero constatare come il sistema economico occidentale non sia più  da lunga pezza il sistema economico mondiale, né quello di riferimento.

I paesi del Brics infatti non ne condividono le dottrine sociali, politiche ed economiche e sembrerebbero aver passato senza troppi triboli il periodo di crisi: nel terzo trimestre il pil cinese è cresciuto del 4.9%% anno su anno, e l’export è cresciuto del +9.9%, sempre anno su anno. È tornato alla crescita.

Gli economisti dovrebbero rassegnarsi al fatto che l’occidente non è più egemone, e che la sua Weltanschauung non rappresenta più la realtà mondiale, che non la condivide.

*


Time to Reset Expectations for World Economy With Virus Untamed.

– Questions remain on timing, distribution and use of vaccine

– New wave of pandemic means rising health fears, restrictions

*

Investors banking on a coronavirus vaccine to save the world economy in 2021 need to temper their ambitions as scientists increasingly warn of a long and difficult road ahead.

While drug companies are making progress in the quest to find a cure for a disease that triggered the worst recession since the Great Depression, questions remain about how effective the first wave of vaccines would be, how easy they will be to distribute to more than 7 billion people and then how many will agree to take them.

The future for global growth relies on the answers to those questions as a new wave of the pandemic means health fears and government restrictions continue to inhibit daily life and commerce. Even when a successful immunization system does come along, it won’t be an instant economic panacea, says Chris Chapman, a portfolio manager at Manulife Investment, which manages more than $660 billion.

“In terms of actually getting back to pre-Covid or trend growth, it could take more than a year,” said Chapman. “The timing of the recovery will be delayed, but there is still expectation of a vaccine at some point next year.”

For decades, the world economy relied on central bankers and finance ministers to pull it out of crisis, on the basis that if you pump the right amount of money into an economy, a recovery will eventually follow.

This time is different, as investors look to scientists and data from vaccine and treatment trials for signs of hope just as much as they pore over stimulus plans coming out of Washington, Beijing or European capitals. The longer the hunt for an effective vaccine lasts, the weaker economic expansions will be.

To be sure, science could yet make major breakthroughs in the near term. If even only a small proportion of the population such as healthcare workers and the most vulnerable are immunized, that could make a big difference to the resumption of everyday life. Savings built up by households and businesses in 2020 could be unleashed in 2021.

Pfizer Inc. said this month it could seek emergency-use authorization in the U.S. by late November for its vaccine with German partner BioNTech SE. Moderna, another frontrunner in the race, is also looking at the possibility of an emergency approval this year if it has positive interim results next month.

Balancing Act

“There is a fair prospect that by the late spring, vaccines will be available in quantities sufficient to protect the most vulnerable groups,” said Neil Ferguson, an epidemiologist at Imperial College London, and former Covid-19 adviser to the U.K. government. “But at least until then, life will unfortunately remain a balancing act between reopening society and keeping the virus in check.”

Scientific hiccups may slow things down too. Johnson & Johnson paused clinical trials of its Covid-19 shot this month after a participant fell ill, weeks after AstraZeneca Plc and the University of Oxford stopped studies for the same reason. On Friday, both companies announced plans to resume their U.S. trials.

Effective treatments that would also help the economic recovery are also a mixed picture. Disappointing trial results this month for the much-hailed drug remdesivir from Gilead Sciences Inc. showed the antiviral treatment doesn’t save the lives of Covid-19 patients, despite U.S. President Donald Trump extolling its benefits. Still, U.S. regulators cleared the drug for use this week and Gilead has challenged the recent findings citing other positive results.

While there are hopeful signs from some antibody treatments being tested, the steroid dexamethasone is one of the only other therapeutics showing a meaningful benefit, and is aimed at people with very severe symptoms.

Even if an effective vaccine is discovered, the logistics of distribution will still mean disruption to work, travel and leisure will remain, with only a small subset of the population expected to receive a shot in the first instance anyway.

That all spells trouble for global growth, even as data in the U.S. and euro-area are likely to show this week that it rebounded smartly in the third quarter and didn’t collapse as much as once feared.

Long gone though is talk of a V-shaped recovery, as winter nears in the northern hemisphere — and with it the risk the virus spreads more easily. Bloomberg Economics’s gauges of high-frequency data already point to a weakening of activity in many industrial nations in October, particularly those in Europe.

‘Very Precarious’

“The virus is creating a major element of uncertainty,” former Federal Reserve Chairman Alan Greenspan told Bloomberg Television last week. “Forecasting it is very precarious.”

Underscoring the pressure for an end to the pandemic is the knowledge economic scars are already forming. Among them: lost jobs, record debts, corporate bankruptcies, atrophying skills, missed investment, deglobalization, frayed mental health and rising inequality.

A recent study declared the U.S. economy alone will witness “large, persistent adverse effects” in the long term that outweigh the short-term hit in part because the virus means greater unease among the public.

“This did not start as a financial crisis but it is morphing into a major economic crisis, with very serious financial consequences,” World Bank Chief Economist Carmen Reinhart told Bloomberg Television. “There’s a long road ahead.”
Even in those parts of the world where the virus has been largely contained, consumers remain cautious. Chinese retail sales have only just begun to accelerate even though the most severe limits on movement were lifted months ago.

There is also the question of re-infection. Scientists have found it’s possible to get Covid-19 more than once, with a handful of confirmed cases globally. That presents another obstacle, which a vaccine may only partially solve.

There’s a high chance the coronavirus, like flu, could require regular shots to keep it at bay, meaning the virus could cast an even longer arc than already expected, cautioned Graham Medley, a professor of infectious disease modeling at the London School of Hygiene & Tropical Medicine, and member of the U.K. government’s Covid-19 advisory panel.

“If second and third infections are as infectious as the first infection, and the first generation of vaccines is not very efficacious, then it’s possible that Covid-19 will continue to be a major aspect of life into 2022,” he said.

Pubblicato in: Banche Centrali, Cina, Devoluzione socialismo

L’economia cinese è l’unico grande motore di crescita al mondo. – Bloomberg

Giuseppe Sandro Mela.

2020-11-01.

dies-irae

«China’s economy plows on as world’s only major growth engine»

«China’s recovery from the coronavirus slump continued in the third quarter and showed signs of broadening in September, keeping the economy on track to be the world’s only major growth engine and validating Beijing’s aggressive approach to controlling the pandemic»

«Gross domestic product expanded 4.9% in the third quarter from a year ago»

«Both retail sales and industrial production gained momentum in September, reassuring markets that the recovery is intact»

«The numbers show China’s early and fierce containment of the virus has set the economy up for a faster rebound than any of its peers»

«That’s a rare positive for a global economy still clawing its way out of its worst slump since the Great Depression»

«Retail sales expanded 3.3% in September from a year earlier, industrial production grew 6.9% and investment growth accelerated to 0.8% in the nine months to the end of the quarter»

«Output expanded 0.7% in the year to date, meaning that the world’s second-largest economy has now regained all the ground it lost in the early months of the year»

«The improving picture has come with relatively restrained government borrowing and central bank easing compared to China’s peers»

«Instead, the government has focused on targeted support for business and the central bank on keeping liquidity flowing; today’s readings suggest there’s no need to change tack»

«Analysis of International Monetary Fund data shows the proportion of worldwide growth coming from China is expected to increase from 26.8% in 2021 to 27.7% in 2025, according to Bloomberg calculations»

«GDP is on track to grow further into the fourth quarter»

* * * * * * *

Cina. Non più ‘ripresa’, bensì crescita. Pil Q3 +4.9%, Produzione Industriale +6.9% anno su anno.

Cina. Esiste ed agisce ‘Despite International Furor’ ed ‘international condemnation’.

Quattro conti della serva. Niente paura: solo addizioni ed due divisioni di numeri interi.

Secondo i dati Imf, la Cina aveva un pil ppa di 27,805 miliardi contro i 138,805 del mondo, di cui rappresenta il 20.03%, mentre i Brics valevano il 30.78%.

Ma sempre l’Imf prevede che la percentuale di crescita mondiale proveniente dalla Cina dovrebbe aumentare dal 26.8% nel 2021 al 27.7% nel 2025. Questo però significherebbe che a tale data i Brics varrebbero più del 50% dell’economia mondiale.

Governi ed economisti occidentali sono di fronte a questi numeri: se non cambiano registro in tempi brevi, finiranno come finirono i tedeschi a Stalingrado.

*


China’s Economy Plows On as World’s Only Major Growth Engine.

– Third quarter GDP growth missed estimate; retail sales pick up

– Industrial production and investment growth accelerated

*

China’s recovery from the coronavirus slump continued in the third quarter and showed signs of broadening in September, keeping the economy on track to be the world’s only major growth engine and validating Beijing’s aggressive approach to controlling the pandemic.

Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists’ forecast for a 5.5% expansion. Both retail sales and industrial production gained momentum in September, reassuring markets that the recovery is intact.

The numbers show China’s early and fierce containment of the virus has set the economy up for a faster rebound than any of its peers. That’s a rare positive for a global economy still clawing its way out of its worst slump since the Great Depression — a revival further complicated by the resurgence of Covid-19 in Europe and the U.S.

“It’s an encouraging and hopeful message for the rest of the world,” said Rob Subbaraman, global head of macro research at Nomura Holdings Inc. in Singapore. “If you successfully handle the health crisis, your economy can recover.”

Retail sales expanded 3.3% in September from a year earlier, industrial production grew 6.9% and investment growth accelerated to 0.8% in the nine months to the end of the quarter. Strong import growth in the third quarter may have dented the GDP number, even though it’s broadly seen as a bullish sign for demand.

Output expanded 0.7% in the year to date, meaning that the world’s second-largest economy has now regained all the ground it lost in the early months of the year.

Markets were mixed on the news. The CSI 300 Index of stocks, which last week was within 1% of a five-year high, slipped 0.3% as of the mid-day break in Shanghai. The yuan was little changed near 6.7 per dollar, after briefly trading at its strongest in 18 months.

Underpinning the recovery has been the containment of the virus that has allowed factories to quickly reopen and capitalise on a global rush for medical equipment and work-from-home technology. That export strength was offset by a recent increase in imports, depressing the contribution of net trade to output growth.

“That should not be viewed negatively,” said Liu Peiqian, China economist at Natwest Markets Plc in Singapore, because the strong import growth suggests the recovery in underlying economic growth is accelerating.

The improving picture has come with relatively restrained government borrowing and central bank easing compared to China’s peers. Instead, the government has focused on targeted support for business and the central bank on keeping liquidity flowing; today’s readings suggest there’s no need to change tack.

———–

What Bloomberg’s Economists Say

“The data — on balance — suggest there is no urgency for the government to add fresh stimulus, though the window is not completely closed for a rate cut by year-end. The focus is still on targeted measures. Heading into next year, whether the tax measures are extended will shape the optimal mix of fiscal and monetary policy. In the event fiscal support is rolled back, more rate cuts are likely.”

Click here to read the full report.

Chang Shu, chief Asia economist

———–

Central bank Governor Yi Gang said Sunday that China has “pro-active fiscal policy” and “an acommodative monetary policy to support the economy.”

“Right now, China has basically got Covid-19 under control,” Yi said in a webinar organized by the Group of 30. “In general, the Chinese economy remains resilient with great potential. Continued recovery is anticipated which will benefit the global economy.”

Yet the recovery isn’t without its holes.

Even with the virus beaten back, shoppers have spent about 7% less in the first nine months of the year compared to the same period last year. Services sectors including tourism, education and travel are continuing to lag.

“The economy is not entirely back in its strongest shape,” Helen Qiao, chief Greater China economist at Bank of America, told Bloomberg Television. “The services sector is not doing that well.”

It’s also unclear how durable the recovery will prove to be given domestic pressures from unemployment and rising corporate and household debt. China Evergrande Group, the world’s most indebted developer, has rattled investors amid fears for its financial health.

Much will also depend on how relations with the U.S. evolve after November’s presidential election. Any worsening of trade frictions could throw a spanner in the export revival.

Analysis of International Monetary Fund data shows the proportion of worldwide growth coming from China is expected to increase from 26.8% in 2021 to 27.7% in 2025, according to Bloomberg calculations. The IMF says Chinese growth is virtually the only reason it expects global output to be 0.6% higher by the end of 2021 compared to the end of 2019.

Getting the economy quickly back on its feet is crucial to China’s global ambitions. They were hammered home last week by President Xi Jinping during a tour of tech-hub Shenzhen, where he doubled down on calls to take the global lead in technology and other strategic industries.

Urging an “unswerving” commitment to technological innovation in a period of “changes unseen in a century,” Xi again promoted a need to become more self reliant, a policy that is expected to be a central part of a new 5-year economic plan that will be discussed at a Communist Party gathering expected later this month.

Nearer term, the return in consumer confidence has set the economy up for a strong finish to the year, said Natwest’s Liu. “GDP is on track to grow further into the fourth quarter.”

Pubblicato in: Sistemi Economici, Stati Uniti

USA. Molti analisti prevedrebbero un crash. – Bloomberg.

Giuseppe Sandro Mela.

2020-07-03.

Statua della Libertà

Come più volte abbiamo avuto modo di ripetere, siamo alieni dai facili ottimismi così come dai catastrofismi, corrente di pensiero cui appartiene questo ultimo editoriale di Bloomberg.

«The world is having serious doubts about the once widely accepted presumption of American exceptionalism»

«The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end»

«For almost 60 years, the world complained but did nothing about it. Those days are over.»

«The balance is shifting, and a crash in the dollar could well be in the offing.»

«The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic»

«In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, fell to 1.4% of national income»

«In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982»

«Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point. The culprit: exploding government budget deficits»

«According to the bi-partisan Congressional Budget Office, the federal budget deficit is likely to soar to a peacetime record of 17.9% of gross domestic product in 2020 before hopefully receding to 9.8% in 2021.»

«Compared with the situation during the global financial crisis, when domestic saving was a net negative for the first time on record, averaging -1.8% of national income from the third quarter of 2008 to the second quarter of 2010, a much sharper drop into negative territory is now likely, possibly plunging into the unheard of -5% to -10% zone»

«For the moment, the greenback is strong, benefiting from typical safe-haven demand long evident during periods of crisis. Against a broad cross-section of U.S. trading partners, the dollar was up almost 7% over the January to April period in inflation-adjusted, trade-weighted terms to a level that stands fully 33% above its July 2011 low»

«The coming collapse in the dollar will have three key implication»

«It will be inflationary»

«Moreover, to the extent a weaker dollar is symptomatic of an exploding current-account deficit, look for a sharp widening of America’s trade deficit»

«Finally, in the face of Washington’s poorly timed wish for financial decoupling from China, who will fund the saving deficit of a nation that has finally lost its exorbitant privilege?»

* * * * * * * * * * *

Dal nostro sommesso punto di vista concordiamo con il fatto che al momento vi siano problemi di ardua soluzione ed una crisi che ridimensionerebbe molte ambizioni, ma di lì ad un crash del dollaro ce ne corre.

*


A Crash in the Dollar Is Coming.

The world is having serious doubts about the once widely accepted presumption of American exceptionalism.

The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.

Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. At the same time, the world is having serious doubts about the once widely accepted presumption of American exceptionalism. Currencies set the equilibrium between these two forces — domestic economic fundamentals and foreign perceptions of a nation’s strength or weakness. The balance is shifting, and a crash in the dollar could well be in the offing.

The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic. In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, fell to 1.4% of national income. This was the lowest reading since late 2011 and one-fifth the average of 7% from 1960 to 2005.

Lacking in domestic saving, and wanting to invest and grow, the U.S. has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982.

Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point. The culprit: exploding government budget deficits. According to the bi-partisan Congressional Budget Office, the federal budget deficit is likely to soar to a peacetime record of 17.9% of gross domestic product in 2020 before hopefully receding to 9.8% in 2021.

A significant portion of the fiscal support has initially been saved by fear-driven, unemployed U.S. workers. That tends to ameliorate some of the immediate pressures on overall national saving. However, monthly Treasury Department data show that the crisis-related expansion of the federal deficit has far outstripped the fear-driven surge in personal saving, with the April deficit 5.7 times the shortfall in the first quarter, or fully 50% larger than the April increment of personal saving.   

In other words, intense downward pressure is now building on already sharply depressed domestic saving. Compared with the situation during the global financial crisis, when domestic saving was a net negative for the first time on record, averaging -1.8% of national income from the third quarter of 2008 to the second quarter of 2010, a much sharper drop into negative territory is now likely, possibly plunging into the unheard of -5% to -10% zone.             

And that is where the dollar will come into play. For the moment, the greenback is strong, benefiting from typical safe-haven demand long evident during periods of crisis. Against a broad cross-section of U.S. trading partners, the dollar was up almost 7% over the January to April period in inflation-adjusted, trade-weighted terms to a level that stands fully 33% above its July 2011 low, Bank for International Settlements data show. (Preliminary data hint at a fractional slippage in early June.)

But the coming collapse in saving points to a sharp widening of the current-account deficit, likely taking it well beyond the prior record of -6.3% of GDP that it reached in late 2005. Reserve currency or not, the dollar will not be spared under these circumstances. The key question is what will spark the decline?

Look no further than the Trump administration. Protectionist trade policies, withdrawal from the architectural pillars of globalization such as the Paris Agreement on Climate, Trans-Pacific Partnership, World Health Organization and traditional Atlantic alliances, gross mismanagement of Covid-19 response, together with wrenching social turmoil not seen since the late 1960s, are all painfully visible manifestations of America’s sharply diminished global leadership. 

As the economic crisis starts to stabilize, hopefully later this year or in early 2021, that realization should hit home just as domestic saving plunges. The dollar could easily test its July 2011 lows, weakening by as much as 35% in broad trade-weighted, inflation-adjusted terms.

The coming collapse in the dollar will have three key implications:  It will be inflationary — a welcome short-term buffer against deflation but, in conjunction with what is likely to be a weak post-Covid economic recovery, yet another reason to worry about an onset of stagflation — the tough combination of weak economic growth and rising inflation that wreaks havoc on financial markets.

Moreover, to the extent a weaker dollar is symptomatic of an exploding current-account deficit, look for a sharp widening of America’s trade deficit.   Protectionist pressures on the largest piece of the country’s multilateral shortfall with 102 nations – namely the Chinese bilateral imbalance — will backfire and divert trade to other, higher-cost, producers,  effectively taxing beleaguered U.S. consumers.

Finally, in the face of Washington’s poorly timed wish for financial decoupling from China, who will fund the saving deficit of a nation that has finally lost its exorbitant privilege? And what terms — namely interest rates — will that funding now require?

Like Covid-19 and racial turmoil, the fall of the almighty dollar will cast global economic leadership of a saving-short U.S. economy in a very harsh light. Exorbitant privilege needs to be earned, not taken for granted.

Pubblicato in: Devoluzione socialismo

Italia. Debito pubblico al limite della sostenibilità. – Bloomberg.

Giuseppe Sandro Mela.

2020-05-25.

Bruegel Pieter. Torre di Babele. 1563. Vienna__001

«Italy’s Huge Debt Load Is at Risk of Becoming Unmanageable»

«Bloomberg Economics says debt ratio could rise well above 150%»

«Low economic growth will hamper ability to manage situation»

«Italy’s debts run the risk of becoming unmanageable, and a creeping rise in borrowing costs shows investors are getting nervous»

«Italy …. has suffered serious economic damage from nearly two months of lockdown»

«The European Commission forecasts output will shrink 9.5% this year, while Bloomberg Economics expects a 13% contraction.»

«If there’s long-lasting damage, low growth combined with government spending could push the already mammoth debt well beyond 150% of gross domestic product»

«Italy’s dismal economic performance …. puts the country’s ability to service its debts in doubt»

«Though the European Central Bank has been buying bonds through its Pandemic Emergency Purchase Program to help reduce spreads, Italy’s 10-year sovereign yield has still slowly increased to about 1.8% from 0.9% in mid-February»

«EU leaders will have to decide if they want to underwrite a bailout or let Italy go bust»

«debt restructuring may be inevitable for Italy»

* * * * * * *

Il dramma dell’Italia è riassumibile in una legislazione assurdamente prolifica e farraginosa, cui si associa una pletora di norme attuative, circolari, direttive, decreti attuativi, normativi e via quant’altro. A ciò consegue un moloch burocratico che incombe su chiunque avesse avuto l’idea di produrre qualcosa, sia esso artigiano oppure società. Poi, a moh di ciliegina sulla torta, una pressione fiscale che troneggia a livello mondiale. Infine, c’è tutto il resto.

Sotto questa premessa diventano del tutto leciti i dubbi degli investitori sulla sostenibilità nel tempo del debito pubblico.

Ma se questa sarebbe la situazione odierna, quella futura apparirebbe a tinte ben più fosche.

A seguito del lockdown aziende e partite Iva presenteranno una denuncia dei redditi in perdita, da cui un crollo delle entrate statali l’anno prossimo, proprio quando ci sarebbe più bisogno di interventi statali strutturali. Saranno almeno ottanta miliardi.

Sinceramente, gli analisti di Bloomberg sembrerebbero essere degli inguaribili ottimisti.

*


Italy’s Huge Debt Load Is at Risk of Becoming Unmanageable

– Bloomberg Economics says debt ratio could rise well above 150%

– Low economic growth will hamper ability to manage situation

*

Italy’s debts run the risk of becoming unmanageable, and a creeping rise in borrowing costs shows investors are getting nervous, according to Bloomberg Economics.

Italy, the original epicenter of the coronavirus pandemic in Europe, has suffered serious economic damage from nearly two months of lockdown. The European Commission forecasts output will shrink 9.5% this year, while Bloomberg Economics expects a 13% contraction.

If there’s long-lasting damage, low growth combined with government spending could push the already mammoth debt well beyond 150% of gross domestic product. That would reinforce the view that Italy needs more fiscal help from the European Union or even raise the issue of restructuring.

“Italy’s dismal economic performance, which is set to get worse as the nation’s leaders struggle to deal with the fallout from the coronavirus, puts the country’s ability to service its debts in doubt,” said David Powell, senior euro-area economist at Bloomberg Economics.

The government has just passed a 55-billion euro ($60 billion) stimulus program to try to prop up the economy, which follows an earlier 25 billion-euro plan in March.

Though the European Central Bank has been buying bonds through its Pandemic Emergency Purchase Program to help reduce spreads, Italy’s 10-year sovereign yield has still slowly increased to about 1.8% from 0.9% in mid-February.

The ECB’s program “will only go so far,” said Powell. “EU leaders will have to decide if they want to underwrite a bailout or let Italy go bust.”

If they go for the latter, debt restructuring “may be inevitable for Italy,” he said.