Faber News Flow

As it was showed last week (in 20 charts) while 2020 was certainly an unforgettable year for stocks, it was actually credit where the real action was - or as Goldman put it  "a year like no other"  - for two reasons: i) the direct injection of over $10 trillion in liquidity by central banks in the span of just weeks after the March crash had a direct goal of stabilizing the rates market where US treasury yields briefly became unhinged amid the wholesale liquidation, threatening the collapse of hundreds of trillions in rate-linked securities; ii) the second, and more important reason, is that on March 23, Fed chair Jerome Powell crossed a rubicon that even Bernanke stayed away from when the Fed effectively soft-nationalized the entire bond market, announcing it would buy corporate bonds in both the primary and secondary market, including investment grade and junk bond ETFs. Naturally, apologists argue that the Fed had no choice, as the alternati...

No Wonder the Cry Babies on Wall Street are clamoring for more. Five SPVs,  already on ice, will expire on December 31. The Fed released  details  today of its corporate-bond purchases in November ($215 minuscule millions) and corporate-bond ETF purchases in November (zilch). Last time it bought any ETFs had been on July 23. It released details about its other activities in its Special Purpose Vehicles (SPVs), which are essentially on ice. Five of them will expire on December 31, including the SPV that handles the corporate bond purchases. The Fed unwound its "repo" positions in early July down to zero, and more recently most its "central bank liquidity swaps." Its purchases of residential mortgage-backed securities (MBS) have been in a holding pattern since mid-September. What it is still buying at a steady clip are Treasury securities, thereby monetizing part of the debt the government is adding monthly to its gigantic pile. The net effect is that its total assets...

Good Morning. As of this writing, The DXY is flat after a pounding yesterday . Bonds are unchanged. Gold February futures are up $1.50 at $1891.90.  March Silver is trading $26.13 after a massive rally yesterday, PGMs are mixed and Copper is up 3 cents at $3.60. Stocks across the board are up small. BitCoin is up 150 around 23,000 after touching 23,837 a significant ATH change from 3 days ago.  Oil futures are up slightly, at $48.55. Nat Gas is trading up 4 cents at $2.68ish. Soy futures are up 8 cents having cracked the $1200 barrier. BitCoin Goes Bonkers-   touches just below $24,000 Gold, Brent, and WTI Technicals The following are excerpts from Moor Analytics Gold and Energy Technical Reports[EDIT- Written 5:05AM- VBL]   posted here with  permission : Gold (G)- Upside: Sell against/into $1,900.1- XXX (-1 tic per/hour starting at 8:20am); get long on a solid penetration above and look for strength to come in... Brent (G)-12/15 EOD: Decent trade below $49.80 (+1.4 tics per/hour start...

Former Goldman Sachs CFO Marty Chavez thinks that income redistribution via Universal Basic Income (UBI) is the only way to stave off revolution as the wealth gap continues to increase. In an interview with  The Business of Business , host Gregory Ugwi asked Chavez if he agrees with Rep. Alexandria Ocasio-Cortez (D-NY), who says "there should be no billionaires in the US as long as there are poor families," adding that venture capitalist Paul Graham says that income inequality is a "natural part of capitalism, and a sign that the process is working." Chavez,  a Democrat donor (most recently Pete Buttigieg's presidential bid), agreed that the income gap is a consequence of capitalism, but said "at the same time, it isn't an inevitable feature of capitalism that the inequality be as extreme as it's getting.  There have been long periods in American history where there was always inequality - but it wasn't this kind of inequality ." He also  i...

Yesterday we asked if it was time to start worrying about food inflation while discussing recent notes by both Goldman and SocGen's Albert Edwards, who highlighted the current burst in food inflation across the globe and especially emerging markets, pointing out troubling similarities to the period of soaring food inflation in late 2010 - sparked by QE2 - and which culminated with the Arab Spring which led to numerous governments being toppled across the MENA region. In his conclusion, Edwards urged readers to "keep a very close eye as to whether we see a repeat of the 2010/11 surge in food prices" because  "on the 10th anniversary of the start of the Arab Spring, and with poverty having already been made much worse by the pandemic, another food price bubble could well be the straw to break the very angry camel's back." In this context it becomes immediately clear why the topic of inflation is as much about politics (and geopolitics) as it is about economics...

Well, I was wrong. I had previously written that the election was in the courts and that based on legal precedent, the courts would give President Trump a second term. The Supreme Court put that notion to rest late on Friday night when it rejected to even  hear  the case brought by Texas and 18 other states. It's pretty staggering if you think about it. There are sworn affidavits from thousands of poll workers swearing to witnessing fraud. There are vote audits that have turned up fraud. There is statistical analysis that shows fraud. There is historical precedent concerning how key counties and states determine election outcomes that show fraud.  And yet the courts have all either refused to accept any of this evidence… OR refused to even listen to the cases. It's pretty incredible when you consider just how many ridiculous lawsuits and court cases are heard at all levels of the judiciary, even the Supreme Court. There are ...

The U.K. became the first Western country to start vaccinations for COVID-19 today, while the FDA is set to OK the emergency use of Pfizer/BioNTech's vaccine. With much of the vaccine enthusiasm reflected in November's rally, equities are posting just modest gains. But the market's expectations for inflation are higher than they've been in 19 months and around the rebound levels where the economy broke out of recession after the financial crisis in 2009. The 10-year breakeven inflation rate is at 1.89. The breakeven rate is the difference between the 10-year Treasury yield (now at 0.91%) and the 10-year inflation-protected TIPS, or real, yield (now at -0.98%) and implies expectations for inflation, on average, in 10 years. The breakeven rate is now as high as it has been since May 5, 2019, when it hit 1.91%, moving down from the 2019 peak of 1.98%. It got back to 1.97% in June 2009 as economic growth resumed. Former New York Fed President Bill Du...

Call it the latest economic paradox. Despite widespread stories of doom and gloom about the state of US consumer finances once the fiscal stimulus bill expires on Dec 31, the latest NY Fed survey of consumer expectations unexpectedly shows that US consumers have little intention of slowing down their spending. In fact, and very paradoxically,  despite depressed and flat income and earnings growth expectations,  with median one-year ahead expected earnings growth at 2.0% for fifth consecutive month and expected income growth barely little changed at 2.14% ... ...  consumers' 1-year ahead  spending growth expectations  jumped to 3.73% over the next 12 months in November  - the highest level in more than four years, not only up from the 3.06% in the previous month but a whopping 33% more than the 2.8% reported last November,  making this the biggest Y/Y increase in expected spending in series history. This bizarre increase took place even as labor market signals were mixed: although t...

The pool of negative-yielding debt across the world exceeded $18 trillion for the first time in history, according to Bloomberg data. The move came after the ECB announced it will expand its massive monetary stimulus program by another €500 billion and will extend emergency bond purchases for nine months. In a context where global economic policy uncertainties remain particularly high (Covid-19, Brexit, U.S. fiscal stimulus, etc.), it seems that central banks in advanced economies are ready to be even more accommodative in the coming months to support confidence and economic activity. As a reminder, according to my calculation, G7 central banks' combined balance sheet has already increased by more than $8.0 trillion since February 2020. These policies have led to a sharp increase in money supply and have contributed to inflate price of financial assets such as bonds (downward pressure on yields) and equities. In this context, Bloomberg World Exchange Market ...

Is the global investment world about to be caught in the Hannibal trap? Hannibal was considered as one of the greatest military tacticians and generals in history. He was a master of strategy and regularly led his enemies into excruciating defeats. The trap that investors are now being led into has many similarities with Hannibal's strategy in his victory over the Romans at Lake Trasimene in 217 BC. Hannibal was a general and statesman from Carthage (now Tunisia) who successfully fought against the Romans in the Second Punic War. THE BATTLE AT LAKE TRASIMENE In 218 BC Hannibal took his troops, with cavalry and elephants, over the Alps and into Italy. Hannibal enticed the Roman Consul Flaminius, and his troops, in 217 BC to follow him to Lake Trasimene in Umbria. The Romans followed Hannibal's troops into a narrow valley on the northern shores of the lake. When the Roman troops were inside the valley, they were trapped. They had the Carthaginians ahead of them, the lake on their...

There are three certainties in life: death, taxes and the BIS – the central banks' central bank – warning about excesses from monetary policy (the most recent amusing example of this was last October when as we wrote, "Fed Announces QE4 One Day After BIS Warns QE Has Broken The Market"). Actually, to this list of 3 certainties we can add one more: central banks roundly ignoring the warnings from the central bank mothership. That, however, does not prevent the BIS from continuing this trend of warnings, and today the Basel-based organization did just that when in its  Quarterly Review  publication it cautioned that the surge in financial markets following COVID-19 vaccine breakthroughs and the U.S. election has left asset prices increasingly stretched. Sounding surprisingly similar to Goldman, which as we reported earlier today issued an almost identical warning, when it observed that its sentiment indicator is now +2.0 standard deviations above average… … which has left p...