Faber News Flow

The financial media is rife with misinformation on the debt ceiling and the jump in interest rates. However, a review of history shows that not only is the  "debt-ceiling"  issue a non-crisis, but the recent rise in rates is likely an opportunity to buy bonds. Let's start with the media scare tactics over the debt ceiling: If Congress doesn't raise the debt ceiling, the Treasury will run out of money. The U.S. will default on its debt. The markets and economy will crash. While there is a grain of truth behind these statements, they are largely false.  However, for the media, a manufactured crisis should never be allowed to go to waste. To wit: "As Washington teeters closer to a possible government shutdown at midnight Thursday, here's why the status of the nation's debt ceiling may ignite more worry in financial markets. Sept. 30 marks the end of the federal government's fiscal year, and the deadline for Congress to pass a funding measure. The debt ce...

As a reminder, just over 10 years ago, S&P downgraded the US after that year's debt ceiling debacle prompted the rating agency to do the unthinkable and lob an A from the untouchable AAA US rating (prompting a very unhappy response from both the market and the then-Obama administration). Well, moments ago Fitch lobbed the first official warning shot across the bow of the world's reserve currency, writing that with the Drop-Dead Date in just 17 days, any debt-cap "brinkmanship" between Democrats and Republicans may put pressure on Fitch's AAA rating of the US. In the statement, Fitch said that the failure of the latest efforts to suspend the U.S. federal government's debt limit indicates that the current stand-off could be among the most protracted since 2013. Additionally, the rating agency believes that the debt limit will be raised or suspended in time to avert a default event,  but if this were not done in a timely manner, political brinkmanship and red...

With both 'hard' and 'soft' data showing notable weakness recently (more the surveys catching down to hard data's reality), analysts expected the latest Manufacturing survey data (for September) to show slowing growth. Markit's US Manufacturing PMI rose very modestly from a flash print of 60.5 to 60.7 final , but that is still down from August's 61.1 and at the  lowest since April . ISM's Manufacturing survey rose  from 59.9 to 61.1, better than the 59.5 expected –  highest since May. So take your pick – US Manufacturing at 5 month lows or 4 month highs. Source: Bloomberg Stagflation fears persist as  demand conditions softened  from the peaks seen earlier in the year, and Markit data showed that  Input costs increased at the second-fastest rate since data collection began  in May 2007, easing only slightly from August's high. The sustained rise in cost burdens was linked to greater transportation charges and supplier price hikes. As a result,  fi...

Preliminary data showed no improvement in Americans' sentiment in September, but the final print today showed a small rebound in confidence (and buying attitudes). The UMich final sentiment index rose to 72.8 from the preliminary reading of 71 (and better than the 70.3 expected). The gauge of current conditions rose to 80.1 from 77.1 in the initial print, while a measure of future expectations improved to 68.1, according to the survey conducted Aug. 25 to Sept. 27. Source: Bloomberg "Consumer sentiment edged upward in late September,"  Richard Curtin, director of the survey, said in a statement. "Although the overall gain still meant the continuation of depressed optimism, initially sparked by the delta variant and supported by a surge in inflation and unfavorable long-term prospects for the national economy." Perhaps of most note for Fed-watchers and Taper-tantrumers,  longer-term inflation expectations rose unexpectedly to 3.0%, the highest in a decade … Sourc...

The United Kingdom is short 100,000 qualified truck drivers after tens of thousands of them returned to the European Union during Brexit, and 40,000 heavy goods vehicle (HGV) driver tests were suspended because of the virus pandemic in 2020. The lack of drivers has roiled supply chains, resulting in higher logistical costs that could make the price of food and anything else hauled by trucks more expensive ahead of the holiday season.  The "Winter of Discontent" is starting to become a reality for millions across the world's fifth-largest economy as a deficit of truckers triggered widespread fuel shortages this week. There's also been a shortage of natural gas from Russia that has pushed UK wholesale natgas prices to record highs has transformed the country's power industry into a chaotic mess. Soaring prices and shortages are reminiscent of the late 1970s and may worsen in the months ahead. The government announced Sunday temporary visas for 5,000 foreign truck ...

Global food prices climbed back to near-decade highs in early September, reviving concerns about inflationary pressures. A  newly emerging risk  that many have missed and  could catapult food prices even higher  this fall/winter is  China's difficult harvest season as power curbs hurt the outlook for production , according to  Bloomberg .  Autumn harvest has begun for the world's second-largest economy amid  power  constraints in at least 20 Chinese provinces and regions, making up more than 66% of the country's GDP. Some of these regions are industrial hubs that have key manufacturing plants.  Among the worst-hit are industrial hubs in China's northeastern heartland, such as Jilin, Liaoning, and Heilongjiang, where most of the country's corn and soybeans are grown. "The crisis is stoking concern that China will have a tough time handling crops from corn to soy to peanuts and cotton this year after some plants were asked t...

Friday, Oct 01, 2021 - 08:40 AM Following mixed data in July, today's August print for personal income and spending was expected to show modest gains in both (with income growth slowing and spending growth increasing) and they were right with incomes growing 0.2% MoM (slightly worse than the 0.3% expected) and spending rising 0.8% (slightly better than the 0.7% MoM expected). Source: Bloomberg It appears the good days are behind us as stimmies run dry and Americans are once again left to rely on their earning power (or credit cards) to fund their excess spending. Year-over-year wage growth slowed overall  with Private wages up 11.0% Y/Y, down from 11.6%; and Government Wages up 6.6% Y/Y, down from 8.1%... All of that means that the savings rate dipped to 9.4% (from a revised higher 10.1%)... And all those personal savings from stimmies have gone (down to $1.7TN SAAR from a peak of $6.4TN in April 2020)... Finally, we note that The Fed's favorite inflation indicator - Core PCE D...

If only we could eat rhetoric The usual talking heads were out in force yesterday underlining that inflation is transitory:  Powell, Lagarde, Bailey, Kuroda (who has a new boss, PM "Continuity" Kishida). Yes, inflation is higher than they thought; yes, it's lasted longer than they had expected; but, yes, it's still just going to resolve itself when supply-chain bottlenecks do. Logically, that is true. Mathematically, that is true – prices can't keep going up at this rate forever. Politically, it is also "true" in that it is what everyone in power wants to hear. Practically , it means nothing, however.  How  are these supply-chain bottlenecks to be resolved, exactly? Yes, you can send the army to deliver fuel, as in the UK, and stop the worst of the short-term panic on the forecourts. But are the army also going to be delivering food? Or, better, *growing* food, picking it, shipping it in via their own port network, to their own port network, and then del...

Just days after Goldman slashed its Q3 GDP estimate for China to 0%, predicting no growth in the world's second largest economy, overnight Beijing confirmed that the Chinese economy has indeed stalled, with the September Mfg PMI contracting in September for the first time since the COVID-19 outbreak, even as the non-Mfg PMI rebounded after the end of the recent Delta outbreak. Commenting on the contraction in mfg PMI, Goldman attributed it to the production cuts caused by energy constraints with both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreasing in September. However, Goldman warned that the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month. Key highlights : Mfg PMI contracted in September for the first time since the COVID-19 outbreak on the back of weaker production.  The headline reading declined by -0.5pp from August to 49.6, overriding the seasonality...

There's panic-buying of gasoline in the U.K. Natural gas prices in Europe and Asia are skyrocketing. Protests are breaking out across Europe due to spiking electricity bills. India and China are short of coal for utilities. Power is being rationed to factories in multiple Chinese provinces — and winter is coming. First came the COVID-induced global supply chain crisis for container shipping. Now comes a power crunch across Asia and Europe. Energy commodity stockpiles - just like U.S. retail inventories - did not build back up fast enough to contend with post-lockdown demand. How could the power crunch affect ocean shipping? For U.S. importers of Asian containerized goods, it's a negative: another crimp in the supply chain. For commodity shipping - dry bulk, liquefied natural gas (LNG) and possibly oil tankers - it's a recipe for higher rates. Container shipping According to Bloomberg , power use is now being curbed by tight supply and emissions restrictions in the Chinese p...