Faber News Flow

In what some may call the 'worst' affirmation of a 'AAA' rating, Fitch has published a somewhat damning set of reasons why that AAA-rating may not last due to   soaring debt, shrinking GDP, and the "helicopter-money" anti-virus actions . Notably,  the sovereign credit risk of USA has been notably rising since 'helicopter money' began to make the mainstream  two weeks ago... Full Fitch Statement:  Key Rating Drivers Global Economic Situation Getting Worse: Fitch Ratings The U.S. sovereign rating is  supported by structural strengths that include the size of the economy, high per capita income and a dynamic business environment.  The U.S. benefits from issuing the U.S. dollar, the world's pre-eminent reserve currency, and from the associated extraordinary financing flexibility. Fitch considers U.S. debt tolerance to be higher than that of other 'AAA' sovereigns. However, high fiscal deficits and debt -- which were already rising even before t...

The feedback loop has reversed: by saving more, people will spend, borrow and speculate less, draining the fuel from any broadbased expansion. In eras of confidence and certainty, people save less and spend more freely.  When we're confident that good times are not only here but will continue, we not only spend more freely, we're more inclined to borrow money and speculate on the shimmering promises of more good times ahead. In eras of uncertainty, people save more and spend, borrow and speculate less.  There is an obvious feedback loop here: if people feel confident about their future prospects and have a measure of certainty about the general economic trend, they spend more, borrow more and speculate more, all of which feed the expansive mood that then encourages further spending, borrowing and speculating. If their confidence collapses and the future is deeply uncertain, people save more  as a hedge against bad things happening in the economy that could trigger hardships in ...

 There's more road left for central banks, but there's no denying it will be bumpy... For most of the past decade following the global financial (and European sovereign debt) crisis, developed market central banks had been optimistic that economic conditions would, by this stage, have permitted them to move their policy levers closer to "normal".  Their monetary toolkits – having been reset – could then effectively deal with the next recession. Yet the next global crisis, in the form of COVID-19, has already arrived, and the deep contraction in output, incomes and spending it brings with it is are now at hand. Poland's bid for nuclear power   Not only have central banks not had opportunity to sufficiently rebuild their monetary armouries over recent years, but the speed with which policy easing has been required – and delivered – over a period of just two weeks means that  in many cases, central banks look to be a spent force.  After all, once interest rates have ...

  There was something strange about today's continuation rally in stocks: while risk assets soared, the VIX barely moved. In fact the Vix is now roughly where it was on Monday, largely ignoring the move in stocks.   But there was another more sinister move in today's risk rally, which as we  noted earlier , appears to have been mostly a massive short squeeze, in fact the biggest two-day short squeeze in history... T-Mobile Launches $15 5G Plan   ... namely the persistent buying of safe havens such as Treasurys but more importantly, Bills. And so, one week after we reported that yields on many T-Bills through 3 months turned negative for the first time since the financial crisis, today virtually all Bills maturing around July had a negative yield.     Needless to say, a scramble for both cash-equivalents (i.e. Bills)  and  stocks is rather unorthofox, and sparked debate among Wall Street desks what may be behind it. One answer that emerged is that for those who did not have fait...

Last week's initial claims print, which surged to 281K from a recent baseline of about 220K, while bad was nowhere near the apocalyptic prints some strategists had predicted in light of the massive closures of restaurants, retailers, lodgings, and virtually all other service establishments which have shuttered for the duration of the coronavirus pandemic. Indeed, many now think that last week's print was "low" only because the real hit was deferred to tomorrow due to processing delays and other logistical issues (countless labor department websites are only sporadically online amid the surge in traffic). And while looking at tomorrow's initial claims report reveals a historic surge in Wall Street expectations, with consensus now expecting up to 750K newly laid-off workers seeking benefits,  according to Southbay, historically one of the most accurate labor market forecasters, tomorrow's print will be a whopper at no less than 2.5 million ! Prior Week Initial C...

The following article by   David Haggith   was published recently:   The soup lines hadn't formed yet. Jobs had not even noticeably started to dry up, but they weren't as easy to find anymore. You had to be angry to quit without having a better job firmly in hand. Stocks were climbing furiously above an economy that had been slowly ebbing away since summer. Sales were down for months, so revenues were down for months, and profits were down. Funding in the world's easiest credit market — interbank repos — was extremely tight — so tight the Fed had to come to the rescue every single day for months, and the problem was only getting worse. Such were the times  before  COVID-19 struck the world in 2020 like an asteroid from some far reach of the solar system crumbling the walls that already sat on cracked foundations, burying in ash a partying world that hadn't yet figured out it was already slowly dying from its own internal decay.   Archeologic evidence of a society alread...