Faber News Flow

How much has the Fed's epic " inflationary is transitory"  policy error cost the world? Try $29 trillion and counting. According to calculations from Bloomberg's Robert Fullem,  the combined market value of the Bloomberg Global Aggregate bond index and the MSCI World index has dropped $29 trillion since its peak in November 2021.  The price gauge of the former has dropped to its lowest level since 2011.  That is more than twice the level of the world's international reserves assets, currently at about $12 trillion. As Fullem notes,  the drop in asset prices may not just be about inflation or rising rates but also about the prospect of a perpetual debt spiral to fuel a modicum of growth . Central-bank rate hikes and balance sheet trimming is making future debt more expensive. In some cases, debt costs rise further amid a dearth of foreign buyers as investors stick to local markets and official accounts see reserve balances shrink. In other cases, a high absolute ...

VEN, 23 SETTEMBRE 2022 h.  6:31 EDT,  AGGIORNATO VENERDÌ 23 SETTEMBRE 2022  h.  16:18 EDT by  Jenni Reid (CNBC)   La sterlina è scesa a partire da $ 1,084, dopo che un programma di tagli alle tasse è stato presentato alla Camera dei Comuni. La sterlina ha registrato un precipitoso calo rispetto al biglietto verde quest'anno, raggiungendo livelli che questo mese non si vedevano dal 1985. Le misure di venerdì sono state annunciate dal governo come l'annuncio di una nuova era per il Regno Unito incentrata sulla crescita e includevano un mix di tagli fiscali e incentivi agli investimenti per le imprese. La sterlina ha toccato un minimo storico. La  sterlina britannica  è scesa del 3,5% rispetto al dollaro venerdì, dopo che il nuovo governo britannico ha annunciato un  piano economico radicale  nel tentativo di rilanciare la crescita. La sterlina è scesa a partire da $ 1,084, estendendo le perdite subite dopo che le misure sono state svelate in mattinata a Londra. La sterlina è sta...

Don't let the cacophony of central-bank rate-hike announcements mislead you: global policy settings are still historically loose. Monetary policy has room to tighten much more significantly, leaving asset prices exposed to further, potentially material, downside. This week the Riksbank in Sweden unexpectedly hiked 100bps, on Wednesday the Fed delivered its fifth consecutive rate increase, while the Philippines, Indonesia, Switzerland, Norway, South Africa and the UK are all expected to lift rates today. Yet despite this flurry of policy tightening, the Global Policy Rate – the median central-bank rate of the major EM and DM countries around the world – is only 3%. This rate was more than 5% before the Lehman crisis, and 15% in the early 1980s. But it's the inflation-adjusted version of this measure that's the real (pun intended) eye opener: the Global Real Policy Rate is very negative and still close to its historical lows. It has only recently begun to turn up, and has a l...

An energy policy that bans investment in some technologies based on ideological views and ignores security of supply is doomed to a strepitous failure. The energy crisis in the European Union was not created by market failures or lack of alternatives. It was created by political nudging and imposition. Renewable energies are a positive force within a balanced energy mix, not on their own, due to the volatile and intermittent nature of the technology. Politicians have imposed an unstable energy mix banning base technologies that work almost 100% of the time and this has made prices soar for consumers and threatened security of supply. This week, Ursula Von Der Leyen, President of the European Commission, gave two messages that have grabbed many headlines.  First, she announced a strong intervention in the electricity market, and then she stated at the Baltic Sea Energy Security Summit the proposal to increase renewables to 45% of the total generation mix by 2030.  She considers...

Even though European power and natural gas prices have subsided this week, Germany, the largest economy in the bloc, still faces historically high energy costs that have forced cuts in industrial output.  The latest example is the world's largest steelmaker, ArcelorMittal, which released a  statement  Friday about shutting down two plants and idling one.  Europe's top steelmaker said two plants in Germany (one in Bremen and the other in Hamburg) would be partially closed at the end of September. A plant in Asturias, Spain, will also be idled.  ArcelorMittal blamed the coming smelter shutdowns on "the exorbitant rise in energy prices," which is devastatingly impacting the company's "competitiveness of steel production." The decision to reduce metal output was also based on "weak market demand and a negative economic outlook" as energy hyperinflation risks sending Europe into a deep recession.   "As an energy-intensive industry, we are extre...

Over the last 72 hours, China and Russia have taken big steps toward separating themselves from the monetary policy and economies of the west – and nobody has even noticed. Those who have been reading my blog for the last couple of weeks know that I have been predicting that China and Russia would grow far closer economically, creating, in essence, a second global monetary system where the US dollar is no longer the reserve currency. A few weeks ago we proclaimed that Russia would back the ruble with gold as a way to fight back against western economic sanctions. I also made similar predictions about the new digital Chinese currency last summer . This shift is happening as a result of the United States and the rest of the western economies foolishly thinking that they're going to be able to effectively sanction Russia economically, despite the fact that Russia is a massive producer of oil and the country seems prepared to back its currency, the ruble, with this productive capacity....

SPX - time to chill? SPX has squeezed from the low of the range straight up to the high of the range. People still try to push the break out momentum, but there is no trend in SPX to be pushed. Let's see where we go from here, but we are rather overbought; 4500/4520 is a big "congestion" area and short gamma is gone (dealers are sellers of deltas on upticks). Time for SPX to chill for a few days? Source: Refinitiv Who is buying this tape right now? Answer: CTAs ($20b S&P this week), Retail (High Retail Sentiment Basket +578bps...GME +30% and TSLA + 8%), HFs Covers (GS Most Short Basket +376bps) and L/Os back nibbling in China ADRs on heels of BABA $25b buyback (China ADR Basket +823bps) (GS trading desk) ~7% stocks account for over 90% of all gains Even in the public markets power law dynamics play out. In between 1980 to 2014….~40% of stocks lost money, 64% of stocks underperformed benchmark and ~7% stocks account for over 90% of all gains (Bobby Molavi) Time to hedg...

It's not just Wall Street's increasingly less shrill army of legacy permabulls that has dismissed the collapsing 2s10s yield curve in favor of other, less relevant alternatives when it comes to timing the next recession: during Monday's speech by Jerome Powell, the Fed chair did so too, because as DB's Jim Reid explains, the Fed has "long preferred measures like the spread between the 18m forward 3m yield and the 3m yield which as our CoTD shows is now the steepest since on record with data going back to 1996." This has profound implications, the biggest one being that  the Fed won't see a 2s10s inversion as a reason to slow down rate hikes and that on their measure they have a record level of steepness in their curve to play with before the curve gets to a flat enough level to worry them.  In other words, the Fed won't realize that the US is in a full-blown until as much as 9-12 months  after  the fact. For his part, Jim Reid writes that "I can...

In recent weeks we have repeatedly directed attention to the woeful liquidity in the e-mini S&P future, arguably the most important contract behind the broader US equity market, where book depth has collapsed to levels last seen during the March 2020 crash when just an order size of just 4 million could move the contract by 1 tick. This has translated into violent and often painful swings in the S&P, leading to a surge in intraday volatility which has reflexively reinforced the market's sharp downdraft in the past month, which in turn has led to even less liquidity, and so on. Yet while stocks have seen a surge in volatility in the past month coupled with a collapse in liquidity, bond markets have remained relatively resilient despite the Fed's upcoming quantitative tightening. That's about to change. As Bloomberg's Edward Bolingbroke  writes , liquidity in the world's (normally) deepest and most liquid market, that of U.S. Treasuries,  is eroding again, as ...