Author: BlackMask Financial

Inflation Could Paralyze Global Policymakers

How will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months. The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, supply bottlenecks in both goods and labour markets, and shortages of some commodities, intermediate inputs, final goods, and labour. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary. The four scenarios depend on whether growth accelerates or decelerates, and on whether inflation remains persistently higher or slows down. Wall Street analysts and most policymakers anticipate a “Goldilocks” scenario of stronger growth alongside moderating inflation in line with central banks’ 2% target. According to this view, the recent stagflationary episode is driven largely by the impact of the Delta variant. Once it fades, so, too, will the supply bottlenecks, provided that new virulent variants do not emerge. Then growth would accelerate while inflation would fall. For markets, this would represent a resumption of the “reflation trade” outlook from earlier this year, when it was hoped that stronger growth would support stronger earnings and even higher stock prices. In this rosy scenario, inflation would subside, keeping inflation expectations anchored about 2%, bond yields would gradually rise alongside real interest rates, and central banks would be in a position to taper quantitative easing without rocking stock or bond markets. NB: This is a wet dream that is not going to happen. The longer central banks wait to raise rates, the longer they want to stop the buying of debt and the more politicians subsidize stupidness and throw money at the masses the worse thing will get… It will be ugly, They will have to slam on the brakes and soon!

In equities, there would be a rotation from US to foreign markets (Europe, Japan, and emerging markets) and from growth, technology, and defensive stocks to cyclical and value stocks. The second scenario involves “overheating.” Here, growth would accelerate as the supply bottlenecks are cleared, but inflation would remain stubbornly higher, because its causes would turn out not to be temporary. With unspent savings and pent-up demand already high, the continuation of ultra-loose monetary and fiscal policies would boost aggregate demand even further. The resulting growth would be associated with persistent above-target inflation, disproving central banks’ belief that price increases are merely temporary. The market response to such overheating would then depend on how central banks react. If policymakers remain behind the curve, stock markets may continue to rise for a while as real bond yields remain low. But the ensuing increase in inflation expectations would eventually boost nominal and even real bond yields as inflation risk premia would rise, forcing a correction in equities. Alternatively, if central banks become hawkish and start fighting inflation, real rates would rise, sending bond yields higher and, again, forcing a bigger correction in equities. A third scenario is ongoing stagflation, with high inflation and much slower growth over the medium term. In this case, inflation would continue to be fed by loose monetary, credit, and fiscal policies. Central banks, caught in a debt trap by high public and private debt ratios, would struggle to normalise rates without triggering a financial-market crash.

Moreover, a host of medium-term persistent negative supply shocks could curtail growth over time and drive up production costs, adding to the inflationary pressure. Such shocks could stem from de-globalisation and rising protectionism, the Balkanisation of global supply chains, demographic ageing in developing and emerging economies, migration restrictions, the Sino-American “decoupling,” the effects of climate change on commodity prices, pandemics, cyberwarfare, and the backlash against income and wealth inequality. In this scenario, nominal bond yields would rise much higher as inflation expectations become de-anchored. And real yields, too, would be higher (even if central banks remain behind the curve), because rapid and volatile price growth would boost the risk premium on longer-term bonds. Under these conditions, stock markets would be poised for a sharp correction, potentially into bear-market territory (reflecting at least a 20% drop from their last high). The last scenario would feature a growth slowdown. Weakening aggregate demand would turn out to be not just a transitory scare but a harbinger of the new normal, particularly if monetary and fiscal stimulus is withdrawn too soon. In this case, lower aggregate demand and slower growth, stocks would crash  to reflect the weaker growth outlook, and bond yields would fall further (because real yields and inflation expectations would be lower).

The last scenario would feature a growth slowdown. Weakening aggregate demand would turn out to be not just a transitory scare but a harbinger of the new normal, particularly if monetary and fiscal stimulus is withdrawn too soon. In this case, lower aggregate demand and slower growth would lead to lower inflation, stocks would correct to reflect the weaker growth outlook, and bond yields would fall further (because real yields and inflation expectations would be lower). NN: Pick your poison a stock market crash is coming… the biggest ever…

https://youtu.be/uSQ7pBzlQ3c

Surging shopper demand coupled with shipping container shortages and bottlenecks at ports have already triggered tighter supply of products, from cars to shoes. In particular, some of America’s biggest sellers of clothing and shoes cite one catalyst that has compounded the pressure: factory closures in Vietnam stemming from a second wave of the coronavirus outbreak there. That’s led brands from PacSun to Nike to warn about the effects on their supply. In late September, Nike cut its full-year sales outlook due to supply chain issues, despite its CEO noting strong consumer demand. Nike makes about three-quarters of its shoes in Southeast Asia, with 51% and 24% of manufacturing in Vietnam and Indonesia respectively. But as the Vietnam government imposed pandemic-related restrictions, including a mandatory shutdown of factories for several weeks from July into September, Nike said it incurred 10 weeks of lost production. Even when factories start to reopen, which the company expects to happen in phases beginning in October, ramping up to full production could take several months, Nike’s chief financial officer Matthew Friend said in a recent earnings call. Half of Nike’s clothing factories in Vietnam are currently closed, company executives said during that call. Vietnam accounts for a third of sports brand Under Armour’s footwear and clothing production. Under Armour’s CEO Patrik Frisk said during its most recent earnings call in August that it was closely monitoring impact of factory shutdowns there on its supply chain there, calling it a “developing situation.” Vietnam is a crucial supplier to the US in particular for apparel and footwear. “It’s a very big partner of the United States. It’s our second largest source of apparel and footwear,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association, an industry group. China is the largest supplier of clothing and shoes, according to the AAFA. In July, Vietnam was caught in the throes of a coronavirus outbreak caused by a suspected new variant of the virus, which Vietnam’s health minister said led to a fast spread of new infections in the nation’s industrial zones. The government subsequently imposed strict lockdowns and temporarily shut factories there until mid-August, then extended it into September. Some factories are still closed. All of this means that production for everything from sneakers and sandals to jeans, dresses, T-shirts, jackets and more is stalled. In a research note last month, BITG analyst Camilo Lyon said athletic footwear brands such as Nike and Adidas are most at risk of having serious supply chain disruptions because “Vietnam has served as a strong manufacturing alternative to China in recent years.” Other brands that have significant manufacturing exposure to Vietnam, he said, include Ugg maker Deckers Outdoor, Columbia Sportswear, Coach parent Tapestry and Capri Holdings (which owns the Michael Kors brand). Lyon estimates it may take five to six months for factories in Vietnam to be back up and running normally when the lockdown ends. And whenever they do come back on line, he anticipates another issue: staffing. “Vietnamese factories will also likely have trouble getting workers to come back to work post-lockdown,” he said. Teen retailer PacSun is expecting an impact to the holiday season. Brieane Olson, president of PacSun, said in an interview in August with CNNBusiness that about 10% of its goods are sourced from Vietnam. Olson said the retailer was already dealing with a two-to-four week delay for its back-to-school inventory this year because of the ongoing global supply chain delays. Now, she said, new products for the winter and holiday season is likely to also face another four-week delay, she said, making it a challenge to get new fashions and styles in jeans, tops, sweaters and sweatshirts into stores in a timely manner. And there’s an additional effect on the consumer, Olson said: Having less product means the retailer will pull back on discounts “because there is no need for it,” she said. NN: I remember when these corporate titans panicked when China shut down and went whole hog into Vietnam of all places. Investing billions in factories. One thing we have seen the commies are loath to report actual infection rates. What were they thinking? It was obvious the plague was spreading around the globe. Why would any of their board of directors assume a poor country like Nam would be immune…. Obviously they fucked up again big time……. These supply chain disruptions are far from over.

The United States reached another grim milestone on Friday, as the confirmed coronavirus death toll topped 700,000, just over a year and a half into the pandemic, and despite the wide availability of vaccines. The milestone, according to data from Johns Hopkins University, comes less than two weeks after the national death toll surpassed the estimated number of fatalities in the U.S. during the 1918 influenza pandemic. Despite national COVID-19 metrics showing encouraging signs of decline, approximately 1,500 Americans are dying from the virus every day, according to federal data. “Reaching 700,000 deaths is a tragic and completely avoidable milestone. We had the knowledge and the tools to prevent this from happening, and unfortunately politics, lack of urgency and mistrust in science got us here,” said John Brownstein, Ph.D., an epidemiologist at Boston Children’s Hospital and ABC News contributor. To put it in perspective, the staggering number of deaths is greater than the number of Americans who were estimated to have died of cancer last year, one of the nation’s leading causes of death. It’s higher than the total number of American troops who have died in battle throughout the recent history of the country, and it is about the same as the population of Boston, Massachusetts. Some experts believe that the current COVID-19 death count could already be greatly undercounted, due to inconsistent reporting by states and localities, and the exclusion of excess deaths, a measure of how many lives have been lost beyond what would be expected if the pandemic had not occurred. The country’s four largest states — California, Texas, New York and Florida — all have recorded more than 50,000 deaths, close to a third of the overall total. The COVID death toll is now seven times what former President Donald Trump once predicted in the early days of the pandemic. “The minimum number was 100,000 lives, and I think we’ll be substantially under that number. … So we’ll see what it ends up being, but it looks like we’re headed to a number substantially below 100,000,” Trump said in April 2020. Approximately 117.4 million Americans remain completely unvaccinated, nearly 70 million of whom are over the age of 12 and eligible for a vaccine. On average, the number of Americans receiving a newly authorized Pfizer third dose is now higher than the number of Americans initiating a vaccination each day. “Heading into the winter months, we can significantly delay the next grim milestone if more people, especially those at high risk for severe illness, choose to get vaccinated,” said Ajay Sethi, an epidemiologist and associate professor of population health sciences at the University of Wisconsin-Madison. People who have not been fully vaccinated are eight times more likely to test positive, 41 times more likely to be hospitalized, and 57 times more likely to die, compared with people who are vaccinated, according to CDC Director Rochelle Walensky

“We are laser-focused on getting more shots in arms, particularly to vaccinate the unvaccinated. That’s our path out of this pandemic. So if you’re unvaccinated, please go get a shot. It’s free, it’s safe, it’s easy. It’ll help make all of us safer,” Walensky said at a press conference on Friday. NN: Little to add. that’s a lot of dead people. Remember its conclusive your vaccine wears off after 5 to 7 months. To me the delay in rolling out the third vaccines is criminal. As far as the anti vaccines….. you made your choice and within the next year you will live or die by your decision…. Good Luck!

Former FDA head says Merck’s oral pill could become a powerful tool in combating COVID in high-risk patients who are already symptomatic. Merck cheered investors and healthcare experts alike on Friday with the news that its COVID-19 antiviral cut the risk of hospitalization or death by roughly half in a late-stage trial, and could become a powerful tool in reining in the pandemic.

The drug company MRK, 9.49% said molnupiravir, an oral antiviral developed with partner Ridgeback Biotherapeutics, reduced the risk of hospitalization or death in at-risk adult patients with mild to moderate COVID by about 50% in an interim analysis of data from a late-stage trial. The data came from 775 patients out of 1,550 that were enrolled in the trial. Merck shares soared 9% in early trades Friday as investors welcomed what would be a much-needed and long-awaited treatment for COVID. While several effective vaccines have been developed against the illness, far fewer treatments have emerged, and those that have require infusions and must be administered in a clinical setting.Molnupiravir is a pill administered orally in capsule form every 12 hours for five days, according to clinicaltrials.gov.Through Day 29 in the Phase 3 trial, no patients given molnupiravir died, compared with the eight patients who died on the placebo. The company is now planning to submit an application for emergency-use authorization for the treatment from the Food and Drug Administration and to seek authorizations from other regulatory bodies around the world.Merck plans to produce 10 million courses of treatment by year-end. The U.S. government has already committed to purchasing about 1.7 million courses of the drug, once it receives an EUA.

The company said it halted the study early at the recommendation of an independent data-monitoring committee and in consultation with the FDA, because the results were so positive.

Health experts applauded the news and said it would make a big difference in the fight against the coronavirus-borne illness, which has caused the deaths of almost 5 million people since the start of the outbreak. NN: Anything that can  keep people off ventilators well help. Its not yet time to declare victory…… Do not let your guard down

• Comfortable with where the FOMC seems to be heading
• But does not believe Fed needs to raise rates until 2024
• The job market still has a long way to go before healing
• Once supply chain issues are resolved, worried that Fed will have to deal with same forces that have pinned down inflation before the pandemic

Wants to see broader measures of wages increasing to start believing that the labour market is getting tighter His remarks on tapering fits with what the Fed is priming for before year-end but his timeline on rates is arguably leaning more towards the dovish side, all things considered. He is still arguing that rising inflation pressures are largely transient in nature and while that may be true, the persistently high costs/prices is surely still something that they have to address eventually especially if supply chain issues are going to take much longer to work themselves out. NN:  You can not see what you don’t want to see. The institution of the FED survival is in question. They cannot admit they have lit off embedded inflation. They cannot admit that over stimulation has created an incredible destructive bubble. When the markets crash (not to be confused with a correction) and they will crash . The whipping boy will be the FED and they will no longer exsit in the present structure…. And they damn well know it. Since they have fucked up royally their only help is denial and pray for a miracle…..

JERUSALEM, Oct 1 (Reuters) – Israel’s Health Ministry has identified fewer than 10 cases of heart inflammation following a third dose of the Pfizer/BioNtech vaccine among millions administered, according to recently released data.

Israel began administering boosters to risk groups in July and by the end of August expanded its campaign to include anyone above the age of 12, five months or more after a second dose. Having kicked off its rapid vaccination drive relatively early, in December, Israel was one of the first countries to report that the vaccine’s protection diminished with time, and has since deemed its booster campaign safe and effective. The booster drive is being watched closely in the United States, where third Pfizer shots have been rolled out for those 65 and older, all people at high risk of severe disease, and others who are regularly exposed to the virus. In data published late on Thursday, the Health Ministry reported nine cases of myocarditis within four age groups that comprised more than 1.5 million people who had received a booster shot. All were male, three were between the ages of 16 and 29 and six were in the 30-59 group. Eight more possible cases were still being reviewed. Most myocarditis cases are generally mild, the ministry said. In total, out of all 3.2 million Israelis who have received a third jab, 25 reported serious adverse events that appeared within 30 days of the shot, including myocarditis, though a causal link had yet to be established among many of them. Employing a “living with COVID” strategy, the government is hoping that the boosters, so far administered to around a third of the 9.3 million population, will fend off an outbreak of the Delta variant while the economy is kept open. Since Delta began spreading in June, the government has reimposed indoor mask wearing and Israelis require a Green Pass – a digital document that confirms full immunization, including a third shot, or recovery from the illness – to enter most places of leisure. Teachers must either be vaccinated or get tested in order to enter schools. The number of COVID-19 patients hospitalized in serious condition has been dropping in recent days, as has the number of confirmed daily cases, which now stand at around 4,000, compared with around 8,000 a month ago. But experts are concerned that, with schools reopening this week after the Jewish high holiday season, illness will shoot up again. They have urged the government to take more steps to rein in infections, such as limiting large crowds, and not to rely on boosters alone. NN: this is a story we broke months ago. To maybe avoid  myocarditis be sure your booster shot is not injected in a vein. Many Many countries are mandating that health care workers aspirate the vaccine syringe.