BlackMask Breaking News

Stock and bond investors who’ve spent months sneering at the Federal Reserve are starting to worry about a comeuppance. On the eve of a landmark gathering in Jackson Hole, Wyoming, a concern repeatedly voiced in interviews with big money managers is that market confidence itself is something the Jerome Powell-led bank is bent on doing away with. Financial conditions — going by measures of strain across asset classes — are at easier levels than before the Fed kicked off its most aggressive tightening campaign in decades back in March, according to a Bloomberg gauge. By Powell’s own admission, that’s a problem for policy makers, who are monitoring whether these drivers and strictures on the real economy are “appropriately tight” as they battle to cool inflation.   “The Fed needs to break one of two things,” said Gene Tannuzzo, global head of fixed income at Columbia Threadneedle. “Either they need to break the labor market, with unemployment pushing higher. Or they need to break financial conditions.”

Even with this week’s shudder, stocks and Treasuries have rebounded mightily from June’s lows. Corporate bonds have rallied as well, with spreads on both investment-grade and high-yield debt far narrower than July’s peaks.  That’s all served to ease financial conditions as policy makers try and beat back market pricing of a friendlier Fed in the face of still decades-high inflation. Earlier this week, Federal Reserve Bank of Minneapolis President Neel Kashkari said it’s “very clear” the Fed needs to continue tightening. On Wednesday alone, both Kansas City Fed President Esther George and Philadelphia Fed President Patrick Harker said rates need to be lifted into restrictive territory.

“I don’t think the market’s listened to any of the governors,” Tom Thornton, Hedge Fund Telemetry Founder, said in a Bloomberg Television interview. “It’s going to take Powell to reverse some of the dovish comments he had at the last Fed meeting to have the market take this seriously.”

Minutes of the Fed’s meeting last month stoked a view that the Fed might soon pivot to a less-aggressive stance. After several consecutive super-sized hikes, the pace of rate increases could slow “at some point,” the minutes showed. But even if policy makers back off from another 75-basis point hike at September’s meeting, quantitative tightening is scheduled to kick into its highest gear. The balance-sheet runoff’s monthly cap will lift from $47.5 billion to a maximum pace of $95 billion next month — a reality that has yet to be reflected in markets.

“Here we are with a Fed that’s going to want to reduce the size of its balance sheet, it wants to soak up excess liquidity, and as that happens, markets are doing exactly the opposite,” Karissa McDonough, Community Bank Trust Services fixed-income strategist, said in a Bloomberg Television interview. “They are going to do whatever they can to put a fork in it.”

The potential for a marketwide shock is high. A Barclays Plc measure of cross-asset correlation is hovering near the highest levels of the past 17 years, with everything from equities to bonds to commodities moving seemingly in lockstep. 

The current macro-obsession across markets puts the focus squarely on Powell’s performance Friday. Given that the annual Jackson Hole symposium is such a high-profile event, the Fed Chair would be seen as endorsing the easing seen in financial conditions if he doesn’t comment on it, according to LH Meyer’s Derek Tang. “The Fed really needs to convince the market that you are not taking us seriously enough — we are saying all these things and you are not believing us,” said Tang, an economist at LH Meyer in Washington. “People are want a comment from Powell on it. And if he doesn’t, it’s sort of silence speaks volumes.” NN: I want to be clear here. I expect a 20% drop in the NASDAQ100 from here in the next 10 months….. Be careful of the chop shop. The algo guys will chop us to ribbons if we ovrleverage….

 

 

Consensus is growing for an idea first proposed by Saudi Arabia that it could pump fewer barrels

OPEC+ Is a Big Winner of Russia’s War in Ukraine. High oil prices have been beneficial for OPEC+, an alliance of oil-producing countries that controls more than half of the world’s output.  Momentum is building among oil producers behind the idea of cutting crude production to stabilize the market, with OPEC’s president the latest to back Saudi Arabia’s suggestion that the alliance might pump less—comments that pushed the price of a barrel back over $100 earlier this week. The growing consensus among members of the Organization of the Petroleum Exporting Countries and its Russian-led allies, known as OPEC+, threatens to keep energy prices elevated despite Biden administration efforts to get the members to pump more.

https://youtu.be/5hiQyK_4eGc

WASHINGTON, Aug 24 (Reuters) – President Joe Biden said on Wednesday the U.S. government will forgive $10,000 in student loans for millions of debt-saddled former college students, keeping a pledge he made in the 2020 campaign for the White House. The move could boost support for his fellow Democrats in the November congressional elections, but some economists said it may fuel inflation and some Republicans in the U.S. Congress questioned whether the president had the legal authority to cancel the debt.

Debt forgiveness will free up hundreds of billions of dollars for new consumer spending that could be aimed at homebuying and other big-ticket expenses, according to economists who said this would add a new wrinkle to the country’s inflation fight.

The actions are “for families that need them the most – working and middle class people hit especially hard during the pandemic,” Biden said during remarks at the White House. He pledged no high-income households would benefit, addressing a central criticism of the plan. “I will never apologize for helping working Americans and middle class, especially not to the same folks who voted for a $2 trillion tax cut that mainly benefited the wealthiest Americans and the biggest corporations,” Biden said, referring to a Republican tax cut passed under former President Donald Trump. Borrower balances have been frozen since the beginning of the COVID-19 outbreak, with no payments required on most federal student loans since March 2020. Many Democrats had pushed for Biden to forgive as much as $50,000 per borrower. Republicans mostly opposed student loan forgiveness, calling it unfair because it will disproportionately help people earning higher incomes. “President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” Senate Minority Leader Mitch McConnell said Wednesday. The administration has yet to determine the price tag for the package, which will depend on how many people apply for it, White House domestic policy adviser Susan Rice told reporters. Student loans obtained after June 30 this year are not eligible, she said. White House Press Secretary Karine Jean-Pierre told reporters the administration has legal authority to forgive the debt under a law allowing such action during a national emergency such as a pandemic. Earlier, Republican U.S. Representative Elise Stefanik had called the plan “reckless and illegal.” NB: their is no national emergence on student loans. This is an abuse of power. Reminds me of the dictators i have lived under who ruled by decree. American university tuition fees are substantially higher than in most other rich countries, and U.S. consumers carry $1.75 trillion in student loan debt, most of it held by the federal government. Biden said other countries could bypass the United States economically if students are not offered economic relief. The administration will extend a COVID-19 pandemic-linked pause on student loan repayment to year end, while forgiving $10,000 in student debt for single borrowers with annual income under $125,000 a year or married couples who earn less than $250,000, the White House said. Some 8 million borrowers will be affected automatically, the Department of Education said; others need to apply for forgiveness. The government is also forgiving up to $20,000 in debt for some 6 million students from low-income familieswho received federal Pell Grants, and proposing a new rule that protects some income from repayment plans and forgives some loan balances after 10 years of repayment, the Education Department said. A New York Federal Reserve study shows that cutting $10,000 in federal debt for every student would amount to $321 billion and eliminate the entire balance for 11.8 million borrowers, or 31% of them. After Dec. 31, the government will resume requiring payment on remaining student loans that were paused during the pandemic. The official said this would offset any inflationary effects of the forgiveness. Payment resumptions could even have a dampening effect on prices, the official said.

Former U.S. Treasury secretary Larry Summers disagreed. He said on Twitter that debt relief “consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”

Similarly Jason Furman, a Harvard professor who headed the Council of Economic Advisers during the Obama administration, said debt-cancellation would nullify the deflationary powers of the Inflation Reduction Act. “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” he said.

NN: if you “forgive” the debt who pays it. This is another multi billion dollar liberal lefty gift to them selves out of the treasury… Its inflationary as hell as is the build back better bill renamed  ( ha ha ha ha) Inflation Reduction Act…. The Fed is trying to rein in spending that is how you stop inflation… The more governemnt stimulus by any name they choose is that much higher for longer interest rates must go!

Reuters) – Oil prices ended Wednesday higher after a volatile trading session on concerns that the United States will not consider additional concessions to Iran in its response to a draft agreement that would restore Tehran’s nuclear deal – and potentially the OPEC member’s crude exports. Iran said it had received a response from the United States to the EU’s “final” text for revival of Tehran’s 2015 nuclear deal with major powers. Brent crude settled up $1.00 to $101.22 while U.S. crude settled up $1.15 to $94.89 a barrel. Both benchmarks fell by more than $1 earlier in the session. Oil was also supported after Saudi Arabia suggested this week that the Organization of the Petroleum Exporting Countries could consider cutting output, though bearish economic signals from central bankers and falling equities weighed. Both crude oil benchmark contracts touched three-week highs earlier on Wednesday after the Saudi energy minister flagged the possibility of cutting production. OPEC sources later told Reuters that any cuts by the producer group and its allies, known collectively as OPEC+, are likely to coincide with a return of Iranian oil to the market should Tehran secure a nuclear deal with world powers. A U.S. official on Monday said that Iran had dropped some of its main demands in negotiations to resurrect a deal to rein in Tehran’s nuclear programme. OPEC+ is already producing 2.9 million barrels per day less than its target, sources said, complicating any decision on cuts or how to calculate the baseline for an output reduction. “The oil price and supply outlook suggest that an OPEC+ cut is not currently warranted,” PVM analyst Stephen Brennock said. “Global oil supply could take a hit as peak U.S. hurricane season approaches. Elsewhere, future supply outages in Libya cannot be discounted while Nigeria’s oil fortunes show little sign of improving.” Earlier in the session oil prices fell after U.S. government data showed lackluster demand for gasoline, which augurs for a notable slowdown in economic activity. Gasoline demand data showed the four-week average of daily gasoline product supplied 7% below the year-earlier period.

NN:

The United States rejected all additional conditions requested by Iran in its latest response to the European Union’s nuclear deal draft, Al-Arabiya reported on Wednesday. According to the report, Washington said that Iran’s uranium enrichment must not exceed 4%, adding that the US wants to see Tehran lift all restrictions on international inspectors.