2022-10-03
A Red October to Follow Black September?
Don’t expect a quick pivot for anything short of a Lehman-style financial crisis.
That explains the intense speculation about Credit Suisse that led to the release of a memo from its chief executive officer, Ulrich Koerner, on Friday. The key section reads as follows:
I know it's not easy to remain focused amid the many stories you read in the media – in particular, given the many factually inaccurate statements being made. That said, I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank.
It’s never healthy when a CEO has to offer reassurance like this.
John Authers Bloomberg 3 oktober 2022
2022-10-02
Credit Suisse Default Swaps Near 2009 Level
Credit Suisse’s market capitalization dropped to around 10 billion Swiss francs. The market value was above 30 billion francs as recently as March 2021.
Bloomberg 2 October 2022
Credit Suisse Chairman Axel Lehmann
Swissair was the national airline of Switzerland between its founding in 1931 and bankruptcy in 2002.
2 October 2001 saw an increased necessity for strong liquidity, as all suppliers insisted on cash payments of outstanding invoices following the request of payment delay announced the day before.
Cash reserves of Swissair filed on this day were barely sufficient to carry out the first morning flights. During the morning, fuel suppliers refused to fuel the waiting aircraft.
Senior Credit Suisse executives spent the weekend reassuring large clients, counterparties and investors about the Swiss bank’s liquidity and capital position in response to concerns raised about its financial strength
FT 2 October 2020
US Housing Prices Fall for First Time Since 2012
To be sure, prices remain high.
The Case-Shiller national index jumped 15.8% year-over-year in July. The smallest gain since April 2021
Niall Ferguson - I am struggling to see that good trends outnumber bad ones...
... in the way that Summers and Pinker suggest.
The planet keeps getting warmer
The world’s population keeps growing
In the US life expectancy is declining
Donald Trump could well be the Republican nominee in 2024
OK, I know, there are some good trends. For example, the unit costs of photovoltaics and batteries for electric vehicles have fallen substantially over the past two decades.
How is the trend in inflation around the world in any sense good? Thirty-seven countries now have double-digit inflation rates
Judged in terms of the growth rate of the money supply, the Federal Reserve made a bigger mistake last year than at any point between 1968 and 1979.
Increased conflict, ranging from proxy wars such as the one raging in Ukraine, to the risk of a full-blown nuclear Armageddon over Taiwan.
Niall Ferguson Bloomberg 2 oktober 2022
Gazprom Halts Gas Supplies to Italy
Bloomberg 1 oktober 2022
2022-10-01
Once inflation rises above 5%, it takes an average of 10 years for it to return to 2%
In a recent research note Athanasios Vamvakidis, a strategist at Bank of America, analysed episodes of high inflation in advanced economies between 1980 and 2000.
Mr Vamvakidis found that once inflation rises above 5%, it takes an average of 10 years for it to return to 2%.
This suggests that the consensus view—that inflation in America will come down to 3% by 2024—may be too optimistic.
The Economist 30 September 2022
https://www.northumbria.ac.uk/about-us/our-staff/v/athanasios-vamvakidis/
The everything-rally that investors were once accustomed to during 13 years of near-zero interest rates is over
Runaway Bear Market Blows Past Everything
During the previous six bear markets, all bottoms formed when the Fed was lowering rates. That’s a long way off considering bond traders currently don’t expect Fed rates to peak until April 2023.
Down for a sixth time in seven weeks, the S&P 500 sank to fresh bear-market lows.
Notching a 25% decline in nine months, the benchmark index has now suffered its third-worst performance at this point of a year since 1931.
“The market is forced to reckon with the possibility that the central-bank put is not in place.”
Amid the relentless selling, bulls are yielding one after another. Retail traders, one of the most steadfast dip buyers since the 2020 pandemic crash, are bailing on stocks.
Bloomberg 30 september 2022
Short sellers are homing in on Cathie Wood’s pool of exchange-traded funds,
undeterred by the rising cost to bet against the Ark Investment Management family.
Raging Markets Selloff in Five Charts: $36 Trillion and Counting
Stocks and bond fall in tandem as investors rush to cash
Jan-Patrick Barnert Bloomberg 1 oktober 2022
Government bond yields, after declining for 40 years, might be trending upwards again OBS date 5 January 2022
Trigger points loom over equity markets
Philip Coggan FT 5 January 2022
https://englundmacro.blogspot.com/2022/02/government-bond-yields-after-declining.html
Economic orthodoxy is not ideological but the accumulated knowledge and experience of what tends to work best
Accusations that economic orthodoxy is driven by a cosy cabal of the Davos-attending global elite
It is not the slave of some defunct economist, but a constantly evolving body of thinking and experimenting in the real world.
Far from every element of the “Washington consensus” — the economic orthodoxy of the 1990s — survived the Asian financial crisis in the latter part of that decade.
The lesson from 2010 to 2015, now accepted by the IMF, OECD and European Commission, is that there was a little too much focus on deficit reduction and austerity in the post-global financial crisis years.
Chris Giles FT 29 September 2022
https://www.ft.com/content/f1f27816-b0ca-4b66-a8fe-cce74c3b0af2
Her Majesty’s question ("If these things were so large, how come everyone missed them?")
Chris Giles, FT, November 25 2008
https://englundmacro.blogspot.com/2022/01/why-did-almost-nobody-see-inflation.html
What is the “Washington Consensus? Did it fail?
https://englundmacro.blogspot.com/2021/09/what-is-washington-consensus-did-it-fail.html
Svenska fondsparare 900 miljarder kronor fattigare
Svenska fondsparare har blivit närmare 900 miljarder kronor fattigare under årets tre första kvartal.
Värst drabbade är ägare till Sverigefonder och småbolagsfonder. Här har börsfallet kapat uppemot 30-40 procent av värdet från årsskiftet.
Hans Bolander DI 30 september 2022
https://www.di.se/nyheter/svenska-fondsparare-900-miljarder-kronor-fattigare/
Den svenska fondbranschen lever gott på att förvalta drygt 6.000 miljarder kronor åt svenska hushåll och företag.
Hans Bolander DI 17 september 2022
https://englundmacro.blogspot.com/2022/09/sparekonomer-fondsaljare-hall-ut-borsen.html
60 per cent of actively-managed equity funds have fallen further than the market
They don’t want to be what investor Mark Kritzman calls “wrong and alone.”
FT 27 July 2022
https://englundmacro.blogspot.com/2022/07/60-per-cent-of-actively-managed-equity.html
Lånekraschen lärde inte bankerna något
Bankerna fortsätter att spekulera i symbios med de myndigheter som ska övervaka dem.
Lars Hässler SvD 6 april 2015
https://www.svd.se/a/67d4183d-f4e7-3b61-ab90-16920e318024/lanekraschen-larde-inte-bankerna-nagot
Lars Hässler hos Det Goda Samhället
https://detgodasamhallet.com/category/lars-hassler/
Det Goda Samhället
Patrik Engellau
https://detgodasamhallet.com/category/patrik-engellau/
”PV, WC och teve”
Patrik Engellau 25 september 2022
2022-09-30
Fed’s Lael Brainard Warns on Inflation, Financial Stability Risks
Fed Vice Chairwoman Lael Brainard said it would take time for policy tightening to take full effect.
Ms. Brainard devoted most of her speech to financial stability risks that central banks around the world could face as they raise rates rapidly, especially as many countries face very high inflation.
They may face added pressure to raise rates to prevent their currencies from depreciating as the Fed and others lift borrowing costs.
WSJ 30 September 2022
https://www.wsj.com/articles/feds-brainard-warns-on-inflation-financial-stability-risks-11664542846
15 years on from the great financial crisis, there’s still plenty of risk in the market
Fastighetsbolagen kunde i början av året låna till nära noll procents ränta
På Stockholmsbörsen har fastighetsindex rasat med 23 procent på bara två veckor. I den sektor som ofta ses som avgörande för pensioner och finansiell stabilitet, har mer än halva börsvärdet gått upp i rök sedan årsskiftet.
I stormens öga befinner sig Ilija Batljans SBB
Fastighetsbolagen kunde i början av året låna till nära noll procents ränta, eller till bara någon enstaka procent, men i dag kräver vissa långivare uppåt 10 procent.
– Det innebär att obligationsmarknaden är praktiskt taget stängd.
– Just nu är det inga stora obligationer som löper ut, men från 2023 och framåt handlar det om cirka 100 miljarder kronor per år i förfall på obligationsmarknaden.
Johan Hellekant SvD 30 September 2022
https://www.svd.se/a/dwnlQA/sbb-i-gungning-rantan-stoppar-affarer
US Home prices rose more than 40 percent from February 2020 to June 2022
The pandemic housing price surge may seem reminiscent of the 2000s bubble. But this time really is different, in a couple of ways.
Soaring prices in the 2000s were generally limited to coastal metropolitan areas where zoning requirements and NIMBYism often made it hard to build more housing.
This time, though, prices have soared everywhere
The good news is that one important source of recent inflation, especially high core inflation, may have reflected a one-time shift in people’s housing preferences in response to the pandemic and the changes it wrought rather than an overheated economy in general.
The bad news is that America’s housing affordability crisis has gotten even worse.
Paul Krugman NYT 30 September 2022
https://www.nytimes.com/2022/09/30/opinion/remote-work-housing-prices-covid.html
U.S. Home Prices Record High in Second Quarter
WSJ 11 August 2022
https://englundmacro.blogspot.com/2022/08/sky-high-housing-prices-still-threaten.html
https://englundmacro.blogspot.com/2022/07/the-housing-slowdown-could-become.html
Börsen 30 september 2022
En fastighetsförsäljning i Finspång värd 1,35 miljarder kronor gick i mål för SBB.
SBB-aktien steg kraftigt på fredagen.
https://www.di.se/nyheter/sbb-stangde-miljardaffar-rusade-tvasiffrigt-pa-borsen/
Market instability raising the chances of a pivot by the Fed
Overloaded debt in the financial system can spread like a virus
Market instability is the biggest risk to central banks globally, replacing inflation, owing to massive amounts of leverage.
The Bank of England (BOE) is a current example of what happens when things go awry.
Fed doesn’t want to cause a recession. That may be a challenge for two reasons:
Fed remains focused on lagging economic data, such as employment, which are highly subject to future revisions.
Changes to monetary policy do not show up in the economy until nine to 12 months in the future.
After more than 12 years of the most unprecedented monetary policy program in history, the Federal Reserve has put itself into a poor situation.
Policy makers risk an inflation spiral if they don’t hike rates to quell inflation. If the Fed hikes rates to kill inflation, the risk of a recession and market instability increases.
Lance Roberts MarketWatch 29 September 2022
Lance Roberts is chief strategist at RIA Advisors, editor of Real Investment Advice and host of “The Real Investment Hour.”
https://realinvestmentadvice.com/
2022-09-29
Här ser vi ett fundamentalt övertramp. Det har att göra med EU:s befogenheter, säger Claes Hammarstedt, skatteexpert på Svenskt Näringsliv
Framför allt är han kritisk till att EU-kommissionen presenterar åtgärderna som avgifter och solidaritetsbidrag och inte som en ny skatt.
– Det finns ju ingen motprestation här och finns inte det är det ingen avgift – då är det en skatt, säger han.
Poängen med att hänvisa till krisen och inte kalla åtgärderna vid deras rätta namn är enligt Hammarstedt att EU-kommissionen vill kringgå kravet på enhällighet bland EU-ländernas regeringar om skattebeslut.
Avgifter kan införas med kvalificerad majoritet i rådet.
– Sådant här får ju lätt prejudicerande verkan. Har man gjort det en gång kan man lätt göra det fler gånger. Och den här frågan är känslig inom EU just nu, beslutsordningen kring skatterna, säger han.
Joakim Goksör/TT SvD 29 September 2022
https://www.svd.se/a/696n5L/energikrispaket-sagas-straffbeskattning
The notorious Luxembourg Compromise och Qualified Majority Voting
https://englundmacro.blogspot.com/2022/09/the-notorious-luxembourg-compromise.html
Räntekänsligheten har ökat
Det gör styrräntan till ett kraftfullare verktyg än den varit, vilket Riksbanken är mycket medveten om.
”Den ökade skuldsättningen bland hushållen har gjort att penningpolitiken nu har ett större genomslag på efterfrågan i ekonomin”, som det heter i en läsvärd fördjupningstext i den senaste penningpolitiska rapporten.
Svenska bolåntagare har så smått börjat känna av att även i absoluta tal ganska låga räntenivåer kan svida i plånboken om man bara har tillräckligt stora lån.
Även rörliga bolån har en bindningstid på tre månader. Lejonparten av ränteuppgången har ännu inte letat sig in i de månatliga avierna från banken.
Viktor Munkhammar DI 28 september 2022
https://www.di.se/analys/nu-smaller-ingves-dynamit-med-dubbel-kraft/
Penningpolitisk rapport, september 2022
Interest rates that are far higher than the world has become accustomed to for much of the 21st century
After years of keeping inflation below their 2% targets, the guardians of monetary stability have been caught napping at the wheel. The current G-7 average of 7.2% is way beyond the two-decade mean of 1.7%, the one-decade level of 1.6% or the 2002-2012 average of 1.8%.
Mark Gilbert Bloomberg 29 september 2022
2022-09-28
Börsen 28 september
A wild run for global government bonds after the Bank of England stepped in to stop a rout in the U.K. gilts market, spurring a furious rally on both sides of the Atlantic. The sharp move came just after the 10-year U.S. Treasury note had climbed above 4% for the first time in more than a decade
The notorious Luxembourg Compromise
Europe must curb abusive national vetoes. Time to tweak the notorious Luxembourg Compromise
Some say it does not exist anymore, others that it never really did; Eurocrats speak of it in hushed tones, as if mindful not to wake a monster.
The Luxembourg Compromise holds that any national government can single-handedly derail any eu measure if it feels its “vital interests” are threatened.
The measure was crafted in 1966 to assuage Charles de Gaulle
The compromise is rarely seen in the wild; if anything its use is obliquely threatened behind closed doors.
Yet other such vetoes abound in Brussels. Most eu business now is agreed by a qualified majority of countries. But in several policy areas unanimity among member states is still needed. This includes anything relating to defence and foreign policy, enlargement, taxation and policing
On September 20th a meeting of the bloc’s Europe ministers looked at ways to veto-proof more of the eu’s business by increasing the use of qualified-majority votes. But because the proposal to move away from unanimity itself requires unanimity, it is unlikely to go anywhere.
As with the original compromise, there is no need to codify the Reverse Luxembourg in any treaty.
The Economist 22 September 2022
Nu åker ett antal regeringschefer hem och säger dels att de är stolta över vad de kommit överens om, dels att det är EUs fel.
Att ett antal regeringschefer kommer överens om något gör det inte till ett EU-beslut även om det har fattats i en lokal smyckad med EU-flaggor.
https://englundmacro.blogspot.com/2016/03/migrantoverenskommelsen-var-inget-eu.html
http://www.nejtillemu.com/konvent.htm#qmv
QMV Qualified Majority Voting
The procedures for voting in the Council of the European Union are described in the treaties of the European Union. The Council of the European Union (or simply "Council" or "Council of Ministers") has had its voting procedure amended by subsequent treaties and currently operates on the system set forth in the Treaty of Lisbon. The system is known as qualified majority voting.
https://en.wikipedia.org/wiki/Voting_in_the_Council_of_the_European_Union#Treaty_of_Lisbon
It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."
Romano Prodi, EU Commission President. Financial Times, 4 December 2001
https://englundmacro.blogspot.com/2022/09/eu-prepares-to-reform-its-fiscal-rules.html
Predictably, many politicians and pundits are howling in protest, warning of the risks of overkill
The nominal FFR, now effectively at 3.1%, remains five percentage points below the three-month average of the headline CPI inflation rate of 8%.
It is all but impossible to accomplish that objective with a sharply negative real FFR of around -5%.
With the real FFR at -5%, the Fed is not even close to being neutral, let alone restrictive.
They and the financial markets are underestimating the ultimate monetary tightening that will be required to return inflation to a 2% target.
I suspect that the nominal FFR may well have to rise into the 5-6% zone to accomplish that task
A global recession next year is all but inevitable.
Stephen S. Roach Project Syndicate 27 September 2022
The worst bond rout in decades is drawing more investors to government debt, with JPMorgan Asset Management joining the growing camp of bulls.
it’s clearly cheap relative to recent history,” Vij said in a briefing.
Vij wagering on government bonds in the belief that the global economy will eventually buckle under the weight of aggressive rate hikes.
But with major central banks showing little inclination to ease the pace of tightening, they risk being saddled with outsized losses if the bets backfire.
Bloomberg 28 september 2022
The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal 26 August 2022
https://englundmacro.blogspot.com/2022/09/the-federal-open-market-committees-fomc.html
Lagarde said bringing inflation back to the 2% medium-term goal is the ECB’s main mission
-- despite increasing concerns about recessions in Germany and the 19-nation euro zone.
“We will do what we have to do, which is to continue hiking interest rates in the next several meetings,” she said.
“Our primary goal is not to create a recession. Our primary objective is price stability and we have to deliver on that. If we were not delivering, it would hurt the economy far more.”
Bloomberg 28 september 2022
Månadskostnaden över 50.000 kronor för en högt belånad bostadsrättsägare...
... i en av Stockholms mest kända fastigheter, Norra tornen.
/RE: "Månadskostnaden" inkl amortering/
Statligt ägda bolånebanken SBAB tror att den rörliga räntan stiger upp mot 4 procent i början av nästa år. I ett historiskt perspektiv är en bolåneränta på runt 4 procent inte ovanligt.
Beräkningarna är tänkta att illustrerar den negativa hävstången med att själv vara högt belånad i en bostadsrättsförening med stora skulder. Ofta handlar det då om nyproduktion som brukar ha höga lån.
Agnetha Jönsson DI 28 september 2022
https://www.di.se/analys/rantesmocka-pa-vag-stresstesta-egna-ekonomin/
The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal
26 August 2022
https://englundmacro.blogspot.com/2022/08/chair-of-us-central-bank-uses-jackson.html
Fed Chair Jerome Powell said the bank “is strongly resolved to bring inflation down to 2%,
and we will keep at it until the job is done.”
https://englundmacro.blogspot.com/2022/09/the-great-bond-bubble-is-poof-gone-in.html
Inflation may improve at times. The point is we aren’t going back to the halcyon days of 1% and 2% inflation for years
John Mauldin 23 September 2022
https://englundmacro.blogspot.com/2022/09/i-suppose-its-possible-to-control.html
To bring price increases down to 2%, we may need to tolerate unemployment of 6.5% for two years.
Jason Furman WSJ 7 September 2022
https://englundmacro.blogspot.com/2022/09/scariest-economics-paper-of-2022.html
Fed appear solely focused on getting core inflation back down to 2%
without acknowledging how much economic pain it will cause.
John Authers Bloomberg 28 september 2022
The 2 per cent inflation target came up repeatedly throughout the conference,
with economists suggesting that it may need to be adapted to fit a more fractured global economy.
Fed in 2020 announced it would target inflation at a 2 per cent average over time, in order to make up for past periods of undershooting the target.
Many economists advocated for a 3 per cent inflation target.
FT 28 August 2022
https://englundmacro.blogspot.com/2022/08/rooting-out-high-inflation-will-become.html
Fed’s Bullard Says Credibility of Inflation-Targeting Is at Risk
Price pressures threaten the credibility of the central bank’s inflation target.
Federal Reserve Bank of St. Louis President James Bullard
Bloomberg September 27th, 2022
Tillbaka till 2 procent? Really?
Augusti 2022
Om arbetslösheten inte stiger väsentligt, hur faller då inflationen tillbaka till Fed:s 2%-mål?
Wolf och Dudley
US dollar appreciated by 12 per cent Does it matter? What can be done about it?
Does the dollar’s strength matter?
Yes, it does, because, as a recent paper co-authored by Maurice Obstfeld, former chief economist of the IMF, notes, it tends to impose contractionary pressure on the world economy.
What can be done? Not that much.
Martin Wolf FT 27 September 2022
https://www.ft.com/content/daf5c774-fb7f-4ef3-a4ba-c92e3b373066
Maurice Obstfeld Central banks are raising rates nearly everywhere, risking a global recession
Bostadsobligationerna (5 år) steg till 3,91
2022-09-27
Fed’s Bullard Says Credibility of Inflation-Targeting Is at Risk
Price pressures threaten the credibility of the central bank’s inflation target.
Federal Reserve Bank of St. Louis President James Bullard
Bloomberg September 27th, 2022
Inflation targeting has been successful because it managed to anchor expectations — until it did not.
Wolfgang Munchau FT 19 July 2020
https://englundmacro.blogspot.com/2020/07/the-troubling-bit-is-that-these.html
Att inflationsmålet är just två procent kan ses som något av en slump.
Det infördes 1995, efter att Sverige genomgått en av sina värsta ekonomiska kriser
(RE: Som bekant hade Riksbanken dessförinnan haft målet om fast växelkurs.)
– Det är inte någon “rocket science” att det blev just 2 procent. Det hade lika gärna kunna bli 1,5, 2,5 eller 3 procent. Det var ett politisk beslut kan man säga.
Lars Calmfors 12 augusti 2022
https://englundmacro.blogspot.com/2022/08/lars-calmfors-nu-ett-bra-tillfalle-att.html
Börsen 27 September 2022
Efter en svängig handelsdag stängde Stockholmsbörsen strax ovanför nollan.
Fastighetssektorn kämpade dock i fortsatt motvind
Porsche will raise €9.4bn and be valued at more than €75bn
Shares in Ferrari, the high-end marque that went public in 2015, trade at 30 times its projected earnings, while the trio of luxury fashion houses LVMH, Hermes and Christian Dior all trade between 20 to 40 times
By contrast, if Porsche sells shares in the middle of its range, investors will be paying roughly 15 times the carmaker’s projected earnings
The discount to Ferrari partly reflects one unavoidable fact: there are simply too many Porsches, stripping the carmaker of the scarcity premium central to the definition of luxury.
One sales pitch being made to investors is that Porsche offers “luxury with scale”, something a banker familiar with the IPO acknowledges is an oxymoron / a combination of contradictory or incongruous words (such as cruel kindness)/.
FT 27 September 2022
https://www.ft.com/content/f04f887c-fdaa-45bd-8e0b-0e517eb54cc0
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