Englund

 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 https://englundmacro.blogspot.com/2022/09/15-years-on-from-great-financial-crisis.html

 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

 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.blog...

  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/

 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 https://www.marketwatch.com/story/market-instabil...

 

 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

  WSJ 29 September 2022

 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 https://www.riksbank.se/sv/penningpolitik/penningpolitisk-rapport/2022/penningpolitisk-rapport-september-2022/

 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 https://www.bloomberg.com/opinion/articles/2022-09-29/bond-markets-are-nearing-a-painful-inflection-point

  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

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 q...

 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 https://www.project-syndicate.org/commentary/federal-reserve-and-china-governance-share-conceptual-flaw-by-stephen-s-roach-2022-09   The worst bond rout in decades is drawing more investors to government debt, with JPMorgan Asset Management joining the growing camp of bulls.  i t’s c...

 -- 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 https://www.bloomberg.com/news/articles/2022-09-28/lagarde-says-rates-will-be-lifted-at-next-several-meetings  

 ... 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/

 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 https://www.bloomberg.com/opinion/ar...

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 https://www.piie.com/research/piie-charts/central-banks-are-raising-rates-nearly-everywhere-risking-global-recession Bostadsobligationerna (5 år) steg till 3,91 https://englundmacro.blogspot.com/2022/09/bostadsobligationerna-5-ar-steg-till-391.html

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 https://www.bloomberg.com/news/videos/2022-09-27/fed-s-bullard-says-credibility-of-inflation-targeting-is-at-risk 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-ca...

  Efter en svängig handelsdag stängde Stockholmsbörsen strax ovanför nollan.  Fastighetssektorn kämpade dock i fortsatt motvind

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

  Dow on Monday  fell into a bear market, a pullback of 20% or more. The average Dow bear market sees a peak-to-trough decline of 35.5% and a median decline of 35.9%. https://www.marketwatch.com/story/the-dow-just-joined-the-s-p-500-in-a-bear-market-what-investors-need-to-know-11664229328

 EU:s ministerråd har förbjudit spridning av innehållet i två ryska medier. Censurbeslutet får stöd av EU-domstolen.   Kontroll är frihet. Att förbjuda farliga talare är demokrati. Yttrandefriheten omfattar inte fientlig propaganda. Det här är inte ännu en omskrivning av budskapet i George Orwells bok ”1984”. Det är inte heller en översättning av de ryska argumenten för att utvisa utländska journalister eller för att döma inhemska kritiker till 15 års fängelse. Det är så som EU-domstolen i Luxemburg motiverar varför vi inte ska ha tillgång till de ryska medierna RT och Sputnik, och varför vi skall kunna straffas om vi citerar de två mediernas innehåll. Den här nedmonteringen av klassiska liberala friheter sker utan en offentlig debatt. Jurister, statsvetare, medier, medieorganisationer och naturligtvis politiskt intresserade i allmänhet har hållits ovetandes om vad som nu visar sig vara gällande EU-rätt: Att grundlagens censurförbud upphävdes av 27 utrikesministrar den 1 ...

And “stability” is a misnomer; the pact’s tools may limit public borrowing but they don’t guarantee stability, as Spain and Ireland’s experiences in the eurozone sovereign debt crisis showed. The “general escape clause” was first triggered in the pandemic and then extended after Vladimir Putin’s assault on Ukraine. When governments start planning their 2024 budgets next year, they will need to know what rule book to go back to. The EU’s northern flank of smaller liberal states were traditionally strictest   Much more constructive attitude on budget policy, including surprising new constellations such as a joint Dutch-Spanish position. https://www.government.nl/latest/news/2022/04/04/spain-and-the-netherlands-call-for-a-renewed-eu-fiscal-framework-fit-for-current-and-future-challenges Will Germany play ball? The answer is probably yes.  Will the reforms achieve enough? Here, the answer is probably no. Martin Sandbu  FT 25 Septembr 2022 https://www.ft.com/content/28f64...

Rapid rise in cost of borrowing to put pressure on raging housing market  At 6%, the rate on the average 30-year residential mortgage has nearly doubled since Januar Though price increases have decelerated in recent months, prices continue to grow at a double-digit pace driven by tight supply and determined buyers. The S&P CoreLogic Case-Shiller US national home price index rose 18 per cent in the latest reading in June, down from 19.9 per cent the month before. FT 15 September 2022 https://www.ft.com/content/3a37400a-de2b-4a59-9a2d-bc834453d074 U.S. Home Prices  Record High in Second Quarter Median prices rose by double digits from a year earlier in 80% of 185 metro areas WSJ 11 August 2022 https://englundmacro.blogspot.com/2022/08/sky-high-housing-prices-still-threaten.html

 I år har Stockholmsbörsen fallit mer än 30 procent, konstaterar Maria Landeborn, strateg på Danske Bank, i en intervju med TT. ”Det vi ser är en besvikelse över ränteuppgången”, säger Frida Bratt, sparekonom på Nordnet, En sak är proffsen rörande överens om – att börsen förr eller senare vänder uppåt igen. Inget vet exakt när, men rådet är att INTE sluta månadsspara på börsen, även om det just nu ser väldigt mörkt ut.  PS 26 september 2022 https://www.dagensps.se/bors-finans/hall-ut-borsen-vander-uppat-igen/ – Det är lätt att känna att man vill trycka på säljknappen, men risken är då att man inte riktigt kommer in igen, säger Nordnets sparekonom Frida Bratt. SvT 24 januari 2022 https://englundmacro.blogspot.com/2022/06/frida-bratt.html  Maria Landeborn spår att ett globalt aktieindex kan stiga med runt 5 procent i år , men att skillnaderna mellan olika sektorer och regioner kan bli stora. SvD 12 januari 2022 https://englundmacro.blogspot.com/2022/01/isaksons-grundtips-a...

  Många hade väl för inte så länge sedan en ränta på 1,2 procent  och trodde att man skulle fortsätta ha det.

Contrary to the belief of most central bankers, there is no definitive model that works: “monetary theory . . . does not provide central bankers with decision rules that are at once firm and dependable”, as Burns put it. We might know that “excessive creation of money” will cause inflation, for example, but this knowledge “stops short of mathematical precision”. The result? Surprises and mistakes at “every stage of the process of making monetary policy”. In the audience in Belgrade sat Paul Volcker A few years later Volcker gave a talk titled “The Triumph of Central Banking?” No wonder today’s central bankers all want history to remember them as a Volcker not a Burns. But note the question mark in his title.  Merryn Somerset Webb FT 23 September 2022 https://www.ft.com/content/ac786b9e-be5a-4b8a-87b0-bc020a28f5c5 The writer is editor-in-chief of Money Week Powell Burns Volcker https://englundmacro.blogspot.com/2022/06/powell-burns-volcker.html If you have only been in markets for, ...

The financial system is still dealing with the fallout from 2008 A recent Brookings Institution report on the topic put it: “without changes, the size of the Treasury market will outstrip the capacity of dealers to safely intermediate the market on their own balance sheets, causing more frequent bouts of market illiquidity that will raise doubts over the safe haven status of US Treasuries.” The $24tn US Treasury market. The core, and still unanswered, questions of the great financial crisis — why are banks so special?  Yes, the major US banks are far safer and better capitalised than they were before 2008. But why do they chafe at single-digit capital requirements when businesses in any other industry hold multiples of that? The biggest question that we never answered in the wake of 2008 — who is the financial system meant to serve? Wall Street or Main Street? Everything from an increasingly volatile T-bill market to a home lending market now dominated by shadow banks Rana Foroohar...

 Bonds keep sliding in the face of aggressive central banks Losses mount as Fed vows to pull inflation down to 2% target Two-year US Treasuries are in the middle of the the longest losing streak since at least 1976, dropping for 12 straight days. Worldwide, Bank of America Corp. strategists said government bond markets are on course for the worst year since 1949, when Europe was rebuilding from the ruins of World War Two. Peter Boockvar, chief investment officer at Bleakley Advisory Group. “These bonds are trading like emerging market bonds, and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate.” 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.”  Longer-dated yields are lagging the rise as traders price in the risk of a recession. Still, the 10-year hit as much as 3.82% Friday, a 12-year high. A broad Treasury index,  /price/ down ove...

 ...and forcing Corporate America and many friendly governments into a solvency crisis that will threaten America’s own stability.  Things are far worse in the eurozone, where policymakers refused to do the obvious once Europe’s banks had failed after 2008: establish a proper federation’s foundation – a fiscal union. Instead, they let the European Central Bank do “whatever it takes” to save the euro.  Only by poisoning its own money could the ECB keep the euro show on the road. Today, the ECB owns huge quantities of Italian, Spanish, French, even Greek debt that it can no longer justify holding as a means of achieving its inflation target, but which it cannot renounce without calling the euro’s existence into question. Money has two natures. Its first nature, that of a commodity that we trade with other commodities, can never explain why money would ever acquire a negative price.  Socialism for bankers and austerity for most of the rest thwarted capitalism’s dynamism...

The five stages of grief are denial, anger, bargaining, depression and acceptance. For investors, the five stages of a bear market appear broadly similar. Looking at data stretching as far back as 1790 (not a typo — banks just love super long-term data for moments like these), BofA describes this as the third Great Bond Bear Market. We have seen nothing like it since at least the Marshall Plan in 1949, wrote Michael Hartnett and colleagues at the bank.  Famed investor Stanley Druckenmiller, once second-in-command to George Soros at the Quantum Fund, sounds further along in the process than many others. “I’ve had a bearish bias for 45 years. I like darkness,”  “There’s a high probability that the market at best is going to be flat for 10 years.” If he is right, that is potentially bad news for people whose job it is to try to write interesting things about markets on a weekly basis for national newspapers, for example. It will also require a reset of expectations among investor...

Jordan B Peterson Youtube 17 September 2022  Humility, Liberty, Autonomy, Truth, Agency, Identity, Merit, Responsibility, Community, Stewardship, Justice, Tradition, Unity https://youtu.be/h2yHGcmhbEk

 ... more likely, reducing demand enough to squelch inflation will require raising real rates at least to 0%, and probably a bit higher. After this week’s Fed action, I continue to think Jerome Powell is quite serious about controlling inflation. I hope they don’t lose that focus too soon. Last week Ray Dalio noted this could take a long time because, for now, US households have enough cash to sustain spending.  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://www.mauldineconomics.com/frontlinethoughts/notes-on-inflation

Inflation will abate gradually of its own accord, without the need for a punishment beating Western central banks are on a misguided mission to restore their damaged credibility The central banks are pushing through with triple-barrelled rate rises after the inflation fever has broken; after the commodity boom has deflated; and after key monetary indicators on both sides of the Atlantic have turned negative. They are prisoners of lagging indicators. Fed has begun draining $95 billion a month of dollar liquidity through quantitative tightening. This squeezes the offshore dollar lending markets. It is slow torture for borrowers in the developing world with dollar liabilities. The Bernanke Fed long insisted that quantitative easing was a necessary and powerful stimulus: now the Powell Fed asserts that QT is just background noise.  Monetarists beg to differ. Both narrow and broad money have been contracting for several months. In real terms, they have collapsed. Simon Ward from Janus H...

Nedgångarna mildrades på Stockholmsbörsen under eftermiddagen  men index avslutade ändå nedåt för åttonde gången under de nio senaste handelsdagarna.   DJ 3Y Nu samma nivå som före pandemin. Men hänsyn till inflationen, nedgång. Så här ser det ut i Stockholm  

 ECB har höjt depositräntan från -0,50 till +0,75 procent, vilket även träffar de cirka 4.600 miljarder euro som bankerna har i placerade reserver utöver lagstiftade krav. Det innebär att ECB kan stå inför många miljarder euro i årliga utbetalningar på dessa reserver  Förslagen väntas få kritik från bankerna och väcka juridiska invändningar.  DI 23 september 2022 https://www.di.se/live/ecb-studerar-satt-att-minska-sina-ersattningar-till-banker/

 We’re living through arguably the most truly global attempt to tighten financial conditions in memory. The downward trend in 10-year Treasury yields that has persisted ever since the Fed under Paul Volcker slew inflation is over.  The joys of bond math mean that a rise in yield from a lower level can inflict a greater dent on the price Losses that holders of 10-year bonds have suffered since 1961. With 2022 not quite three-quarters over, this is already the worst year for bond investors in six decades Read the latest opinions of Albert Edwards.  Societe Generale’s chief investment strategist is (slightly unfairly) known as an inveterate perma-bear. He’s certainly been negative on equities for a long time, but he’s also (correctly) been bullish about bonds.  His thesis, inspired from his time in Japan in the 1990s, was that the US and the rest of the developed economies faced an “Ice Age” in which yields stayed permanently low. So psychologically, it means a lot that...

 Fastighetsmiljardären Erik Selin är inte särskilt bekymrad över de stigande räntorna, men Ola Serneke hade hellre sett en mindre höjning. Balder har enligt Erik Selin rörlig ränta, eller kort bindningstid, på skulder på 50 till 60 miljarder kronor.  Enligt den senaste kvartalsrapporten ligger Balders räntebärande skulder exklusive hybridkapital på ungefär 121 miljarder kronor. Den genomsnittliga räntebindningen är på 3,6 år.  Ola Serneke, grundaren till byggbolaget Serneke och vd för Serneke Invest, tycker att Riksbankens senaste höjning var i häftigaste laget.  ”Jag hade hellre sett en höjning mellan 0,5 och 0,75 procentenheter”, säger han.  Cathrine Hofbauer DI 22 september 2022 https://www.di.se/nyheter/selin-och-serneke-oeniga-om-riksbankens-rantehojning/ Karlatornet Serneke och Balder - "De är nog inte så räntekänsliga de som köper lägenheter för 20, 30 eller 40 miljoner kronor” https://englundmacro.blogspot.com/2022/09/karlatornet-serneke-och-balder-de-ar...

  En dag Ett år