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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

https://www.marketwatch.com/story/market-instability-replaces-inflation-as-the-biggest-risk-raising-the-chances-of-a-pivot-by-the-federal-reserve-11664471363


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

Börsen 29 sptember 2022

 






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


Tesla Market Cap

 



WSJ 29 September 2022

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

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

https://www.economist.com/europe/2022/09/22/to-prevent-diplomatic-shakedowns-europe-must-curb-abusive-national-vetoes


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

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.

 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

https://www.bloomberg.com/news/articles/2022-09-28/epic-bond-collapse-is-met-by-a-growing-chorus-it-s-time-to-buy



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

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

 

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

https://www.bloomberg.com/opinion/articles/2022-09-28/the-fed-is-pushing-the-economy-into-recession-and-needs-to-reconsider-inflation


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





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

https://www.piie.com/research/piie-charts/central-banks-are-raising-rates-nearly-everywhere-risking-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

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-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



2022-09-26

Börsen 26 september 2022

 





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%.








”EU-domstolen kör över svensk grundlag”

 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 mars och stadfästes av 15 domare i Luxemburg den 27 juli.

Känner sig någon kallad att ta ansvar?

Staffan Dahllöf SvD Debatt 25 september 2022

https://www.svd.se/a/q1Rk7w/eu-domstolen-kor-over-svensk-grundlag-skriver-staffan-dahllof


I Sverige är vi vana vid att lyda överheten, de svenska kungarna ansågs sig ha sin makt av Gud, liksom dagens ayatollor.

Men efter vad jag förstår är nu efter Lissabon all makt av EU-domstolen. Högsta Domstolen får vackert begära förhandsbesked från EU-domstolen i de fall de inte är säkra på att deras dom skulle överensstämma med EU-reglerna.

Det är ovärdigt en institution som kallar sig Högsta Domstolen.

Tänk om någon modig riksdagsledamot skulle våga motionera om ett namnbyte för HD till Nästa Högsta Domstolen (NHD).

Rolf Englund blogg 3 december 2010

https://englundmacro.blogspot.com/2010/12/efsf-pcrm-esm-och-nast-hogsta-domstolen.html


war is peace freedom is slavery ignorance is strength






EU prepares to reform its fiscal rules, informally known as the stability and growth pact

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/28f64f9f-8613-4c8d-85a8-30d387eba41e


Jfr Gunnar Sträng om löntagarfonderna: 

Steg för steg ska vi socialisera samhället, men vi ska inte basunera ut det på gator och torg där det kan missförstås.


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/europe-will-be-forged-in-crisis-and.html


US home mortgage rates top 6% for first time since 2008

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


Sparekonomer /Fondsäljare/: Håll ut, börsen vänder uppåt igen

 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-ar-att-sitta-lugnt-i.html


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://www.di.se/nyheter/fonderna-helt-fel-ute-spararna-har-borjat-trottna/


Bostadsobligationerna (5 år) steg till 3,91

 


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


2022-09-25

Arthur Burns “The Anguish of Central Banking”

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, say, 15 years, you are seeing the collapse of everything that you have been told is true and have also observed to be true about markets.

Merryn Somerset Webb FT 20 May 2022

https://englundmacro.blogspot.com/2022/05/dont-count-on-fed-to-ride-to-rescue-of.html


15 years on from the great financial crisis, there’s still plenty of risk in the market

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 FT 25 September 2022

https://www.ft.com/content/cbf8214d-0fb7-46bb-94dd-b70b1210c040

Rana Foroohar is Global Business Columnist and an Associate Editor at the Financial Times


Report of the Task Force on Financial Stability

Brookings June 2021

https://www.brookings.edu/research/report-of-the-task-force-on-financial-stability/


Shadow banking — in the form of everything from repos and eurodollars to commercial paper and money market funds — grew, and the Fed continued to support all these shadow entities. 

Paul Volcker had to take away the “punch bowl”

Rana Foroohar FT 16 May 2022


The decade between the 2008 financial crisis and this one saw the creation of a vast asset price bubble in just about everything. 

That bubble is now bursting

Rana Foroohar FT 19 April 2020

https://englundmacro.blogspot.com/2022/05/fed-managing-inflation-it-helped-to-set.html


How shadow banks threaten the global economy

Shadow banks manage $63tn in financial assets — up from $30tn a decade ago.

Ruchir Sharma FT 23 May 2022 

https://englundmacro.blogspot.com/2022/05/how-shadow-banks-threaten-global-economy.html


Authorities successfully pushed for more capital in the aftermath of the 2008 financial crisis, but never went far enough. 

Capital levels have waned along with political will: As of June 2021, that tangible equity ratio stood at around 6.4%.

Bloomberg Editorial Board 14 september 2021

https://englundmacro.blogspot.com/2021/09/banks-consider-one-crucial-indicator-of.html


The Great Bond Bubble Is ‘Poof, Gone’ in Worst Year Since 1949

 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 over 12% this year. 

Bloomberg 24 September 2022

https://www.bloomberg.com/news/articles/2022-09-24/the-great-bond-bubble-is-poof-gone-in-worst-year-since-1949




The $24tn US Treasury market has been hit...
with its most severe bout of turbulence since the coronavirus crisis

FT 28 September 2022







The US government faces the impossible dilemma of curbing domestic inflation ...

 ...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, plunging it into a state of gilded stagnation. Poisoned money flowed in torrents, but not into serious investments, good jobs, or anything capable of reanimating capitalism’s lost animal spirits. 

Yanis Varoufakis Project Syndicate 21 September 2022

https://www.project-syndicate.org/commentary/west-poisoned-its-money-with-austerity-and-negative-interest-rates-by-yanis-varoufakis-2022-09



Historic sell-off in bonds

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 investors of all types. 

Katie Martin FT 24 September 2022

https://www.ft.com/content/3b347f19-3735-4a8d-bee3-cbc589b202c5


The Great Moderation is dead

Ajay Rajadhyaksha, a rates strategist at Barclays. “Financial markets are very good at making analysts feel foolish, and that’s especially been true in 2022.”

More than half of Nasdaq stocks have dropped 50 per cent or more from their 12-month rolling highs.

Katie Martin FT 15 July 2022

https://englundmacro.blogspot.com/2022/07/the-great-moderation-is-dead.html


Jordan Peterson’s Vision for Conservatives Part 1

Jordan B Peterson Youtube 17 September 2022 

Humility, Liberty, Autonomy, Truth, Agency, Identity, Merit, Responsibility, Community, Stewardship, Justice, Tradition, Unity



2022-09-24

I suppose it’s possible to control inflation while keeping real rates well below zero. But ...

 ... 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


Ambrose: Central banks are making another horrible mistake

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 Henderson says broad M4 money in the G7 bloc peaked 20 months ago and is now below trend levels. “Inflation risks are fading fast,” he says.

The European Central Bank’s stated plan for jumbo rate rises is even more questionable given that Europe’s inflation is chiefly caused by an external energy shock, beyond central bank competence. High fuel costs cause deflation for the rest of the economy.

One day people will look back and ask what possessed the ECB’s governing council to keep tightening hard into the teeth of this storm. The decision will live in monetary infamy alongside Jean-Claude Trichet’s rate rise in July 2008, when the world’s financial system was visibly keeling over.

Ambrose Evans-Pritchard Telegraph 22 September 2022

https://www.telegraph.co.uk/business/2022/09/22/overzealous-central-banks-making-another-horrible-mistake-batten/



2022-09-23

Börsen 23 september 2022



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 många miljarder euro i årliga utbetalningar till bankerna

 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/


The post-Volcker, multi-generational trend of low yields is over

 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 he is now prepared to declare the Ice Age over. 

He thinks bond yields will keep rising. But don’t worry, that doesn’t mean that he’s gone positive on stocks:

Politicians begin to shed their fiscal shackles. Until recently, economic ideology had prevented them breaking free from fiscal austerity. That had caused central bankers to fill the economic void with super-expansionary monetary policy. Those days are now over and aggressive fiscal activism reigns supreme, most visible currently in the UK.

The yield curve has now inverted to more than 50 basis points for the first time in more than 40 years 

Both the fed funds rate and the 10-year yield are still far below the level of inflation, so on this basis real rates are still negative.

Britain’s Labour Prime Minister Jim Callaghan imparting painful truths to his party conference. Callaghan hasn’t gone down as one of the great prime ministers; he took over the job only when his predecessor (who’d been diagnosed with early-onset Alzheimer’s) resigned. 

/RE: Aha. Harold Wilson was not a Russian spy?/

He went on to lose to Margaret Thatcher in 1979. But he was a decent man who inherited an impossibly difficult situation, and took solid steps toward sorting out the UK’s problems. With hindsight, some even date economic “Thatcherism” from this speech, when he accepted the case for fiscal discipline. 

John Authers Bloomberg 23 september 2022

https://www.bloomberg.com/opinion/articles/2022-09-23/bond-yields-leave-the-ice-age-as-post-volcker-trend-ends-for-world-economy


If Edwards is correct, it will come as a shock to investors who are used to stocks going up most of the time, and a Fed that always had the market’s back.

Barrons 23 September 2022

https://www.marketwatch.com/articles/stock-market-lost-decade-51663945507



12 Reasons Why Negative Rates Will Devastate The World - Albert Edwards

Zerohedge 18 August 2019

https://englundmacro.blogspot.com/2019/08/12-reasons-why-negative-rates-will.html


2022-09-22

Fastighetsmiljardären Erik Selin, Balder, Ola Serneke och räntan

 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.html








Börsen 22 september 2022

 




En dag

Ett år







Karlatornet Serneke och Balder - "De är nog inte så räntekänsliga de som köper lägenheter för 20, 30 eller 40 miljoner kronor”

Drygt 80 procent av lägenheterna sålda, något som både Erik Selin och Ola Serneke är nöjda med. ”Med tanke på att det är två år kvar skulle jag säga att det är ovanligt hög försäljningsgrad”, säger Erik Selin. 

När det gäller de allra dyraste lägenheterna högst upp i huset är enligt Ola Serneke fem av 13 osålda. 

Hans egen lägenhet gick på 66 miljoner kronor.

Cathrine Hofbauer DI 22 september 2022

 


Erik Thedéen De kommersiella fastighetsbolagen är mer sårbara än någon annan kategori företag i Sverige

  – Är räntorna och riskpremierna kvar på de här nivåerna över tid då riskerar det att bli betydande finansieringsproblem för ett antal fastighetsbolag.

De senaste tio åren har fastighetsbolagens skulder mer än fördubblats till runt 1 800 miljarder kronor

Fastighetssektorn var nämligen just den sektorn som kastade in Sverige i en djup ekonomisk kris för drygt trettio år sedan. 

Då växte bankernas kreditförluster när bolagen inte kunde betala tillbaka sina lån. 90-talskrisen blev ett faktum och arbetslösheten sköt i höjden.

Många bolag har visserligen en genomsnittlig räntebindningstid på flera år men en hel del upplåning är också till rörlig ränta och med räntebindningstider som är kortare än tolv månader, säger Johan Sahlström, chef för kreditanalys på Handelsbanken.

– Obligationsmarknaden är i praktiken stängd för trippel-B-ratade bolag, vilket är ganska många av de här fastighetsbolagen, säger Erik Thedéen.

Johan Carlström SvD 17 september 2022

https://www.svd.se/a/Kn3dV4/stor-rantehojning-satter-ny-press-pa-sarbara-fastighetsbolag


Fastighetssektorn är bättre rustad denna gång än inför tidigare liknande perioder

Det bedömer fastighetsrådgivaren Max Barclay vid Newsec.

- Den svenska fastighetssektorn har inte samma höga inslag av spekulation som tidigare, och aktörerna har investerat klokt samt har en sund finansieringsmix med inslag av både lång- och kortsiktig finansiering.

En annan paneldeltagare var Jenny Lindholm, investeringschef på Alecta Fastigheter som i sitt bestånd har bland annat gallerian Solna Centrum, som man köpte i december 2021 från galleriajätten Unibail Rodamco Westfield.

”Är du orolig för något?” 

 ”Nej, jag håller med om allt som Rosie och Max sa”, sa Jenny Lindholm och lovordade den svenska fastighetssektorns höga likviditet och transparens, en följd av bland annat de många noterade fastighetsbolagen.

”Sedan görs många fastighetstransaktioner genom aktiebolagstransaktioner, och där kommer vi tillbaka till tillit, eftersom det inte finns något publikt aktieregister”, sa Lisa Hybbinette.

Martin Lindgren DI 21 september 2022