Teaching Joy: L.A. School District Opts For "Educational Enjoyment" Over Standardized Tests

Authored by Jonathan Turley,

It appears that the Harris-Walz campaign to embrace “joy” has taken hold among educators in L.A. The Los Angeles Unified School District (LAUSD) voted 4-3 to allow 10 schools to opt out of standardized tests and test preparation beginning in the 2025-26 school year. LAUSD President Jackie Goldberg declared the move was a blow to “corporate America” and would restore the “enjoyment of education.”

We have previously discussed how schools have been dropping the use of standardized tests to achieve diversity goals in admissions. That trend continued this month with Cal State dropping standardized testing “to level the playing field” for minority students. I have long been a critic of this movement given the overwhelming evidence that these tests allow an objective measure of academic merit and have great predictive value on the performance of students.

Many colleges and universities are returning to standardized testing after the much acclaimed abandonment of the tests for a more “holistic approach” to selection.

However, public educators have continued to lower proficiency requirements and cancel gifted programs to “even the playing field.” The result has been to further hide the dismal scores and educational standards of many public school districts.

Goldberg lashed out at the “testing industry” which tends to expose the continued failure of public education to give these students a fighting chance in society. Rather than look at their own failures over decades to significantly improve scores, Goldberg said that she “hoped” the resolution  would “begin to change how we look at student assessment.” In other words, students would be assessed without looking at how they actually perform on tests with other students.

Tests, it appears, are just a buzz kill for teachers and students alike:

“Because the whole goal of life became not the love of learning, not the enjoyment of education, not the exchange of ideas, but whether or not your school could move up on its test scores. For at least 20 years, I have found that repugnant.”

It shows, Ms. Goldberg, it shows.

The retiring Goldberg has always been more focused on increasing budgets than improving scores. Her website declares

“California is the world’s fifth richest economy. There are 157 billionaires here who pay almost nothing in taxes. There is no excuse for why New York spends $29k per pupil while we spend $16.5k. It’s time to tax the great wealth in this state and re-invest in our children!”

That appears to be one statistical score that Goldberg does find relevant as a measure of education.

Others at the meeting noted that they have failing enrollments and this will not help.

I previously wrote about how public educators and teacher unions are killing public education in America.Many of us have advocated for public education for decades. I sent my children to public schools, and I still hope we can turn this around without wholesale voucher systems.

Teachers and boards are killing the institution of public education by treating children and parents more like captives than consumers. They are force-feeding social and political priorities, including passes for engaging in approved protests.

As public schools continue to produce abysmal scores, particularly for minority students, board and union officials have called for lowering or suspending proficiency standards or declared meritocracy to be a form of “white supremacy.” Gifted and talented programs are being eliminated in the name of “equity.”

Once parents have a choice, these teachers lose a virtual monopoly over many families, and these districts could lose billions in states like Florida.

This is precisely why school systems are facing budget shortfalls as families vote with their feet. These families want a return to the educational mission that once defined our schools.

L.A. will pursue a program under which they appoint a “lead teacher” for additional professional development from Community School Coaches and the University of California Los Angeles Center for Community Schooling. They will focus on an effort to “integrate culturally relevant curriculum, community- and project-based learning, and civic engagement” into their programs. The “relevant” curriculum would not include actual standardized testing.

It promises more the same. Bringing “joy” back to schools will come without the accountability of standardized testing.

For teachers, such tests are decidedly not joyful since they expose their own failures and set goals for improvement. Now they can just “assess” students as successful and send them along their way.

Public schools across the country will continue to fail inner city children and leave them in the same crushing patterns of poverty.  In Baltimore, a survey found that forty percent of schools did not have a single student proficient in math. Rather than reverse that trend, the schools are just waiving the tests and graduating the students.

What is so frustrating is reading about failing school systems lowering proficiency standards and claiming that it is better for minority students.

American education faces the perfect storm. Despite record expenditures on public schools, we are still effectively abandoning students, particularly minority students, in teaching the basic subjects needed to succeed in life. We will then graduate the students by removing testing barriers for graduation. Then some may go to colleges and universities that have eliminated standardized testing for admission.

At every stage in their education, they have been pushed through by educators without objective proof that they are minimally educated. That certainly guarantees high graduation rates or improved diversity admissions. However, these students are still left at a sub-proficient state as they enter an increasingly competitive job market and economy.

Any failures will come down the road when they will be asked to write, read, or add by someone who is looking for actual work product. They will then be outside of the educational system and any failures will not be attributed to public educators.

As I have previously written, if we truly care for these students, we cannot rig the system to just kick them down the road toward failure. It is like declaring patients healthy by just looking at them and sending them on their way. We have the ability to measure proficiency and we have the moral obligation to face our own failures in helping these kids achieve it.

*  *  *

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University. He is the author of “The Indispensable Right: Free Speech in an Age of Rage”

Tyler Durden Mon, 09/16/2024 - 13:45

Boeing Strike May Spark Chaos Across Supplier Network As "Significant Spending Reductions" Imminent 

A week ago, Boeing executives thought they had secured a new labor contract for approximately 33,000 unionized workers in Washington state. However, on Thursday night, 94.6% of union members rejected Boeing's contract offer, while 96% voted for a strike. Boeing's last major labor action occurred in 2008 and persisted for eight weeks. 

CNBC reported Monday that Boeing announced a hiring freeze on nonessential staff travel and reduced supplier spending to preserve cash piles. This could be a troubling sign that executives at the struggling planemaker forecast the strike might last weeks, if not longer.

Boeing CFO Brian West told employees via an internal memo that "significant reductions" to supplier spending are imminent. He said purchase orders for 737 Max, 767, and 777 jetliners must be halted. 

"We are working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume," West wrote in the note, adding, "However, our business is in a difficult period. This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future."

Credit rating agencies Fitch and Moody's warned Friday that a downgrade of Boeing's credit rating into junk bond status is just ahead. Standard & Poor's had already warned that a downgrade would likely occur after the strike materialized. 

Moody's noted that prolonged labor disruptions could undermine Boeing's commercial airplanes recovery, complicating liquidity as $12 billion in debt matures through 2026. The strike may lead to a downgrade if Boeing's liquidity deteriorates significantly or if it fails to generate sufficient free cash flow, which remains constrained through 2025 due to production challenges and cost pressures.

The last time Boeing machinists went on strike was September 7, 2008. At the time, the strike was over job security, outsourcing, pay, and benefits. This caused a $1.2 billion hit to the company's net income. This could be much more costly today. 

"The strike will impact production and deliveries and operations and will jeopardize our recovery," CEO Brian West told investors at a Morgan Stanley conference Friday. 

Boeing is set to lose its prized investment-grade rating, which has been cited in every quarterly earnings presentation. 

West said, "We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks."

What's emerging for Boeing is the downstream effects of strikes. That includes a reduction in spending on suppliers, and by the way, Boeing's website says there are 11,000 active suppliers worldwide, which could trigger layoffs and disruptions across its supplier network. 

Using Bloomberg data, here are some of Boeing's top suppliers:

According to risk management firm Sayari Labs, the latest Boeing shipments primarily come from India, Turkey, South Korea, Mexico, and China. Suppliers in these regions are likely to be the most impacted.

That's a lot of suppliers. 

If Boeing's supplier network was to experience throttling and or shutdowns on a prolonged strike, then how long would it take to get the supplier network back to full capacity? 

Tyler Durden Mon, 09/16/2024 - 13:25

An Unprecedented Monetary Destruction Is Coming

Authored by Daniel Lacalle,

Global money supply has soared by $20.6 trillion since 2019, according to Bloomberg.

Additionally, global debt surged by over $15 trillion in 2023, reaching a new record high of $313 trillion. Around 55% of this rise came from developed economies, mainly the U.S., France, and Germany. Unfunded liabilities in the United States amount to $72 trillion, almost 300% of GDP. This may seem high until you look at Spain with 500% of GDP, France with close to 400%, or Germany with close to 350% of GDP.

There is no escape from debt. Paying for the government’s fictitious promises in paper money will result in a constantly depreciating currency, thereby impoverishing those who earn a wage or have savings. Inflation is the hidden tax, and it is very convenient for governments because they always blame shops or businesses and present themselves as the solution by printing even more currency.

Governments want more inflation to reduce the impact of the enormous debt and unfunded liabilities in real terms. They know they can’t tax you more, so they will tax you indirectly by destroying the purchasing power of the currency they issue.

High taxes are not a tool to reduce high debt, but rather to perpetuate the expropriation of national wealth. Countries with high taxes and big governments also have enormous public debt levels.

If you thought the monetary destruction we have witnessed in recent years was excessive, just wait for the suffering we will endure in the future.

In 2024, the world has seen more than seventy elections where none of the parties with access to power even bothered to present a realistic plan to cut debt. Governments and politicians understand that they can make any promises using someone else’s money, and many voters will readily accept the fallacy of taxing the wealthy. Naturally, currency debasement leads to widespread impoverishment.

Kamala Harris promises tax deductions for start-ups and first-time homebuyers, as well as families with children. It is hilarious. Inflation, a hidden tax, consumes their earnings and savings, while high direct and indirect taxes absorb the remaining funds. Despite this, she promises a tax deduction that most small businesses will never take advantage of, as they will shut down before generating any profit.

The Treasury expects a $16 trillion increase in public debt between 2024 and 2034, without taking into account any recession risk. The enormous government debt of $35 trillion, along with its subsequent additions, has the potential to destroy the currency. Citizens will face higher debt, reduced access to goods and services, and the ultimate dissolution of the middle class in the absence of a pro-growth plan and serious support for the currency’s purchasing power.

Governments and politicians need the votes of the middle class to reach power, and they also need to erode the savings and wages of that same middle class to reduce the weight of public debt in real terms. When the government says they can print and issue more debt, you pay for it.

The trillions of dollars accumulated in debt will lead to an unprecedented wave of central bank easing, which will continue to include negative real rates and even direct debt monetization. However, they need an excuse to present themselves as the solution to the problem they created. A recession or a significant slowdown will be the trigger to implement the plan to destroy the purchasing power of currencies. However, this time inflation is already evident and persistent.

Remember why governments are pleased to destroy the purchasing power of the currency they issue? It is a form of nationalization of the country’s wealth.

How can governments implement currency destruction when citizens are already upset about high prices? First, they need to silence you. Second, eliminate your options to run away from the currency. Thirdly, enforce the expropriation with the motto, “You may have nothing, but you will find happiness.” Yes, you won’t have anything, but you won’t be content either. Only this time you will be unable to complain. Eliminating free speech and independent media is a key part of this plan.

You think I am exaggerating? If the government really believed you would be better off and more prosperous with their policies, they would encourage free speech because everyone would value their welfare improvements. They need to limit free speech because they know they will make you poorer. Therefore, it’s crucial for you to safeguard yourself against the promises made by the government and comprehend the reasons behind the destruction of money.

Fiat money is just a promise, and the issuer knows they cannot pay it in today’s value. Making you dependent and rendering the currency worthless is the best way to control you. Protect yourself investing.

Tyler Durden Mon, 09/16/2024 - 13:05

"We're Not Up Against A Candidate... We're Up Against A Machine" - Vivek 'Drops Mic' In 3-Minute Breakdown Of 2024 Election

"This is mastery," says @Overton in a post on X, "The perfect articulation of what is currently transpiring in America."

In just over three brief minutes, Vivek Ramaswamy delivered what might be the most incisive explanation of the forces shaping the 2024 election and what Americans are truly facing.

"You hear a lot of fellow Republicans refer to Kamala Harris as a far-left ideologue or a Marxist or a communist. You won't generally hear me levelling that critique against her because I think it gives her too much credit."

"Kamala Harris isn't ideological particularly. I think last night [the debate] demonstrated this too."

Ramaswamy argues that the real adversary is not a singular candidate, but rather a pervasive interconnected system;

"We're not even up against a candidate. We're up against a machine. It's a perverted upside down version, hellish version of the San Antonio Spurs under Gregg Popovich or something like that in the sphere of American politics."

"You could replace the individual person who's playing in the position, but it's the machine that ultimately achieves its objective, and that's what's really going on in this race."

"This isn't about Republicans vs. Democrats. Not quite. It's not about Black vs. White. It's not about man vs. woman. The media, the powers that be will try to train you. Divide and conquer. Pit groups against one another. Identity politics. Vote bank politics. Don't fall for that trick."

According to Ramaswamy, the true divide is between the managerial class and everyday citizens.

"It is about the managerial class, the bureaucratic class and the everyday citizen. That's the real divide in this country."

"You've seen many former Democrats, even iconoclastic Democrats that have criticized candidate like Kamala Harris or Joe Biden, even from a progressive vantage point, now shifting over to support Donald Trump."

"So," Ramaswamy asks (and answers): "what's going on there?"

"I think it is evidence of the fact of the real divide is not really between the traditional Republican and the Democrat, but between this managerial class, the people who were never elected to exercise political power."

"Be they in the media, be they in certain parts of the corporate capture machine or especially be they in the administrative state, the unelected bureaucrats who are writing more laws and setting more policies than even Congress which was elected to actually carry out that function, that's who's actually running the country."

The clear-speaking and clear-thinking tech executive turned political operative summed it all up perfectly:

"It's not Joe Biden - it's not even really Kamala Harris, it's not their ideology because I don't think they have one."

"It is the permanent state."

"The fourth branch of government."

"The leviathan."

"The swamp."

"The managerial class."

"The committee class."

"The bureaucrats."

"That's who's running the show today. And that's what we're really up against. We're not just running to defeat a candidate, we are running to dismantle a system."

And that's why Ramaswamy says we need Donald Trump...

"That's what Donald Trump meant the first time around when he said he wanted to go in there and drain the swamp, and I think this time more than ever, he has the toolkit to actually do it."

Watch Vivek's 'drop the mic' moment in full below:

WATCH: Vivek Ramaswamy Delivers The Greatest Breakdown of the 2024 Election in Under Three Minutes — 'We Are Running to Dismantle a System' | @VivekGRamaswamy

This is mastery. The perfect articulation of what is currently transpiring in America.

Vivek Ramaswamy just delivered… pic.twitter.com/LsPHttvnZM

— Overton (@overton_news) September 14, 2024

Tyler Durden Mon, 09/16/2024 - 12:45

"You Be Quiet When I Speak" - Angry Biden Blasts Foreign Reporter

Authored by Luis Cornelio via HeadlineUSA.com,

President Joe Biden threw his pledge of decency out of the window on Sunday when a British reporter asked about Russian threats of a potential war with the U.S. 

Biden - about to converse with British Prime Minister Keir Starmer - showed no interest in the question and told the reporter to hush. 

“I say you be quiet when I speak, okay? That’s what I say. Good idea?” Biden rudely said while sitting in front of Starmer and next to Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. 

The reporter, presumably a member of the British press corps traveling with Starmer, reiterated his question despite Biden’s berating. 

“But what do you say to Vladimir Putin’s threat of war, sir? It’s a serious threat,” the journalist pressed, referring to Putin’s warning that any U.S. approval of long-range weapons for Ukraine could lead to war with Russia.

“You gotta be quiet and I’m going to make a statement, okay?" Biden responded, turning back to Starmer and welcoming him to the White House. 

Crooked Joe Biden freaks out on a reporter for asking him a question.

His cognitive decline (which Kamala covered up) has turned him even angrier. pic.twitter.com/6fXMo9PPGZ

— RNC Research (@RNCResearch) September 14, 2024

This incident - first reported by the New York Post - is part of Biden’s pattern of berating reporters who ask pointed questions. 

He previously referred to Peter Doocy, a White House correspondent for Fox News, as a “stupid son of a b*tch.” Doocy’s question about whether inflation was a “political liability” for the 2022 midterms triggered Biden’s anger.

In February 2024, Biden lashed out at Doocy during a press conference discussing Special Counsel Robert Hur’s findings on Biden’s mishandling of classified documents. Hur cited Biden’s weak memory as a factor in recommending against criminal prosecution. 

“How bad is your memory and can you continue as president,” Doocy asked, referencing Hur’s findings. 

Biden then retorted, “My memory is so bad I let you speak.” 

Seemingly taking cues from her boss, White House Press Secretary Karine Jean-Pierre on Friday berated Newsmax’s James Rosen for challenging her on Haitian nationals.

“Not everybody wants to hear the sound of your voice, sir,” she rudely told Rosen.

This behavior, though unsurprising, contradicts Biden’s purported pledge to restore “decency” and “respect” to the White House if elected in 2020.

Tyler Durden Mon, 09/16/2024 - 12:25

Traders Are Most Bearish Oil On Record As Bears Conclude OPEC+ Has Run Out Of Options

Hedge funds and other asset managers have never been more pessimistic about the outlook for petroleum prices, as signs multiply that the major industrial economies are losing momentum according to energy analyst John Kemp. Investors have also concluded Saudi Arabia and its OPEC+ allies have run out of options and either cannot or will not restrict their own production further to offset the slowdown in consumption growth and slide in prices.

Hedge funds and other money managers sold the equivalent of 128 million barrels in the six most important futures and options contracts over the seven days ending on September 10. Fund managers have sold petroleum in eight of the most recent ten weeks, cutting their combined position by a total of 558 million barrels since the start of July.

And for the first time on record, funds held a net short position of 34 million barrels down from a net long position of 524 million barrels on July 2.

The most recent week saw heavy sales across the board, led by Brent (-54 million barrels), but including NYMEX and ICE WTI (-27 million), European gas oil (-20 million), U.S. diesel (-15 million) and U.S. gasoline (-11 million). 

Fund managers have sold Brent in seven of the most recent nine weeks, slashing their position by a total of 213 million barrels since July 9.  For the first time on record, funds held a net short position in Brent of 13 million barrels down from a net long position of 200 million nine weeks earlier.

 
Fund managers also held a record net short position of 48 million barrels in European gas oil and a near-record net short position of 39 million barrels in U.S. diesel.

Even in WTI and gasoline, where sentiment was not quite as gloomy, positions were only a few million barrels above record lows.

In the premier NYMEX WTI contract, fund managers have boosted short positions by a total of 61 million barrels in the last four weeks.

Bearish petroleum positions have become very crowded and the accumulation of short positions is creating conditions for a sharp jump in prices if and when the news flow becomes less negative.

For now, however, investors are focused on the limited options available to OPEC⁺ to counter the deteriorating economic outlook.

DEPTHS OF DESPAIR

Investors are extraordinarily pessimistic even though benchmark Brent futures prices have already fallen to their lowest in real terms since early 2021.

After adjusting for inflation, crude prices have retreated to levels last seen when the major economies were still in the grip of the coronavirus pandemic and the first successful vaccines had only recently been announced.

Inflation-adjusted Brent prices have averaged $72 per barrel so far in September, putting them in the 35th percentile for all months since the turn of the century, down from a recent high of $90 (57th percentile) in April.

The price slide is sending an increasingly strong signal about the need for a further deceleration in production growth to match the deteriorating macroeconomic environment and worsening outlook for consumption.

Since October 2022, Saudi Arabia and its OPEC⁺ partners have announced production cuts totalling 5.66 million barrels per day (b/d) to reduce excess inventories and drive prices higher.

Recently the group has been trying to unwind some of those cuts but has been forced to postpone planned output increases by the slowdown in consumption and renewed slump in prices.

Investors have concluded the group does not have an appetite to cut production further in the short or medium term.

The burden of adjustment must therefore fall on rival producers in the United States, Brazil, Canada and Guyana, which have accounted for nearly all output growth in recent years

Prices will decline until they enforce a further slowdown in drilling and production growth by U.S. shale producers, the most price-sensitive suppliers in the short term.

U.S. NATURAL GAS

Investors are cautiously building a bullish position in U.S. natural gas as ultra-low prices and record consumption by gas-fired generators whittle away excess inventories inherited from the exceptionally mild winter of 2023/24.

Hedge funds purchased the equivalent of 192 billion cubic feet (bcf) in the two major futures and options contracts tied to prices at Henry Hub in Louisiana over the seven days ending on September 10.

Funds have purchased a total of 290 bcf over the last two weeks taking their net long position to 507 bcf (45th percentile for all weeks since 2010) though the position is still far below the recent high of 1,170 bcf (60th percentile) in mid-June.

Inventories have been normalising rapidly as ultra-low prices have encouraged maximum consumption by power generators in the last stages of the summer airconditioning season.

Working inventories increased by a total of just 188 bcf over the nine weeks ending on September 6, the smallest seasonal accumulation for more than a decade, and less than half the average of 441 bcf in the past ten years.

As a result, in early September stocks were still high but back within the normal range of ± 1 standard deviations away from the average for the first time since early February.

With the main airconditioning season almost over, inventories will soon start rising faster, and are likely still to be above average when the main winter heating season starts on November 1.

But the surplus will be much smaller than a few months ago, and prices have begun to climb, reflecting the more balanced outlook for winter 2024/25.

Tyler Durden Mon, 09/16/2024 - 12:05

Leftist Media Blames Trump For Second Failed Assassination Attempt

In the lead up to the 2020 election between Donald Trump and Joe Biden the US was embroiled in a host of civil conflicts from BLM and Antifa riots to debates over the pandemic response.  The Democrat's election message was essentially a "return to normalcy" - "Wouldn't it be nice if all these riots and disruptions stopped?  Vote for Joe and it will all go away."

Except, it didn't go away.

Today as the 2024 election swiftly approaches the public is being made a very similar empty offer; the claim being that none of this political drama would be happening if Trump wasn't a factor.  It is this argument that is being used to justify not one but two separate near-miss assassination attempts on Trump, both carried out by confirmed supporters of Democrat institutions like ActBlue and the latest suspect, 58-year-old Ryan Routh, is a verified Bernie Sanders and DNC supporter who actively tried to recruit foreign mercenaries for the war in Ukraine. (Claims that Routh voted for Trump in 2016 appear to be false.  Records from his residence in North Carolina show Routh did not vote in 2016).

This is 58-year-old Ryan Wesley Routh. A background check on Routh turned up about 50 pages of criminal activity. (Yes, 50). Most of the charges state 'charges filed, unspecified' and cover a time span from 1984 to 2019.

He is registered to vote in Guilford County, North… pic.twitter.com/0bBOJwCI0L

— Sarah Fields (@SarahisCensored) September 15, 2024

Establishment news platforms blame Trump for both attempts on his life.

The second assertion by leftists is that Democrats like Kamala Harris are not responsible for the actions of two "random" unhinged shooters and the political left is mostly peaceful, but this excuse doesn't hold up to scrutiny.  In fact, Democrat media rhetoric for the past several years has radicalized progressive activists into a delusional frenzy, with millions of them being told that Trump and conservatives are an "existential threat to Democracy" similar to the Third Reich.  

The Russian Collusion hoax, the false claims of insurrection on January 6th and the false claims about Trump's "racism" have driven these people insane and, in their minds, killing him would save the world.  Demonize your political enemies enough and any criminal action could be treated as justifiable.  This zealotry is not limited to a handful of bad apples, it's pervasive among progressive groups.

 

The classic Marxist strategy is to attack the target leadership or system as much as possible while claiming your attempts at sabotage are actually the fault of the very people you seek to destroy.  In other words, gaslight your political opponents and tell everyone they made you do bad things to them.  Leftists must remain the perpetual victims, the perpetual underdogs, otherwise their entire narrative as "revolutionaries" falls apart.

It should be noted that only one side of the American discourse has consistently supported violence and assassination as their go-to solution to the possibility of losing the election.

The corporate media want to blame Trump for the second assassinat*on attempt on his life today.

His mortal sin? Disagreeing with Democrats.

Here are two straight minutes of partisan Democrats spreading hateful and incendiary rhetoric about Donald Trump:pic.twitter.com/6t3q9XJuv7

— Kyle Becker (@kylenabecker) September 16, 2024

This is not to say that the scale needs to be "balanced out" (that's a debate for another time), only that leftists continue to ignore the very democracy they claim to defend whenever public sentiment doesn't go their way.  Make no mistake, if Ryan Routh had been successful there would be millions of Democrats on social media cheering and gloating today.  They don't care about what's right, they only care about "winning."

Tyler Durden Mon, 09/16/2024 - 10:20

 

It’s hard to believe that it has been only 11 years since we launched RWM…

I am in Huntington Beach, California at at FutureProof 2024 — I’ll get some photos up later this week — but I don’t have time to get lost in any nostalgia

If you are interested in our history, check out any of the links below — or my or Josh‘s announcements when we launched.

The 11th anniversary is steel (I jumped the gun by a year), but all of us are very much looking forward to what we can accomplish in the next decade.

Much more to come…

 

 

Previously:
10 Years On (September 18, 2023)

10 Things I Have Learned Launching RWM (September 16, 2019)

Our Exorbitant Privilege (June 19, 2018)

What is your Value Add ? (April 12, 2018)

5 Years On . . .  (September 17, 2018)

Announcing: Ritholtz Wealth Management (September 16, 2013)

 

 

 

The post RWM 11th Anniversary (Steel) appeared first on The Big Picture.

Kamalanomics: Robbing The Future To Appease The Present

Via SchiffGold.com,

As the 2024 presidential race ramps up, Vice President Kamala Harris has unveiled an economic agenda that she claims will lower costs for American families and boost economic growth. However, her proposals reveal a reliance on heavy-handed government intervention that will harm the very people she aims to help. At the core of Harris’ approach is a fundamental distrust of free markets and a belief that the government can effectively micromanage the country’s economic systems.

One of Harris’ most concerning proposals is her plan to impose federal limits on price increases for food producers and grocers. While rising food prices are undoubtedly a burden for many families, attempting to control prices through government intervention is a recipe for disaster. Price controls invariably lead to shortages and black markets. Looking at the failures of price controls in countries like Venezuela is enough to see the devastating consequences of such policies. Instead of allowing market forces to efficiently allocate resources and incentivize increased production, Harris’ approach will result in reduced investment in the food industry and potential shortages of staple goods.

Harris’ housing proposals similarly rely on heavy-handed government intervention. Her plan calls for the construction of 3 million new housing units to ease supply shortages, along with providing $25,000 in down payment support for first-time homebuyers. Having the federal government directly subsidize construction on this scale risks crowding out private investment, leading to crippling public sector inefficiencies.

Instead, housing reform should focus on removing regulatory barriers to new construction at the local level. Restrictive zoning laws and mandates are the primary culprits behind America’s housing shortage. By incentivizing states to improve these processes, we would promote private sector housing development without incurring massive federal spending. The solution is less government intervention, not more.

Harris’ tax proposals also reflect a misguided belief that we can tax and spend our way to prosperity. By seeking to raise taxes on corporations and high-income individuals, she risks reducing the capital investment needed to drive productivity growth and real wage increases.

The vice president also plans to expand various subsidies for housing, childcare, and other expenses. While they appear to give support to families, these policies fail to address the root causes of affordability challenges and risk creating new forms of government dependency. A better approach would be to pursue policies that decrease the government influence in the economy which causes the inflation that is harming families.

Proponents of Harris’ plan argue that it will provide much-needed relief to struggling American citizens. However, the long-term consequences outweigh the potential short-term benefits. According to an analysis by the Penn Wharton Budget Model, Harris’ economic proposals would increase federal deficits by $1.2 trillion over the next 10 years on a conventional basis, and by $2.0 trillion when accounting for macroeconomic effects. This massive increase in government debt will tend to crowd out private investment and lead to higher interest rates, potentially triggering a recession.

Moreover, the Penn Wharton analysis projects that Harris’ plan would actually reduce GDP by 1.3 percent by 2034 and by 4 percent within 30 years, relative to current law.

This decline in economic output would translate to lower wages for workers across all income groups. The model estimates that pre-tax wages would fall by nearly one percent over the next decade and by 3.3 percent by 2054.

These projections highlight the central flaw in Harris’ approach: by prioritizing short-term government intervention over policies that foster long-term economic growth, her plan risks making everyone worse off in the long run.

Ultimately, Harris’ economic vision reflects a belief that enlightened bureaucrats and politicians in Washington can effectively plan and manage a $25 trillion economy.

But the failures of central planning throughout history show that free markets remain the greatest engine for prosperity and human flourishing.

Rather than expanding government control over vast swaths of the economy, policymakers should focus on creating the conditions for organic economic growth. This means maintaining sound monetary policy, reducing regulatory burdens, promoting free trade, and fostering innovation and entrepreneurship.

Economic freedom, not top-down control, is the most effective way to build a more prosperous future for all.

Tyler Durden Mon, 09/16/2024 - 10:00

Key Events This Week: All Eyes On The First Rate Cut Since Covid

It's all about the Fed this week and the first rate cut since March 2020 when Powell took rates to zero in response to the global covid shock. The only question is whether it will be a 25bps or 50bps rate cut. During a 36-hour monetary roller coaster mid week, we will also get policy decisions in Brazil, South Africa the UK and Japan, but those pale in comparison to the Fed.

This time last week DB's Jim Reid suggested that if we were going to get 50bps from the Fed on Wednesday we probably needed a media leak as we approached or entered this past weekend. Thursday's WSJ (link here) and FT (link here) articles certainly weren't smoking guns towards 50bps but they suggested the prospect was higher than where it was after Wednesday's slightly firmer CPI report. It's hard to know how informed the WSJ article was but as you will remember, the same author (Nick Timiraos) wrote a much firmer endorsement of a surprise 75bps hike just before the June 2022 FOMC which completely moved the needle at the time. There was little doubt that this was well informed. As we will discuss in more detail shortly, DB economists and strategists put both WSJ articles (2022 vs 2024) from this same author into the bank's proprietary AI tool (it’s not called ChatDBT but I'll refer to it that way) and it said that "the June 2022 article conveys a strong sense of urgency and conviction regarding the need for a significant rate hike to combat inflation. The September 2024 article, while discussing the possibility of a rate cut, presents a more balanced and less decisive outlook, reflecting the Fed's cautious approach in navigating economic uncertainty". So it confirmed the prior assumption about the fresh WSJ article that although this could be a signal that things were closer than we thought, there is no slam dunk here.

Back to the Fed, in the absence of any weekend articles that could have been sourced to the Fed, it really leaves the decision on Wednesday on a knife-edge, something that hasn't often been the case by the time we ultimately arrived at each FOMC in recent years. Normally its been fairly obvious that close to the meeting or the Fed have found a way of guiding the market to the eventual outcome. At the moment DB is expecting 25bps but with market pricing where it is (66bps priced in this morning), and if no Fed leaks push us back towards 25bps over the course of the next 12-24 hours, DB economists could easily move to a 50bps today as they don't think the Fed will want to surprise the market too much on the day. We will see. As important as the 25 vs 50 debate will be the communication from the Fed. Would a 50bps be the start of 50s or a one off larger move to start the cycle? Would a 25bps mean the bar for subsequent 50s is high? There will be lots to digest.It will be difficult to deviate the messaging too far away from the latest updated Summary of Economic Projections (SEP) and dot  plots though. So in many ways that constrains the messaging unless we see large changes.

DB's economists think the Fed’s growth forecasts are likely to be little changed but the median core PCE inflation forecast could fall by a tenth or two. They believe the unemployment rate forecast will move higher this year – likely into the 4.3-4.4% range – but be mostly unchanged in subsequent years. If the Fed cuts by 25bps on Wednesday, they would expect a median of 75bps of cuts this year and if they cut by 50bps, they would expect the SEP to reflect 100bps of cuts through year-end.

Outside of the Fed the main highlights are tomorrow's US retail sales and industrial production, Wednesday's US housing starts and permits and UK inflation, Thursday's Bank of England decision, US existing home sales and initial jobless claims, and Friday sees the BoJ meeting, China decide on 1 and 5-yr prime rates, Japan's CPI, and German PPI.

We also get some global central bank activity starting with the Bank of England’s policy rate decision on Wednesday. Economists surveyed by Bloomberg are expecting the Bank Rate to remain unchanged at 5% after Governor Bailey warned in August that the BOE will need to be “careful not to cut interest rates too quickly, or too much.”  And on Friday, the key point of interest for the day will be the Bank of Japan’s policy rate decision. No change from the prevailing 0.25% target rate is expected by surveyed economists this time around.

Courtesy of DB, here is a day-by-day calendar of events

Monday September 16

• Data: US September Empire manufacturing index, Italy July general government debt, trade balance, Eurozone July trade balance, Q2 labour costs, Canada August existing home sales, July manufacturing sales
• Central banks: ECB's Panetta speaks

Tuesday September 17

• Data: US August retail sales, industrial production, capacity utilisation, September New York Fed services business activity, NAHB housing market index, July business inventories, Japan July Tertiary industry index, Germany and Eurozone September Zew survey, Canada August CPI, housing starts
• Auctions: US 20-yr Bonds (reopening, $13bn)

Wednesday September 18

• Data: US August building permits, housing starts, July total net TIC flows, UK August CPI, RPI, PPI, July house price index, Japan August trade balance, July core machine orders, Eurozone July construction output, Canada July international securities transactions, New Zealand Q2 GDP
• Central banks: Fed's decision, BoC's summary of deliberations, ECB's Holzmann, Vujcic and Nagel speak

Thursday September 19

• Data: US Q2 current account balance, September Philadelphia Fed business outlook, August leading index, existing home sales, initial jobless claims, Italy July current account balance, EU27 August new car registrations, ECB July current account
• Central banks: BoE's decision, ECB's Knot, Nagel and Schnabel speak, Norges decision
• Earnings: FedEx
• Auctions: US 10-yr TIPS (reopening, $17bn)

Friday September 20

• Data: China 1-yr and 5-yr loan prime rates, UK September GfK consumer confidence, August retail sales, public finances, Japan August national CPI, Germany August PPI, France September manufacturing confidence, August retail sales, Eurozone September consumer confidence, Canada July retail sales, August industrial product price index, raw materials price index
• Central banks: BoJ's decision, ECB's Lagarde speaks

* * *

Finally, looking at just the US, Goldman writes that the key economic data releases this week are the retail sales report on Tuesday and the Philly Fed manufacturing index on Thursday. The September FOMC meeting is this week. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.

Monday, September 16

• 08:30 AM Empire State manufacturing survey, September 11.5 (consensus -4.3, last -4.7)

Tuesday, September 17

• 08:30 AM Retail sales, August (GS -0.3%, consensus -0.2%, last +1.0%); Retail sales ex-auto, August (GS +0.1%, consensus +0.2%, last +0.4%); Retail sales ex-auto & gas, August (GS +0.1%, consensus +0.3%, last +0.4%); Core retail sales, August (GS +0.1%, consensus +0.3%, last +0.3%): We estimate core retail sales expanded 0.1% in August (ex-autos, gasoline, and building materials; month-over-month SA). Our forecast reflects mixed card spending and a moderation from the 7.7% annualized pace of retail control growth over the prior two months, but a potential boost from back-to-school shopping. We estimate a 0.3% decline in headline retail sales, reflecting lower gasoline prices and lower auto sales.
• 09:15 AM Industrial production, August (GS +0.2%, consensus +0.2%, last -0.6%); Manufacturing production, August (GS +0.1%, consensus flat, last -0.3%); Capacity utilization, August (GS 77.8%, consensus 77.9%, last 77.8%): We estimate industrial production increased 0.2%, as strong natural gas and electricity production balance weak oil and mining production. We estimate capacity utilization remained at 77.8%.
• 10:00 AM Dallas Fed President Logan (FOMC non-voter) speaks: Dallas Fed President Lorie Logan will deliver pre-recorded welcoming remarks at the Eleventh District Banking Conference, hosted by the Dallas Fed. Her remarks will not address monetary policy or the economy, reflecting the FOMC’s blackout period.
• 10:00 AM NAHB housing market index, September (consensus 41, last 39): 10:00 AM Business inventories, August (consensus +0.3%, last +0.3%)

Wednesday, September 18

08:30 AM Housing starts, August (GS +6.3%, consensus +5.9%, last -6.8%); Building permits, August (consensus +1.3%, last -3.3%);

02:00 PM FOMC statement, September 17-18 meeting: We expect the FOMC to lower the fed funds rate by 25bp at the September meeting, followed by 25bp cuts at the November and December meetings. We expect the SEP’s median unemployment rate projection to rise to 4.2%/4.3%/4.2% in 2024-2026 (vs. 4.0%/4.2%/4.1% in June) and remain at 4.2% in 2027. We expect the median GDP growth projection to rise slightly in 2024 and the core PCE inflation projection to edge down in 2024 and 2025 in response to softer inflation data since the June FOMC meeting. We will publish our expectations for the fed funds rate projections in our FOMC preview this week.

Thursday, September 19

• 08:30 AM Initial jobless claims, week ended September 13 (GS 225k, consensus 230k, last 230k); Continuing jobless claims, week ended September 6 (consensus 1,855k, last 1,855k)
• 08:30 AM Philadelphia Fed manufacturing index, September (GS flat, consensus -1.0, last -7.0): We estimate that the Philadelphia Fed manufacturing index rebounded 7.0pt to flat in September, reflecting upward convergence to other surveys.
• 10:00 AM Existing home sales, August (GS +1.5%, consensus -1.3%, last -0.6%)

Friday, September 20

• There are no major economic data releases scheduled.

Source: DB, Goldman

Tyler Durden Mon, 09/16/2024 - 09:50

Arabica Bean Hits 2011 Highs As Coffee Inflation Soars 

Consumers are furious that ground beef, orange juice, eggs, cocoa, and food in general have skyrocketed in price. For low—and middle-income households, a trip to the supermarket has become a painful experience in the era of Bidenomics. Adding to the strain, the cost of a cup of coffee will rise even higher into the end of the year and likely in the first half of 2025.  

Bloomberg reports that premium arabica beans are experiencing adverse weather conditions in top producer Brazil, pushing prices up in New York to a 13-year high. 

Coffee rallies have been gathering pace from ongoing concerns about harsh weather in top producer Brazil. The nation is wrapping up its 2024-25 harvest and production prospects weakened after heat and dryness hurt fields. Attention is now shifting to next season's potential, and Brazil has been gripped by its worst drought in decades, threatening further crop damage.-BBG

Arabica futures in New York jumped to $2.6475 per pound in New York, the highest since 2011. Prices are up 40% on the year as shortages of the cheaper robusta beans increase demand for arabica by coffee chains. 

Bloomberg outlines the latest price hikes:

Across the supply chain, the impact of this year's rally is already evident. JM Smucker Co., whose brands like Folgers and Café Bustelo dominate the US's at-home coffee market, hiked its prices earlier this summer. Restaurant chain Pret A Manger scrapped its UK coffee subscription that gave customers as many as five drinks per day.

Meanwhile, Giuseppe Lavazza, chairman of coffee roaster Luigi Lavazza SpA, told Bloomberg in a separate report that low-cost robusta beans in Vietnam, the world's top producer of robusta, have experienced adverse weather conditions contributing to a production shortfall, thus fueling prices higher and higher. 

"We've never seen something like that in the history of our industry," Lavazza said, adding, "And what is very special is the long-lasting effect of this."

Lavazza said the European Union Deforestation Regulation, which will be enforced by the end of 2024, will ensure companies do not source coffee beans from deforested lands. 

"No doubt that the coffee that European roasters are going to buy will cost much more," he noted, adding, "Companies in the coffee industry are facing very strong headwinds."

The big takeaway for consumers is that food inflation is very sticky. Get used to higher prices. And somehow, the Marxists in America believe supermarkets are gouging customers.

Tyler Durden Mon, 09/16/2024 - 09:00

The Great Debates

Authored by Peter Tchir via Academy Securities,

The Great Debates

Another in a string of “interesting” weeks! Stocks surged on the week, with the S&P 500 rising 4% and breaking 5,555, which was discussed by many as being a critical level to breach. The Nasdaq led the way, up almost 6% on the week, but many of the laggards started to catch up. ARKK (a proxy for “disruption”) rallied a whopping 10% on the week! The first time in a while that I think it performed like a truly high-beta play on the market!

On the surface, a “simple” week of rallying, but we had some moments of downside, most critically on Wednesday as the S&P opened down more than 1.5% only to stage a “stunning” (at least for me) turnaround, finishing the day up over 1% (the Nasdaq trading was even more volatile).

As we continue to see the market whipsaw (the major indices are below where they rallied to in August, after the early August fear), I think that we can keep this week’s T-Report simple (my travel week was a bit draining) and cover the major bases, by sticking to the theme of “Debates.”

The Presidential Debate

I hate treading into this area as it is fraught with danger. So I will stick to what I think I know, from the data and commentary I’m collecting:

• Unlike the last debate, both Trump and Harris are likely sticking around for the election! (I figured I’d start with something easy).

• According to the betting odds, it seems that Harris has edged up slightly on most betting platforms. Not by much, but I think based on that we can assume that the debate seemed to work in her favor versus his favor (which might be backed up by the fact that Trump has now said he will not do another debate – though that could change on a moment’s notice).

So why did we sell off so hard overnight and at the open only to recover?

• There were some comments regarding AI, which we will discuss later (it certainly helped).

• The markets are pricing in that the Republicans will control the Senate, which means that we can start pricing in a split government and Wall Street does like gridlock. One view, which I agree with, is that if you are voting against someone as opposed to for someone, there is a greater probability of splitting your ticket – helping keep gridlock on the table. Gridlock will be generally good for Wall Street as opposed to the “risk” of a full sweep, which would likely scare the markets.

• As you know, I’ve been avoiding getting very specific on what I think either candidate’s campaign promises will mean for the economy after the election – namely because they are just that – “promises” from politicians on the campaign trail that rarely come to fruition. While I think we all have a sense of how Trump might govern if elected (since he already served 4 years as president) we are all trying to figure out how Harris would govern if elected. What seemed to give a lot of people comfort was a series of stories indicating that she is being pressured by large donors to move to the center. From my seat, she does seem to have changed her messaging over time – from when she was a prosecutor to when she was running for Senate, so maybe she will adopt a policy more centric than what she has advocated for in the fairly recent past. That is a bet that Wall Street seems to be making, and it seems reasonable to me.

The key for the election, from a Wall Street standpoint, seems as simple as:

• Wall Street would like gridlock. The anticipation of gridlock is helping bonds because the market would be able to discount the likelihood of some of the bigger deficit-producing “promises” ever becoming reality.

• Wall Street will like any sense that politicians are already pivoting towards the center as the election nears and they try to win over moderates and independents.

Only 7 more weeks of campaigning!

The Rate Cut Debate

According to the WIRP (Interest Rate Probability on Bloomberg) function, the market has priced in a total of 3 cuts in the next 2 meetings (to be honest, I had to check if the thing is working, because it certainly felt like 4 or more cuts were being priced in).

The meeting this week is priced in at 50/50 for a 50 bp cut. As someone who advocated for a July cut (and even thought 50 in July would be appropriate - Building the Case for Rate Cuts), I should be in the 50 bp camp (it is certainly what I think they should do, but will they?).

The Fed doesn’t like to surprise markets (though it is probably more against surprising on the negative side than on the positive) which leaves them in a bit of a quandary with markets pricing in a 50% chance. At that level, a 25 bp cut would surprise the market negatively (I cannot shake the impression that the contracts used to estimate the WIRP are less aggressive on the cut front than other markets). Let’s also not forget that on 9/11 (a day we should never forget and that still brings tears to my eyes, reliving that horrible time) the market was “only” pricing in a 17% chance of a 50 bp hike.

I’d go 50, but for a group that decided not to cut at all in July, has the data been good enough on the inflation front (maybe) or weak enough on the job front (maybe) to cut 50?

Either way I expect at least one dissent, as at least one person will say they wanted 50 if they go with 25, or someone will argue that 25 was right, if they go with 50. I find the dissent “fascinating” since I think (facetiously) that as far as “Chairmen” go, Mao and Stalin had more dissenters than the Fed Chair gets, which has always seemed weird to me.

Is this a Fed that is willing to cut 50 and risk seeing either an uptick in inflation or job creation? That is probably what will drive the debate at this meeting!

In any case:

• 75 in the next 2 meetings sounds correct (though I’m leaning towards 25 then 50).

• More “interesting” is that the market is pricing in 10 cuts, getting down to 2.86% by next September – which seems far too fast.

  • I’m not sure that the terminal rate will still be in the 2.75% to 2.875% range based on the dots. The median was 2.75% but the average was 2.875%. I don’t see it dropping and could see a case where it moves up a smidge – but that is only useful at the margin.

  • They would need to revise their dots for next year downwards rather significantly! Are they really prepared to do that?

The risk from the Fed is to disappoint holders of longer-dated bonds and equities, with more of the risk coming from what they say about the next year or so, than what they do at this meeting – though a 50 bp cut would allow markets to ignore any hawkish comments (which seems like a path the Fed would not like to go down – as it really would decrease their ability to jawbone).

The AI Debate

From a macro/econ/market perspective, the AI debate remains incredibly important as the AI stocks remain big drivers of most market moves. As discussed in Gell-Mann Amnesia Effect, it is a debate surrounding valuations and current (call it next year or so) cost versus benefit. Is the cost of implementing AI outpacing the benefit? Has the market priced in competition or other risks? Or, is the risk still that the market hasn’t yet digested the true impact of AI?

Markets did respond to some industry leaders giving positive comments on the outlook and if “buy the dip” remains strong in any sector, it is the AI and chip sector (though NVDL actually saw the leveraged version of NVDA shares outstanding decrease on the week).

What I’m starting to play with is Open AI o1 (also known as Strawberry). It is designed to be a “reasoning model for solving hard problems.” It seems interesting at first blush. It is much slower than ChatGPT but seems to try to come up with actual answers (rather than what sometimes seems like glorified search results). It wouldn’t tell me who will win the election (something about data only until October 2023) or what the stock market would do (which I guess is bad, since it would be great to day trade this market perfectly and capture all those 1% moves, but probably good, as I’d have less reason to exist).

Speaking of which, I’ve been told this model is scoring 95% on average on the LSAT.

I just started to play with this, but since I’ve been on the “overvalued” side of the equation, I wanted to make sure people see this as soon as possible, as it could be another seminal moment in AI! While everyone was talking 50 bps on Thursday and Friday, this new version was released on September 12th , so I’m not sure how much, if anything, is priced in. However, given the valuations, even with this sort of advancement (if it is truly as impressive as it sounds), was it already priced in?

Bottom Line

My biggest fear, in both directions, for stocks and bonds (and even credit), remains that there seems to be very little depth in terms of liquidity.

Be small, be nervous, and expect volatility to continue – in both directions and for moves to be outsized relative to the news or information flow!

The “peaceful” days of summer seem like a distant memory already, and those days weren’t even that peaceful this summer!

Good luck, and I do wish the Fed would come out at 10am ET, as the hours ahead of the Fed are dull and filled with nothing but time to second guess every position you have, regardless of how much time, effort, and preparation went into setting up those positions!

Tyler Durden Mon, 09/16/2024 - 08:40

Apple Slips On Pre-Order Analysis Showing Weak iPhone 16 Pro Demand 

Apple supply chain analyst Ming-Chi Kuo published a pre-order analysis report on the demand for the iPhone 16 on Sunday following last week's launch event. He found less demand for the iPhone 16 Pro and iPhone 16 Pro Max and, inversely, more demand for base models. This report contradicts the optimism of many Wall Street analysts who forecasted that new AI Siri features embedded in the new iPhone would spark an upgrade "super cycle." Apparently, that's not the case.

Kuo wrote in the report posted on Medium titled "iPhone 16 first weekend pre-order analysis: estimated total sales of about 37 million units; Pro series demand lower than expected," that his analysis was based on the "latest supply chain survey and pre-order results from Apple's official websites ... I've compiled key data on iPhone 16's first-weekend pre-orders for each model, including pre-order sales, average delivery times, and shipments before pre-order." 

Here are Kuo's top findings:

Table item explanations:

1. First Weekend pre-order sales: estimated based on each model's delivery time and production plans for that period.

2. Average delivery time: results from Apple's official websites in major iPhone markets 48 hours after pre-orders opened.

3. Shipments before pre-order: Production volume before pre-orders.

Kuo's conclusion: 

1. iPhone 16 series first-weekend pre-order sales are estimated at about 37 million units, down about 12.7% YoY from last year's iPhone 15 series first-weekend sales. The key factor is the lower-than-expected demand for the iPhone 16 Pro series.

2. The delivery times of the iPhone 16 Pro series are significantly shorter than those of the 15 Pro series. In addition to the shipment increase before the pre-order, the key is that demand is lower than expected, as evidenced by the YoY decline in first-weekend sales.

3. The significant YoY growth in shipments before pre-order for iPhone 16 Pro Max is due to improved tetraprism camera production yields and Apple's optimistic outlook for demand for this model.

4. One of the key factors for the lower-than-expected demand for the iPhone 16 Pro series is that the major selling point, Apple Intelligence, is not available at launch alongside the iPhone 16 release. Additionally, intense competition in the Chinese market continues to impact iPhone demand.

5. While first-weekend sales of the iPhone 16 Plus and standard version were up YoY, their impact on total iPhone shipments is limited.

6. Despite the YoY decline in first-weekend pre-order sales of the iPhone 16 Pro series, the supply chain's production plans are unlikely to change significantly in the near term. Apple still has opportunities to improve sales through the release of Apple Intelligence and peak season promotions (year-end holiday season in America and Europe and Double 11 in China). These factors will be key points to watch for changes in iPhone demand.

7. Strategies such as adding a tetraprism camera to the 16 Pro and maintaining iPhone 16 series pricing have had a limited help to iPhone 16 first-weekend pre-order sales. Suppose Apple Intelligence releases in 4Q24 and peak season promotions have a limited effect on iPhone 16 shipments. In that case, I believe that Apple will implement more aggressive iPhone product strategies in 2025 to stimulate market demand.

A key takeaway from the report is that consumers are more interested in the base iPhone models during this launch cycle than in the Pro series. This shift could be driven by pricing concerns in an era of elevated inflation and high interest rates, or possibly because the Pro models are too large in size. The exact reasons remain unclear.

In markets, shares of Apple are lower by more than 2%. 

Let's not forget.

The whole reason AAPL stock levitated from the $170s to $240 is because AI was supposed to spark an iPhone upgrade cycle https://t.co/gnBXPTnvJD

— zerohedge (@zerohedge) September 16, 2024

Wall Street's expectations for a robust iPhone upgrade cycle driven by Siri AI now face serious doubt following this report. 

Tyler Durden Mon, 09/16/2024 - 08:25

Futures Flat As Traders Brace For First Rate Cut Since 2020

Futures are flat, erasing an earlier modest gain, ahead of a very busy week which will see the first Fed rate cut since March 2020. As of 7:45am, S&P futures were down fractionally, with small-caps outperforming following a trend from late last week as investors price in a 50bps rate cut on Wednesday. Nasdaq futures are down 0.3% as Semis lag and the Mag7 are mixed and AAPL slumps as much as 2.4% as noted analyst Ming-Chi Kuo notes that, based on his first weekend pre-order analysis, demand for the iPhone 16 Pro series is lower than expected. There was little reaction in markets to the second attempt to assassinate Donald Trump. Shares of Trump Media & Technology rose as much as 10% in premarket trading after the former president said he has “absolutely no intention of selling” his stake when a lockup expires this week. While JPM's Andrew Tyler asks rhetorically this morning "let's see if last week’s bid returns", it does not look very likely since we just entered the worst 2 week calendar period for the year, and stocks enter a buyback blackout, plus there is no tech conference to spike the euphoric AI narrative yet again. Bond yields are down as the curve bull steepens, pressuring the USD which slides for the 4th day in a row to its lowest level in more than eight months. The move was driven by strength in the yen, which touched the highest since July 2023 amid speculation this week’s slew of central bank decisions will lead to a narrowing interest rate differential between the US and Japan. Commodities are higher with Energy and Metals boosting the index. Today is a light macro day ahead of tomorrow’s Retail Sales and Weds’ Fed Mtg where the market remains split on 25 o5 50bps.

In premarket trading, Apple shares fall 2.2% as TF International analyst Ming-Chi Kuo notes that demand for the iPhone 16 Pro series is lower than expected, based on his pre-order analysis of the first weekend. Intel rose 1% as the chipmaker officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the Pentagon, according to people familiar with the matter. Here are some other notable premarket movers:

• Colgate-Palmolive (CL) shares drop 1.5% after Wells Fargo downgraded the stock to underweight from equal-weight, saying the household and personal care products company’s growth is set to normalize.
• Exact Sciences (EXAS) shares rise 11% after the diagnostics company released performance data from a study of its blood-based colon cancer screening test candidate.
• Nuvalent (NUVL) shares jump 16% after the drug developer presented updated data from two early-stage trials of its lead cancer programs that impressed Wall Street.
• Stratasys (SSYS) shares rise 6.0% after the three-dimensional printer maker’s board authorized a $50 million share repurchase program. The new repurchase program represents 10% of the company’s current market value, data compiled by Bloomberg show.
• Trump Media (DJT US) rises 1.3%, with the stock set to extend Friday’s gains, after Donald Trump said he has “absolutely no intention of selling” his stake when a lockup period expires later this week.

Stocks have not reacted to the biggest news of the weekend, a second assassination attempt on Donald Trump, who is safe after his Secret Service detail opened fire at a man who was wielding an AK47 assault rifle at his West Palm Beach, Florida, golf course Sunday, in what the FBI called an apparent (second) assassination attempt. According to law enforcement officials, Secret Service officers clearing the golf course ahead of Trump spotted a man in the woods with a gun. The suspect — later identified as radical left-wing nutjob 58-year-old Ryan Routh who had previously fought in Ukraine against Russia — fled in a black car but was later detained after a chase.

The start of a long-anticipated US easing cycle takes center stage this week, part of a 36-hour monetary roller coaster that includes policy decisions in Brazil, South Africa the UK and Japan. It’s come down to a virtual coin toss for traders on whether the Fed will go for a 25 or 50 basis-point cut.

“There has rarely been so much uncertainty over central bank intentions,” analysts at Edmond de Rothschild wrote in a note. “They are caught between signs of economic weakness and inflation which is stubbornly resisting a return to the 2% target.”

For Joyce Chang, chair of global research at JPMorgan, the Fed has scope to make the bigger move and doing more now would probably send the right signal. “We are still sticking with a 50 basis-point call, but it is a debate, internally and within the broader market,” Chang said on Bloomberg TV. “When I talk to investors, 25 versus 50 isn’t so much the debate, but really how does the US growth story look.” That view was echoed by several other top Wall Street strategists, who suggested that the health of the US economy could have more bearing on stocks than the size of the Fed’s rate cut. The flipside, of course, is that a rate cut now with home prices once again rising, will spark another episode of runaway inflation, something which gold at a record $2580 is clearly anticipating.

“If the labor data weaken from here, markets can trade with a risk-off tone regardless of whether the Fed’s first move is 25 or 50 basis points,” Morgan Stanley’s Mike Wilson wrote in a note. On the other hand, if jobs were to strengthen, a series of 25 basis-point reductions into mid-2025 could prop up equity valuations further, he said. Goldman Sachs and JPMorgan analysts also warned that rates alone were less important for stocks, given the uncertain outlook for the economy.

The Bank of Japan, meanwhile, is expected to keep rates on hold after roiling global financial markets with an increase at its last meeting. “The communication from the BOJ will be critical to let market participants know exactly, as clear as they can be, what the next move and the particular timings of the next moves will be,” Katrina Ell, director of economic research Moody’s Analytics, told Bloomberg Television.  

European stocks are little changed as mining shares provide a drag after data showed China’s economy lost momentum in August. Among single stocks Rexel and Ipsen are the biggest gainers, while the biggest Polish insurer PZU plunged as heavy flooding hit the country’s southwest region. Here are the biggest movers Monday:

• Rexel shares surge as much as 14%, their steepest gain in four years, after the French electrical equipment group said it rejected an unsolicited takeover offer from QXO Inc. because it “significantly” undervalued the company
• Ipsen advances as much as 5.8% following an upgrade to outperform from sector perform at RBC, based on a higher peak sales estimate for the French drugmaker’s Iqirvo for primary biliary cholangitis
• Saipem shares jump as much as 6.1%, the most intraday since March, after the Italian drilling company won an offshore contract with QatarEnergy LNG worth about $4 billion
• Icade gains as much as 6.9% to the highest in more than three months, after Citi double-upgraded to buy and set a Street-high target, saying the commercial property investor’s dividend yield of about 20% is “hard to ignore”
• Crayon jumps as much as 18%, the most since August 2020, after Bloomberg reported Swiss technology firm SoftwareOne is exploring a potential combination of the two firms as it considers strategic options
• Intermonte Partners SIM jumped as much as 20% in Milan after asset manager Banca Generali made a takeover bid on Monday at €3.04 per share, with the aim of delisting it
• TI Fluid Systems shares rise as much as 17% after the auto supplier rejected a second takeover proposal from ABC Technologies, arguing the bid “significantly undervalued” the business. Analysts at Jefferies agree the valuation is too low
• TT Electronics shares plunge as much as 37%, the most on record, after the electronics company warned revenue will be lower than previously expected in the second half because of “weak” trading at two of its North American sites, which will also hurt profitability
• PZU insurer drops 13% as heavy flooding hits southwest Poland

Earlier, Asian equities climbed for a third day, bolstered by expectations of a rate cut by the US Fed this week. The MSCI Asia Pacific Index climbed 0.5%, with Hong Kong-listed tech stocks, including Tencent and Meituan, along with Australian lenders featuring among top gainers. Japan, Korea and China markets were closed for a holiday. In China, data published over the weekend showed industrial output recording its longest slowing streak since 2021, while consumption and investment were weaker than expected. That has bolstered expectations of more stimulus from the PBOC before year-end, adding to tailwinds from an expected Fed rate cut that might bring in larger emerging market flows.

“Support from fiscal policy, which has lagged throughout 2024, could step up,” Wei He, an analyst with Gavekal Research wrote in a note. “The government will probably introduce some additional stimulus measures in coming months.” Still, those measures are unlikely to convince market participants that nominal growth prospects are improving, she said.

In FX, the Bloomberg Dollar Spot Index falls 0.4% to the lowest since January as traders added bets on a 50bps interest-rate cut by the Federal Reserve this week while expectations of a narrowing rate differential between the US and Japan boosted the yen. The Japanese yen and Norwegian krone are the best performers among the G-10 currencies, rising 0.7% each.

In rates, Treasuries extended their gains, with the yield on the policy-sensitive two-year note falling to the lowest since September 2022 and outperformed as markets see higher odds that Wednesday’s Fed decision will be a half-point rather than a quarter-point rate cut. Front-end yields are richer by more than 2bp, longer maturities by 1bp-2bp; the 10-year yield is around 3.64% outperforming bunds and gilts slightly; 2s10s spread is ~1bp steeper on the day at ~8bp. Swap contracts price in around 37bp of easing for the September meeting and around 75bp by November, anticipating that one of the next two moves will be a a half-point cut. Corporate new-issue volume stands to be heavy Monday as borrowers aim to complete offerings ahead of the Fed decision. IG dollar issuance slate includes a couple of deals so far; around $25b of supply is expected this week, concentrated on Monday and Tuesday ahead of Wednesday’s FOMC decision. This week’s Treasury coupon supply includes $13b 20-year bond reopening Tuesday and $17b 10-year TIPS reopening Thursday

In commodities, oil prices advance, with WTI rising 0.8% to near $69.20 after its first weekly gain in a month as a drop in Libyan exports was offset by China’s economic woes. Meanwhile hedge fund traders are net short the oil complex for the first time on record. Spot gold rises $9 to around $2,586/oz. Bitcoin falls over 1%. gold rose to a fresh record high as markets waited for the Fed easing.

Looking at today's light calendar, the data includes only September Empire manufacturing at 8:30am; this week we get retail sales, industrial production, housing starts and existing home sales. Fed speakers are in self-imposed quiet period until the Sept. 18 policy decision

Market Snapshot

• S&P 500 futures little changed at 5,633.50
• STOXX Europe 600 little changed at 515.95
• MXAP up 0.5% to 183.99
• MXAPJ up 0.5% to 571.56
• Nikkei down 0.7% to 36,581.76
• Topix down 0.8% to 2,571.14
• Hang Seng Index up 0.3% to 17,422.12
• Shanghai Composite down 0.5% to 2,704.09
• Sensex up 0.2% to 83,022.63
• Australia S&P/ASX 200 up 0.3% to 8,121.60
• Kospi up 0.1% to 2,575.41
• German 10Y yield little changed at 2.14%
• Euro up 0.4% to $1.1120
• Brent Futures up 0.7% to $72.12/bbl
• Gold spot up 0.4% to $2,587.72
• US Dollar Index down 0.43% to 100.68

Top Overnight News

• President Donald Trump survived a second assassination attempt on his golf course in West Palm Beach and the Secret Service opened fire at a suspected person with a weapon while Trump was golfing, according to law enforcement sources cited by AP. Trump’s campaign said the former President is safe following a shooting in his vicinity, while Trump said he will never give up and nothing will stop him. Furthermore, the FBI said it is investigating what appears to be an assassination attempt and a Palm Beach law enforcement official said the suspect was arrested and that they found an AK-47 type weapon.
• China economic data continues to fall short of expectations, with retail sales coming in +2.1% (down from +2.7% in Jul and below the Street’s +2.5% forecast) and industrial production at +4.5% (down from +5.1% in Jul and below the Street’s +4.7% forecast) while home price deflation worsens and time runs out for the gov’t to achieve its full-year targets. SCMP
• Major American retailers including Amazon and Walmart have been quietly exploring shifting toward a business model that would ship more goods directly to consumers from Chinese factories and require fewer U.S. workers in retail stores and logistics centers. NYT
• The US and UK are increasingly concerned Russia is giving Iran information and technology that may help it to build nuclear weapons, Western officials familiar said. Iran said it’s ready to enter talks under the framework of the 2015 nuclear deal, which Trump scrapped as president. BBG
• Bank of Canada governor Tiff Macklem has opened the door to accelerating the pace of interest rate cuts, signaling policymakers could switch to jumbo 50 basis point moves should growth disappoint. FT
• The Fed should cut by 50bp this week according to Greg Ip in the WSJ given cooling inflation (which is causing monetary policy to passively tighten) and rising employment risks. Ip said the Fed's rate decision this week looks more difficult than it should be and the real question isn’t how much to cut, but where rates ought to be, while it added that the answer is much lower which argues for a half-point cut: WSJ
• DirecTV and Dish are in talks to merge, a combination that would create the largest pay-TV operator in the country (the firms hope regulators will be more amenable to a transaction this time around given shifting industry dynamics). BBG
• OpenAI could close a fundraising round at a valuation of $150B within weeks (demand has been strong), although the specific mechanism will be a convert, and the valuation could adjust lower if the firm is unsuccessful in altering its corporate structure to remove a cap on profits. RTRS

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed amid the holiday-thinned conditions with many key markets in the region closed and as participants braced for this week's central bank announcements including from the FOMC, BoE and BoJ. ASX 200 mildly gained as real estate and financials led the advances across most sectors aside from defensives. Hang Seng was dragged lower amid the absence of mainland participants and with underperformance seen in property developers after Chinese house prices further deteriorated, while the latest Chinese Industrial Production and Retail Sales also disappointed.

Top Asian news

• China is strongly dissatisfied with and firmly opposes the US locking in tariff hikes on Chinese imports. Furthermore, China urges the US to immediately correct its ‘wrongdoings’ and lift all tariffs imposed on Chinese goods, while China will take necessary measures to firmly safeguard the interests of Chinese firms, according to MOFCOM.
• China Stats Bureau spokesperson said China will step up macro policy adjustments, while they expect a mild rebound in the consumer price index and for quickening bond issuance and policy initiatives to support China’s investment growth.

European bourses, Stoxx 600 (U/C) began the session almost entirely in the red, albeit modestly so. As the morning progressed, sentiment gradually improved and now displays more of a mixed picture. European sectors hold a negative bias; Retail takes the top spot alongside Consumer Products whilst Basic Resources lags, largely a factor of the poor Chinese data over the weekend. US Equity Futures (ES +0.1%, NQ U/C, RTY +0.1%) are indicative of a flat/slightly firmer open, ahead of the FOMC Policy Announcement on Wednesday. Intel (+3.5%) gains after the Co. reached a deal to make chips for the US military; a deal worth as much as USD 3.5bln.

Top European news

• ECB's de Guindos says ECB projections show that inflation by 2025-end will hover around 2% target. Inflation in services is still resisting, this remains the ECB's main concern. ECB expects a significant slowdown in growth of labour costs next year. ECB wants to keep all options open when it comes to interest rate decisions. The ECB's balance sheet is expected to decrease by around EUR 40bln per month.
• ECB's Kazimir says the ECB will almost surely have to wait until December for the next rate cut; it would take a significant shift in outlook for ECB to cut in October; very little new info in the pipeline before October meeting. There is no rush to cut rates, safest to wait for the outlook to become clearer.
• UK Chancellor Reeves was advised by a group of leading economists that cutting public investment in the UK would damage the foundations of the economy, according to FT.

FX

• DXY has extended the slump seen since last Thursday with the dovish Fed repricing the main catalyst. Markets now assign a circa 59% chance of a 50bps reduction this week compared to 15% post-CPI last week. The next target for DXY comes via the YTD trough at 100.51.
• EUR/USD is back above 1.11 thanks to the softer USD. EUR/USD is now eyeing the post-payrolls peak from September 6th at 1.1155 with the YTD high at 1.1201.
• GBP is firmer vs. the USD but flat against the EUR heading into the BoE on Thursday. Expectations are for an unchanged rate with a 7-2 vote split (dovish dissent expected from Dhingra and most likely Ramsden). Attention for Cable is on a test of 1.32; not breached since 6th September.
• JPY is the best performer across the majors as further dovish Fed repricing stands in contrast to a hawkish BoJ. USD/JPY has slipped below 140 for the first time since July 2023.
• Both antipodes are firmer vs. the USD and able to overlook the soft Chinese trade data overnight. AUD/USD has been able to undo much of the downside seen late last week with the current session high of 0.6736.
• CAD is a touch firmer vs. the USD but less so than peers following an interview in the FT with BoC Governor Macklem who signalled that the Bank could increase the size of rate cuts from 25bps to 50bps on account of softening labour market data and weakening crude prices.
• CNH is marginally firmer vs. the USD as the broadly softer dollar overshadows the negative follow-through from further soft Chinese metrics over the weekend.
• Bank of Canada Governor Macklem opened the door to increasing the pace of rate cuts as growth fears mount, according to FT.

Fixed Income

• USTs are relatively contained as markets count down to this week’s FOMC policy announcement, as it stands market pricing has the odds of a 50bps cut at around 60% and a 25bps move at 40%. Despite the shift in pricing, USTs themselves are essentially unchanged at 115-15 in a thin five tick range.
• Bunds are incrementally firmer and towards the midpoint of 134.71-97 parameters. Holding within Friday’s 134.62-135.19 range. The main focus point for the bloc is a speech from ECB's Lane at 13:00BST / 08:00 EDT, a text is expected.
• Gilts are also slightly higher and holding around 20 ticks above the 101.00 mark and just off a 101.30 session peak. For the UK, the week’s focus point is the BoE on Thursday (exp. to hold, 7-2 split possible).

Commodities

• Crude is modestly firmer intraday amid the softer Dollar but despite the downbeat Chinese data over the weekend which reinforced the theme of an ailing Chinese economy following the Chinese inflation and trade balance figures in the week prior. Brent November trades within 71.52-72.39/bbl.
• Precious metals are firmer across the board amid the softer Dollar and with added optimism for precious metals as spot gold continues printing fresh all-time highs, with today's parameter between USD 2,577.59-2,589.72/oz.
• Mixed trade across base metals with copper on a softer footing following the sub-par Chinese data. 3M LME copper resides in the middle of a 9,219.50-9,291.50/t range.
• UBS cuts Q4 2024 Brent price forecast to USD 75/bbl from USD 83/bbl; Cuts 2024 Brent forecast by USD 4/bbl to USD 80/bbl
• Almost a fifth of US Gulf of Mexico crude oil production remained offline and nearly 28% of natural gas production was shut-in in the aftermath of Francine on Sunday, according to the US offshore energy regulator cited by Reuters.
• BP (BP/ LN) is restarting operations at its Castrol lubricants facility in Port Allen, Louisiana after determining conditions are safe to return and Shell (SHEL LN) is ramping up production at Perdido following the resolution of downstream issues, according to Reuters.
• Chevron (CVX) said its US Gulf of Mexico Jack/St Malo and Big Foot platforms are producing at reduced rates due to onshore gas plant disruption, while it continues to return workers and restore oil production at the US Gulf of Mexico Anchor and Tahiti platforms shut-in by Francine with initial assessments showed that neither the Anchor nor Tahiti platforms suffered significant damage, according to Reuters.
• ANZ expects gold to reach USD 2,900/oz by end of 2025 (current spot price USD 2,587.50/oz).

Geopolitics: Middle East

• Sirens sounded in Avivim in the Upper Galilee to warn of rocket launches, according to Al Jazeera.
• Yemen’s Houthis claimed responsibility for a missile attack on central Israel and stated that a Yemeni missile reached Israel after 20 missiles failed to intercept it. There were separate reports that Israel’s military announced sirens were set off by a missile which crossed into the country from the east and fell in an open area but caused no casualties.
• Israeli PM Netanyahu said Yemen’s Houthis should know that they will exact a heavy price for every attempt to harm Israel and noted that a missile fired from Yemen most likely fragmented in mid-air, while he also said the current situation in northern Israel will not continue.
• Houthis said they downed a US drone over Dhamar

Geopolitics: Other

• Russia’s Medvedev said Russia already has formal grounds to use nuclear weapons but has so far chosen not to do so, while their patience has its limits and their response might come in non-nuclear form.
• Russia’s Deputy Foreign Minister said Moscow is aware that the West decided on whether to allow Ukraine to strike deep within Russia and that Moscow should use other means since verbal warnings to the West against escalation are not working, according to TASS.
• G7 Foreign Ministers condemned in the strongest terms Iran’s export and Russia’s procurement of Iranian ballistic missiles, while they called for Iran to immediately cease all support to Russia’s illegal war against Ukraine and halt such transfers of ballistic missiles, according to Reuters.
• Ukrainian President Zelensky said Ukraine brought home 103 POWs from Russia in a second swap in two days and noted the incursion into Kursk helped bring about a prisoner exchange with Russia.
• Ukrainian spy chief Budanov said North Korea’s artillery supplies to Russia are a major problem and have a visible battlefield impact. Budanov said that Russia has ramped up production of Iskander ballistic missiles and guided bombs, as well as commented that Russia expects to face recruitment problems in the summer of 2025.
• US National Security Adviser Sullivan said long-range weapons permission is the subject of intense consultations among allies and that fighting around Ukraine’s Pokrovsk is of unique concern, while the US is preparing to present a substantial Ukraine aid package this month.
• US military member was detained in Venezuela and it was also reported that two additional US citizens were detained, according to a State Department spokesperson cited by Reuters.
• Russian and Chinese warships practiced missile and artillery firing in the Sea of Japan as part of Ocean-2024 drills, according to RIA.
• China’s military said the transit of two German warships in the Taiwan Strait increased security risks and sent a wrong signal. China’s military also stated that Chinese troops are always on high alert and ready to counter all threats and provocations.
• China’s Coast Guard said Philippine vessel 9701 withdrew from the Sabina Shoal on September 14th which ‘illegally’ stayed there for nearly five months, while it added that China took measures against the Philippine vessel in accordance with the law and the Philippines’ repeated attempts to organise supple replenishment to the vessel had all failed. However, the Philippines said it would send another vessel to immediately takeover from the vessel in the disputed Spratlys.

US Event Calendar

• 08:30: Sept. Empire Manufacturing, est. -4.0, prior -4.7

DB's Jim Reid concludes the overnight wrap

This time last week we suggested that if we were going to get 50bps from the Fed on Wednesday we probably needed a media leak as we approached or entered this past weekend. Thursday's WSJ and FT articles certainly weren't smoking guns towards 50bps but they suggested the prospect was higher than where it was after Wednesday's slightly firmer CPI report. It's hard to know how informed the WSJ article was but as you will remember, the same author (Nick Timiraos) wrote a much firmer endorsement of a surprise 75bps hike just before the June 2022 FOMC which completely moved the needle at the time. There was little doubt that this was well informed. As you'll see from my CoTD on Friday, our economists and strategists put both WSJ articles (2022 vs 2024) from this same author into our proprietary AI tool (it’s not called ChatDBT but I'll refer to it that way) and it told us that "the June 2022 article conveys a strong sense of urgency and conviction regarding the need for a significant rate hike to combat inflation. The September 2024 article, while discussing the possibility of a rate cut, presents a more balanced and less decisive outlook, reflecting the Fed's cautious approach in navigating economic uncertainty". So it confirmed our prior about the fresh WSJ article that although this could be a signal that things were closer than we thought, there is no slam dunk here. We feel this is a good use case for AI as we all have our biases and its nice to see what the unbiased linguistic analysis suggests. I'll be typing everything my wife tells me into this now to ensure I get the true meaning not what my biases interpreted.

Back to the Fed, in the absence of any weekend articles that could have been sourced to the Fed, it really leaves the decision on Wednesday on a knife-edge, something that hasn't often been the case by the time we ultimately arrived at each FOMC in recent years. Normally its been fairly obvious that close to the meeting or the Fed have found a way of guiding the market to the eventual outcome. At the moment DB is expecting 25bps but with market pricing where it is (41bps priced in and up 3-4bps overnight), and if no Fed leaks push us back towards 25bps over the course of the next 12-24 hours, our economists could easily move to a 50bps today as they don't think the Fed will want to surprise the market too much on the day. We will see. As important as the 25 vs 50 debate will be the communication from the Fed. Would a 50bps be the start of 50s or a one off larger move to start the cycle? Would a 25bps mean the bar for subsequent 50s is high? There will be lots to digest.

It will be difficult to deviate the messaging too far away from the latest updated Summary of Economic Projections (SEP) and dot plots though. So in many ways that constrains the messaging unless we see large changes. Our economists think the Fed’s growth forecasts are likely to be little changed but the median core PCE inflation forecast could fall by a tenth or two. They believe the unemployment rate forecast will move higher this year – likely into the 4.3-4.4% range – but be mostly unchanged in subsequent years. If the Fed cuts by 25bps on Wednesday, they would expect a median of 75bps of cuts this year and if they cut by 50bps, they would expect the SEP to reflect 100bps of cuts through year-end.

Outside of the Fed the main highlights are tomorrow's US retail sales and industrial production, Wednesday's US housing starts and permits and UK inflation, Thursday's Bank of England decision (DB expect unchanged, see preview here), US existing home sales and initial jobless claims, and Friday sees the BoJ meeting (DB preview here, view is for unchanged), China decide on 1 and 5-yr prime rates, Japan's CPI, and German PPI.

Over the weekend, China's latest monthly data dump was weaker than expected across the board. Industrial Production (4.5% vs. 4.7% expected), Retail Sales (2.1% vs. 2.5% expected), the Jobless rate (5.3% vs. 5.2% expected) and Fixed Asset Investment (3.4% vs. 3.5% expected) were all soft alongside slightly lower than expected new and used home prices. Our economists have downgraded their GDP forecasts and believe YoY growth likely slipped to 3.7% in August from 4.6% in July.
We can't see the immediate market response as mainland Chinese markets (and South Korean) are closed until Wednesday with markets in Japan also closed today for a holiday. The Hang Seng opened -0.76% lower but has rallied back to -0.29% as I type. US equity futures are fairly flat and Treasuries aren't trading due to the Japanese holiday.

Another big story to break last night was what the FBI are calling a second assassination attempt on former President Donald Trump at his Florida golf course. This may steer the campaign in a different direction again over the next few days.

Recapping last week now, markets put in a very strong performance, with risk assets recovering the bulk of their losses from the previous week. Initially, that was driven by growing optimism about the economic outlook, with fears diminishing about a potential downturn in the US. Then by the end of the week, markets got a further boost as the prospect of a 50bp Fed rate cut this month came back into view, which provided a fresh uplift for equities and bonds. In many respects, it was the best of both worlds from a near-term market perspective, as the perceived likelihood of a 50bp rate cut went up, but unlike in early August, it wasn’t because of negative data surprises.

For equities, this was a very good combination, and the S&P 500 advanced every day last week to gain +4.02% (+0.54% Friday), leaving the index less than 1% beneath its all-time high from mid-July. Tech stocks helped to drive the gains, and the NASDAQ advanced +5.95% (+0.65% Friday). For both indices, this was their best weekly performance of 2024 so far. There were more modest equity gains around the world, with Europe’s STOXX 600 up +1.85% (+0.76% Friday), and Japan’s Nikkei up +0.52% (-0.68% Friday). However, Chinese equities underperformed, and the CSI 300 fell -2.23% last week (-0.42% Friday) to close at its lowest level since January 2019.

The growing prospect of a 50bp rate cut, which was 49% priced by the end of the week, was also very good for sovereign bonds. For instance, the 2yr Treasury yield was down another -6.5bps last week (-5.8bps Friday) to 3.58%, whilst the 10yr yield was down -5.7bps (-2.2bps Friday) to 3.65%, its lowest weekly close since May 2023. Illustrating a more dovish market perception of the Fed’s reaction function, the decline was even more noticeable for real yields, and the US 10yr real yield fell -10.3bps last week (-4.0bps Friday) to 1.57%. Meanwhile in Europe, sovereign bond yields fell slightly last week, with the 10yr bund yield down -2.3bps (-0.2bps Friday) to 2.15%.

Finally, it was an eventful week for oil prices, with Brent crude closing beneath $70/bbl on Tuesday for the first time since December 2021. But over the week as a whole, it was actually up by +0.77% (-0.50% Friday) to close at $71.61/bbl. Those gains were echoed across other commodities, and gold prices closed at an all-time high in nominal terms of $2,578/oz, having risen by +3.21% over the week (+1.06% Friday).

Tyler Durden Mon, 09/16/2024 - 08:15

UK High Court Revokes Permit For First Coal Mine In 30 Years

Authored by Tsvetana Paraskova via OilPrice.com,

London’s High Court on Friday quashed a planning permission for the UK’s first new coal mine in three decades, ruling that the permit was unlawful as it hadn’t considered the emissions from burning the fuel. 

Earlier this year, climate campaigners, including Friends of the Earth, challenged the approval of the coal mining project.

The UK’s previous Conservative government approved in December 2022 the Woodhouse Colliery project in Whitehaven, northwest England, developed by West Cumbria Mining.  

The project to mine metallurgical coal, the one used for steelmaking, will be required to support steelmaking throughout the transition to Net Zero over the next few decades, WCM said at the end of 2023.

However, the new Labour government in the UK pulled in July its support for the project and said that it would no longer defend the case at High Court.

The UK’s new Secretary of State for Housing, Communities and Local Government, Angela Rayner, has accepted there was an “error of law” in the approval from December 2022. 

The government’s move to drop its defense of the project follows a landmark Supreme Court judgment from June 2024, which ruled that a local council unlawfully granted approval to an onshore oil drilling project as planners must have considered the emissions from the oil’s future use as fuels, in a landmark case that could upset new UK fossil fuel projects.

Today the High Court agreed with the legal challenges that the lifetime emissions of the proposed Whitehaven mine, mostly from burning coal, were not properly considered and the approval was unlawful. 

“We have to leave fossil fuels in the ground and build the cleaner, brighter future that will slash emissions, cut bills and create the well-paid jobs of tomorrow that areas like West Cumbria so urgently need,” said Niall Toru, senior lawyer at Friends of the Earth.  

Tyler Durden Mon, 09/16/2024 - 06:30

Goldman Losses On Consumer Business Hit A Massive $6 Billion As Bank Scrambles To Exit Credit Card Business

Six years ago, when we first described Goldman's catastrophic foray into consumer banking, we joked that the Goldman of 2008 would be shorting the Goldman of 2018 for that ridiculous idea.

Here's Why The Goldman Of 2008 Would Be Shorting The Goldman Of 2018 https://t.co/SdcJs3i4zO

— zerohedge (@zerohedge) May 3, 2018

Fast forward to today when the joke is indeed on Goldman, and the bank's losses on its now defunct subprime, pardon, consumer lending unit have hit the stratosphere: according to the WSJ, Goldman is still looking to exit its partnership with Apple as losses continue to mount, and the bank is set to take a $400 million hit this quarter due to its floundering consumer business.

Speaking at a conference this week, Goldman Sachs CEO David Solomon explained that this $400 million hit comes from two primary things: selling off its General Motors credit card partnership and selling real estate loans. According to the report, the GM card business will be sold to Barclays, with around $2 billion in card balances.

In total, Goldman Sachs has lost a staggering $6 billion pre-tax since the beginning of 2020 “on a big chunk of its consumer-lending businesses, including its credit cards", a sad confirmation of our 2018 warning. Several factors contribute to Goldman’s massive losses associated with Apple Card, including lax underwriting standards and the resulting charge-off rates that are nearly double those of other credit cards.

In fact the latest Fed stress test revealed that Goldman - the former master of the universe - now has the second crappiest, subprimiest credit card portfolio of all US banks; only Ally bank, whose stock got absolutely crushed last week, is worse.

In the years ahead of the covid crisis, Goldman had planned to its Apple Card to bolster the bank's efforts and expand into consumer banking. However, in the intervening years, the bank - which had exactly zero previous experience with consumer lending - bank began pivoting away from consumer-financing in 2022 after accumulating staggering losses, focusing its attention on its core strength: catering to big business and ultrarich clients.

Looking toward the future, Goldman Sachs is still looking to exit its partnership with Apple, which consists of the Apple Card and Apple Card Savings Account. Currently, Apple Card credit card balances total $17 billion. The Wall Street Journal says that Goldman Sachs could face even bigger losses when it offloads the Apple partnership than the losses associated with the GM sale to Barclays.

Last November, the WSJ reported that Apple had “sent a proposal to Goldman to exit from the contract in the next roughly 12-to-15 months.” The current fate of that proposal remains unclear. It’s previously been reported that Goldman has talked to American Express and Synchrony Financial about taking over the Apple Card business.

Tyler Durden Mon, 09/16/2024 - 05:45

Arab States, Northern Africa Suffers World's Worst Youth Unemployment

According to the International Labour Organization (ILO), youth unemployment hit its lowest level in the past 15 years in 2023, at 13%, marking a strong recovery from the high rates during the COVID-19 pandemic.

However, these unemployment figures vary significantly by geographical region.

This map, via Visual Capitalist's Kayla Zhu, visualizes youth unemployment rates by global region in 2023. Youth are defined as individuals between the ages of 15 to 24.

The data comes from the International Labour Organization’s 2024 Global Employment Trends for Youth 2024 report.

Which Region has the Highest Youth Unemployment?

Below, we show youth unemployment rates by region in 2023.

The Arab States, consisting of countries like Saudi Arabia, United Arab Emirates, Qatar, Yemen, and others, recorded the highest (28.6%) youth unemployment rate globally, with Northern Africa, consisting of countries like Algeria, Egypt, and Morocco, following closely behind at 22.5%.

According to the Brookings Institution, youth unemployment rates in the MENA (Middle East and North Africa) region have been the highest in the world for over 25 years.

In 2019, just before the onset of the COVID-19 pandemic, 30% of youth in the MENA region were NEET–not in education, employment, or training, according to the ILO.

Experts say the combination of low infant mortality rates and high fertility rates, which translated into high labor force growth rates from 1970 onwards could be a leading cause of the high youth unemployment rates in the region.

In contrast, the Northern America region saw the lowest youth unemployment rate in 2023, at only 8.3%. The U.S. saw a significant decrease in the youth unemployment rate last year, with young workers seeing the lowest unemployment rate in 70 years at 7.5% in March of 2023.

However, in the first half of 2024, both the U.S. and Canada both have seen increases in youth unemployment rates.

To learn more about youth employment, check out this graphic that show employment rates for U.S. college and high school students since 1993.

Tyler Durden Mon, 09/16/2024 - 04:15

Hedge Fund CIO: Europe's Collapse Is A Healthy Reminder For Americans To Stay True To Their System

By Eric Peters, CIO of One River Asset Management

“For complex reasoning tasks this is a significant advancement and represents a new level of AI capability,” wrote OpenAI, describing its latest model release. “Given this, we are resetting the counter back to 1 and naming this series OpenAI o1.” Such is the pace of advancement (and hype) in AI that we need to rebase our calibrations. o1 answered 78% of PhD-level science questions accurately, compared to 56.1% for GPT-4o and 69.7% for human experts, which confirms that o1 is way smarter than I am.

But for some reason I feel I’m probably more intelligent, at least for now. Even if I couldn’t tell you without the help of o1 the precise difference between smarts and intelligence.

Overall:

“For the first time since the Cold War we must genuinely fear for our self-preservation,” Draghi told reporters, working himself up into another ‘whatever-it-takes” frenzy.

“And the reason for a unified response has never been so compelling and I am confident that in our unity we will find the strength to reform,” said Mario, far from confident, his long-awaited report on EU competitiveness hot off the press. But of course, the stock market provides objective, real-time analysis on national competitiveness, and the European benchmark equity index is now just slightly above where it was at the 2007 market high.

Equities are priced in nominal terms though, and the EU consumer price index is roughly 52% higher since 2007. Which means that European equities have fallen 30% in real terms from where they were 17yrs ago (excluding dividends). Relative to where they were at the 2000 highs, European stocks are worth about half what they were nearly 25yrs ago in real terms.

By the same measure, Chinese stock prices are -67% in real terms from the 2007 nosebleed highs (+44% in real terms since 2000 – just before its WTO entry). And the S&P 500 is +60% in real terms from the 2007 highs (+107% from the 2000 highs). As a general observation, the US invents, China builds, the EU regulates.

And the stock market does an admirable job at indicating which of those activities you want to prioritize, if the goal is to aggressively increase overall national prosperity. But the EU’s goal was never really that. That union was formed to avoid another disastrous continental war, which has been a recurring theme since well before the first Italian started shaving coins. The European project as it is currently constituted has narrowly achieved this primary objective, but at the cost of more chronic economic stasis. Naturally though, national weakness invites discontent from within and aggression from without. Which is where Europe finds itself today.

It’s a healthy reminder for Americans, as we enter our political season, to stay true to our system and to that which has led to our greatness. Innovation, invention, risk taking, entrepreneurialism.

Anecdote

“We have 4% of the world’s population and the dominant economy – almost twice the size of China and 5x the next largest,” said the Chairman, an American patriot, a public servant, realist, capitalist.

“US stock market cap is over $50trln, dwarfing China at $11trln and Japan at $6trln,” he continued. “For over five decades, the US has produced the next generation of great global companies.”

As Nippon Steel begs our politicians to buy US Steel for $14.9bln, Nvidia’s market cap is nearly $3trln, and OpenAI is raising a fresh venture round at a $150bln valuation. “Meta started in 2004 and employs 70k people, producing $134bln in annual revenue, much of it from abroad.” Apple, Google, Netflix, the list goes on.

“Silicon Valley is the world’s premier innovation hub and attracts the best and brightest from across the globe.” Technology is helping lift the world’s poor out of poverty at an unprecedented rate, and in today’s hyper-connected world, every person who comes online, becomes a customer of a US tech company.

“Genentech and Amgen were once startups and are now industry leaders. Without the hundreds of billions in they’d invested in R&D, we would never been able to develop the COVID vaccines in record time,” said the Chairman.

“The flywheel effects of being the world’s innovation and growth engine are breathtaking. And are strongly supported by the tax code.”

Since the Revenue Act of 1921, capital gains have been taxed at a lower rate than ordinary income, providing a powerful incentive for individuals to invest in new, often risky ideas. Fueling an entrepreneurial culture, that is the source of America’s prosperity, strength, power.

“Energy is vital to our enduring strength too, economic and geopolitical. We lifted US domestic oil production between 2016-2020 from 9mm barrels per day to 12mm, and natural gas production by 25%.”

Biden quietly continued Trump’s energy policies, lifting oil production another 1mm barrels and natural gas 15%. “Had we not, our military and economic adversaries would have more control over the future of America and our allies,” said the Chairman.

“We need a coherence across economic, national security, and energy policy that is centered on and builds upon all these strengths.” 

Tyler Durden Mon, 09/16/2024 - 03:30

Why Do So Many Young Africans Want To Leave?

Nearly three in five young Africans said that they are either very or somewhat likely to consider emigrating to another country in the next three years, according to the African Youth Survey 2024 by Ichikowitz Family Foundation.

As Statista's Anna Fleck details below, this marks a seven percentage point increase from 2022, when the last survey wave was conducted, likely driven by the improving freedom of movement post-pandemic.

Where young people from Rwanda who are considering emigrating said that it would likely only be temporary (90 percent), those in Nigeria (45 percent), Ghana (44 percent) and Congo Brazzaville (41 percent) were among those more likely to say they would make a permanent move. The 2024 poll included 5,604 people aged between 18 and 24 year olds across 16 countries: Botswana, Cameroon, Chad, Congo Brazzaville, Côte d’Ivoire, Ethiopia, Gabon, Ghana, Kenya, Malawi, Namibia, Nigeria, Rwanda, South Africa, Tanzania and Zambia.

Main reasons cited as motivations for moving abroad included economic reasons (selected by 43 percent of respondents), education opportunities (38 percent) and due to corruption in respondents’ respective home countries. The latter option, corruption, saw an increase of three percentage points since the survey wave in 2022. In South Africa, corruption was cited as the top reason for young people considering emigrating in 2024 (38 percent) as well as in Gabon (32 percent).

You will find more infographics at Statista

When asked what the major barriers are to finding employment, corruption was selected as the top issue (40 percent), followed by a lack of well-paying jobs (29 percent) and not having enough government support (27 percent).

Tyler Durden Mon, 09/16/2024 - 02:45

Sweden To Pay Migrants Who've Failed To Integrate Nearly €31,000 To Return Home

By Thomas Brooke of Remix.news

Sweden has announced plans to pay migrants 350,000 SEK (€30,809) to return to their homeland in a new voluntary remigration scheme proposed by the center-right government.

Remix News was one of few English-language sites to report on the plans proposed last month by then Migration Minister Maria Stenergard and reviewed by the Swedish justice ministry.

“For those who have not entered Swedish society, remigration can be a way to create a better life for themselves,” Stenergard said at the time.

"This is one of several ways we achieve sustainable immigration that strengthens integration and reduces exclusion,” she added.

This week, Stenergard was appointed the new foreign secretary and succeeded by Johan Forssell who announced the new policy on Thursday.

“Migrants who voluntarily return to their home countries from 2026 onwards will be eligible to receive 350,000 Swedish kronor (€31,000),” he said. Even those with Swedish citizenship will be eligible.

Forssell, whose appointment was backed by the right-wing Sweden Democrats who influence government policy, said upon starting his new role that the government must commit to remigration and abandon the open borders policies of the previous liberal administrations.

“The important thing now is that we should not return to the previous policy, which after all put Sweden in a very difficult situation. A lot of people were affected by it,” he told Aftonbladet.

“It is clear that it is an important issue for Sweden and for this government,” he added.

The country, previously lauded as a migrant magnet and known for its hospitality, has cracked down on the number of new arrivals permitted after a radical cultural shift across the country that has seen crime and particularly gang warfare skyrocket."

Sweden isn’t the first European nation to give migrants a golden handshake upon leaving the bloc. Last month in Germany, convicted criminals including child rapists were handed €1,000 upon their flight back to Afghanistan, although these, however, were forced deportations and only amounted to 28 people.

Earlier this year, the Swedish government announced it was toughening up its family reunification laws to slash immigration with income requirements expected to increase and extra DNA testing to prove relations is likely to be rolled out.

Last month, Stockholm announced that for the first time in 50 years the country had seen net emigration over the past 12 months. These figures were contested, however, by some right-wing groups with some claiming the government has ramped up naturalizations to massage the figures.

Continue reading at remix.news

Tyler Durden Mon, 09/16/2024 - 02:00