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These manias and the rising long-term yields are on collision course. (You can also download THE WOLF STREET REPORT wherever you get your podcasts).
wolfstreet, wolf street report, wolf richter, long-term interest rates, interest rates, financial markets
The historic short squeeze, engineered by millions of deeply cynical small traders, exposed just how rigged the market has been. (You can also download THE WOLF STREET REPORT wherever you get your podcasts).
Under the effects of the Pandemic, consumers and businesses grapple with their own “Reset.”
This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT.
We’ve got the weirdest economy ever. A disputed number of people lost their jobs early on in the Pandemic, with figures ranging from 22 million to 33 million people who lost their jobs, depending on whether we looked at the monthly jobs report or the number of people having filed for unemployment.
Since then, millions of people have been hired back by restaurants, gyms, hotels, and other enterprises that had shut down. This was followed – and that’s the phase we’re in now – by more layoffs but further up the corporate chain, with higher-paying jobs now getting axed. Initial unemployment claims of newly laid-off workers have remained horribly high, at over 800,000 a week, and have risen recently.
But wait… at the same time that this jobs fiasco is playing out, retail sales – so that’s goods bought online and in stores – after plunging in March and April have spiked to record highs.
This does not include services such as insurance, airline tickets, hotel bookings, rent, healthcare, etc. And we know that airline passenger revenue at Delta, for example, has collapsed by 83% from a year ago in the third quarter, according to Delta’s quarterly earnings report. Many hotels remain closed.
In August, spending by Americans on services was still 7.4% below a year ago. And spending on services is the largest part of consumer spending.
But they plowed record amounts of money into buying goods, such as electronics, appliances, cars, bicycles, exercise equipment, and the like. According to government data, the amount that Americans spent on durable goods in August spiked by 12% from February, just before the Pandemic.
…click on the above link to read the rest of the article…
What does it mean when the Fed and other central banks jointly bemoan the effects of their own policies? Worried about not being able to keep all the plates spinning?
The Federal Reserve, the ECB, the individual central banks of Eurozone countries, such as the Bundesbank and the Bank of France, the central banks of negative-interest-rate countries outside the Eurozone, such as in Switzerland and Sweden, they’re all now lamenting, bemoaning, and begroaning one of the consequences of low and negative interest rates, the ballooning record-breaking pile of business debts.
This is ironic because these outfits that are now lamenting, bemoaning, and begroaning the pileup of business debts are the ones that manipulated interest rates down via their radical and experimental monetary policies, thereby triggering the pileup of business debts.
This debt pileup isn’t an unintended consequence of their policies. It was one of the purposes of their policies.
But central banks also know from history that this historically high level of business debts is a powder keg waiting to explode – company by company at first, and then as contagion spreads, all at once.
The Fed is a superb example. In its most recent “Financial Stability Report,” released in November, the Fed warns about the historic record-breaking pileup of business debts in the US, as a consequence of low interest rates, and it considers this business debt the biggest risk to financial stability in the US.
But this warning came after the Fed had just cut its policy interest rates three times, and after it had begun to bail out the repo market with over $200 billion so far, and after it had begun buying $60 billion a month in T-bills, in total printing over $300 billion in less than three months, to repress short term rates in the repo market and to bail out its crybaby-cronies on Wall Street – and not necessarily banks – that had become hooked on these low interest rates.
…click on the above link to read the rest of the article…
What does it mean when the Fed and other central banks jointly bemoan the effects of their own policies? Worried about not being able to keep all the plates spinning? (11 minutes)
The biggest force behind the startup bubble in the US has been SoftBank. But the scheme has run into trouble, and a lot is at stake (12 minutes).
In the US alone, it impacts nearly $40 trillion. And there are consequences for the real economy (10 minutes).
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Market Exuberance Ends, Pain Starts
In the 14 months from the presidential election through January 2018, the Dow soared 49%. Housing prices soared too. The real economy followed. Consumers went on a spending spree. But now, this phenomenon — the surge in exuberance among consumers, investors, homebuyers, speculators, business-decision makers, and the like, often called the “Trump Bump,” whether or not Trump had anything to do with it — is petering out. So what will happen as this exuberance deflates? (13 minutes)
