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Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

Suddenly investors are panicked that (hyper)inflation is taking over.

But what if they’re mistaken? That could be a costly mistake if they’re betting their portfolio’s future on it. Because there’s a strong case to be made that we’re now actually entering a period of dis-inflation, one that has a high risk of tipping into outright deflation by next year.

To argue this, investment manager Michael Pento, who pulls no punches, joins Wealthion for this video explaining why the Fed and Congress don’t currently have sufficient air cover to continue the same magnitude of stimulus the market is now addicted to — and thus won’t be able to resume it until after the next painful market correction arrives.

Michael then proceeds to explain why the bond market is such a ticking time bomb right now for investors.

And, of course, he shares his views on his favored asset classes for each stage of the upcoming progression he sees:

1. first disinflation, then…

2. outright deflation, and then…

3. a hugely inflationary response from our central planners

Watch the full interview below:

Sydney Sends In Military To Help Enforce Lockdown Amid Record Jump In COVID Cases

Sydney Sends In Military To Help Enforce Lockdown Amid Record Jump In COVID Cases

Despite being locked down for nearly a month now, Sydney has just reported a record one-day rise in local COVID cases on Thursday as public health authorities warned that the outbreak would likely worsen, inspiring them to once again turn to the Australian military for help.

According to Reuters, Sydney, Australia’s most populous city, has struggled to contain an outbreak of the highly infectious Delta variant with another economy-crippling lockdown. Instead, cases have continued to move higher, leading public health authorities to double down on their efforts to protect against a broader outbreak of the delta variant, believed to be far more infectious than other strains.

But that didn’t stop authorities from counting 239 locally transmitted cases in the past 24 hours, the biggest daily increase for Sydney since the pandemic began. We should note that Australia’s COVID issue has never really been all that bad: nationwide, the country of 26MM has counted fewer than 1,000 deaths since the start of the pandemic, a far lower rate.

“We can only assume that things are likely to get worse before they get better given the quantity of people infectious in the community,” said New South Wales Premier Gladys Berejiklian told reporters in Sydney.

Berejiklian said one more person had died from COVID-19, taking the death toll from the current outbreak to 13, while the national death toll rose to 921.

Unfortunately for Berejiklian, who has emerged as a kind of villain for the small business owners and restaurateurs who fear they’re about to be crushed by a “double dip” recession, the Australian military is probably better at twerking than fighting viruses.

…click on the above link to read the rest of the article…

Corn Belt At Risk For ‘Damaging Derecho’ Storms

Corn Belt At Risk For ‘Damaging Derecho’ Storms

A derecho, otherwise known as a widespread, long-lived, straight-line wind storm, is expected to traverse parts of the Midwest Wednesday night and early Thursday, according to The Weather Channel.

Derechos can cause hurricane-force winds, tornadoes, torrential rains, and flash floods. This one could wreak havoc in the areas shaded in purple below.

What’s important to note is that this derecho is sweeping across the corn belt.

Last year, a derecho rolled through Iowa and damaged about 14 million crop acres, or about 57% of the state’s farms.

Across the corn belt, crops have already been damaged by sweltering heat and a persisting megadrought. This could weaken the root system and make corn more susceptible to snap under wind pressure.

World’s Food Supplies In Jeopardy Amid Climate Disasters

World’s Food Supplies In Jeopardy Amid Climate Disasters

Devastating floods in Germany, China, Turkey, and India. Scorching hot weather in the Western U.S. and Canada. Worst frost in two decades across Brazil. These recent weather phenomena are rapidly intensifying and threaten further food inflation already at decade highs.

We documented last week Brazil had some of the worst frost conditions in two decades. Temperatures dropped below zero and delivered a massive blow to farmers across the country’s coffee belt. The result has been sky-high coffee prices.

Back-to-back heatwaves continue to scorch the Earth across the Western half of the U.S. The corn belt, which spans the Midwest, lacks rainfall, and hot weather could negatively impact crop development, leading to an underwhelming harvest.

In Europe, China, Turkey, and India, devastating floods have torn apart towns, damaged farmland, and killed hundreds of people. Torrential rains have the risk of sparking fungal diseases for grain crops.

“All of these events are touched by jet streams, strong and narrow bands of westerly winds blowing above the Earth’s surface. The currents are generated when cold air from the poles clashes against hot air from the tropics, creating storms and other phenomena such as rain and drought,” Bloomberg said.

“Jet streams are the weather—they create it, and they steer it,” said Jennifer Francis, a senior scientist at the Woodwell Climate Research Center. “Sometimes the jet stream takes on a very convoluted pattern. When we see it taking big swings north and big dips southward, we know we’re going to see some unusual weather conditions.”

Source: Bloomberg 

Meteorologists worry whenever those swings and dips form omega-shaped curves that look like waves. When that happens, warm air travels further north and cold air penetrates further south…

…click on the above link to read the rest of the article…

Christmas Tree Farms Scorched In Oregon Amid Record Heat

Christmas Tree Farms Scorched In Oregon Amid Record Heat

Oregon’s record-breaking heat waves and raging wildfires are set to dent Christmas tree crop output, resulting in supply constraints that may send prices skyrocketing come December.

According to Reuters, who spoke with multiple Christmas tree farm operators in Oregon, one of the top Christmas tree producing states, extreme heat and wildfires are impacting crop yields.

Jacob Hemphill, the owner of Hemphill Tree Farm in Oregon City, estimates he’s already lost more than $100,000 in trees due to the latest back-to-back heatwaves. At one point, temperatures in the area were triple digits for days.

“The second day of the heat, it was 116. I came in the driveway that night and seen the trees were basically cooking. Burnt down to nothing,” Hemphill said.

He said the losses will impact his farm revenue this year but hopes the 2022 season will improve.

“I mean, you just kind of got to roll with the punches, and replant next year… and hopefully make up for the loss that we’re gonna have in the future.”

Reuters spoke to several tree farm operators across the Willamette Valley who said the heat waves have severely damaged their crops.

On top of the heat waves, the Bootleg Fire in Southern Oregon, spurred by months of drought, has burned nearly 400,000 acres and is likely to increase in size as no relief is in sight.

Oregon is the top-selling state of Christmas trees which are Douglas fir, Noble fir, Grand fir, and Nordmann fir. This could present supply constraints come December.

In other words, on the back of already record-high prices, consumers could shell out even more money this year for a Christmas tree if shortages materialize in Oregon. On top of the supply crunch, the cost of everything, from fuel to labor to transportation, has soared and will positively impact prices.

Protesters Rage Across Europe As Lockdown, Vaccination Mandates Begin

Protesters Rage Across Europe As Lockdown, Vaccination Mandates Begin

Update (19115ET): Anti-lockdown protests kicked into high gear around the globe on Saturday, including irate Irish protesters:

Bitter Brits:

Pissed-off Parisians:

And incensed Italians, where the country has restricted public access to restaurants and museums to the unvaccinated.

This is what it looked like today in Australia, Milan, London, and France.

Protests were worldwide today as many are fed up with elites whittling away their freedoms under the guise of COVID.

*  *  *

Thousands of anti-lockdown demonstrators took to the streets of Sydney and other Australian towns on Saturday to protest new lockdown measures amid a surge of COVID-19 cases in the country.

Dozens were arrested and charged after crowds broke through barriers and clashed with officers, hurling bottles and anything they could get their hands on.

The unmasked protesters marched from Sydney’s Victoria Park to Town Hall. News.com.au estimates 15,000 people took part in the march. Many chanted anti-lockdown slogans and held signs calling for “freedom” and “the truth.”

Footage on social media shows thousands of demonstrators marching through Sydney’s downtown area.

There was a significant police presence, including mounted police and riot control officers in response to what authorities said was an “unauthorized protest.”

…click on the above link to read the rest of the article…

“This Is The Biggest Bubble I’ve Seen In My Career” – Dems’ Infrastructure Spending Could Lead To Devastating Crash, Druck Warns

“This Is The Biggest Bubble I’ve Seen In My Career” – Dems’ Infrastructure Spending Could Lead To Devastating Crash, Druck Warns

This isn’t the first time billionaire investor Stanley Druckenmiller has warned that US markets are caught up in a “raging mania” fostered by the trillions of dollars in government spending. Druck, an acolyte of George Soros known for his macro investing prowess (even as he complains that contemporary Fed-backstopped markets “make no sense”) is a frequent guest on CNBC. But on Friday morning, he made a brief appearance on MSNBC’s Morning Show with Stephanie Ruhle, who seemed ill-equipped to respond to Druck’s arguments about why the Dems’ multi-trillion two-part infrastructure plan will end up hurting America’s poorest citizens.

Druckenmiller

As Druck explains, the “V-shaped” economic recovery has been “the sharpest recovery in history,” noting that it took 10 years for the American economy to achieve the same gains following the start of the Great Depression.

The problem is that the nearly $6 trillion allocated by Congress to combat the economic impact of COVID has been spent after the economy already finished recovering. The accelerating pace of inflation, and inability of certain businesses to hire lower-wage workers, are but byproducts of this.

Source: Committee for a Responsible Federal Budget

Moving on, Druck pointed out that the biggest economic crises of the last 100 years have largely been caused by asset bubbles and inflation. “Inflation is a tax the poor can’t afford or avoid,” Druck added.

Any further stimulus spending is intended to fix a problem that, in Druck’s words, “doesn’t exist anymore.” He added: “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy.”

…click on the above link to read the rest of the article…

“Alarming Forecasts” Show US Agricultural Belt In For 15-Day Dry Spell

“Alarming Forecasts” Show US Agricultural Belt In For 15-Day Dry Spell

Meteorologists at private weather forecaster BAMWX have sounded the alarm of troubling new forecasts for the US’ agricultural belt for the next 15 days.

Kirk Hinz, the chief meteorologist at BAMWX, said rising temperatures and drier conditions would be present across the midwestern US, approximately covering western Indiana, Illinois, Iowa, Missouri, eastern Nebraska, and eastern Kansas, which corn and soybeans are dominating crops.

He said the forecasts for the next 15 days are “alarming:”

“Somewhat of an alarming forecast. Roughly 60% of the Ag belt is looking at only a 30-40% chance of seeing 1″+ of rain the next 15 days. Its not often you see the American ensemble out to 15 days this dry.”

This is bad news for crops.

We noted earlier this month that expanding drought conditions during a crucial time of the year ahead of corn pollination is a significant concern for yields. Here’s what happens to corn if pollination is unsuccessful. 

…click on the above link to read the rest of the article…

Bank of Canada Tapers Weekly QE To C$2BN, Sees Lift Off In “Sometime In Second Half Of 2022”

Bank of Canada Tapers Weekly QE To C$2BN, Sees Lift Off In “Sometime In Second Half Of 2022”

As expected, the Bank of Canada took another step to normalize the emergency levels of stimulus, when it announced that it is tapering its bond purchases from C$3BN weekly to C$2BN, in what it hopes to telegraph is a sign of optimism about the speed of the recovery. Naturally, it kept the rate unchanged at 0.25%.

“The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s quantitative easing (QE) program, which is being adjusted to a target pace of $2 billion per week. This adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook,” the bank said in a statement, which while echoing the Fed in claiming that while “the factors pushing up inflation are transitory” their “persistence and magnitude are uncertain and will be monitored closely.”

Looking ahead, the BOC is maintaining guidance that economic slack will be absorbed in the second half of 2022, suggesting a rate hike won’t occur until then. There remains significant surplus capacity in the economy. And while vaccine progress and easing lockdowns are encouraging, the spread of variants remains a risk.

“The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achievedIn the Bank’s July projection, this happens sometime in the second half of 2022”

…click on the above link to read the rest of the article…

Over 70 Killed As South Africa “Crumbles” Despite Military Intervention

Over 70 Killed As South Africa “Crumbles” Despite Military Intervention

South Africa could be on the verge of collapse, and all the warning signs are there.

The looters have targeted foreign shops, shopping centers, distribution centers/warehouses, and raided gun shops. Shortages are beginning with food, fuel, and ammo. 

Over 70 have reportedly been killed since social unrest began last week after ex-president Jacob Zuma was jailed for failing to appear at a corruption inquiry. Supporters of Zuma, the nation’s first Zulu president, have been on a looting spree that has crippled KwaZulu-Natal and parts of Johannesburg and disrupted national supply routes, resulting in food and fuel shortages in the affected area.

According to the Consumer Goods Council of South Africa, more than 600 stores have been looted with hundreds millions of dollars in damage.

President Cyril Ramaphosa deployed the military to quell the unrest, but nothing has worked so far worked.

Civilians are defending their own communities and running low on food, fuel, and ammo; supply chains are destroyed, and it wasn’t quick, about a week, as the country faces collapse.

On Tuesday, Sapref refinery near Durban, operated by Shell and BP, had shuttered operations due to civil unrest.

There’s also news that the country’s top chicken and meat processor, Rainbow Chickens Ltd., was raided by looters, which means widespread food shortages could be imminent.

Allegedly, some security firms are reporting police are “low on ammunition.”

Supposedly from a security group, looters are targeting all the gun shops.

Community members have set up private patrols to defend their community from rioters.

Someone explains that the unrest from Zulu rioters is to starve out the “Whites/Indians.” The unknown person said this could be “civil war.”

More scenes of the chaos.

…click on the above link to read the rest of the article…

California Grid Strained As Power Shortfalls Loom

California Grid Strained As Power Shortfalls Loom

Amid another heat wave across the Western half of the US, California issued a stage-2 power-grid emergency alert Friday and urged customers to conserve power as temperatures surpassed 100 degrees, according to The Sacramento Bee.

The state’s grid operator, California Independent System Operator (ISO), issued the alert on Friday, which is one step away from rolling blackouts.

Readers may recall, as early as Tuesday, we outlined how “scorching temperatures return to the West, persisting through mid-week, and reappear this weekend.” By Friday, we gave the full breakdown of the second heat wave and its impact for the next several days, affecting upwards of 28 million people from California to Washington State.

Excessive heat warnings have already been posted for California, Nevada, western Arizona, and western Utah. Watches have also been posted for interior portions of Oregon and southern Idaho.

By late Friday, ISO discontinued the emergency, but with multiple 100-degree-plus days forecasted for Saturday and Sunday for Californians, the power grid operator may have to reissue grid alerts.

Large swaths of the West could experience temperatures 20 or more degrees above average. Below is a temperature anomalies forecast showing the heat dome could last through mid-next week

For those who are curious what “stage 2” means, power consumption is exceptionally high in the state, and the grid has become “reserve deficient,” allowing grid operators to resupply the grid with generators. If supply doesn’t meet demand, the next stage would be rolling blackouts to prevent the grid from collapse. The alert was the first in 2021 and was last declared in August 2020.

Making matters worse is a wildfire raging in southern Oregon and may threaten transmission lines bringing power into California.

The wildfire prompted California Gov. Gavin Newsom to issue an emergency proclamation to free up additional energy supplies.

…click on the above link to read the rest of the article…

Dry Corn Belt Ahead Of Pollination May Spell Disaster For Farmers

Dry Corn Belt Ahead Of Pollination May Spell Disaster For Farmers

Kirk Hinz, a meteorologist with BAMWX, published an agriculture note Thursday which outlines “persisting rains” in some parts of the Southwest but “expanding dryness” in the north.

Hinz concentrates on the corn belt, which spans the Midwest. He said, “expanding drought into a crucial time of the year ahead of pollination.” This means that persistent dry conditions could affect pollination success – and if pollination is not successful this year because of drought and lack of water, then harvest yields this season could come under pressure.

“A lack of consistent rainfall across a big chunk of the US major corn production areas in the Midwest and northern Plains this year continues, with the expanding drought into a crucial time of the year ahead of pollination as well. Weather models have remained volatile recently in regards to how much of these major production areas will receive timely rainfall, but the trend recently has been to push previously forecast widespread nourishing rains further south that’s starting to be a growing concern (plus more heat building back in a mid-to-late month) ahead,” Hinz wrote. 

Here’s what happens to corn if pollination is unsuccessful. 

Here’s the US Drought Monitor, which shows much of the Western US is in some form of drought.

Some rain relief was seen in the week ending June 6, but worsening conditions continue in the corn belt (or Midwest area).

For the four weeks ending June 6, rains increased in west Texas and east New Mexico but expanding dryness in the corn belt.

Over the last two months ending June 6, significant increases in precipitation have been seen from Texas to New Mexico up into Colorado. However, most of the corn belt continues to experience worsening droughts.

…click on the above link to read the rest of the article…

Grocery Stores Are Masking Price Hikes Via “Shrinkflation”

Grocery Stores Are Masking Price Hikes Via “Shrinkflation”

The continued decline in Treasury yields has prompted many short-sighted arm-chair analysts to declare that the Fed was right about inflationary pressures being “transitory”. Of course, as Treasury Secretary Janet Yellen herself admitted, a little inflation is necessary for the economy to function long term – because without “controlled inflation,” how else will policymakers inflate away the enormous debts of the US and other governments.

As policymakers prepare to explain to the investing public why inflation is a “good thing”, a report published this week by left-leaning NPR highlighted a phenomenon that is manifesting in grocery stores and other retailers across the US: economists including Pippa Malmgren call it “shrinkflation”. It happens when companies reduce the size or quantity of their products while charging the same price, or even more money.

As NPR points out, the preponderance of “shrinkflation” creates a problem for academics and purveyors of classical economic theory. “If consumers were the rational creatures depicted in classic economic theory, they would notice shrinkflation. They would keep their eyes on the price per Cocoa Puff and not fall for gimmicks in how companies package those Cocoa Puffs.”

However, research by behavioral economists has found that consumers are “much more gullible than classic theory predicts. They are more sensitive to changes in price than to changes in quantity.” It’s one of many well-documented ways that human reasoning differs from strict rationality (for a more comprehensive review of the limitations of human reasoning in the loosely defined world of behavioral economics, read Daniel Kahneman’s “Thinking Fast and Slow”).

Just a few months ago, we described shrinkflation as “the oldest trick in the retailer’s book” with an explanation of how Costco was masking a 14% price hike by instead reducing the sheet count in its rolls of paper towels and toilet paper.

…click on the above link to read the rest of the article…

Wells Unexpectedly Shuts All Existing Personal Lines Of Credit, Hinting US Economy On The Edge

Wells Unexpectedly Shuts All Existing Personal Lines Of Credit, Hinting US Economy On The Edge

Wells Fargo just announced that it’s shutting down all of its existing personal lines of credit – a popular product offered by the retail-focused Wall Street giant – a move that will likely infuriate legions of customers.

The revolving credit lines, which will be shut down in the coming weeks, typically allow users borrow $3K to $100K, were pitched as a way to consolidate higher-interest credit-card debt, pay for home renovations or avoid overdraft fees on checking accounts attached to the loan.

Customers have been given a 60-day notice that their accounts will be shuttered, and remaining balances will require regular minimum payments, according to the statement.

According to CNBC, it’s the latest “difficult decision” facing Wells CEO Charlie Scharf, who is being forced to make cutbacks to the banks’ business thanks to restrictions imposed by the Federal Reserve years ago as punishment for the bank’s criminal scandals like the now-infamous scandal whereby branch managers opened credit lines for customers without permission. a scandal that outraged the public.

“Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts,” the bank said in the six-page letter. The move would let the bank focus on credit cards and personal loans, it said.

The sudden closures will leave many customers without what may be a critical source of liquidity. What’s worse, many will be penalized for the decision, making it more difficult for them to receive credit from a new source. Per CNBC, those whose credit lines are involuntarily closed will still see their FICO scores penalized as if they had elected to close the credit line willingly.

…click on the above link to read the rest of the article…

Russia Says US Engineered June’s Black Sea Provocation, “We’ll Sink” Any Threat Next Time

Russia Says US Engineered June’s Black Sea Provocation, “We’ll Sink” Any Threat Next Time

In the days after the June 23 incident between the UK Royal Navy’s HMS Defender and a Russian patrol vessel and military aircraft near Crimea which resulted in warning shots fired from the Russian side, Putin asserted that a US reconnaissance plane had been nearby monitoring the dangerous close-call incident as it unfolded below. Putin had cast the whole showdown as a “provocation” in which the US aircraft was present monitor Russia’s response to the UK vessel. Moscow’s position is that the UK vessel had ventured a full three kilometers into Russian territorial waters, which was met with a Su-24M dropping bombs in the Defender’s path along with the Russian patrol ship firing warning shots.

The latest charge on Sunday, however, has gone further, with Russian presidential spokesman Dmitry Peskov accusing Washington and the UK of essentially engineering the dangerously close military encounter in order to probe and test Russia’s defense of its borders.

I think our intelligence certainly knows who made a decision there [in the situation with the British destroyer]. But certainly I think such operations are basically planned by senior partners from overseas,” Peskov was cited in TASS as saying.

UK military drills involving HMS Defender in the Mediterranean, via The Drive.

Given Putin’s prior words pointing the finger directly at Washington during his annual televised Q&A last month, this latest Kremlin statement is also no doubt a clear reference to the US (in terms of the provocative reference to “who made the decision here”). Presidential spokesman Peskov elaborated further in his Sunday statements that “in this case the destroyer was just a tool of provocation.”

…click on the above link to read the rest of the article…

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