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ISM Services Survey Explodes To Record High (And So Does Cost Inflation)

ISM Services Survey Explodes To Record High (And So Does Cost Inflation)

After the mixed final data for US Manufacturing in November (Markit…

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This article was originally published by Zero Hedge

ISM Services Survey Explodes To Record High (And So Does Cost Inflation)

After the mixed final data for US Manufacturing in November (Markit PMI down, ISM up), expectations were for both Markit and ISM to show the Services sector weakened modestly in November.

  • Markit US Manufacturing dropped from 58.4 to 58.3

  • Markit US Services dropped from 58.7 to 58.0 (better than the 57.0 flash print)

  • ISM Manufacturing rose from 60.9 to 61.1

  • ISM Services exploded higher from 66.7 to 69.1

Spot the odd one out…

Source: Bloomberg

That is the highest ISM Services print… ever…

The IHS Markit US Composite PMI Output Index posted 57.2 in November, down from 57.6 in October but still signalling a marked overall expansion in private sector activity. Output was led by the service sector as factories were hampered by supply chain disruptions.

Sharper increases in manufacturing and service sector input prices led to the fastest rise in cost inflation on record (since October 2009). Alongside greater fuel and material costs, firms noted a steeper uptick in wage bills. Although the rate of charge inflation softened from October, it was the second-sharpest on record as firms sought to pass on higher costs to customers.

On the bright side, ‘Exam Glove’ prices are down (so let’s all rush out and get our prostate tests!!)

Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:

US business activity continued to grow at a solid rate in November, adding to signs that the pace of economic growth is accelerating in the fourth quarter after the Delta-wave induced slowdown of the third quarter. While growth is not matching the surge seen earlier in the year when the economy reopened, the fourth quarter expansion should be well above the economy’s long-run trend to mark a solid end to the year.

Growth is lopsided, however, being led by the service sector as manufacturing remains heavily constricted by supply shortages and, in some cases, labor supply issues. These constraints are also increasingly affecting service providers, as evidenced by the service sector reporting a near record build-up of uncompleted orders during November as companies often lacked the capacity to meet demand. Cost pressures in the service sector also spiked higher in November, generally linked to higher prices paid for inputs and staff due to shortages, the rate of inflation running just shy of May’s all-time peak.

“While business expectations for the year ahead rose in November, the vast majority of the survey data were collected prior to the news of the Omicron variant, which casts a renewed shadow of uncertainty over the outlook for business and poses a downside risk to near-term growth prospects.“

Just as a reminder, with regard to ISM Services’ outlier move, ISM’s index of supplier delivery times held at the second-highest on record, indicating delays are still well-extended… and this ‘disruption’ in the supply chain is integrated entirely bullishly into the headline index (reflecting record demand as opposed to disrupted supply chains and many points of failure around the world).

Tyler Durden
Fri, 12/03/2021 – 10:04

Author: Tyler Durden

Economics

Fear And Panic As Bitcoin Crashes 50% From All Time High

Fear And Panic As Bitcoin Crashes 50% From All Time High

Just two months after cryptos hit an all time high amid widespread euphoria that…

Fear And Panic As Bitcoin Crashes 50% From All Time High

Just two months after cryptos hit an all time high amid widespread euphoria that the newly launched bitcoin ETF would lead to even more substantial upside, the two largest tokens have lost half of their value, with the broader crypto sector suffering more than $1 trillion in losses amid an accelerating liquidation panic that the Fed’s tightening cycle will lead to another crypto winter. 

Such is the volatility in the sector where, as Bloomberg put it overnight, there has been just one constant recently: “decline after decline after decline.” Of course, for veteran hodlers, Bloomberg hyperbole seems trivial in a world where 80% drawdowns are the norm and the current drop may have a ways to go before it hits a bottom, before a new all time high is hit.

Where Bloomberg is right however, is that superlatives for the latest carnage have been easy to come by: Friday’s decline led to the liquidation of more than $1.1 billion in crypto futures positions and overall more than $1 trillion in market value has been destroyed since the last peak. In other words, “the meltdown is pouring salt on an already-deep wound.”

After the latest furious puke that pushed Bitcoin RSI’s indicator to the most oversold level since the covid crash in March of 2020…

… Bitcoin, which lost more than 12% on Friday, saw its price drop just above $34,000 with Ethereum sliding as low as $2,400, as the two largest digital assets now trade at a 50% discount from their all time highs and are back to levels last seen in late July, early August. Other digital currencies have suffered just as much, if not more, most meme coins mired in similar drawdowns.

While the selling has been relentless for the past two months, it accelerated in the past three weeks, after the latest Fed minutes – published in early January – showed its intention to not only hike rates but to accelerate the unwind of its balance sheet, which has sent all “bubble baskets” plunging, with bitcoin getting hit especially hard amid the carnage.

And while there have been much larger percentage drawdowns for both Bitcoin and the aggregate market, according to Bespoke,  this marks the second-largest ever decline in dollar terms for both.

“It gives an idea of the scale of value destruction that percentage declines can mask,” wrote Bespoke analysts in a note. “Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”

Another fact that Bloomberg gets right, is that over the past year, cryptos have transformed from relatively uncorrelated assets providing diversification during market turbulence, into what is effectively a high beta stock. This is easily seen in the following chart showing the 60d correlation between cryptos and stocks. One can thank institutional adoption for that, because the same institutions that are now facing margin calls on their tech holdings, are also dumping cryptos to provide much needed liquidity.

“Crypto is reacting to the same kind of dynamics that are weighing on risk-assets globally,” said Stephane Ouellette, chief executive and co-founder of institutional crypto-platform FRNT Financial. “Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class it’s almost a certainty that it falls, at least temporarily in a broader alt-coin valuation contraction.”

Antoni Trenchev,, co-founder of Nexo, cites Bitcoin’s correlation to the tech-heavy Nasdaq 100, which right now is near the highest in a decade. “Bitcoin is being battered by a wave of risk-off sentiment. For further cues, keep an eye on traditional markets,” he said. “Fear and unease among investors is palpable.”

According to  Art Hogan, chief market strategist at National Securities, it’s useful to think of cryptocurrencies as living in the same space as other speculative sectors, including special-purpose acquisition companies and electric-vehicle makers. “When we’re in an environment where all of those riskier assets are selling off, crypto is going to find itself doing the same,” Hogan said. “When the Nasdaq 100 or any of the other more-speculative, rapid-growth, momentum-type asset classes start to gain some traction, so will cryptocurrencies.”

Unfortunately for Bitcoin longs, one place where the token’s correlation is especially high is that to such market naplam as Cathie Wood’s sinking ARK Innovation ETF, a pandemic poster-child of speculative risk-taking. That correlation stands at around 60% year-to-date, versus about 14% for the price of gold, according to Katie Stockton, founder and managing partner of Fairlead Strategies, a research firm focused on technical analysis. It’s “reminding us to categorize Bitcoin and altcoins as risk assets rather than safe havens,” she said.

Perhaps unaware what “hodling” means, data from Coinglass shows that more than 342,000 traders had their positions closed over the past 24 hours, with liquidations totaling roughly $1.1 billion.

“Digital-currency markets in total have been challenged this month,” said Jonathan Padilla, co-founder of Snickerdoodle Labs, a blockchain company focused on data privacy. “There’s definitely some pain there.”

Though liquidations have spiked, the numbers are rather muted when compared to previous declines, according to Noelle Acheson, head of market insights at Genesis Global Trading. Acheson points out that Bitcoin’s one-week skew, which compares the cost of bearish options to bullish ones, spiked to almost 15% on Wednesday compared to an average of about 6% in the past seven days.

“This flagged a jump in bearish sentiment, in line with overall market jitters given the current macro uncertainty,” she said.

Amid the pain, some of bitcoin’s most faithful are professing patience…

… while others are starting to wonder out loud at what point the battering might end. Famed crypto investor and (former?) billionaire Mike Novogratz mused on Twitter that “this will be a year where people realize being an investor is a difficult job.”

Unfortunately for Novogratz, 2600 did not hold and Eth is now trading below 2,400.

Still, many point out that like on all previous occasions when cryptos crashed, they eventually rebounded to new all time highs. At some point, sellers will become exhausted and the market could see some capitulation soon, said Matt Maley, chief market strategist for Miller Tabak + Co. “When that happens, the institutions will come back in in a meaningful way,” he said. “Once the asset class becomes more washed-out, they’ll have a lot more confidence to come back in and buy them. They know that cryptos are not going away, so they’ll have to move back into them before long.”

But it’s not just central bank tightening fears and liquidation technicals that have depressed cryptos: one can also throw in a relentless news cycle, where just in recent days, regulators from Russia, the U.K., Singapore and Spain all announced interventions that could undermine crypto companies looking to grow in those regions. Meanwhile, the Biden administration is preparing to release an initial government-wide strategy for digital assets as soon as next month and task federal agencies with assessing the risks and opportunities that they pose, Bloomberg reported late on Friday.

Testing the resilience and patience of the faithful, so far the sharp drop below the psychological level of $40,000 has failed to serve as an upward inflection point. Crypto proponents say heavy liquidations often serve to cut out the froth in easy-win asset speculation, helping to solidify new bottoms in the market.

Ultimately, the real support will come from none other than the Fed, which will soon realize that it is hiking into a slowing economy…

… and will be forced to be far more dovish during this week’s FOMC meeting, a reversal which should serve to send risk assets sharply higher.

“Fear and unease among investors is palpable,” Nexo’s Trenchev,said. “If we see a bigger selloff in equities, expect the Fed to verbally intervene to calm nerves and that’s when Bitcoin and other cryptos will bounce.”

In other words, the more the Fed tightens – or the more the Fed scares markets into believing it will tighten – the bigger the market selloff, and the worse the economic slowdown, until eventually Powell will be forced to ease, a key point brought up by  Bank of America CIO Michael Hartnett yesterday.

Incidentally, it also means that the faster markets crash, the faster the Fed panics, and is forced to stabilize stocks because even if the new and improved Powell Put is well below previous levels, the Fed can’t risk a market crash just to appease Biden’s demands for an inflationary slowdown so Democrats aren’t destroyed in the midterms.

And incidentally, this weekend’s ongoing selloff in cryptos means that while stocks are currently mercifully not trading, Monday should be another bloodbath, as Jim Bianco reminds us.

One thing is certain: several more 2% drops in the Nasdaq, and Powell – who two years ago crossed the Fed’s final rubicon and bought corporate bonds to halt a catastrophic collapse – will be making emergency phone calls to put an end to the carnage. As such, a continuation of the meltdown may just be the best thing that the bitcoin faithful can hope for.

Tyler Durden
Sat, 01/22/2022 – 13:04








Author: Tyler Durden

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Economics

Oil Traders Will “Break The Fed” And “Make Jerome Powell Cry Uncle”

Oil Traders Will "Break The Fed" And "Make Jerome Powell Cry Uncle"

Submitted by QTR’s Fringe Finance

This is Part 2 of an interview with…

Oil Traders Will “Break The Fed” And “Make Jerome Powell Cry Uncle”

Submitted by QTR’s Fringe Finance

This is Part 2 of an interview with Harris Kupperman, founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection. Mr. Kupperman is also the chief adventurer at Adventures in Capitalism, a website that details his investments and travels.

Part 1 of this interview will be found here.

Harris is one of my favorite Twitter follows and I find his opinions – especially on macro and commodities – to be extremely resourceful. I’m certain my readers will find the same. I was excited to get the chance to ask him about anything I wanted, which I did last week.

Q; What one sector of the equities market would you dive into now if you had to pick only one – and why?

It’s not an equity, but if there was one asset to focus on, it would be long-dated OTM oil futures options. They’re the purest way to get long inflation and they’re mispriced compared to the potential upside. All sorts of right-tail assets seem mispriced, but the IV on oil futures options seem particularly mispriced as it is so cheap compared to the parabolic upside potential.

In terms of equities themselves, I think offshore oil services are about to really inflect.

With Brent at $86, demand for offshore production will come back in a major way. Especially because many Western governments are making it so painful to explore and produce oil domestically. As a result, the incremental supply will come from places that need the oil revenue—much of this will be offshore.

Meanwhile, much of this offshore equipment trades at tiny fractions of replacement cost. At the top of the cycle, these companies often trade for a few times replacement cost. I think we’re about to a surprising move in the price of oil, and these equities are the fulcrum security in the oil sector—but since most have restructured in bankruptcy, they have clean balance sheets and minimal risk if I’m wrong and the sector doesn’t inflect.

Oil is about to surprise people—offshore hasn’t moved yet. That’s where I’d be focusing my time, but buying the 2025, $100 strike oil call just seems like a more elegant way to play this with a lot less operational risk and a whole lot greater upside potential.  

What’s your broader view on markets in 2022? Will they stabilize? Full on crash? Rotation from growth to value?

I think the market will have a lot of volatility, but sort of go nowhere. Instead, I expect a huge sector rotation from Ponzi and high-multiple growth to industrials and commodities.

A lot of these “old economy” businesses trade at low single-digit multiples on cash flow and fractions of replacement cost. They’ve been ignored for years, they’ve cut costs, consolidated and not invested much in capacity. We’re at the part of the cycle where they finally earn huge returns. That’s where you want to be.

Meanwhile, as the Fed raises rates and tightens liquidity, the high-multiple stuff will get bludgeoned. It’s amazing how many multi-billion market cap stocks are down 75% from the highs last year, yet they still seem ludicrously expensive. This will eventually get corrected and corrected with a lot more pain.

What fiat currencies do you prefer to own, assuming you have to own one? And why?

I think crypto has had its bubble. It now needs to consolidate. There’s far too much speculative interest for me. I sold out of my Bitcoin last spring for a 6x from where I bought it in 2020.

Longer term, I’m quite partial to Monero and own a few. It’s what everyone thinks Bitcoin is, while Bitcoin is actually something VERY different. The privacy aspect, along with negligible transaction costs will make Monero viable. It’s out of consensus, but adoption continues to accelerate. During the coming wash-out in risk assets, I intend to pick up some more Monero.

Is the Fed still firmly in control of the bond market. Is there any chance “bond vigilantes” take over at some point?

Oil traders are the new bond vigilantes. They’ll be the ones that break the Fed and force JPOW to cry uncle. The Fed hasn’t lost control yet, but when oil breaks $100, they’ll go into panic mode.

I worry that they’ll eventually crush everything with a CUSIP while trying to stop oil from going parabolic. Naturally, they’ll fail at this because they have little to do with the price of oil, but that won’t stop them from trying.

What’s one lesson you’ve learned in your investing career that you want to pass on and think is important in 2022?

Leverage is dangerous. We’re entering a much more volatile period. I think the overall market will continue going much higher because they’ll keep stimulating, but there will be periods where they panic and stop stimulating.

Equities can literally trade at any price. Make sure that on these sharp and steep pullbacks, you aren’t the one forced to sell at the lows. Instead, you want to be the one who buys when others get margin calls. Play with less leverage, keep extra liquidity and expect that there will be huge opportunities coming up.

What’s your outlook on how the world thinks about Covid in the coming year?

Covid is a bad cold that has evolved into a mental disorder. You really need to separate the two. Left alone, Covid the virus will evolve to be less dangerous to humans. Unfortunately, governments like to tinker and convince voters that they’re doing something useful. Vaccinating a huge percentage of the population, with multiple boosters, is likely to change how the virus would naturally evolve. We’re already seeing this with Omicron.

The triple vax’d are more susceptible than the double vax’d, and the unvax’d are almost immune to it. This is an adjusted evolutionary path and governments should be terrified of the data. This is a warning that is getting ignored. Most scientists have always known that vaccinating against a coronavirus is a mistake—it’s the reason that they don’t vaccinate livestock against coronaviruses.

They’ve already tried that and know it doesn’t work, with the added risk that the virus can evolve to be more dangerous. What we should have done is gone for herd immunity, protected the at-risk, and gotten on with life.

Unfortunately, Covid has evolved into this mental disorder where people walk around with cloth diapers on their faces and scrub their hands with alcohol all day. There’s this whole neurosis to it, with people lecturing others on if they’re going through the motions correctly.

Governments have been quick to realize that a large portion of the population is mentally unstable and easily manipulated. They’ve prayed upon this to gain power and tell these people that their mental disorder is now normal.

Eventually, most people will get bored of role-playing “pandemic,” and they’ll push back against government-created inconveniences. We’ll return to sanity, while a lunatic fringe will continue with their new neuroses. I finally believe we’re now past peak-stupid, but I’ve thought that a few times and then governments have once again tried to flex their powers and scare people into acting insane.

Fortunately, people are starting to wake up to all of this. In another few quarters, Covid, the mental disorder, will hopefully mostly be over with—though we’ll have the residual question about long-term health risks from these experimental mRNA vaccines—which is still quite a wild-card.

You have to remember that governments are just a collection of politicians trying to guess which way the mob is trending. As the mob adjusts, the smarter politicians will follow the voters and hopefully this thing ends. Here in Florida, no one has worn a mask in 18-months, yet you have these tourists with 2 masks on at the beach.

It’s quite hilarious. But then after a few days in Florida, they attune culturally and no longer fear germs as much. This process will happen everywhere as people realize that this is all just a bad cold. They’ll see others going on with their lives without dying. People will adjust and the more astute politicians will try to stay in front of this trend. Until then, we just have to wait it out and watch this crazy psychological experiment unfold…

Part 1 of this interview can be found here

Now read:

  1. Capitalism And Common Sense Will End Vaccine Mandates In 2022

  2. Oil Is Now “Out Of OPEC’s Hands” And Is “Going Higher”

  3. Short The Whole F*cking Vaccine Thing

ZeroHedge readers always get 20% off a subscription to my blog using this link: GET 20% OFF FOR LIFE

DISCLAIMER: 

All content is Harris Kupperman’s opinion. I own physical silver, GLD, GDX, GDXJ, PAAS, PSLV and a number of other metals/miners/gold/silver equities as well as numerous companies with exposure to oil and uranium. Readers should assume Harris also has positions in all trends/equities/etc. mentioned in this interview – as do I. We will likely stand to benefit if prices of commodities rise and/or our prognostications come true. None of this is a solicitation to buy or sell securities. It is only a look into personal opinions and personal portfolios. Positions can change immediately as soon as I publish this, with or without notice. These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. I’m not a financial advisor, I hold no licenses or registrations and am not qualified to give advice on anything, let alone finance or medicine. Talk to your doctor, talk to your financial advisor or your therapist. You are on your own. Do not make decisions based on my blog. I exist on the fringe.

Tyler Durden
Sat, 01/22/2022 – 13:30









Author: Tyler Durden

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Economics

Trucker Shortage Leading to Widespread Grocery Outages Across Canada

Grocery stores across Canada are beginning to showcase bare shelves, after a recently imposed vaccine mandate further exasperated what has
The post Trucker…

Grocery stores across Canada are beginning to showcase bare shelves, after a recently imposed vaccine mandate further exasperated what has been a growing trucker shortage.

Since January 15, unvaccinated truck drivers from the US have been refused entry into Canada, and grocery stores across the country are beginning to feel the pressure of fruit and vegetable shortages. Given that approximately 90% of Canada’s entire supply of fresh produce comes from its southern neighbour, the fact that only about half of American truck drivers are inoculated against the vaccine has already caused substantial problems for grocery stores attempting to secure shipments.

“We’re hearing from members they’re going into some stores where there’s no oranges or bananas,” Canadian Federation of Independent Grocers senior vice president Gary Sands told Bloomberg. The stringent mandate is further exasperating Canada’s supply chain woes, which have only worsened due to adverse weather as well as the Covid-19 pandemic.

According to North American Produce Buyers, fright costs of one truck hauling fresh produce from either California or Arizona to Canada has risen from an average of US$7,000 to US$9,500— an increase that will only help accelerate already surging food inflation across the country. To make matters worse, the logistics industry has already been suffering from a growing shortage of eligible truckers, leaving hundreds of shipments bound from Canada to the US sitting in warehouses.

The situation will likely become worse, as the US is set to impose its own vaccine mandate on foreign travellers come January 22, which is expected to eliminate up to 16,000 truckers off the road.


Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Trucker Shortage Leading to Widespread Grocery Outages Across Canada appeared first on the deep dive.

Author: Hermina Paull

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