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Fed’s Williams Says Inflation Fight Could Last Into 2024 The New York Fed president points to signs that price pressures are easing, but sees inflation remaining above 3% in a year.
(…) “I hope [a recession] is not the case, but that’s clearly a risk out there given all of the uncertainty in the global economic outlook,” he told reporters during a videoconference following a Monday speech to the Economic Club of New York.
Mr. Williams said he expected that rates would have to rise in 2023 to somewhat higher levels than he had penciled in during projections Fed officials submitted individually at their September meeting.
“Stronger demand for labor, stronger demand in the economy than I previously thought, and then somewhat higher underlying inflation suggest a modestly higher path for policy relative to September,” he said. “Not a massive change, but somewhat higher.”
Mr. Williams, who serves as a key lieutenant to Fed Chair Jerome Powell, did nothing to push back against expectations that the central bank will lift rates by a half percentage point at its meeting next month, Dec. 13-14. That would bring the Fed’s benchmark rate to a range between 4.25% and 4.5%, continuing the most aggressive series of rate increases since the 1980s.
Mr. Williams said if inflation declines as he anticipates next year, the central bank might need to lower rates in 2024 to hold inflation-adjusted interest rates constant. (…)
The New York Fed leader said he expected the unemployment rate to rise to between 4.5% and 5% next year. A forecast where the unemployment rate peaks at around 4.5% represents a more “benign scenario,” he said. “There are scenarios of the economy slowing more sharply,” he added.
Inflation using the Fed’s preferred gauge, the personal-consumption-expenditures price index, rose 6.2% in the 12-months ended September. Mr. Williams said he expects the inflation rate to slow to between 5% and 5.5% by the end of this year, and to between 3% and 3.5% next year. (…)
He warned that bringing down underlying price pressures, including those that reflect rising domestic wages, will require further tightening of monetary policy to slow economic activity and demand. (…)
Separately, an essay published Monday by Fed Vice Chair Lael Brainard flagged the risk that central banks around the world could face more inflationary pressures than they had over recent decades if forces such as demographics and globalization turned from headwinds to tailwinds that support higher prices.
- Loretta Mester: The costs of stopping tightening too early are high
- It is time to revisit the 2% inflation target The right goal for central banks in advanced economies such as the US might be 3% a year (Olivier Blanchard)
Global Yield Curve Inverts in Signal a Recession Is Brewing The gauge inverted for the first time in at least two decades.
The average yield on sovereign debt maturing in 10 years or more has fallen below that of securities due in one-to-three years, according to Bloomberg Global Aggregate bond sub-indexes. That has never happened before based on data going back to the beginning of the millennium.
The inversion of the yield curve is typically seen to herald a recession, as investors switch money to longer-term bonds due to pessimism over the economic outlook. (…)
China blames local officials for outbreaks as Beijing sticks to zero-Covid plan Health authorities vow to boost vaccination of elderly after widespread protests against restrictions
- Sinopharm’s F61 nasal spray receives clinical trial approval for people at high risk of exposure to COVID-19 The approval is of great significance as it will be an important weapon in the fight against the rapidly spreading Omicron variant.
According to the company, the F61 monoclonal antibody showed broad-spectrum neutralizing activity against SARS-CoV-2 prototype strains and major variants against COVID-19. In particular, it maintained high activity against Omicron BA.1, BA.1, BA.2, BA.3, BA.4/5 and BF.7, which were the main strains of the current epidemic. (…)
But no specific data on actual, measured, efficacy.
- #CHINA AIMS TO SPEED UP VACCINATION AMONG PEOPLE AGED ABOVE 80 – BBG *CHINA TO ALLOW ELDERLY TAKE BOOSTER 3 MONTHS AFTER VACCINE *CHINA TO USE BIG DATA TO TARGET SENIORS FOR COVID VACCINATION
- *ABOUT 1.2B PEOPLE FULLY VACCINATED IN CHINA: HEALTH OFFICIAL *86.42% OF 60 YEARS OLDS AND ABOVE FULLY VACCINATED IN CHINA
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From Forexlive: Here’s an interesting item that suggests China may soon dump the COVID zero policy
Crypto Lender BlockFi Follows FTX Into Bankruptcy Cryptocurrency lender BlockFi filed for bankruptcy, making it the latest major digital assets company to fail since FTX, with which BlockFi is financially intertwined.
- Crypto’s Final Price Could Be Zero (Andy Kessler) No sane lender would extend credit against assets lacking any underlying collateral.
There aren’t many leveraged buyouts of technology companies, and for good reason. Technology and debt, like Red Bull and milk, don’t mix. Why? Because when technology works, it commands high valuations. You can’t LBO Google. But when technology moves on to the next new thing, there isn’t much residual value in the form of assets and collateral to call on in case of debt defaults. FTX, Elon Musk and SoftBank are learning this lesson. (…)
The new poster child for the toxic cocktail of technology and debt is Sam Bankman-Fried, with his imploded FTX and Alameda empires. Sure, these companies misappropriated, to put it nicely, customers’ assets. And yes, withdrawals that acted like a bank run drove the company into Chapter 11. But the company’s original sin was to borrow against its own FTT token, which was held up by nothing but air.
This was crypto’s mass delusion. FTT was so thinly traded that FTX could set any price, but not forever. FTX and Alameda borrowed against tokens they themselves were manipulating, including Solana and others, which some called Sam Coins, now Scam Coins. The fatal conceit: They thought FTT would stay high forever, so they invested in often illiquid positions. (…)
You can’t manipulate something forever. Reality eventually replaces delusion. (…)
A cottage industry of firms emerged to lever up crypto. This is when things turned toxic. The first task was to lure customers by paying interest on their crypto holdings. The Anchor Protocol behind the spectacularly imploded Terra-Luna algorithmic tokens was paying up to 20%.
Other platforms such as Binance and Crypto.com would pay 4%, 8% or more on crypto as well, suckering in the masses who could earn only 0.01% interest from, well, real banks. But how could anyone pay interest on crypto? By turning around and lending it out to hedge funds and others who also used leverage. Insanity.
Genesis Global Capital created a lending platform to facilitate borrowing crypto. Lending against what? Again, just air. Firms such as Gemini, set up by the Winklevoss twins, were paying 8% interest, so customers could harvest yields. Why was there any yield on crypto? Good question. It worked on the way up, not so much on the way down. Crypto was lent out like a hot potato until someone got stuck with the value down 90% and everyone else left with defaulted debt. This was probably the only way the delusion could have ended. (…)
Of course, all these crypto lenders had to do was ask: What’s the underlying collateral? Where are the assets? With no good answer, no sane lender would have lent against it. But no one asked. (…)
As an aside, last June, a company asked me to help it sell coins it had received from a few clients. After exploring a few “exchange platforms”, I advised to sell as quickly as possible because it was obvious these platforms were, uh…, unusual.
An uninformed investor could easily get creamed by the trading algos. And the apparent activity on “the tape” is fake; it gives the impression of very active, sometimes hectic, trading when the actual volume traded is insignificant, when there is any. The “price charts” are likely not real.
To avoid killing the “markets” for these coins, I had to trade very gingerly against rather silly bots. It took me 5 months to liquidate the not so large positions! On most days I sold, I was 90-95% of the volume traded. Who bought? Bids were from an algo driven, totally predictable bot, but I have no clue where the money came from?
Strangely, the “exchange” I was using no longer accepts deposits to trade (sell) one of these coins. “[coin] deposits are temporarily closed and will reopen as soon as possible.” It’s been over a week now…
SPAC, CRACKEL AND POP!
Palantir Failed to Spot Pattern in SPAC Debacle The data-analysis company aimed to use deals with startups to jumpstart its non-government business. There were some misfires.
Palantir Technologies Inc.’s raison d’etre is identifying patterns hidden within mountains of data. Yet somehow it didn’t spot the risks in its own investment strategy or the danger that startups might not be able to pay their bills. (…)
Co-founded by outspoken entrepreneur Peter Thiel and known for its work with the intelligence community and the UK’s National Health Service, Palantir has spent $450 million since 2021 acquiring shares in about two dozen early-stage companies, nearly all ex-SPACs. The quid pro quo: The startups promised to purchase Palantir software and services, typically of a value that was equal or greater than its investment.
Realized and unrealized losses on the SPAC portfolio reached 75% at the end of September, or about $333 million, according to my analysis of Palantir’s latest accounts. The red ink may have increased since then. Because many of these startups now face a cash squeeze, Palantir may also be overestimating how much revenue it will receive from them. (…)
Though backing a bunch of SPACs seems hubristic in hindsight, it’s the kind of thing that happens when the stock market is awash in liquidity and rewards growth above profits. (…)
At the peak in 2021, Palantir was valued at $68 billion, or around 35 times sales. (…)
Palantir’s stock has crashed more than 80% from the high as its revenue growth slowed and the SPAC investments plummeted. (…)
In February 2021, I wrote: “BTW, Palantir has never made a profit in 17 years, despite dealing almost exclusively with governments…” FYI, it reported a $1.2B loss in 2020 and another $520M loss in 2021. Current market cap is $13.7B.