Via SchiffGold.com,

In a recent discussion with Darcy Ungaro of The Everyday Investor, Peter challenged the widespread narratives surrounding government spending, the Fed’s 2% inflation target, and the policies that perpetuate these problems. Peter and Darcy highlight the underlying structural issues that plague the economy—massive government debt, intentional inflation, and a citizenry oblivious of the true cost of inflation.

Peter begins by pointing to the fundamental problem: profligate politicians have borrowed freely, relying on the reserve currency status of the US dollar and eager lenders worldwide. That global willingness to lend paved the way for politicians to promise generous programs without raising enough revenue to cover them:

The world was dumb enough to loan us the money. But it goes back to the days where the dollar became the reserve currency. And so the world is looking to accumulate dollars and not to just hold them in cash, but to lend them out to generate a return…

These large deficits enable politicians to promise something for nothing, which is how politicians win elections…

And so if you deliver government programs but you don’t raise taxes, commensurate with the cost of those programs, then you get votes. 

This $34 trillion figure barely scratches the surface of America’s true liabilities. Unfunded promises, hidden from official tallies, only compound the country’s dire financial position:

But that’s just the tip of the iceberg because politicians didn’t just borrow money and spend it. They actually promised voters all sorts of benefits that have never been funded. So that’s still a debt that’s still a liability. Social Security, Medicare, guaranteed student loans, guaranteed mortgages, guaranteed brokerage accounts, guaranteed pensions – the US government gave all these benefits to Americans but never funded them. … So the government is hopelessly insolvent. 

With the debt ballooning, the Federal Reserve faces immense pressure. Peter suggests that while the market expects interest rate cuts, economic reality demands hikes instead:

Well, the markets expect a cut, but a cut is not warranted. In fact, the Fed should continue to hike….

[The debt] is currently financed at very low rates and it would have to be rolled over at much, much higher rates. In addition, we’re adding about a trillion dollars a quarter to the national debt. So that’s another $4 trillion that the government’s going to need to borrow. In addition to the $9 trillion, it’s going to need to refinance. So you’re looking at $13 trillion of debt. I mean, I just don’t think the appetite is there around the world.

Peter recounts the history of the Fed’s 2% inflation target, noting that it was originally intended to be a limit, not a target:

Central banks eventually perverted this whole concept to making a target of inflation. Like you need 2%, that 1% isn’t enough. But that was never part of what New Zealand did. They never said that we needed 2% inflation. They just said if we get 2%, that’s too much. It needs to be, it needs to be less. 2% was the upper end of what they would tolerate for inflation. But it became the target and now it’s really a floor. 

Inflation is a subtle but malicious tax. It benefits those in power by allowing them to appear generous without overtly raising taxes:

It’s in the government’s best interest to have inflation. And so they have to convince the public that it’s good for them… because that’s how they give you something for nothing.

But inflation is a tax. It’s just a tax that the public doesn’t realize they’re paying. And they actually expect us to believe it.

Contrary to what the mainstream says, falling prices benefit consumers. Falling prices don’t destroy commerce any more than rising prices:

Nobody wants health care to be more expensive, education to be more expensive, their insurance to be more expensive. Everybody wants stuff to get cheaper and it’s better.

Now, the other thing they say as well, if prices go down, businesses can’t make any money. Sure, they can. They make more money because their costs are also coming down. 

Unfortunately, the Fed is poised only to continue these problems, not fix them. As Peter explains in his most recent podcast, Fed chair Jerome Powell is distracted from the real issues.

On Monday the Kremlin disclosed that the fate of its military bases in Syria remains unclear and undecided, following the collapse of the Syrian government and Assad having fled the country on December 8.

“There are no final decisions on this,” Kremlin spokesman Dmitry Peskov told a press briefing. “We are in contact with representatives of the forces that now control the situation in the country.”

Likely Moscow is pressing representatives of Hayat Tahrir al-Sham (HTS), which holds Damascus, to at least temporarily give assent to the continued Russian military presence on the coast.

The Tartus Naval Base remains Russia’s only Mediterranean military port. And alongside Khmeimim Air Base, these are the only two major Russian military outposts outside the former Soviet Union.

They are strategic and crucial for Russia’s operations in the Middle East and North Africa, and a full closure of these bases would be a logistical blow in the region for Moscow. It would also signal Russia’s waning influence in the Middle East, also at a moment the Pentagon continues occupying Syria’s northeast.

Moscow has been busy evacuating both diplomatic staff and some military assets from Syria, as Maxar satellite photos show. 

Since the HTS takeover of Damascus there have been no reported incidents of Russian troops or the bases coming under fire; however, Moscow forces are on high alert.

The last several days have seen huge Russian armored and troop convoys withdrawing from the capital area and some other parts of Syria, headed to the safety of Hmeimim airbase in Latakia province. Assets like anti-air defense missiles are being flown out, and will likely be repositioned related to the war in Ukraine.

Who controls the oil and gas infrastructure in Syria after the fall of Assad (via @MeesEnergy)

Several videos have emerged showing significant amounts of Russian equipment being moved to the coast. Negotiations with the new leaders in Damascus for Russia’s bases to be maintained appear to be ongoing.

Washington is likely to press the powers that be in Damascus to force a Russian military exit from the country. And certainly HTS leaders themselves are not going to trust Moscow, given that it was Russian forces for years bombing its enclave of Idlib in support of the Syrian Army.

Authored by Aldgra Fredly via The Epoch Times,

The Wright Patterson Air Force Base in Ohio temporarily closed its airspace on Dec. 13 after drone activity was detected in the area, a base spokesperson said on Dec. 15.

Bob Purtiman, public affairs director for 88th Air Base Wing, told media outlets that the airspace was blocked after small unmanned aerial systems were spotted flying over the air base late Friday and early Saturday.

Purtiman said installation leadership determined that none of the incursions impacted base residents, facilities, or assets.

Purtiman told defense industry news outlet The War Zone that the drones ranged in size and configuration, without elaborating further. It was not immediately clear where the drones came from.

The air base issued a Notice to Air Missions to announce the airspace closure after the drones were detected. The airspace has since been reopened.

Purtiman said that the 88th Air Base Wing, the host unit for Wright Patterson Air Force Base, was working with local authorities in Ohio to ensure the safety of base personnel, facilities, and assets.

“The Air Force is taking all appropriate measures to safeguard our installations and residents,” he said.

The Epoch Times has reached out to Wright Patterson Air Force Base for details on the incident.

Located northeast of Dayton, Ohio, the Wright Patterson Air Force Base is home to Air Force Material Command, which conducts research, testing, and evaluation, and provides acquisition management services and logistics support “necessary to keep Air Force weapon systems ready for war,” according to its website.

The base also hosts the Air Force research laboratory and the National Air and Space Intelligence Center, which serves as the primary source of the U.S. Defense Department for “foreign air and space threats.”

The incident occurred amid reports of unidentified drone-like objects flying over parts of New Jersey, New York, and California.

Alejandro Mayorkas, secretary of the Department of Homeland Security, said the federal government will take action to address concerns but signaled that officials don’t have the authority to shoot them down.

“I want to assure the American public that we in the federal government have deployed additional resources, personnel, technology to assist the New Jersey State Police in addressing the drone sightings,” he told ABC News’ “This Week” anchor George Stephanopoulos on Sunday.

Mayorkas said the sightings are “in fact” of drones, but some are “manned aircraft that are commonly mistaken for drones,” echoing previous statements made by the FBI and the White House. He did not provide further details.

He stated that the U.S. government is limited in its authority to take down a drone, noting that more than 8,000 drones are flown across the country each day.

Authored by Steve Watson via Modernity.news,

Actor Daniel Baldwin has made extraordinary claims that Hollywood stars are involved in “bidding wars” to prevent copies of blackmail sex tapes filmed at the infamous Sean “Diddy” Combs’ freak off parties from falling into the wrong hands.

Appearing on the PBD podcast, Baldwin stated “He has videos of the parties… I’ve heard from friends that are attorneys… there’s a bidding war going on right now.”

The brother of Alec Baldwin continued, “They’re driving that price up because if you want your client and your famous actor to not be involved, a famous singer to not come out, here’s the price, and that they’re just selling to the individuals that are in those.”

“This is what I heard. They’re selling those videos,” he reiterated, claiming that some celebrities are buying them to try to save their own skins.

Baldwin compared the Diddy situation to Jeffrey Epstein’s alleged recordings of elites engaged in incriminating sex acts.

Watch:

Actor Daniel Baldwin (brother of Alec) makes an extraordinary claim that Diddy ‘freak off’ sex tapes are being peddled around Hollywood, sparking a “bidding war” as celebrities in the tapes try to buy them up to save their own skins. Full report here: https://t.co/Fjcehb8WfT pic.twitter.com/TE27gqvImQ

— m o d e r n i t y (@ModernityNews) December 16, 2024

Here’s the full podcast episode:

As we previously highlighted, a former bodyguard of Combs has claimed that the rapper has footage of not only celebrities, but elite politicians and state figures engaging in compromising activities.

The bodyguard, Gene Deal, says the secret footage was captured at Diddy’s various so called “freak off” parties, which are claimed to have involved victims being forced to engage in sex acts while Combs masturbated and recorded the events.

“I don’t think it’s only celebrities gonna be shook. He had politicians in there, he had princes in there. He also had a couple of preachers in there,” said Deal, adding that “he had every room bugged.”

One alleged victim of Combs has filed a lawsuit claiming that the rapper raped her when she was 13 years old while a male and female celebrity pair watched and joined in.

The suit claims that the male celebrity also raped her while the female and Diddy observed.

It has since been alleged by the victim that Jay Z was the male celebrity, a claim which the rapper vehemently denies. Attorneys for Jay z have called for the case to be dismissed on the grounds of inconsistencies in the testimony of the alleged victim.

Another witness in the ongoing case claims he has several sex tapes that allegedly feature “intoxicated” and “victimized” celebrities, including two who were underage.

During an interview with NewsNation, Courtney Burgess, who testified against Combs before a grand jury in Manhattan, claimed that he has in his possession flash drives featuring videos of eight celebrities with Diddy.

Since his indictment in New York, more than two dozen civil lawsuits have been filed against Combs, and if convicted, he could face a sentence of anywhere from 15 years to life in prison.

Combs has been denied bail twice on charges of racketeering, sex trafficking and transportation to engage in prostitution.

He remains in custody at the Metropolitan Detention Center in Brooklyn, and has repeatedly denied all allegations against him.

The trial is scheduled to begin on May 5, 2025.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

China’s retail sales increased just 3% in November from a year ago, falling short of forecasts for 5% growth by economists surveyed by Bloomberg.

The weakening in retail sales was surprising following strong sales of home appliances and cars a month ago thanks to government subsidies.

While sales for those two categories remained strong in November, a number of discretionary goods recorded a slump.

Cosmetics led the decline with a 26% plunge in sales from a year ago, while those of clothing, jewelry, beverages and tobacco and alcohol also decreased.

The November retail number “was the big disappointment of the month, as retail sales . . . came in well softer than both consensus and our forecasts”, said Lynn Song, chief economist for greater China at ING in a research note.

The data builds on traders’ disappointment last week when Beijing pledged to boost consumption but failed to offer details on fiscal stimulus.

The retail-sales data “is a reflection of the dire situation there and how the stimulus efforts have prioritized optics over delivering meaningful economic improvements,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore.

“Even for a tactical recovery, we need more after a series of false starts and the risk of tariffs ahead.”

As The FT reports, Beijing has struggled to boost confidence against the backdrop of a property slowdown, now entering its fourth year, and bouts of deflation.

The government unveiled a series of measures to boost stock markets in late September and to refinance local government debt last month.

Chinese stocks fell on the report and bond yields tumbled to a new record low…

Source: Bloomberg

“The Japanification of China bonds may be inevitable at some point,” said Stephen Miller, a four-decade markets veteran and consultant at GSFM, calling the recent stimulus a sugar hit.

“China’s issues are deep-seated structural issues. You can’t fully rule out the possibility of yields heading toward zero if these issues aren’t addressed,” he said.

“Bond yields at 0% are a possibility,” said George Boubouras, head of research at hedge fund K2 Asset Management Ltd.

He said the central bank will need to take an ‘anything goes’ approach to stimulus to avoid the economy sliding into a Japan-style balance sheet recession.

Indeed, China is already showing partial signs of a balance-sheet recession, said Yingrui Wang, China economist at AXA Investment Managers.

Households and corporations are curbing spending due to their rising debt burden, which has left the central government as a key source of demand, according to Wang.

China’s recent monetary easing pledges point to a continued decline in bond yields until fundamentals in the economy start to recover. Over recent months, the People’s Bank of China appears to have eased its control on bond yields,

“We forecast the 10-year CGB yield to reach around 1.6% by the end of 2025”, she said.

The damage to consumer confidence is deep-rooted and will require substantial effort to repair; China has yet to act decisively to stabilize its property market, although recent months have seen a shift in focus.

The government’s lack of effective action mirrors Japan’s early missteps, risking a prolonged downturn, and with China’s 30Y yield plunging below that of Japan’s, the market is clearly starting to believe the same…

Source: Bloomberg

Beijing hasn’t fully absorbed Japan’s lessons: The lack of decisive fiscal action despite pressure from the property market, local government debt, and declining confidence among consumers could worsen China’s economic challenges.

“The data show that the recovery in domestic demand has remained sluggish, while the stabilization in industrial production was likely due to some order front-loading ahead of US tariffs and is not sustainable,” said Michelle Lam, Greater China economist at Societe Generale SA.

As Mike Shedlock concludes, via MishTalk, facing debt deflation, China’s best bet would be to allow more bankruptcies, write down debt, and strengthen the yuan. But it is highly unlikely to do so.

US hypocrites led by then Fed Chair Ben Bernanke pleaded with Japan to do that, then failed to do so at our turn in the Great Recession.

Lower for longer will suppress the yuan. It’s one way China has of countering Trump’s tariff threats.

But it’s also counterproductive.

Lower for longer did not help Japan, and negative yields helped neither Japan nor the EU.

Unfortunately, the only thing China seems to understand is growth by exports but that means a weaker yuan.

Even more problematic for Beijing, a huge fight with Donald Trump is about a month away…

The last full week of 2024 started off with a burst of US exceptionalism which helped US equity futures shrug off downbeat performances in other global markets as traders prepared for a slate of interest-rate decisions by major central banks due later this week. S&P and Nasdaq futures both traded at record high, as did Bitcoin which hit a fresh all-time high of $106,000. As of 8:00am ET, S&P futures were 0.3% higher and Nasdaq futures gained 0.5% as the panic chase of momentum, which pushed the index at an all-time high on Friday, continued. MicroStrategy advanced more than 6% in premarket trading, fueled by its pending inclusion in the index following the software maker’s transformation into a leveraged bet on Bitcoin. Monday’s US stock performance stands in stark contrast with broad losses in Asia and Europe as weaker-than-expected retail data in China weighed on sentiment. A contraction in the euro-area’s private sector also dragged on European equities. Treasuries climb, pushing US 10-year yields down 2 bps to 4.38%. The Bloomberg Dollar Spot Index falls 0.1%. Oil dipped with WTI falling 0.9% to $70.60 a barrel. Today’s key macro events are the Empire Fed Manfuacturing index and S&P Global PMI prints for the US.

In premarket trading, MicroStrategy leads fellow cryptocurrency-exposed stocks higher on optimism about the company’s upcoming inclusion of the company in the Nasdaq 100 Index. MicroStrategy (MSTR) +4%, Riot Platforms (RIOT) +2%, Mara Holdings (MARA) +2%. On the other end, Super Micro Computer tumbled 15% after the announcement that the stock is to be removed from the Nasdaq 100 in the annual reconstitution of the index. Here are some other notable premarket movers:

• Axon (AXON) rises 2% as the stock will be added to Nasdaq 100 Index in annual reconstitution of the index.
• Capri Holdings (CPRI) climbs 5% after Women’s Wear Daily reported that the fashion company is working with a bank to find buyers for its Versace and Jimmy Choo brands.
• Edgewise Therapeutics (EWTX) gains 23% after the company said its Phase 2 trial of sevasemten in individuals with Becker muscular dystrophy met its primary endpoint.
• Ford shares (F) falls 2% as Jefferies turns bearish on the automaker, citing concerns ranging from inventory overhang to looming strategic decisions on the company’s European presence.
• Honeywell (HON) advances 3% after saying it’s considering strategic options, including the possible separation of its aerospace business, a month after Elliott Investment Management called for a breakup of the industrial group.
• Red Cat (RCAT) rises 14% after the drone tech company announced a strategic partnership with Palantir Technologies.
• Teradyne, NetApp and Keysight Technologies all rise after JPMorgan upgraded the three tech hardware firms amid growing demand for their products.

An expected quarter-point rate cut from the Federal Reserve on Wednesday could add fresh support and extend US stocks’ outperformance. The S&P 500 has rallied 27% so far in 2024, with strategist expecting the rally to build further steam in anticipation of favorable economic policies under President-elect Donald Trump and strong earnings.

“Central banks have been helpful in 2024 as they start cutting interest rates when the economy was still strong,” Marija Veitmane, senior multi-asset strategist at State Street Global Equities, told Bloomberg TV. Going forward, “what we need to rely on is earnings and where they can grow the fastest. In the US, we can still see solid growth.”

Wednesday’s Fed decision will be followed by peers in Japan, the Nordics and the UK over the following day. Swaps traders are now pricing in around three quarter-point rate cuts by the Fed over the next 12 months, whereas they’d seen better than 50/50 odds of a fourth one a week ago.

In Europe, the Stoxx 600 is down 0.3% in the wake of disappointing retail-sales data in China, while traders assess the impact of Moody’s Ratings’ France downgrade. Banks are the best performers while Novo Nordisk boosts healthcare stocks after announcing its Catalent deal got the go-ahead. Automakers and consumer goods are the biggest laggards. France’s CAC 40 falls 0.7%, underperforming its regional peers after Moody’s cut the French credit rating on Friday. Here are some of the biggest movers on Monday:

• Novo Nordisk shares rise as much as 2.7% after the Danish drugmaker said it can advance with its acquisition of factories from contract development and manufacturing organization Catalent.
• Basilea shares rise as much as 9.2% after the Swiss pharma company entered into an exclusive distribution and license agreement with Innoviva for the commercialization of Basilea’s hospital anti-MRSA antibiotic Zevtera in the US.
• Johnson Matthey shares rise as much as 6.6%, the most since March, after its largest shareholder, Standard Investments, called on the chemicals company to refresh its board and launch a strategic review of the business following its underperformance in recent years.
• Galderma gains as much as 4.7%, the most since Aug. 6 and hitting a record high, after UBS upgraded the Swiss dermatology firm to buy from neutral.
• DKSH shares gain as much as 3.5%, the most since July, after the Swiss distribution group saw its recommendation raised to outperform from neutral at BNP Paribas Exane, seeing a “potent mix of margin expansion and balance sheet optimization” driving earnings momentum.
• Bunzl shares rise as much as 2.8% after the value-added distributor was upgraded by analysts at RBC Capital Markets, citing a dependable outlook and an undemanding valuation.
• Porsche Automobil Holding SE shares drop as much as 3.3% after the German firm withdrew its current year forecast due to the expected impairment of at-equity carrying amounts of its investments in Volkswagen and Porsche AG.
• Getlink shares drop as much as 3.6%, the most since June, after the travel infrastructure operator warned it has discovered a second fault on its interconnector between France and the UK.

Earlier in the session, Asian stocks also slumped, dragged lower by shares in mainland China after the country’s retail sales data came below expectations. The MSCI Asia Pacific Index declined 0.2%, with China Eastern Airlines and Australian miner Fortescue Ltd among the biggest losers. Hong Kong and mainland China were among the worst performing markets in the region, while the stock benchmark in Taiwan rose. China’s data dump on Monday showed retail sales for November rose 3% on-year, well below an expectation of a 5% gain. That weighed on sentiment at a time when Beijing has been touting more stimulus to support spending. Home prices fell for a third month in a row, although the decline is slowing. Chip makers Taiwan Semiconductor Manufacturing Co and SK Hynix were among the gainers. A gauge tracking Asian IT shares was up around 0.3%.

The retail-sales data “is a reflection of the dire situation there and how the stimulus efforts have prioritized optics over delivering meaningful economic improvements,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Even for a tactical recovery, we need more after a series of false starts and the risk of tariffs ahead.”

“This data really verifies that the headwinds for consumers are still very very high,” said Johanna Chua, head of emerging market economics at Citigroup Global Markets in a Bloomberg TV interview.

In FX, the Bloomberg dollar index was little changed after six days of gains. Wall Street is starting to sour on the dollar as President-elect Donald Trump’s policies and the Fed’s interest-rate cuts will likely put pressure on the greenback in the latter portion of 2025. Roughly a half dozen sell-side strategists are now forecasting the world’s reserve currency will peak as early as mid next year before starting to decline. Euro-area PMIs were mixed and largely ignored with the euro little changed versus the dollar. The pound outperforms, rising 0.2% as investors seemed to focus on the services PMI beat rather than the manufacturing PMI miss.

In rates, treasuries hold small gains, tracking bigger rallies in bunds and gilts after mixed European PMI readings and recovering some of last week’s steep loss. US yields are richer by 1.5bp to 3bp across maturities with gains led by front-end and belly, steepening 5s30s spread by ~1bp. 10-year is back around 4.37% after topping 4.4% Friday for the first time since Nov. 22. OATs also lag their German counterparts, widening the 10-year yield spread to around 79 bps, after France was downgraded unexpectedly by Moody’s on Friday. Treasury coupon auctions this week include $13 billion 20-year bond reopening Tuesday and $22 billion 5-year TIPS reopening Thursday. US session includes Empire manufacturing survey and US PMIs, with November retail sales ahead Tuesday before Wednesday’s Fed rate decision. Oil trades lower, also supporting Treasuries.  

In commodities, oil prices declined, with WTI falling 0.9% to $70.60 a barrel after rising 6.1% last week. Spot gold adds $12 to around $2,660/oz. Bitcoin rallies to a record high.

Today’s US economic data calendar includes December Empire manufacturing (8:30am) and S&P Global US manufacturing and services PMIs at 9:45am

Market Snapshot

• S&P 500 futures little changed at 6,061.50
• STOXX Europe 600 down 0.1% to 515.69
• MXAP down 0.2% to 185.09
• MXAPJ down 0.2% to 584.05
• Nikkei little changed at 39,457.49
• Topix down 0.3% to 2,738.33
• Hang Seng Index down 0.9% to 19,795.49
• Shanghai Composite down 0.2% to 3,386.33
• Sensex down 0.4% to 81,777.79
• Australia S&P/ASX 200 down 0.6% to 8,249.48
• Kospi down 0.2% to 2,488.97
• German 10Y yield down 1 bp at 2.25%
• Euro up 0.1% to $1.0516
• Brent Futures down 0.7% to $73.97/bbl
• Gold spot up 0.4% to $2,657.85
• US Dollar Index down 0.19% to 106.81

Top Overnight News

• US DHHS nominee (under President-elect Trump) RFK Jr. is to attempt to win over the Senate by playing down the vaccine topic and sticking to Trump’s messaging: WSJ
• Nasdaq announced that Palantir Technologies (PLTR), MicroStrategy (MSTR), and Axon Enterprise (AXON) will be added to the index, while Illumina (ILMN), Super Micro Computer (SMCI), and Moderna (MRNA) will be removed as part of the annual reconstitution of the Nasdaq-100 Index, which will become effective prior to market open on Monday, December 23rd: RTRS
• WSJ’s Timiraos writes, ahead of this week’s FOMC, “Investors widely expect a third-in-a-row rate cut this week. Officials are ready to slow—or even stop—lowering rates after that.”
• A surprise retail slowdown in China highlighted the urgency for Beijing to further boost consumer spending. Sales growth slowed sharply last month, though industrial output improved. BBG
• China’s regulators pledged to boost efforts to stabilize the housing and equity markets, as well as conduct more effective fiscal policies. Several branches weighed in after a major leadership meeting last week ended in calls for greater stimulus. BBG
• Eurozone flash PMIs for Dec are mixed, with an inline manufacturing reading (45.2, flat vs. Nov and a tiny bit below the consensus of 45.3) and upside services number (51.4, up from 49.5 in Nov and above the consensus of 49.5). S&P
• The European Central Bank is likely to continue to lower its key interest rate as the threat of U.S. tariffs clouds already weak growth prospects, President Christine Lagarde said Monday. WSJ
• French stocks struggled after Moody’s downgraded the country’s credit rating. New PM Francois Bayrou met with Marine Le Pen, who felt “listened to” but is unsure if the talks were useful. BBG
• Apple plans to introduce new iPhones (including thinner models and foldable ones as well) as the firm prepares to offer more radical design changes to help accelerate growth. WSJ
•  
• Slumping office values are prompting smaller US banks to modify more CRE loans, Moody’s data show. About $500 billion of such mortgages are set to mature in the next year and many are expected to default. Potential losses and fire sales may further pressure property prices. BBG
• Bitcoin briefly topped $106,000 — a fresh record — buoyed by optimism about MicroStrategy’s inclusion in the Nasdaq 100. BBG
• Tesla (TSLA) has raised the price of the Model S to USD 79,990 from USD 74,990 in the US and the price of the Model S Plaid to USD 94,990 from USD 89,990, according to its website.
• Meta (META) has urged the California Attorney General to stop OpenAI (MSFT) from becoming for-profit: WSJ.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks saw an uninspiring start to the week following the mixed session on Wall Street on Friday and ahead of this week’s risk events including the final FOMC, BoJ, and BoE meetings of the year. ASX 200 saw gold miners pressured by the recent pullback of the yellow metal towards USD 2,650/oz levels, with sentiment also weighed on by the downticks in prelim. Aussie PMIs. Nikkei 225 swung between modest positive and negative territory throughout the session as the index oscillated the 39,500 level, whilst the Japanese Flash PMI highlighted “stubborn inflation” with “anecdotal evidence placing particular emphasis on the impact of the weakness of the yen in relation to inputs sourced from abroad.” KOSPI conformed to the broader risk tone with little sustained move after South Korean MPs successfully voted to impeach President Yoon in their second attempt. Hang Seng and Shanghai Comp fluctuated between modest gains and losses with little initial reaction seen to the Chinese activity data, which saw a marked miss in Retail Sales whilst Industrial Output saw a modest surprise uptick. Furthermore, Chinese markets failed to garner much support from weekend reports that China has room to further cut the RRR, according to PBoC officials on Saturday via CCTV.

Top Asian News

• IDC expects China’s smartphone shipments to increase to 289mln in 2025, +1.6% Y/Y
• China has room to further cut the reserve requirement ratio (RRR), according to PBoC officials on Saturday via CCTV.
• China’s Central Financial and Economic Affairs Commission deputy director said the country’s GDP is expected to grow by about 5% this year, with foreign exchange reserves remaining above USD 3.2tln. He added that China’s contribution to global economic growth is expected to be close to 30% and that employment and prices in China are expected to remain stable, according to Reuters.
• Chinese Stats Bureau stated that China is on track to achieve key economic targets in 2024, but more efforts are needed to promote continued economic recovery in 2025. It added the trend of recovery in consumption remained unchanged and that more policies would be implemented to expand domestic demand. It noted that while new policies had gained more traction, the external situation had become more complex and severe. The Bureau expects further improvement in the property market, emphasises the need to stabilise employment and increase incomes to boost consumption capacity, and anticipates that China’s CPI will maintain modest increases. It also noted that China’s economy is generally stable in November and sees increasing positive changes, according to Reuters.
• China Financial and Economic Affairs Commission says China will increase the size of government bonds, including local special bonds, in 2025, via Xinhua. Will promote stable household income growth next year through increasing direct fiscal support to consumers and improving social security. Will implement “appropriately loose” monetary policy to effective lower interest rate on local government debt. China still has big room for investment.
• PBoC injected CNY 753.1bln via 7-day reverse repos with the rate maintained at 1.50%.
• Moody’s raised China’s 2025 GDP growth forecast to 4.2% from 4.0%, according to Reuters.
• The US Treasury has told Nippon Steel (5401 JT) that the panel vetting its proposed acquisition of US Steel (X) has not reached a consensus on how to mitigate security risks, according to the FT.
• New Zealand NZIER Consensus Forecasts show that the economic growth outlook remains broadly unchanged relative to the previous release; GDP forecasts continue to suggest sluggish growth in the year to March 2025 before picking up to 2.2% in the following year.

South Korea News

• South Korean MPs have successfully voted to impeach President Yoon in their second attempt, amid backlash following his brief move to impose martial law, according to BBC. Yoon was suspended from official duties at 19:24 local time on Saturday while PM Han is to continue as acting president, according to Yonhap.
• South Korea’s acting president Han vowed to leave no vacuum in state affairs, build a solid security posture, and ensure the cabinet works hard to maintain trust with the US, Japan, and other partners. He also pledged efforts to operate financial and forex markets smoothly, according to Yonhap. Acting President Han said the country will maintain preparedness to prevent North Korea from stirring up provocations, secure national interests ahead of the new US administration, and prioritise national security above all else, according to News1 and Yonhap.
• South Korea’s opposition leader Lee Jae-myung said the party has decided not to proceed with the impeachment of acting president Han, according to Reuters.
• Bank of Korea stated it is necessary to respond more actively to the economic impact compared with past impeachment periods, given heightened challenges in external conditions. It also said it will use all available policy instruments, in conjunction with the government, to respond to and avert escalation of volatility in financial and forex markets, according to Reuters.
• South Korea’s Finance Minister said the government will continue to swiftly deploy market-stabilising measures as needed, seek more support measures for vulnerable sectors, and actively communicate with parliament to keep the economy stable. The minister also confirmed that the bi-annual economic policy plan will be announced before the end of the year, according to Reuters.
• South Korea’s financial regulator said it will expand market-stabilising funds if needed to boost liquidity in bond and short-term money markets and expects financial markets to stabilise as recent political events are temporary shocks, according to Reuters.

European bourses began the European session on a modestly mixed footing, with indices generally trading on either side of the unchanged mark. As the morning progressed, sentiment slipped a touch to display a slightly negative picture in Europe. Today’s EZ PMIs strengthens the case for further ECB easing, but had little impact on the complex. European sectors hold a strong negative bias, with a clear defensive tilt given the risk tone. Healthcare takes the top spot, after heavyweight Novo Nordisk (+1.9%) gains after it announced regulatory approval for Catalent deal. Autos parks itself at the foot of the pile, weighed on by losses in Porsche SE (-1.7%) after the automaker withdrew guidance. US equity futures are very modestly on a firmer footing, with sentiment a little better vs in Europe. The NQ marginally outperforms vs peers.

Top European News

• Moody’s cut France’s rating to “Aa3” from “Aa2”, outlook stable, in an unscheduled rating revision, citing political fragmentation. Moody’s said its view is that France’s public finances will be substantially weakened over the coming years. The agency noted that France’s political fragmentation is more likely to impede meaningful fiscal consolidation and said there is now a very low probability that the next French government will sustainably reduce the size of fiscal deficits beyond next year. However, France’s local- and foreign-currency ceilings remain unchanged at AAA, according to Moody’s.
• ECB Holzmann said it would be wrong to cut rates just to help the economy, according to Reuters.
• ECB’s Lagarde says more rate cuts are to come and the direction of travel is clear, via Bloomberg; risks around inflation are two sided. “The ECB is also moving through its monetary policy cycle, and we are now at a stage where the darkest days of winter look to be behind us, and we can start to look forward instead.”
• ECB’s de Guindos says “our confidence that inflation will converge to target in 2025 is reflected in our monetary policy”. US tariff increases could result in inflationary pressures.
• EU reportedly presses for new powers to combat threat of Chinese import surge and amid fears Brussels will struggle to fight back in a global trade war, according to FT.
• Norges Bank to purchase NOK and sell foreign currency to fund transfers to the government for FY24.
• SNB has adjusted the remuneration of sight deposits, lowers the threshold factor from 22 to 20 as of 1st February 2025.

FX

• DXY is flat and has been trading within a very tight 106.75-92 range for much of the European morning. As it stands the index currently trades towards the bottom end of Friday’s 106.71-107.18 range; and quite a bit away from its 21 DMA at 106.47. US Flash PMIs due later.
• EUR is flat vs the Dollar, with price action fairly choppy as traders react to a slew the EZ PMI metrics dotted throughout the morning. ECB President Lagarde spoke today, with her commentary very much in-fitting with her remarks made at her press conference. EUR/USD traded choppily to the French figures, but ultimately edged a little higher on the German release. Since, the upside has been pared to reside around 1.05.
• JPY is essentially flat, but is the G10 laggard thus far. Overnight, the Japanese PMI release showed manufacturing rebounding and services improving. USD/JPY sits in a very tight 153.31-96 range, a touch above Friday’s 153.79.
• GBP is on a stronger footing, in reaction to the region’s PMI release which saw the Services figure above expectations and further into expansionary territory, while Manufacturing was a touch softer. Cable currently trades at the top end of today’s 1.2609-72 range, with today’s peak coinciding with its 21 DMA at 1.2670.
• Antipodeans are marginally firmer vs the Dollar; the Kiwi outperforms vs the Aussie. AUD currently trades at the mid-point of a 0.6348-82 range, and just within Friday’s confines. NZD/USD on the other hand, has topped the best from Friday and currently trades just off the day’s best at 0.5786.
• Norges Bank said it is to purchase NOK and sell foreign currency to fund transfers to the government for FY24. This helped to strengthen the NOK, with EUR/NOK slipping from 11.7440 to 11.7130 over the course of eight minutes; thereafter, extended to a session low of 11.7030 before paring almost the entire move.
• S&P affirmed Mexico “BBB” foreign currency and “BBB+” local currency long-term rating; Outlook remains Stable.
• Brazilian President Lula has been discharged from the hospital and has recovered well and can resume normal work activities but is to avoid long-haul flights, according to the medical team.
• PBoC set USD/CNY mid-point at 7.1882 vs exp. 7.2769 (prev. 7.1876)

Fixed Income

• USTs are rangebound in a tight 109-27+ to 109-31+ band ahead of Flash PMIs from the US but with the focus firmly on Wednesday’s FOMC. Given contained action for the benchmark yields are also relatively steady but are lower across the curve, which itself is marginally flatter.
• Bunds are pressured, but yet to deviate significantly from the unchanged mark in a tight 134.43-73 band. PMIs sparked modest two way action with the net read being bearish as the German economy fares better than expected in some areas. Into the EZ-wide release, Bunds edged a little higher but the poor manufacturing situation saw Bunds pare back those gains. As it stands, Bunds reside just in the red as the dust settles post-PMIs and remarks from ECB speakers thus far are yet to move the dial; ahead, the often influential Schnabel is scheduled.
• OATs are softer and moved in tandem with EGBs on the German metrics after being relatively unreactive to their own PMIs which focused firmly on political uncertainty. As a reminder, and weighing, Moody’s downgraded France a notch with the outlook stable, due to increased political uncertainty and a low probability that the gov’t will succeed in reducing the deficit.
• Gilts are a touch firmer but little changed overall into the UK Flash PMI release, which was mixed but in a delayed reaction weighed on Gilts, given services strength and inflationary internals, pressuring them from a 94.50 high back towards but not testing earlier 94.24 lows.

Commodities

• WTI and Brent began the session modestly in the red before slipping further as the European session got underway given the tepid risk tone for the region. Brent’Feb 2025 sits just shy of USD 74/bbl.
• Gold is firmer and at the top-end of parameters for today. XAU found itself under pressure in APAC trade and slipped to a USD 2643/oz base before bouncing back and residing at USD 2662/oz highs.
• Base metals are mostly on the back foot, given the risk tone; Copper is a little more contained, not really deriving any direction from the morning’s PMIs or before than from China activity data and commentary.
• Marathon’s Detroit refinery (140k BPD) union workers voted to ratify a pay deal following a three-month strike, according to a union post on X.
• Damage to two tankers in the Black Sea caused an oil products spill, according to Interfax.
• Nigeria’s maritime agency reported an oil spill at the Shell loading terminal in Nigeria’s Delta region after a pipeline ruptured, according to Reuters.
• Libya’s NOC declared force majeure at its Zawiya facility following clashes, according to Bloomberg.
• Nornickel CEO Potanin said the company will move to positive free cash flow in 2025 and, until then, shareholders will need to be patient with dividends, according to Russian media RBC.
• Some Japanese aluminium buyers agree to a January-March premium of USD 228/t, +30% from the current quarter, according to Reuters sources.

Geopolitics: Middle East

• “Progress in the negotiations of the exchange deal and may be completed after the Jewish holidays at the end of this month”, according to Al Jazeera citing an informed source via Israeli press.
• US President-elect Trump and Israeli PM discussed the Gaza hostage deal bid and Syria on Sunday, according to Reuters.
• Israeli PM Netanyahu’s government approved a plan to expand settlements on Israeli-occupied Golan Heights. The statement said Netanyahu acted “in light of the war and the new front facing Syria” and out of a desire to double the Israeli population on the Golan, according to Reuters.
• Russia is pulling back its military in Syria but is not withdrawing from its main military bases, Syrian sources say, according to Reuters.
• Trump’s Middle East envoy has met with the Saudi crown prince, according to Axios.
• “Syrian media: Strong explosions in the countryside of Tartous and Latakia resulting from an Israeli attack” according to Asharq News. Note: Russia has two bases in Syria – a naval base in Tartous and the Khmeimim Air Base near the port city of Latakia..
• “US sources to Alarabiya English: US army carried out strikes against Houthi sites in Yemen”, according to Al Arabiya.

Geopolitics: US-China

• US Treasury Secretary Yellen said the Treasury continues to warn China about the potential for bank sanctions over transactions aiding Russia’s war effort in Ukraine and will not rule out sanctions on Chinese banks. She noted that the largest Chinese banks are wary of the consequences. Yellen also said the US aims to reduce Russia’s energy revenues, with options such as lowering the oil price cap and imposing more sanctions on ‘dark fleet’ tankers being considered. She emphasised the need for clear communication channels at all levels between the US and China, stating that leader-to-leader discussions alone are insufficient. Yellen added that the next US Treasury Secretary is likely to continue pushing back on currency manipulation if evidence is found.

Geopolitics: Other

• Russian President Putin says “is concerned about US development and deployment of short and medium-range missiles”; “we are not brandishing nuclear weapons, it a policy of nuclear deterrence”.

US Event Calendar

• 08:30: Dec. Empire Manufacturing, est. 10.0, prior 31.2
• 09:45: Dec. S&P Global US Services PMI, est. 55.8, prior 56.1
• 09:45: Dec. S&P Global US Composite PMI, est. 55.1, prior 54.9
• 09:45: Dec. S&P Global US Manufacturing PM, est. 49.5, prior 49.7

DB’s Jim Reid concludes the overnight wrap

This morning we will publish our 2025 survey results with lots of interesting answers. Your two favourite Xmas films are quite violent though so that’s the demographic of the responses! Long-time readers of the EMR will be wondering where time is going when I tell you that our belovedly wayward dog Brontë, who used to play a starring role in the EMR, was 10 over the weekend. Brontë is the most affectionate, good natured, people dog you can imagine but has zero recall. So in the first 2-3 years when we were trying to get used to having a dog, with extensive gun dog training included, we lost her on probably 7 or 8 occasions on walks. One of which was followed by my wife uttering (or shouting) the word “divorce” when I lost her on a motorway service station in France in the dark while my wife was feeding a very young baby around 8 years ago. She was seen crossing the motorway at one point before returning to the petrol pumps tired, bedraggled, and hungry two hours later. Since then she’s not been off the lead, and I saved my marriage by having our garden fortified. As she gets older, the calmer she doesn’t get. Happy birthday Brontë.

As we hit the last full week of the year, the natural winding down of activity will be punctuated by bursts of activity, centred around the Fed (Wednesday), the BoJ (Thursday) and the BoE (also Thursday) meetings. In terms of data, the highlights are the global flash PMIs today, US retail sales (tomorrow) and inflation prints from the US (PCE on Friday), Canada (tomorrow), UK (Wednesday), and Japan (Friday). Outside of that, today’s German government vote of no confidence should almost certainly pave the way for a February 23rd election and tomorrow’s CDU/CSU manifesto announcement will help shape the campaign (more later). Another thing to watch is France where Moody’s surprisingly cut France late on Friday night in a rare unscheduled move, albeit one that brings it in line with S&P and Fitch (also more below).

Let’s expand on some of these highlights now and start with the Fed. Our economists’ preview is here but in brief they expect a 25bps cut and then for them to be on hold for the entirety of 2025 as the SEP should show meaningful revisions to the 2024 economic forecasts, with growth and inflation revised higher and the unemployment rate lower. The median dot is likely to show three additional rate cuts but we think Powell will likely deemphasis this signal in the press conference and be as data dependant as he can be. Powell will also likely emphasise that it is still too early for officials to build any major policy changes from the new Trump administration into their outlook. The long-run dot will likely continue its upward migration, rising to 3.1%. Our economists’ estimates of neutral are notably above the Fed’s and we think they will likely continue to move this higher.

The BoJ meeting on Thursday is more uncertain, but most economists expect no change and with only a 16% probability of a hike priced in. Our Chief Japan economist previews the meeting here and goes against consensus in seeing a rate hike as the most likely scenario. One of the reasons why a hike might wait until January though is that MP Ishiba is trying to push a stimulus plan through parliament this month and the BoJ may prefer to avoid political interference and delay the hike.

On Thursday our UK economist expects a BoE hold, with a 9-0 vote decision, keeping the rate at 4.75%. The full preview of the meeting is here. The Riksbank is expected to cut rates 25bps on Thursday in a busy last full week of the year for central banks.
For core PCE on Friday our economists believe it comes in a little soft at 0.16% mom versus 0.27% previously with subcomponents in last Thursday’s PPI and Friday’s import price data, that feed into this number, on the weaker side. However, the year-over-year rate for core PCE should still tick up from 2.8% to 2.9%.

In Germany, Chancellor Scholz’s vote of confidence today is scheduled to start at 1:00 pm CET. The expected loss will likely clear the path to early elections on February 23. More importantly tomorrow sees the CDU/CSU publish their manifesto at 11.30 CET. According to current polls the CDU is likely to lead the next government, and the manifesto could give clearer signals on their economic policy priorities, even if the coalition agreement after the elections could result in policy compromises. The key question is whether the CDU will formally signal an openness to reforming the debt brake at this stage. Recently signalled openness by Merz to discuss reforms might just be intended to create optionality for potential compromises in coalition talks. However, a leaked draft of the CDU election manifesto late last week saw a continued commitment to the debt brake which at this stage is not unexpected and corroborates what our economists expect.

Staying at the centre of Europe, the Moody’s downgrade of France late on Friday night to Aa3 from Aa2 with a stable outlook was unscheduled and will surprise many when European markets reopen this morning. Their commentary on future deficits is quite damning but the fact that it’s a stable outlook for now, and that this just brings the rating in line with S&P and Fitch, will likely mean that this is more headline grabbing than massively market moving for now. OAT futures are only a little lower in Asia trading. France’s new Prime Minister Francois Bayrou will meet with far-right leader Marine Le Pen and Jordan Bardella (head of National Rally) at 9am CET this morning to start the process of agreeing a budget. So we may see some headlines post the meeting. For all the rest of the week’s events, see the full day-by-day week ahead at the end as per usual.

Asian equity markets are falling this morning with Chinese stocks weak after disappointing retail sales data (more below). As I check my screens, the Hang Seng (-0.75%) and the CSI (-0.51%) are lower with the S&P/ASX 200 (-0.56%) and the Nikkei (-0.18%) also dipping. Elsewhere, the KOSPI (-0.39%) has erased its opening gains following the impeachment of President Yoon Suk Yeol over the weekend. In overnight trading, US equity futures are flat with 10yr UST -1.5bps lower.

Coming back to China retail sales unexpectedly slowed in November, rising +3.0% y/y (v/s +5.0% expected) and marking a sharp slowdown from the +4.8% growth in October. November industrial production rose by +5.4% from a year ago, accelerating from a climb of +5.3% in the prior month and in line with expectations. Fixed asset investment (Ex rural), reported on a year-to-date basis, rose by +3.3% through November on an annual basis, missing the forecast of 3.5%. The figure had risen by +3.4% in the period from January to October. However, new-home prices “only” fell -0.2%, the smallest decrease in 17 months, indicating a fragile stabilisation in China’s real estate market. Values of used homes dropped -0.35%, the least since May 2023. Yields on 10yr Chinese government bonds are -5.1bps lower, trading at a record low of 1.72% with longer-tenor yields also tumbling.

Looking back at last week now, markets struggled to keep up their momentum thanks to the combination of underwhelming data and an ECB decision that whilst dovish was less so than many hoped for. That meant risk assets slipped back, with the S&P 500 falling -0.64% last week (-0.003% Friday to be very precise), whilst the STOXX 600 fell -0.77% (-0.53% Friday). In fact for both indices, the moves ended a run of three consecutive weekly gains, although Japan was a relative outperformer as the Nikkei rose +0.97% (-0.95% Friday). In a remarkable metric of the weakening breadth of momentum in US equities, Friday marked the tenth session in a row that more stocks fell than rose within the S&P 500, the longest such run since 1996.

US inflation data didn’t really help matters, as it raised fears that inflation might be proving sticky above the Fed’s target. To be fair, it wasn’t so bad as to prevent a December rate cut in investors’ eyes, but the longer-term trends were of concern. Indeed, US monthly core CPI has been running at +0.3% for four consecutive months, so it doesn’t look like a temporary blip anymore, and the 3m annualised pace of core CPI now stands at +3.7%. In the meantime, headline PPI inflation also surprised on the upside, with the year-on-year rate moving up to +3.0% for the first time since early 2023. As we mentioned in the core PCE preview above, some of the sub components were weak but we’re about to enter the more seasonally unfavourable H1 period for US inflation so there are concerns that inflation hasn’t behaved well enough in the seasonally dovish H2 period this year.

Concerns about the inflation outlook contributed to a selloff among US Treasuries last week, with the 10yr yield up +24.4bps last week to 4.40% (+6.9bps Friday). That’s its biggest weekly jump since October 2023, and the 2yr yield was also up +14.2bps (+5.4bps Friday) to 4.25%. Over in Europe, government bond yields also moved higher after the ECB’s latest decision. They cut rates by 25bps as expected, but there was some disappointment among investors that the tone wasn’t more dovish, as President Lagarde described inflation risks as “two-sided”. In fact yields on 10yr Italian BTPs were up +20.0bps (+4.3bps Friday), in their biggest weekly jump since July 2023. And yields on 10yr bunds were up +15.0bps (+5.2bps Friday) in their biggest rise since March.

Although equities and bonds both struggled last week, there was a stronger performance among several commodities. For instance, Brent crude oil prices rose +4.74% (+1.47% Friday) to $74.49/bbl, and gold prices were up +0.56% (-1.42% Friday) to $2,648/oz. Meanwhile in the FX space, it was another good week for the US Dollar, with the dollar index moving up for the 10th time in the last 11 weeks.

While everyone, including local, state, and federal authorities, is desperately searching for answers, there has been a notable lack of disclosure regarding what is actually happening in the skies above New Jersey—some of the most restricted airspace in the world.

One theory points to drones equipped with payload sensors designed to detect radioactive material, given ongoing and heightened Al-Qaeda threats on the East Coast. Others believe this could be part of a large psyop aimed at pushing through new drone legislation in Washington, DC. Additional theories suggest that Iranian or Chinese operators may be deploying drones to spark mass hysteria.

Even Washington Post’s Josh Rogin called out the feds for “the lack of disclosure is damaging public trust.” He added it’s time for the feds “to come clean.” 

If these really are Defense Department drones doing radiation sniffing for possible dirty bombs, one could understand why they wouldn’t want to admit that & panic people. But at this point, the lack of disclosure is damaging public trust. Time to come clean.

— Josh Rogin (@joshrogin) December 15, 2024

What may seem like a mere coincidence is worth noting: reports of drone sightings began in mid-November, and on December 2, the US Nuclear Regulatory Commission disclosed that a medical device containing radioactive material was “lost in transit” in New Jersey.

Nazha Cancer Center reported to the New Jersey Department of Environmental Protection (NJDEP) on December 3 that an “Eckert & Ziegler model HEGL-0132, with the current approximate activity of 0.267 mCi sent for disposal has been lost in transit on December 2.” 

“The shipping container arrived at its destination damaged and empty. The licensee has filed a claim with the shipper. If the source is not located within the 30 days, the licensee will follow up with a full written report to include root cause(s) and corrective actions,” the email from the cancer center located in Newfield continued. 

Here’s a website image of the missing Eckert & Ziegler model HEGL-0132 medical device: 

NJDEP noted, “THIS MATERIAL EVENT CONTAINS A ‘Less than Cat 3’ LEVEL OF RADIOACTIVE MATERIAL.” 

The agency explained more:

Sources that are “Less than IAEA Category 3 sources,” are either sources that are very unlikely to cause permanent injury to individuals or contain a very small amount of radioactive material that would not cause any permanent injury. Some of these sources, such as moisture density gauges or thickness gauges that are Category 4, the amount of unshielded radioactive material, if not safely managed or securely protected, could possibly – although it is unlikely – temporarily injure someone who handled it or were otherwise in contact with it, or who were close to it for a period of many weeks.

It had not occurred to us that cancer centers could cause radiation threats… 

It remains unclear whether the purported drone sightings in NJ/NY airspace were even equipped with sniffing tech to even search for the missing radioactive medical device (or other devices). The government’s undeniable lack of disclosure at all levels has fueled panic. Perhaps even the feds have no idea what’s truly happening.​

Authored by Lance Roberts via RealInvestmentAdvice.com,

Understanding the trajectory of corporate earnings is crucial for investors, as these earnings significantly influence stock valuations and market performance. Economic indicators such as Gross Domestic Product (GDP), the Institute for Supply Management (ISM) Manufacturing Index, and the Chicago Fed National Activity Index (CFNAI) provide valuable insights into the economic environment that shapes company profitability. These indicators can also help investors evaluate whether Wall Street’s earnings estimates are realistic.

During raging bull markets, exuberance about the market can detach from the underlying economic fundamentals. During these periods, it is not uncommon for Wall Street analysts to continually increase forward estimates on the hopes that the economy will catch up to reality. However, there is a symbiotic relationship between economic indicators and the trajectory of earnings that we will explore.

Let’s start with the economy itself.

Gross Domestic Product (GDP)

GDP measures the total value of goods and services produced within a country. It is a reliable gauge of overall economic health. A growing GDP indicates increased economic activity, typically driving higher corporate earnings due to greater consumer spending and business investment. Conversely, a contracting GDP suggests an economic slowdown, often dampening corporate profits.

That data supports this concept. Historically, GDP growth has closely correlated with corporate earnings growth. Data from the Federal Reserve shows that, since 1948, a 1% increase in real GDP growth has translated to roughly a 6% increase in S&P 500 earnings on average. This relationship underscores why GDP is a cornerstone for assessing earnings trends. We can also see this visually.

“Since 1947, earnings per share have grown at 7.7% annually, while the economy expanded by 6.40% annually. That close relationship in growth rates should be logical, particularly given the significant role that consumer spending has in the GDP equation.” – Market Forecasts Are Very Bullish

A better way to visualize this data is to look at the correlation between the annual change in earnings growth and inflation-adjusted GDP. There are periods when earnings deviate from underlying economic activity. However, those periods are due to pre- or post-recession earnings fluctuations. Currently, economic and earnings growth are very close to the long-term correlation.

However, as we discussed previously, there is also a high correlation between the market and the corporate profits to GDP ratio. As is the case currently, markets can detach from underlying economic realities due to momentum and psychology for brief periods. However, those deviations are unsustainable in the long term, and corporate profitability, as discussed, is derived from underlying economic activity.

The ISM Composite Index can also give us clues as to where earnings will likely be in 2025.

ISM Manufacturing Index

The ISM Manufacturing Index is a widely followed leading indicator of economic activity in the manufacturing sector. It surveys purchasing managers on critical metrics like new orders, production levels, and employment.

• A reading above 50 signals expansion, which tends to support earnings growth.
• A reading below 50 suggests contraction, often foreshadowing economic weakness and declining corporate profits.

As of late 2024, the ISM Manufacturing Index has been consistently below 50, marking a manufacturing recession. This data aligns with declining new orders and softer demand, raising concerns about corporate earnings resilience in 2025. However, while manufacturing only accounts for about 20% of U.S. GDP, it has a outsized influence that extends across supply chains, amplifying the impact on broader economic activity.

As shown, corporate earnings growth, which correlates with economic indicators like the ISM Manufacturing index, suggests some caution in the more optimistic Wall Street estimates. However, even if we include the services side of the index, which comprises the bulk of economic growth, and weight it accordingly, we see that the stock market has far outpaced underlying economic activity. Historically, such outsized returns were unsustainable as earnings growth could not meet expectations.

However, one of the better economic indicators to pay attention to is the Chicago Fed National Activity Index, which is a very broad measure of the economy but does not receive much attention.

Chicago Fed National Activity Index (CFNAI)

The CFNAI aggregates 85 monthly economic indicators from four categories:

1. Production and income.
2. Employment, unemployment, and hours worked.
3. Personal consumption and housing.
4. Sales, orders, and inventories.

A CFNAI reading above zero indicates above-trend economic growth, while below zero suggests below-trend growth. In October 2024, the CFNAI registered at -0.15, reflecting subdued economic activity. Prolonged readings in negative territory often signal a rising risk of recession. Notably, the employment measure suggests that the annual rate of change in employment will continue to decline, industrial production will slow, and personal consumption will moderate lower.

The CFNAI’s broad scope provides a nuanced view of how various economic forces combine to affect corporate earnings. With production and employment metrics deteriorating, the outlook for robust earnings in 2025 appears increasingly strained. As shown, a high but volatile historical correlation exists between the CFNAI and corporate earnings.

While these are the major indicators to pay attention to heading into 2025, there are others.

• Consumer Spending: This accounts for nearly 70% of U.S. GDP. Recent data shows retail sales growth has slowed, indicating cautious consumer behavior amid inflationary pressures and higher interest rates. Lower spending reduces revenue prospects for consumer-focused companies.
• Labor Market Trends: While the unemployment rate remains low, job openings and wage growth are moderating. A weakening labor market could hinder disposable income growth, further challenging consumer-driven earnings.
• Corporate Margins: Rising costs for raw materials, labor, and borrowing are compressing profit margins. If these trends persist, corporate earnings in 2025 could be weaker than anticipated.

Wall Street Earnings Estimates for 2025

Currently, Wall Street analysts project record corporate earnings for 2025. The bottom-up earnings-per-share (EPS) estimate for the S&P 500 stands at $268.94, reflecting an annual growth of over 10%. If realized, this would mark the highest EPS in history.

However, historical patterns suggest caution: analysts tend to overestimate earnings by roughly 30% (the median) one year in advance. With economic data signaling a slowdown, these estimates may be overly optimistic. Current trends in leading indicators like ISM Manufacturing and CFNAI support a more conservative outlook.

One key risk lies in valuation metrics. The S&P 500 trades at approximately 22.43 times forward earnings, well above the historical average of 15.8 times. If earnings fall short of estimates, stocks could face downward pressure as investors reassess valuations.

Based on current economic data, it seems likely that Wall Street’s earnings estimates for 2025 are higher than expected. Subdued manufacturing activity, slowing GDP growth, and cautious consumer behavior all point to an economic environment less supportive of aggressive earnings growth. As such, investors must carefully navigate the disconnect between high Wall Street expectations and softening economic conditions. Here are some strategies to consider:

• Diversification: Spread investments across sectors to mitigate risks tied to specific industries, particularly those heavily reliant on consumer spending or manufacturing.
• Focus on Quality: Prioritize companies with strong balance sheets, consistent cash flows, and defensible market positions. Quality companies tend to weather economic slowdowns better than their peers.
• Monitor Leading Indicators: To anticipate earnings revisions, pay close attention to ISM Manufacturing, CFNAI, and consumer spending trends.
• Prepare for Volatility: Elevated valuations leave little margin for error. If earnings fall short of expectations, expect heightened market volatility.

If these headwinds persist, corporate earnings may grow much slower or even contract slightly compared to Wall Street’s current projections. For investors, this scenario could mean lower returns from equities, particularly in high-growth sectors more sensitive to earnings disappointments.

We will continue to monitor these data points, as well as credit spreads, for increases in market risks. However, bullish optimism and extreme consumer confidence in high stock prices dominate market dynamics. While that can remain the case for much longer than logic suggests, that complacency will eventually give way to economic fundamentals.

While we cannot consistently effectively “time the market” over long periods of time, we can manage portfolio risk by paying attention to what drives markets. Sentiment, credit spreads, earnings, and real-time economic data will provide the clues needed to navigate the markets effectively.

*  *  *

We will continue to report on these variables and provide actionable advice tailored to current market conditions at RealInvestmentAdvice.com. Explore our resources to help you build a resilient portfolio and stay informed about the trends shaping the investment landscape.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

The Secretary of the Department of Homeland Security (DHS), Alejandro Mayorkas, provided an update Sunday on a rash of apparent drone sightings in the New Jersey region, saying the federal government will take action to address concerns but signaled that officials don’t have the authority to shoot them down.

Over the past several weeks, residents and local officials have reported drones flying over New Jersey, drawing intense speculation and scrutiny in the past week. Some federal lawmakers have called on the drones to be shot down or captured, while federal officials have not disclosed the source of the unmanned aerial vehicles.

“There’s no question that people are seeing drones,” Mayorkas told ABC News’ “This Week” anchor George Stephanopoulos on Sunday morning. “I want to assure the American public that we in the federal government have deployed additional resources, personnel, technology to assist the New Jersey State Police in addressing the drone sightings.”

Mayorkas added that the sightings are “in fact” of drones, but some are “manned aircraft that are commonly mistaken for drones,” echoing previous statements made by the FBI, DHS, and the White House. He did not provide further details.

“But there’s no question that drones are being sighted,” the secretary said, adding that there are “thousands” of drones that are flown every day in the United States, including commercial and recreational vehicles. He also pointed out that in September 2023, the Federal Aviation Administration changed federal rules that allow drones to fly in the evening.

“I want to assure the American public that we are on it. We are working in close coordination with state and local authorities,” Mayorkas said. “And it is critical, as we all have said for a number of years that we need from Congress additional authorities to address the drone situation. Our authorities currently are limited, and they are set to expire. We need them extended and expanded.”

Elaborating, he called on Congress to allow state and local officials to have broader latitude in dealing with drones “under federal supervision.”

When asked by Stephanopoulos about whether the drones should be shot down, as suggested by President-elect Donald Trump in a social media post over the weekend, Mayorkas signaled that the U.S. government has limited capacity in that regard.

Several local New Jersey elected officials, including Rep. Chris Smith (R-N.J.), said in a Saturday news conference that that government should take down the drones and have them inspected by federal officials. “Why can’t we bag at least one drone and get to the bottom of this?” Smith asked.

Mayorkas said Sunday that the U.S. government is “limited in our authorities” in taking down a drone, noting that there are more than 8,000 drones being flown each day across the country.

“We have certain agencies within the Department of Homeland Security that can do that, and outside our department,” he added, “but we need those authorities expanded as well.”

The Homeland Security secretary then stressed that U.S. officials have not seen evidence that the drones are being operated by a foreign adversary, echoing statements made by the White House and FBI. He also suggested that the drones have not been flown over any sensitive or restricted areas.

“When a drone is flown over restricted air space, we act very, very swiftly,” said Mayorkas, who is due to leave office on Jan. 20, 2025. “And, in fact, when an individual in California flew a drone over restricted air space, that individual was identified, apprehended, and is being charged by federal authorities. And so we act as swiftly as possible when an individual does fly a drone over restricted air space and violates the rules.”

He was making reference to an incident earlier this month in which a Chinese national living in the United States was flying a drone near Vandenburg Air Force Base in Southern California.

The suspect, Yinpiao Zhou, was arrested at the San Francisco International Airport right before he was set to board a flight back to China on Dec. 9, officials have said.

By Charles Kennedy of OilPrice.com

Trafigura saw its net profit for the financial year 2023/2024 ended on September 30 plunge by 62% as the commodity trading giant recorded a loss of $1.1 billion related to serious misconduct by individuals in its Mongolian oil business.

Trafigura booked a net profit of $2.8 billion for FY2024, down from a $7.3 billion profit in FY2023 and $6.8 billion for FY 2022, the oil and metals trading house said on Friday.

The underlying performance was strong, with strong contributions from all three core businesses – Oil and Petroleum Products; Metals, Minerals, and Bulk Commodities; and Gas, Power, and Renewables, said outgoing chief executive Jeremy Weir.

He is stepping down from the CEO role in January 2025 after ten years. Weir will be chairman of Trafigura’s board as of next year and will be succeeded by Richard Holtum as CEO, effective 1 January 2025.

Commenting on the FY2024 performance, Weir said that the strong business performance was “marred by the extremely disappointing discovery of serious misconduct by individuals in our Mongolian oil business, involving deliberate manipulation of data and documents and concealment of overdue receivables.”

Trafigura publicly disclosed in October 2024 that it had recorded a total loss of $1.1 billion on the discovered fraud in the Mongolian business. Of this loss, $358 million is reflected in the FY2024 results.

“An external investigation remains ongoing. We have reviewed other higher-risk offices and lines of business, and we are confident that these issues are isolated to a self-contained operation in Mongolia,” Weir said.

In accordance with International Accounting Standards (IAS 8), Trafigura has also restated prior year comparative figures to account for the exposure provisions for the Mongolian business.

In oil and petroleum products, “prices periodically disconnected from physical market fundamentals because of factors including the conflict in the Middle East, disruptions to shipping in the Red Sea and the ongoing war in Ukraine,” Trafigura said.

Separately, Trafigura and three other defendants earlier this month went on trial in Switzerland’s top criminal court over allegations of bribery. Trafigura has been charged for failing to take all reasonable measures to prevent payment of more than $5 million in bribes to an Angolan oil official in exchange for oil and shipping contracts more than a decade ago.