Authored by Allen Stein via The Epoch Times,

Jeff Worsham is a realist regarding the weather because he believes what he sees.

That the regional drought is a bad one, getting worse, is beyond dispute. The Mississippi River is at the lowest it’s been in decades, he said.

Worse, the barges are backing up because of it, running aground, and wreaking havoc on the regional supply chain.

“There’s no relief in sight as far as rainfall,” said Worsham, port manager of Poinsett Rice & Grain’s loading facility in Osceola, Arkansas.

When will it rain next?

Worsham said, “Who knows?”

Jeff Worsham, port manager of Poinsett Rice & Grain in Osceola, Ark., said the Mississippi River is at the lowest it’s been in decades due to an ongoing drought wreaking havoc with commercial barge lines. (Allan Stein/The Epoch Times)

Loaded at about 65 percent capacity with soybeans to reduce weight, the barges at the Osceola facility have been “dead in the water” for days in a jagged queue, blocked by a single barge that became stuck in the shallow mouth of the port.

Unprecedented Times

“I’ve never seen it this bad,” said Worsham, who’s been with the company for over 20 years. “We had water [levels] close to this in 2012. But it was August, and it wasn’t the harvesting season. It wasn’t a big deal for us.”

At the height of the corn and soybean harvest, and with tons of products waiting to be shipped, Worsham remains optimistic.

“A lot of the soybeans have been stored on the barges. We’ll be down a little bit on volume and stretched out. We’ll be able to get the bushels [out]. It’s just going to take longer,” he told The Epoch Times.

Barge loader Raul Rivas walks to the loading station at Poinsett Rice Grain on Oct. 20, 2022. (Allan Stein/The Epoch Times)

Worsham said a tow boat would eventually drag the stuck barge to deeper water and free up the other barges. He said until then, nothing can get in or out of the port—and then the phone rang.

It was Worsham’s boss asking for an update.

“It’s more than hard,” Worsham told his supervisor. “They would get them [out] if they could … I don’t know what else to do.”

The situation is no less challenging with other competing barge lines, Worsham said.

In recent weeks, hundreds of barges have become stalled in the receding Mississippi, caught in the lower depths. In early October, some 2,000 barges reportedly clogged the channels in long pileups along the river south of Memphis.

The barges need around a nine-foot depth to navigate. The problem is that the water levels have fallen so low in many places even the tugboats are getting stuck.

Barges sit in the port facility at Poinsett Rice & Grain in Osceola, Ark., on Oct. 20, 2022. Behind the barges, the river tributary’s water line has been receding for months in the continuing drought. (Allan Stein/The Epoch Times)

Near the Gulf of Mexico, the ocean has begun seeping into the weakening river, threatening the water supply. The U.S. Army Corps of Engineers is working to build a temporary levee to fend off the ocean’s slow advance north.

Situation ‘Grave’

As the nation’s second-largest river, the Mississippi stretches 2,340 miles from its source at Lake Itasca in northwestern Minnesota to the Gulf. The river provides easy access for midwestern farmers looking to ship their products cheaply and efficiently.

Commercial barges each year account for about 418 million tons of goods moved between U.S. ports along the Mississippi River system. Nationally, it’s around 700 million tons.

But as water levels continue to fall, it allows less room for the barges to navigate and more opportunities to become stuck, said Ben Lerner, vice president of public affairs for the American Waterways Operators, a national trade association.

Lerner said the Mississippi River at a historically low level presents a significant challenge for the nation’s supply chain.

“In some spots in the river, it is at its lowest level since 1988, so it’s a real challenge for the supply chain and our industry,” Lerner told The Epoch Times.

Barges laden with agricultural products now have longer waiting times to deliver their cargos while in transit, causing back-ups along the river.

Lerner said a standard barge has 16 rail cars or 70 semi trucks carrying capacity, but it’s cheaper and more efficient.

“The bottom line is the American barge industry is a major component of the global and American supply chain. If we can’t move cargo on the Mississippi efficiently, that ultimately has far-reaching economic implications,” he said.

“I don’t want to understate the gravity of the situation we’re dealing with—the tremendous strain on the supply chain.”

Barge loader Raul Rivas (R), deckhand Clifton Brown (L), and other workers at Poinsett Rice & Grain in Osceola, Ark., walk to the loading docks on Oct. 20, 2022. (Allan Stein/The Epoch Times)

At its widest point, the Mississippi River is over seven miles wide, allowing for as many as 42 lashed barges to operate, pushed by a single tow boat.

“We’ve got a river now that’s shallower and narrower than it’s ever been,” Lerner told The Epoch Times.

Many commercial barge lines have reduced loads by as much as 50 percent to compensate for the shallower water. Other barge lines have switched to shipping via the more costly and less efficient rail and trucking systems.

“The more shippers switch to rail or truck to move their cargo, the more congested our railways and highways ultimately become,” Lerner said.

It also translates into higher costs for the nation’s agricultural producers, 92 percent of whose output travels through the Mississippi River Basin.

About 60 percent of grain and 54 percent of soybeans for U.S. export rely on barges for delivery to foreign and domestic markets, according to FreightWaves.

The market research site ReportLinker.com projected that the U.S. barge transportation market should grow from $25.17 billion in 2021 to around $39.9 billion by 2028 due to increased demand, infrastructure, and investment.

Poinsett Rice & Grain deck hand Clifton Brown points to where the water level used to be at the loading port near the Mississippi River on Oct. 20, 2022. (Allan Stein/The Epoch Times)

“The system needs water,” said Lerner, confident that the commercial barge industry is resilient and accustomed to operating in a crisis.

‘Game Time’ For Farmers

“It’s a significant challenge for U.S. agriculture and farmers to be successful and profitable,” noted Mike Steenhoek, executive director of the Soy Transportation Coalition.

The organization comprises 13 state soybean boards, including the American Soybean Association and the United Soybean Board, encompassing 85 percent of soybean production.

Steenhoek said while farmers are geographically distant from coastal ports, they enjoy easy access to inland waterways like the Mississippi, Ohio, and Illinois rivers.

“It’s game time for agriculture,” Steenhoek said. “When the system operates as normal, there’s no more effective way of moving commodities long distances in an economical manner” than commercial barges.

“When the system goes awry, it poses a significant hardship.”

The problem going into 2022 has been the lack of rain and snowmelt to replenish inland rivers to allow the ground to become saturated ahead of the spring planting season.

A large pile of beans lies under a tarp at Consolidated Grain & Barge in West Memphis, Ark., as seen from the highway on Oct. 20, 2022. (Allan Stein/The Epoch Times)

While crops this year have benefited from the available moisture, very little has made its way into the water system, contributing to lower river levels.

“When you have a [barge] grounding, it’s a major effort to alleviate,” Steenhoek said. “It shuts down the river. So you have to resort to putting less freight per barge.”

Steenhoek said in the case of soybeans, for every 12 inches of lost channel depth, a standard barge must shed 5,000 bushels—about 136 tons—to stay afloat. He said it means that fewer barges can operate in tandem, resulting in the industry-imposed maximum of 25 lashed barges per shipment.

“You don’t have your optimal route available to you. It still will find a way—maybe not as much as normal—not as efficiently as normal,” Steenhoek said. “Whenever you have a disruption like this, those costs get passed on. It adds a lot of costs [and] the farmer will bear a lot of that.

“Some of it’s going to be borne by the shipper. It adds insult to injury when you’ve got challenges with our inland waterway system.”

Other barge lines, such as Consolidated Grain and Barge Co. in West Memphis, have begun storing beans in large outdoor piles under tarps in the wake of the barge crisis.

Steenhoek compared switching transportation modes from barge to rail and truck to a garden hose attached to a fire hydrant, where “you’ve got lots of [product] volume” and less efficient ways to move it.

A towboat sits in its dock along the Mississippi River in Memphis, Tenn., on Oct. 20, 2022. (Allan Stein/The Epoch Times)

“When you’re in that scenario, it’s not efficient, and it’s not as cost-effective. There are consequences,” he said. “What’s particularly inopportune right now and consequential is how comprehensive it is—not just one part of our nation. It’s the whole [transportation] system” under stress.

Worse Before It Gets Better

Poinsett Rice & Grain operates with a fleet of 100 barges, each of which carries around 85,000 bushels of rice, soybeans, or corn to ports along the river. Those volumes are about 35,000 bushels less in the drought to reduce weight and increase floating capacity.

“Hopefully, we will be able to continue operations. It’s gotten a lot worse [but] we’re still loading,” Worsham said.

The company, which ships around five or six million bushels per year, had expected to ship eight million bushels this year, given the robust harvest.

Worsham said that number is down to around three million bushels.

“We’ll probably match last year’s volume” of around four million bushels.”

Poinsett Rice & Grain barge loader Raul Rivas points to the long line of barges awaiting delivery of soybeans on Oct. 20, 2022. (Allan Stein/The Epoch Times)

Barge loader Raul Rivas said the barge logjam at the Poinsett facility is a logistics headache.

“We can’t load that many barges right now. The traffic right here can’t get in and out. Right now, this will be our last barge for a while,” Rivas said.

Typically, Rivas’ crew will load three barges daily with soybeans, rice, or corn from loading towers.

“There isn’t much we can do. Everything we’ve got is overstocked or on the ground. We got one [barge] stuck last night. We had to get to the tugboat at least until it broke free. Then we finished loading [the barge],” Rivas said.

“Supposedly, when it gets down to a negative 12 [feet level], that’s when they’re supposed to shut the barges and boats down.”

A grain loader operator awaits instructions at Poinsett Rice & Grain in Osceola, Ark., on Oct. 20, 2022. (Allan Stein/The Epoch Times)

Poinsett deck hand Clifton Brown said that dock workers have been “running into a lot of problems” with the low water levels, now going on two months.

“That’s about the worst of it—[barges] getting stuck. It’s pretty rough on us just loading barges right now. See that barge over there, stuck on the bank, on the corner?”

Brown pointed toward the far end of the port at the former water line where that “used to be to those trees.”

In the current drought, Brown also remains positive, saying it’s only a matter of time before the Mississippi is back up and running as the water level fluctuates.

“We’ll be down for another week or so until the river comes back up. Everything is good.”

Today’s market moves were very much specific as geopolitical and macro-economic chaos reigned…

It appeared like BoJ stepped in rather inelegantly last night as the Asian FX markets started trading (in an attempt to use the thin markets to extend Friday’s intervention liftathon). It worked for around 15 minutes… and then yen started to fall and by the end of the US session had erased all of that yen-tervention and erased half of Friday’s gains…

Source: Bloomberg

Chinese markets shit the bed, technically speaking, overnight as Xi’s new era appears anything but more open.

Chinese tech stocks were a total bloodbath today with Nasdaq’s Golden Dragon index down a stunning 16% (biggest daily drop ever) to its lowest since Dec 2012…

Source: Bloomberg

The offshore yuan plunged to new record lows (breaking down below the RMB Fix lower bound)…

Source: Bloomberg

And all that after they announced better than expected GDP growth and Industrial production.

Next up was the UK as Rishi Sunak became the new UK PM (by default), which appeared to reassure British capital markets as bond yields tumbled (2Y gilt yields plunged 37bps – the biggest daily drop since 1992!), but we do note that Cable was modestly lower today…

Source: Bloomberg

And then came the US… where PMIs plunged into contraction and Janet Yellen told MSNBC she “can’t rule out the risk” of a recession (is she a biologist?)… which of course is great news for stocks.

Small Caps underperformed, but the rest of the majors accelerated higher on the day with The Dow leading. We did see ‘Dump Capital’ appear around 1530ET though, which wiped some lipstick off this pig. Nasdaq had ytet another day of being down 1% and then being up 1%…

Today’s melt-up should not have been a surprise to readers since Goldman warned “the pain trade is to the upside”…

ICYMI: “The Pain Trade Is To The Upside”: 10 Reasons From Goldman’s Trading Desk For A November Meltuphttps://t.co/DSSrkjUB3A

— zerohedge (@zerohedge) October 24, 2022

TSLA bucked the trend of the day (tumbling in the pre and early market, down to its lowest level since mid-2021, below $200 briefly), but was bid all afternoon and ended just over 1% lower…

But, we note that the market’s expectations for Fed rates shifted notably hawkishly, erasing some of Friday’s dovish dive (odds for a 75bps hike in Dec rose to 40% from 30%)…

Source: Bloomberg

Treasury yields were volatile intraday but ended higher with the long-end underperforming…

Source: Bloomberg

Most notably, long-term inflation breakevens (market expectations) soared in the last week…

Source: Bloomberg

The Dollar managed modest gains on the day, but remains well down from Friday’s pre-yentervention puke…

Source: Bloomberg

Bitcoin is higher from Friday’s close after a surge in buying yesterday early afternoon (which was sold into)…

Source: Bloomberg

Oil prices tumbled overnight (perhaps on the back of Xi’s ‘crowning’ signaling the likelihood of ZeroCOVID policies continuing) then rallied back to a modest loss with WTI just below $85…

Gold was very modestly lower on the day with futures hovering around $1655, holding most of Friday’s gains…

Finally, as Bloomberg details, the value of the yen against its peers – adjusted for inflation – has slumped to a 52-year low, as widening interest-rate differentials between Japan and other major economies continued to pile pressure on the currency.

A gauge of the real effective exchange rate slumped 3% in September, based on the most recent data from the Bank of Japan and Bank for International Settlements.

The decline has been driven in part by outflows from Japan owing to the lack of attractive investment opportunities locally, according to Takuya Kanda, general manager at Gaitame.com Research Institute in Tokyo.

Authored by Daniel Lacalle,

The narrative to attack any tax cut and defend any increase in government size is reaching feverish levels. However, we must continue to remind citizens that constantly bloating government spending and increasing the size of monetary interventions are some of the causes of the widespread impoverishment of the middle class. Constantly increasing taxes and diminishing the purchasing power of the currency is wiping out the middle class in most developed nations.

Currency printing is not neutral, and it never is. It disproportionately benefits government and massively hurts real salaries and deposit savings. It is a massive transfer of wealth from savers to the indebted.

Readers may say that what needs to happen is to tax the rich and corporations and all will be solved. Why do you think that many of the ultra-wealthy are extremely happy with financial repression, issuing more currency, cutting rates and higher taxes? Because the net effect is positive for them and negative for you. Financial repression is a tool that makes it more difficult for the middle class to be richer and therefore wipes out private savings and any possible competition at the top.

The latest dogma is that tax cuts are negative because they boost inflation. However, it is yet another fallacy predicated on the idea that money is better off in the pocket of government.

Inflation is the destruction of the purchasing power of a currency, not “rising prices.” Prices do not rise in unison due to an exogenous factor like a war unless the quantity of currency issued is higher than the growth in the productive sector.

Government spending weighs close to 50% of GDP in most developed economies. One unit of currency in the pocket of government is certainly spent and even multiplied, as most of the public sector will spend that unit of currency and more via deficit.

Cutting taxes does not add units of currency to the economy. It is the same quantity of currency only a bit more in the pocket of those who earned it.

When governments reduce taxes, the citizens and businesses that have earned money have more in their pockets. Some might spend it, others might save it, which means investment, and others might take more credit. Tax cuts are only inflationary if they boost and extraordinary and unjustified credit impulse. This is rarely if ever the case.

A unit of currency in the hands of government is certainly going to be spent, adding even more money into the system via debt and deficits. A unit of currency in the hands of those who earned it is not just likely to lead to a better capital allocation but also it is fair.

Tax cuts in an inflationary environment are not just logical and just, but necessary because most governments do not deflate their tax receipts and, by keeping monetary tax rates untouched, receipts rise, and the amount of taxes paid by citizens increases.

Inflation is a tax and a policy. Governments benefit from inflation collecting higher receipts due to the inflation impact on tax revenues, while citizens suffer elevated prices, higher direct and indirect taxation, and lower real wages.

If increasing the size of government is always dangerous it is even more perilous in times of high inflation because the risk of malinvestment becomes a certainty.

There has been a massive campaign against any tax cuts all over the world that adds to a view that all government spending is justified. The concepts of efficiency, saving and prioritization have been abandoned and the administration is perceived as an entity that cannot perform any of those measures and needs constantly rising revenues to undertake its duties, yet all is false.

Taxes are not set because the government needs more revenues, but to pay for services and adjusted to the reality of the economy. When the public sector becomes an all-consuming and never-saving entity it does not contribute to growth and productivity, it prevents them.

Governments use any excuse to increase their size in the economy and using constant emergencies or alleged crises is the easiest way to advance a confiscatory and extractive view of the economy where citizens and businesses are viewed as cash machines of the political sector, where the private sector is at the service of the government and not the other way around.

Tax cuts do not increase inflation, it is giving a bit more of the existing money to the ones who earned it. What increases inflation, always, is bloating government spending, perpetuating deficits, and monetizing it by printing constantly depreciated currencies.

Government spending is not the engine of the economy. Tax hikes are not the only solution to bad administrations. Printing money is not a tool for growth, but one for cronyism. Upside down economics does not work. We need to return to monetary and fiscal sanity. A tax wedge of almost 40% of income is not normal. It is confiscatory.

If we want to reduce inflation, we need to limit the uncontrolled policies those that create it: central banks and governments.

Via The College Fix,

The University of California Berkeley will be offering a course this coming spring which focuses on popular female rapper Nicki Minaj.

Officially titled “The Galaxy of Hip-Hop Feminisms” in the UC Berkeley 2022-23 Academic Guide, instructor Peace And Love B El Henson’s (pictured below) class will delve into the “many iterations” of the topic “on stage and in everyday spaces.”

According to its description, the course will “track the constellation of dynamic voices, theories and productions of underground and mainstream Black feminine rappers who have influenced the origins of Hip-Hop and its ongoing evolution.”

It will also look at the “genealogy and nuance of key Black feminine rappers and theoreticians in the field, practice, and culture of Hip-Hop Feminisms across the Black Diaspora.”

Readings for the course come from the areas of “Hip-Hop Studies, Feminist Studies, Gender & Sexuality Studies, Porn Studies, Media & Film Studies, Performance Studies.”

Students need permission from both Henson and “the department” (presumably African American and African Diaspora Studies) to get into the course … which may account for why there currently is no one enrolled (below).

WKRC reports that Minaj noted on Twitter she would “love to stop by” upon hearing news of the class.

I’d love to stop by

— Nicki Minaj (@NICKIMINAJ) October 6, 2022

Henson’s faculty page describes her as a “black feminist urban ethnographer and critical porn studies analyst” whose research deals with “black queer femmes, state violence, pornography, and ethnography.”

Regarding that first research topic, Henson says it utilizes “black femmes’ theatrical performances from online interracial pornography to read real-life state policing encounters and vice versa [and] aims to denude the unconscious racialized pornographic BDSM […] structured into interracial relations across sites of chattel slavery, professional pornography, public schools, universities, neighborhoods, and beyond.”

Two weeks before the midterm elections, the Republican National Committee hit Alphabet Inc.’s Google with a lawsuit, claiming they can’t communicate with party members to fundraise because the big tech firm routes their emails into spam folders. 

The GOP lawsuit alleges Google “has relegated millions of RNC emails en masse to potential donors’ and supporters’ spam folders during pivotal points in election fundraising and community building.”

“The timing of Google’s most egregious filtering is particularly damning… 

“For most of each month, nearly all of the RNC’s emails make it into users’ inboxes. At approximately the same time at the end of each month, Google sends to spam nearly all of the RNC’s emails. Critically, and suspiciously, this end of the month period is historically when the RNC’s fundraising is most successful,” GOP said. 

GOP argues in the lawsuit this has been an ongoing issue for ten months. The committee is asking for unspecified monetary damages and a court order to “remedy Google’s violations of state and federal law.”

None of these allegations are surprising in the age of censorship pushed by the government and left-leaning big tech firms. Google, of course, denies culpability:

“As we have repeatedly said, we simply don’t filter emails based on political affiliation. Gmail’s spam filters reflect users’ actions. We provide training and guidelines to campaigns, we recently launched an FEC-approved pilot for political senders, and we continue to work to maximize email deliverability while minimizing unwanted spam,” spokesperson Jose Castenada said in an email to Bloomberg. 

For years, GOP officials have expressed discontent with big tech, including Google, Facebook, and Twitter, for their unrelenting censorship. 

“Google, far more than any other single entity, determines what humanity thinks is true about current events and knowledge in general. The platform continues to filter and refine its left-wing ideology through artificial intelligence, brainwashing most of the globe with a subtlety never seen in history,” Epoch’s Roger Simon wrote. 

Big tech’s censorship of conservatives could be on full display again, and just more evidence that elites are becoming desperate ahead of next month’s elections:

“Censorship is the tribute that lies pay to truth. If truth were not so powerful, no censorship would be necessary,” Epoch’s Jeffrey Tucker recently opined. 

Even with the GOP whining about big tech censorship, pre-midterm polls still show momentum is clearly in Republicans’ favor. 

After being caught on up in earlier controversy and pushback over his Russia-Ukraine peace proposal, resulting in a back-and-forth with the Pentagon over the status of public funding for SpaceX’s satellite internet service Starlink, Elon Musk on Sunday made a new pledge seeking to reassure Ukraine.

“Before [the Department of Defense] even came back with an answer, I told @FedorovMykhailo that SpaceX would not turn off Starlink even if DoD refused to provide funding,” Musk stated in a Sunday evening tweet, referring to Ukraine’s vice prime minister and minister of digital transformation Mykhailo Fedorov.

The new pledge to not “turn off” the Starlink services used by Ukrainian troops means that even if the US Department of Defense ultimately refuses to share the bill, Musk will personally ensure it stays on.

The Register reported of the controversy that “The Starlink-Ukraine honeymoon period appears to be at an end: SpaceX reportedly wants the US to begin picking up the tab for more of its war-zone services.” Musk has said SpaceX already forked over $80 million in costs to keep the internet systems operating, which the Ukrainian government has long acknowledged as crucial to its military operations and communications.

This public promise comes also as some hawkish pundits have begun to float the idea of nationalizing the Starlink systems. This is precisely what Former George W. Bush speechwriter and columnist for The Atlantic David Frum argued last week: 

Frum argued on Monday that it is becoming too “unwise” to suspect that Musk will continue to provide Starlink satellite equipment to help Ukrainian citizens access the internet during Russia’s invasion of the country. To remedy this, he suggested the U.S. government should seize and nationalize the company if Musk ever plans to pull his satellites. 

Frum had tweeted “It was always unreasonable, and is becoming unwise, to expect @elonmusk to provide Internet to Ukraine for free forever. Western allies should pay. And US should have a plan ready to nationalize Starlink fast if Musk cuts off Ukraine’s connection to advance his political agenda.”

Socialism comes at you fast.

“Nationalize Starlink.”

From a former conservative. https://t.co/6lbkXhs3LJ

— Tom Giovanetti (@tgiovanetti) October 18, 2022

In September, SpaceX’s director of government sales spelled out in a letter to the Pentagon that “We are not in a position to further donate terminals to Ukraine, or fund the existing terminals for an indefinite period of time.”

It’s expected that by year’s end SpaceX will have eaten through $100 million for the donated 25,000 Starlink terminals so that Ukraine can continue using the services. Ukraine’s government has lately “played nice”, expressing its gratitude – for example in this Sunday exchange with Musk:

“Before all the talks about funding, you confirmed to me that in any case, you will ensure the work of Starlink in Ukraine. This was critically important for Ukraine,” Mykhailo wrote.

Musk replied: “You’re most welcome.”

Mykhailo had previously thanked SpaceX while declaring that “Ukraine will stay connected no matter what.”

Interestingly as part of the same thread, on Monday Musk indicated he would be donating more Starlink terminals for use in Iran amid ongoing anti-government protests and efforts by authorities to restrict internet and social media access…

Yes

— Elon Musk (@elonmusk) October 24, 2022

Musk has of late come under greater media and even possible government scrutiny for unfounded allegations that he’s been in direct contact with the Kremlin, a charge he’s rejected as patently false. This merely because he has sought ways that the warring sides in Ukraine might compromise toward ceasefire and negotiated settlement, as opposed to escalation to the point of nuclear armed powers – namely the US and Russia – clashing directly.

By Peter Tchir of Academy Securities

VUCA – Volatility, Uncertainty, Complexity, and Ambiguity

Given what we are experiencing geopolitically and in the markets, we are living through VUCA, or VUCA², or even VUCA to the n^th degree!

There is no shortage of any of these factors in our daily lives.

Due to our team being scattered across the country today, this T-Report will be mercifully short and we will follow up with a detailed report at the start of the week (especially on the markets and inflation front). But in the meantime, let’s point out a couple of elements that are key for the coming week:

• China. To some degree, we expected (and received) some clarity at the end of the Party Congress, but watching former President Hu Jintao being awkwardly removed from his seat is disturbing at best. I fully expect Xi to continue to Recentralize China (August 2021) and for China to continue to Separate from the West (February 2022). These reports have aged well and China currently remains un-investible from my perspective.

• Markets started to Climb the Wall of Worry. Equities surged, especially into the close on Friday. The 2-year yield finished down on the week, though not before we had what was potentially a crescendo of selling. The 10-year closed the week near Thursday’s high yields, but was well off the highest yields it saw earlier that day. The Japanese Yen had a stunning 3.75% reversal from 152 to as strong as 146.2. FX is an increasingly important subject in its own right, which we will address in more detail in the coming days. It may be a stretch to say that FX is entering the realm of geopolitics, but it may not be. Much of the recent U.S. Treasury and investment grade bond market weakness may be traced to the rapidly rising costs of hedging FX exposure.

• The Fed. As the Fed prepared to enter into the quiet period, markets rallied as the last messages sent out directly (and via their favorite media outlets) hinted that the December and February hikes are far from being determined. The fact that the Fed meetings have taken on the aura of a papal conclave is disturbing. However, as we now get to digest data without the Fed’s constant hawkishness, markets may see how quickly many leading indicators are rolling over and finally agree with my view that the Fed needs to pause because they have already set in motion a chain reaction that is driving us towards a deeper and longer recession than we want.

• Will the Treasury announce purchases of off-the-run bonds? That would help address several issues including a lack of liquidity, the fact that the Fed’s balance sheet is now a cost center rather than a profit center, and the absorption of foreign selling of old bonds.

• Inflation and the economy. If you don’t believe that an economy like ours can experience stagflation for an extended period of time (QT vs Stagflation), then you expect that economic weakness will coincide with lower prices. The list of leading indicators that are rolling over is extensive and getting longer by the day. I expect to be able to prove that when inflation is calculated in a way that we experience it, we will see that the Fed has done enough and the prudent choice is to watch and wait (rather than continue on their stated path).

• Russia and OPEC+. We talked about the Nuclear Threat, which was a big topic of conversation at the summit (though still viewed as highly unlikely). Draining our strategic oil reserves is a problem and our relationship with OPEC+ (as well as providers of rare earths and critical minerals across the globe) needs to improve.

Bottom Line

Despite all the risks (or maybe because of them), I expect the “everything rally” to continue and even extend into this week. I’m bullish on equities and fixed income products. I’m nervous about commodities, but the strength of the rally could carry them higher as well.

This is definitely trying to thread the needle by capturing the transition of “the Fed is nearly done” to what I think will become a risk-off moment because “the Fed went too far”. So, I’m nervous and there is no shortage of global risk that could crush this nascent rally right from the get-go, but I’m still bullish at the moment.

Following Russia’s initial major weekend accusation that Ukraine is plotting a ‘dirty bomb’ false flag incident, the Kremlin has announced it has “readied all forces and capabilities to fulfill tasks in conditions of radioactive contamination.”

This is according to a briefing given Monday by the head of Russia’s nuclear, chemical, and biological forces. Western allies of Ukraine have responded by slamming the “false allegations” over the dirty bomb narrative, instead alleging Russia will itself stage a mass detonation and use it as a pretext for escalation of its invasion.

It remains that up till this point, with the conflict reaching the eight month mark, President Putin has yet to issue a formal war declaration. Kiev has claimed Russia is readying a narrative that would justify full invasion of its forces and complete national mobilization.

Ukraine on Monday is requesting that the UN nuclear watchdog, the IAEA, urgently dispatch a team to Kiev in order to conduct inspections to counter Russia’s claims of a Ukrainian “provocation” in the works.

Ukrainian Foreign Minister Dmytro Kuleba issued a public statement referencing a phone call with IAEA chief Rafael Grossi: “I officially invited IAEA to urgently send experts to peaceful facilities in Ukraine, which Russia deceitfully claims to be developing a dirty bomb. He agreed. Unlike Russia, Ukraine has always been and remains transparent. We have nothing to hide,” Kuleba said.

Russia very specifically alleged that its intelligence shows Britain is helping the Ukrainians with the ‘dirty bomb’ plot, but Western officials say they didn’t present evidence.

The head of Russia’s nuclear, chemical, and biological forces just gave a briefing about Moscow’s claims Ukraine is developing a “dirty bomb.” Russia has “readied all forces and capabilities to fulfill tasks in conditions of radioactive contamination.”https://t.co/c02P92ZLpM pic.twitter.com/f0qgdY6KWY

— max seddon (@maxseddon) October 24, 2022

On Monday Kremlin spokesman Dmitry Peskov responded to critics as follows: 

“The fact that they do not trust the information which was provided by the Russian side does not mean that the threat of the use of such a dirty bomb ceases to exist. The threat is present. This information was brought to the attention of the [Russian] defense minister’s interlocutors. It’s up to them whether they want to believe it or not,” Peskov told journalists in a briefing Monday.

Given some of the Russian allegations were specific in terms of citing locations, the IAEA team which is now expected to deploy to Ukraine is likely to inspect some of the said sites: 

The Russian state news agency RIA Novosti cited “reliable sources” when claiming that the “dirty bomb” had been commissioned by Ukraine to its Eastern Mining and Processing Plant in Zhovti Vody, Dnipropetrovsk Region, as well as the Institute for Nuclear Research in Kyiv.

The US, France, and the UK flatly rejected and condemned the Russian claims in a Sunday joint statement. They all rejected “Russia’s transparently false allegations” following a series of phone calls at the request of Russian Defense Minister Sergei Shoigu. He had additionally told France’s Macron that the Ukraine situation is leading toward “uncontrolled escalation”.

“Sleepy” Joe Biden is at it again.

During an interview with MSNBC‘s Jonathan Capehart, the President was asked if his wife, First Lady Jill Biden, supports him running for reelection in 2024 – to which Biden’s brain appeared to reboot with updates. As it searched for a gear, Capeheart asks: “Mr. President?”

To which Biden ultimately replied: “Dr Biden thinks that uh, my wife thinks that uh, that I uh, that, that we’re, that we’re doing something very important and that I shouldn’t walk away from it.”

The “president” fell asleep on camera in the middle of a televised interview pic.twitter.com/ghKioeYx9o

— Monica Crowley (@MonicaCrowley) October 22, 2022

It wasn’t the first time during the interview that the 79-year-old groped for words;

At one point, Biden grabbed Capehart and got right in his face while discussing how ancient he is. Remember, Democrats and their media lapdogs wanted to impeach Donald Trump for a lack of mental acuity.

This is so creepy. pic.twitter.com/qug3GepxcD

— Ian Miles Cheong (@stillgray) October 23, 2022

60 seconds to prove Joe Biden has dementia pic.twitter.com/RQF3IHTeGC

— Benny Johnson (@bennyjohnson) October 24, 2022

Meanwhile, in another pre-midterm interview…

Joe Biden comes out as pro child mutilation days before the 2022 midterms.

This is all you need to know.
pic.twitter.com/ndDdAo7Kzz

— Benny Johnson (@bennyjohnson) October 24, 2022

Americans: We can’t afford food

The White House: pic.twitter.com/oZH6sMEn3B

— End Wokeness (@EndWokeness) October 23, 2022

And here’s Biden declaring that Congress voted on his student loan debt bailout, saying “It’s passed. I got it passed by a vote or two.”

The bailout was in fact done via executive order (and is currently paused while it’s tied up in litigation).

Biden claims his executive order on student loans is a bill that passed Congress by one or two votes and that he recently signed into law
pic.twitter.com/LidAkKMJ3k

— Eddie Zipperer (@EddieZipperer) October 24, 2022

Really bizarre. Biden says ‘I just signed a law’ and ‘It’s passed. I got it passed by a vote or two.’ Referring, of course, to his executive order, never passed by Congress. BTW, Biden had notes in hand. Long version here; begins at 11:12. https://t.co/LwFUngqNnD https://t.co/H40jorGC0m

— Byron York (@ByronYork) October 24, 2022

Having willfully violated his oath of office by issuing an executive order he knows is flatly illegal—and having then tried to dodge review by the courts by amending it on the fly —Biden is now lying about it having gone through Congress. https://t.co/XNRSCyIdZd

— Charles C. W. Cooke (@charlescwcooke) October 24, 2022

Also interesting, Biden thinks thanks to some legislation of his, there can be ‘no more than eights bullets in a round, okay?’

BIDEN: “My legislation says there can be no more than eight bullets in a round, okay?” 🤔 pic.twitter.com/LxmTk9EjyC

— RNC Research (@RNCResearch) October 24, 2022

Time for another reboot?

Just imagine if Donald Trump (or to be honest any Republican politician) behaved like this around young children.pic.twitter.com/KM7O3UwTT9

— Ben Kew 🐶 (@ben_kew) October 23, 2022

Shares of Tesla are down about 7% in the pre-market session after the company cut the price of some of its cars in China, drumming up concerns about demand just days after Musk said the company would continue robust production regardless of whether or not the global economy slipped into recession. 

TSLA just broke below $200 for the first time since June 2021…

EV names like Lucid, Rivian, Fisker, and Workhorse will all be on watch heading into the cash session. 

Tesla slashed the price of its Model 3 and Model Y to 265,900 Chinese yuan ($36,615) from 279,900 yuan and to 288,900 yuan versus the previous price of 316,900 yuan, CNBC reported Monday morning. 

“China is experiencing a recession of sorts,” CEO Musk had said last week. The cuts offset price hikes that took place earlier in the year, which came as a result of higher input costs. 

Recall, CEO Elon Musk said on his company’s conference call last week that the company is pushing forward with production despite the current macroeconomic climate. 

Musk said: “To be frank, we’re very pedal to the metal come rain or shine. We are not reducing our production in any meaningful way, recession or not recession.”

He continued: “The public at large realizes that world’s moving towards electric vehicles, and it’s foolish to buy a new gasoline car at this point because the residual value of that gasoline car is going to be very low. So, we’re in a very good spot.”

“I wouldn’t say it’s recession-proof but it’s recession-resilient, because basically the people of Earth have made the decision in large part to move away from gasoline cars,” he added.

Tesla had sold 83,135 China-made vehicles in September, setting a record. The prior sales record was set in June when the company sold 78,906 China-made vehicles. The new record comes after Tesla shut down Shanghai for a portion of the summer in order to upgrade the facilities. 

We all know that there is no $TSLA demand issue in China or anywhere for that matter. My belief is that it’s a smoke screen for shares going to be dumped and a cover up for the pressure that was going to be on the stock today. Could be wrong but Elon is master illusionist.

— squawksquare (@squawksquare) October 24, 2022