A top sanitation company has been accused of employing at least 31 children to clean the killing floors of slaughterhouses during graveyard shifts – one as young as 13, according to the Department of Labor.

The company, Packers Sanitation Services, or PSSI (owned by Blackstone), is contracted to work at meatpacking facilities and slaughterhouses across the country. According to court documents filed Wednesday, the children were allegedly employed at three facilities in Nebraska and Minnesota, NBC News reports.

The company employs over 17,000 employees at more than 700 locations across the country, according to PSSI’s website.

The investigation found that minors cleaned the killing floors and various machines — including meat and bone cutting saws and a grinding machine — during the graveyard shifts, according to the complaint.

PSSI employed at least a dozen 17-year-olds across the three slaughterhouses, fourteen 16-year-olds, three 15-year-olds, one 14-year-old and one 13-year-old, the complaint said. -NBC News

According to the complaint, an Aug. 24 investigation was launched after law enforcement officials were tipped off that the company may be employing children. Search warrants were executed at two plants owned by food processor JBS USA in Grand Island, Nebraska and Worthington, Minnesota – and at a poultry processing plant in Minnesota.

If true, the practice would violate the Fair Labor Standards Act, which prohibits employers from “oppressive child labor,” as well as minors from working in any type of hazardous employment, reads the complaint, which asks the Federal District Court of Nebraska to issue a temporary restraining order as well as a nationwide preliminary injunction against the company to stop it from employing minors while the Labor Department investigates.

Initial evidence indicates the company may also employ more kids under similar conditions at 400 other sites across the country, in addition to the 31 minors employed at three sites that investigators already confirmed, according to the complaint.

The court partially granted the Department of Labor’s request in a Thursday filing. That order requires PSSI to “immediately cease and refrain from employing oppressive child labor” and comply with the Department of Labor’s investigation. -NBC News

According to PSSI, the company “has an absolute company-wide prohibition against the employment of anyone under the age of 18 and zero tolerance for any violation of that policy —period,” with a spokesperson adding that the company mandates the use of the federal E-Verify system when it comes to new hires, “as well as extensive training, document verification, biometrics, and multiple layers of audits.”

“While rogue individuals could of course seek to engage in fraud or identity theft, we are confident in our company’s strict compliance policies and will defend ourselves vigorously against these claims.”

Company executives were reportedly “surprised” by the filing, after PSSI says it “has been cooperating with their inquiry, producing extensive documents and responses.”

Interviews with the kids — which were conducted in Spanish, their first language, according to the complaint — revealed that several children began their shifts at the facilities at 11 p.m. and worked until 5, 6 or 7 a.m. Some worked up to six or seven days a week.

School records showed that one 14-year-old, who worked at the Grand Island facility from 11 p.m. to 5 a.m. five to six days a week, from December 2021 to this past April, fell asleep in class and missed school after suffering injuries from chemical burns. At least two other minors also suffered chemical burns, the complaint states. -NBC News

“While Wage and Hour is continuing to pour over records to identify such children, it is slow, painstaking work. Yet, the children working overnight on the kill floor of these slaughterhouses cannot wait,” states the complaint.

For much of the past year (and certainly at the time, more than a year ago, when the so-called experts, central bankers and macrotourists were still yapping about “transitory inflation” and other things they were wrong about and do not understand), we were warning that at some point the Fed will realize that it is simply impossible to contain supply-driven inflation through stubborn rate hikes which instead would lead to a dire alternative – millions in mass layoffs and newly unemployed workers – and will revise its 2% inflation target higher, a move which will send every risk asset, from high-beta trash and meme stonks, to blue-chip icons, to bitcoin and cryptos, limit up.

To remind readers of this coming phase shift, we most recently warned in June that “at some point Fed will concede it has no control over supply. That’s when we will start getting leaks of raising the inflation target“…

At some point Fed will concede it has no control over supply. That’s when we will start getting leaks of raising the inflation target

— zerohedge (@zerohedge) June 21, 2022

Well, it turns out that we were right, and not just about the coming mass layoffs…

Layoffs This Month (% of Workers):

1. Twitter: 50%

2. Cameo: 25%

3. Robinhood: 23%

4. Intel: 20%

5. Snapchat: 20%

6. Coinbase: 18%

7. Opendoor: 18%

8. Stripe: 14%

9. Lyft: 13%

10. Shopify: 10%

11. Meta: “Thousands”

12. Apple: Hiring Freeze

13. Amazon: Hiring Freeze

— The Kobeissi Letter (@KobeissiLetter) November 8, 2022

… but also about the inflation target leaks. But first, lets back up a bit.

A little over one year after nobody expected the Fed would be hiking rates like a drunken sailor until some time in late 2023 or 2024, it has now become fashionable to not only predict that the Fed will keep hiking rates at every FOMC meeting and at the fastest pace since the near-hyperinflation of the 1980s, but that the central bank will somehow manage to avoid a hard landing (i.e., the hiking cycle won’t end in a recession or depression), even though every single Fed tightening cycle since 1913 has ended in disaster.

An example of this was the statement by former Fed vice chair (and PIMCO’s “twice-revolving door”) Rich Clarida, who told CNBC that “failure is not an option for Jay Powell,” adding that “I think they’re going to 4% hell or high water. Until inflation comes down a lot, the Fed is really a single mandate central bank.”

“Failure is not an option for Jay Powell,” says Former Fed Vice Chair Richard Clarida. “I think they’re going to 4% hell or high water. Until #inflation comes down a lot, the Fed is really a single mandate central bank.” pic.twitter.com/4hfLCVWZDP

— Squawk Box (@SquawkCNBC) September 9, 2022

Of course, if one could hike rates in a vacuum that could work – after all, Clarida himself, who admits he got this year’s soaring inflation dead wrong when he was still a daytrading god and part oft he Fed in 2021, said that the Fed may as well have just one mandate, namely to tame inflation. But what so few seem to recall is that the Fed is “hiking to spark a recession“, or as CNBC’s Steve Liesman put it, there is no such thing as “immaculate rate hikes” meaning that rate hikes have dire tradeoffs in other sectors of the economy. In other words, if the Fed’s intention is to spark a recession, it will spark a recession… leading to millions of Americans losing their jobs, something which even Elizabeth Warren appears to have grasped.

SENATOR WARREN SAYS SHE IS VERY WORRIED THAT FED IS GOING TO TIP ECONOMY INTO RECESSION

Looks like someone didn’t read Chairman Doom’s speech https://t.co/wQALP1aA3Y

— zerohedge (@zerohedge) August 28, 2022

Yet due to the recency bias of Biden’s trillions in stimmies, and a world where workers – whether working form home or the office – have virtually all the leverage, few today can conceive of a world where inflation is zero or negative and is instead replaced with millions in unemployed workers, an outcome which one could (or rather should) say is even worse for the ruling democrats than roaring inflation. At least, with runaway prices, most people have a job and their wages are rising (at least nominally, if not in real terms).

However, the higher rates rise, the closer we get to that inevitable moment when the BLS – unable to kick the can any longer – admits what has been obvious to so many for months: the US is facing a labor crisis of epic proportions with millions and millions of mass layoffs. And for those to whom it is not yet obvious, we urge readers to re-read a WSJ op-ed published two months ago by none other than Jason Furman, who was Obama top Economic Adviser from 2013-2017 and currently economic policy professor at Harvard.

In “Inflation and the Scariest Economics Paper of 2022“, Furman summarized a paper written by Johns Hopkins macroeconomist Larry Ball with co-authors Daniel Leigh and Prachi Mishra of the International Monetary Fund released by the Brookings Papers on Economic Activity, whose conclusion is as follows: “To bring price increases down to 2%, we may need to tolerate unemployment of 6.5% for two years.“

In other words, just as we said, inflation – much of which is supply-driven, which the Fed can do nothing about – will force the Fed to crush the economy by keeping rates for much longer, the result of which will be many millions in unemployed workers, or as Furman puts it, the paper “shows why the Federal Reserve will likely need to maintain its war on inflation, even if unemployment continues to rise.”

What is more remarkable about Furman’s read of the economist paper is that in addition to its primary theme (the lack of labor slack, or labor tightness, is responsible for some 3.4% of underlying inflation in July 2022), the paper admits precisely what we have been saying all along – that the Fed can’t control supply-side variables:

The paper also argues, convincingly in my view, for a different measure of underlying inflation. Fluctuations in energy and food prices are generally due to factors outside the control of macroeconomic policy makers. Geopolitics and weather have elevated the inflation rate in recent years. Plunging gasoline prices are temporarily lowering the inflation rate now. That’s why economists since the 1970s have focused on “core” inflation, which excludes food and energy.

But food and energy aren’t the only things people buy that are subject to supply-side volatility. Prices of new and used cars, for example, have gyrated over the past two years for reasons that are mostly unrelated to the strength of the overall economy. Both regular and core inflation are based on taking averages of price increases and can be distorted by large changes in outlier categories. The median inflation rate calculated by the Federal Reserve Bank of Cleveland drops outliers to remove these distortions.

According to Furman, median inflation – which is a statistically better measure of the underlying inflation that policy makers can actually control – is well above the Fed’s preferred headline inflation print and still shows little signs of moderating and has run at a 6.3% annual rate in the last three months. But the “scariest” part of the new paper, Furman reveals, is when the authors use their model to forecast the unemployment rate that would be needed to bring inflation down to the Fed’s 2% target. He explains why this is so scary:

The authors present a range of scenarios, so I ran their model using my own assumptions…  Under these assumptions, which are more optimistic than the authors’ midpoint scenario, if the unemployment rate follows the Federal Open Market Committee’s median economic projection from June that the unemployment will rise to only 4.1%, then the inflation rate will still be about 4% at the end of 2025. To get the inflation rate to the Fed’s target of 2% by then would require an average unemployment rate of about 6.5% in 2023 and 2024.

Under these scenarios if the unemployment rate rises to 4.1% then inflation will stay above 3%. If it rises to 7.5% then inflation will slightly undershot the Fed’s target.

The unemployment rate needed to hit the Fed’s target in this scenario is 6.4%. pic.twitter.com/ysUDUU6yaG

— Jason Furman (@jasonfurman) September 8, 2022

Where is unemployment now: it’s 3.7% (6.059 million unemployed workers vs 164.753 million civilian labor force). This matters, because according to one of the most erudite economist Democrats, by the end of the Biden admin in 2024, the unemployment will have to soar to 6.5% for inflation to plunge to the Fed’s historical target of 2.0%

What does this mean in absolute numbers? Assuming a modest increase in the US labor force, a 6.5% unemployment rate in 2024 would translate into no less than 10.8 million unemployed workers, an 80% increase from the 6 million today!

Still think that politicians – and especially Democrats – will sit quietly and blindly ignore how high the Fed is hiking rates if it means that to normalize inflation back to 2% it means nearly doubling the number of unemployed Americans (and a crushing recession to boot). Spoiler alert: no, they won’t, and this may be one of the very rare occasions when Elizabeth Warren is actually right to worry about what the coming mass layoff wave means for Democrats… and the 2024 presidential election.

So what should the Fed do? Well, according to Furman, the Fed has four options:

1. First, place more emphasis on the ratio of job openings to unemployment and median inflation as it assesses the tightness of labor markets and the underlying rate of inflation.
2. Second, the new paper shows how much easier it will be to tackle inflation if expectations remain under control. The Fed should follow up on Chairman Jerome Powell’s tough talk at Jackson Hole with meaningful action such as a 75-basis-point increase at the next meeting.
3. Third, be prepared to accept the unemployment rate rising above 5% if inflation is still out of control.

While we doubt #3 is actionable, what is more remarkable is Furman’s final proposal: it’s the one that, like the Dude’s proverbial rug, ties the room together and sets the stage for what is coming:

Finally, stabilizing at a 3% inflation rate is probably healthier for the economy than stabilizing at 2%—so while fighting inflation should be the central bank’s only focus today, at some point the Fed should reassess the meaning of victory in that struggle.

And just in case his WSJ proves too complicated for some mainstream experts and economists, here it is in truncated, twitter format:

(iii) Seriously consider raising the inflation target to something like 3 percent

This one is tricky. On a blank slate a 3% target would be better than a 2% target. But shifting to that could deanchor expectations.

— Jason Furman (@jasonfurman) September 8, 2022

And there you have it: remember what we said on June 21: “At some point Fed will concede it has no control over supply. That’s when we will start getting leaks of raising the inflation target.” Well… there it is.

We first brought all this up more than two months ago, on Sept 10, and said “that while mainstream economists and the market may require quite a few months to grasp what is coming, it is the only way out of a crisis of commodities – as Zoltan Pozsar has repeatedly and correctly put it – and which central banks have no control over, and thus will have to move not only the goalposts but the entire football field to avoid a social revolt or something even scarier.”

* * *

Well, it’s now a “few months” later, and we are delighted to note that our June 21 prediction that “At some point Fed will concede it has no control over supply. That’s when we will start getting leaks of raising the inflation target” is becoming more and more accurate by the day.

Consider the November 4 note from TS Lombard chief strategist Steven Blitz discussing “October US Employment” (available to pro subscribers in the usual place), in which contrary to widespread consensus (especially after the weaker than expected CPI print), Blitz says that the Fed remains on pace for a 75bps rate hike.

But while we will let readers parse his logic for why the dovish view is due for another disappointment, we will highlight his concluding paragraph in which he makes precisely the point we h

In the end, a recession is pretty much baked in by what the Fed has done, signalled, and will do. The overall imbalance between the supply and demand for labor is too much of a driver of inflation, through wages and, in turn, services ex shelter, for the Fed to stop now and say they have done enough. Powell, in fact, was very clear there is much more to do. This does not negate the  fact that the coming downcycle will greatly impact those that AIT [average inflation targeting] was seeking to protect and are only just getting closer to even in terms of employment. None of this changes the Fed’s coming actions, what this coming hit to employment does mean is that the political cycle for the Fed is about to get a lot hotter – from all sides. This is one reason why I have long believed, as have many others, that the Fed ultimately bails and raises the inflation target to 3%. Powell does not have the same license to keep unemployment high and real growth low for an extended period as did Volcker (more so in retrospect than at the time). My guess is, Powell knows that.

Much more in the full must-read note available to pro subs.

But while the opinions of Furman and Blitz are notable, they are hardly (with all due respect) critical thought-leaders for US policy. Goldman Sachs, on the other hand, is. Which is why we were shocked when the vampire squid this weekend approached the topic aggressively, making it clear that an inflation target increase is no longer a matter of if but when.

While pro subscriber have access to the full note, we will excerpt some of the big highlights below, confirming that the debate about the coming inflation target raise is in its advanced stages:

The inflation target level debate

In the past few months, markets have been gyrating wildly, with views bifurcating along the paths of soft vs hard landing expectations for 2023. The moderation in the October core inflation print is an important landmark as it reduces the risk of the most adverse sticky and high inflation (6-10%) scenario which leaves the G10 central banks no other option but to crush demand.

How does 3.5-5% inflation allow for policy scenario optionality? Given that most would agree that a fast reduction in inflation to 2% is unlikely we can now have a debate whether raising the G10 inflation target to the 3-4% range is more optimal for reasons of maintaining employment levels or public debt sustainability than the 2% goal which would not be possible if inflation was sticky in the 6-10% range. (see “To keep unemployment low, central banks should plan to raise inflation target” by J Gagnon).

The premise of this debate (and we mean debate by market participants and not, or at least not yet, by central bankers) is that the shift in the global supply curve to the right (de-globalization / underinvestment / tariffs and sanctions) has probably moved the saddle point of the supply curve defining the inflation level at potential output from 2% to the 3.5-5% range. (see diagram on slide 3).

If this is the case, slowing the economy to potential will not satisfy the 2% inflation target. As the supply curve flattens at negative output gap levels, the output and social cost of bringing inflation to 2% increases disproportionately, creating the political context for the inflation target level revision debate.

Goldman next lays out the dilemma facing politicians and central banks in no uncertain terms: keep the inflation target unchanged and suffer economic and market devastation, or raise it and enjoy another (however brief) Golden Age. Take a wild guess which option politicians whose careers are measured in “next four year” increments will pick:

Our very stylized global macro financial framework sees scope for a significant divergence in the growth/inflation/fiscal outcomes in 2023 based on the level of the front end real rates (1y fwd rate futures – 5y BEI) which will be defined by the G10 central banks’ adherence to or departure from the 2% inflation target. If front end real rates are significantly lower from here (ie G10 CBs signal a pause in Q1-23, and break-evens go up meaningfully with the CBs remaining on hold) we see:

• real growth rebounding,
• G10 inflation moderating to 3.5-5.0 range allowing for ongoing fiscal consolidation and
• reduction in public debt/GDP levels,
• equities rallying,
• weaker dollar,
• credit spreads tightening and capital flows returning to EM assets

If front end real rates keep tightening from here (G10 CBs keep hiking until the 2% core inflation looks clearly within reach with the first indication being much higher Fed dots for 2023 in Dec) we see:

• real growth collapsing in H1-23,
• inflation reaching but also possibly undershooting the 2% target and the fiscal position deteriorating with public debt / GDP ratios going higher.
• The current challenging environment for risky assets will persist in this environment until policy turns for recession stabilization.

There’s more in the full must-read GS note (also available to pro subs), but that, in a nutshell, is the simple choice that is now being actively discussed behind closed doors at various G7/G20 and BIS/Tower of Basel meetings until the inevitable decision is made.

Professional subs can find much more on this arguably most important for the future of market topic here and here.

By Eric Peters, CIO of One River Asset Management

“Keep me posted when anything material pops up,” I told our team, scanning Twitter feeds for developments in the unfolding FTX drama, everything moving fast. “This is unlike anything I’ve seen in my 33yrs of doing this,” I said. “It has hints of many crises – Lehman, Enron, Madoff, MF Global – but moving at light speed with no lender of last resort. It’s like banking in the late-1800s.” We had no exposure to FTX or its token FTT, avoiding each for different reasons, intuitive/qualitative/quantitative risk management at work.

“This smells like the kind of thing that happens toward the bottom. Near the end. This is the kind of catalyst that ushers in the capitulation, the flush, that then leads to the next stage we’ve been building for: the first regulated market cycle in digital assets.”

* * *

“There was no way US policymakers were going to relax regulation to accommodate new technology,” said The Chairman, repeating advice he’s shared for a couple years, helping guide me through the innovation maze.

“If you want to introduce new technology into financial markets, you need to start with the premise that it performs the regulatory functions at least as well as the current technology,” he continued. FTX was imploding in the Bahamas, the crypto market’s third largest exchange collapsing in on itself, crypto markets in free fall.

“And only with that condition satisfied will you be able to capture the efficiencies these new technologies represent.” Creative destruction sounds great in a sentence, though less so when you live it, and this makes navigating change so interesting, worthy, profitable.

“With the FTX crisis following the Three Arrows collapse, Celsius, Luna and the others, this perspective will become a regulatory reality,” said The Chairman. “And the question for the industry and the regulators today is how do we transition from where we now are to a place where tokenization is consistent with the fundamental principles of sound financial regulation,” he said. “Those principles are:

1. liquidity transformation needs prudential regulation

2. customer assets need to be segregated and accessible, and

3. leverage of all forms needs to be limited and commensurate with liquidity in times of stress

“And it is fundamental that you can’t sell financial products to retail customers on a caveat emptor basis; transparency and a level informational playing field are necessary,” the Chairman added.

“The US has a choice now, and there is only one to make. Regulators must incrementally accommodate crypto products, making way for the products, actors, and services that comply with these fundamental principles while keeping out the others. Identifying what is in and what is out has been bogged down in semantics and in the search for regulatory gaps,” he said.

“The key financial regulators should collectively move forward with the identification of compliant and non-compliant products as well as paths to compliance for those that can get there. And wherever the US draws the line, people will be disappointed. That’s okay. That’s part of bringing discipline to activities that are out of step. What’s not okay is to do nothing and cede many of the opportunities that crypto represents to our competitors and adversaries, while subjecting our retail investors to the risk.”

The Miami Heat “terminated” all business relations with the bankrupted FTX crypto exchange, despite signing a two-decade $135 million deal last year to name the sports stadium “FTX Arena.” The team announced Friday they’re searching for a new stadium sponsorship partner, while the adult company “Bang Bros” tweeted out their offer to name the area “Bang Bros Center (The BBC)” still stands. 

“The reports about FTX and its affiliates are extremely disappointing,” Miami Heat tweeted out in a statement, adding, “Miami-Dade County and the Miami HEAT are immediately taking action to terminate our business relationships with FTX. We will be working together to find a new naming rights partner for the arena.”

Miami-Dade County and the Miami HEAT have released the following statement pic.twitter.com/ERZo1IsZ2o

— Miami HEAT (@MiamiHEAT) November 12, 2022

With the stadium naming rights in the air, Bang Bros tweeted its $10 million offer for the naming rights still stands. 

In a tweet, the adult film company posted two images of the stadium, one with “Bankrupt” across the top picture that also said “OOOPS!” And right below it, a photoshopped Bang Bros’ logo was placed on top of the stadium, with a caption that read, “BUT HEY! OUR OFFER STANDS! … WE PROMISE LESS PEOPLE WILL GET F@$%ED!”

In another tweet, the company said their “offer still stands to buy the naming rights” of the stadium.

Our offer for the naming rights still stands ! They should take our deal! https://t.co/pZEtTltEvn@BillyCorben @ONLYinDADE

— BANG BROS (@BangBrosDotCom1) November 11, 2022

Bang Bros, based out of Miami, tried to purchase the stadium’s naming rights in 2019. Here’s what they said in a tweet back then:

“We’ve officially Submitted our $10,000,000 bid for the naming rights to the Miami Heat Arena. We wish to thank American Airlines for their past support of the HEAT. We intend to change the name to the BangBros Center aka ‘The BBC.'”

Twitter users had a field day with Bang Bros’ tweets:

“Well BangBros arena it is smh this is where we are in the movie Idiocracy thx a lot @SBF_FTX a reality star for president, was the beginning of this alternate time, I think & it appears it can actually keep getting worse this is crypto 2022 god damn who would thunk it in 2013,” one Twitter user said. 

“After the fraud and disaster that was FTX, they should accept this,” another person said. 

“Should’ve gone with Bang Bros back in 2019. Everyone knew FTX was a house of cards. Bang Bros won’t be filing for bankruptcy any time soon,” someone else said. 

“This only has a chance of happening because its Florida,” a Twitter user said.  

Authored by Jonathan Turley,

Parental rights are becoming one of the defining issues for 2024. Building from Glenn Youngkin’s 2021 gubernatorial victory in Virginia, school boards races and educational initiatives have become some of the most fiercely contested areas on local and state ballots. Rep. Eric Swalwell (D., Cal.) weighed in this week into the area with a curious attack on parents demanding more say in the education of their children.

The California Democrat insisted that it is akin to “Putting patients in charge of their own surgeries? Clients in charge of their own trials?” These were curious analogies to draw since patients and clients are in charge of the key decisions in their surgeries and trials. What Rep. Swalwell is missing is called informed consent.

Swalwell is a lawyer with a degree from the University of Maryland Law School.

He took to Twitter to lash out against parents who dare challenge aspects of the education of their children. The tweet came in response to South Carolina GOP Sen. Tim Scott saying that Republicans intend to put “parents back in charge of their kids’ education.” Swalwell declared such a notion to be ridiculous:

“Please tell me what I’m missing here. What are we doing next? Putting patients in charge of their own surgeries? Clients in charge of their own trials? When did we stop trusting experts. … This is so stupid.”

As a threshold matter, it is important to note that parents have always had a say in the education of their children. School boards are invested with the authority to dictate changes in curriculum and teaching policies.

Indeed, in Meyer v. Nebraska (1925), the Court struck down a state law prohibiting instruction in German. In the decision, it stressed that parental roles in the education of their children was an essential part of the protections under the Constitution’s Due Process Clause: the right “to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized at common law as essential to the orderly pursuit of happiness by free men.”

Putting that historical and constitutional context aside, Rep. Swalwell is equally mistaken in his analogies to the medical and legal professions. In reality, patients and clients do control major decisions over their cases. Since he asked for assistance, let’s deal with each in turn.

Patients and Medical Consent

From the outset, the argument that patients do not make the key decisions on their own medical care is a bit incongruous given Swalwell’s support for abortion rights without any limits. (Swalwell was widely criticized for a campaign commercial showing a women being arrested at a restaurant by police with guns drawn under suspicion of having an abortion). While women clearly consult with doctors, the whole premise of “my body, my choice” is that these decisions are left to women, not the doctors or the state.

Parents are asking for consent in the basic goals, material, and methods used the education of their children.

American torts have long required consent in torts. Indeed, what Swalwell seemed to suggest would be battery for doctors to make the key decisions over surgical goals or purposes. Indeed, even when doctors secured consent to operate on one ear, it was still considered battery when they decided in the operation to address the other ear in the best interests of the patient. Mohr v. Williams, 104 N.W. 12 (Minn. 1905).

In Canterbury v. Spence, 464 F.2d 772, 784, the court observed:

“Nor can we ignore the fact that to bind the disclosure obligation to medical usage is to arrogate the decision on revelation to the physician alone. Respect for the patient’s right of self-determination on particular therapy demands a standard set by law for physicians rather than one which physicians may or may not impose upon themselves.”

Thus, doctors in the United States do have to secure the consent of patients in what they intend to do in surgeries or other medical procedures. (There are narrow exceptions such things as “substituted consent” or  emergencies that do not apply here).

Ironically, California has one of the strongest patient-based consent rules. As the California Supreme Court stated in Cobbs v. Grant, 8 Cal. 3d 229 (1972):

“Unlimited discretion in the physician is irreconcilable with the basic right of the patient to make the ultimate informed decision regarding the course of treatment to which he knowledgeably consents to be subjected.

A medical doctor, being the expert, appreciates the risks inherent in the procedure he is prescribing, the risks of a decision not to undergo the treatment, and the probability of a successful outcome of the treatment. But once this information has been disclosed, that aspect of the doctor’s expert function has been performed. The weighing of these risks against the individual subjective fears and hopes of the patient is not an expert skill. Such evaluation and decision is a nonmedical judgment reserved to the patient alone.”

While obviously a patient cannot direct an operation itself, the doctor is expected to explain and secure the consent of the patient in what a surgery will attempt and how it will be accomplished. That is precisely what parents are demanding in looking at the subjects and books being taught in school. Moreover, that is precisely the role of school boards, which has historically exercised concurrent authority over the schools with the teachers hired under the school board-approved budgets.

Clients and Legal Consent

Swalwell is also wrong on suggesting that clients are not in charge of their own trials. Not only must attorneys secure the consent of their clients on what will be argued in trial but they can be removed by their clients for failure to adequately represent their interests. It would be malpractice for a lawyer to tell a client, as suggested by Swalwell, that they do not control the major decisions in their own cases.

Ironically, the informed consent rule in the law has been traced to its rise in the medical profession. It was adopted by bars to give clients the right to direct their own legal affairs. MODEL RULES OF PROF’L CONDUCT r. 1.7 cmt. 18. “Informed consent” is a defined term in the Model Rules. See id. r. 1.0(e) (defining “informed consent” as the “agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct”).

Obviously, lawyers must follow their own ethical and professional judgment in trials and tactical choices are generally left up to the lawyers. However, the main arguments and objectives of the trial remain for the client to decide. As one court explained in Metrick v. Chatz, 639 N.E.2d 198, 653-54 (Ill. App. Ct. 1994):

“An attorney’s liability for failing to advise a client of the foreseeable risks attendant to a given course of legal action is not predicated upon the impropriety of the recommended course of action; rather, it is predicated upon the client’s exposure to a risk that the client did not knowingly and voluntarily assume. Consequently, to establish the element of proximate cause, it is necessary for the client to both plead and prove that had the undisclosed risk been known, he or she would not have accepted the risk and consented to the recommended course of action.”

Much like the claim of parents, clients demand the right to reject a plan for trial and the arguments or means to be used at trial. This right of consent is ongoing and can be exercised at any point in the litigation.

Informed Consent

Of course, the key to informed consent is that parents are giving the information needed to secure their consent. School districts have been resisting such disclosures and pushing back on parental opposition to major curriculum or policy decisions.

I have previously stated my opposition to micromanaging classrooms. However, in public education, citizens vote to elect board members to be accountable for educational priorities and policies. In private education, citizens vote with their tuition dollars as well as through school boards. Most of these controversies involve major educational policies ranging from transgender participation on teams to the lesson plans viewed by many as extreme or political. Those policies go to the issues of educational priorities that have historically been subject to school board authority.

In other words, “what is missing here” is that Rep. Swalwell’s interpretation could constitute both medical and legal malpractice. It may also constitute political malpractice as both parties now careen toward the 2024 elections.

Dave Chappelle has once again managed to trigger just about everyone during his opening monologue as host of Saturday Night Live this weekend – including SNL staff members who reportedly extremely unhappy about his appearance.

Commentary ranged from Kanye West, Jews, and why Donald Trump won the 2016 US election.

Kicking things off, Chappelle read a note which said: “I denounce antisemitism in all its forms, and I stand with my friends in the Jewish community,” adding “And that, Kanye, is how you buy yourself some time.”

He then noted how Kanye, who now goes by Ye, ‘lost $1.5 billion in one day’ after speaking against Jews.

“I learned that there are two words in the English language that you should never say together in sequence. And those words are ‘the’ and ‘Jews,'” said Chappelle, who later said that it’s a game of ‘perception’ – “If they’re black, it’s a gang. If they’re Italian, it’s a mob. If they’re Jewish, it’s a coincidence and you should neeeever speak about it.”

He then turned his attention to politics, which included saying that Herschel Walker is “observably stupid,” and then explaining why Trump won the 2016 US election.

“He’s very loved. And the reason he’s loved is because people in Ohio have never seen somebody like him,” said Chappelle, who then described how the billionaire captured hearts and minds by admitting “I know the system is rigged because I use it.”

Of course, Chappelle then suggested that Trump was colluding with Russia (as opposed to the Obama DOJ, FBI, and Hillary Clinton setting him up), and suggested that Melania Trump “looks like the type of chick that James Bond would smash but not trust.” So he either sold out on that one or is woefully under-informed.

Unsurprisingly, the left was outraged:

As for the actual show itself, a “House of the Dragon’ parody appears to have been the most popular:

A new YouGov survey has found that 42% of Republicans and Republican-leaning independents would prefer Florida Gov. Ron DeSantis over former President Trump as the party’s 2024 presidential nominee.

Just 35% polled said they would prefer Trump over DeSantis.

That said, those who consider themselves “strong Republicans” were more likely to support a third Trump run (45%) over the Florida governor, while 43% said they would prefer DeSantis.

The difference was far more pronounced among the ‘Republican-leaning’ respondents, of which 45% preferred DeSantis vs. 21% for Trump. 38% of those who described themselves as “not very strong Republicans” prefer DeSantis, vs. 31% who picked Trump.

The poll comes after Trump lashed out at DeSantis following the governor’s resounding midterm victory last week – cementing his position as a top GOP candidate to run against Trump in the 2024 GOP primaries.

Trump nicknamed DeSantis “Ron DeSanctimonious” during a rally last week, before going further and releasing a statement in which he took credit for DeSantis’ political success.

The former president then suggested that he could share damaging private information about DeSantis “that won’t be very flattering” if the Florida governor runs in 2024, and that DeSantis is actually a RINO.

“I think if he runs, he could hurt himself very badly,” said Trump, adding “I know more about him than anybody — other than, perhaps, his wife.”

Authored by Caitlin Johnstone via Medium.com,

War criminal George W Bush and Ukrainian President Volodymyr Zelensky will be appearing at an event next week at the George W. Bush Presidential Center, in partnership with US government-funded narrative management operations Freedom House and National Endowment for Democracy. The goal of the presentation will reportedly be to address the completely fictional and imaginary concern that congressional Republicans won’t continue supporting US proxy war efforts in Ukraine.

CNN reports:

Former US President George W. Bush will hold a public conversation with Ukrainian President Volodymyr Zelensky next week with the aim of underscoring the importance of the US continuing to support Ukraine’s war effort against Russia.

The event, which will take place in Dallas and be open to the public, comes amid questions about the willingness of the former president’s Republican Party to maintain support for Ukraine.

“Ukraine is the frontline in the struggle for freedom and democracy. It’s literally under attack as we speak, and it is vitally important that the United States provide the assistance, military and otherwise to help Ukraine defend itself,” David Kramer, the managing director for global policy at the George W. Bush Institute, told CNN. “President Bush believes in standing with Ukraine.”

The Struggle for Freedom event will take place on Wednesday, in partnership with the Freedom House and the National Endowment for Democracy, at the George W. Bush Presidential Center.

NEW: President George W. Bush, Ukraine President Volodymyr Zelenskyy, and Taiwan President Tsai Ing-wen will participate in the Bush Institute’s Nov. 16 event on advancing freedom.

More from @kylieatwood @CNN: https://t.co/cGvBylur7G

— George W. Bush Presidential Center (@TheBushCenter) November 10, 2022

To be clear, there is absolutely no reality-based reason to believe Republicans will meaningfully shy away from full-scale support for arming and assisting the Ukrainian military. The proxy war has only an impotent minority of opposition in the party and every bill to fund it has passed with overwhelming bipartisan support. Some “MAGA” Republicans have claimed that funding for the war would stop if the GOP won the midterm elections, but they were lying; there was never the slightest chance of that happening.

Bush, you may remember, drew headlines and laughter earlier this year with his Freudian confession in which he accused Vladimir Putin of launching “a wholly unjustified and brutal invasion of Iraq — I mean, of Ukraine.” The fact that the president who launched a full-scale ground invasion which destabilized the entire region and led to the deaths of over a million people is now narrative managing for the US empire’s current aggressively propagandized intervention says everything about the nature of this war.

Also appearing with Bush will be the leader who’s slated to become the face of the US empire’s next proxy war, Tsai Ing-wen of Taiwan. CNN writes:

Taiwan’s President Tsai Ing-wen will also take part in the event next week. She will deliver a recorded message, in which she is expected to underscore that the struggle for freedom is a global challenge.

And sure, why not. If you’re going to manufacture consent for proxy warfare against multiple powers as your empire flails around frantically scrambling to prevent the emergence of a multipolar world, you may as well save time and promote them all on the same ticket.

Former President George W. Bush: “The decision of one man to launch a wholly unjustified and brutal invasion of Iraq. I mean of Ukraine.” pic.twitter.com/UMwNMwMnmX

— Sahil Kapur (@sahilkapur) May 19, 2022

Many people who support the US proxy war in Ukraine now recognize that the Iraq war was a horrific disaster, but Ukraine isn’t the good war, it’s just the current war. Western propaganda means people always oppose the last war but not the war that’s currently being pushed by the propaganda of today. The US provoking and sustaining its Ukraine proxy war is no more ethical than its invading of Iraq; it just looks that way due to propaganda.

It is only by the copious amounts of propaganda our civilization is being hammered with that this is not immediately obvious to everyone. In the future (assuming we don’t annihilate ourselves first), the propaganda will have cleared from the air enough for people to look back with clarity on 2022 and realize that they were lied to, yet again.

It’s easy to oppose the last war. It’s hard to oppose current wars as the propaganda machine is shoving them down our throats. Everyone’s anti-war until the war propaganda starts.

*  *  *

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Just days after China unexpectedly eased covid zero restrictions, sending commodities across the globe soaring amid hopes that China’s covid crackdown may be finally ending, Bloomberg reported late on Saturday that Beijing has issued “sweeping relaxation measures on property and Covid controls”, in what the media outlet called the strongest signal yet that President Xi Jinping is now turning his attention on rescuing the economy.

Confirming that China is increasingly concerned about its sinking economy, not to mention the local property market which Goldman last year calculated was the world’s largest asset class…

… Bloomberg reported that Beijing issued its most extensive 16-point rescue package for the struggling real estate market, citing “people familiar with the matter”, marking a decisive effort to turn around an economy devastated by two years of Covid Zero curbs.

Specifically, the PBOC and the China Banking and Insurance Regulatory Commission on Friday jointly issued a notice to financial institutions laying out plans to ensure the “stable and healthy development” of the property sector. Unlike previous piecemeal steps which were purposefully vague, the notice included 16 measures that range from addressing the liquidity crisis faced by developers to loosening down-payment requirements for homebuyers.

As part of the rescue plan, developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations, Bloomberg sources added.

The major policy shifts by Xi’s government, first on covid and now on property, will aid China’s growth outlook and add fuel to a market rally that sent a gauge of Chinese shares in Hong Kong up 17% in the past two weeks. It also ends a long period of policy paralysis before last month’s Communist Party congress when Xi jockeyed for a third term.

It’s also a stark reversal from the gloom that descended over markets in late October, after Xi’s elevation of close allies to the highest rungs of power stoked concern that ideology would trump pragmatism for the most powerful Chinese leader since Mao Zedong. The Hang Seng China Enterprises Index has now erased losses suffered in the immediate wake of the party congress, swinging from one of the world’s worst-performing stock gauges to among the best.

The economy still matters to Xi Jinping. He needs growth to gird China for competition with US. Having just adjusted covid response, Beijing is now pulling back from a years-long crackdown on property to shore up growth. w/@yifanxie @caocli
https://t.co/Nv77ikQkCR via @WSJ

— Lingling Wei 魏玲灵 (@Lingling_Wei) November 13, 2022

…restrictions aimed at curbing property developer debt and give lenders permission to extend loans to home builders in financial trouble. The new measures are “massive in scale,” said Dan Wang, chief economist at Hang Seng Bank China …

— Lingling Wei 魏玲灵 (@Lingling_Wei) November 13, 2022

“These property measures, on top of announcements of Covid loosening, are a clear indication that Beijing’s efforts to support growth are intensifying,” said @MichaelHirson

— Lingling Wei 魏玲灵 (@Lingling_Wei) November 13, 2022

“It’s a meaningful easing,” said Larry Hu, head of China economics at Macquarie. “It seems that the room for policy change has widened on various fronts after the Party Congress, including for the two major headwinds to the Chinese economy: Covid Zero and property.”

As part of its attempt to kickstart the economy, on Friday Beijing also issued a set of measures to recalibrate their pandemic response, publicly outlining a 20-point playbook for officials aimed at reducing the economic and social impact of containing the virus, although as Bloomberg was quick to note, “the changes by no means signal the end of Covid Zero” and indeed, a day after releasing the new parameters, officials were quick to clarify that Covid rules were being refined, not relaxed, and a strict attitude toward stamping out infections remains China’s guiding principle.

The proposed changes take place just before Xi is set to meet US President Joe Biden Monday on the sidelines of a G-20 summit, in the first head-to-head meeting between the two heads of state since the pandemic began. Bloomberg adds that Treasury Secretary Janet Yellen will seek information on China’s Covid lockdown policies and the troubled property sector during a meeting with central bank Governor Yi Gang this week, according to senior Treasury Department officials.

Meanwhile, even with the rescue package, investors of Chinese property dollar bonds are still likely facing massive losses.

“The extreme pessimism in markets has finally led to a key policy change on the two biggest overhangs over the economy,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. “It’s still hard to say whether this is going to be a turning point for the economy though.”

Authorities have sought to defuse the property crisis with a raft of (largely toothless) measures in the past few months, including cutting interest rates, urging major banks to extend 1 trillion yuan ($140 billion) of financing in the final months of the year, and offering special loans through policy banks to ensure property projects are delivered. None of those measures, however, have made any material dent in China’s rapidly slowing property market.  Last week, China also expanded a key financing support program designed for private firms including real estate companies to about 250 billion yuan, a move that could help developers sell more bonds and ease their liquidity woes.

One of the biggest policy changes in the latest notice is to allow a “temporary” easing of restrictions on bank lending to developers.  As a reminder, China began imposing caps on bank’s property lending in 2021, as authorities sought to tighten the reins on a bubble-prone industry and curb leverage at some of the nation’s largest developers. Banks not meeting the current restrictions will be given extra time to meet the requirement, said the people.

In addition, regulators encouraged lenders to negotiate with homebuyers on extending mortgage repayment, and emphasized that buyers’ credit scores will be protected. That may alleviate the risk of social unrest among homebuyers who have engaged in a widespread boycott on mortgage payments since July.

Meanwhile, China’s $2.4 trillion new-home market remains fragile and property debt defaults have surged, sparking increasingly concerns about social unrest. Price declines in the existing-home market were the most extreme in almost eight years in September, according to the latest official data. At banks, the proportion of bad loans related to property has surged to 30%, according to Citigroup estimates.

But while Chinese stocks have suffered depression-level declines in recent weeks, as a result of relentless home price declines, now in their second year…

… signs of easing property curbs and pandemic restrictions have led to a sharp rebound in China assets. A Bloomberg Intelligence gauge of Chinese developers’ stocks jumped a record 18% Friday, with Country Garden Holdings Co. surging 35%.

Still, Bloomberg cautions that the financial backstop is dwarfed by the looming debt maturities facing developers. China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023. That includes $53.7 billion in borrowings this year, followed by $72.3 billion of maturities in the first quarter of next year.

So while Beijing’s move is welcome, much more will be needed to convince markets that systemic risk has been mitigated: “China developers are facing another peak in debt maturity next year, if regulators don’t make adjustments for property-related policies, developer liquidity will continue to deteriorate,” said Shen. “This will very likely trigger systemic financial risk.”

By Peter Tchir of Academy Securities

Was There an Election this Week?

There was an election this week. The results apparently suited the market. I use “apparently” because the final results are not in. I’ve lost the ability to figure out if this is due to people being extremely cautious about calling elections, the fact that the results are still too close to call because of all the remaining uncounted ballots, or because of the run-offs. Maybe you have found websites that explain the uncalled seats better than the ones that I’ve found. In any case, it looks like Republicans will win the House, which is enough to create some gridlock. There were no red, blue, or green waves.

But it wasn’t the elections that drove stocks, it was mostly the inflation story! CPI sparked a massive one-day rally in spite of the Michigan data (which a few weeks ago would have been viewed negatively) and the “demise” of FTX. Technically the phrase I’m looking for is “filed for bankruptcy,” but demise seems more appropriate.

Two Ways to Lose Money

We will dig into inflation and the Fed, but let’s start with FTX and what happened to crypto this week. I think that it is important because Crypto Crashes Impact the Economy & Markets. We will address that, but let’s start with the two ways to lose money:

1. You buy something that goes down in price (or short something that goes up). There are a myriad of ways to do this and 2022 has given us plenty of opportunities to lose money the “old-fashioned” way. Whether you bought bonds, stocks, or many other things (other than energy), it has been easy to lose money this year. Sometimes it is easy to figure out how you lost money (the Fed tightened a lot, earnings were weak, etc.). Sometimes you can assess “intrinsic” value (based on cash flow, property, plant, & equipment, etc.). And sometimes you just don’t have a clue! I don’t know what a Polkadot is or does, but it still has $6.5 billion of market value according to coinmarketcap.com, even with the price at $5.68 (down from a high of $52.20 on November 7th, 2021). Losing money in something where it is difficult to figure out the intrinsic value is a frustrating way to lose money. Making it even worse, it is even more difficult to figure out when people might step in and buy.

2. You trust your money (or asset) with a counterparty that doesn’t fully pay you back. You can make good or bad investment decisions, but if you cannot get your money (or asset) back, you have lost. This, to me, is the absolute worst way to lose money, because to a large degree, it is often preventable. Some amount of due diligence can help determine the counterparty’s ability and willingness to pay you back. Some analysis of corporate structure, domicile, etc., can help identify risks. Examining the character of the individuals may also help spot risks. I will never forget (and I’ve mentioned this before) the time that the Head of Credit at Bankers Trust spoke to the trainee program (mostly a bunch of derivative nerds) about credit. It seemed like a dull topic, but it was the only part of the training program that I remember (other than betting on Series 7 scores). He emphasized that the ability to pay is the “easy” part of credit analysis, but it is the “willingness” to pay that is difficult and often the more important. In hindsight, at least for those holding assets at FTX, there should have been more soul searching given what went on with Three Arrows Capital and Celsius. I expect a lot more scrutiny in the crypto space now.

When people lose money, they take measures to avoid it. On the asset side, maybe you sell to mitigate losses. Maybe you buy more to dollar cost average, which allows you to claw back a little extra money on any rebound. On the “custodial” side you can figure out a “safer” place to move your assets, assuming you decide not to sell them outright.

Will there be opportunities in crypto?

• Could we be oversold/have we over-reacted? That is possible, but I don’t think so. Remember, Lehman was NEVER a moment, it was just one part of a story that started playing out a year before they went bankrupt and played out for another 6 months or more after their bankruptcy. FTX is just too big and too mainstream (the list of investors in their seed rounds is a literal who’s who of the private equity space) to not have knock-on effects. I expect to see crypto struggle from here. Not that there can’t be bounces, but I’m looking for bitcoin to break $10,000 before year-end (this is not a new call – see Traditional versus Disruptive Portfolio Construction).

• Could some entities that offer the best transparency, audited financials, and possibly even regulation be big beneficiaries of the chaos? That is possible. I certainly expect “smart” investors in the crypto space to do more to “secure” their holdings! There are some companies that purportedly are much more diligent on custodial services, have better backing, and have better internal systems than others. They should benefit, but for me, the question is if they will just get a bigger market share of a market that is dying rapidly.

Does this mean anything for markets or the economy?

• Fortunately, it means less for MARKETS than it did even a few months ago. The “disruptive” portfolio has already had so much pain, the positioning is lower, and any use of leverage has decreased dramatically (ARKK as a metric for disruptive investing is down 57% YTD, 65% for one year, and 75% since its peak in February 2021). Crypto returns have been worse (in many cases) than that. It has been impossible to maintain leverage in the “disruptive” portfolio. More importantly (from my perspective) is that people have stopped equating disruptive stocks with crypto. Companies conduct business, have customers, cash flow, etc. These are the things that help investors put valuations on them. While some of those valuations may have been way off (many stocks are down 75% or more), at least there is a process to figure out what these companies might be worth. For the last six months or so (since the Disruptive Portfolio piece was published), investors have treated crypto very differently than stocks and that is a good thing for markets right now because crypto losses won’t have such an immediate impact on the broader stock market.

• I’m more worried about the ECONOMY. Many of the crypto haters are so dismissive that they don’t give crypto the credit that it is due! Cryptocurrencies grew to as much as $3 trillion and are well under $1 trillion now. This is my best estimate after taking a look at CoinMarketCap and seeing that bitcoin is down to $350 billion. That is an immense loss in a relatively short period of time! That should (must) affect some spending! At a time when people could quite literally make a living waiting for NFTs to “drop” so they could sell them, there was a lot of “free” money available to be spent. Do not underestimate the fact that much of the inflationary pressure we felt in 2021 was attributable to people making money in cryptocurrencies and NFTs. But that is only one part of the equation. The second part of the equation is the companies in the space. FTX allegedly raised over $1.5 billion in various funding rounds (the Crunchbase stories came up high enough in my searches for FTX funding rounds and seem in line with other stories I’ve read). How much of that money went into buying technology? At its heart, FTX was a technology company that presumably needed servers (not just so Sam could play Lord of Legends with minimal lag), cloud services, etc. What were they spending on ads? They got an arena in Miami named for them, but presumably that was just a small portion of their ad spending. Who knows how much was paid to promoters. How much energy were they using? FTX spent money on technology, ads, and paying people and they likely were significant users of energy. That might actually help decrease energy usage (though watching hash rates, this might not come down for a bit). In any case, companies involved in the crypto space have raised and spent a lot of money (billions) that won’t be spent going forward! In addition to the tightening of purse strings by virtually every private company that now needs to avoid funding at what they view as extremely low valuations, mega-caps like META have had several headlines related to cost cuts recently. The spending that was generated by crypto and disruptive tech was a big part of the inflationary (easy money) push post-COVID and will be greatly diminished (in fact, it is already greatly diminished). Those who benefited from the spending (often big tech of all types) could face pressure and it looks like that already happened in last quarter’s earnings for a lot of big tech companies. That could further slow spending in the economy because when one’s customers suffer, you often also have to take steps to cut costs.

In the coming days and weeks, I am less worried about how crypto will affect markets, but I am EXTREMELY worried that we’ve only seen the beginning of spending cuts related to crypto wealth and crypto/disruptive companies! That will be bad for the economy and it will bleed into certain stocks if I’m correct.

Five More Weeks!

We have almost 5 weeks until the next FOMC meeting and presser on December 15th. Plenty of time for the Fed to Stop Seeing Dead People. There is one more jobs report and a few more inflation prints (including another CPI print).

On jobs, you know that we’ve questioned the disparity between the Household and Establishment data, questioned the potential overstatement of JOLTS data (I’ve been seeing some interesting work in this space), and even questioned the birth/death model adjustments (which is something some serious economists are also questioning). Jobs may remain strong, and it is the one thing that the Fed can use to justify its hawkish stance (though it would be nice to declare victory on inflation and not force Americans into the unemployment lines.)

On inflation:

• See Inflation Dumpster Dive and More Inflation Dumpster Diving.

• If you skipped the previous section, all you need to know is that I believe crypto and NFT profits and spending by disruptive companies fueled inflation (tech/semiconductors, various services, advertising, and even energy usage) and that trend has abated and may be reversing. This was a really big contributor to spending that was largely off the radar of mainstream economists (crypto deniers in particular) and is now helping the case for deflation. If you didn’t model it as inflationary before, you won’t pick it up as deflationary now, but two wrongs don’t make a right and won’t help you find inflection points!

• The rent calculations in CPI are absurd. Talk about two wrongs not making a right! Using data that is “knowingly” lagged (amongst other potential flaws) to determine current policy is so wrong that it continues to make my head hurt! A month ago we sent out OER Seems Crazy. The only thing that I could bring myself to send regarding Thursday’s CPI print was from the BLS Report:

“The index for all items less food and energy rose 0.3 percent in October, following a 0.6-percent increase in September. The shelter index continued to increase, rising 0.8 percent in October, the largest monthly increase in that index since August 1990. The rent index rose 0.7 percent over the month, and the owners’ equivalent rent index rose 0.6 percent.”

• Are they trying to tell me that October rents experienced the biggest monthly gain since 1990 and the second highest gain was in September? That is just unbelievable! If you told me that last summer (when we were still doing QE with rates at 0) was out of control on the rent front and the worst in 3 decades, I would have believed you, but now?

• On the bright side, even the erroneous data will start picking up the smaller increases that started late last year (and early this year) in the real world as opposed to the BLS world.

• On the commodity side (see chart below), we might see some month-on-month upticks, but the annual data will look great for many commodities!

A few weeks ago, I was asked to do a yield forecast for a client (though I’m really more about figuring out the next few months or big moves). What I sent at the time seemed almost outlandish, but it feels like it has some hope now as we get more (non-inflationary) inflation data! Yes, my “base case” is “too far too fast”! The India inspired commodity boon is also an interesting possibility in 2023.

While the Fed is likely to jawbone to the hawkish side, I fully expect 5 more weeks of data to weaken the case for more hikes rather dramatically!

Other “Stuff”

I feel obligated to discuss a few other “things” that could impact the market in the coming weeks:

• Seasonality. Seasonality could help the market as we head into the holiday season. Recent upward price action could be enough to chase some money off of the sidelines. My sense of “sentiment” is that it remains heavily skewed towards inflation, the Fed, and higher bond yields/lower stock prices despite some chatter about seasonality. Basically “fade the move” still dominates the “seasonality” chatter, but I think that will reverse.

• Russia. Our Geopolitical Intelligence Group expects little change in the war (Russia will make another push west once the rivers freeze, but Ukraine will defend itself well with all their weapons). However, there is a chance that with the midterm elections behind us and new and more severe energy related sanctions starting to approach (which will hurt the West more than Russia), we could see attempts to cobble together some sort of a deal. China also seems to be gently nudging (if not pushing) Russia in that direction.

• China COVID 0.1 policy. China is unlikely to back off COVID 0 until after the winter, but with our demand down (and potentially shrinking further) the inflationary supply pressures are receding anyway! Baltic Dry (one measure of international shipping costs) has been receding again and it is down 56% in the past 6 months.

Bottom Line

Let the “everything” rally play out a bit longer.

• For stocks, I think somewhere between the middle of August and the middle of September levels are a good target. On SPX, we were at 4,305 on August 16th and 4,110 on September 12th, which I guess is a complex way of saying the S&P target is 4,200. This also seems to be the right stopping point if we breach the 200-day moving average of 4,080 (causing a wave of panic buying).

• On rates, look for bull steepeners! All yields should come down, but the front-end should respond extremely well if I’m correct on the inflation and jobs data and what that means for the Fed.

And there it is: the final curve inverted – Powell’s personal favorite, the 3M-3M18M fwd.

And now we go all-in steepeners pic.twitter.com/43BVckRdGM

— zerohedge (@zerohedge) November 12, 2022

• Credit should rip tighter here, with high yield poised to do extremely well as credit risk gets priced out of the market, even with an overhang of some big deals that banks will want to offload on any strength (ideally ahead of year-end).

• Don’t touch crypto, but also don’t expect weaker crypto to drag stocks down!

Ultimately, I think that this all ends with risk-off trading taking us to much lower yields AND lower stock prices, but it is too early to bet on that as we first need to get through the “lower yields are good for stocks” phase!