The mass shooter who killed three students and critically wounded five others at Michigan State University on Monday evening turned into an “evil and mean” recluse after his mother’s death two years ago, his father said in an interview with NBC. 

In another new development, police say the killer — 43-year-old Anthony McRae — was carrying a note in his pocket that threatened two New Jersey schools when he killed himself as police approached him a few miles off campus.  

That information prompted a closure of all schools in the Ewing Township, New Jersey school district, which is an an area where McRae had lived previously. 

The killer’s father, Michael McRae, said his son’s path to its sinister end on Monday night began with the sudden death of his mother, who suffered a stroke on Sept. 13, 2020:   

“He was grieving his mom. He wouldn’t let it go. He got bitter, bitter and bitter. His mom died, and he just started getting evil and mean. He didn’t care about anything anymore.”

I said, ‘Talk to daddy. Let me know if something is on your mind. If you need help, I’ll get you help.’ He said, ‘I’m OK, dad, I don’t need help.’

He was a good kid, don’t get me wrong. But you never know what your kid will do when they walk out the door.”

In the aftermath of his mother’s death, Anthony McRae quit a job where he loaded refrigerators onto delivery trucks, and started spending his days playing video games in his room, his father said. McRae lived with his father in Lansing. 

Neighbors told the Detroit News that McRae was a “hell-raiser” who would fire his gun out the back door of his home.

He was arrested in 2019 for carrying a concealed Ruger LCP .380 without a permit — a felony charge. He’d later plead guilty to a lesser misdemeanor charge of possessing a loaded firearm in a vehicle, and was sentenced to 12 months probation.

The probation was extended by six months so he could complete all its terms. During that time, he was prohibited from having a weapon “of any time.” At the time of his murders, however, his probation was long over.  

The elder McRae that his son bought a gun after his arrest, but wouldn’t admit to having one. “I told him to get rid of the gun,” he told the Washington Post. “He kept lying to me about it and told me he got rid of it.” 

Police say McRae had no affiliation of any kind with Michigan State, and have yet to determine a motive for his shooting, which began at approximately 8:15pm at MSU’s Berkey Hall, which is home to MSU’s College of Social Science, Institute for Public Policy and Social Research, and the Department of Sociology. McRae then took his rampage to the student union building. 

🚨#BREAKING: Chaotic scenes at Michigan State University as heavily-armed police search for active shooter⁰⁰📌#EastLansing | #Michigan

Watch as terrifying video as dozens, of Students run for their lives as a Active shooter fires multiple rounds around the Michigan State… https://t.co/SctzoIFFzY pic.twitter.com/mNnWKLzN2N

— R A W S A L E R T S (@rawsalerts) February 14, 2023

Claire Papoulias was in a Cuban history class when McRae entered her classroom, and hit the floor when she heard gunshots just behind her head. “I will never forget the screams of my classmates because they were screaming in pain for help,” she told NBC. “Someone was yelling that there was a shooter and everybody needed to get down on the ground, and at that moment I thought that I was going to die. I was so scared.”

“At that moment, I thought I was going to die,” Claire Papoulias, a #MichiganStateUniversity shooting survivor, says while recounting her escape from a classroom in a building where the shooter opened fire. pic.twitter.com/vRG1BFZGSq

— Catalyst for Change (@aldogue66895472) February 14, 2023

More than three hours passed between the start of the shooting and McRae’s suicide at 11:35pm as police approached him. Chris Rozman, deputy chief of campus police, credits an “alert citizen” who recognized McRae from security images police had quickly circulated in the immediate aftermath of the shooting. 

Police haven’t said what type of firearm McRae used on Monday night. However, security video appears to show him drawing a pistol as he entered one of the buildings.  

Credit Suisse Group AG notified its workforce about a ‘rogue’ employee, who has since left the Swiss bank, stole personal data, including salaries and bonuses, of other employees. 

Recruitment company eFinancialCareers first reported the former employee stole personal data years ago. At the time, the staffer had legitimate access to employee data and transferred it to a personal device in breach of company policies. 

eFinancialCareers provided a snippet of the email that went out to employees:

“An individual employee, who has since left the firm and had legitimate access to your personal data at the time of their daily work, inappropriately copied this information without Credit Suisse authorization onto their personal device.”

The email outlined that “salary and variable compensation” data between 2013-15 was taken. Also, bank account information to pay bonuses and salaries was copied onto the personal device. 

The Swiss bank first discovered the issue in March 2021. “There is no evidence that the data has been used maliciously or forwarded to other individuals,” eFinancialCareers said. 

Credit Suisse released this statement about the incident:

“Credit Suisse has recently addressed a data security incident that involved information relating to a number of Credit Suisse personnel. This data was moved some years ago by a former employee, with legitimate systems access, to their personal device – in breach of Credit Suisse policies and procedures. Having investigated it thoroughly, we have taken and are continuing to take steps – including legal remedies – to adequately contain the incident. To date, there is no evidence of any onward transmission or intent to use the data in any way.”

A former director at the bank told eFinancialCareers that employees are concerned about their data being compromised. The person added: “it’s more bad news” for the bank embroiled in scandals and experienced a “staggering” bank run in 2022.  

Two weeks ago, when the meme stock frenzy made a triumphal return only this time with a 0DTE twist, we published a list of the most shorted names that had been rushing higher in 2023 on the back of the most brutal short squeeze since Jan 2021, when reddit daytraders became instant millionaires overnight after steamrolling such popular bearish hedge funds as Melvin Capital and other levered shorts who needed bailouts to avoid a total wipeout.

The list revealed that the most shorted company, with a short interest as % of float higher even than that of Carvana, was embattled crypto bank Silvergate:

It sported a 65% short interest as % of float, a number that has since risen to a record 66.8% of the float in the form of 20.2 million shares short as of Feb 1…

… or more than two-thirds of the company’s entire float!

While one can certainly argue that Silvergate has had its share of problems – especially in the aftermath of the FTX bankruptcy – which has led to the stock price losing some 87% of its value in the past year, the question whether those problems are existential has opened up a fascinating clash on Wall Street, where some of the most iconic hedge funds have amassed huge positions in Silvergate hoping for a powerful reversal in the stock price even as a familiar name, Soros Fund Management, has belatedly taken the other side, by going short on Silvergate using puts.

According to the latest 13F data, Ken Griffen’s Citadel filed a 13G form revealing that it is the owner of a 5.5% stake in Silvergate Capital consisting of roughly 1.73 million shares and worth about $25 million.

While it was unclear if Citadel’s position was a directional bet or merely the result of option-based market making, other hedge funds have also been piling in: on Tuesday another trading firm, Susquehanna, also reported in a 13G filing that it bought about 2.37 million shares, or a 7.5% stake in Silvergate.

The latest moves come after BlackRock said it boosted stake in Silvergate last month. A filing showed that the asset management giant had a 7.2% stake in Silvergate Capital as of Dec. 31, up from its prior 6.3% stake reported a year earlier.

One fund which definitely has a directional bias, however, is Anson Funds Management, whose 13F showed it owned 1.11 million Silvergate shares accounting for 3.5% of the company’s outstanding stock. We profiled the $1.6 billion Anson recently in the context of the best performing funds of 2022, when it posted a 7.6% return (remarkable in a year when 98% of hedge funds lost money), and followed 40% returns in both 2020 and 2021…

… as well as an impressive 800% total return since 2007.

And then there are the likes of Block.one and Bill Miller’s Miller Value: last November, Block.one owner Brandon Blumer – original developer of the EOSIO blockchain platform – bought a 3 million stake in Silvergate, equivalent to almost 10% of the float, and making him the single largest holder.

A few weeks later iconic tech investor Bill Miller also boosted his stake in Silvergate by 325K shares to 1.75 million shares, or 5.5% of the float. Roughly at the same time, Millennium Partners also quietly revealed a big stake in Silvergate, when in December the pod-based hedge fund revealed it owns 1.046 million shares, of 3.30% of the float. At roughly the same time none other than iconic quant fund Renaissance also revealed it holds 1.054 million shares as of Dec 31, or 3.33% of the float; while it quant peer, Two Sigma, also revealed that it owns 3.88% of the stocks as of Dec 31. Add to this the 4.26% owned by Marshall Wave as of Dec 31 and you end up with hedge funds and individual investors owning more than a third of the Silvergate float (and that’s not even counting Citadel’s holdings).

We expect to have an updated Silvergate holders list later today when all the latest 13F filings hit.

Of course, it wouldn’t be interest if there wasn’t someone notable on the other side – besides the usual retail army which has been aggressively adding to shorts since November – and today we got just that when everyone’s favorite Democrat puppetmaster, 92-year-old George Soros through his family office, Soros Fund Management, revealed that he is levered short against Silvergate, holding put options on 100,000 shares of Silvergate, with a market value of $1.74 million, as of Dec. 31.

And here is the punchline: while we don’t know what the Silvergate short interest as a % of float is today, according to S3 Partners, last week Silvergate had the biggest increase in short interest relative to tradable shares among Russell 3000 Index companies. As the table below shows, S3 calculates that Silvergate’s short interest has increased by 8.5% in just the past week; if accurate this would push its total short as a % of float to above 75%. That could be an issue.

Why is that an issue? Well, recall what happens when there are more shorts than float (and look no further than Volkswagen for the answer).

What happens next, and will Soros go the way of Melvin Capital? We doubt it – the fund’s short is tiny compared to its overall balance sheet. But that doesn’t mean it can’t start a modest gamma squeeze if the price of the extremely illiquid stock spikes, which then translates into a full-blown short squeeze. And indeed, when hedge funds collectively own enough float to leave the shorts hanging out to dry should they pull their borrow, making covering of every outstanding share impossible, then things get exciting.

Will the Silvergate hedge fund hotel do this, and are they just waiting for a few more last minute shorts – like Soros – to pile in and push up Silvergate’s short as a % of float to even more record highs before they collectively pull the borrow and start the fireworks, we hope to find out in the very near future.

No sooner did we write about how Tesla’s sales in China were perking up to start the new year thanks to price cuts, than it looks as though the increase in demand may be falling off to start the new month.

That was the topic of a new GLJ Research note to clients on Tuesday morning. Analyst Gordon Johnson looked at the company’s weekly China deliveries for the week of February 6th to February 12th and noted an apparent plunge in demand.

While the “trend” only looks to have been for one week so far, it is worth keeping an eye on, especially because Tesla has once again raised prices in China (as we noted days ago). Whether or not this was in response to the fall in demand or the cause of it remains unclear. 

Johnson wrote to clients: “In short, as detailed in Ex. 1 below, we remind our readers that in TSLA’s most important/profitable market of China, on Jan. 5th, 2023, due to lackluster demand, the company resorted to sharp price cuts across its suite of cars in China, to include: (a) -17.0% for the Model 3 SR, (b) -5.7% for the Model 3 P, (c) -13.4% for both the Model Y SR and Model Y LR, and (d) -9.6% for the Model Y P.”

Recall we wrote last week that the price of a Model Y had risen again to 261,900 Yuan. The price of the vehicle had been cut to 259,900 Yuan on January 6th from its original price of 288,900. 

He continues, noting the fall off in sales for the second week of February: “And, as detailed in Ex. 2 below, while these cuts resulted in a (mild) short-term boost in demand, this week TSLA sold just 6.963K cars in China, domestically, or a FRACTION of the roughly 17.734K adjusted cars/week TSLA produced in Shanghai in January 2023 (i.e., 58.270K cars produced ÷ [31 days in Jan. – 8 days of Shanghai plant shutdown in Jan.] = 2.534K adjusted cars produced/day in Jan.).”

“Stated differently, TSLA sold just 39% of its Shanghai adjusted production, domestically, this week,” Johnson says. 

Due to the plunge, Johnson revised his estimates for the year:

Using simple math, and also considering BYD sold 31.417K NEV cars (Ex. 3), domestically in China, Feb 6-Feb 12, or 4.5x that of TSLA (this is not a typo), barring another, large, price cut, we see TSLA’s 1Q23E China sales coming in around 90K, or down -25.8% QoQ from 4Q22’s 121K figure. At risk of stating the obvious, given Consensus currently expects TSLA to deliver ~129K cars, domestically, in China in 1Q23 (Ex. 4), this would be seen as a major headwind to TSLA’s growth narrative, as well as its ability to achieve 1.8M-to-2.0M in global sales in 2023E (as many currently assume).

Stated more clearly, should TSLA’s 1Q23 domestic China sales come in below and/or around 100K, as the data currently suggests it will, we believe the stock would come under acute selling pressure.

As for us, we’ll wait for another week – or even month’s – worth of data before claiming all has been lost in China for the quarter.

Update (1345ET): The NTSB has said in a Tuesday statement that “investigators have identified and examined the rail car that initiated the derailment,” adding “Surveillance video from a residence showed what appears to be a wheel bearing in the final stage of overheat failure moments before the derailment.“

The agency says it will publish a preliminary report on the incident in two weeks, as it is still examining evidence from the train and cars.

NTSB investigators have identified and examined the rail car that initiated the derailment. Surveillance video from a residence showed what appears to be a wheel bearing in the final stage of overheat failure moments before the derailment. The wheelset from the suspected railcar has been collected as evidence for metallurgical examination. The suspected overheated wheel bearing has been collected and will be examined by engineers from the NTSB Materials Laboratory in Washington, D.C.

The tank cars are currently being decontaminated. Once the process is complete, NTSB investigators will return to Ohio to complete a thorough examination of the tank cars.

The vinyl chloride tank car top fittings, including the relief valves, were removed and secured in a locked intermodal container pending an NTSB examination. Once the fittings are examined by NTSB investigators, they will be shipped to Texas for testing, which will be conducted under the direction of the NTSB.

According to the press release, the NTSB has obtained “locomotive event recorder data, forward- and inward-facing image recording data and wayside defect detector data.”

*  *  *

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

Transportation Secretary Pete Buttigieg has broken his silence on the disastrous derailment of a train in Ohio that released a toxic chemical, sparking health concerns.

The fiery crash in East Palestine, Ohio, on Feb. 3 involved about 50 cars, with some carrying hazardous materials, including the highly flammable chemical vinyl chloride.

The dangerous toxin was released into the air from five of the derailed cars before crews ignited it to get rid of the highly flammable chemical in a controlled fashion.

Area residents were evacuated because of the health risks from the fumes, though they have since been allowed back to their homes.

So far, there have been reports from local residents of animals dying off, including fish, chickens, and livestock.

Few federal officials have made public statements regarding the derailment and the toxic fire, and Buttigieg did not reference the incident during a Feb. 13 appearance at the National Association of Counties Legislative Conference in Washington.

‘Actively Engaged’

During the on-stage discussion, Buttigieg touched on topics like racial disparity and mentioned the safety risks of “balloons,” drawing laughs from the audience. But his avoidance of the topic of the derailment and the toxic chemical release didn’t go over well on social media, where critics complained that he seemed to be dodging the subject.

Buttigieg broke his silence following the criticism, posting on Twitter a series of statements.

“I continue to be concerned about the impacts of the Feb 3 train derailment near East Palestine, OH, and the effects on families in the ten days since their lives were upended through no fault of their own,” he said in a post on Twitter.

USDOT has been supporting the investigation led by The National Transportation Safety Board (NTSB). Our Federal Rail Administration and Pipelines and Hazardous Materials teams were onsite within hours of the initial incident and continue to be actively engaged.

— Secretary Pete Buttigieg (@SecretaryPete) February 14, 2023

He made reference to an investigation into the accident being conducted by the National Transportation Safety Board (NTSB), noting that the Department of Transportation (DOT) was assisting with the probe.

“Our Federal Rail Administration and Pipelines and Hazardous Materials teams were onsite within hours of the initial incident and continue to be actively engaged,” he said.

“We will look to these investigation results & based on them, use all relevant authorities to ensure accountability and continue to support safety,” Buttigieg continued.

As The American Prospect also reports, in a private Facebook group, East Palestine residents have shared anecdotes of continued lung irritation, headaches, and more.

Over the weekend, several residents posted images of their children suffering from rashes spread along their arms and faces. Others have described their homes as covered in residue, even after cleaning services were hired, suggesting that despite the notice that it was safe to return, residue from the accident remains in the air. Inside the group, they are urging each other to keep meticulous documentation for any future action against Norfolk Southern…

…Against this backdrop, a blighted landscape remains.

Advocacy groups have urged residents to call upon Gov. DeWine to request an emergency declaration from President Biden. At time of publication, an emergency has not been declared, leaving residents alone to attempt piecing their lives back together.

Meanwhile, a West Virginia water utility has enhanced its water treatment process as a precaution following the derailment.

West Virginia American Water said Sunday that there hasn’t been any change in raw water at its Ohio River intake.

“The health and safety of our customers is a priority, and there are currently no drinking water advisories in place for customers,” the company said in a statement.

It added that it is planning to install a secondary intake on the Guyandotte River in case there’s a need to switch to an alternate water source.

Read more here…

Authored by Charles Lipson via RealClear Wire,

Kamala Harris is a living embodiment of the Peter Principle, where people keep getting promoted until they reach jobs for which they are clearly unqualified. More and more Americans think that describes our current vice president.

Harris is deeply unpopular with independents, who are essential for electoral success (fewer than one in three voters view her favorably), and she is losing popularity among Democratic Party leaders. They see her ineptitude, listen to her word salads, and watch the polls with dismay. The latest evidence of Harris’ fading position is a sharply critical article in the New York Times, of all places, filled with anonymous disapproval from senior Democrats, many of whom once supported her. Now, they are worried.

Their fear is that although she’d be a drag on the 2024 party ticket, she’s almost impossible to drop. To win, Democrats need enthusiastic support from African Americans, who are likely to be insulted if Harris is dumped. That problem might be averted if she were replaced by another African American. But there are no obvious alternatives. If Harris is replaced, it would likely be by a white or Hispanic candidate.

Such a change would roil a party deeply invested in the politics of racial and ethnic identity, where losing groups are seen as aggrieved victims, winners as “privileged” oppressors. Those divisions are most virulent when they center on America’s historic wound of race, and they would be turned inward on the party.

Normally, voters don’t care much about the vice presidential nominee, even when they aren’t wild about the choices, as we learned in 1988 when George H.W. Bush chose Dan Quayle and again two decades later with John McCain’s surprise selection of Sarah Palin. But 2024 is likely to be different if Biden runs again. He is already the oldest person to sit in the Oval Office, and he is showing his age. Although gaffes have plagued Biden throughout his career, they have grown worse in recent years. There’s a reason he refuses to hold press conferences.

Voters are not blind to this quandary inside the White House. It’s a reasonable inference that a man who would turn 86 during a second term in the Oval Office might not be able to finish the job. His vice president would be forced to step in. Polls show voters are not thrilled with the prospect of Kamala Harris doing that.

What’s the evidence voters are unhappy with Harris? The best evidence comes from the last two campaigns, as well as recent public opinion surveys. When Harris ran for president in 2000, she had to drop out before the first primary votes were cast. Despite a glamorous roll-out that included national magazine covers and glowing endorsements, her polling stood at less than 1% in the Democratic primary field. That failure is stunning because her résumé checked all the boxes Democrats love: She was a progressive, a woman, a racial minority (black and Asian), and a senator from a deep blue state, who could raise big money from wealthy California donors. But checking all those boxes wasn’t enough after primary voters got a closer look.

The 2022 mid-terms exposed Harris’ flaws yet again. Normally, the White House dispatches the veep to crisscross the country, appearing with candidates eager to be seen with such a prominent national figure. Not this time. Although candidates wanted her help in raising money, they wanted it behind closed doors. No joint public appearances, please.

Harris was also damaged politically when she was saddled with the informal title of “border czar.” Joe Biden gave her that thankless task. It was his decisions, not hers, that opened the border to record numbers of illegal immigrants, deadly drugs, and Mexican cartels. But Vice President Harris and Homeland Security Secretary Alejandro Mayorkas have become the public faces of that failed policy. They compounded the problem by denying the obvious. Time after time, they declared our southern border is closed and secure. No one believes them, and for good reason. Not only have illegal border crossings reached record highs, the administration has no solutions.

These cumulating problems have eroded Harris’ popularity. It was over 50% when she and Biden took office. Now, more than half the adults surveyed view her unfavorably, including some 40% who view her “very unfavorably.” The flip side of the ledger is no better. Only 14% say they have “very favorable” views; another 22% are “somewhat favorable.” These bleak numbers are even worse than Biden’s and make her one of the least popular vice presidents in recent history. They also explain why, if Biden runs again, only 39% want her as his running mate.

Harris’ unpopularity is not limited to one or two groups. The latest Quinnipiac Poll shows she is substantially underwater with all demographic groups except one. Among blacks, 62% of registered voters view Harris favorably; only 17% unfavorably.

This racial divergence is the crux of the Democrats’ predicament.

Would this dilemma disappear if Biden chose not to run? Not necessarily. In an open contest for the nomination, Kamala could well lose to another prominent Democrat, such as Sen. Amy Klobuchar, Gov. Gavin Newsom, or Transportation Secretary Pete Buttigieg. If Harris lost after sharp attacks and primary voting split along racial lines, the outcome could pose a problem for Democrats in the general election.

Those troubles would be dwarfed, however, if Harris actually won the nomination and faced a stronger Republican candidate than Donald Trump, without his trainload of baggage.

If Biden does run again, he’s probably stuck with Harris. Democrats have painted themselves into this corner. For decades, they have mobilized voters with identity politics. They have highlighted group differences and amplified their grievances. As Joe Biden once told a black audience, they “want to put y’all back in chains.” Now, that rabid dogma threatens to bite its owner.

Authored by Paul Joseph Watson via Summit News,

USA Today raised some eyebrows when it deviated from the usual narrative by acknowledging “little by little” Russia is winning the ground war in a pivotal area of Ukraine, citing a quote given by a pro-Ukraine spokeswoman.

The admission was in relation to the battle for the city of Bakhmut in Ukraine’s eastern Donbas region.

Russia has been fighting fiercely to take back the city since last summer, and now appears to be pouring more manpower into the region to finish the job.

“They have been trying to take the city since July,” Iryna Rybakova, press officer for Ukraine’s 93rd Brigade, told BBC. “Little by little they are winning now. They have more resources, so if they play the long game they will win. I can’t say how long it will take.”

Moscow has established control of both main roads into the city, with only one back route left open, making it increasingly difficult to get supplies to Ukraine troops.

‘Little by little they are winning’: Russian offensive underway as tide turns in key Ukraine city. Updates. https://t.co/UqVDMFcM5J

— Tellme Times (@tellmetimes) February 13, 2023

Ukraine President Volodymyr Zelensky’s office also admitted that the turf war had become “difficult,” while Donetsk Gov. Pavlo Kyrylenko said, “We’re seeing a very tough battle in which the Russians aren’t sparing neither themselves nor us.”

As Chris Menahan notes, the statements contradict legacy media narratives that Russia is running out of weapons and supplies, which has been the dominant mantra since just after the start of the conflict.

“Nonetheless, the US and NATO keep stringing Ukraine along with this BS to encourage them to fight their proxy war with Russia,” writes Menahan.

“The most likely outcome of this war is that Russia will take the Donbas and Ukraine will agree not to join NATO and recognize Crimea as Russian, which is an outcome that could have been achieved 10 months ago (with a tiny fraction of the deaths and the EU/global economy intact) if the US and NATO didn’t bribe the Zelensky regime with over $100 billion to keep the war going in perpetuity.”

For months now, numerous mainstream media outlets have been pushing the narrative that Russia is being routed in many areas of Ukraine and that the war could have entered its final phase.

Much of this appears to be little more than pro-NATO propaganda to boost morale, which paradoxically in the longer term could actually harm morale if Ukrainian forces aren’t prepared to dig in for a prolonged war.

*  *  *

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We already shared several kneejerk reactions from Wall Street’s peanut gallery, now it’s time for the slightly more refined and thought out takes, courtesy of some of the biggest banks such as BofA, Goldman and JPM.

We start with BofA chief economist Michael Gapen who writes that the January CPI report was in line with expectations, and notes that over the last three months core CPI has increased at a 4.6% annualized rate, accelerating slightly from the 4.3% pace in December. In Gapen’s view, “there is not a lot of new information in this report. The Fed will need to see moderation in services inflation before having confidence that 2% is achievable. Today’s report did not drastically alter the risks around the policy outlook.” As a result, BofA still sees risks tilted to a terminal above the bank’s baseline estimate of 5.0-5.25% on account of labor markets and risks around services inflation staying sticky.

Some more details from BofA’s report:

• The increase in headline CPI was largely driven by two components: energy and shelter. Together these components accounted for three-fourths of the 0.5% increase. Energy prices rose by 2.0% m/m driven by higher gas prices and shelter inflation rose by 0.7% m/m. The former was stronger than BofA expected, while the latter was roughly in line with expectations. Additionally, food prices rose by 0.5%, in-line with the revised trend in 4Q. 
• Meanwhile, core inflation was also driven by shelter inflation, which accounted for 32bp of the 41bp increase. Within core inflation services remained sticky at 0.5% m/m. Over the last three months, core services prices have risen by 6.8% annualized, well above the pre-pandemic pace. Granted much of the increase in core services reflects the ongoing strength of shelter inflation, which increased by 0.7% m/m. Within shelter Owners’ equivalent rent (OER) and rent rose by 0.7%, in line with our expectations. However, lodging away from home surprised relative to BofA’s forecasts with a 1.2% m/m increase. 

• Outside of shelter. Medical care services fell by 0.7% m/m owing to a 3.6% drop in health insurance and a 0.1% decline in professional services. This was much weaker than BofA’s expected 0.1% m/m decline. Meanwhile, other services generally accelerated this month with transportation services rising by 0.9% m/m, education, and communication up 0.5% m/m and recreation services up 0.7% m/m. The Fed will likely take little comfort in these readings as it looks for signs that services inflation ex-housing is moderating. 
• While core services inflation was broadly in line with expectations, core goods inflation was stronger than Gapen expected, rising by 0.1% m/m. This broke a streak of three consecutive decreases in core goods prices. Used car prices did fall again (-1.9% m/m), but that streak may be coming to an end soon based on data from Manheim (Exhibit 3). Additionally, the weight of used cars was reduced in the latest update. Therefore, it should be less of a swing factor moving forward. Excluding used cars, core goods rose by 0.5% m/m and 3.5% annualized over the last three months. While this is a noticeable deceleration, it is well above the pre-pandemic pace. Additionally, it suggests that goods price deflation is not broadening outside of used cars as BofA had been anticipating.

Next, we take a look at the reaction from Goldman’s Jan Hatzius, who as a reminder forecast inflation prints that were well above consensus and was therefore not wrong, and who writes that January core CPI rose 0.41%, slightly above consensus and its recent trend, and the year-on-year rate fell one tenth to 5.6%. According to the Goldman strategist, “start-of-year price increases were larger than normal in several categories including prescription drugs and private transportation services, but used car prices and airfares surprised to the downside.” Meanwhile, shelter categories finally decelerated (just barely).

Some more details from the GS report:

January core CPI rose 0.41% (mom sa), slightly above consensus of 0.4% but below our forecast of 0.49%. The year-on-year rate fell another tenth to 5.6%, above consensus and in line with our forecast.

The January effect—the interaction between start-of-year price setting and pent-up cost pressures—resulted in larger than normal price increases in several categories including prescription drugs (+2.1% mom), car fees (+1.2%), and several labor-reliant categories like nursing homes (+1.4%), car repair (+1.3%), day care (+0.7%), and food away from home (+0.6%). The key exception was physician services, for which prices declined 0.1%.

Hospital services (+0.7%) and personal care services (+0.2%) were also a bit softer than our expectations.

Used car prices (-1.9%) and airfares (-2.2%) declined by more than we expected and contributed -11bps to the monthly core reading. With used car auction prices and jet fuel prices moving higher at the start of the year, we expect this weakness to partially reverse in coming months.

Shelter categories finally decelerated (rent +0.74% vs. +0.79% in December, OER +0.67% vs. +0.79%), likely reflecting weakness in the new rental market and the larger OER weight on single-family homes implemented with today’s report.

Apparel (+0.8%) and new car (+0.2%) prices were firm, in our view reflecting positive residual seasonality.

Core services prices excluding rent and OER rose 0.36%, 0.03pp firmer than the prior 3-month average.

Headline CPI rose 0.52%, as energy prices rose 2.0% and food prices rose 0.5%.

Finally, here is JPM’s Daniel Silver who writes that “the main consumer price index (CPI) aggregates were pretty close to expectations in January, with the headline rising 0.5% and the core index moving up 0.4% (0.41% to two decimals).”

This headline gain was the firmest monthly change reported for this index since last June, and the January increase in the core was the strongest monthly change in four months. Even so, we think that the broad trends for inflation are moderating even if they remain firm.

In terms of year-ago inflation rates, the headline moved down from 6.5% in December to 6.4% in January while the core eased from 5.7% to 5.6%. Thursday’s PPI report also will contain important relevant information, but for now with only the January CPI data in hand, we think that January core PCE inflation is tracking a 0.44% monthly gain. The corresponding year-ago rate is expected to come in basically unchanged between December and January after rounding, at 4.4% oya.

In terms of some of the CPI report’s main details, Silver notes that the 2.0% increase in energy prices in January and the 0.5% increase in the food price index were pretty close to, but marginally above, his forecasts. Excluding food and energy, the core index came out a little below our forecast, in part because used vehicle prices fell another 1.9% in January (Silver had looked for a modest increase as industry data show recent firming in prices). Meanwhile, apparel prices increased 0.8% in January, the firmest monthly change in about a year, and prices for medical care commodities jumped 1.1%, the biggest increase in about three years.  On the whole, core goods prices rose 0.1% in January, a fairly soft monthly change, but the firmest monthly gain since last August.

Elsewhere in the CPI, JPM notes that core services prices rose 0.5% in January, with this gain in line with the average rate of inflation for this aggregate from the past few months. Shelter inflation continued to look strong in January, including a 0.74% increase for tenants’ rent and a 0.67% increase in owners’ equivalent rent. Changes to the other main components within the core services aggregate were mixed, with a 0.7% drop in medical care services prices standing out on the downside. This weakness in medical care services prices reflected another drop in health insurance prices (continuing the recent very weak trend) and also a 0.1% move down in prices for related professional services, which marked the first monthly decline for this series in almost a year.

* * *

As a result of today’s data, Goldman continues to expect a 25bp rate hike at each of the next two FOMC meetings, with risks skewed towards additional hikes.

As for BofA’s Gapen, he writes that “there is not a lot of new information in this report” and adds that “on net, the disinflation we are seeing remains narrow, driven by a few key core goods components, and it has yet to broaden. The Fed will need to see moderation in services inflation before having confidence that 2% is achievable.” As such BofA sees risks to its terminal rate forecast of 5.0-5.25% “as being tilted to the upside on account of labor markets and risks around services inflation staying sticky.”

All source reports available to pro subs.

Authored by Jonathan Turley,

The White House has drawn the ire of the Twitter community by repeating President Joe Biden’s dubious claim that his administration had achieved a historical feat on budget reduction. The President often tells the public that he is responsible for the largest deficit reduction in history. It is a claim that has drawn widespread criticism in the past. Even The Washington Post balked and previously gave Biden “three Pinocchios” for the claim.

The earlier spending and then sharp reduction were due to the pandemic, not Biden’s policies. Indeed, the reduction would have been far greater but for enormous spending by the Administration.

The White House posted a Tweet on Monday that said:

“The Biden-Harris Administration lowered the deficit with the single largest one-year reduction in American history.”

Twitter responded with a fact correction in a “Community Notes” section that:

“COVID-driven deficits in both FY20 & 21 were roughly double the previous record (09), making the drop to FY22 sizeable. But the FY22 deficit is still the 4th largest in history and is 41% larger than FY19.”

“Community Notes” is a program run by Twitter and allows readers “on Twitter to collaboratively add context to potentially misleading Tweets.”

Biden repeatedly takes credit for the fact that the annual federal deficit fell from $3.1 trillion in fiscal year 2020 to $1.4 trillion in fiscal year 2022, a drop of $1.7 trillion. However, the truth is that he is responsible for a larger deficit than predicted.

In February 2021, the Congressional Budget Office (CBO) already estimated that the budget deficit in fiscal years 2021 and 2022 would drop $3.31 trillion due to the fact that emergency COVID pandemic spending would lapse. That was before Biden’s spending plans were even submitted to Congress.

However, the deficits for 2021 and 2022 ended up totaling $4.15 trillion, according to the CBO. In other words, the deficits for those years were about $840 billion higher than expected due to the Biden-supported spending packages.

The White House correctly withdrew the Tweet, but the President continues to make such highly misleading claims.

Previously, the Washington Post gave President Biden a “bottomless Pinocchio” due to continued and regular false statement

Air Moldova announced through its social media accounts Tuesday the country’s airspace has been temporarily closed, with some flights being canceled.

“We are waiting for the resumption of flights. Today’s schedule will undergo changes,” the company wrote without giving details. Moldovan media outlets have meanwhile said the country’s airspace had been breached by one or more drones earlier in the day, which would make the second significant airspace breach in under a week, after a Russian cruise missile fired from the Black Sea briefly briefly entered Moldovan air space days ago.

Some reports have indicated “a large number of drones” were observed near Chisinau airport in what could possibly be spillover from the neighboring war in Ukraine.

Just as these reports emerged of an unknown UAV breach, the Kremlin issued a statement angrily rejecting the Moldovan president’s Monday allegations that Russia is plotting to overthrow the pro-EU government and replace it with a Russia-friendly one.

President Maia Sandu had described an elaborate plan by Russian intelligence to destabilize and collapse the government using color revolution-style tactics. She claimed that Kremlin agents are preparing to flood the country with Russian, Belarusian and Serbian agents provocateurs to steer protests and unrest in order to “change the legitimate government to an illegal government controlled by the Russian Federation.”

On Tuesday Russia’s Foreign Ministry spokeswoman Maria Zakharova called Sandu’s claims “absolutely unfounded and unsubstantiated.”

“They are built in the spirit of classical techniques that are often used by the United States, other Western countries and Ukraine,” Zakharova said, pointing the finger back at the West for itself utilizing color revolution strategies in Eastern Europe.

“First, accusations are made with reference to purportedly classified intelligence information that cannot be verified, and then they are used to justify their own illegal actions.”

⚡️Airspace over Moldova appears to have closed.

Local media reporting “drones” in the air. All unconfirmed as of now pic.twitter.com/O3Rf6vhxhB

— War Monitor (@WarMonitors) February 14, 2023

All of this has put intense pressure on the Chișinău government. Moldova was granted EU candidate status in June 2022, but the deeply impoverished nation is believed to have a long way to go, and its struggling energy sector was recently bailed out by Western donors.

Not only does Moldova border Ukraine, but its breakaway Transnistria region has long had a Russian troop presence. Last week Ukrainian President Volodymyr Zelensky was the first to issue a specific claim that there’s an active Russian intelligence plot “for the destruction of Moldova”. 

While not a NATO country, and unlikely to ever be one, NATO has of late pledged a deepened ‘partnership’ with it’s pro-EU leadership.