Authored by Henry Schwartz via CBOE.com,

The ratio of listed option put volume to call volume is a well-known measure for traders who appreciate a relatively simple metric comprised of accessible data that can be applied across assets and time frames.

Like most indicators, interpretation of the put/call ratio involves several assumptions – primarily that puts express a bearish view, while calls are bullish. Like the Cboe Volatility ® (VIX®) Index, a high put/call ratio is often considered a sign of investor uncertainty, while a low level usually indicates optimism. Historical data generally supports this assumption, as the put/call ratio typically spikes during crashes and reverts to lower levels in bull markets.

In practice, many traders prefer to examine put/call ratios for index, ETF and equity products separately based on the characteristics and use cases across products. For convenience, Cboe Global Markets® provides daily summary data for several market statistics, including a put/call calculation that isolates equity (single stock) options flow trading on the hybrid Cboe Options Exchange (C1). 

Cboe Equity Put/Call

Source: Cboe Daily Market Statistics

As shown in the chart above, the daily average put/call ratio over the past five years has ranged from about 0.4 to 0.8, with a trendline near to 0.6, or three puts trading for every five calls. Prior to 2022, the highest p/call ratios correspond to significant market shocks, while the lowest levels were seen during the 2020-21 bull market, when the S&P 500® Index nearly doubled from 2300 to 4600 in 21 months.

Confounding some analysts and financial media, including columnists at Forbes, MarketWatch and Interactive Brokers, is the recent rise of the average daily put/call ratio on C1 to nearly 1.0 in the current quarter despite a rebound for equities and lower levels of volatility, illustrated by a climb of nearly 5% for the S&P 500 and a decline of nearly 10 points for the VIX® Index.

Source: WhatsTrading (trade-alert.com)

The inclusion of equity option data from all exchanges paints a similar picture, with the put/call ratio spiking to 0.85 in Q1 2020, followed by nearly 18 months at very low levels near 0.4 and a sharp climb higher this year to the current level peak near 0.84.

Equity Put/Call Ratio and Volume All Markets

Source: Cboe DataShop Option Sentiment

A closer look at recent daily data shows interesting spacing of the highest put/call ratios with Wednesdays consistently seeing the highest levels.

Cboe Equity Put/Call

Intraday data for one of the highest spikes on December 7 shows large surges of put volume hitting the market at 1 p.m. ET, and again near 2:30 p.m., causing the ratio to jump sharply from 0.86 to nearly 1.3 on the day.

Equity Put and Call Volume and P/C Ratio Per-Minute, All Markets – December 7, 2022

Examination of trade-level data on this day shows several large deep-in-the-money (ITM) put trades in AMZN with total volume exceeding open interest by a wide margin, eliminating the possibility of closing activity.

Source: Cboe Trade Alert

The most active contract, the 1/23 125 AMZN put, saw nearly 99k contracts trade, compared to 9,275 contracts open at the time. Open interest the next day was little changed.

Source: Cboe Trade Alert

A look at most-active ITM put flow on that date shows similar deep in the money activity in C, TSLA and BABA, with little next day open interest change. 

Source: Cboe Trade Alert

Breaking the data down by moneyness identifies a trend that accelerated in the second half of 2022—a surge in ITM put activity (black line near the bottom)—making up nearly 11% of the ADV in Q4 compared to a multi-year average near 5%. In fact, Q4 2022 ITM put share is higher than both ATM put and call share.

Equity Option Marketshare by Option Type

Source: Datashop Option Sentiment 

The incidence of heavy volume in deep ITM contracts with no resulting open interest is indicative of a strategy employed by the largest market participants to minimize exposure to early assignment. Commonly seen in deep ITM calls ahead of an ex-dividend date, this type of activity creates large blocks of open interest that are immediately assigned by another party. The net effect is that early assignment on original short positions is avoided based on the percentage pro-rata allocation method used by OCC. Another effect is a sharp spike in the equity put/call ratio that is nondirectional and unrelated to typical option use cases.

Historically, dividend related ITM call exercises have resulted in some of the highest call volume days of the year, including March 15, 2012, when a record 9M calls traded in SPY, but changes to the clearing process since then have dampened that activity. 

Mathematically, the decision to exercise a call or put early is related to the extrinsic value of the contract. For calls, if the dividend(s) amount exceeds the extrinsic value, a long holder is usually better off exercising. For puts, the decision is a bit more subtle, with extrinsic value compared to the carry cost on the strike. As U.S. interest rates have increased sharply to decade-highs this year, the cost of carry for deep positions has increased, while the selloff in many popular stocks has resulted in large blocks of deep put open interest. Unlike dividend-related call exercises, which tend to happen quarterly, put exercise dynamics may repeat daily if positions are open. In practice, put exercises are more common on Wednesdays based on the timing of settlement. Puts exercised on a Wednesday result in a stock sale on Thursday, which settles Monday.

 Fortunately, early-exercise candidate call and put strikes for all listed products are calculated intraday and available in a subscription product on the Cboe DataShop.

A sample from the file for December 7 shows that all the active Amazon deep put strikes were considered optimal to exercise as of 2 p.m.

Source: Early Exercise Strike by Option Class – Subscription

Understanding that simple total put/call ratio calculations are likely to be impacted by noise from exercise-related activity for some time, it makes sense to consider alternate approaches that would yield more stable output.

One method involves exclusion of in-the-money options entirely, effectively avoiding the most likely contracts that would be subject to dividend (calls) and carry (puts) early assignment: P/C using only OTM and ATM contracts.

All Markets Equity NON ITM Put/Call Ratio

Source: Data Shop Option Sentiment

Another method takes advantage of the account-type volume disclosed in the Cboe Open-Close datasets, available for each of Cboe’s four options exchanges C1, C2℠, EDGX ® and BZX ®. As the accounts involved in the exercise-related volume are not customers, a put/call ratio calculated from the customer totals will be unaffected and remain relatively flat over the past six months. 

Cboe Equity Put/Call Open-Close File Data

Source: Cboe Open-Close Volume Summary 

A last alternative would be to focus on smaller executions, using the size brackets included in the Open-Close datasets. This “Small Trade P/C” avoids the distortion of the large-scale early-exercise activity and may support a better picture of small-trader sentiment across time and product.

Equity Option Small Trade P/C

Source: Cboe Open-Close Volume Summary 

As we approach the 50th anniversary of listed options and Cboe, it’s a good time to reflect on how far our markets have come while acknowledging that some aspects of the business are remarkably unchanged. Focusing on the data side, exchanges and vendors are now processing over 170 billion messages per day1 from 16 exchanges that list nearly 1.5 million contracts on over 6,000 stocks, ETFs and indices. In 2022, volume surpassed 10.3 billion contracts, or nearly 42 million contracts daily, a new record that is more than double 2019 levels. New technologies and business models have widened customer access to listed options, while strong growth in listings and expiration cycles have resonated with retail and institutional traders who have embraced options in their quest to efficiently adjust risk and express specific views.

Despite these changes, the need for simple and effective ways to characterize market activity and investor sentiment persists. For any area of interest, a close examination of volume, volatility and options can deliver quantitative and qualitative insights to enhance understanding and complement any approach to capital and risk management.

Update (1500ET): FTX founder Sam Bankman-Fried has pleaded not guilty to criminal charges, and is set to face trial in October.

Appearing on Tuesday in US District Court in New York, US District Judge Lewis Kaplan set a trial date of October 2nd for the disgraced crypto king, after US prosecutors said they expect to submit all of their evidence in the case over the next month, Bloomberg reports.

While the plea was not unexpected, it buys the 30-year-old more time, legal experts say. Bankman-Fried will get a better idea on the evidence prosecutors have against him and plan his next move. The plea puts the case on track for a lengthy trial, which could last at least four weeks.

Bankman-Fried emerged from a black SUV into a crowd of photographers and TV crews Tuesday, ahead of a 2 pm hearing scheduled in New York. In December, US prosecutors in Manhattan revealed eight criminal counts against him, including wire fraud and campaign finance violations. -Bloomberg

Prosecutors have accused the 30-year-old of stealing billions of dollars of customer funds from FTX, and defrauding investors and lenders to Alameda Research, his trading arm. He also allegedly made millions of dollars in illegal campaign contributions funded by Alameda.

SBF has previously said he didn’t ‘intend’ to commit Fraud, but acknowledged making mistakes.

*  *  *

FTX founder Sam Bankman-Fried has asked a judge to conceal the identities of two people who will help secure his bail in addition to his parents’ house in Palo Alto, California, Bloomberg reports.

“If the two remaining sureties are publicly identified, they will likely be subjected to probing media scrutiny, and potentially targeted for harassment, despite having no substantive connection to the case,” wrote SBF’s lawyers in a letter filed on Tuesday seeking redactions of the names of the two individuals who intend to sign as sureties to his bail.

“Consequently, the privacy and safety of the sureties are “countervailing factors” that significantly outweigh the presumption of public access to the very limited information at issue,” the letter continues.

Bankman-Fried’s $250 million bail package – granted in his first appearance on US soil since his arrest in the Bahamas, was secured by his parents’ Palo Alto home, which is worth nowhere near that amount. The judge in the case also required that two people of “considerable means,” at least one of whom cannot be a relative, also sign the bond.

Bankman-Fried was granted a $250 million bail package in December, one of the largest in US history. The personal recognizance bond approved by the judge was secured by the equity in Bankman-Fried’s parents home in Palo Alto, California, which is almost certainly not worth anywhere near that amount. But outsized bonds are more a means of establishing harsh financial consequences for bail-jumping and are often backed by assets worth only around 10% of the stated amount. -Bloomberg

The two individuals have not yet signed the bond but intend to do so by the Jan. 5 deadline, according to the letter.

Bankman-Fried is set to appear in a Manhattan federal court on Tuesday to face charges on eight criminal counts ranging from wire fraud to conspiracy to commit money laundering, to conspiracy by misusing customer funds, CNN reports. He is expected to plead not guilty.

He faces 115 years if convicted on all charges.

Update (1455ET): Kevin McCarthy has lost the second tally for Speaker of the House.

McCarthy Fails Again In Second Ballot pic.twitter.com/ElBa7bLjM6

— The Columbia Bugle 🇺🇸 (@ColumbiaBugle) January 3, 2023

Of note, when this happened in 1923, it went to nine ballots.

And look who’s gaining steam…

The 19 who voted for Jordan on second ballot

Andy Ogles
Lauren Boebert
Michael Cloud
Anna Paulina Luna
Mary Miller
Keith Self
Andy Biggs
Dan Bishop
Andrew Clyde
Phil Crane
Matt Gaetz
Bob Good
Paul Gosar
Andy Harris
Josh Brecheen
Ralph Norman
Scott Perry
Matt Rosendale
Chip Roy

— Manu Raju (@mkraju) January 3, 2023

#NeverKevin

Cc: MTG pic.twitter.com/4nyf2M6Sml

— Laura Loomer (@LauraLoomer) January 3, 2023

*  *  *

Update (1310ET): Not even a quarter of the way through roll call, and Kevin McCarthy (R-CA) has failed to secure enough votes to become Speaker of the House – which will push the contest into a multiple-ballot vote.

MCCARTHY NO VOTES:
Biggs — Biggs
Bishop — Biggs
Boebert — Jordan
Breechen — Banks
Cloud — Jordan
Clyde — Biggs
Crane — Biggs

— Olivia Beavers (@Olivia_Beavers) January 3, 2023

BREAKING: Rep. Kevin McCarthy appears to lose first ballot for House speaker.

Watch live: https://t.co/MPjgQRmzjX pic.twitter.com/wOrUCWbmzc

— MSNBC (@MSNBC) January 3, 2023

According to the Washington Post‘s Paul Kane, the last time this happened was 1923.

We are into uncharted territory: No one in House chamber right now has ever been alive for a multiple-ballot vote for House speaker, let alone seen one in person.
With 7 votes from Rs for someone other than McCarthy, we are certain to head to a 2nd ballot.
Last one: 1923.

— Paul Kane (@pkcapitol) January 3, 2023

What’s next? As Politico reports:

After McCarthy fails to get 218 votes on the first ballot, the Freedom Caucus antagonists have signaled that they will start backing another yet-unnamed candidate on the second ballot. The Daily Beast reported Monday night that that person is Ohio Rep. JIM JORDAN, the longtime McCarthy critic-turned-ally.

The Ohio Republican, however, has no shot at being speaker — something that his adoring conservative colleagues know very well. But, per the Daily Beast story, that’s not the point: They’re hoping to peel off more Republicans to back Jordan, aiming to have McCarthy’s vote count decrease from the first ballot to the second.

It’s an open question how long today will go until someone nominates a viable candidate for the gavel — someone like STEVE SCALISE (R-La.) or PATRICK McHENRY (R-N.C.). And there’s a fear that if one of these member’s names is called too early in the process, the conference will turn on them.

Buckle up. It’s going to be a long day. 

Hakeem Jeffries will likely win the plurality vote, but you need a majority vote to be the speaker. So they will just keep voting until someone gets a majority. In 1855 that took 2 months. #mccarthy #118thCongress #Speaker

— Ben Sheehan (@ThatBenSheehan) January 3, 2023

McCarthy’s loss on the first vote is a terrible day for mediocre Americans. Millions of Americans are mediocre, and they deserve representation too.

— Ian Millhiser (@imillhiser) January 3, 2023

*  *  *

Rep. Kevin McCarthy (R-CA) gave a Tuesday morning speech imploring fellow Republicans to elect him as Speaker of the House, as several notable members of the GOP have openly opposed McCarthy.

According to Axios, McCarthy has given hardliners nearly everything they’ve asked for, however he still hasn’t secured enough votes for the position, meaning that for the first time in 100 years, the House will likely hold multiple ballots for the speaker.

In his Tuesday speech, McCarthy listed all the concessions he’s made to the right, and pointed out that Rep. Matt Gaetz (R-FL) praised elements of his rules package. Gaetz, notably, has spearheaded the anti-McCarthy movement within the chamber.

Gaetz, of course, has been rallying support against McCarthy. https://t.co/JcxS2Wx5sU

— Jake Sherman (@JakeSherman) January 3, 2023

“I’ve earned this job,” said McCarthy, after running through everything he’s done to become speaker – to which Rep. Chip Roy (R-TX) reportedly shook his head, according to Punchbowl News’ Jake Sherman.

“This is bullshit,” said Rep. Lauren Boebert (R-CO) in response to McCarthy’s speech.

.@mkraju just dropped a “bullshit” on CNN pic.twitter.com/53xj9p4VCE

— Aaron Rupar (@atrupar) January 3, 2023

In December, Gaetz said he wouldn’t vote for McCarthy because he’s “just a shill of the establishment.”

I’m not voting for Kevin McCarthy for Speaker because he’s just a shill of The Establishment.

The reason most of my Republican colleagues are supporting him is because they benefit from the redistribution of lobbyist & special interest money from McCarthy to their campaigns. pic.twitter.com/bdJmjwy6W7

— Rep. Matt Gaetz (@RepMattGaetz) December 27, 2022

McCarthy also got into an argument with Rep. Perry, who accused McCarthy of having no track record on spending bills.

Perry & McCarthy got in a heated back and forth, even raising their voices-

Perry accused McCarthy of not having a track record on spending bills “You have no track record.”

McCarthy asked Perry what he is still fighting for

With @mkraju @MZanona

— Annie Grayer (@AnnieGrayerCNN) January 3, 2023

McCarthy’s supporters chime in:

In addition to Rep. Marjorie Taylor Greene (R-GA), McCarthy has the support of neocon Dan Crenshaw (R-TX), who has called McCarthy’s detractors “enemies” and “narcissists.”

“They are enemies now. They have made it clear that they prefer a Democrat agenda than a Republican,” Crenshaw told CNN‘s Manu Raju.

“This handful of members is very clearly looking for notoriety over principle. That’s what it is. And anyone who suggests differently is in some kind of make believe fantasy reality. It’s not, it’s not true,” he continued, adding “They lost those debates.”

“That should have been the end of it because that’s how a team works, right? But if you’re a narcissist, … then you’ll keep going. And you’ll threaten to tear down the team for the benefit of the Democrats just because of your own sense of self importance.”

“We will not vote for anyone else but McCarthy,” Crenshaw said. “These people think they’re stubborn, we’re more stubborn.”

— Manu Raju (@mkraju) January 3, 2023

Another McCarthy supporter, Mike Rogers (R-AL), said the GOP should bar McCarthy dissenters from getting committee slots – an idea Chip Roy didn’t like. 

CHIP ROY and MCCARTHY just got into it. @chiproytx Roy said he tried to negotiate on rules. McCarthy thanked him for handling it respectfully and said Roy should say yes more.

— Jake Sherman (@JakeSherman) January 3, 2023

Here’s Roy in December explaining the situation;

According to Axios, this could become a war of attrition in which “[a] good number of pro-McCarthy House Republicans are hoping some of the holdouts are bluffing and looking for a show — and will ultimately get worn down enough during the process to cave for McCarthy.”

Do you remember who made a formal nomination speech in support of KEVIN McCARTHY to be SPEAKER OF THE HOUSE on January 3, 2019?

*****It was your new best friend LIZ CHENEY*****

And now you know why Kevin McCarthy did not get a criminal referral to DOJ from the @January6thCmte!! pic.twitter.com/vhYmQEoWLV

— Don Winslow (@donwinslow) January 3, 2023

The likely candidate to replace McCarthy, in the unlikely event he pulls out, is Rep. Steve Scalise (R-LA), who said he won’t run against McCarthy but has been quietly preparing for this scenario.

It doesn’t look like McCarthy is too worried…

GOP Leader McCarthy has moved into the speakers suite but if he fails to secure 218 he will have to move all his stuff back out ⁦@AllieRaffa⁩ pic.twitter.com/Lb2swMgQ2p

— Haley Talbot (@haleytalbotnbc) January 2, 2023

As DB’s Henry Allen puts it succinctly, “2022 was an awful year for financial markets, with the S&P 500 seeing its worst annual performance since 2008, just as global bonds fell into a bear market for the first time in 70 years.”

The biggest driver of this was much stronger-than-expected inflation, which hit multi-decade highs and led central banks to embark on their most aggressive tightening cycle in a generation. In the meantime, investors also had to grapple with geopolitical turmoil, since Russia’s invasion of Ukraine led to massive spikes in energy and food prices that particularly hit emerging market economies. That meant commodities were among the few assets that ended the year in positive territory. But elsewhere, the picture was far less rosy, and just 9 of the 38 non-currency assets in DB’s sample made gains over 2022 as a whole, whilst in USD terms it was just 6 out of 38.

Year in Review – The high-level macro overview

The start of the year contained much of the themes that continued over the rest of 2022, with January seeing central banks pivot in a hawkish direction in response to continued and persistent inflation. For instance, investors initially expected the Fed to hike by just 74bps over 2022 as a whole, which was roughly in line with the FOMC dot plot from December 2021 that pointed to three 25bp hikes. But by the end of January, futures were pricing 123bps of hikes by year-end, with an initial rate hike widely expected for March.

That trend continued into early February, with growing speculation that the Fed might start the hiking cycle with a larger-than-usual 50bp hike. But by mid-February there were growing warnings that Russia was about to invade Ukraine, which then occurred on February 24. That led commodity prices to surge, with Brent crude surpassing $100/bbl for the first time since 2014, before peaking at an intraday high for the year at $139/bbl on March 7. Other commodities also spiked, including European natural gas, and various agricultural goods such as wheat.

This rise in commodity prices created a fresh dilemma for central banks. On the one hand, they were unable to directly deal with the supply shock, but its consequences were being seen through higher inflation, creating the risk that inflation would become increasingly entrenched over time. With inflation concerns dominating the growth worries, the Fed began its hiking cycle in March with a 25bps move. However, on March 29 the US 2s10s yield curve inverted for the first time of this cycle, which was a concerning sign given that it had inverted prior to all of the last 10 US recessions.

By the end of Q1, markets had put in a pretty poor performance, but in Q2 it was even worse. Once again, the catalyst for this was stubbornly persistent inflation, and there was a massive slump in mid-June after the US CPI release for May came out. That showed inflation surprising to the upside yet again, which in turn prompted the Fed to ratchet up the pace of rate hikes to 75bps for the first time since the 1990s as they sought to get inflation back to target. The prospect of 75bp hikes triggered sizeable losses, with the S&P 500 falling by more than -10% in the space of a week, which was the first time that had happened since the pandemic turmoil of March 2020. At the same time, yields on 10yr Treasuries rose to 3.50%, their highest intraday level in over a decade.

Following the awful H1 performance, there were growing hopes by the summer that the Fed might soon begin pivoting in a dovish direction. Falling energy prices helped to boost that narrative, and the US CPI report for July showed the first monthly decline in prices since May 2020. But any hopes of that were firmly stamped out by a hawkish speech from Fed Chair Powell at Jackson Hole, where he said that getting back to price stability would “likely require maintaining a restrictive policy stance for some time.” The ECB also hiked rates for the first time in over a decade, opening with a 50bps move in July and following up with a 75bps move in September.

Another feature of Q3 was growing fears about a potential recession, particularly after the Nord Stream gas pipeline from Russia was suspended. At their peak, European natural gas futures rose above €300 per megawatt-hour, which ledEuropean governments to step in to protect consumers and businesses from the impact of higher energy prices. Later in the quarter, there was then a fresh bout of turmoil centred on the UK, after the government unveiled the biggest package of tax cuts in half a century. Sterling hit an all-time intraday low against the dollar and there was a large spike in gilt yields that prompted a Bank of England intervention. The turmoil did subside after the government U-turned on the bulk of the announcements, with Liz Truss succeeded as PM by Rishi Sunak. But even with the stabilization in Q4, gilts were still down -25.0% over 2022 as a whole.

This backdrop meant that Q4 started on a rough note, with the S&P 500 hitting its closing low for the year shortly afterwards on October 12. However, markets were more resilient after that as both the October and November CPI readings from the US surprised on the downside, leading to growing hopes that we might have finally seen “peak inflation”. That was echoed in the Euro Area too, where inflation fell from a peak of +10.6% in October to +10.1% in November. With inflation falling back, both the Fed and the ECB stepped down to 50bp hikes in December, but they remained hawkish in both cases, signalling further rate hikes ahead in 2023. The Bank of Japan also joined in the action right at the end of the year, announcing in a surprise move on December 20 that they were adjusting their yield curve control policy, with the 10yr yield now able to rise to 0.5%, having been limited to 0.25% before. However, even with the hawkish moves in December, Q4 still marked the only quarter of the year where markets had a broadly positive performance, with each of the S&P 500, the STOXX 600 and US Treasuries seeing a positive quarterly performance for the first time this year.

Which assets saw the biggest gains of 2022?

• Commodities: In a rough year more broadly, commodities were one of the few asset classes to post consistent gains in 2022. A big factor in that was Russia’s invasion of Ukraine, which led to a major spike in energy and food prices in Q1, which then unwound somewhat as the year went on. Nevertheless, Brent Crude (+10.5%) and WTI (+6.7%) still posted gains for the year, as did corn (+14.4%) and wheat (+2.8%) prices. For metals there was a more mixed performance however. Some such as platinum (+10.9%) performed very strongly, but gold (-0.3%) saw little movement and copper (-14.6%) posted its first annual decline since 2018.
• US Dollar: With the Fed hiking rates and moving faster than other central banks, the US Dollar was a major outperformer in 2022. The dollar index (+8.2%) posted its biggest annual advance since 2015, and the dollar itself strengthened against every other G10 currency over the year.

Which assets saw the biggest losses of 2022?

• Equities: An aggressive campaign of rate hikes and growing fears of a recession meant it was a rough year for equities. The S&P 500 (-18.1%) saw its biggest annual decline in total return terms since 2008, despite a +7.5% gain in Q4. Over in Europe, the STOXX 600 fell -9.9% over the year, and there was little respite in emerging markets either, with the MSCI EM index down -19.9%.
• Sovereign Bonds: After a multi-decade bull run, 2022 was an incredibly bad year for sovereign bonds. For instance, Bloomberg’s index of US Treasuries (-12.5%) posted its worst annual performance since data begins in 1973, and the iBoxx series was also down -12.9%. Longer-term data showed that it was the worst year for 10yr Treasuries on a total return basis since 1788. Euro sovereign bonds saw even larger declines, with a -18.4% decline thanks to losses in every single quarter, whilst gilts fell -25.0% amidst the turmoil in the UK.
• Credit: It was a very bad year for credit, with losses across all of the USD, EUR and GBP indices we follow. GBP credit saw some of the biggest declines, with GBP IG non-fin down -20.4%. However, high-yield credit was a relative outperformer across different regions, with EUR HY only down -10.6%, and US HY only down -10.7%.
• Cryptocurrencies: The risk-off moves more broadly proved bad news for cryptocurrencies, with Bitcoin down -64.3% to close the year at $16,540, having started the year at $46,334. This pattern was echoed among other cryptocurrencies, with Ethereum down -67.5%, Litecoin down -52.0%, and XRP down -58.7%.

Best and worst performing assets in December (local currency and USD)

Best and worst performing assets in Q4 (local currency and USD)

Best and worst performing assets in 2022  (local currency and USD)

More in the full DB note available to pro subs in the usual place.

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

The prospects for peace, justice, and the advancement of liberty in 2023 may at first seem further away than ever. Washington’s determination to overthrow the Russian government via a proxy war in Ukraine has brought the threat of nuclear war closer than ever in history. The mainstream media is even “normalizing” the idea that a nuclear attack on the US is really no big deal. Yahoo News wrote yesterday that a “public health expert” is “concerned” that Americans are not sufficiently prepared for nuclear bombs hitting major US cities!

The Yahoo article even links to a FEMA-authored “nuclear detonation planning guide” to help us better get through a barrage of nuclear missiles. Are they insane? They act as if a nuclear attack on the United States is just another inconvenience to plan for, like an ice storm or a hurricane.

The FEMA guide’s advice on what to do during a nuclear attack is, “Get inside, stay inside, and stay tuned.” Stay tuned to what? Have they not seen the photos from Hiroshima or Nagasaki?

While we are foolishly edging toward war, with the media and Beltway neocons cheering it on, there are still some bright spots we can look to in 2023.

• First, polls consistently demonstrate increasing American opposition to US involvement in Ukraine. Republicans are set to take control of the House this week right as Republican voter support for more military aid to Ukraine has seen a dramatic and steady decline. US households continue to struggle under runaway inflation and a looming economic crack-up and more Americans are going to demand answers from their government as to why we have sent more than $100 billion to Ukraine while so many are struggling at home.

• Second, a recent Rasmussen poll has revealed that in light of the “Twitter Files” – which showed that the FBI viewed the social media platform as a paid subsidiary of the US government – some 63 percent of likely US voters “believe Congress should investigate whether the FBI was involved in censoring information on social media sites.” A large percentage of those polled believe the FBI has been politicized by the current Administration, which may give incoming Republicans in the House some backbone to launch an actual investigation. Without the First Amendment, the other Amendments are virtually meaningless, and when the US government can strong-arm “private” businesses to attack free speech, freedom has no future.

• A third bright point is that the nearly twelve-year war on Syria might finally be closer to settlement. Syrian and Turkish defense ministers held negotiations brokered by Moscow which resulted in an agreement by Turkey to withdraw its military forces from Syrian soil. There are rumors that a meeting between the leaders of Turkey and Syria may come as soon as early this new year.

The destruction of Syria was part of the Obama/Hillary/neocon plan to “remake” the Middle East, but as always these interventionist schemes have only resulted in death and destruction. Washington continues to lecture Russia about occupying Ukrainian soil, yet the US military has for years occupied Syrian territory for the sole purpose of backing extremists and stealing Syrian oil. Turkey leaving Syria will add pressure for the US to leave Syria. That is a good thing.

The new year is upon us. It might be easy to feel dejected. But for we who promote peace, freedom, and justice, there is much to build on. Do not allow your voices to be silenced!

The Kremlin has announced that Japan’s “anti-Russian course” means that peace treaty talks remain “impossible” at this point, according to the words of a senior Russian foreign ministry official quoted in TASS.

“It is absolutely obvious that it is impossible to discuss the signing of such a document [a peace treaty] with a state that takes openly unfriendly positions and allows itself direct threats against our country,” the official said.

The two countries have long been locked in a standoff regarding competing territorial claims over islands off northern Japan, disputed since the end of WWII, but which have come under increasing militarization by Russia.

For example, Russian forces have just in the last month deployed new missile defense systems in the disputed Kuril Islands, as part of what looks to be a semi-permanent forward positioning of troops, specifically a mobile coastal defense missiles system on a northernmost island in the chain, Paramushir.

Russia knows the island chain as the Kurils while Japan calls them the Northern Territories. Russia has long been denounced by Japan and its allies in the West for sending military assets there.

The Soviet Union had annexed the islands during the final days of WWII, and the status of ownership of the islands, which Russia de facto currently controls, is still unresolved and as a treaty regarding their status has been subject of on-again, off-again negotiations with President Putin. 

As for the fresh Kremlin statement on Japan’s “unfriendly positions” which make negotiations “impossible” – this appears a reference to Japan joining the Western initiative to impose sweeping sanctions on Russia over its invasion of Ukraine. 

Tokyo has also moved to cut its dependence on Russian oil and coal exports over the past months. In November Russia’s ambassador to Japan lashed out at both Tokyo and Washington while describing that “The unfriendly action from the Japanese side unfortunately worsened our relations greatly. And now the future of our relation is uncertain.”

Authored by Mike Shedlock via MishTalk.com,

A Prudential Pulse survey finds large percentages of millennials, gen Z and women  struggle with finances. The result is more gig work…

Nearly half of millennials agree or somewhat agree with the statement “I regularly run out of money and have to rely on credit cards or family for financial support.”

Please consider Generational Gap Grows: Work & Money Outlook Divided

Job Hopping to Increase Pay or Better Work Balance

• Younger generations continue to drive the Great Resignation: One-third of millennials and 46% of Gen Z have switched employers since the start of the pandemic — a stark contrast compared to 29% of all workers.

• Job-hopping for paycheck-bumping: Younger generations are more likely to say that the best way to increase their earning potential is to change employers every few years, with 41% of millennial workers and 44% of Gen Z workers expressing this belief, compared to 36% of all workers.

• Younger generations look to employers for help: Almost 6 in 10 Gen Z (58%) and millennial (57%) workers believe their employer has a responsibility to help them feel more financially empowered.

• Flexibility strong against the dollar: Conversely, over the past year, 29% of millennials who switched jobs took a pay cut, with more than 1 in 4 millennials who took a pay cut explaining they did so in order to achieve a better work/life balance.

Debt and Financial Goals

Gig Work to Make Ends Meet

• Salary not sufficing: 49% of millennials and 48% of Gen Z don’t believe that a salary is going to be enough to achieve their financial goals.

• Growth in gig work: 70% of all workers have pursued or considered pursuing gig work to supplement their income over the past year. This is even higher among Gen Z (81%) and millennials (77%) — roughly a quarter of whom hope that their gig work will one day be their full-time job.

• Gig work seen as a temporary option: Most workers who are considering or are pursuing gig work (34%) say they are only doing it until their main source of income can fully sustain their financial needs.

Dipping Into Emergency Funds

Need Financial Help

• Looking to others for financial help: Half of millennials say they regularly run out of money and have to rely on credit cards or family for financial support, and 65% of millennials and Gen Z have received financial support in the past two years from either parents, significant others, relatives or grandparents.

• Emergency savings funds in crisis: 50% of all respondents have less than $500 or no emergency savings fund. Nearly 4 in 10 (39%) of both millennials and Gen Z report having no emergency savings at all.

• Debt taking a toll: 55% of millennials say that debt is preventing them from accomplishing personal goals, such as owning a home and having kids; 33% of millennials and 32% of Gen Z say student loan debt is a barrier to accomplishing those personal goals.

• Social obligations turn financial burden: 46% of millennials and 48% of Gen Z say they’d be able to spend more on personal goals if they did not have to spend on friends’ and family members’ life milestones like wedding gifts, baby gifts, or milestone birthday celebrations and gifts.

• Not keeping a budget or prioritizing investing: Nearly 70% of millennials and Gen Z do not keep a formal budget; 44% of Gen Z and 38% of millennials do not invest.

More Female Stress

• A shaky situation: 4 in 10 women (41%) strongly agree that the economic environment has made them more concerned about their financial security (compared to 34% of men). Alarmingly, only 56% of all women have an emergency savings account (compared to 73% of men).

• Income is stretched: More than half of women (53%) say they cannot afford their current lifestyle or are barely getting by — just 40% of men say the same.

• Feeling the stress: More than one-third of women (36%) report experiencing health or mental health issues as a result of financial stress (versus 28% of men). More than 4 in 10 women (45%) say they have trouble sleeping for the same reason (versus 36% of men).

Gig Work Stunner

The stunner to me was the growth in gig work. Many want to work less but are working more because they have to.

81% of zoomers and 77% of  millennials have pursued or considered pursuing gig work to supplement their income over the past year. 

Undoubtedly, it’s not just gig work but rather any part-time work, especially the leisure and hospitality sector.

Act Your Wage 

Yesterday I noted Act Your Wage is the New Meme as Career Ambitions Plunge

There’s no time to do extra unpaid work when you need a second part-time job just to pay the bills. 

This also explains Quiet Quitting, Are You Doing Only What’s Necessary at Work and No More?

Sentiment is pessimistic and many zoomers are flat out giving up on the American dream of owning a home. 

I am going to gather some data from the BLS this week to tie some of these ideas together.

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In the waning days of 2022, one of the most bearish (and accurate, at least as far as last year was concerned) strategists, SocGen’s resident permabear Albert Edwards, laid out what he thinks will be the big surprise of 2023, which will be “a return to deflation fears as headline CPI inflation drops close to, or likely below zero. Investors are already anticipating recession and have an unusually strong preference for bonds.”

Edwards’ also expects that while the current recession and collapse in commodity prices will also cause headline inflation to collapse, core inflation will abate too but remain sticky around 3% due to residual wage-price inflation (justifying the inevitable change in the Fed’s target).

Which, to Edwards, sets us up for the worst possible scenario: a second wave of inflation, just like we saw in the 1970s under the Burns Fed, to wit: “any decline will be purely a cyclical phenomenon rather than a full-blown return to the Ice Age theme” and as a result, “investors have not yet discounted a second secular wave of inflation as we eventually exit this unfolding recession – ie the Great Melt.”

While Edwards is hardly alone in calling for a recession and a deflationary reversal of current soaring prices, following by an even more brutal inflationary wave as Powell reveals he was not Volcker by Burns all along, overnight another bearish icon repeated the exact same sequence of events.

Tweeting late on Monday, Scion Capital’s Michael Burry, aka “the Big Short” said that while inflation has peaked, it is likely to pick up again in response to the coming stimulus which will be unleashed to offset the painful 2023 recession. 

“The US in recession by any definition,” Burry tweeted on Sunday, echoing Albert Edwards verbatim, adding that “Fed will cut and government will stimulate. And we will have another inflation spike.”

Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.

— Cassandra B.C. (@michaeljburry) January 2, 2023

Burry is certainly right about the US being in a recession, especially now that more than half of US states have negative growth, a threshold that has always led to recessions in the past…

… the last, missing piece is the BLS admitting the US labor market is in freefall and now that even the Philadelphia Fed has opened up the pandora’s box over rigged jobs data, it is only a matter of weeks if not days before the Dept of Labor admits it made a “mistake.”

Where Burry is wrong is in expecting a government, or fiscal, stimmy. With Congress now divided at least until 2024, one can kiss any major, multi-trillion injection goodbye until after the next presidential election (absent a war with China of course). Which means the only stimulus for the next 24 months will have to come from the Fed, i.e., monetary, and thus will stimulate risk assets far more than the economy.

This was Burry’s latest warning since September, when the S&P tumbled to its 52-week lows, and when the Big Short predicted more pain for the stock market, saying “we have not hit bottom yet.” However, the weeks following the September dump saw stocks briefly soar into a bull market amid a powerful short squeeze expect a Fed pivot; it remains to be seen if stocks will take out

In the second quarter, Burry put his money where his mouth is, as his firm dumped all of its equity exposure besides one company. One quarter later, Burry was back in the market, adding to his GEO Group stake and opening new positions in 5 companies as we discussed at the time.

Authored by Paul Joseph Watson via Summit News,

Author Paul Ehrlich, whose 1968 book ‘The Population Bomb’ predicted environmental catastrophes that never happened, appeared on 60 Minutes to warn of “the end of the kind of civilization we’re used to.”

Ehrlich’s conversation with CBS host Scott Pelley centered around the narrative that human population growth will be too much for the Earth to sustain, despite the fact that it is set to peak at 9 billion people before rapidly declining.

“Too many people, too much consumption and growth mania” is killing the planet and devastating wildlife according to Ehrlich.

“Humanity is not sustainable. To maintain our lifestyle (yours and mine, basically) for the entire planet, you’d need five more Earths. Not clear where they’re gonna come from,” he claimed.

Paul Ehrlich: “The next few decades will be the end of the kind of civilization we’re used to.”

CBS’s @ScottPelley: “The 5 mass extinctions of the ancient past were caused by natural calamities … humanity may have to survive a 6th mass extinction in a world of its own making.” pic.twitter.com/Vf7DNPLGai

— Tom Elliott (@tomselliott) January 2, 2023

Despite charges of alarmism, the author defiantly asserted, “I was alarmed. I am still alarmed. All of my colleagues are alarmed” (seemingly unaware that the definition of alarmism is to grossly exaggerate something that isn’t true).

“I know there’s no political will to do any of the things that I’m concerned with, which is exactly why I and the vast majority of my colleagues think we’ve had it; that the next few decades will be the end of the kind of civilization we’re used to,” Ehrlich absurdly claimed.

“The five mass extinctions of the ancient past were caused by natural calamities—volcanoes, and an asteroid. Today, if the science is right, humanity may have to survive a sixth mass extinction in a world of its own making,” he added.

Enrivonmental author Michael Shellenberger responded to the segment by documenting how Ehrlich’s claims were “totally & utterly false” and accusing CBS of pushing “apocalyptic pseudoscience.”

Elon Musk, who has warned about the dangers of population decline, agreed, tweeting, “Absolutely.”

Absolutely

— Elon Musk (@elonmusk) January 2, 2023

Ehrlich is still treated as a credible voice by the legacy media despite his previous predictions proving to be completely laughable.

In his 1968 book The Population Bomb, Ehrlich ludicrously claimed “hundreds of millions of people are going to starve to death” by the 1980’s because of overpopulation.

It never happened.

Similarly, in 2004, climate change “experts” claimed that by 2020, “major European cities will be sunk beneath rising seas as Britain is plunged into a ‘Siberian’ climate by 2020”.

It never happened.

In 2013, Al Gore claimed that the Arctic would have “ice free” summers by 2013.

It never happened, in fact measurements taken by the EU’s Earth observation programme last year showed that Arctic sea ice was just 3 per cent below its 30 year average.

None of it ever happens, but that doesn’t stop people like Ehrlich continually spewing doomsday rhetoric in order to advance the narrative that living standards must be drastically reduced in the name of saving the planet.

They should have all been dismissed as wild cranks years ago, but the legacy media is still treating them like they have a shred of credibility left when they clearly don’t.

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FTX founder Sam Bankman-Fried has asked a judge to conceal the identities of two people who will help secure his bail in addition to his parents’ house in Palo Alto, California, Bloomberg reports.

“If the two remaining sureties are publicly identified, they will likely be subjected to probing media scrutiny, and potentially targeted for harassment, despite having no substantive connection to the case,” wrote SBF’s lawyers in a letter filed on Tuesday seeking redactions of the names of the two individuals who intend to sign as sureties to his bail.

“Consequently, the privacy and safety of the sureties are “countervailing factors” that significantly outweigh the presumption of public access to the very limited information at issue,” the letter continues.

Bankman-Fried’s $250 million bail package – granted in his first appearance on US soil since his arrest in the Bahamas, was secured by his parents’ Palo Alto home, which is worth nowhere near that amount. The judge in the case also required that two people of “considerable means,” at least one of whom cannot be a relative, also sign the bond.

Bankman-Fried was granted a $250 million bail package in December, one of the largest in US history. The personal recognizance bond approved by the judge was secured by the equity in Bankman-Fried’s parents home in Palo Alto, California, which is almost certainly not worth anywhere near that amount. But outsized bonds are more a means of establishing harsh financial consequences for bail-jumping and are often backed by assets worth only around 10% of the stated amount. -Bloomberg

The two individuals have not yet signed the bond but intend to do so by the Jan. 5 deadline, according to the letter.

Bankman-Fried is set to appear in a Manhattan federal court on Tuesday to face charges on eight criminal counts ranging from wire fraud to conspiracy to commit money laundering, to conspiracy by misusing customer funds, CNN reports. He is expected to plead not guilty.

He faces 115 years if convicted on all charges.