JPMorgan Quickly Fires 1000 First Republic Bankers
Earlier this week, JPMorgan confirmed cynical observations that it was almost as if the regional bank crisis was designed to make JPMorgan bigger and billionaire CEO Jamie Dimon even richer, when the bank reveled during its investor day that the failure of First Republic Bank would boost JPM’s top line – in this case the Net Interest Income – by at least 3 billion, as the bank generously accepted the bulk of FRC’s viable loans while the FDIC was stuck holding on to the toxic (and worthless) leftovers.
But while JPM was more than happy to accept the free gift of FRC’s loan book, it was far less excited about inheriting the expense side of the ledger, and sure enough, less than a month after JPM “acquired” First Republic (at a risk-free IRR of 20%+) with US taxpayer funding, JPMorgan has notified 1,000 First Republic Bank employees that they aren’t being given jobs — even temporarily — following its takeover of the failed lender.
According to Bloomberg, the biggest US bank on Thursday offered full-time or transitional roles to 85% of the nearly 7,000 employees still working at First Republic when it collapsed, while the rest were told they wouldn’t get offers. Those getting temporary offers would be offered jobs for three, six, nine or 12 months, depending on the position.
“Since our acquisition of First Republic on May 1, we’ve been transparent with their employees and kept our promise to update them on their employment status within 30 days,” a spokesperson for New York-based JPMorgan said in a statement. “We recognize that they have been under stress and uncertainty since March and hope that today will bring clarity and closure.”
First Republic employees who weren’t offered jobs at JPMorgan “will receive pay and benefits covering 60 days and will be offered a package that includes an additional lump-sum payment and continuing benefits coverage,” the spokesperson said; it wasn’t clear if the FDIC would be footing those costs as well.
JPMorgan, which has 296,877 employees, beat out rivals in a “government-led auction” for First Republic, which was just another fund transfer from taxpayers to JPM, and which immediately boosted the company’s top line by $3 billion. As part of its winning bid, JPMorgan “acquired” about $173 billion of First Republic’s best loans, $30 billion of securities and $92 billion in deposits, not to mention a peculiar, little $50 billion “term-financing” from the FDIC whose terms nobody has yet disclosed …
… and would then then decide what to do about its employees, dozens of whom had been paid more than $10 million a year, Bloomberg News reported earlier Thursday; needless to say, all those highly paid FRC bankers are now among the ranks of the unemployed, as JPM no longer needs the now defunct loan origination platform, and instead it will simply milk the existing loan portfolio for the next decade or so.
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Iran Shows Off New Ballistic Missile Capable Of Hitting Israel With Large Payload
Iran on Thursday showcased a new long-range ballistic missile at a moment tensions with Israel are at their highest in years. A Jerusalem Post headline on the same day reads, “Mounting tensions between Israel, Iran herald possible military showdown”.
Iran’s military touted that the Khoramshahr-4 missile can strike targets up to 2,000 kilometers, or 1,240 miles, away. It’s also said to be capable of carrying a 1,500-kilogram (or 3,300-pound), warhead. This would make it the heaviest warhead among all of Iran’s ballistic missiles. The military also released undated footage of what they said was a successful test launch of the new missile.
“Our message to Iran’s enemies is that we will defend the country and its achievements. Our message to our friends is that we want to help regional stability,” Iranian Defense Minister Mohammad Reza Ashtiani said.
The test launch appears to be a direct challenge to Israel, given that while unveiling it at a press event the defense ministry had set up a miniature model of the Dome of the Rock on the Al-Aqsa Mosque in Jerusalem, according to an Associated Press description.
Both Iran and regional Arab states have recently expressed outrage at Israeli police crackdowns on Muslims at al-Aqsa Mosque, as well as security services allowing far-right Jewish groups to march through Jerusalem chanting “death to Arabs” .
Against this backdrop and the recent conflict in Gaza, Israeli officials have this week warned the military could take “action” against Iran’s advancing nuclear program:
“Iran has progressed in recent years with enriching uranium more than ever before,” he said. “We are looking closely at the various arenas that are part of the path to nuclear capabilities. There are negative potential trends on the horizon that could lead to [us] acting. We have the capabilities.”
Halevi further accused Iran of being involved in “everything around us and with everyone who is against us,” including strategy, intelligence, and funding. “We have the capability to strike Iran. We are not aloof to what Iran is trying to do around us. Iran also cannot be aloof to what we can do against it.”
As for the Khoramshahr-4 missile, the AP underscores that it is capable of hitting Israel while carrying a large payload.
“The Khorramshahr has the heaviest payload of Iran’s ballistic missile fleet, which analysts say may be designed to keep the weapon under a 2,000-kilometer range limit imposed by the country’s supreme leader. That puts most of the Mideast in range, but falls short of Western Europe,” the report says.
Solid 7Y Auction Stops Through After Jump In Foreign Demand
The week’s final coupon auction has just concluded and while not nearly as strong as yesterday’s blowout 5Y auction which saw the 2nd highest foreign demand on record, was no slouch either.
Pricing at a high yield of 3.827%, this was the highest yield for the 7Y tenor since February’s 4.062%; still, the auction stopped through the When Issued 3.835% by 0.8bps, which was the first stop through since January, driven by the continued bleed higher in yields across the curve (the 10Y is now 3.8%) which led to a generous concession into the auction.
The bid to cover of 2.61 was also slid, and was the highest since January and also well above the six-auction average of 2.46.
The internals were especially strong, and while once upon a time foreigners balked at the prospect of buying the belly of the curve, today there were no such issues with Indirects awarded 72.3%, the highest since January and above the 66.7% recent average; and with directs awarded 17.3%, the lowest since January and below the recent average, dealers were left with 10.4% of the auction, which was also the lowest since January.
Overall, this was a solid, if not spectacular auction, but it was certainly one of the best 7Y auctions in the past year.
Independent investigative journalist Glenn Greenwald succinctly summarises how ‘regime media narratives’ are formed and disseminated, and that any journalist who questions the process ends up a target for destruction by the establishment.
During his “System Update” broadcast on Rumble, Greenwald noted how “Journalists who spread conspiracy theories that the CIA wants them to spread get promoted, and the journalists who question the conspiracy theories of the CIA get destroyed.”
Glenn Greenwald highlights the irony of the editor-in-chief of The Atlantic being the journalist primarily responsible for deceiving the American public into the Iraq War:
“It’s not prohibited in American corporate journalism to spread false stories and conspiracy theories,” Greenwald asserted, adding “In fact, that’s the only way you can thrive in journalism.”
“The people who have lied the most, and who spread the most conspiracy theories, are the ones who have been promoted and enriched most within corporate journalism,” he further urged.
“The difference is, the way to advance in journalism is to tell lies and spread conspiracy theories on behalf of the CIA, and that advance the interests of the U.S. government. That is not only permitted. That is required to be promoted,” Greenwald emphasised.
He continued, “What you can’t do, the thing that [Seymour] Hersh did that got him expelled from journalism, is he spread what are called conspiracy theories that are against the narrative of the U.S. security state, that undermined U.S. foreign policy. That is the only thing that is prohibited. That’s what gets you kicked out of journalism.”
Greenwald was referring to Hersh’s reporting on the destruction of Russia’s Nord Stream pipeline, which the veteran journalist is adamant was a coordinated operation by U.S. intelligence.
Greenwald continued, “As long as the conspiracy theories you’re affirming and the false stories you’re publishing are aligned with what the CIA, Pentagon, and the entire rest of the corporate media says, you’re fine. In fact, you’re better than fine. You’re going to have all kinds of rewards lavished upon you.”
Greenwald then cited the example of editor-in-chief of The Atlantic, Jeffrey Goldberg, who “did more [than anyone] to spread the false conspiracy theories that led to the Iraq War,” and “also became ground zero for every Russiagate fraud.”
Greenwald further proclaimed that Goldberg “was rewarded… as a result of the lying he did on behalf of the U.S. security state.”
The journalist went on a further deep dive into the example of the 2001 anthrax attacks, which he posits is a prime example of how “people in the CIA, FBI, and DHS know they can lie to the media on purpose without any accountability because they do so while hiding behind the shield of anonymity.”
“Even if you know they lied, the media will protect these liars, people who are deceiving America on purpose through the use of their media platforms,” Greenwald further charged.
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Goldman: Mutual Funds Flood Into MegaTech Stocks As They Start Cutting Cash Allocations
Even before the NVDA blowout earnings report, Goldman flow trader John Flood wrote yesterday that on the bank’s trading desk he had seen consistent Mutual Fund buyers in supercap tech over the last 3 weeks, ever since AAPL made it 5 for 5 in regards to MAGMA earnings beats (all that was before Nvidia added $200 billion in market cap in a stunning, record move). This was a key component of our note from this weekend, in which we observed the first notable sentiment shift of 2023, which pointed out the FOMO frenzy and hedge fund buying following the S&P breakout to new 2023 highs last Thursday. That’s in part because Long Only funds entered 2023 holding a record $235BN of cash, and bracing for an imminent hard landing,having dramatically slashed mega-cap tech exposure in Q1.
However, as the market has remained incredibly resilient (driven by a handful of stocks, the Nasdaq and S&P both closed at YTD highs last Thursday) Goldman is seeing mutual funds (as well as HFs) get “stopped in” as buyers.
This factoid from Goldman PB data which we first discussed over the weekend, is key here: over a 2 week period the notional net buying from 5/5 – 5/18 in US equities was the largest since Oct ’22 and ranks in the 94th percentile vs. the past 5 years.
And with many long-onlies bumping up against their cash ceilings, Goldman is now seeing these dollars on sidelines start to chase into mega-cap tech (also the most liquid stocks in the market) and act essentially as cash place holders.
Flood’s conclusion is that a full bearish capitulation is coming, and such permabears as Mike Wilson and Marko Kolanovic will soon throw in the towel: “From my seat I do not see the current rotation back into supercap tech ending anytime soon (which in the near term will provide the overall market a higher than previously anticipated floor…call it S&P 4k).”
As a reminder, it is only when the last bear throws in the towel that the next big drop can begin.
By Bas van Geffen, CFA, senior macro strategist at Rabobank
Grinding to a halt
A cargo ship has grounded in the Suez Canal early this morning. Though the Xin Hai Tong 23 was re-floated relatively quickly, it certainly brings back the memory of the 2021 stranding of the Ever Given and the knock-on effects this had on global supply chains. This reminder of supply chain fragility is not just relevant for routes through the Suez Canal. The Strait of Malacca remains a key weakness to potential geopolitical tensions, and the reliability of the Panama Canal is being affected by climate change. Last month, the Panama Canal was already forced to lower the maximum depth of ships passing through, as drought hits the water levels. In other words, fewer goods can be transported at a time.
Aside from the reminder that we should no longer rely on hyper-efficient, yet easily disrupted, supply chains, the grounding of the Xin Hai Tong 23 also provides a great metaphor for the overnight news flow.
First of all, updated estimates for German Q1 GDP show that the economy did not just grind to a halt in the first quarter of the year; the statistics office now estimates that GDP shrunk by -0.3% q/q. This means that Germany did, after all, experience a winter recession as the industrial motor suffered from the gas crisis. The 0.3pp downward adjustment means that, barring upside revisions to other countries’ GDP estimates, Eurozone growth has probably stalled in Q1.
Unsurprisingly, inflation has hit consumers’ willingness and ability to spend, at least in volume terms: household consumption expenditure was down 1.2% in Q1. And while the economy will probably re-float, the monetary tightening cycle should prevent it from picking up much steam. The one bright spot, perhaps, was the strong investment spending. Gross fixed capital formation in machinery and equipment rose by 3.2% q/q. While that may be a drop in the ocean when one looks at the sheer amount of investments needed to ramp up Europe’s domestic production capacity in order to reduce the continent’s international dependencies, the number could’ve been far worse in the face of ECB policy tightening. So, for now, the ECB may actually be quite pleased to see this division in the German GDP breakdown: lower consumer demand should hopefully lead to lower inflation, while the continued fixed investments should alleviate supply constraints in the longer term. That said, much of this consumer slowdown is attributable to the sharp decline in households’ disposable incomes, whereas much of the effects of higher rates are probably yet to be seen. The past two Bank Lending Surveys have pointed at a marked slowdown in demand for loans – usually heralding a drop in investments.
Turning to the US, the debt limit talks continue the pattern of stranding and being re-floated. Ironically, President Biden now sees himself very much stuck in the debt ceiling talks he vowed to avoid. For Fitch the current brinkmanship was sufficient to put the United States’ AAA rating on negative watch. Although the rating agency “still expects a resolution to the debt limit before the x-date,” they see increased risks of missed payments, and the debt limit illustrates the failure to “meaningfully tackle medium-term fiscal challenges.”
This adds to the Fed’s challenges. The minutes already revealed a considerable divergence of opinions regarding possibly pausing the hiking cycle. For now, a hold in June remains a pausebility, but whether this would also be the de facto end of the hiking cycle depends on the amount of credit tightening that is still expected to materialize.
Moreover, the Fed now has to worry about potential fallout to markets and the US economy, should the debt ceiling lead to broader market turmoil – particularly in the Treasury market that underpins the global financial system. Should this happen, a number of policymakers suggested that the central bank should be ready to re-float the financial market. This would most likely be done through the central bank’s liquidity tools, the minutes suggested. It’s unclear what these measures would entail exactly. However, during the debt limit standoffs in 2011 and 2013, the FOMC discussed various options, including repurchases to inject liquidity, or even buying or swapping Treasury securities that had technically defaulted – although Powell expressed strong disapproval of such extreme measures.
At the same time, central banks certainly cannot breathe easily. The shock-increase in gauges of underlying inflation in the UK made that point all too clear. Yesterday we already stressed the upside risk that this poses for the Bank of England’s policy trajectory, and sterling markets are certainly pricing for this. Yet, despite the unexpectedly high core and services inflation rates, Governor Bailey gave a much more measured first reaction to the data release. He refused to speculate where the April inflation data leave the Bank relative to its latest forecasts.
And returning to the topic of grinding halts, Ron DeSantis (R-Fla) put his name in the hat for the 2024 elections. He is considered to be the most serious challenger to Donald Trump for the Republican nomination to date. Unfortunately for Mr. DeSantis, the launch of his presidential campaign started with a number of technical hiccups. The live feed on Twitter crashed repeatedly before the event started, and the stream froze several times during the programme. While that might be an indication that his bid drew a large online audience, Twitter hasn’t exactly been a stable platform since Musk took over.
The Ron DeSantis 2024 presidential campaign got off to a terrible start on Wednesday night, as Twitter glitched under the weight of traffic (though admittedly once Musk transitioned the hosting role from his 140mm follower account to David Sacks’s account, the discussion was flawless and fascinating.)
Slated to start at 6pm ET, what promised to be an edgy, modern launch — using Twitter’s interactive, live-audio “Spaces” feature – quickly turned into a painstaking embarrassment for both DeSantis and his host, Twitter owner Elon Musk.
Over a half-hour span, users were booted off the chat and others had to endure feedback noise and hot-mic whispering until the event finally got underway around 6:30, when DeSantis declared, “I am running for president of the United States to lead our great American comeback.”
The Twitter audience wasn’t the only one that was kept waiting, according to The New York Times:
The DeSantis campaign had invited prominent donors to Miami on Wednesday for a fund-raising event, hosting them at a conference space at the Four Seasons as the Twitter discussion was projected onto a large screen. Thenthey waited. And waited.
Trying to make lemonade out of lemons, the DeSantis campaign tweeted, “It seems we broke the internet with so much excitement. While you’re waiting, donate NOW.”
Social media naturally had a field day, with the hashtag #DeSaster trending on Twitter well into the night.
To fix the foul-up, the event was moved from Musk’s Twitter account to that of tech investor and Musk associate David Sacks.
There’s “just a massive number of people online, so the servers are straining somewhat,”said Musk during the early minutes.
“My account was breaking the system,” he said later.
I’m sure Presidential candidates are running over to Twitter Spaces right now after seeing the #DeSaster that just happened pic.twitter.com/CRVDF40VDX
— Wu Tang is for the Children (@WUTangKids) May 25, 2023
While the audience initially slowed in terms of constant traffic, Musk retweeted a note showing that over 3 million people tuned in at some point to the discussion.
“Glitchy. Tech issues.Uncomfortable silences. A complete failure to launch. And that’s just the candidate!” said Steven Cheung, a spokesman for GOP frontrunner Donald Trump. The Biden campaign also tried to exploit the fiasco, tweeting “this link works” and pointing users to the Biden-Harris donation page.
Putting a favorable spin on things, Sacks said, “We started with some technical issues because of the sheer scale and unprecedented nature of what we were doing. It’s not how you start, it’s how you finish, and I think this finished really strong.”
In his remarks, DeSantis didn’t say Trump’s name, but did draw contrasts indirectly, such as when he said, “We must look forward, not backwards.” In the three most recent national GOP primary polls — from Fox News, Quinnipiac and CNN — Trump leads DeSantis by margins of 33%, 31% and 27% respectively.
It’s early, though, and DeSantis has a large campaign coffer, and had a very fruitful swing through Iowa earlier this month, racking up the endorsements of more than three dozen Republican state legislators — which is more than a third of the total in the state. His endorsement tally there is already more than triple the highest count for any 2016 contender. Then again, the 2016 Iowa endorsement leader was Ted Cruz, and we know how things turned out for him.
Mockery aside, DeSantis performance was strong as he laid out the reasons why he can win the Republican presidential nomination over Donald Trump because he’s broadly acceptable to Republicans, adding that he will then beat Joe Biden in the general election because he has the proven strength to appeal to independents.
“We are acceptable to the broad swath. It’s not like I’m taking policy positions that are alienating massive segments of Republicans. And so people are going to see somebody who’s got a proven record of success, who’s representing the values that the vast, vast majority of our party professes to hold.”
“I won 97 percent of Republicans in my reelection,” DeSantis said in a phone-in press conference with select news organizations, including The Epoch Times, on May 24, a few hours after declaring his candidacy on Twitter.
As Dan Berger writes at The Epoch Times, DeSantis made it clear that winning independents is essential, he said. He pointed to the examples of Georgia’s Brian Kemp and Iowa’s Kim Reynolds in their gubernatorial reelections.
“I think that there’s millions of people that want to move on from Biden. I think they’re ripe for us to be able to get,” DeSantis said.
“But I think you have got to have a vehicle that they’re comfortable with. And I think we’ve shown in Florida that we’re able to win voters who don’t always vote Republican. You know, you can’t win 60-40 with only Republicans.”
The GOP had a 2 percent edge in voter registration over Democrats going into the election in Florida, he said.
He said the party would need to be aggressive, including using ballot harvesting in states where it’s legal, such as Nevada, Pennsylvania, and possibly Wisconsin, which may legalize it once more. “We banned all that in Florida, but I don’t think you can say, ‘Don’t play the way they’re playing.’”
He acknowledged Trump’s high poll numbers.
“I would be shocked if the former president wasn’t leading. He had a hundred percent name ID, one of the most famous people in the world, and had been president of the United States,” DeSantis said.
But he said most Republicans haven’t yet focused on the race. And he noted that polls could be wrong, such as those that failed to predict his recent reelection victory by nearly 20 percentage points.
“We’re going into the race with more local endorsements in the early states than any candidate has ever had with even being an announced candidate,” he said, pointing to almost 200 endorsements he’d received from state legislators in New Hampshire, Iowa, and Florida, including most of those state’s Republican legislative leaders.
“We feel really good about that.”
Responding to another question, DeSantis contrasted his positions with those of Trump by noting particular issues where Trump has attacked him.
DeSantis said he voted against a Trump-backed bill to declare amnesty for 2 million illegal immigrants in return for “a pittance” in gains against illegal immigration.
“I oppose amnesty. That was supposed to be America First policy to oppose amnesty, and yet he endorsed and tried to ram through an amnesty.”
DeSantis said he voted against an omnibus spending bill that Trump signed. “Absolutely, I think he should not have signed those spending bills. He added almost 8 trillion dollars to the debt in a four-year period. I’m happy to be on the conservative side of that debate, because I think our debts have gone up way too much.”
And on one of Trump’s signature issues, building a border wall, DeSantis told The Epoch Times that he’d “make it a day one priority. I will use all the levers available to me to push that through.”
He reiterated how, after Hurricane Ian, he had the state takeover repair of two damaged island bridges predicted to take six months to fix. “We got one done in three days and the other done in two (more) weeks.”
“I can tell you that it was not anything anybody expected. And so it’s cutting through red tape. It’s telling people not to make excuses. And just getting the job done. You just have to be disciplined.”
Addressing the debt ceiling impasse, the governor said the problem is outcome of poor government policy during the COVID pandemic, including lockdowns and flushing “trillions of dollars down the drain.”
Finally, DeSantis made it clear he is a crypto (freedom) advocate.
“As president, we’ll protect the ability to do things like Bitcoin,” said DeSantis. He added “there’s risks involved with it,” but the people interested in the cryptocurrency “are sophisticated” and “can make decisions.”
“You have every right to do Bitcoin. The only reason these people in Washington don’t like it, is because they don’t control it.”
DeSantis called those on Capitol Hill “central planners” who “want to have control over society.”
“Bitcoin represents a threat to them, so they’re trying to regulate it out of existence,” he said.
Of course, all that policy prognostication was lost to the mainstream media who focused almost 100% on the glitches and not the substance.
And the mainstream media refuse to get the joke…
I think it’s odd but telling when CNN admits that the only way they can get anyone to watch their network – the only time they can boast of ratings – is when they have Trump on.
As we said earlier, following comments from the Saudi energy minister that oil shorts will be “ouching” soon, the market interpreted this as a sign that OPEC+ would proceed with another output cut following the unexpected move in early April which briefly sent oil prices sharply higher. The alternative would be another painful blow to OPEC’s credibility, which has emerged as a kind of jawboning “central bank” for the commodity.
But overnight, oil bulls were served a cold shower by Russian Deputy Prime Minister Alexander Novak who said he expected no new steps from OPEC+ when it meets in Vienna on June 4, the state-owned news agency RIA reported.
As Bloomberg’s Grant Smith notes, the contradictory signals on oil policy from OPEC+ leaders Saudi Arabia and Russia suggest the group probably won’t agree new measures next week. That’ll do little to improve souring sentiment in crude markets, and sure enough oil has plunged on Thursday, erasing all recent losses.
Russia, which needs oil revenues to fund its war on Ukraine and which the west is gladly funding as Biden has made clear his reelection chances will collapse if oil prices soar if Russian oil supply is suddenly halted, has so far struggled to implement production cutbacks it announced months ago. Agreeing to even deeper curbs at this point might be more than Moscow can countenance.
It’s possible that the Saudis and fellow Gulf exporters could decide to move without Russian support, but given that they’ve already shouldered much of the burden for supporting oil markets this year, they may feel reluctant to do more.
The rhetorical schism between Riyadh and Moscow is a reprise of positions taken by the two sides ever since they formed OPEC+ just over six years ago, with the Saudis ready for action and Russia advocating a more moderate stance.
Despite dousing expectations for more production cuts, Novak said he expected Brent price to be above $80 a barrel by the end of the year. He said current prices of $75-76 reflected the market’s assessment of the global macroeconomic situation. Novak also said that high U.S. interest rates and a slower than expected Chinese economic recovery were holding back oil prices from rising further.
“This will be the first face-to-face meeting in six months, we are waiting, as usual, for an assessment of the situation in the market,” Novak was quoted as saying by Izvestia newspaper.
“But I don’t think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries due to the fact that we saw the slow pace of global economic recovery.”
He also said he hoped that oil demand will increase in the summer.
“But I repeat once again: we do not have the task of inflating prices – there is the task of balancing in order to ensure the interests of both producers and consumers.”
Sending another signal that no action might be required from OPEC+ at its next meeting, Russian President Vladimir Putin said on Wednesday that energy prices were approaching “economically justified” levels.
Putin said this month that production cuts implemented by OPEC+ were required to maintain a certain price level, contradicting assurances from other leaders of the group that it was not seeking to manage the market in that way.
Oil prices were little changed on Thursday as uncertainty over whether the United States will avoid a debt default weighed against the prospect of further OPEC+ production cuts.
The Market Is Not The Economy: Germany Enters Recession With DAX At Record High
The old mantra that ‘the market is not the economy’ has never been more true than in Germany as the country’s stock market continues to surge to record highs as the nation’s economy enters recession.
Germany suffered its first recession since the start of pandemic, extinguishing hopes that Europe’s top economy could escape such a fate after the war in Ukraine sent energy prices soaring.
Q1 GDP shrank 0.3% from the previous three months following a 0.5% drop between October and December.
“The reluctance of households to buy was apparent in a variety of areas,” the office said in a statement.
“Households spent less on food and beverages, clothing and footwear, and on furnishings.”
They also purchased fewer electric cars as incentives were reduced.
But, of course, markets shrugged off Thursday’s numbers – despite their implications for the wider performance of the 20-nation euro zone – because all that matters is liquidity and shitty econ numbers means a dovish pressure on the ECB at the margin which has been completely conditioned into investors’ minds as a “BTFD” driver.
Sure enough, Germany’s DAX is hitting new record highs, despite, as Bloomberg reports,companies like Zalando SE reflect the flagging consumer sentiment. The fashion retailer saw inventory levels driven higher in the first quarter by falling demand. Domestic car orders, meanwhile, were down by about a third between January and April, according to the VDA auto industry association.
The key manufacturing sector is also proving to be a problem: A deepening downturn is casting doubt on the rebound many anticipate for the coming quarters.
“We must turn the corner in economic policy and put an end to the neglect of our competitiveness,” Finance Minister Christian Lindner said in Berlin, adding that this included the “acceleration of planning and approval procedures and strengthening the idea of technological freedom in order to leverage our creative potential.”
Not if you want the markets to keep going up.
“The optimism at the start of the year seems to have given way to more of a sense of reality,” ING economist Carsten Brzeski said in a report to clients.
“A drop in purchasing power, thinned-out industrial order books as well as the impact of the most aggressive monetary policy tightening in decades, and the expected slowdown of the US economy all argue in favor of weak economic activity.”
Well, it seems stock market investors seem pretty optimistic to us? Forget BTFD, it’s Buy The F**king Stagflationary Spiral
