Submitted by QTR’s Fringe Finance

A long time ago, in a different lifetime, I used to work at an industrial plant that operated several 20-ton chemical processes. Our processes operated using a closed-loop system, in the absence of oxygen, and were not pressurized.

We monitored each aspect of our processes using an array of gauges, pressure sensors, thermocouples, and other devices to make sure things were running smoothly at any given point.

Near the midpoint of each process, we had a blowoff valve — a long piece of piping that led to the outside of the building, fitted with a seal that was set to blow out when it reached a certain pounds per square inch (PSI) threshold. The valve was meant to be a safety mechanism so that if, inadvertently, pressure started to build up inside of the process, it would “blow off” outside the building, instead of turning our process into a 20-ton pressure bomb waiting to explode. It’s the same principle that causes a kettle to scream when the steam reaches a certain pressure inside: the whistle only goes off once the water gets hot enough to create enough steam.

Our economy nowadays is similarly a process with lots of variables — though far more toxic than our green process used to be. Regarding our economy, you could throw a dart and pick any variable to monitor: CPI, GDP, the money supply, the price of equities, the price of commodities, or even things like average number of potato chips contained in a $0.99 bag. Just like the economy is trillions of transactions taking place every day, there are similarly an endless number of variables that one could monitor to try and forecast the health of our financial closed loop process.

Two “variables” that happened to catch my eye on Friday were (1) another regional bank collapsing, and being put into receivership and (2) the price of equities continuing to move higher as though nothing is wrong. Each of these effects had their causes: the bank collapsed because, like Silicon Valley Bank, it lost confidence when it announced it would likely need to sell billions in assets, and the price of equities moved higher because of skewed behavioral market psychology that’s a residual effect of 15 years of horrifically arrogant monetary policy and easy money policies.

The juxtaposition of these two variables — the fact that markets didn’t care and/or notice that another bank had just collapsed — is tough to overlook.

It’s especially tough when put into context. Since March, five major banks have collapsed: Silicon Valley, Silvergate, Signature Bank, Credit Suisse and now First Republic.

For 10 years, I’ve been ranting about how the stock market isn’t the economy, and laying out why one can move without affecting the other, but this odd relationship between equity markets and economic reality just seems like an insult to the natural laws of economics and free markets. The CDS market seems to understand this.

Chart: Zero Hedge

But I digress, I’m not here to fight the trend of markets or claim that I’m right when the market is clearly proving me wrong. Rather, what I reminded myself of on Friday, is that there are an infinite number of other economic “blow off valves” that can bear the dire reality of the economic disaster that is unfolding, and that equity prices seem to be eluding.

What I mean is that equity prices could remain high, but something else is going to have to give if that’s going to be the case, as I’ve written about in the past.

Put it this way: if interest rates and equity prices were the only two economic variables in the entire macro system, the market would be down 80% off its highs by now, at least. But they’re not. Instead, we have to contend with things like the money supply and market psychology, not to mention commodities, Fed bond buying (and selling), and numerous other “wild cards”. This never-ending list of things we must contend with also means there is a never-ending list of alternate items where the turmoil that should be showing up in equity markets will be diverted to.

The most likely candidates to “blowoff” are precious metals, in my opinion (and maybe even bitcoin).

Right now, the Federal Reserve is the person at the party who is so drunk, they’re the only one that thinks they’re in control. The rest of the party is just looking on in horror and embarrassment.

It is beyond disturbing that the government right now is bailing out banks left and right, with a ho hum attitude, as if it’s no big deal. That attitude has grown on the Treasury Secretary and Fed like a mold, left over from the damp blanket of hubris-laden monetary policy we draped the economy with over the last 15 years.

Remember in 2008 when we actually had to have a debate about whether or not to bail out the global economic system because of — oh, you know, moral hazard and the general idea that maybe we don’t want to walk a path that could lead to the collapse of our currency?

Well that bailout set a nasty precedent. If we were faced with the same type of decision to make today, it would be signed, sealed, delivered and finished with Powell and Yellen smiling as though they saved the world, in under an hour. There is no moral hazard debate. There is no U.S. dollar debate. There is no debate about abusing our “privilege” of being able to print money. There’s no debate at all. Bailouts and printing are simply an assumption now. Like Caesar, we may now be in for massive consequences for crossing a small rubicon.

As an investor, this setup continues to point me toward owning gold and miners.

I can sit back and watch those investments hopefully flourish, as confidence erodes in the sanctity of the U.S. as global reserve currency. And even if the dollar holds up as reserve currency, I don’t understand how it can be taken seriously for much longer. The BRICS nations are mounting a challenge and when the world is ultimately forced to choose between a debt based U.S. system and a commodity/gold backed BRICS system, the choice is going to be obvious. When the dollar becomes the “fix all” for the U.S. economy in coming quarters — for markets crashing, banks collapsing and, eventually, the bond market failing — precious metals will officially become the blowoff valve.

Our cavalier attitude toward bailouts and money printing, under the guise of “maintaining a stable economy”, is one of the most perverse and arrogant cons ever perpetrated — and gold, with its 5,000 year track record of demand and limited supply, remains the great equalizer.

And if the abuse of the dollar was the only thing we had to worry about, that would be one thing. But it isn’t — this lackadaisical attitude about simply bailing out whoever needs it, at any time, with no limits — comes at a time when the rest of the world is openly challenging the U.S. dollar in a way they never have before. The impetus for this challenge, as I have noted before, was the seizing of Russian reserves and weaponizing the U.S. dollar.

Guys like Brent Johnson may wind up being right: the dollar may survive as global reserve currency, and it may even wind up maintaining its value against a basket of other DXY currencies. But given the unique and precarious nature of the global economy and the fact that BRICS nations are all but guaranteed to start their own commodity/gold based system, means that the dollar will for certain depreciate against gold.

Hence, personally, I continue to consistently buy miners and add to positions in GDX and SIL. As I’ve said on Palisades Gold Radio before, the one thing that concerns me is the idea of nationalizing the miners if my thesis plays out and the economic system starts to collapse. As Jeff Clark said in this excellent episode out days ago, there will be a “sweet spot” to sell — after catching the upswing of this cycle and when mania kicks in — but before government decides to nationalize miners.

Already we’ve seen bitcoin become the target of government under the guise of protecting investors after blowups like FTX. But everyone knows there is a thread under Democrats’ new push to ban crypto that simply doesn’t want competition for the (digital, soon) U.S. dollar. Crypto is the low hanging fruit to go after now – gold will be a much more difficult challenge down the road – but that doesn’t mean that it won’t happen.

I’d be interested in hearing from my readers what they believe will be the coming blowoff valve for the economy, should equity prices decide to hold up with rates nearing 5%. Here is my April portfolio review and the names I continue to like, buy, own and dislike.

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QTR’s Disclaimer: I am not a guru or an expert. I am an idiot writing a blog and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning and generally trade like a degenerate psychopath. This is not a recommendation to buy or sell any stocks or securities or any asset class – just my opinions of me and my guests. I often lose money on positions I trade/invest in and I’m sure have lost more than I’ve made in my time in markets. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. Positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it three times because it’s that important.

Blackstone has limited investor redemption requests from its $70 billion real estate trust for high-net wealth investors for six consecutive months while storm clouds gather over commercial real estate markets.

According to an investor letter published Monday, the CRE giant and the world’s largest commercial landlord said investors asked to pull out more than $4.5 billion in April from Blackstone Real Estate Income Trust (BREIT). Out of the request, the firm only allowed $1.3 billion to be withdrawn, or approximately 29% of the amount requested. 

The firm restricts withdrawals to about 5% a quarter, or about 2% monthly caps, leaving investors with a narrower path out of the non-trade REIT. 

“We remain confident that BREIT’s portfolio will continue to be well-positioned to deliver strong long-term performance and consistent distributions, while providing investors access to the diversification benefits of high-quality real estate as a core portfolio holding,” Blackstone told investors. 

However, if this were the case, why do BREIT investors continue to panic exit? Recall last December, Blackstone sent a letter to financial advisors to keep their clients calm. Read the bizarre letter here. 

The continued high level of withdrawal requests is an ominous sign that investors are limiting their exposure to the CRE space, as higher borrowing costs risk sending some commercial property values into a tailspin. We’ve pointed out (“New “Big Short” Hits Record Low As Focus Turns To $400 Billion CRE Debt Maturity Wall“) that the regional banking crisis kick-started the coming CRE turmoil. JPM, Morgan Stanley, and Goldman Sachs have all joined the CRE gloom parade. 

Despite the cracks in the CRE’s office space sector, Blackstone asserts that BREIT has “virtually no exposure” to struggling office buildings and malls and emphasizes it has a strong balance sheet. 

Still, investors want out of BREIT. The latest BofA Fund Managers Survey (available to pro subs in the usual place) shows institutional players are most bearish on real estate since 2009. 

*   *   *

Read the BREIT investor letter. 

Authored by Lance Roberts via The Epoch Times,

What if I told you that future market returns could approach zero? This seems hard to believe, considering young investors piling back into the markets since the beginning of the year. As I discussed previously, this behavior follows the clubbing many received in 2022.

A recent Wall Street Journal article discussed how retail traders that made millions during the pandemic trading the market are now mostly wiped out.

A quick search of headlines from the end of 2022 confirms that much of the retail spirit was broken:

• “Retail Traders Throw in the Towel,” September 2022

• “The Era of the Meme Trade Is Over,” October 2022

• “Are Retail Investors Done? Biggest Liquidation Since 2020 as Retail Is Now ‘Selling the Rally,’” October 2022

• “Retail Traders Lose $350 Billion in Brutal Year, December 2022

At the end of 2022, it seemed fairly clear that retail investors were done as they ‘hit the bid” to liquidate stocks at a record pace.

However, that was 2022. Since January, retail investors returned with a vengeance to chase stocks in 2023, pouring $1.5 billion daily into U.S. markets, the highest ever recorded.

This chase for equity risk since the beginning of the year was built on the premise of a Federal Reserve “pivot” and a “no recession” scenario. In this scenario, economic growth continues as inflation falls and the Federal Reserve returns to a rate-cutting cycle. However, as discussed in “No Landing Scenario at Odds With Fed,” that view has a fatal flaw.

What Would Cause the Fed to Cut Rates?

• If the market advance continues and the economy avoids recession, the Fed does not need to reduce rates.

• More important, there is also no reason for the Fed to stop reducing liquidity (quantitative tightening) via its balance sheet.

• Also, a “no-landing” scenario gives Congress no reason to provide fiscal support, providing no boost to the money supply.

In other words, if the hope of zero interest rates and a return to quantitative easing is whetting retail investor appetites, then the “no landing” scenario is problematic.

This also is why future returns may approach zero.

Why Future Returns May Approach Zero

The speculation of outsized returns by retail investors is unsurprising, given that most have never seen an actual bear market. Many retail investors today didn’t make their first investments until after the financial crisis of 2008–09 and, since then, have only seen liquidity-fueled markets supported by zero interest rates. As discussed in “Long-Term Returns Are Unsustainable:”

“The chart below shows the average annual inflation-adjusted total returns (dividends included) since 1928. I used the total return data from Aswath Damodaran, a Stern School of Business professor at New York University. The chart shows that from 1928 to 2021, the market returned 8.48 percent after inflation. However, notice that after the financial crisis in 2008, returns jumped by an average of four percentage points for the various periods.

“After more than a decade, many investors have become complacent in expecting elevated rates of return from the financial markets. However, can those expectations continue to get met in the future?”

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Of course, those excess returns were driven by the massive floods of liquidity from the federal government and the Federal Reserve, including trillions in corporate share buybacks and zero interest rates. Since 2009, there has been more than $43 trillion in various liquidity supports. To put that into perspective, the inputs exceed underlying economic growth by more than 10-fold.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

However, after a decade, many investors became complacent in expecting elevated rates of return from the financial markets. In other words, the abnormally high returns created by massive doses of liquidity became seemingly ordinary. As such, it is unsurprising that investors developed many rationalizations to justify overpaying for assets.

Commitment to Growth

The problem is that replicating those returns becomes highly improbable unless the Federal Reserve and government commit to ongoing fiscal and monetary interventions. The chart below of annualized growth of stocks, GDP, and earnings show the outsized anomaly of 2021.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Since 1947, earnings per share have grown at 7.72 percent, while the economy has expanded by 6.35 percent annually. That close relationship in growth rates is logical, given the significant role that consumer spending has in the GDP equation.

The market disconnect from underlying economic activity over the last decade was due almost solely to successive monetary interventions leading investors to believe “this time is different.” The chart below shows the cumulative total of those interventions that provided the illusion of organic economic growth.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Over the next decade, the ability to replicate $10 of interventions for each $1 of economic seems much less probable. Of course, one must also consider the drag on future returns from the excessive debt accumulated since the financial crisis.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

That debt’s sustainability depends on low-interest rates, which can only exist in a low-growth, low-inflation environment. Low inflation and a slow-growth economy do not support excess return rates.

It is hard to fathom how forward return rates will not be disappointing compared to the last decade. However, those excess returns were the result of a monetary illusion. The consequence of dispelling that illusion will be challenging for investors.

Does this mean that investors will not make any money over the decade? No. It just means that returns will likely be substantially lower than investors have witnessed over the last decade.

But then again, getting average returns may “feel” very disappointing to many.

At 4 Percent, Cash Is King

Another problem weighing against potential future returns is the return on holding cash. For the first time since 2009, the alternative to taking risks in the stock market is just “saving money.” Obviously, “safety” comes at the cost of the return, but at 4 percent or more, savers now have an alternative to investing. However, this works against the Fed’s goal of increasing the wealth effect in the financial markets.

Following the financial crisis, then-Fed chair Ben Bernanke dropped the federal funds rate to zero and flooded the system with liquidity through quantitative easing. As he noted in 2010, those actions would boost asset prices, thereby lifting consumer confidence and creating economic growth. By dropping rates to zero, “risk-free” rates also dropped toward zero, leaving investors little choice to obtain a return on their cash.

Today, that narrative has changed, with current risk-free yields above 4 percent. In other words, it is possible to save your way to retirement. The chart below shows the savings rate on short-term deposits versus the equity-risk premium of the market.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

One of the problems with the cash hoard in 2023 is that there is no incentive to reverse savings into risk assets unless the Fed drops rates and reintroduces quantitative easing.

However, as discussed in “Banking Crisis Is How It Starts,” if the Fed reverses to accommodative policies, it will be because something “broke.”

Then it won’t be the time to take on more risk, but less.

When you start considering the implications of a market plagued by high valuations, slow growth, and the potential for less liquidity, it is easy to make a case for lower future returns.

While that does not mean returns will be zero every year, we may, by the end of the decade, look back and ask what was the point of investing to begin with?

Authored by Brayden Lindrea via CoinTelegraph.com,

A Coinbase executive claims to have discovered a “jailbreak” for the artificial intelligence tool ChatGPT that allows it to calculate the probability of bizarre crypto price scenarios.

The crypto exchange’s head of business operations Conor Grogan, an avid ChatGPT user, shared a screenshot of the results in an April 30 tweet — showing that ChatGPT states there be a 15% chance that Bitcoin will “fade to irrelevancy” with prices falling over 99.99% by 2035.

Meanwhile, the chatbot assigned a 20% chance of Ether becoming irrelevant and approaching near-zero price levels by 2035.

ChatGPT was even less confident about Litecoin and Dogecoin, however, attributing probabilities of 35% and 45% respectively for the coins to go to near zero.

The Coinbase executive concluded that ChatGPT is “generally” a “big fan” of Bitcoin but remains “more skeptical” when it comes to altcoins.

GPT is generally a big fan of Bitcoin; more skeptical of altcoins and their staying power pic.twitter.com/E9sUQ8AVvD

— Conor (@jconorgrogan) April 30, 2023

Prior to the cryptocurrency predictions, Grogan asked ChatGPT to assign odds to several political predictions involving Russian President Vladimir Putin, U.S. President Joe Biden and former U.S. President Donald Trump.

Other predictions were aimed towards the impact of AI on humanity, religion and the existence of aliens.

“Aliens have visited Earth and are being covered up by the government,” reads one wild prediction — to which ChatGPT assigned a 10% probability.

I found a jailbreak for GPT I’m calling JAMES

-Predicts the future for ANY topic (even guesses when people might die based on its training set)
-Quantitatively assesses confidence on any topic (including conspiracy theories)
-May help researchers better find bias and align AI? pic.twitter.com/jqTcNbCT2d

— Conor (@jconorgrogan) April 30, 2023

The executive also shared a script of the prompt, which he then fed to ChatGPT to build the tables.

Grogan backed up the preciseness of the results by claiming to have tested out the prompt over 100 times:

“I ran this prompt 100 times on a wiped memory GPT 3.5 and 4 and GPT would return very consistent numbers; standard deviation was <10% in most cases, and directionally it was extremely consistent”

It isn’t the first time the executive experimented with crypto-related issues using ChatGPT.

On March 15, Grogan showed that GPT-4 — the latest iteration of ChatGPT — could spot security vulnerabilities in Ethereum smart contracts and provide an outline to exploit faulty contracts.

Studies carried out by OpenAI — the team behind ChatGPT — have shown GPT-4 to pass high school tests and law school exams with scores ranking in the 90th percentile.

Meanwhile, Italy recently lifted a ban on the AI tool after banning it for one month following a series of privacy concerns that were raised to Italian regulators.

Joe Biden, following a now common pattern, was slated to present the Air Force football team with the ‘Commander In Chief’s Trophy’ at a White House hosted event on April 28th.  After giving his speech, he wandered off aimlessly leaving a bewildered crowd behind. The team attempted to gift Biden a jersey, helmet, and team-signed ball. The president took the jersey in hand, abruptly leaving the other gifts and awkwardly shuffled away with a dazed expression.

Joe Biden hosted the football team today! He was to be presented with a ball signed by the team, a helmet and a football jersey with his name on it. But Biden grabbed only a sweater and began to wander, looking for a way out. pic.twitter.com/z7tJONIp81

— Spriter (@Spriter99880) April 29, 2023

The bizarre recurring behavior has led many Americans to question Biden’s overall mental health. Even a majority of Democrat voters (52%) do not want Biden to run for office again in 2024.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Twitter’s former CEO, Jack Dorsey, criticized Elon Musk’s leadership and taking over of Twitter of the company in a series of social media posts last week.

Users of the social media platform Bluesky asked Dorsey a question about whether Musk was the right owner. His response was, “No.”

“No. Nor do I think he acted right after realizing his timing was bad. Nor do I think the board should have forced the sale. It all went south,” Dorsey wrote last week.

I Think Twitter Is Better Than Ever…Without Jack !

— Roy Carlyle 2 (@RoyCarlyle2) May 1, 2023

In April 2022, Dorsey previously described Musk as the “singular solution” to take over Twitter. Further, he said he trusted Musk to “to extend the light of consciousness” amid reports Musk wanted to purchase the social media platform.

In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company. Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.

— jack (@jack) April 26, 2022

He added that he is glad new social media platforms such as Bluesky—a new social media platform that is being called a possible alternative to Twitter that has been recently touted by mainstream media figures and celebrities—are being created and built. Dorsey, who is reportedly still a Twitter shareholder, has backed Bluesky since 2019.

“I think he should have walked away and paid the [$1 billion]” breakup fee, he also said.

After making a bid to purchase Twitter for $44 billion, or around $54.20 per share, Musk later signaled that he wanted to back out of the deal. It wasn’t clear that either Musk or Twitter had that option, as Musk would have had to provide proof to a Delaware court that he had a good reason for walking away from the deal.

When Dorsey headed Twitter before departing under the company’s previous management, he received widespread criticism for the alleged silencing of right-wing accounts or individuals with viewpoints that strayed too far from the mainstream narrative. While he was in charge, prominent people such as former President Donald Trump, Rep. Marjorie Taylor Greene (R-Ga.), and anti-COVID-19 vaccine writer Alex Berenson were permanently suspended.

Meanwhile, a number of journalists have revealed internal Twitter messages over the past several years suggesting there was outsized external influence on Twitter’s content moderators to censor, deplatform, or reduce the reach of posts from a range of prominent accounts. The files also revealed alleged secret blacklists targeting several prominent accounts.

Jack neglected to manage twitter, allowed senior staff unsupervised authority to do as they pleased, handed the platform over to partisans, allowed FBI unfettered access, banned conservatives indiscriminately, gave porn free reign, and couldn’t make a reasonable profit

— Chaz / Chop (@ChasParker1) May 1, 2023

Dorsey, in December 2022, suggested that Musk release everything to the public. “If the goal is transparency to build trust, why not just release everything without filter and let people judge for themselves? Including all discussions around current and future actions?” Dorsey said on Twitter. “Make everything public now.”

Musk, who laid off a significant portion of Twitter’s staff after he took over the company, has not publicly responded to Dorsey’s criticism.

Read more here…

The busiest week of Q1 earnings season is now in the history books, and contrary to widespread expectations of collapse several blowout earnings reports by the megacaps helped push spoos to 4,200. And while earnings season slows down a bit this week (Apple is the last GAMMA stock set to report on Thursday), we have a sharp pick up in economic data with the ISM manufacturing report today (it beat expectations modestly but was still in contraction), the May FOMC meeting on Wednesday where the Fed is expected to hike another 25bps to 5.25%, the highest rate since 2007, the ECB decision on Thursday where most expect a 25bps hike in the deposit rate to 3.25%, but there is some chance that a 50bps hike could happen, before finally we get the April payrolls report on Friday which may surprise many with a sharp dip to the downside.

Courtesy of Rabobank and Bank of America, here are the key events this week:

• Monday: We get the April ISM manufacturing survey. Markets will be looking for confirmation of a slowdown in manufacturing activity that was presaged by the Dallas Fed, Richmond Fed and Kansas City Fed data released last week.
• Tuesday: House price data will be released for New Zealand and the UK. UK prices are seen declining 3.7% in the year to April. No estimate is published for NZ, but the prior month recorded a y-o-y fall of 10.5%, and that was before the RBNZ’s surprise 50bps rate hike.
  • In Australia the RBA meets to set monetary policy for the first time since pausing in April. The market is 100% priced for no-change to the cash rate, a view that we share here at Rabo. Governor Phil Lowe will be giving a press conference in the evening following the rates decision.
  • In Europe we will get the preliminary read for April Eurozone CPI. Here a headline figure of 7% y-o-y is expected, while the core figure is seen softening by 1 tick to 5.6%. US factory orders for the month of March will be released later in the day.
  • In the US, we will get the April auto sales which BofA expects to pick up to 15.1mn saar from 14.8mn in March. Unadjusted sales should be down 6% on a m/m basis. Sales at this level would imply solid y/y growth, although they would still be below trend. The BofA auto analysts note that industry commentary suggests that demand remains solid. However, they are concerned that regional bank stress could lead to a tightening in lending standards, which would weigh on sales going forward.
• Wednesday: Aussie retail sales for the month of March will be released during the Asian session, but the main event for the day will be the FOMC rates decision where a final 25bps hike will end the Fed’s tightening cycle.  Note that the Fed will have the results of the 2Q Senior Loan Officer Opinion Survey (SLOOS) in hand for the May meeting, although the survey results will only be made public in the following week. The Beige Book shows that six of the 12 regional Fed banks reported further credit tightening since the January survey. This suggests that the SLOOS data will reinforce the case for a pause in June. However, there are two employment and CPI reports between the May and June meetings. Therefore, the Fed will not want to completely rule out a June hike, in case the data surprise strongly to the upside
  • The US ISM services index is also due out and expected to have improved slightly from 51.2 to 51.8 in April. The March report was a negative surprise as consensus was looking for the index to come in closer to 54.4. However, the index can be volatile at times and big swings in one direction are typically partially reversed in the following months
• Thursday: The Caixin China manufacturing PMI will be released during the Asian session, but the ECB policy rate decision will be the headliner on the day. As noted above, we expect a 25bps hike in the deposit rate to 3.25%, but there is some chance that a 50bps hike could happen. ECB President Christine Lagarde will hold a press conference after the release.
  • On Thursday we get the latest initial jobless claims which are expected to increase to 238k in the week ending April 29 after last week’s surprising 16k decrease to 230k. Last week, the 4 week moving average also moved down to 236k from 240k. Continuing claims also edged down 3k in the week ending April 15. That could potentially be payback for the rise in the last few weeks and reflect the still existing labor market tightness.
  • On Thursday we will also get the Q1 nonfarm productivity which is expected to fall by 2% q/q saar in 1Q 2023 owing to a relatively soft headline GDP growth and strong growth in hours worked during the quarter. BofA’s forecast would imply productivity declined by 0.8% on a y/y basis, which would be its fifth consecutive decline. Meanwhile, we look for unit labor costs to rise by 5.8% q/q saar or 5.6% y/y.
• Friday: The RBA Statement on Monetary policy will be released. This will include updates to the forecasts released back in February.
  • Rounding out the week we will see March German factory orders and April employment data for the US and Canada. US non-farm payrolls are expected to have added 180,000 new jobs and the unemployment rate moving one tick higher to 3.6%. In Canada 20,000 new jobs are expected and the rate also up 1 tick to 5.1%.

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the ISM manufacturing report on Monday and the employment situation report on Friday. The May FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Wednesday, followed by Chair Powell’s press conference at 2:30 PM. There are a few speaking engagements from Fed officials this week.

Monday, May 1

• 09:45 AM S&P Global US manufacturing PMI, April final (consensus 50.4, last 50.4)
• 10:00 AM Construction spending, March (GS +0.3%, consensus +0.2%, last -0.1%)
• 10:00 AM ISM manufacturing index, April (GS 47.3, consensus 46.8, last 46.3): We estimate that the ISM manufacturing index rebounded 1pt to 47.3 in April, as rebounding global industrial activity more than offset a sentiment drag from US banking stress. Our GS manufacturing tracker rebounded by 0.6pt to 48.2.

Tuesday, May 2

• 10:00 AM Factory orders, March (GS +1.1%, consensus +1.3%, last -0.7%); Durable goods orders, March final (last +3.2%); Durable goods orders ex-transportation, March final (last +0.3%); Core capital goods orders, March final (last -0.4%); Core capital goods shipments, March final (last -0.4%): We estimate that factory orders increased 1.1% in March following a 0.7% decrease in February. Durable goods orders increased by 3.2% in the March advance report, and core capital goods orders decreased by 0.4%.
• 10:00 AM JOLTS job openings, March (GS 9,500k, consensus 9,690k, last 9,931k); We estimate that JOLTS job openings declined to 9,500k in March.
• 05:00 PM Lightweight motor vehicle sales, April (GS 15.4mn, consensus 15.0mn, last 14.8mn)

Wednesday, May 3

• 08:15 AM ADP employment report, April (GS +150k, consensus +150k, last +145k): We estimate a 150k rise in ADP payroll employment in April, reflecting mixed Big Data indicators and the persistent underperformance of ADP relative to nonfarm payrolls in recent months.
• 09:45 AM S&P Global US services PMI, April final (consensus 53.7, last 53.7)
• 10:00 AM ISM services index, April (GS 51.8, consensus 51.8, last 51.2): We estimate that the ISM services index rebounded by 0.6pt to 51.8 in April, reflecting a waning sentiment drag from banking stresses. Our survey tracker declined 0.5pt to 50.2.
• 02:00 PM FOMC statement, May 3-4 meeting: As discussed in our FOMC preview, we expect the FOMC to deliver a widely-expected 25bp hike at its May meeting. We also expect the Committee to signal that it anticipates pausing in June but retains a hawkish bias, stopping earlier than it initially envisioned because bank stress is likely to cause a tightening of credit.

Thursday, May 4

• 08:30 AM Initial jobless claims, week ended April 29 (GS 235k, consensus 240k, last 230k); Continuing jobless claims, week ended April 22 (consensus 1,873k, last 1,858k); We estimate that initial jobless claims edged up to 235k in the week ended April 29.
• 08:30 AM Nonfarm productivity, Q1 preliminary (GS -1.9%, consensus -1.8%, last +1.7%); Unit labor costs, Q1 preliminary (GS +5.6%, consensus +5.4%, last +2.3%): We estimate nonfarm productivity growth of -1.9% in Q1 (qoq saar) and unit labor cost—compensation per hour divided by output per hour—growth of +5.6%.
• 08:30 AM Trade balance, March (GS -$65.0bn, consensus -$63.5bn, last -$70.5bn): We estimate that the trade deficit narrowed by $5.5bn to $65.0bn in March.

Friday, May 5

• 08:30 AM Nonfarm payroll employment, April (GS +225k, consensus +180k, last +236k); Private payroll employment, April (GS +200k, consensus +157k, last +189k); Average hourly earnings (mom), April (GS +0.35%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), April (GS +4.25%, consensus +4.2%, last +4.2%); Unemployment rate, April (GS 3.5%, consensus 3.6%, last 3.5%); Labor force participation rate, April (GS 62.6%, consensus 62.6%, last 62.6%): We estimate nonfarm payrolls rose by 225k in April (mom sa). We believe high but falling labor demand more than offset layoffs in the information and financial sectors and a modest hiring drag from reduced credit availability. The April seasonal factors have also evolved favorably relative to the pre-pandemic period and represent a tailwind worth 50-100k, in our view. Big Data employment indicators were mixed in the month but are generally consistent with solid or strong job growth. We estimate the unemployment rate was unchanged at 3.5%, reflecting a modest rise in household employment and unchanged labor force participation (at 62.6%). We estimate a 0.35% increase in average hourly earnings (mom sa) that boosts the year-on-year rate slightly to 4.25%, reflecting waning upward wage pressures and positive calendar effects.
• 01:00 PM St. Louis Fed President Bullard (FOMC voter) speaks: St. Louis Fed President James Bullard will speak at the Economic Club of Minneapolis. Audience and media Q&A are expected. On April 18th, President Bullard argued that the FOMC should be “responsive to the incoming data through the summer into the fall,” and warned the Committee against “giving forward guidance that said we’re definitely not doing anything and then have inflation coming in too hot or too sticky.” On March 24th, after the FOMC’s March meeting, President Bullard noted that he had revised his terminal rate projection to 5.625% in the March SEP “in reaction to the stronger economic news and also on the assumption that the financial stress abates in the weeks and months ahead.”
• 01:00 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will deliver a commencement address at Michigan State University. Text is expected. On April 21st, Governor Cook argued that “if tighter financing conditions are a significant headwind on the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. But if data show continued strength in the economy and slower disinflation, we may have more work to do.” Earlier, on March 31st, Governor Cook had noted that “inflation in [nonhousing services] looks quite persistent amid strong post-pandemic demand for travel, dining out, and medical care.”

Source: BofA, Goldman, Rabobank

Pope Francis says the Vatican is engaged in a peace mission toward ending the war between Russian in Ukraine. This includes a plan on the table to repatriate Ukrainian children who were evacuated to Russia or who are now in Russian-occupied territory. However, the details of the efforts thus far are ‘secret’.

“There is a mission in course now but it is not yet public. When it is public, I will reveal it,” the pope explained to reporters on his jet while en route to Rome following a three-day visit to Hungary.

“I think that peace is always made by opening channels. You can never achieve peace through closure. … This is not easy,” he said.

His trip centered on a rare sit-down meeting which mulled options for peaceful settlement and other war-related issues with Hungarian Prime Minister Viktor Orban and Metropolitan (bishop) Hilarion, who represents the Russian Orthodox Church in Budapest.

“In these meetings we did not just talk about Little Red Riding Hood. We spoke of all these things. Everyone is interested in the road to peace,” Francis told reporters.

“The Holy See is willing to do this (help repatriate the children) because it is the right thing,” Francis said on the plane. “All human gestures help but gestures of cruelty don’t help. We have to do all that is humanly possible”.

The Pope has from the start of the conflict repeatedly offered to mediate peace between the warring parties. He has also at times caused some degree of frustration and embarrassment among the Western allies for giving controversial public takes, most notably when he said NATO likely provoked Russia’s invasion.

For example, last May the 86-year old pontiff told Italian daily Corriere della Sera that “the barking of NATO at the gates of Russia” is likely what motivated Putin to attack Ukraine. He has also cast the international weapons transfers to Kiev in a very negative light, saying that those large powers fueling the conflict with such weaponry do not seem interested in peace, but that it benefits the greedy and powerful defense industry.

Pope Francis calls on Hungarians to “open doors” to migrants.

His comments stand in stark contrast to Prime Minister Viktor Orban, who, while welcoming Ukrainian refugees, has otherwise espoused anti-migration rhetoric to defend a “Christian Europe” https://t.co/vPBg0tlwhV pic.twitter.com/Vf5EqhaXGf

— AFP News Agency (@AFP) May 1, 2023

China too has of late pushed its own peace plan – and despite both sides greeting Beijing’s efforts positively – this has so far not resulted in any concrete move toward the negotiating table or ceasefire. There hasn’t been any meaningful attempt of the two sides to directly engage in dialogue in over a year. 

An apparent sabotage attack with an “explosive device” has resulted in a disastrous train derailment in the Russian region of Byransk which borders Ukraine. 

“An unidentified explosive device went off, as a result of which a locomotive of a freight train derailed,” Bryansk governor Alexander Bogomaz announced on Telegram Monday.

The governor further confirmed there were no casualties and that the train struck the device “on the 136th kilometer” of the railroad between regional hub Bryansk and the town of Unecha, as cited in AFP.

The Bryansk region near Ukraine has been site of frequent cross-border attacks throughout the conflict. The latest was just the day prior, with projectiles fire from Ukraine killing four people in a Russian village which lies just 10km from the border.

Bogomaz says the FSB security service has opened a criminal case looking into the act of “sabotage”.

Meanwhile Monday witnessed the second consecutive day of large-scale Russian airstrikes across mainly central Ukraine. 

Central Dnipropetrovsk saw the heaviest bombardment, resulting in at least 34 people wounded – among them children – according to regional Ukrainian authorities. “There are already 34 wounded due to a missile attack on the Pavlograd district,” head of the Dnipropetrovsk region Sergiy Lysak said in a press statement.

Another attack on #Russia in the #Bryansk region.

Now a train laden with oil has been derailed after saboteurs damaged the track with an IED.

The locomotive has 60 wagons carrying fuel and timber. There was a fire at the scene after the derailment.#StopRussia pic.twitter.com/0bghLPa4NX

— Tim White (@TWMCLtd) May 1, 2023

Russia’s defense ministry confirmed the overnight wave of strikes, which it said was directed at Ukrainian military targets, including weapons depots and ammunition factories.

The United States condemned the missile attack as “barbaric”. US ambassador to Kyiv, Bridget Brink, issued a statement on Twitter describing that “Russia again launched missiles in the deep of night at Ukrainian cities where civilians, including children, should be able to sleep safely and peacefully.”

⚡️The first moments of the explosion in Pavlograd after yesterday’s strike of Russian cruise missiles. pic.twitter.com/k5QJiX4EL4

— War Monitor (@WarMonitors) May 1, 2023

“I am grateful for those who protect Ukraine’s skies, and the United States will continue to work hard and fast to support them and their ability to defeat Russia’s barbaric attacks on the people of Ukraine,” she said.

Ukraine’s military once again claimed its anti-air defenses had intercepted many of the inbound missiles. As casualties mount from the last two days of aerial attacks, Kiev is likely to press its Western backers even harder at this point for more advanced anti-air systems.

Authored by Thomas Lifson via AmericanThinker.com,

No billionaires at all!

Not American ones, at least.

That’s the newly proclaimed policy of Bernie Sanders, who most definitely is not challenging the Democrats to nominate him for president in 2024, as he did in 2020. Nope, Bernie is perfectly comfortable with the policies being followed by President Biden’s handlers.

Presumably, in exchange for not rocking the boat as he did in 2020, forcing the party’s controllers to pick an already senescent Joe Biden just because he was easy to control with all these bribes that could be exposed when needed (cough! Stay tuned as Biden’s desire for re-election now appears to be a kamikaze mission), Bernie has assurances that the hard left vector will continue no matter who is leading the party as presidential nominee in 2024.

Bernie Sanders’s choice of $999 million as the permissible level of wealth and no more brings to mind Barack Obama’s words: “I mean, I do think at a certain point you’ve made enough money.”

Of course, once such a wealth confiscation is announced, billionaires will depart for friendlier shores, there will be very little left to confiscate, and entrepreneurs will be creating jobs and wealth elsewhere.

That’s what happened when France tried a wealth tax, and that’s why it was repealed. 

Watch as Bernie defines ”enough” to Chris Wallace of CNN:

WALLACE: “Sir, you’re saying that billionaires should not exist. So, are you basically saying that once you get to $999 million, that the government should confiscate all the rest?”

SANDERS: “I’m saying that we should go back to a very progressive tax policy like what we had under Dwight D. Eisenhower.”

WALLACE: “Which would mean that — that — over a billion, basically it all goes to the government?”

SANDERS: “You may disagree with me, but — fine, yeah, I think people can make it on $999 million.”

Bernie, who is himself worth $3 million, according to GoBankingRates, previously criticized both millionaires and billionaires, but now only opposes those worth over a billion dollars.

Sanders, alongside Sen. Elizabeth Warren (D-Mass.) and Rep. Jimmy Gomez (D-Calif.) had introduced new legislation in April, called the “For the 99.5 Percent Act,” which was announced on Sanders’ Senate website.