Elizabeth Holmes was convicted earlier this year of defrauding investors out of hundreds of millions of dollars following the epic demise of Silicon Valley blood-testing company Theranos Inc. Holmes’ lawyer filed a request to the judge for leniency in the sentencing and requested 18 months of home confinement instead of years in prison, reported Bloomberg.

Ten months after 50 hours of deliberations, the jury of eight men and four women convicted the Theranos founder of three counts of wire fraud and one count of conspiracy to commit wire fraud for scamming investors about the innovative technology Theranos allegedly had to revolutionize blood testing with the simple prick of a patient’s finger.

Her lawyer penned a letter ahead of sentencing next week for US District Judge Edward Davila to overlook her fraudster caricature and instead focus on her as a human being. The memo said she deserved 18 months of home confinement rather than prison. 

The memo was accompanied by letters from over 130 friends, family, and even Theranos investors, as well as former company employees who described Holmes as a ‘good person.’ 

Judge Davila has handled her case since the collapse of Theranos after reaching a valuation of $9 billion. Criminal defense lawyers tell Bloomberg that Holmes’ sentencing could send a warning shot to Silicon Valley companies that run on hopes and dreams. 

Another expert said the sentencing of Holmes is to discourage technology startups that blind investors with hype. Holmes’ request subtracts about 18.5 years from the maximum incarceration period she faces for her convictions, with the memo noting that time would be better spent at home than in prison. 

“We acknowledge that this may seem a tall order given the public perception of this case,” her lawyers wrote. 

They added: the judge shouldn’t view Theranos as “a house of cards,” but as the “ambitious, inventive, and indisputably valuable enterprise it was.” 

“The court’s difficult task is to look beyond those surface-level views when it fashions its sentence,” the letter concluded. 

Holmes’s memo also expands on her childhood and years at Stanford University. It also touches on life’s traumas detailed in court, such as the rape of Holmes in college. 

The memo reiterates her ex-boyfriend and a former executive at Theranos, Ramesh “Sunny” Balwani, of sexual abuse that clouded her judgment. Balwani, 57, was convicted of fraud in July and faces sentencing next month.  

Holmes’ scheme defrauded media tycoon Rupert Murdoch, former Secretary of Education Betsy Devos, and Walmart’s Walton family for hundreds of millions of dollars. Defrauding the DeVos family of $100 million in one count alone calls for 9-11 years in prison. 

By John Gallagher of FreightWaves

Recent data from the American Trucking Associations found that the average truckload driver made over $69,000 including salary and bonuses in 2021 — an 18% increase from 2019.

At the same time, however, driver compensation — that is, a lack of it — ranked as the No. 1 issue among company drivers and third among all drivers, according to the latest annual survey released in October by the American Transportation Research Institute, which works closely with ATA.

Drivers also ranked detention/delay at customer facilities among their top concerns. The U.S. Department of Transportation estimated in 2018 that time lost waiting to pick up and drop off freight costs commercial truck drivers over $1 billion in annual pay.

Many of those drivers believe that the best way to address both issues is for the government to step in and require that trucking companies pay their drivers overtime.

“The big guys get away with cheap labor because they don’t want to pay overtime. The big box shippers get away with detaining drivers because nobody charges them. The big carriers don’t charge the shippers because they don’t want to lose the freight,” Lewie Pugh, executive vice president for the Owner-Operator Independent Trucking Association, told FreightWaves.

“We spent years trying to figure out how to get people’s attention on this, and with trucking being so diverse — what you haul might take 15 minutes, what I haul might take four hours — we decided the simplest thing is to remove an exemption from the Fair Labor Standards Act (FLSA) so that truckers could get paid overtime. Right now, they’re working 70 hours a week or more.”

Overtime pay legislation pending

OOIDA is a principal backer of the Guaranteeing Overtime for Truckers Act, legislation introduced in the House in April and in the Senate in September that would repeal the motor carrier exemption in the FLSA that excludes company drivers from overtime protections. Pugh estimates that roughly 10-15% of OOIDA’s membership consists of company drivers.

“If this legislation were to pass, the big carriers would be able to pressure shippers and receivers to load their drivers who are on the clock sitting at the loading dock,” Pugh said. “And raising driver pay will raise the rates, which will have a downstream economic effect whereby the smaller owner-operators will be able to raise their rates as well.”

A third-party logistics executive also sees benefits to providing overtime to truckers. “While this wouldn’t help us directly, we care about the drivers we use and whatever affects them positively would affect us,” Dimitre Kirilov, president of consumer services at Montway Auto Transport, a Chicago-based 3PL, told FreightWaves. “Transportation touches everything — we all pay the bill at the end of the day.”

OOIDA and other backers of the legislation seem to have firm support from the Biden administration. Repealing the trucking industry’s FLSA exemption was highlighted in the U.S. Department of Transportation’s supply chain vulnerability report released in February.

DOT Secretary Pete Buttigieg himself said that driver recruitment should not become a “leaky bucket” if new drivers end up leaving due to a pay gap with other industries. “Rather, we make sure that the working conditions and the compensation reflect the fact that those jobs are absolutely essential,” he said.

And the Federal Motor Carrier Safety Administration recently contracted a study with the Transportation Research Board, as required by the infrastructure law passed last year, on how various methods of driver pay — including getting paid by the hour — affects safety and driver retention.

Opposition to overtime pay is fierce

But getting the legislation passed will be an uphill battle. ATA is actively lobbying against the bills, arguing, among other things, that mandating overtime would require the industry to revamp compensation models that have been in place for decades but “likely resulting in no net change in the total compensation to truck drivers,” according to the group.

Instead, the threat of wage and hour litigation “will inevitably force employers to manage driver workloads with a focus on limiting liability and economic downside rather than on safety, efficiency, and levels of service for freight customers,” ATA contends. “Such a change would limit trucking capacity nationwide, drive up freight costs, slow the movement of goods, and threaten highway safety.”

Jim Mullen, who served as acting administrator at FMCSA during the Trump administration, acknowledged that driver pay remains an issue but that getting rid of the FLSA is not the way to go.

“There are some segments of the industry where drivers are being taken advantage of, and that needs to be corrected,” Mullen, now head of his own consulting firm, Mullen Consulting LLC, told FreightWaves. It’s been a problem for some time, and you would hope that the marketplace would eventually correct that.

“But as far as eliminating the exemption under the FLSA for interstate trucking, it’s a good concept in theory. In practice, it would create a rather large shift for both drivers and carriers in how they look at the labor force.”

The Manhattan rental crisis appears to be softening, although rents for luxury apartments continue to soar to new extremes.

In October, the median rent on new leases for luxury units in the borough reached a staggering 13% from September to $13,000, according to Bloomberg, citing data from Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

“Luxury is through the roof relative to the balance of the market,” said Jonathan Miller, president of Miller Samuel. 

Demand for luxury apartments comes as the national average 30-year mortgage rate is above 7% for the first time since 2000, pushing price-sensitive wealthy New Yorkers away from purchasing mansions due to economic uncertainty and or affordability. 

Rents for the most expensive apartments are up nearly 50% since October 2019, outpacing the non-luxury rents by 15%. 

“That trend is continuing even as the overall market peaks,” Miller added. 

Median rent prices for the bottom 90% of the market slightly cooled further but off the peak, dropping $21 to $3,850.

After a summer of “record number of records” for the median rent of all apartments, it wasn’t until August that prices peaked and then reversed. 

“Rents are robust but they are starting to plateau,” Miller said in September. 

We correctly pointed out that rent prices in the borough would skyrocket this summer in an April note titled “Not A Peak” – Manhattan Apartment Rents Hit Another Record High,” informing readers who were looking at renting in the city to hold off because there will be “cooling in the fall.” 

Again, it appears we were right about the fall cooling if you’re signing a lease agreement for a non-luxury apartment. 

There’s more good news. The share of leases signed after fierce bidding wars fell last month from around 20% to 14.2%. But those signing new deals still paid a 13.1% premium more than the list price, a record. 

Data from brokerage Corcoran Group show inventories increased last month, the highest in 14 months. More apartments available will help continue cooling through the rest of the year. 

As for the luxury market, well, the bankers on Wall Street can afford it, or maybe not, because their bonuses this year will be slashed. For the average person looking to rent in Manhattan, at least now the cooling period has begun, though perhaps wait until 2023 to lock in a contract when rent prices likely slide some more. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

It’s certainly possible to be disgusted, but being disabused of the fantasy that the system is self-correcting is the healthier perspective.

I used to be disgusted, now I’m disabused: beneath all the self-serving narratives, fad-memes and over-simplifications regurgitated as serious analysis, these are the core dynamics I see:

1. Imperial corruption of democracy and open markets. I described this in Regardless of Who’s Elected, Imperial Corruption Rules the Nation: the dynamic adaptive churn of unfettered representative democracy and open markets are anathema to insiders, vested interests and elites, each of which has gained asymmetric power by subverting democracy and markets to serve their private interests rather than the public interest / common good–phrases that are meaningless to insiders, vested interests and elites except as simulacra used for PR.

2. The Deep State, the unelected and unaccountable Administrative State. I’ve been discussing the Deep State before it entered common use–for example:

Going to War with the Political Elite You Have (May 14, 2007)

The Dollar and the Deep State (February 24, 2014)

Is the Deep State Fracturing into Disunity? (March 14, 2014)

The Administrative State has existed in some form in every nation-state / empire, but the U.S. Deep State only gained its vast global powers in World War II and the Cold War, where the lesson learned was the public may choose unwisely (for example, choosing appeasement over preparation) and so the really important decisions needed to preserve the nation cannot be left to parochial politicos in elected office–those decisions must be in the hands of those who know what has to be done.

Democracy is the rubber stamp for doing what’s necessary. Beyond that, it’s a potentially fatal hindrance. That’s the mindset of the Deep State, and if you and I were in upper-echelon positions in the Administrative State, we’d agree with this mindset when things get serious.

This mindset is a self-reinforcing group-think feedback loop: those who believe the public should set policy are weeded out, either by self-selection or via being sent to bureaucratic Siberia.

We’re protecting you. That’s all you need to know.

This opens the door to functionaries who came to do good but stayed to do well, i.e. those with the right credentials and connections to enter the Power Circle to “serve the public” but soon become insiders maximizing their own private gains. That’s the problem with the Administrative State: it’s ultimately unaccountable, not just to the public or elected officials but to itself.

3. Vested interests block adaptions that threaten their share of the spoils. Any advance that increases efficiency and productivity and furthers the public good is squelched, suppressed or co-opted by vested interests who rightly fear their share of the spoils might be diminished by advances that obsolete their particular cartel, monopoly or other embedded skim, scam, fraud, embezzlement or simply unproductive dead weight.

The status quo is thus locked into a death spiral as gatekeepers, insiders, vested interests and sold to the highest bidder politicos will protect vested interests even as the engines flood and the ship begins its long descent into the void.

How do otherwise smart people become so blind to what’s going on? They believe the status quo is so wealthy, so powerful, so clever, etc., that it will overcome any obstacles or crises because it’s always done so in the past, and so it is permanent, immutable, forever, and our supping at the trough of free money couldn’t possibly weaken such an enduring Leviathan.

This is the fatal fantasy of every empire. We’re too successful to fail and collapse. But oddly enough, faith in the permanence of success leads to the very collapse that’s deemed “impossible.”

4. Concentrations of wealth, power, capital and production fatally distort the economy and the social order. When “competition” has been reduced to two telecoms, two healthcare insurers, two pork processors, etc., the system has been stripped of adaptability and resilience.

When 10,000 small farmers each have 100 chickens, the stock of 1 million chickens is spread over a wide geography and entrepreneurial network of suppliers, wholesalers, etc. Bird flu may spread widely but it’s far more difficult to wipe out 10,000 small farms’ poultry compared to the ease of bird flu spreading in one giant factory that concentrates 1 million chickens in one facility. Supply chains stripped of network resilience are equally fragile and prone to disruption and collapse.

Concentrating any form of capital, production and power renders the system vulnerable to collapse due to the inherent weaknesses generated by replacing complex networks with vertical-integration under the control of a few cartels, monopolies, autocrats, gatekeepers or regulators–the latter two being easily influenced by political pressure and/or private gain.

It’s certainly possible to be disgusted, but being disabused of the fantasy that the system is self-correcting is the healthier perspective. Everything is forever until systemic weaknesses reveal themselves, typically at the most inopportune junctures.

*  *  *

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Authored by Haley Zaremba via OilPrice.com,

• The current oil market climate is complex, to say the least.

• Europe is preparing to enact its embargo on Russian oil and refiners are scrambling for alternatives.

• Many searching for new sources of crude have landed on Middle Eastern producers as a potential alternative.

While the world has slapped a wide variety of sanctions on Russia in the wake of Vladmir Putin’s illegal invasion and partial annexation of Ukraine, most of them have been relatively toothless. To hit Russia where it hurts, the world has to stop buying energy from the oil and gas titan. But slapping energy sanctions on the Kremlin while Europe was dependent on Russian oil and gas to keep the lights on would have been a pyrrhic victory at best.

Finally, Europe is in a position to start getting serious about energy sanctions, but securing enough extra energy supply to replace Russian imports will be no easy feat.

Indeed, as Europe has inched closer to easing its energy dependence on Russia and has ramped up its sanctions on Russian energy bit by bit, the Kremlin has hit back hard, and European markets are still reeling. In early September when G7 countries agreed to impose a price cap on Russian oil, Russia responded by shutting off the flow of gas through the Nord Stream 1 pipeline completely within a matter of hours, citing suspiciously timed maintenance.

While this overnight loss of crucial energy supplies worsened an already dire energy crisis in Europe, it also galvanized the development of new energy sources and trading partners. In fact, while Europe’s energy crisis remains serious, it has not been as devastating as many experts predicted. Energy demand has fallen in response to skyrocketing prices, and alternative energies have risen to the occasion. As part of the effort to replace Russian energy imports, 18 out of 27 countries in the European Union set new records for solar power generation this year. In the wake of these developments, Europe is ready to throw down the gauntlet. In less than a month European Union nations will no longer be legally allowed to purchase seaborne cargo from Russia as the bloc continues to ramp up sanctions against the Kremlin. 

While the boost in solar energy is hopeful news for Europe and for the climate, however, this added production capacity will only cover a fraction of the energy needed to fill the massive void left by Russia in Western energy markets. While the result will be an economic downturn for both the European Union and Russia, there will be a major winner: the Middle East.

Already, oil refineries around the world are rushing to secure deals and guarantee supplies of crude oil from the Middle East for the coming year. 

However, some of the refineries scrambling to secure term contracts may be denied their requests, as OPEC+ has already agreed to impose a major production cut, much to the West’s dismay. Starting this month, OPEC+ will cut production quotas by a whopping two million barrels per day. While the United States has publicly condemned the move, saying that the oil cartel is propping up Russia, OPEC nations had legitimate economic self-interest in propping up oil prices. Worried that a coming global recession and continued lockdowns in China will decrease oil demand, OPEC member nations are trying to protect themselves from next year’s potential losses. 

As a result, oil importing countries are looking at a complex picture: on the one hand, global oil demand could fall considerably in the coming year; on the other hand, if Europe starts snapping up Middle East crude, it could lead to “intensifying competition for spot cargoes from the US, North Sea and even the Persian Gulf.” That’s according to World Oil, who report that Europe’s sudden interest in non-Russian oil could lead to difficulties for Asian importers. According to that report, “cargoes from the North Sea and Kazakhstan are also getting increasingly snapped up by Europeans, leaving fewer options for those Asian refiners that have shunned Russian barrels.”

All of this is to say that the outlook for oil markets in 2023 is complex, to say the least. Indeed, the current economy is throwing out all kinds of mixed messages and confusing indicators that have even top-level experts confused about which way the winds are blowing. With all this uncertainty in the air, it’s a tough climate for big energy decisions.

Less than a month ago, as the S&P 500 face-ripped higher off the mid-October puke opening lows, Wall Street’s biggest bear – Morgan Stanley’s Mike Wilson – warned traders that this rally could have legs…

… we may get another overshorted, oversold rally on Monday and we may get a powerful bear market rally in November that pushes stocks to 4,000 or higher by year end, but the bear market won’t end until the Fed pivots. The timing of that still remains to be determined, however after the midterm elections when the political blinders drop, we expect that the full – and dire – picture of the US labor market will finally emerge and shock everyone, especially the Fed.

Today, following the softer than expected CPI print, Wilson reiterated during an interview with Bloomberg TV that the recent rally in US equities isn’t finished and should keep running over the coming weeks.

“There’s probably further to go, probably through Thanksgiving, maybe even into early December,” Wilson, the bank’s chief US equity strategist, said in an interview on Bloomberg Television on Friday.

“I don’t think the rally is over at this point.”

But once the S&P 500 breaks through its 200-day moving average, which currently sits around 4,081, that may “get the animal spirits going” and draw in more passive flows, he explained.

That could propel the broad index to 4,200 or 4,300, he added.

As rates begin to ease back this week, Wilson confirms that will help alleviate pressure on longer-duration assets like growth stocks, which will help lead to the next leg of the equity rally,

“As rates come down… the Nasdaq, which has been the laggard in this rally so far, can now catch up,” Wilson said.

“That’s tied directly to the move in rates.”

Of course, there is downside risk as Wilson hedged in October, “if this market cannot hold the 200-WEEK moving average, then it’s likely there will be no meaningful countertrend move. Instead, we can make straight shot to 3400 or lower. A break below last Thursday’s lows would seal the deal in that regard, in our view.”

“It’s going to remain volatile,” Wilson cautioned.

“It’s still a bear market so it could rip you apart.”

Finally, Wilson pointed out that US equities have held up despite the selloff in cryptocurrencies in the wake of the meltdown in Sam Bankman-Fried’s FTX crypto empire.

“Clearly, this overhang from crypto isn’t constructive,” Wilson said.

“We’re having this event, which is a little bit scary, and yet the market was up…which tells me that people were just out of position.”

We do note that cryptos tried to rally on the CPI print (green box), but the overhang from FTX is too strong…

The gains this week, as rates fell, have been all valuation-driven as P/Es soared. However, as the Morgan Stanley equity strategist explained, while P/Es are close to fair value assuming EPS estimates are correct; they’re still not.

In other words, “until earnings fall, the market can dream and P/Es can even increase if rates come down.”

But, those P/Es will soar dramatically rich if/when the ‘E’ is repriced… and if the market really thinks The Fed will be cutting 50bps in H2 2023 (as seen below), then equity valuations are clearly not pricing in the only thing that would prompt The Fed to pivot that aggressively dovish – a recession…

Finally, Wilson noted, “we do think this ultimately is a bear-market rally.” And we have seen this kind of bounce before…

Watch the full interview below:

Authored by Steve Watson via Summit News,

Senator Ted Cruz has claimed that the reason Democrats did better than expected in the midterm elections is because for the past two years they have focused on engaging and exciting a “left wing nut-job” base of young voters.

Appearing on Hannity, Cruz stated “Here’s a lesson to take from last night. Look, why do the Democrats do better than expected? Because for two years they’ve governed as liberals. They’ve governed as whacked-out lefty nut jobs.”

“You know what that did?” Cruz continued, explaining “That excited their base, excited a bunch of young voters that came out in massive numbers because when you actually stand for something your base gets excited.”

“There’s a lesson for Republicans to learn,” the Senator declared, adding “when we have a majority next year, we damn better well act like it and use it, hold this administration to account.”

“We need to be happy warriors. If we do that, that leads to victory. If we don’t stand and fight, then we don’t win,” Cruz concluded.

Watch:

Did Democrats, some of them barely able to function and some of them even dead, manage to enagage the Tik-Tok voter?

I regret to inform you that John Fetterman makes TikToks. pic.twitter.com/9VaTuVSYiX

— Greg Price (@greg_price11) November 11, 2022

What happened?

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South Korea is insistent that its official policy of not sending arms to the Ukraine conflict has remain unchanged, even as news is breaking of a secret deal to sell 100,000 artillery shells to the United States, who then reportedly intends to transfer them to Ukraine. 

News of the controversial deal was first reported in The Wall Street Journal. “South Korea will for the first time sell artillery shells destined for Ukrainian forces through a confidential arms deal between Seoul and Washington, a move that reflects a global scramble for munitions after months of war with Russia.”

“US officials familiar with the deal said that the U.S. will purchase 100,000 rounds of 155mm artillery ammunition that will be delivered to Ukraine, enough to supply Ukraine’s artillery units for at least several weeks of intensive combat,” the report continues.

A US official confirmed separately to Reuters on Friday that the Pentagon indeed plans to send the South Korean-manufactured shells to the Ukrainian army, utilizing the Ukraine Security Assistance Initiative (USAI).

And interestingly, “The official warned that news of the talks being made public could threaten the deal.”

The confidential plan being made public has already put Seoul on the defensive, with South Korean military officials asserting that the “confidential” negotiations were being conducted “under the premise that the US is the end user.”

The defense ministry is framing it as making up for deficiencies in US stocks. “In order to make up for the shortage of 155mm ammunition inventories in the US, negotiations are ongoing between the US and Korean companies to export ammunition,” a statement said. And more: 

South Korea’s Yonhap News Agency reported on Friday that the country’s defence minister Lee Jong-sup and US Secretary of Defense Lloyd Austin had “agreed ‘in principle’ to proceed with the artillery deal” during talks earlier this month.

“But the allies are having related talks under the premise that the materials will be used by the US,” Yonhap reported, citing a statement from the country’s defence ministry.

Last month South Korean President Yoon Suk-yeol’s responded to warnings from Russia’s President Vladimir Putin that arming Ukraine would destroy bilateral ties.

We’ve started scouring the world for artillery ammo.
South Korea will sell 100,000 155mm shells to the US for Ukraine. But that’s only enough for a few weeks.
Russia is said to be getting rounds from North Korea. https://t.co/0cYTNdd3TI

— Whyvert (@whyvert) November 11, 2022

“We’ve provided humanitarian and peaceful assistance to Ukraine in solidarity with the international community but never lethal weapons or any such things,” Yoon said at the time. “In any case, it’s a matter of our sovereignty, and I’d like you to know that we are trying to maintain peaceful and good relations with all countries around the world, including Russia.”

Controversy has also raged regarding North Korea. Pyongyang has long stood accused by Washington of doing secret weapons transfers to the Russian military, something both sides have denied. US intelligence has charged that North Korea is seeking to carefully conceal these shipments, however, there’s been no evidence of such large scale arms or artillery transfers.

By Bas van Geffen, Senior Macro Strategist at Rabobank

As inflation continues to bite, households are increasingly reassessing what to spend their money on.

According to a YouGov poll, Britons are more likely to spend less on new clothes than they are to cut their gym memberships and TV subscriptions.

“Workouts win out”, as Bloomberg headlined this morning. However, isn’t this just demonstrating the fallacy of gyms? People sign up as a New Year’s resolution, only to be stuck with a membership for the remainder of the year.

Consumers’ spending cuts were clearly visible in UK’s Q3 GDP. The economy shrank 0.2% q/q. Although that is better than the expected decline, the GDP data gives a deceivingly positive picture. The more recent monthly GDP indicator shows a 0.6% m/m decline for September, pointing to a sharper decline in the underlying pace. And, as our UK strategist notes, the drop in GDP is predominantly driven by a fall in private consumption (0.5%). In fact, the output in consumer-facing services is now 10% lower than it was prior to the pandemic. On top of that, business investment fell by 0.5% q/q. So the two key components of domestic demand are weakening.

On the other hand, there have been increases in government spending, particularly for public administration and defence, and government investment.

If we look at external trade: export volumes increased by 8.0% q/q, though much of this was driven by an increase in non-monetary gold.

Import volumes fell by 3.2% in the latest quarter, driven by falls in chemicals, manufactures and other goods. So net trade adds to GDP, but for completely wrong reasons.

Whereas inflation is still a major headache for consumers, US CPI was a reason for markets to rally yesterday. Inflation euphoria struck traders as the US CPI print for October came in at ‘just’ 7.7%. That is a solid drop compared to September’s 8.2%. Moreover, the rate of core inflation decelerated to 6.3% y/y from the prior month’s 6.6%. Did anyone say ‘pivot’? Markets certainly seemed to think so – at least in terms of the implied expectations for the Fed’s next rate hike. Odds of a 75bp hike vanished from Fed funds futures, long-dated yields dropped, and equities rallied.

This renewed ‘pivot’-optimism was not contained to the US. European fixed income and equities rallied alongside their US counterparts, despite quite hawkish comments from Isabel Schnabel.

The ECB executive board member presented a slide deck with the ominous title “Persistence of inflation in the euro area”, in which she noted that “the risk of inflation persistence has risen further” and that “only a deep recession with a sharp rise in unemployment would dampen inflation, but this is unlikely now.”

Ms. Schnabel concluded that the ECB cannot afford to pause and that their policy will have to move into restrictive territory. Is this the central bank fearing the start of a wage-price spiral?

Wage demands are increasing as households feel inflation squeeze their disposable incomes. And, thanks to a relatively tight labour market, some bargaining power seems to have shifted from employers to employees. Earlier this week, Bloomberg reported on the latest trend this earnings season: large European firms warning for increased wage pressures next year – and the risk of strikes if these demands aren’t met.

Higher wage bills add to the price pressures companies were already facing, and many companies –particularly SMEs– will only have limited room to increase pay.

After all, productivity has hardly increased, so higher wages will erode profit margins. So any wage increases will probably come out of employees’ own pockets: Bloomberg continues that many of these European firms warn that they may have to raise prices again next year, but this time as a direct result of higher wages.

Even if wage demands are not met fully, this dynamic could still lead to a wage-price spiral that delays the return of inflation to the ECB’s 2% target.

In her slides, Schnabel referred to a new ‘wage tracker’ that has been developed by Indeed and the Central Bank of Ireland. It determines wage developments based on the texts of job advertisements, and the data is therefore much more timely than the ECB’s current indicators. Although the index is still new and could overstate wage dynamics as it only reports on ‘job changers’, it suggests that wage pressures have accelerated markedly in recent months.

So, while we are reluctant to call this a wage-price spiral yet, the ECB must be careful that the economy is not drawn into one. That could be as difficult to get out of as it is to get out of an annual gym membership.

Bill, Bill, Bill…what are you thinking?

Things have been going good enough for billionaire Bill Ackman of late. His fund has been weathering the storm and performing decently enough to stay out of the news, and the torrid saga that was once Herbalife is now a far off distance in the rearview mirror.

Even Ackman’s famous “hell is coming” CNBC moment that marked the bottom of the pandemic sell off has mostly been forgotten about. But we guess you just can’t keep a good man down…

Like everybody else in the industry, Ackman made his way over to Twitter earlier this week to weigh in with his opinion on the FTX blowup. Except, instead of criticizing Sam Bankman-Fried, Ackman decided it would be a great time to congratulate him. 

“You have to give [Bankman-Fried] credit for his accountability here,” Ackman wrote. “I don’t know any of the facts, but I have never before seen a CEO take responsibility as he does here. It reflects well on him and the possibility of a more favorable outcome for [FTX]”. 

We’re guessing it was only shortly thereafter, as Ackman was being mercilessly ratioed by nearly everyone on FinTwit, that he eventually learned some of the “facts” of what had taken place with FTX.

He deleted his Tweet shortly thereafter. 

“The problem with [Twitter] is that it is too easy to tweet,” he wrote after deleting his original Tweet. “The good news is that you can recall the missile before it causes too much collateral damage,” Ackman later lamented. 

Just spitballing here, Bill, but maybe get a grasp on “the facts” first next time…