Container volumes at the twin ports of Los Angeles and Long Beach, California, are seeing steep declines versus one year ago, signaling a downturn in imported goods might suggest continued sinking economic activity. 

The twin ports are the busiest container port complex in the country, responsible for 40% of all containerized flow, and are a major artery feeding overseas goods into the Heartland through rail and trucking networks. 

Gene Seroka, the executive director of the Port of Los Angeles, told Bloomberg the days of more than 100 container ships waiting in queue and massive container backlogs are all but over. 

Imports are sliding as major US retailers such as Walmart, Target, and Costco pull back on orders because of high inventories. Management of these retailers noted on recent earnings calls that consumer demand for big-ticket items such as electronics and furniture has waned because of elevated inflation and interest rates, leaving them with an abundance of supply in warehouses.  

US retail sales tumbled in November, the Commerce Department said last month, as consumers buy staple items to survive the inflation storm rather than buying televisions and computers.

Last month, Seroka said, “We are seeing a nationwide slowing of imports.” 

The latest charts show West Coast transport networks are slowing.   

The first chart shows easing congestion at the largest containerized ports and slumping congestion on rail networks. 

Seroka noted in the Bloomberg interview that easing backlogs meant processing containers through the twin ports has increased in speed. 

Next are container rates for major shipping lines that have plunged — some are nearing pre-pandemic levels. 

Transit times for vessels from Asia to the US are normalizing. 

Inventory levels at warehouses are coming off a peak. 

Separately, in a note on Wednesday, Goldman Sachs’ Patrick Creuset told clients, “demand destruction allowed for an unwinding of supply chain bottlenecks” across the air and sea networks. He expects this “will come to an end during 1Q23, with volumes returning to modest growth through the rest of the year.” 

Creuset pointed out, “a record order book of containerships about to be delivered from 1Q23 through 2H24, and belly capacity set to gradually return in air cargo.” The good news is that seaborne transport capacity is about to be expanded. 

And according to Morgan Stanley’s Ravi Shank, he expects retailers’ 12-15 month de-stocking cycle could reach a bottom and begin to normalize by the midpoint of the year, and it could even lead to an upcycle in the second half. 

So the good news is the shipping downturn has cleared out supply chain snarls at some of the largest US containerized ports. It seems like retailers are at an inflection point, and once de-stocking is complete, they will increase overseas orders, which might not occur until the second half. 

We ask why retailers would want to increase goods on hand if the IMF and World Bank are slashing global growth estimates and warning about recession. 

The digital ink on the CPI print had barely dried but Philadelphia Fed president Patrick Harker had seen enough, and moments after the report he declared that he is for a 25 basis points in three weeks saying 25bps (which for the Vox grads does not mean 25%) “will be appropriate going forward.” Harker is a voter on rates this year, so that tells us that, as of now, there’s at least one vote for 25 at the Feb. 1 meeting, and after today’s report, likely many more.

“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Harker said in prepared remarks Thursday for an event in Malvern, Pennsylvania. “In my view, hikes of 25 basis points will be appropriate going forward.”

And since Harker’s prepared remarks did not mention the consumer price index report for December, which was published shortly before the release of his speech, it is likely that the soft report merely solidified his dovish case.

Fed officials see interest rates rising above 5% this year and staying there until 2024, according to Fed projections released last month. Other Fed officials have also said they are open to making a more incremental 25 basis-point rate increase at their next meeting ending Feb. 1, depending on the data. But policymakers stress the central bank still has more work to do to tame prices and are not anticipating rate cuts this year.

Harker, who votes in monetary policy decisions this year, reiterated that officials expect to hold rates at higher levels to give them time to travel through the economy. “At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place to let monetary policy do its work,” he said.

The Fed official said he is not forecasting a recession, though he does expect the US economy to grow by about 1% this year before rising to “trend growth” of about 2% in 2024 and 2025. He expects the unemployment rate to rise to about 4.5% this year before dropping to 4% over the next two years.

Whether due to the soft CPI report, or Harker’s comments, but according to the bond market, the odds of a more than 25bps hike in February tumbled from 26% before the report to just 8% currently and sliding.

And alongside that, the terminal rate has slumped to just above 4.90%, the bottom end of the post-NFP range.

Bottom line: February 1 we get a 25bps rate hike, and that may well be it from the Fed this hiking cycle, since not even all the BLS gimmicks will be able to deflect from jobs falling off a cliff by then.

One day before FTX Founder Sam Bankman-Fried was set to give testimony to the US House Financial Services Committee, he was arrested in the Bahamas.

Now, in a Thursday Substack post, SBF denied allegations that he stole billions in user funds, and suggested that FTX was actually brought down after a monthslong effort by Binance CEO Changpeng “CZ” Zhao.

In the post, Bankman-Fried says he estimated Alameda Research had net assets of $99 billion at the beginning of 2022. By October, he says his hedge fund’s assets had fallen to $10 billion due to a broader downturn in the market – and even compared his FTT token’s performance to various equities.

SBF’s Substack post marks SBF’s first comprehensive response to federal charges, which include fraud and money laundering, CNBC reports.

.@SBF_FTX denies stealing user funds and says that a “very substantial recovery” is possible for #FTX customers. @andrewrsorkin and @BeckyQuick discuss: pic.twitter.com/ntQ5VSKIaI

— Squawk Box (@SquawkCNBC) January 12, 2023

Below is SBF’s whole note in its entirety;

Authored by Sam Bankman-Fried,

Summary

In mid November, FTX International became effectively insolvent.  The FTX saga, at the end of the day, is somewhere between that of Voyager and Celsius.

Three things combined together to cause the implosion:

a) Over the course of 2021, Alameda’s balance sheet grew to roughly $100b of Net Asset Value, $8b of net borrowing (leverage), and $7b of liquidity on hand.

b) Alameda failed to sufficiently hedge its market exposure.   Over the course of 2022, a series of large broad market crashes came–in stocks and in crypto–leading to a ~80% decrease in the market value of its assets.

c) In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent.

And then Alameda’s contagion spread to FTX and other places, similarly to how Three Arrows etc. ultimately impacted Voyager, Genesis, Celsius, BlockFi, Gemini, and others.  

Despite this, very substantial recovery remains potentially available.  FTX US remains fully solvent and should be able to return all customers’ funds.  FTX International has many billions of dollars of assets, and I am dedicating nearly all of my personal assets to customers.

Notes

• This post is about FTX International’s (in)solvency.

  It’s not about FTX US, because FTX US is fully solvent and always has been

  When I passed FTX US off to Mr. Ray and the Chapter 11 team, it had around +$350m net cash on hand beyond customer balances.  Its funds and customers were segregated from FTX International.

  It’s ridiculous that FTX US users haven’t been made whole and gotten their funds back yet.

  Here is my record of FTX US’s balance sheet as of when I handed it off:

• FTX International was a non-US exchange.  It was run outside the US, regulated outside the US, incorporated outside the US, and took non-US customers.

  (In fact, it was primarily headquartered, run from, and incorporated in The Bahamas, as FTX Digital Markets LTD.)

  US customers were onboarded to the (still solvent) FTX US exchange. 

• Senators have raised concerns about a potential conflict of interest from Sullivan & Crowell (S&C). Contrary to S&C’s statement that they “had a limited and largely transactional relationship with FTX”, S&C was one of FTX International’s two primary law firms prior to bankruptcy, and were FTX US’s primary law firm. FTX US’ GC came from S&C, they worked with FTX US in its most important regulatory application, they worked with FTX International on some of its most important regulatory concerns, and they worked with FTX US on its most important transaction. When I would visit NYC, I would sometimes work out of S&C’s office.

  S&C and the GC were the primary parties strong-arming and threatening me into naming the candidate they themselves chose as CEO of FTX–including for a solvent entity in FTX US–who then filed for Chapter 11 and chose S&C as counsel to the debtor entities.

• Despite its insolvency, and despite processing roughly $5b of withdrawals over its last few days of operation, FTX International retains significant assets–roughly $8b of assets of varying liquidity as of when Mr. Ray took over.

  In addition to that, there were numerous potential funding offers–including signed LOIs post chapter 11 filing totaling over $4b.  I believe that, had FTX International been given a few weeks, it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole.

  Since S&C pressured FTX into Chapter 11 filings, however, I worry that those pathways may have been abandoned.  Even now, I believe that if FTX International were to reboot, there would be a real possibility of customers being made substantially whole.

• While FTX’s liquidity had started off in 2019 as largely dependent on Alameda, by 2022 it had greatly diversified, with Alameda falling to around 2% of volume on FTX.

• I didn’t steal funds, and I certainly didn’t stash billions away.  Nearly all of my assets were and still are utilizable to backstop FTX customers.  I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers–or 100%, if the Chapter 11 team would honor my D&O legal expense indemnification.

  FTX International and Alameda were both legitimately and independently profitable businesses in 2021, each making billions.

  And then Alameda lost about 80 percent of its assets’ value over the course of 2022, due to a series of market crashes–as did Three Arrows Capital (3AC) and other crypto firms last year–and after that its assets fell even more from a targeted attack.  FTX was impacted by Alameda’s decline, as Voyager and others were earlier by 3AC and others.

• Note that, in many places here, I’m still forced to make approximations.  Many of my personal passwords are still being held by the Chapter 11 team–to say nothing about data.  If the Chapter 11 team wants to add their data to the conversation, I would welcome that.

  Also–I haven’t run Alameda for the past few years. 

  So much of this is pieced together post-hoc, coming from models and approximations, generally based on data that I had prior to resigning as CEO and modeling and estimations based on that data.
   

Overview of what happened

2021

Over the course of 2021, Alameda’s Net Asset Value skyrocketed, to roughly $100b marked to market by the end of the year by my model.  Even if you ignore assets like SRM that had much larger fully diluted than circulating supplies, I think it was still roughly $50b.

And over the course of 2021, Alameda’s positions grew, too.

In particular, I think it had about $8b of net borrowing, which I believe was spent on:

a) ~$1b interest payments to lenders
b) ~$3b buying out Binance from FTX’s cap table
c) ~$4b venture investments

(By ‘net borrowing’, I mean, basically, borrowing minus liquid assets on hand that could be used to return the loans. This net borrowing in 2021 came primarily from third party borrow-lending desks–Genesis, Celsius, Voyager, etc., rather than from margin trading on FTX.)

So by the start of 2022, I believe that Alameda’s balance sheet looked roughly like the following:

a) ~$100b NAV
b) ~$12b liquidity from 3rd party desks (Genesis, etc.)
c) ~$10b more liquidity it likely could have gotten from them
d) ~1.06x leverage

In that context, the ~$8b illiquid position (with tens of billions of dollars of available credit/margin from third party lenders) seemed reasonable and not very risky.  I think that Alameda’s SOL alone was enough to cover the net borrowing.  And it was coming from third party borrow-lending desks, who were all–I was told–sent accurate balance sheets from Alameda.

I think its position on FTX International was reasonable at the time–about $1.3b by my model, collateralized with tens of billions of dollars of assets–and FTX successfully passed a GAAP audit as of then.

As of the end of 2021, then, it would have taken a ~94% market crash to drag Alameda underwater!  And not just in SRM and assets like it–Alameda was still massively overcollateralized if you ignore those. I think that its SOL position alone was larger than its leverage.

But Alameda failed to sufficiently hedge against the risk of an extreme market crash: the hundred billion of assets had only a few billion dollars of hedges.  It had a net leverage–[net position – hedges]/NAV–of roughly 1.06x; it was long the market.

As a result, Alameda was in theory exposed to an extreme market crash–but it would take something like a 94% crash to bankrupt it.

2022 Market Crashes

Alameda, then, entered 2022 with roughly:

1. $100b NAV

2. $8b net borrow

3. 1.06x leverage

4. Tens of billions of dollars of liquidity

Then, over the course of the year, markets crash–again and again and again.  And Alameda repeatedly fails to sufficiently hedge its position until mid summer.

–BTC crashed 30%
–BTC crashed another 30%
–BTC crashed another 30%
–rising interest rates curtailed global financial liquidity
–Luna went to $0
–3AC blew out
–Alameda’s co-CEO quit
–Voyager blew out
–BlockFi almost blew out
–Celsius blew out
–Genesis started shutting down
–Alameda’s borrow/lending liquidity went from ~$20b in late 2021 to ~$2b by late 2022

And so Alameda’s assets get hit, again and again and again.  But this part isn’t specific to Alameda’s assets.  Bitcoin, Ethereum, Tesla, and Facebook are all down more than 60% on the year; Coinbase and Robinhood are down about 85% from their peaks last year.

Remember that, at the end of 2021, Alameda had roughly $8b of net borrowing:

a) ~$1b interest payments to lenders
b) ~$3b buying out Binance from FTX’s cap table
c) ~$4b venture investments

That $8b of net borrowing, less the few billion of hedges it had on, resulted in around $6b of excess leverage/net position, backed by ~$100b of assets.

And as markets crashed, so did those assets.  Alameda’s assets–a combination of altcoins, crypto companies, public equities, and venture investments–fell around 80% over the course of the year, raising its leverage bit by bit.

And over the same period, liquidity dried up–in borrow-lending markets, public markets, credit, private equity, venture, and pretty much everything else.  Nearly every liquidity source in crypto–including nearly all of the borrow-lending desks–blew out over the course of the year.

Which means that Alameda’s liquidity–tens of billions of dollars at the end of 2021–dropped to single digit billions by fall 2022.  Most of the other platforms in the space had already gone under or were in the process of doing so, leaving FTX as the last man standing.

In the summer of 2022, Alameda finally put on substantial hedges, in some combination of BTC, ETH, and QQQ (a NASDAQ ETF).

But even after all the market crashes of 2022, shortly before November Alameda still had ~$10b of net asset value; it was positive even if you excluded SRM and tokens like it, and it was finally hedged.

Margin Trading

Over the course of 2022, a number of crypto platforms became insolvent due to margin positions blowing out, likely including Voyager, Celsius, BlockFi, Genesis, Gemini, and ultimately FTX.

This is a fairly common on margin platforms; among others, it’s happened on:

Traditional Finance:

• LME

• MF Global

• LTCM

• Lehman

Crypto:

• OKEx

• OKEx again, and basically every week for a year

• CoinFlex

• EMX

• Voyager, Celsius, BlockFi, Genesis, Gemini, etc.

The November Crash

Then came CZ’s fateful tweet, following an extremely effective months-long PR campaign against FTX–and the crash.

Up until that final crash in November, QQQ had moved roughly half as much as Alameda’s portfolio, and BTC/ETH had moved roughly 80% as much–meaning that Alameda’s hedges (QQQ/BTC/ETH), to the extent they existed, had worked.  Unfortunately the hedges hadn’t been sufficiently large until after the 3AC crash–but as of October 2022, they finally were.

But the November crash was a targeted attack on assets held by Alameda, not a broad market move.  Over the few days in November, Alameda’s assets fell roughly 50%; BTC fell about 15%–only 30% as much as Alameda’s assets–and QQQ didn’t move at all. As a result, the larger hedge that Alameda had finally put on that summer didn’t end up helping.  It would have for every previous crash that year–but not for this one.

Over the course of November 7th and 8th, things went from stressful but mostly under control to clearly insolvent.

By November 10th, 2022, Alameda’s balance sheet had only ~$8b of (only semi-liquid) assets left, versus roughly the same ~$8b of liquid liabilities:

And a run on the bank required immediate liquidity—liquidity that Alameda no longer had.

Credit Suisse fell nearly 50% this autumn on the threat of a run on the bank.  At the end of the day, its run on the bank fell short.  FTX’s didn’t.

And so, as Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX; and the run on the bank turned that illiquidity into insolvency.

Meaning that FTX joined Voyager, Celsius, BlockFi, Genesis, Gemini, and others that experienced collateral damage from the liquidity crunch of their borrowers.

All of which is to say: no funds were stolen.  Alameda lost money due to a market crash it was not adequately hedged for–as Three Arrows and others have this year.  And FTX was impacted, as Voyager and others were earlier.

Coda

Even then, I think it’s likely that FTX could have made all customers whole if a concerted effort had been made to raise liquidity.

There were billions of dollars of funding offers when Mr. Ray took over, and more than $4b that came in after.

If FTX had been given a few weeks to raise the necessary liquidity, I believe it would have been able to make customers substantially whole.  I didn’t realize at the time that Sullivan & Cromwell—via pressure to instate Mr. Ray and file Chapter 11, including for solvent companies like FTX US–would potentially quash those efforts.  I still think that, if FTX International were to reboot today, there would be a real possibility of making customers substantially whole.  And even without that, there are significant assets available for customers.

I’ve been, regrettably, slow to respond to public misperceptions and material misstatements.  It took me some time to piece together what I could–I don’t have access to much of the relevant data, much of which is for a company (Alameda) I wasn’t running at the time.

I had been planning to give my first substantive account of what happened in testimony to the US House Financial Services Committee on December 13th.  Unfortunately, the DOJ moved to arrest me the night before, preempting my testimony with an entirely different news cycle.  For what it’s worth, a draft of the testimony I planned to give leaked out here.

I have a lot more to say–about why Alameda failed to hedge, what happened with FTX US, what led to the Chapter 11 process, S&C, and more.  But at least this is a start.

Tl;dr: Headline and Core CPI printed ‘as expected’ (which is likely disappointing for the whisper numbers and remember the last CPI printed ‘cooler than expected’). Goods inflation continues to slow but Services inflation continues to soar (highest in over 40 years). Shelter costs continue to soar.

*  *  *

Expectations for this morning’s headline CPI ranges from +6.3% to +6.8% YoY, with consensus seeing a 0.1% decline MoM – something the world and his pet rabbit has bid stocks up into anticipating this as the signal for an about face by The Fed on their higher for longer narrative as it ‘proves’ inflation has peaked.

The headline print came in right as expected with a 0.1% decline MoM (leaving the YoY print at +6.5% as expected)…

Source: Bloomberg

While Goods inflation tumbled to its lowest since Feb 2021, Services inflation soared to its highest since Sept 1982…

Source: Bloomberg

Energy was the biggest driver of the decline in the YoY print along wioth Goods costs (while Services continues to rise)…

Services and Food costs rose on a MoM basis…

With shelter still rising on a MoM basis…

Core CPI rose 0.3% MoM as expected, leaving the YoY rise at +5.7% – lowest since Dec 2021…

Source: Bloomberg

Shelter was biggest contributor to Core CPI 0.3% gain: the increase in the shelter index in December at 0.8% is biggest since 1990s.

• Dec rent inflation 8.35%, Y/Y up from 7.91% in Nov

• Dec shelter inflation 7.51% up from 7.12% in Nov

It is also about 12 months behind market reality.

Real average weekly earnings continue to decline – this is the 21st month in a row that Americans’

Source: Bloomberg

Finally, it appears CPI is tracking the decline in M2 velocity (with a lag) rather well…

Source: Bloomberg

It seems the ‘not cooler than expected’ CPI print is disappointing the pre-emptive market.

By Ven Ram, Bloomberg markets live reporter and analyst

There is little to over-egg the importance of the US inflation reading for December that we will get today. The markets have been relatively quiet ahead of the release, which isn’t a surprise given it will be the last the Federal Reserve gets to see before it reviews rates next month.

While there is rather a wide scatter of forecasts, pretty much everyone and their crystal ball seem to agree that we will get annual inflation declining below 7% for the first time in more than a year — a pretty significant milestone in itself if it proves to be accurate. Recent moves suggest that positioning heading into the data is bullish Treasuries as well as stocks but bearish the dollar, which of course raises the prospect of “sell on news.”

Consistent with that speculation, interest-rate traders are factoring in only a 26% chance of a move larger than 25 basis points when the Fed meets on Feb. 1. The nub, though, shouldn’t be lost on the markets: unless today’s print is persuasively mild, the Fed has every reason to perhaps gravitate toward a larger hike if only to get its rate to more restrictive levels sooner and then pause rather than drag its feet and get in smaller steps to its intended destination. (A 6.5% print consistent with the median forecast is still way too high from the Fed’s perspective, though it would welcome the direction of travel.)

And with 17 of 19 participants having indicated their preference for a Fed funds rate above 5%, getting there sooner will make the prospect of a soft landing more viable than would be the case otherwise. While Fed St. Louis President James Bullard isn’t a voting member this year, one would think that his advocacy of front-loading the increases would still be a persuasive refrain for the rest on the committee. A bigger move would also keep those all-important inflation expectations under check — and the Fed has an impressive speaker line-up after the CPI print to drive home its message.

Whatever your persuasion on the margin of increase, the markets will be holding their collective breath early in the New York day.

US futures are trading near session highs after earlier fluctuating between gains and losses ahead of make-or-break inflation data which many expect will show price pressures continuing to ease. S&P 500 futures traded 0.1% higher as of 7:30am ET, just shy of 4,000, one day after the S&P 500 clocked this year’s first back-to-back gains on Tuesday and Wednesday. The gains stem from bets that cooling inflation ill give the Federal Reserve room to slow its pace of rate hikes, a take substantiated by Boston Fed chief Susan Collins, who said she was leaning toward a quarter-point move at the bank’s Feb. 1 meeting. Treasuries steadied after gains in Wednesday’s session, with the 10Y trading at 3.52%, while a gauge of dollar strength edged lower as investors looked beyond the drumbeat of hawkish comments from Federal Reserve officials. The yen rallied on a report that the Bank of Japan will look into the side effects of its ultra-loose monetary policy. Commodities are mostly higher with the dollar weaker.

Yesterday, the Fed’s Collins supported a 25bps hike, inline with market expectations coming into CPI. US air traffic was disrupted by a FAA system outage but is back online; US reopening names continue to rally, once again in sympathy with China. Media is flagging the rallies in meme stocks, which may mean that the retail investor is coming back to the market after having sold a near record >$3bn last week. Today’s focus is on the CPI print and the balance of this note includes analysis of the print with views from around the firm, including monetization methods.

“Markets are positioned for a CPI reading which will not disturb their march forward”, said Andrea Tueni, head of sales trading at Saxo Banque France. But “the last three publications generated a lot of volatility across markets so there’s a lot at stake,” he added.

Among premarket movers, Tesla fell 2% after Bloomberg reported that an expansion of the company’s plant in Shanghai has been delayed, putting a roadblock in the way of its ambitions to increase its market share in China. Bed Bath & Beyond shares surged another 26%, extending Wednesday gains, after a rally in other so-called meme stocks. Here are other notable premarket movers:

• Spotify shares fall 2.2%, Roku (ROKU US) declines 3.1%, Unity Software (U US) down 2.8% after Jefferies downgraded them in a note on US media outlook, while upgrading Netflix and JAKKS. Netflix shares gain 1.6% after Jefferies raised the recommendation to buy from hold, citing upside surprises to 2024 operating margin.
• Tesla fell 1.2%, erasing earlier gains, after Bloomberg reported that an expansion of the US electric carmaker’s plant in Shanghai has been delayed.
• Bed Bath & Beyond shares surge 21% in US premarket trading, extending Wednesday gains after a rally in other so-called meme stocks.
• Marathon Digital shares advance 8.6%, leading cryptocurrency-exposed stocks higher as Bitcoin rallies to break back above the $18,000 level, extending gains for a ninth consecutive session — its longest streak since July 2020.
• Oramed’s US shares plunge 71% after the company’s experimental oral insulin failed in a late-stage clinical trial of Type 2 diabetes patients.
• Keep an eye on chemicals after KeyBanc Capital Markets said that it sees a favorable risk skew in the sector’s stocks for 2023, although with only modest upside. The broker downgrades DuPont de Nemours to sector weight.
• Citi says it continues to favor US exchange operators over brokers into 2023, in a note cutting Virtu Financial (VIRT US) to neutral.

Every aspect of Thursday’s CPI report will be scrutinized, with extra attention on core inflation, which excludes food and energy and is seen as a better indicator than the headline measure. The projected 5.7% increase would be well above the Fed’s goal, helping explain its intention of keeping rates higher for longer. But the year-over-year price growth would also show moderation.

“Core inflation remains well above target,” said Ronald Temple, chief market strategist at Lazard Ltd. “Having been late to act, the Fed is unlikely to pause the tightening cycle until inflation is definitively under control.”

There was a note of caution in the morning note from JPM’s Market Intelligence team, which warned that most of a CPI miss may already be priced in:

The SPX is +4.2% since last Friday, leading to multiple conversations as to whether a cooler CPI print is priced in. That seems to be the view from my client conversations, with most thinking we see a spike on the print and then fade from there. Their rationale? The print will confirm the deflationary narrative, but it will not be low enough to materially reprice bonds lower. To clarify, this CPI print should not change Fed expectations for 25bps hikes in both February and March. Further, any subsequent Fedspeak is likely to be hawkish given that financial conditions are now looser than at Jackson Hole (is it possible that the Fed could keep 2023 meetings as “live meetings” after they pause?). While recognizing that inflation expectations are lower now, the Fed’s concern is likely to be that, given the relative strength of the US Consumer, that you could see inflation accelerate higher if lending conditions ease.

Thinking about today’s session, I do think there is still the ability for the market to experience another rally despite the moves coming into the print. Longer-term, earnings are the next key catalyst and if Q4 GDP is stronger than expected, this should be reflected in earnings since EPS growth tends to be more correlated to nominal growth rather than real growth.

European equity indexes rose with the Stoxx 600 up 0.7% and reaching highest since last April as traders bet US inflation will show further signs of cooling. The CAC and FTSE have gain 0.6% while the DAX adds 0.5%. Real estate, autos and travel are the strongest performing sectors. Here are the biggest European movers:

• Whitbread jumps as much as 4.9%, hitting the highest since February 2022, with analysts saying its “positive” trading update implied improvements in 2023 and 2024 performance
• Vodafone shares rise 3% after BofA upgraded to buy, saying easing energy costs and the telecom’s improving price traction should result in positive revision to earnings estimates
• Asos shares soar the most since October, after the struggling fast-fashion retailer said it was making headway in plans to turn around its performance
• Boozt gains as much as 11%, rebounding from the previous day’s 9.9% plunge, after the Swedish online retailer beat expectations in its 4Q report; a “positive relief,” DNB says
• Logitech shares drop as much as 19% in early trading, the most since April 2011, after its second guidance cut in three quarters. The moves pull peers, including GN Store Nord and Demant, lower
• Ubisoft shares tumble as much as 22% after forecasting an operating loss, delaying the Skull & Bones title for a sixth time, and saying recent game launches “have not performed as well as expected”
• Halfords drops as much as 24%, the most since June 2022, as Peel Hunt trimmed its rating to add from buy, noting labor shortages and cost pressures couuld squeeze profit
• Signify shares slumped as much as 6% after the company lowered its full-year guidance once again on Covid-19 disruptions in China

Earlier in the session, Asian stocks advanced, as miners in Australia climbed on demand optimism ahead of highly-awaited US inflation data.  The MSCI Asia Pacific Index rose as much as 0.8% to the highest since August before paring. Japan’s MUFJ, AIA in Hong Kong and Australia’s BHP boosted the index the most while the Chinese tech rally took a pause.  The stock benchmark in Australia was a notable winner in the region, advancing 1.2% to the highest in five weeks, as miners rallied amid hopes China’s reopening will spur demand for metals. Equities in Japan posted moderate gains helped by financials after a report said the Bank of Japan is reviewing the side effects of its ultra-easy monetary policy. Benchmarks in Hong Kong and mainland China fluctuated between gains and losses as traders digested Chinese inflation data. Trading volume was 14% lighter than average ahead of key consumer price data from the US due later Thursday. 

“Continued rerating triggered by improved sentiment is carrying markets higher,” said Lorraine Tan, director of equity research at Morningstar Asia. “Inflation pressure is easing and interest rates should be peaking within the next six months.”  While consensus view is that US prices have peaked, investors will scrutinize the upcoming inflation report for any indication of the Federal Reserve’s future rate hike path.  Asian equities have outperformed US peers so far 2023 amid reversals in the dollar strength and China’s Covid Zero policy. Easing concerns over China’s regulatory risks and property sector have also lured investors back to the region.  “A lot of things that have been bothering me were reversed,” Ajay Kapur, head of APAC and Global EM strategy at Bank of America Securities, told Bloomberg TV, referring to China’s policy turnaround in November. “I’m still quite constructive.” Elsewhere in Asia, the Indonesian benchmark rose, one day after entering a technical correction.

Japanese stocks edged higher as investors assessed reports on the Bank of Japan’s plans and awaited US inflation data that may influence Federal Reserve policy. The Topix rose 0.4% to close at 1,908.18, while the Nikkei was little changed at 26,449.82. The yen gained 0.7% against the dollar after a Yomiuri report that the BOJ is considering further policy tweaks at its meeting next week. Mitsubishi UFJ Financial Group contributed the most to the Topix gain, increasing 5% after the Yomiuri report. Out of 2,162 stocks in the index, 786 rose and 1,257 fell, while 119 were unchanged. “US CPI is definitely one factor to watch, but the BOJ’s YCC change last December still has a lingering effect,” said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management. “It seems that stocks had been oversold on the policy change, and the market is still recovering from it.” 

Australia stocks jumpe to a five week high, buoyed by miners. The S&P/ASX 200 index rose 1.2% to close at 7,280.40, its highest level since Dec. 6. The benchmark outperformed regional stock gauges, boosted by banks and miners. Materials shares have been climbing on bets that China’s reopening will fuel demand for metals. Read: China Reopening Sends Australian Mining Stocks Near Record High In New Zealand, the S&P/NZX 50 index rose 0.2% to 11,664.88.

India’s benchmark stock index dropped for a third day ahead of key economic data including retail inflation. Bharti Airtel and Reliance Industries declined amid rising worries over the impact of 5G services on telecom companies’ pricing recovery. The S&P BSE Sensex fell 0.3% to 59,958.03 in Mumbai, while the NSE Nifty 50 Index declined 0.2%. For the week, the benchmark gauge is flat, helped by a sharp rally on Monday.  Small and mid-cap stock gauges also declined. BSE Ltd.’s 20 sector sub-gauges were mixed, with capital goods firms leading the advance while oil & gas companies were worst performers. Software exporter Infosys, which reported December quarter earnings after close of trading, posted higher-than-expected profit, while raising sales forecast.   Consumer price inflation probably rose 5.9% in December from a year ago, according to a Bloomberg survey, and little changed from the previous month. Data for industrial output in November will also be released after close of markets.

In Fx, the Bloomberg Dollar Index is down 0.2% with the JPY a clear outperformer among the G-10’s. SEK is the weakest. The Bloomberg Dollar Spot Index extended losses in the European session as the yen rallied by as much as 1.2%, to 130.89 per dollar. The greenback traded mixed against the other Group-of-10 peers, with moves confined to narrow ranges.

• The yen’s rally followed after the Yomiuri newspaper said policy makers will consider adjusting their bond purchases and make further policy tweaks if they believe they are necessary, without giving any attribution. The cash 10-year yield remained pinned against the 0.50% ceiling while the 15- year yield added 8bps
• The euro inched up to a day high of 1.0775. Bunds climbed, led by the belly, and Italian bonds outperformed. Money markets added to ECB tightening wagers, paring some of Wednesday’s late declines after policymakers Rehn and De Cos warned of significant rate hikes
• The pound traded higher against the dollar. The Bank of England’s Catherine Mann is due to speak Thursday, with money markets easing wagers on the scope for further rate hikes

In rates, the treasuries curve extends Wednesday’s flattening move with long-end outperforming ahead of 30-year auction, following a wider rally across core European rates led by gilts. US session events include December CPI report and several Fed speakers.  US long-end yields richer by about 3bp, flattening 2s10s, 5s30s spreads by 1.5bp and 2bp vs Wednesday’s close; the 10-year trades around 3.52%, trailing bunds by 2.5bp, gilts by 5.5bp in the sector. UK gilts outperform as deteriorating macro backdrop continues to take BOE rate-hike premium out of the UK swaps market. In US, December inflation data is expected to build a case for a downsized 25bp rate hike at the February policy meeting. The US auction cycle concludes with $18bn in 30-year reopening at 1pm; Wednesday’s 10- year auction stopped through by 0.5bp with strong participation metrics. WI 30-year yield at ~3.640% is ~13bp cheaper than December’s result reflecting curve-steepening in the interim. UK and German bonds are marginally higher having pared most of their earlier advance.

In commodities, oil rose for a sixth day on hopes US inflation is cooling and as China’s crude buying ramps up before the Lunar New Year holidays. WTI was up 0.9% to trade above $78. Spot gold rises roughly $8 to trade near $1,884/oz. Base metals are mixed.

In crypto, bitcoin rose above the $18k mark, with today’s action bringing it back towards its 14th December best, which itself is just shy of USD 18.5k. Coinbase is reportedly considering exiting the Japanese market, via Nikkei.

Looking the day ahead now, the main data highlight will be the US CPI release for December, whilst other data includes the weekly initial jobless claims. From central banks, we’ll hear from the Fed’s Harker, Bullard and Barkin, as well as the BoE’s Mann, and the ECB will be publishing their Economic Bulletin.

Market Snapshot

• S&P 500 futures little changed at 3,990.25
• MXAP up 0.7% to 163.37
• MXAPJ up 0.3% to 537.24
• Nikkei little changed at 26,449.82
• Topix up 0.4% to 1,908.18
• Hang Seng Index up 0.4% to 21,514.10
• Shanghai Composite little changed at 3,163.45
• Sensex down 0.2% to 59,967.65
• Australia S&P/ASX 200 up 1.2% to 7,280.40
• Kospi up 0.2% to 2,365.10
• STOXX Europe 600 up 0.6% to 450.19
• German 10Y yield little changed at 2.17%
• Euro little changed at $1.0766
• Brent Futures up 0.4% to $82.99/bbl
• Brent Futures up 0.4% to $82.99/bbl
• Gold spot up 0.4% to $1,883.84
• U.S. Dollar Index down 0.14% to 103.04

Top Overnight News from Bloomberg

• Overnight volatility remains high in the majors as traders await the release of the US CPI data. While dollar-topside bets lose traction across, it’s the shift in the pound’s volatility skew that gains attention while yen bullish exposure meets another catalyst
• The euro’s rally against the dollar has stalled over the past month at resistance around its May high. Bulls are hoping Thursday’s US inflation data will provide enough ammunition for it to breach that barrier and resume its progress toward $1.10
• Consumers’ expectations for inflation over the next 12 months declined to 5% in November from 5.4% in October, the ECB said Thursday in a statement summarizing the results of its monthly survey
• Kazakhstan said local brokerages that snapped up Russian sovereign debt last year did so largely on behalf of clients who were Kazakh and Russian residents
• Britain’s markets watchdog has warned of potential “systemic defaults” among wholesale brokers in the City of London that may be unfit to weather sudden shocks and longer periods of stress
• HSBC Holdings Plc lost its bid to topple a reputation-bruising decision that it illegally rigged the Euribor benchmark, in a setback that removes part of the gloss from a procedural victory that overturned millions of euros in European Union fines
• China hasn’t updated its daily Covid reports for three days, adding to global concerns that the information vacuum is masking the true impact of the world’s biggest outbreak.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed as the major indices failed to fully sustain the early momentum from Wall St. ASX 200 was led higher by outperformance in the commodity-related industries and the top-weighted financial sector, while the latest trade data showed a wider trade surplus.  Nikkei 225 faded early gains after a report that the BoJ is to review the side effects of its monetary easing. Hang Seng and Shanghai Comp swung between gains and losses with the Hong Kong benchmark initially boosted by the reopening play which helped energy, auto and casino names. However, Chinese markets then failed to sustain the early moment amid losses in tech and as participants digested mixed inflation data from the mainland in which CPI matched estimates but factory gate prices fell by more than expected.

Top Asian News

• PBoC injected CNY 65bln via 7-day reverse repos with the rate kept at 2.00% and CNY 52bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 115bln net daily injection.
• US and Taiwan intend to focus on five areas this weekend during their first round of negotiations towards a trade agreement and indicated a readiness for subset deals as the sides make progress, according to WSJ.
• BoJ is to review the side effects of its massive monetary easing at its policy meeting next week due to skewed interest rates in markets despite last month’s tweak in its bond yield control policy, according to Yomiuri.
• TSMC Offers Mixed Outlook, Lower Spending for Tough Year Ahead
• China’s Covid Zero Enforcement Army Faces Unpaid Wages, Job Loss
• Fosun Is Said to Weigh Sale of Belgian Diamond-Grading Firm IGI
• HSBC Loses Fight at EU Top Court Over Euribor Rigging Charge

European bourses are firmer across the board, Euro Stoxx 50 +0.5%, though price action has been fairly contained in slim pre-CPI newsflow. US futures are essentially unchanged, ES -0.1%, ahead of December’s CPI and Fed speak before and after the key data. TSMC (2330 TT) Q4 (TWD) net 295.9bln (exp. 289.4bln), rev. 625.5bln (prelim. 625.5bln), says smartphone and PC demand dropped more severely than expected. Guides Q1 (TWD) rev. 16.7bln-17.5bln (exp. 16.4bln) and sees H1 revenue down mid-to-high single digit percentage. Tesla’s (TSLA) expansion of its Shanghai plant has been delayed, according to Bloomberg sources; cites concerns in Chinese government over CEO Musk’s Starlink having such a large presence in China.

Top European News

• ECB Consumer Expectations Survey: Inflation is seen at 5% (vs. prev. view of 5.4%) over the next 12 months; 3 year inflation is seen at 2.9% vs. prev. view of 3.0%.
• UK and EU are preparing to enter an intense phase of negotiations from next week, via Bloomberg citing sources; aim of this is to move into the negotiating “tunnel”, ahead of the April N. Ireland agreement anniversary.
• A Third of Dublin’s Office Supply Dormant After Cuts
• Arbonia Falls After Margin Warning; Modest Downgrade Needed: ZKB
• Apollo-Backed Gaming Firm Lottomatica Weighs $1 Billion IPO
• RBC Sees Tough Year For Business Services, Cuts Three Stocks

FX

• Yomiuri Yen revival keeps Greenback grounded awaiting US CPI data.
• USD/JPY probes 131.00 vs almost 133.00 on Wednesday and DXY tethered to pivotal 103.000 level.
• Pound perks up on 1.2100 handle as Dollar drifts, Euro consolidates around 1.0750 axis and Aussie pivots 0.6900 with support from a wider than forecast trade surplus.
• PBoC set USD/CNY mid-point at 6.7680 vs exp. 6.7698 (prev. 6.7756)
• S. African Finance Minister says they want to resolve the Eskom issue ASAP, part of this is sorting the balance sheet. Appropriate announcement will be made on February 22nd.

Fixed Income

• Bonds wane after an early bull run to and through new big figure levels for Bunds and Gilts at 138.45 and 104.14 respectively.
• US Treasuries more reserved ahead of inflation report as T-note holds just under w-t-d peak and resistance within a 114-11/22 range.

Commodities

• Upside for the crude space has occurred this morning seemingly without a fresh specific catalyst or driver, with the space perhaps taking advantage of a pre-CPI softening in the USD and the somewhat constructive European risk tone.
• Lifting WTI Feb’23 to a new WTD peak of USD 78.29/bbl, though this is someway shy of last week’s USD 81.50/bbl best.
• China’s customs officials in the Guangdong province reportedly received notice from the local gov’t that they can clear Australian coal shipments, via WSJ citing sources.
• Morgan Stanley expects Brent prices to remain range-bound for remainder of Q1, around current USD 80-85/bbl range.
• Spot gold is similarly taking advantage of the USD’s pullback but remains slightly shy of yesterday’s USD 1886/oz best thus far, while base metals are softer across the board.
• Magnitude 6.4 earthquake strikes Coquimbo, Chile, according to EMSC.

Geopolitics

• US Defence Secretary Austin said China’s military is engaging in provocative behaviour around Taiwan to try to establish a new normal, but added that he seriously doubts Chinese provocations are a prelude to an imminent invasion of Taiwan, according to Reuters.
• Taiwan’s Defence Ministry said five Chinese air force planes crossed the Taiwan Strait median line in the past 24 hours, according to Reuters.

US Event Calendar

• 08:30: Dec. CPI MoM, est. -0.1%, prior 0.1%
  • CPI YoY, est. 6.5%, prior 7.1%
  • CPI Ex Food and Energy MoM, est. 0.3%, prior 0.2%
  • CPI Ex Food and Energy YoY, est. 5.7%, prior 6.0%
  • Real Avg Hourly Earning YoY, prior -1.9%, revised -2.1%
  • Real Avg Weekly Earnings YoY, prior -3.0%, revised -3.3%
• 08:30: Jan. Initial Jobless Claims, est. 215,000, prior 204,000
  • Continuing Claims, est. 1.71m, prior 1.69m
• 14:00: Dec. Monthly Budget Statement, est. -$65b, prior -$21.3b

Central Bank Speakers

• 08:45: Fed’s Harker Discusses the Economic Outlook
• 11:30: Fed’s Bullard Discusses the US Economy and Monetary Policy
• 12:40: Fed’s Barkin Speaks in Richmond

DB’s Jim Reid concludes the overnight wrap

Morning from Copenhagen on a big day for global markets. Both the worst and best days for the S&P 500 in 2022 came on days of a CPI release. As such, it’s inevitable that today’s US CPI has the ability to shape the next month.

Indeed, after a long run of inflation surprising on the upside, the latest releases have seen two downside surprises on CPI in a row for the first time since the pandemic, which has led to growing hopes that the Fed might achieve a soft landing after all. Furthermore, core inflation has also been increasingly subdued, with the most recent number for November showing monthly core inflation at a 15-month low. Those readings helped to bolster the case for the Fed to downshift their rate hikes last month, and if we did get a third downside surprise today, clearly that would add further fuel on market speculation about a Fed pivot later in the year.

In terms of what to expect today, our US economists think that falling gas prices over December will take headline CPI into negative territory at just -0.15% on the month (vs. -0.1% consensus). They also expect core CPI to remain subdued at +0.22% on a monthly basis (vs. +0.3% consensus), which would be only slightly above the 15-month low of +0.20% in November. If those forecasts are right, then that would take year-on-year growth in CPI down to +6.3% (vs. +6.5% consensus), its lowest in over a year, whilst core CPI would be down to +5.6% (vs. +5.7% consensus). As ever, the individual components will be in focus, particularly the stickier ones that change less frequently.

Ahead of that release, growing optimism about the inflation outlook led to a major rally in sovereign bonds yesterday, particularly in Europe. For instance, yields on 10yr OATs (-14.1bps), BTPs (-18.7bps) and gilts (-14.8bps) all plummeted, and although there was a contract roll on the 10yr bund, the generic series on Bloomberg was also down -10.4bps. In part that was driven by a fresh decline in natural gas prices, which were down -5.56% yesterday to €65.45/MWh, just above their one-year closing low last week.

That rally got further support later in the session by a Bloomberg report which said that German Chancellor Scholz was supportive of a new joint EU financing instrument to help the EU compete against US green subsidies. That helped spreads tighten in particular, with the gap between Italian and German 10yr yields now down to 183bps, which is down by a significant -28.9bps since the start of the year. And the optimism was also clear from other European assets, with the Euro closing at its highest level since May at $1.076, just as the iTraxx Crossover index tightened -10.0bps to levels last seen in April.

In the US, Treasuries rallied as investors looked forward to the CPI release, with 10yr yields down -7.9bps to 3.539% and are down another -1.5bps in Asia at 3.524%. However, the moves have been much more subdued at the front end, with the 2yr yield only down -2.9bps (unch overnight), and there was little sign from Fed funds futures that investors were adjusting their policy outlook either. Indeed, the terminal rate priced in for June was little changed ahead of the CPI today, up just +0.4bps to 4.947%. The lack of movement was despite Boston Fed President Collins saying that she was leaning toward downshifting to a 25bps hike in the February meeting.

For equities, this benign economic backdrop led to further advances, with the S&P 500 up another +1.28%. 22 of 24 industry groups finished up on the day with 80% of overall constituents gaining yesterday. Tech stocks outperformed in that, with the NASDAQ (+1.76%) advancing for a 4th consecutive session for the first time since September. As an example of the swing back, Tesla (+3.68% yesterday) is now up +13.99% from the recent lows on January 3rd. Back in Europe, there were similar gains, with the STOXX 600 (+0.38%), the DAX (+1.17%) and the CAC 40 (+0.80%) all seeing robust advances, which brought the YTD performance for the DAX up to +7.36%.

Asian equity markets have failed to extend the overnight gains on Wall Street though with the Hang Seng (-0.33%), the Shanghai Composite (-0.23%) and the CSI (-0.08%) surrendering their opening gains whilst the Nikkei (+0.10%) and the KOSPI (+0.34%) are just in positive territory. Outside of Asia, US stock futures are fluctuating between gains and losses with contracts on the S&P 500 (+0.04%) just above flat while those on the NASDAQ 100 (-0.05%) trading fractionally lower ahead of the key inflation report.

Data overnight from China showed that inflation accelerated to +1.8% y/y in December, in line with market expectations, driven by rising food prices despite economic activity remaining soft due to Covid. It followed the prior month’s reading of +1.6%. However, factory gate prices (producer prices) dropped -0.7% y/y in December (v/s -0.1% expected), but up from a fall of -1.3% in November. Elsewhere, Australia’s trade surplus unexpectedly grew in November to A$13.20 billion (v/s +A$11.30 billion expected), compared with last month’s revised reading of A$12.74 billion. The figure was at its highest level since a record high hit in June.

In the FX market, the Japanese yen (+0.77%) is strengthening against the dollar this morning, trading at $131.43 following the news that the Bank of Japan (BOJ) will review the side-effects of its ultra-loose policy at next week’s policy meeting.

Elsewhere, several commodities have put in a pretty decent performance over the last 24 hours. For instance, Brent crude oil prices were back up by +3.21% to $82.67/bbl, having risen every day so far this week. They are up another +0.17% in Asia. Separately, copper prices were up +2.17% last night to their highest level since June, having been supported by growing optimism about Chinese demand given the reopening.

Lastly, there wasn’t much data of note yesterday, although Italian retail sales for November unexpectedly grew by +0.8% (vs. -0.3% expected).

To the day ahead now, and the main data highlight will be the US CPI release for December, whilst other data includes the weekly initial jobless claims. From central banks, we’ll hear from the Fed’s Harker, Bullard and Barkin, as well as the BoE’s Mann, and the ECB will be publishing their Economic Bulletin.

Authored by Philip Giraldi via The Ron Paul Institute,

Even though one has become accustomed to seeing the United States government behaving irrationally on an epic scale with no concern for what happens to the average citizen who is not a member of one of the freak show constituencies of the Democratic Party, it is still possible to be surprised or even shocked. Shortly before year’s end 2022 an article appeared in the mainstream media and was quite widely circulated. The headline that it was featured under in the original Business Insider version read “A nuclear attack would most likely target one of these 6 US cities — but an expert says none of them are prepared.” The cities were New York, Washington DC, Los Angeles, Chicago, Houston and San Francisco.

The article seeks to provide information and tips that would allow one to survive a nuclear attack, repeating commentary from several “experts” in emergency management and “public health” suggesting that a nuclear war would be catastrophic but not necessarily the end of the world. One should be prepared. It observes that “those cities would struggle to provide emergency services to the wounded. The cities also no longer have designated fallout shelters to protect people from radiation.” It is full of sage advice and off-the-cuff observations, including “Can you imagine a public official keeping buildings intact for fallout shelters when the real-estate market is so tight?” Or even better the advice from the Federal Emergency Management Agency (FEMA)’s “nuclear detonation planning guide” that for everyday citizens in a city that has been nuked: “Get inside, stay inside, and stay tuned.” Dr. Ron Paul asks “Are they insane? They act as if a nuclear attack on the United States is just another inconvenience to plan for, like an ice storm or a hurricane.”

The article argues that the six cities would be prime targets as they are centers for vital infrastructure. The bomb blasts would kill hundreds of thousands or even millions of Americans with many more deaths to follow from radiation poisoning, but the article makes no attempt to explain why Russia, with a relatively sane leadership, would want to start a nuclear war that would potentially destroy the planet. Also, the targeting list of the cities provided by the “experts” is itself a bit odd. Surely Russia would attack military and government targets as a first priority to limit the possible retaliation while also crippling the ability of the White House and Pentagon to command and control the situation. Such targets would include both San Diego and Norfolk where the US Atlantic and Pacific fleets are based as well as the various Strategic Air Command bases and the underground federal government evacuation site in Mount Weather Virginia.

Reading the article, one is reminded of the early years of the Cold War that sought to reassure the public that nuclear war was somehow manageable. It was a time when we elementary school children were drilled in hiding under our desks when the air raid alarm went off. Herman Kahn was, at that time, the most famous advocate of the school of thought that the United States could survive the “unthinkable,” i.e. a nuclear war. An American physicist by training, Kahn became a founding member of the beyond neocon nationalist Hudson Institute, which is still unfortunately around. Kahn, who served in the US Army during the Second World War as a non-combat telephone lineman, started has career as a military strategist at the RAND Corporation. Kahn endorsed a policy of deterrence and argued that if the Soviet Union believed that the United States had a devastating second-strike capability then Moscow would not initiate hostilities, which he explained in his paper titled “The Nature and Feasibility of War and Deterrence.” The Russians had to believe that even a perfectly coordinated massive attack would guarantee a measure of retaliation that would leave them devastated as well. Kahn also posited his idea of a “winnable” nuclear exchange in his 1960 book On Thermonuclear War for which he is often cited as one of the inspirations for the title character of Stanley Kubrick’s classic film Dr. Strangelove.

The appearance of the Business Insider article dealing with a cool discussion of the survivability from a nuclear war suggests that the nutcases are again escaping from the psychiatric hospital here in the US and are obtaining top jobs in government and the media. While one continues to hope that somehow someone will wake up in the White House and realize that the deep dark hole that we the American people find ourselves in mandates a change of course and a genuine reset, there is little daylight visible in the darkness.

My particular concern relates to the entangling relationships that have kept our country permanently at war in spite of the fact that since the Cold War ended in 1991 no potential adversary has actually threatened the United States. Now, the federal government appears to be in the business of cultivating dangerous relationships to justify defense spending and placing the nation on the brink of what might prove to be catastrophic. The current US mission to “weaken Russia” and eventually also China in order to maintain its own “rules based international order” includes such hypocritical and utterly illegal under international law anomalies as the continued military occupation of part of Syria to deny that country’s leaders’ access to their oil fields and best agricultural land. A recent UN humanitarian agency investigation determined that the Syrian people are suffering and even starving as a result of that and US imposed sanctions that the Biden Administration maintains against all reason and humanity.

At the present time, however, the most entangling of all relationships, even more than with Israel, has to be the engagement of the US in the proxy war being fought against Russia on behalf of Ukraine, which is exactly what threatens to turn nuclear if someone blinks at the wrong time. Billions of dollars in direct aid as well as billions more in the form of weapons stripped from arsenals in Europe and the US have been given to the corrupt regime of President Volodymyr Zelensky while Zelensky continues to work assiduously to milk the situation and draw Washington into a deeper war directly confronting Moscow.

In fact, by some reckonings the war has already begun, with the US and its allies clearly dedicated to crippling the Russian economy while also getting rid of President Vladimir Putin. The 101st Airborne is now in place in Romania next to Ukraine to “warn” the Kremlin while the Pentagon has recently admitted that some American military personnel are already in Ukraine, contrary to the denials by White House spokesmen. The British have also revealed that some of their elite Special Ops personnel are on the ground. And there are reports that more American soldiers will soon be on the way, ostensibly to “track the weapons” being provided to Zelensky, which will include US-made, Patriot Missile batteries some of which might even be placed in NATO member Poland to provide air cover over Western Ukraine, a definite act of war as seen by Russia, which has warned that such a move would mean that the US and its allies had “effectively become a party” to the war in Ukraine and there will be “consequences.” “Consequences” means escalation.

The soldier-“trackers” mission may be in response to reports that weapons provided by NATO have been corruptly sold or given to third countries by the Ukrainians. The several US initiatives taken together could produce a rapid escalation of the conflict complete with dead Americans coming home in body bags and an inevitable direct US involvement in combat roles that could lead anywhere, but at this point it is the Russians who are acting with restraint by not targeting the NATO and US “advisers” who are already active in Ukraine.

Suspicion is also growing that the United States “green-lighted” in advance recent cruise missile attacks carried out by Ukraine against military targets deep inside Russia. Since the attacks, the White House has declared that Ukraine has “permission” to attack Russia and has basically conceded to the unbalanced Zelensky the right to make all the decisions and run the war that the US is largely funding, which is a formula for disaster. It is already known that Ukraine is receiving top level intelligence provided both by the US and also other NATO states. The precision attacks on Russia suggest that the Ukrainian army was given the coordinates of possible active targets, something that the US would be capable of providing but which would have been beyond the abilities of Ukraine, which possesses no satellite surveillance capability. If it is true that the White House was involved in escalating the conflict it would be a very dangerous move, inviting retaliation by Moscow.

To be sure, some idiots in Washington, mostly of the neocon variety, continue to see war against Russia as something like a crusade for world freedom. Rick Newman, Yahoo’s top Finance Columnist, observes how “Budget hawks in Congress are worried about granting President Biden’s request for an additional $38 billion in aid for Ukraine to help defeat the invading Russians.” He concludes “They’re right. Thirty-eight billion isn’t enough. Make it $50 billion. Or even $100 billion. The more, the better, until the job is done.”

Apparently, the bellicose Rick does not quite get that Russia has made clear that if it is about to be defeated by force majeure it will go nuclear. And Congress and the White House don’t seem to get it either, with both the Republican and Democratic parties oblivious to the real danger that confronts the American people. Nuclear war? Sure! Just hide in your basement, if you have one, and tune in.

European natural gas prices have plunged to pre-Ukraine invasion levels on mild winter. Heating demand across the EU has declined, allowing fuel storage tanks to continue injections and remain above seasonal levels. This bodes well for the energy-stricken continent, but new weather forecasts suggest a late-month return to winter. 

The benchmark Dutch TTF futures contract for February was down to 65.80 euros a megawatt-hour or more than 6% on the session. On the eve of Russia’s invasion last February, the contract sold for about 88 euros. 

Several factors have allowed the EU to skirt around an energy crisis, including alternatives to Russian NatGas, such as increased imports of US LNG, widespread conservation efforts for residential and business customers, and a very mild winter. 

NatGas stockpiles across the continent are well above a 12-year mean for this time of the year. The percentage of NatGas full has yet to fall from around 83% since Christmas. 

Meanwhile, new weather models are pointing to a possible flip back to colder temperatures next week for parts of Europe. Natgas traders will be focused on the severity of the cold and the impacts on heating demand. 

The return of wintry conditions follows a record-warm start to the year, which provided relief from an energy crunch that has hammered Europe for months. The mild weather curbed demand for heating, allowing some countries to top up natural gas stockpiles at a time when they’d usually be tapping supplies.

Most of Britain will see below-average temperatures by the end of next week, with snow possible in northern areas, according to the country’s Met Office. –Bloomberg

 A few models show the possible cold snap for parts of the EU next week. 

📉 It’s been a mild start to the year, but colder air is on the way back to the UK

❄️ Many of us will see the return of overnight frosts, and snow is possible in some areas by early next week pic.twitter.com/8GLpCWgWpU

— Met Office (@metoffice) January 11, 2023

🔵❄ Vers un net refroidissement la semaine prochaine sur l’#Europe occidentale, dont la #France, ou plutôt retour à un temps classique d’#hiver après des semaines trop douces. Possibilité de #neige jusqu’en plaine à surveiller ! pic.twitter.com/wR7YzywqW1

— Anthony Grillon 🌪 (@AnthoGrillon) January 11, 2023

Colder temperatures could be arriving in North West EU in days. 

However, Ole Hansen, head of the commodity strategy at Saxo Bank A/S, pointed out that “despite the risk of a colder end to January and early February, the abundance of gas in Europe will continue to curb the upside risk, even with increased demand from Asia.” 

Authored by Chris Summers via The Epoch Times,

Attempts to ban Joe Rogan or get him removed from Spotify for hosting “maverick” voices during the pandemic have “backfired,” a committee of British MPs has been told.

The Digital, Culture, Media and Sport sub-committee on online harms and disinformation has been set up to look at the “role of trusted voices in combating the spread of misinformation” and “ensure the public has sufficient access to authoritative information on matters of national debate.”

Tracey Brown, director of the charity Sense about Science, was one of three scientific experts who were questioned by MPs on Tuesday about lessons that could be learned about the dissemination of factual information, especially about COVID-19.

Brown told the committee:

“Joe Rogan, and ‘The Joe Rogan Experience’ podcast—who got 12.8 million subscribers, 200 million listeners—had a lot of guests on who … were a bit maverick in their thinking.”

“But he was taking an audience of people who were beginning to ask questions about how reliable was the vaccine information. And it wasn’t just about saying vaccines are rubbish, it wasn’t just an anti-vax campaign. He was actually asking a lot of questions that were on a lot of people’s minds,” said Brown.

She said there could have been a conversation with Rogan about the “calibre” of some of his guests, but she said it created an “opportunity” to reach an audience of 200 million people.

Brown said:

“Instead, what happened was a group of epidemiologists in the [United] States wrote to Spotify trying to get him banned and of course, that fed a huge load of conspiracy that was so much harder for us to follow and to get our hands on and to deal with, and I think it really backfires when people in authority try to do that.”

Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment, said there was a need for more scientific experts to go to “the coalface” and “engage with the sceptics.”

He said:

“That’s where we really need to focus because our current set-up, where we’re relying on too many gatekeepers who are making bad decisions or the wrong decision, isn’t serving our purposes.”

Ward said: “You gave the example of the January 6th insurrection in the United States and what we’ve seen in Brazil. Hand on heart, could we say that could never happen here in the UK?”

“I wouldn’t be confident in saying we would never have that happen here. And so better that we learn from the dangers that others have experienced and act preemptively rather than wait until they get as bad there and then go, ‘Oh dear, we should have done something.’”

Misinformation and Disinformation

Ward added: “Let me make a distinction here. Misinformation is inaccurate or misleading information. Disinformation is misleading and inaccurate information which is spread specifically to deceive.”

The chairman of the committee, Damian Green, asked Ward:

“If you model you project into the future … and sometimes you’re going to get it wrong. I mean, we all remember the projections of tens of thousands of deaths from BSE [Bovine Spongiform Encephalopathy, or Mad Cow Disease] and things like that which turned out not to be true.”

Ward replied:

“Well, that’s because modelling is generally misunderstood. I mean, modeling is used in scenarios in situations where you cannot give probabilities … Largely what was happening is the modeling was presented, by the media and other sources, as if these were predictions of an inevitable outcome. Whereas actually, what they were saying is, no policy will get you here. These policies will get you here.”

Chris Smith, clinical director in virology at the University of Cambridge, said: “Social media and the internet has been an amazing thing and it has transformed the world. But what it has also done is to break all of the existing models that meant there was good curated information of responsible reporting and there were editorial practices, because it basically hands a megaphone to anybody.”

He said: “The way these algorithms are created on things like Twitter is they will find you people who agree with you. So if you say something, it will go and find a bunch of people who say the same thing as you and it makes you friends with them. So even if you previously had nobody listening to a thing you said and no one would have believed you, suddenly you’re introduced to enormous loads of people who appear to share your opinion, which reinforces your self-belief.”

Smith said he posted on social media that he had just taken the Pfizer vaccine and he said, “Someone sent me back the circuit diagram for the microchips that were in the vaccine that I had just received and that Bill Gates was now using to control me.”

He went on: “I thought this is quite intriguing because it didn’t look like any microchip circuit diagram I’d ever seen. So I went and looked it up. And it was actually the wah pedal for a guitar.”

Patients lie on beds in a hallway in the emergency department of Zhongshan Hospital, amid a COVID-19 outbreak in Shanghai, China, on Jan. 3, 2023. (Staff/Reuters)

Smith said, “Anyone who doesn’t have the intelligence, or the necessary background education, to pick that apart and realise and see it for what it is, would have been potentially seduced by that piece of disinformation … and potentially put off of getting vaccinated.”

Smith went on to explain how viruses work and he pointed out that in the 1890s there was an outbreak of a virus called OC43—which was better known as Russian flu—which “spread like wildfire” after jumping from cows to humans, and killed a large number of people.

He said: “I guarantee if I go and test 100 people off the streets out there I’ll find probably about five or 10 of them with it today. And they will have the symptoms of the common cold. So what happens is that these things start off as a dramatic splash in the water and then the ripples slowly subside as we become better bedfellows with the virus and the virus becomes better bedfellows with us and we adapt to it.”

Smith said: “What we’re in a situation with COVID right now is … we’ve adapted and we’re now in a position where it’s causing a common cold-type manifestation across most of the world, except in China, where people haven’t spent the last three years catching it. Unlike this country where about 90 percent of the population is having it more than once, no one really has had it in China. Now they’re all getting it, so it’s like it was here three years ago.”