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Alejandro A. Tagliavini

"Quizá haya enemigos de mis opiniones, pero yo mismo, si espero un rato, puedo ser también enemigo de mis opiniones. ", J.L. Borges

While the Fed Falters, Stocks Stumble and Bonds Bounce

by Knave Dave

Wednesday, Jun 16, 2021 – 23:03

The following article by David Haggith was published on The Great Recession Blog:

Federalreserve [Public domain], via Wikimedia Commons

The Fed candidly admitted today’s soaring inflation is not what it had in mind, though it certainly is exactly what I’ve had in mind:

At a news conference after the Fed’s statment [sic.] was released, Chairman Jerome Powell said he expects that inflation will be short-lived but acknowledged that it has run hotter than the Fed anticipated and could remain persistently hot.

MarketWatch

Furthermore,

The [resulting market] decline put the Dow Jones Industrial Average … on track to close below its 50-day moving average for the first time since March 3.

Meanwhile, the S&P remains hunkered near that 4200 level that has acted like a magnet to its highs and lows; while the bond market decided perhaps it should take inflation seriously again after all, immediately spiking six basis points post-Powell, which put it ten basis points above where it started the week:

MarketWatch

Of course, the Elliott Wave people will say the market’s plunge within minutes of Powell’s comments had nothing to do with what Powell said or specifically with his admission that inflation may be just a tad more exciting than what the Fed anticipated and may be just, well, “persistent” — the new word that quickly replaced “transitory.” Because, by Elliott Wave Theory, market sentiment does not respond to the economic and monetary realities around it.

Nevertheless, as anticipated, the Fed said it will be holding its accelerator foot down to the floor for many months ahead (Fed dot plot says into 2023), apparently to see if it can get that inflation to run hotter still because surely the Fed could not be doing all this “money printing” (a.k.a. quantitative easing) just to fund the federal government’s massive debt rollover requirements or just to keep utterly dependent stock and bond market bubbles floating. 

Whatever the Fed’s reasons, we know it certainly is not burning up the money presses because banks need more money in their reserves in order to build up a hotter reverse-repo crisis now that the economy is failing to soak up all the liquidity the Fed is creating.

Or, as ZH put it more precisely, 

[The] Fed is holding rates at zero and buying $120 billion in bonds every month in the face of 17.4% export price inflation, 11.3% import price inflation, 6.6% producer price inflation, 5% consumer price inflation, [with] over 15 million Americans on government dole, over 9 million job openings for Americans, record high stock prices, record low homebuyer sentiment, [while] banks are puking excess cash back to The Fed at record levels.

Zero Hedge

What could go wrong with keeping the accelerator floored for many more months as we fly through those curves in the road? Makes sense to everyone, right?

Fed Fail

The Fed, as I’ve said it would do for the past year, has trapped itself between a rock and a hard place, and it is just now starting to see that, once again, this is not quite the situation it believed it would find itself in. (Just as the Fed once believed tightening would be as boring as watching paint dry (then, oops, stock crash and repo crisis). Tightening was supposed to leave us in a world that would never have another financial crisis during the Fed Head’s lifetime. (Oops again. Maybe Yellen meant her life as Fed Chair; she now has a different life as US treasurer.) Maybe Gramma Yellen just thought she wouldn’t live long enough to see the roaring 20’s for a second time.) The Fed never seems to have a workable end game for any of its big-think programs. Yet, people keep trusting it and thinking it is smart.

This time, the Fed has, on one side, created so much dependency on FedMed throughout the economy, including just about every market out there — stocks, bonds, housing, you name it — that it cannot end the drugs without creating massive withdrawal in all markets at the same time — the catastrophic collapse of the Everything Bubble. On the other side, the Fed’s Big Giant Head now has to admit he didn’t expect inflation to run this hot and that the intensity of the heat and the rate at which it is rising indicates inflation may run hotter and longer than the Fed’s earlier “transitory” guess. That means, if the Fed keeps pouring on the fuel, it risks cooking the everything bubble until everything explodes.

We’ve never experienced what that looks like either. (I would suggest likely a lot worse than the inflations of the seventies when there was no Everything Bubble to burst into tiny bubbles as we whine.)

To what degree are Fed FOMC members changing their minds as to how hot inflation is running? Here is the “dot plot” that shows when those with a vote on the FOMC believed the Fed would make its adjustments in interest rates back in March, and where they placed the likelihood of adjustments now. Each dot represents the view of one committee member as to what level the Fed’s interest target will have to reach in each year on the chart:

Zero Hedge

You can see that what has happened with consumer inflation since March has significantly changed where voting members believe interest targets will have to be set in 2023. The median dot in June is now two typical rate hikes above where March’s median dot was. The unusual and widening dispersion of dots also indicates there is now a lot less certainty between members as to where the Fed needs to be or what is going to happen with inflation. (Won’t they be surprised when the hot inflationary summer ahead puts even more heat beneath their feet?)

Nevertheless, the Fed is still not planning to raise interest rates before 2023. So, that means two more years of running pedal to the metal. The Fed obviously is a little slow on the uptake to realize their antiquated steamer is already careening over the edge of every inflation curve. Why? Because they dare not admit it. Admitting it and backing off on the fuel would crash all markets.

According to David Tepper, Oil Stocks Are The “Cheapest Equities By Every Measure”

Tyler Durden's Photoby Tyler Durden

Thursday, Jun 17, 2021 – 07:56 AM

David Tepper loves the “much loathed” world of oil stocks, he revealed this week.

At the Robin Hood Investors Conference Wednesday, the billionaire told the audience that equities “were the place to be” with interest rates this low, emphasizing the FAANG stocks, according to Bloomberg.

But he also said that oil stocks “are the cheapest equities by every measure because people hate them” and that he’s long “many of them”.

The head of Appaloosa told the audience that Occidental Petroleum Corp. was “incredibly cheap” and had the potential to climb from current levels around $30 to about $45 or $50 per share. He also said that the day Exxon added activist investors to its board was the day to buy oil stocks. He said the addition signaled that drilling “will eventually decrease over time” and supply will follow.

Tepper also said Amazon would be a great place to park his money over the next decade and that he didn’t think the Fed would tape until “unemployment falls significantly.” He noted that he though inflation was “transitory to a certain extend” and that he owns “some” crypto but that he isn’t a believer. 

Finally, he told the audience he’d only invest a maximum of 10% in China because of “the legal lack of protections for investors.”

Recall, we wrote just days ago about how the rise in activism in oil and gas was benefitting state-run oil companies in places like Saudi Arabia and Russia. Even as the supermajor oil companies shrink in size and adhere to incessant criticism, fossil-fuel demand holds strong, according to Yahoo Finance. Activists have been the busiest they have been in years…

Recent weeks saw Exxon and Chevron rebuked by their own shareholders over climate concerns, while Shell lost a lawsuit in the Hague over the pace of its shift away from oil and gas.

…and this has been a tailwind for national oil companies (NOCs) and state owned players who aren’t under the same pressure to play ball with activists. The report notes that “Saudi Aramco and Abu Dhabi National Oil Co. are spending billions to boost their respective output capacities”, as is Qatar Petroleum. 

NOC’s share of global oil output is expected to rise to 65%, from about 50% today, by 2050. Companies like Exxon and Chevron are keeping output at lows and curtailing future investment in traditional oil and gas infrastructure. 

Patrick Heller, an adviser at the Natural Resource Governance Institute, told Yahoo Finance: “We hear government officials and NOC officials say, ‘We look at the divestment of international oil companies from some projects as an opportunity for us to grow. And I do think that’s potentially really risky.”

Jason Bordoff, director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, thinks that the shift to government owners could wind up doing just the opposite of what activists are intending on doing. 

Earlier this month, we also wrote how Saudi and Russian oil producers were benefitting from activism in the industry involving Western producers. Wins in the courtroom for activists against Shell, Chevron and Exxon have been a tailwind for Saudi Aramco, Abu Dhabi National Oil Co and Gazprom, we wrote. The pressure for U.S. names to cut carbon emissions faster pushes more business to companies in Saudi Arabia and Russia, and to OPEC, Reuters reported. 

The only authority is moral authority. The “leadership by influence”

By Alejandro A. Tagliavini

XXXVII Thomist Week – International Congress, 2012

Faculty of Philosophy and Literature – UCA (click for the original paper in Spanish)

Disclaimer: As this presentation has been written for a Catholic university, I rely on pertinent quotes, that is, from Catholic authors, but don not be confused by this, the background is scientific and could well be based on non-Catholic authors.

INTRODUCTION

                           In this short essay I will limit myself to presenting, not what reality currently is, but that perfection that we must have as a horizon. The true authority (and therefore unique) is the one that leads man to Being, the one that has the real power to direct him to his perfection, and the natural (metaphysical) potency to do so: ‘moral leadership’ (‘leadership by influence’) which, contrary to what many believe, is extremely effective -it is effective- , in opposition to the physically coercive “authority” that, strictly speaking, like all violence only destroys. As an example, the USSR, the most powerful tyranny in human history was not defeated by a superior army, but because of the moral influence of people like John Paul II.

DEVELOPMENT

                     Aristotle distinguishes being in act and in potentiality (the possibility of becoming what is not yet). All things are in act and, at the same time, potentially in relation to another different act. The act is prior to the potency, logically, chronologically, and ontologically, because something is potentially only in function of a certain pre-existing act. Consequently, in his Physics he explains that movement is the passage from power to act.

 In the first of the Thomist ‘quinque viae’ the only immobile engine is God (perfection). Thus, in Him (the highest authority, perfection) there is no potency, because this would mean change, but it is a pure act, from which authority is an act and not power (hence that “it is preached by example” and not with words). Following the Stagirite, Saint Thomas of Aquinas reaffirms that “movement is an imperfect action and of the imperfect” (1). This is how it moves (it is moving) what is partially in power and partially in act, continues the Aquinate (2).

So, the natural order (the natural laws of the cosmos, which must be followed necessarily to convert power into act) implies, fundamentally, movement because it exists precisely for man to become. If, in addition, we consider that potency is intrinsic (and its development inevitable), it follows that man necessarily moves by natural tendencies towards the Act (perfection) and, therefore, does not need extrinsic forces to drive him.

On the other hand, Saint Thomas assures, referring to the government of the world, that “… God immediately governs all things; but as regards the execution …, God governs some things by others intermediates … Therefore, it is fitting to say that God has the essentials of government…” (3). I emphasize that it is God who has the ‘essential’ of the government of the universe in an ‘immediate’ way (through Providence) and that there is some earthly authority in as much as “God governs some things through others”. This is to say, the cosmos has its own government prior to the human being, and some things of this government are realized through others “involuntarily”, as they are simple executors of something they can not change.

The natural need for authority is easy to understand. For example, as all people have different ideas, but at the same time it is urgent to be social, they need someone who, finally, decides the way forward. If they decide to follow one together since, although, due to the social nature, at some point they will have to do so, the free agency (and the inability to always associate with everyone), forces you to decide when and with whom. On the other hand, every human action seeks to improve the situation of the person, that cannot be fully reached as an “individual” (for it implies a common good since human beings are necessarily social, since to begin, to procreate two people are needed) hence the existence of some “authority” who knows that such action will lead to a better situation and can order for this purpose. Like, for example, your tennis coach.

Let us emphasize that it is a voluntary (natural) gathering of people, because they have discovered that they can power their resources, in fact, anyone could, at any moment, withdraw from the association. Now, as Providence -the impulse to perfection- manifests through the natural reason, which supposes free will, so that there is truly a government of God (previous to human beings), ‘Delegated’, for the natural order to be respected, the government must be given, exclusively and exclusive, depending on the human free will that adhere, by personal decision and in each act, to each law.

The Catechism says that “Regimes whose nature is contrary to the natural law … and the fundamental rights of people, cannot achieve the common good” (4) and then quotes the Aquinate: “Human legislation only has the character of law when it conforms to just reason, which means that its obligation comes from the eternal law. To the extent that if deviates from reason, it would be necessary to declare it unjust, it would not verify the notion of law; but rather it would be a form of violence (S. Thomas of A., th. 1-2, 93, 3 ad 2)” (5).

Now what is it that radically contradicts the natural order? The Aquinate says: “Violence is directly opposed to the voluntary as well as to the natural, in as much as it is common to the voluntary and the natural that both come from an intrinsic principle, and the violent emanates from an extrinsic principle” (6). To the point that Etienne Gilson assures that, for the Aquinate, “The natural and the violent are mutually exclusive, and it is not conceivable that something possesses both of these characters simultaneously” (7).

In this regard, Aristotle clarifies that “it is possible to violate the animated being: For example, a horse can be forced to move away from the straight line where he runs, making him change the direction … And so, if there is a cause outside of beings that forces them to execute what is contrary to their nature or their will, it is said that these beings do by force what they do … This will be … the definition of violence and coercion: there is violence whenever the cause that forces beings to do what they do is external to them; and there is no violence from the moment that the cause is internal and that it is in the very beings that move” (8).

What has been said so far, does not suppose, on the contrary, it is opposed to the classic rationalist ‘individual freedom’ that proposes the autonomy of man from God (the creation of the cosmos and the creation of humans) and the non-existence of his authority -the previous natural order- , but it does imply, in a radical way, the non-existence of violence (coercion), as a method of ‘government’ or ‘organization’. In short, the authority it is of a natural order and, it will be such, if it is inscribed within it, because the earthly rulers are only ‘intermediaries’, who can add or change nothing to the design of the nature.

The metaphysical principle is clear: violence is extrinsic to man and contrary to his nature and will. In other words, it is contrary to life so, not only never it will have real effectiveness (as it would be a contradiction) over life, but it will destroy it.

Affirming that violence is necessary because, otherwise, authority would be illusory, is saying that moral authority does not have sufficient power, that it does not really exist. This is like saying that the natural order does not exist, since morals are the rules, human beings must follow to adapt themselves to the natural order that involves the development of human life.

It is It is true that the Aquinate wrote that the law induces us to accept what it commands through fear to penalty (9), but the real penalty, that comes from disobedience to the law, is that of distancing oneself from being, is the pain (physical and/or psychological and/or spiritual) that surges from distancing from nature. On the other hand, Leo XIII tells us that: “… as Saint Thomas teaches, fear is very thin support; and those who out of fear submit, when the opportunity to go unpunished, they rebel more ardently … excessive fear leads to despair, and it pushes man to the greatest attacks (De Regim. Princ., l. I, c. 10)” (10).

 Let us remember that morality is ‘the adaptation’ of man to the natural order (the efficiency, the movement towards being), and that we all want to achieve perfection (the last end, the good) that is the proposal of Providence. So, we will follow, with pleasure, he who best leads us to and within the natural order, he who has more moral authority. On the contrary, those who disobey (or are violent), will move away from the moral and consequently (as life develops according to the natural order), they will end disappearing and with them (spontaneously) the lack of respect for real authority.

Moral leadership has the greatest force that exists in the cosmos, which comes from Providence that, following the nature of things, will guide the human being on the path of perfection. As when being babies we follow our parents because they know about life a lot more than we do. The coercive conception of ‘authority’ is undoubtedly materialistic and, so to exercise it, it is necessary the corresponding police power, weapons, that is, pure material.

When the natural order (faith moves mountains, and it does move them) raises the opposite: authority is essentially and finally moral (what we might modernly call ‘leadership by influence’). According to Aldous Huxley, “Societies are maintained, not mainly because of the fear of the more to the coercive power of the less, but because of a widespread faith in the decency of others” (11).

 In contrast, let us look at the supposed effective power of violence. State coercive measures, laws, have been ‘made to be violated’. As soon as the coercive State censorship says that a movie is banned, it becomes the attraction of the moment. Some will say that, if a moral authority (not coercive) decided, for example, to collect taxes, a large percentage would not pay. I wonder how many pay today (tax evasion is calculated globally by about 40%). Instead, what is the most important thing in your life? If it is your family, do you take care because it is coercively imposed on you or because you love it? Most important things, actions, energies, resources and movements in societies are directed for ‘moral reasons’, while strong attempts are made to avoid actions that coercive violence seeks to impose.

One company, for example, had as a policy not to force those who, having made use of their service, did not wanted to pay. The result was that it lost about 0.8 percent of its income on non-paying customers. But this decision impressed the company such a moral level and human warmth, that customers felt it as their home and, from this situation, the company made superior profits. It is estimated that the ‘moral adherence’ of people, it meant an increase in their income of the order of 15 percent.

 Thus, if authority is real, he who should not pay taxes because to do so, for example, would imply stop feeding his family, will not pay, and no one will force him to do so. Coercion is carried out precisely to impose actions to those who did not have intentions to do so. That is, it will cause hunger in the family in question. It will be said that many who could do so, will not pay. And here it is worth remembering the serious moral fault that means consequentialism and proportionalism according to John Paul II: “… the moral norms… without exception prohibit intrinsically evil acts… (We cannot) accept the arguments of ‘teleological’, ‘consequentialist’ and ‘proportionalist’ theories that deny the existence of negative moral norms regarding particular behaviors and that are valid without exception…” (12). The moral behavior would be to let someone that, having the capability to pay does not do so, rather than forcing everyone and causing harm to innocents.

But, in addition, I insist, all empirical evidence clearly shows that, when the authority it is truly moral, it achieves much more than when it is coercive. The maximized coercive ‘government’ (communism, for example) and the minimized (the ‘Laissez faire’) differ, strictly speaking, in the degree of coercion they justify. On the one hand, the Communism legitimized any level of violence as far as it ‘came from the proletariat’. A position that today seems untenable to me. Instead, it is enlightening to discuss the idea of government that justifies only a ‘minimum’ of violence, on the part of the ‘authority’, supposedly to prevent some misfit from imposing on another individual.

Thus, Hobbes believes in the physically coercive state, since otherwise it could not exist society. That is to say, there is no natural social order prior to man, but rather that the ‘society’ must necessarily be imposed violently: “It is clear that while men live without a common power to keep them all fearful, they will be in the a condition called war … of all against all … and consequently there will be no cultivation of the land, … there will be no knowledge … there will be no society and, worst of all, there will be permanent fear and danger of violent death” (13).

Coercive ‘authority’ is made precisely to violate the natural order, as it is established precisely to ‘necessarily’ compel people even when their opposition is the result of their free will, of their moral conscience (of the natural order). The violent State is, in short, a superb invention of rationalism that seeks to impose an order by compulsion, an artificial society designed by the reasoning of some illuminated as to supplant the natural. And as the imposition must be forced because, of its own, collides with the nature of things, ends up making a true cult of violence, of the destruction of life. According to Saint Augustine “Two loves founded two cities: the selfish up to the hate of God, the earthly; God’s love, the heavenly” (14).

Montesquieu’s rationalism (the believe that human reason is absolute, can design anything and above nature) is so clear: “The law, in general, is the human reason, insofar as it governs all the peoples of the earth; and political and civilian’s laws of each nation should not be other than the particular cases of this reason” (15). On the contrary, John Paul II affirms that “the force of the law resides in its authority to impose some duties, grant some rights and sanction certain behaviors: ‘Now, all this could not occur in man if it were he himself who, as a legislator supreme, ruled the actions that should be given’”. And he concludes: ‘It follows that natural law it is the same eternal law, inherent in beings endowed with reason, that inclines them to the act and to the end that suits them; it is the same eternal reason as the Creator and Ruler of the universe’” (16).

Saint Thomas affirms that “the law is something that belongs to reason” (17) but this is not the reason of rationalism but that of the natural order that goes beyond pure egocentric reasoning. Then, “in this way it is understood that the prince’s will has the force of law: otherwise, the prince’s will would be rather iniquity than law” (18), a doctrine that It seems based on the dictation of Saint Augustine according to whom “it does not seem to be a law that is not fair” (19). And the Aquinate clarifies that “There are two kinds of justice. One is to give and receive reciprocally, which is verified in the purchase and sale and other contracts and transactions of this nature; this one, which is called by Aristotle (V Ethic., c.4, n.1) [BK 1131b25] commutative or directive of changes or negotiations, it is not up to God … another is to distribute, for which reason it is called distributive … the order of the universe, which shines in both natural and voluntary things, it is a proof of the justice of God. Which makes Dionysius say (From the names div., C.8): It is necessary to recognize justice of God, in that he grants to all beings what is proper to them according to their respective dignity, and in that he preserves the nature of each thing in the order and virtue that are proper to it” (20).

George H. Sabine, and many other authors, go so far as to affirm that “[Saint Thomas] had no general theory of the origin of political authority … his reverence for the law was such that he took it for granted that its authority was inherent in itself and did not depend on any human source” (21). The Aquinate addresses the issue of community governance in his treatise ‘Of the Government of the Prince’ (‘De regimine principum’). And he points out that “If the government, comes out of a single one, in which he sought his own comforts and not the good of the multitude who is in his charge, this Governor would call himself a tyrant…” (22). And later “… if we speak of the government by way of servile subjection, introduced was by sin … but if we speak of him insofar as it is his office to look after his subjects and direct them to the good, of this mode can be called almost natural [government]…” (23).

NOTES

(1) In Metaphys. (Commentary on Aristotle’s Metaphysics), XI, 9 (2305).

(2) In Phys. (Commentary on Aristotle’s Physics), III, 2 (285).

(3) S.Th., I, q. 103, a. 6.

(4) Catechism of the Catholic Church, n. 1901.

(5) Ibid. n. 1902.

(6) S.Th., I-II, q. 6, a. 5.

(7) ‘El Tomismo’, Part Two, Chapter VIII, EUNSA, Pamplona 1989, p. 438.

(8) ‘La Gran Moral’, I, XIII (in Aristotle, ‘Moral’, Espasa-Calpe Argentina SA, Buenos Aires 1945, p. 46).

(9) S.Th., I-II, q. 92, a. 2, in c.

(10) Encyclical ‘Diuturnum Illud’, Rome 1881, nn. 28 and 29.

(11) ‘La filosofía perenne’, Ed. Sudamericana, Buenos Aires 1967, pp. 289-0.

(12) Encyclical ‘Veritatis Splendor’, Rome 1993, n. 90.

(13) ‘Leviathan’, London: Macmillan Pub., 1962, p. 100.

(14) ‘De Civitate Dei’, XIV, 28.

(15) ‘L’ Esprit des Lois’, Première Partie, Livre Premier, Chapitre III, Des Lois Positives.

(16) Encyclical ‘Veritatis Splendor’, Rome 1993, nn. 41 and 44. The quote is from Leo XIII, Encyclical ‘Libertas Praestantissimum ‘(June 20, 1888): Leonis XIII P.M. Acta VIII, Romae 1889, 219.

(17) S.Th., I-II, q. 90, a. 1.

(18) Ibid., answer to the third difficulty of this article.

(19) ‘De Libero Arbitrio’, 1.1, c. 5.

(20) S.Th., I, q. 21, a. 1.

(21) ‘Historia de la teoría política’, Fondo de Cultura Económica, México 1945, pp. 246-7.

(22) ‘Del gobierno de los príncipes’, Libro I, Capítulo I (Editora Cultural, Buenos Aires 1945, Vol. I, p. 23).

(23) Ibíd., Libro III, Capítlo IX (Vol. II, p. 10). Although this part seems to be authored by Ptolemy of Lucca, it nevertheless exactly matches the S.Th.

Stock markets in an unprecedented situation

By Alejandro A. Tagliavini *

                 From last week’s weaker-than-expected employment data, the Treasury bond’s yield fell sharply, the 10-year to a three-month low of 1.43% on Thursday – then rose on Friday to 1.45% – even after the government reported that the CPI rose 5% year-on-year in May, the biggest rise since 2008. By the way, borrowing costs tend to rise when inflation rises.

                  Precisely when the rise in the US CPI reached its highest level in the last thirteen years, the main stock indices on both sides of the Atlantic continued their upward momentum, although with not so firm or certain prospects, and several managed to arrive to all-time highs.

                  And as the CPI has risen over the past few months, U.S. government bond yields have decoupled, not keeping pace:

Source: Bureau of Labor Statistics, Bloomberg

             So it turns out that real rates are stubbornly negative, the current gap between 10-year bond yields and the CPI has been more negative for only 10 months in the last 70 years, all of which were in 1974, 1975 or 1980:

            This unprecedented decoupling, according to some analysts, is a clear sign that investors know the Fed will take a turn at the first sign of trouble, probably at the time the S&P falls 10%.

           Others see a message because copper prices fell almost 8% since May 10 and many commodities seem saturated and wanting to go down. This, together with the decline in 10-year inflation expectations, seems to indicate that CPI -not real inflation- growth could slow down given not a recession, but a longer economic recovery and slower than initially believed.

             This has spread to parts of the stock market, with the PHLX Housing Index and the Dow Jones Transportation Index recently falling roughly 13% and 6%, respectively, from their highs. The S&P 500 has swung both ways during this time. Next year’s earnings growth is expected to decelerate dramatically. Estimates of earnings per share (EPS) growth for the S&P 500 in 2022 are at 11.7%, according to the latest Refinitiv data, below expectations of nearly 17% in early January. Furthermore, a drastic reduction in the expected growth rate of 37% is estimated in 2021.

             The recent price increase was mainly for basic goods and flight fares, something that is expected to be temporary. Food and energy prices have also contributed to the rise and that is why the base CPI, which excludes food and energy, remains just below 4%. On the other hand, the PCE (personal consumption expenditures) is at 3%, well below both the CPI and the base CPI, and this is the indicator the Fed uses the most to estimate inflation.

             The reality is that the PCE is somewhat better as an indicator of inflation because it takes consumption habits into account. For example, if prices rise on certain items in the family basket, people usually change their habits and buy other or cheaper brands, so consumers do not necessarily end up spending more.

              Anyway, on the other hand, Biden, has proposed an infrastructure plan of about USD 2.3 trillion, something that supposedly would boost the economy, but the proposal is finding it difficult in congress to be approved. And because of this some analysts believe the Dow Jones has not had the same upward momentum as the S&P 500 and the Nasdaq, since the infrastructure plan would mainly support the industrial sector.

                 During last Thursday’s session, the S&P 500 reached an all-time high at 4,249 points and fell on Friday and then resumed the upward path. On the daily chart we see an upward trend in the index, in the short term and, if it continues to rise, its next resistance could be at 4,300 points. To the downside, in the event of a bearish retracement, the 55-day exponential moving average (purple line) could act as support, just as it has on several occasions in the past:

               By the way, so far, the injection of money by central banks has been phenomenal, reaching USD 100 Trillions two weeks ago:

                For this reason, conservative, safeguard investments, have had a strong rise as seen in the global funds of raw materials and real estate that have yielded more than 20% so far in 2021:

                Anyway, as for Argentina, on the one hand, the Government will not let the official dollar skyrocket – which grows at 1.2% per month compared to a CPI that does so at 3.5% – and will try to keep the CCL and the stock market dollar at bay, at least until after the elections. And it could fulfill it. The BCRA earned more than USD 4,000 million net so far in 2021 thanks to raw materials, especially soybeans, and today net reserves exceed USD 6,500 million.

              By the way, the dollar gap began to widen in the last month. Between the wholesaler and the CCL a month ago it was 67% and today it reaches 73%. This pressure is also noticeable in the “blue” that is slowly awakening from the siesta caused by the sharp decline in the monetary issue at the beginning of the year. But this could change given the higher spending claims they envision from the political side.

              Nobody believed him, but the truth is that due to the higher tax collection given the withholdings on exports, strengthened by the sharp rise in grain prices, and due to the new wealth tax, gave the Treasury an unthinkable amount of funds. At the same time managed to liquidate (something unthinkable in a “popular” government) strongly the expenses. For example, the funds for retirement and pensions would increase 30% year-on-year, far from the 46% forecast for “inflation”. Thus, the annual fiscal deficit would be 3% of GDP, when the 2021 Budget forecast 4.2%.

               If spending is increased due to political demands, this could be financed with issuance, which would trigger inflation and, finally, the CPI that, obviously, the poor end up paying, especially if the tax pressure does not drop and, then, the rise in prices. If the aim is for the economy to grow, it should be deregulated so that it can expand, especially considering that the “soy miracle” could end when its price falls.

            At the moment so far in 2021, the purchase of the dollars by people at the bank window has been falling month by month and in April only 46 M were acquired compared to the 4,000 M that they did in August 2020, when it hit highs. And the other dollars, including the “blue”, have remained practically stable so that even the durable goods collectors that increase with the CPI are gaining ground.

             Thus, while the fixed terms deposits lose against the IPC -which gains against the dollar- the UVA fixed term offers a performance above the IPC, especially in the pre-cancellable modality that offers the possibility of canceling it after 30 days and offers a rate on the rise in the CPI, which is usually 1% per year.

            Investing in Argentine equities is bold. In 2020, the shares had a very poor performance, trading today at very low prices, which is why good investment options are opened despite the economy that hardly recovers given the increasing weight of the State. In recent weeks, Argentine assets come off a major bullish rally. The vast majority of ADRs earn more than 8% and up to 45% in the last month. The volume grew 100% since March and some analysts expect the upward trend to continue, but, be cautious because the general trend of the stock markets is not clear, and much less the performance of the local economy.

           The prices of raw materials come from going through an upward cycle that led to products such as oil or soy being at record values, but, as I said at the beginning, there are signs that they could be saturated given that the growth of the economies, with so much injection of inflationary money, could slow down. Soybeans reached USD 600 only a month ago in the Chicago market, but now it is at 550 per ton almost doubling that of 2020, so it was an interesting investment opportunity, but it is not clear if it will continue to be. Oil, which surpassed $ 70 this week for the first time in two years, could be a good investment since, even if economies are not growing as fast, the unavoidable lifting of ridiculous quarantines and other restrictions will necessarily absorb more movement, more oil.

* Senior Advisor at The Cedar Portfolio  and Member of the Advisory Council of the Center on Global Prosperity, de Oakland, California

@alextagliavini

www.alejandrotagliavini.com

Los mercados de valores en situación inédita

Por Alejandro A. Tagliavini*

                 Desde los datos de empleo de la semana anterior, más débiles de lo esperado, el rendimiento de los bonos del Tesoro cayó bruscamente, el del a 10 años a un mínimo de tres meses de 1,43% el jueves -luego el viernes subió a 1,45%- incluso después de que el gobierno informara que el IPC subió un 5% interanual en mayo, la mayor subida desde 2008. Por cierto, los costos de los préstamos suelen aumentar cuando aumenta la inflación.

                  Precisamente cuando la suba del IPC en EE.UU. llega a su nivel más alto de los últimos trece años, los principales índices de bolsa en ambos lados del Atlántico continuaron su impulso alcista, aunque no tan firme ni perspectivas ciertas, y varios logran llegar de nuevo a máximos históricos.

                   Y a medida que el IPC aumentó durante los últimos meses, los rendimientos de los bonos del gobierno de EE.UU. se han desacoplado, sin seguir el mismo ritmo:

Source: Bureau of Labor Statistics, Bloomberg

             Así resulta que las tasas reales son obstinadamente negativas, la brecha actual entre los rendimientos del bono a 10 años y el IPC ha sido más negativa solo durante 10 meses en los últimos 70 años, todos los cuales fueron en 1974, 1975 o 1980:

           Este desacople inédito, según algunos analistas, es una clara señal de que los inversores saben que la Fed dará un golpe de timón al primer indicio de problemas, probablemente en el momento en que el S&P caiga un 10%.

           Otros, ven un mensaje porque los precios del cobre cayeron casi 8% desde el 10 de mayo y muchos commodities parecen saturados y con ganas de bajar. Esto, junto con la disminución de las expectativas de inflación a 10 años, parece indicar que el crecimiento del IPC podría desacelerarse -no así la inflación real, la depreciación intrínseca del dólar- dada no una recesión, pero si una recuperación económica más larga y lenta de lo que se creía inicialmente.

             Esto se ha extendido a partes del mercado de valores, cayendo recientemente el índice PHLX de vivienda y el Dow Jones de Transportes aproximadamente un 13% y un 6%, respectivamente desde sus máximos. El S&P 500 ha oscilado a ambos lados durante este tiempo. Se espera que el crecimiento de las ganancias del año que viene se desacelere drásticamente. Las estimaciones de crecimiento del beneficio por acción (BPA) del S&P 500 en 2022 están en 11,7%, según los últimos datos de Refinitiv, por debajo de las expectativas de casi un 17% de principios de enero. Además, se estima una reducción drástica de la tasa de crecimiento esperada del 37% en 2021.

             El reciente aumento de los precios se dio principalmente en lo que es bienes básicos y tarifas de vuelos, algo que se espera sea temporal. Los precios de alimentos y energía también han contribuido a la subida y es por eso que el IPC base, que excluye alimentos y energía, se mantiene justo por debajo del 4%. Por otro lado, el PCE (personal consumption expenditures) o gasto de consumo personal está en el 3%, muy por debajo de tanto el IPC como del IPC base, y es ese el indicador que más usa la Fed para estimar la inflación.

             La realidad es que el PCE es algo mejor como indicador de inflación, porque toma en cuenta los hábitos de consumo. Por caso, si los precios suben en ciertos artículos de la canasta familiar, las personas normalmente cambian sus hábitos y compran otros o marcas más baratas con lo que no necesariamente los consumidores terminan gastando más.  

              En fin, por otro lado, Biden, ha propuesto un plan de infraestructura de unos USD 2,3 B, algo que supuestamente impulsaría a la economía, pero la propuesta está encontrando dificultad en el congreso para ser aprobada. Y a ello se le atribuye el que el Dow Jones no ha tenido el mismo impulso alcista que el S&P 500 y el Nasdaq, ya que el plan de infraestructura apoyaría principalmente al sector industrial.

                 Durante la sesión del jueves pasado, el S&P 500 llegó a un máximo histórico en los 4.249 puntos y el viernes bajó para luego retomar la senda alcista. Sobre el gráfico diario vemos una tendencia alcista en el índice, a corto plazo y, de continuar subiendo, su próxima resistencia podría estar en los 4.300 puntos. Hacia abajo, en caso de un retroceso bajista, la media móvil exponencial de 55 días (línea morada) podría actuar como soporte, así como lo hizo en varias ocasiones en el pasado:


              Por cierto, hasta ahora, la inyección de dinero por parte de los bancos centrales ha sido fenomenal, llegando a los USD 100 B (Trillions) hace dos semanas:

                Por ello, las inversiones conservadoras, de resguardo, han tenido una fuerte suba como se vio en los Fondos globales de materias primas e inmobiliarios que han rendido más de 20% en lo que va de 2021:  

                En fin, en cuanto a la Argentina, por un lado, el Gobierno no dejará que el dólar oficial se dispare -que crece al 1,2% mensual frente a un IPC que lo hace al 3,5%- e intentará mantener a raya al CCL y al dólar bolsa, por lo menos hasta después de las elecciones. Y podría cumplirlo. El BCRA ganó más de USD 4.000 M netos en lo que va de 2021 gracias a las materias primas, sobre todo la soja, y hoy las reservas netas superan los USD 6.500 M.

                Por cierto, la brecha entre dólares empezó a ampliarse en el último mes. Entre el mayorista y el CCL un mes atrás era de 67% y hoy llega a 73%. Esta presión se nota también en el blue que lentamente se despierta de la siesta que le produjo la fuerte baja en la emisión monetaria de principios de año. Pero esto podría cambiar dados los reclamos de mayor gasto que prevén del lado político.

               Nadie le creía, pero lo cierto es que por la mayor recaudación impositiva dadas las retenciones a las exportaciones, fortalecidas por la fuerte suba de los precios de los granos, y por el nuevo impuesto a la riqueza le dio al Tesoro una cantidad de fondos impensada el año pasado cuando confeccionó el Presupuesto 2021, al mismo tiempo que logró licuar (algo impensado en un gobierno “popular”) fuertemente los gastos. Por caso, los fondos para las jubilaciones y pensiones aumentarían 30% interanual, lejos del 46% previsto para la inflación. Así, el déficit fiscal anual sería del 3% del PIB, cuando el Presupuesto 2021, preveía 4,2%.

              Si se aumenta el gasto por exigencia política, esto podría financiarse con emisión lo que dispararía la inflación y, finalmente, al IPC que, obviamente, terminan pagando los pobres sobre todo si no baja la presión impositiva y, entonces, se amplifica la suba de precios. Si lo que se pretende es que la economía crezca debería desregularse de modo que pueda expandirse, sobre todo teniendo en cuenta que el “milagro soja” podría terminarse al caer su precio.

            De momento, en lo que va de 2021, la compra del billete verde por parte de personas en la ventanilla de los bancos viene cayendo mes a mes y en abril sólo 46 M se adquirieron frente los 4.000 M que lo hicieron en agosto del 2020, cuando tocó niveles máximos. Y los demás dólares, incluido el blue, se han mantenido prácticamente estables de modo que hasta los acopiadores de bienes durables que aumentan con el IPC van ganando terreno.

             Así, mientras que los plazos fijos pierden contra el IPC -que gana respecto del dólar- el plazo fijo UVA ofrece un rendimiento por encima del IPC sobre todo en la modalidad pre cancelable que ofrece la posibilidad de cancelarlo a partir de los 30 días y brinda una tasa sobre la suba del IPC, que suele ser del 1% anual.

            Invertir en renta variable argentina es audaz. En 2020 las acciones tuvieron un muy pobre desempeño cotizando hoy a precios muy bajos por lo que se abren buenas opciones de inversión a pesar de la economía que difícilmente se recupere dado el peso cada vez mayor del Estado. En las últimas semanas, los activos argentinos vienen de un rally alcista importante. La gran mayoría de los ADR ganan más del 8% y hasta 45% en el último mes. El volumen creció un 100% desde marzo y algunos analistas esperan que la tendencia alcista continúe, pero, aunque no está clara la tendencia general de las bolsas ni mucho menos el desempeño de la economía local.

           Los precios de las materias primas vienen de atravesar un ciclo alcista que derivó en que productos como el petróleo o la soja se sitúen en valores récord, pero, como decía al principio, hay indicios de que podrían estar saturados dado que el crecimiento de las economías, con tanta inyección de dinero inflacionario, podría ralentizarse. La soja llego a cotizar a USD 600 hace sólo un mes en el mercado de Chicago, pero ahora está en 550 por tonelada casi duplicando al del 2020, por lo cual fue una oportunidad interesante de inversión, pero no queda claro si lo seguirá siendo. El petróleo, que superó esta semana los USD 70 por primera vez en dos años, sí podría resultar una buena inversión dado que, aunque las economías no crezcan tan rápido, el levantamiento cada vez mayor e inevitable de las ridículas cuarentenas y demás restricciones necesariamente absorberán más movimiento, más petróleo. 

*Senior Advisor, The Cedar Portfolio 

@alextagliavini

www.alejandrotagliavini.com

Does Crumbling USD Monetary Velocity Guarantee Higher US Stock Markets and Render Hyperinflation Possibilities Void?

by skwealthacademy

Friday, Jun 11, 2021 – 4:50

Recently, a slew of very prominent stock market analysts, including JP Morgan’s Marko Kolanovic, have stated that US stock markets still have a long way to run and that the current consolidation is signaling another breakout higher. However, these predictions are pure speculation, based upon a guess that the end of lockdowns in the US will spark a continued higher run in US stock markets, even though the lockdowns enforced worldwide last March 2020 were the very reason US stock markets stopped crashing and then reversed for the remainder of 2020. Nowadays, everything is attributed to the reason why US stock markets have continued to rise. Lockdowns, by ensuring interest rates would remain near zero, caused US stock markets to rise last year. Now, Kolanovic says that ending the lockdowns will continue to prop up US stock markets and send them higher. Obviously, both can’t be true.

Speculation is driving US stock markets for now, but when manic speculation stops providing a floor of support, the market will crash. Even if US stock markets eventually melt up due to massive inflation of the US dollar, history tells us that a crash is likely to precede the melt up. Why? As speculation dries up, and it always eventually does, this will cause the dormant risk inherent in the US stock market to suddenly manifest as if it came out nowhere even though it’s been there the entire time. Thus, the slew of “no one saw it coming” headlines that always follow stock market crashes, even though every single person declaring “no one saw it coming” never bothered to dig deep enough to find any clues and assessed the stock market’s future with superficial cues.  Any statements that US stock markets still have to rise much higher before they collapse demonstrate a profound lack of proper risk assessment. Even were US stock markets to rocket another 20% from here, which I do not believe will happen, such an outcome would merely be a symptom of a lengthening of the irrationality timeline versus proof of an ongoing sustainable economic recovery, a lie that is often forwarded along with the provision of artificially engineered key economic statistics by speculators to create a high-as-possible exit point for them.

Lastly, wishing for another 20% gain in the US S&P 500 from its current 4,230 status, as some have predicted, makes zero sense from an intellectual and a historical perspective. Intellectually, if the S&P rises above 5,075, this can occur only under two feasible scenarios: (1) massive speculation fuels the last 20% spike higher, a spike that will likely wipe out any apprehension about the US stock market and lure back into the market the very contingency of skeptics, at the worst possible time that can least afford losses in their portfolios, at a time that precedes an epic collapse; or (2) this continuing rise comes on the back of a heavily devaluing US dollar that quickly will devolve into a US stock market melt-up in which US dollar inflation heavily outpaces spectacular nominal gains (but spectacular real net losses) in US stock markets, much like what recently happened with the Caracas Stock Market Index (IBVC) and the Zimbabwe Industrial Index.

Historically, as national currencies heavily inflate and devalue, stock markets tend to experience a crash before a melt up. For example, prior to the German stock market melt up in 1923, the market crashed by 90% from 1918 to 1920 before bottoming at a 97% crash by 1922. The previously mentioned Zimbabwe Industrial Index crashed by 45% from 2014 to 2018 before melting up by 2,040% by 2020 and by 3,140% by May of 2021. Accompanying these two market melt ups were hyperinflations of the German mark and Zimbabwe dollar that are still highly misunderstood today. Economists and historians always mistakenly assign blame of historical hyperinflationary episodes to the bad intent of Central Bankers. While Central Bankers enforce the policies, often for decades, that lay the fertile ground to allow for hyperinflationary episodes, only the common people, not Central Bankers, have the power to trigger hyperinflation.

Though no standard definition of hyperinflation exists, hyperinflation is typically marked by a 50% or greater monthly inflation rate of the underlying currency which accelerates over time and eventually causes the currency to return to its intrinsic value of zero. Americans and all US dollar holders around the world could create a hyperinflationary US dollar event tomorrow if they wanted to do so. Though Central Bankers lay down the groundwork for hyperinflation to occur, hyperinflation is always triggered solely by the people’s rejection of acceptance of the currency for their goods and services. When a fiat currency is completely rejected by the people as legal tender for goods and services, this is when hyperinflation is triggered, and not a day before.

The trigger for hyperinflation is also why hyperinflationary periods, after long periods of significant inflation, sometimes appear “seemingly out of nowhere”, as a quick turning of the tide in public sentiment can precipitate hyperinflation at exceedingly rapid rates for which the majority of people are unprepared. Though most people with a modest academic background in economics studied the hyperinflationary period that happened in Weimer Republic Germany, post WWI, most are still unaware of how severe the hyperinflation of the German mark was despite viewing textbook photos of Germans burning billions of paper marks for warmth because it was cheaper to do so than buying wood. Most are unaware that German workers demanded payment from their employers three times a day, during morning hours after arriving at work, before their lunch break and at the end of the workday before departing the office, simply because they would take each payment and immediately go to the store to buy essential items like food, soap, toothpaste and so on because the prices of these items at the start of each day was far cheaper than their prices at the end of each day, so extreme was the hyperinflationary conditions they endured.

Of course, just as our politicians and bankers are lying to us today about inflation, German politicians and bankers also lied to their citizens in the early 1920s about real rates of inflation which is precisely why hyperinflation, when it happened, caught most Germans completely unprepared to deal with it. German Professor Julius Wolf stated in 1922, just a few months before hyperinflationary conditions were triggered in Germany: “In proportion to the need, less money circulates in Germany now than before the war. This statement may cause surprise, but it is correct. The circulation is now fifteen to twenty times that of pre-war days, whilst prices have risen forty to fifty times.” Apparently, Professor Wolf failed to take any critical thinking and logic classes as he contradicts his own conclusion that less money was in circulation in the German economy post-WWI than pre-WWI by immediately stating that the money in circulation post-WWI was fifteen to twenty times greater than during pre-WWI days.  Professor Wolf, a disciple of voodoo economics, declared German mark circulation had decreased significantly post-war after discrediting himself in the same statement, and that no self-respecting German citizen should worry about the hyperinflation that would arrive just a few months later.

Back then, the President of the German Reichsbank central bank, Rudolf Havenstein, also deceived German citizens of the coming hyperinflation by echoing Professor Wolf’s sentiments prior to the hyperinflationary period of 1923. Havenstein publicly denied that the Central Bank had significantly increased the supply of German marks in circulation and even though enough data existed to contradict this lie, the same modus operandus that still works today worked back then – just allow a person in an authoritative position (think Fauci today or the ongoing big media hype about UFO disclosures as proof of intelligent non-human life – it’s not) tell lie after lie after lie, and as long as the spineless media reports it as truth, the unthinking people will embrace all spoken lies as infallible truth.

Today, this same nonsense is happening as “journalists” in cahoots with bankers continue to blame rapidly soaring prices of food around the world on the rising costs of inputs for food production, as if trillions of Central Banker fiat currency creation in Euros, dollars, and yen since the 2008 global financial crisis have zero responsibility in the creation of rising input costs that have contributed to soaring food costs around the world (for the intellectually deficient, Central Banker responsibility for soaring food costs is enormous and the correlation direct). During the hyperinflationary Weimar Republic, in one year, the price of a loaf of bread soared from 160 marks in 1922 to 200 billion marks by 1923.

There are plenty of economists that state hyperinflation in the United States is impossible. Clearly these economists are delusional to not consider this possibility. The creation of US dollars since 2008 by Fed Reserve bankers have already created the fertile conditions necessary to cause a complete loss of confidence in the US dollar worldwide and inside America, which is precisely the trigger for hyperinflationary conditions, especially if another global economic power introduces a currency backed by gold. More than eight years ago, Boston University professor Laurence Kotlikoff calculated the fiscal gap between all projected official government serviceable debt and projected collected taxes, using the projections of the US Congressional Budget Office, and determined that this calculation of $222 trillion was the real US government debt amount. Of course with a fiscal gap of what is surely much greater than $222 trillion in 2021, eight years later, this ensures that the only possible manner by which the US government will not default on its debt obligations, including paying off US treasury debt, is to create trillions of excess dollars out of thin air to service this otherwise unpayable debt amount. This all but ensures that US Central Bankers will keep the grounds fertile for USD hyperinflation scenarios for many years to come.

How quickly we completely forget the 2015 six-sigma “impossible” statistical event that happened with Swiss franc: Euro forex rates, with the Swiss franc strengthening by 33% in just hours versus the Euro, precisely because of the of the Swiss franc. By mandate of the Swiss constitution, the Swiss franc was officially backed 40% by gold, and then lowered to 25% in 1997. Between 2000 and 2005, the Swiss National Bank (SNB) sold off 1,300 metric tonnes of its gold and in 2007 and 2008 it sold an additional 250 tonnes, decreasing its total gold holdings from 2,590 tonnes to just 1,040 tonnes. In 2014 the people introduced a referendum that attempted to restore unofficial backing of the Swiss franc with gold by mandating the Swiss National Bank hold 20% of all assets in gold, but the referendum failed. Even, despite the significant gold selling between 2000 and 2008, many still viewed the Swiss franc as unofficially backed by gold due to its long history of being backed by gold. Thus, when the cap of Swiss franc strength to the Euro was removed in 2015, the historical perception of the Swiss franc as one of the strongest currencies in the world caused it to extraordinarily soar against the Euro.

Even today, the collapsing velocity of M2 money stock is oversold as the reason why USD hyperinflation can never occur. Imagine now, if a nation in the future, unofficially backs its currency with gold through similar constitutional laws. It is easy to understand the massive volatility in that currency’s exchange rates with the US dollar that would occur under such circumstances and the negative effect such an announcement would have on US dollar purchasing power. To say such an event could never happen and that US dollar hyperinflation as a consequence is impossible is therefore, a declaration of utter foolishness. If such a scenario developed, the monetary velocity of the USD inside America would be irrelevant to the world’s loss of confidence in the USD and a potential hyperinflationary collapse. In global currency wars, anything is possible. The only unwavering constant, given the reviewed history above, is that Central Bankers will always tell us the complete opposite accounting of truth and the steps we must take to protect our wealth from complete collapse in the event of a hyperinflationary event.

How Will A 15% Global Minimum Tax Impact S&P500 Earnings?

by Tyler Durden

Tuesday, Jun 08, 2021 – 01:59 PM

Now that it’s confirmed that G7 officials are seeking to enacted a global minimum tax rate of at least 15% (which however is unlikely to be uniformly implemented, and may not even pass in the US where Reuters reports that Senate Republicans have rejected Janet Yellen’s G7 deal), the question on investors’ minds is what impact will such a policy – if ever implemented – will have on corporate earnings.

Answering this question, Goldman’s Ben Snider estimates that such a policy would have a small aggregate impact on S&P 500 earnings, noting that “the direct impact of a 15% global minimum tax on US corporate profits would depend on which other tax reforms, if any, become legislation later this year.” The tax plans proposed by President Biden even prior to his 2020 election included a15% minimum book tax for US companies along with hikes to the tax rates on both domestic and foreign income

Specifically, Snider says that in his estimates a 15% minimum tax – in the context of a larger tax plan – would represent a headwind of less than 1% toS&P 500 earnings. To be sure, a minimum tax rate would have a larger impact absent other tax reforms, especially if implemented on a country-by-country basis as suggested by the G7 agreement. However, Goldman estimates that a 15% global minimum tax rate would represent downside of just 1%-2% relative to current consensus S&P500 2022 EPS estimates. There are some exceptions: drilling down within the US equity market, Goldman cautions that industries with low current effective tax rates and high foreign income exposure face the greatest risk. At the sector level, InfoTech and Health Care would face the greatest earnings risk, but even those sectors appear to face aggregate downside of less than 5% relative to current consensus estimates

So if one wishes to short any particular sector as a hedge to the latest G7 tax policy, the best bet would be to focus on semiconductors, which account for the largest number of S&P 500 stocks with consensus effective tax rates below 15%. The table below shows 41 S&P 500 companies with 2019 and consensus 2022 and 2023 effective tax rates all below 15%. The overwhelming majority of these companies have reported greater than 50% foreign income exposure in recent years.

Nobody Works as Gov. gives such unemployment benefits

Job Openings Soar To All Time High 9.3 Million As Record Numbers Quit Their Job

Tyler Durden's Photoby Tyler Durden

Tuesday, Jun 08, 2021 – 10:24 AM

In case we needed more proof that the US labor market is in a historic supply-demand mismatch crisis sparked by Biden’s generous unemployment benefits, a few hours after the latest NFIB showed that it has never been more difficult for small business to fill job openings, moments ago the BLS confirmed what we expected: that the number of job openings in March (recall JOLTS is one month delayed) soared by a record 998K to 9.286MM in April from an upward revised 8.288MM in march, and the highest in the history of US jobs data!

The record number was also a record beat to the already lofty expectations of a 8.2 million print.

Looking at the details, the increase in job openings was driven by a number of industries with the largest increases in accommodation and food services (+349,000), other services (+115,000), and durable goods manufacturing (+78,000). The number of job openings decreased in educational services (-23,000) and in mining and logging (-8,000). The number of job openings increased in all four regions

Separately, in yet another indication of the record surge in demand for labor since the collapse last April when there were 18.1 million more unemployed workers than there are job openings – the biggest gap on record – the gap has since shrunk dramatically to just 526K in April, down from 1.4 million in March. Yes: despite the covid shock, there are just half a million more unemployed people than there are job openings!

As a result, there has been even more continued improvement in the job availability series, and in April there were jus 1.06 unemployed workers for every job opening, down from 1.19 in March, down from 1.35 in February and from 4.6 at the peak crisis moment last April.

Meanwhile, confirming the accelerating in the hiring picture as covid lockdowns were lifted, in April hiring surged for a 4th consecutive month to 6.075MM, up from 6.009MM in March.

According to the BLS, hires increased in accommodation and food services (+232,000) and in federal government (+10,000). Hires decreased in construction (-107,000), durable goods manufacturing (-37,000), and educational services (-32,000).

Curiously, as hires soared, total separations also increased to 5.8 million (+324,000). The total separations rate was little changed at 4.0 percent. The total separations level increased in retail trade (+116,000) and in transportation, warehousing, and utilities (+60,000).

Finally, confirming the overheating in the labor market sparked by “Biden’s trillions” and the tsunami of unemployment benefits which has prompted a wave of revulsion toward work in general, in April the level of quits – or people leaving their job voluntarily due to better prospects elsewhere – soared by a whopping 384K to a record 3.985 million, after rising by 185K and 77K in the previous two months. The number of quits increased in a number of industries with the largest increases in retail trade (+106,000), professional and business services (+94,000), and transportation, warehousing, and utilities (+49,000).

Why Nation-States Will Die-Off in the Information Age

TDB's PhotoSunday, Jun 06, 2021 – 14:13

by Joe Jarvis via The Daily Bell

When was the fall of the Roman Empire? Was it in 410 when the Visigoths sacked Rome, or 455 when the Vandals plundered Rome? Or was it 476, when the last western Roman Emperor was deposed?

Whatever the answer, the people alive on the ground at the time surely did not wake up to a headline saying: “Rome has fallen, commence medieval barbarianism.”

Only later did historians pinpoint certain dates.

It’s possible, therefore, that we are already past the date that will be considered the fall of the American Empire.

Perhaps historians will look back and say that September 11, 2001 marks the sacking of the American Empire. Not because the Twin Towers fell, but because that’s the day rule of law and due process came crashing down as well.

History may shed more light on the silent coup that occurred behind the scenes, which shifted the US governing structure to a relative dictatorship.

Yes, just like in Rome, the appearances carried on. The Senate still passed bills, and the courts still nominally gave fair trials. But the great erosion hit a turning point. From there on out, due process was not required to assassinate enemies of the US, to spy on “potential terrorists”, and even to confiscate property using civil asset forfeiture.

Or perhaps the CIA already took over as dictators in 1963 with the assassination of the last truly elected US President, John F. Kennedy.

Maybe the fall of the American Empire will be seen in terms of the destruction of the US dollar. The 1913 creation of the Federal Reserve, the 1933 debasement of the gold backed currency, and the 1971 total removal of the gold standard from the US dollar are all part of slow downfall.

These are the events which allowed the barbarians who invaded the US government to loot the treasury  culminating in this, perhaps final stage of vast money printing.

It may be more obvious, in hindsight, that the US government is currently only a shell, serving as a vehicle for barbarians to loot the corpse of a once great empire.

Some people think that the American Empire will simply be replaced by the next globally dominant superpower. And of course there are concerns that China is next in line to dominate the globe, as I discuss in another video on how China used Covid to play Western civilization.

But more likely is the death of all nation states, as we transition out of the industrial age, and into the information age.

I’m going to explain what I mean, but first a quick note– one short video will never do these concepts justice. So if you’re interested in this subject please subscribe and hit the notification bell. That way you will receive a slow drip of content like this that will help you transition smoothly into this new age, at this really exciting time to be alive.

Back to the point–  let me explain why the industrial age was characterized by large nation states.

See, the nation state is more than just a country or a government– those have existed for thousands of years. The nation state aims to bind massive numbers of people in a territory together with myths of common cause, culture, and patriotism. This allows a single government to extract much more revenue and build much bigger armies. And this large scale government rose with the industrial era, because countries required large scale armies to defend the industrial production in a given area.

The scale provided by nation states allowed industry to invest and grow in areas that were relatively safe from plunder and destruction by barbarians or rival countries. Since a factory can’t so easily pick up and move, it needs a stable environment and protection in order to make the large capital investment worth the risk. Therefore, powerful nation states attracted more industry, and thus became richer in the process. Less stable regions, with smaller governments unable to protect their capital did not become as wealthy.

But that situation is rapidly changing as wealth becomes less about material production, and more about information technology, and human capital. These things are extremely mobile, and not very susceptible to plunder. They therefore do NOT require a massive nation states to justify investments.

And for this reason, we are witnessing, in real time, the fall of the nation state. But again, when you are so close to such a major global shift, it’s hard to pinpoint exactly what is happening.

The end of the industrial age won’t be obvious, and only in the future will historians look back and try to pinpoint a day or year that the world transitioned into the age of information.

One great candidate for the fall of the nation state would be November 9, 1989 with the fall of the Berlin Wall. This heralded the demise of the Soviet Union– a massive nation state which tried to bind citizens of various countries and culture together under patriotism for the socialist cause.

1989 is also a great year to mark the end of the industrial era because it is the year that the World Wide Web was invented, marking the beginning of all the massive changes that would come to the world through the internet, and mass communication.

Also 1989 was the year I was born, so I like to think of myself as yet another herald for the glorious death of the nation state.

We have been in the industrial era since the end of the feudal age. If we want to pick a nice clean date, we might pinpoint 1492 as the major shift, with Columbus’ exploration being an early sign of nation states competing for industrial capital.

As the Renaissance bloomed the power of the Catholic Church faded, and a new myth was required to bind the people to their governments.

The nation-state replaced feudal chivalry with nationalist citizenship. Knights, inspired by chivalry, loyal to their Lords were replaced by soldiers, inspired by patriotism, loyal to mother nation.

But now those myths hold less and less power. People, companies, and capital are more mobile than ever, and frequently shop around for the best jurisdictions in which to live, work, and run a business.

Smaller countries and city-states are actually better positioned than nation states to take advantage of this– without the need for massive military and government spending, they can offer government services as a product, based on the actual cost.

There are already a number of signs of the transition to government as a service provider, such as Caribbean nations selling citizenship through investment, Estonia selling e-citizenship, places like the country Georgia, Panama, Portugal and so many others offering competitive tax rates to attract residents and business.

Of course it may seem like these small nations will be threatened by massive governments with huge armies that could take over, sort of like what has happened with China and Hong Kong. And this is still a threat. The dying nation state will not go out without a fight. They will fight to preserve their power in a changing world. They’ll exploit crises like pandemics and terrorism to make it seem like we still need the nation state.

But these efforts will inevitably fail, because nation states can no longer grow rich through conquest and plunder.

It’s easy to move vast wealth when it is all in information technology, and the human mind, capable of working from anywhere in the world, connected via the internet. The need for large governments and armies to protect the capital is fading, because the ability of large governments and armies to take the capital is fading.

And competition among a hopefully growing number of countries will make it so that no government can charge more than a market rate for their services.

No more paying 50% of your income to receive some basic subpar services– the price will be based on product, with plenty of jurisdictions offering a la carte government services.

New models of governance will mean government is no longer characterized by involuntary monopolization on land and force.

Instead we will see, Free Private Cities where you sign a contract with the government, virtual governments which behave similar to insurance companies, distributed governments which do not require their citizens to all be located in the same geographic area, and so much more innovation in how societies will be governed.

That said plenty of people will be left behind by these great new forms of government, because they simply will refuse to believe that Rome has collapsed. Shells of nation-states will remain, offering the worst conditions for the price. But even these may be forced to adapt if only to compete with the new much better forms of governance.

This doesn’t mean you can simply ignore the dying nation-states– they may be more dangerous than ever at this stage. They have the capacity for violence, without much restraint.

This does pose a bit of a balancing act for the sovereign individual.

We have to at the same time make sure we do not become targets of the dying nation state’s wrath, without letting its rules hold us back from participating in the dawning of a new age.

There are still enough legal avenues to participate in the new era of humanity that we don’t have to poke the nation-state and risk our own lives and freedom.

Pay as little taxes as legally possibly, find the best jurisdiction, and diversify so you can safely weather the storm.We’re living in extremely interesting times, with the promise of individual freedom never before afforded to individuals.

Again this is a huge subject so definitely subscribe, hit the bell so you’re notified, and join my email list in case YouTube deletes me in it’s attempts to keep the nation state on life support for a little longer.

Also you might consider reading the book, The Sovereign Individual: Mastering the Transition to the Information Age, (Amazon affiliate link) on which most of this video was based. It’s really fascinating one because it’s about 20 years old and has already accurately predicted a lot, and two because it goes into a deep dive on all this information to help us understand and better navigate this changing world.

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