No, No, No, No, No, No, No, No, No, NO!

By Michael Every of Rabobank

It would be so easy at the start of a week like this to just convey to readers that X went up y% on Friday, and A went down b%, and add a schedule for what data will be released today. That might well be what you are looking for – in which case, you are in the wrong place. This Daily says NO to that kind of thing! That’s because lots of others say no to lots of other things.


We got another strong US (and Canadian) payrolls report on Friday. This week also sees US CPI, where there is a good risk the print comes in hotter than consensus yet again. Yes, there are real questions about the reliability of both of these data sets, but can we please drop the endless attempts to self-servingly sell an imminent Fed pivot?

Yet I suspect we will still get more pivot messaging – from the Fed itself, or parts of it. If you think ‘pro-MMT’ Brainard, pro-Wall Street others, and ‘New Volcker’ Powell see eye to eye on Fed Funds going over 5%, as is entirely possible if we get hot CPI on top of hot payrolls, then you don’t understand the real world. “A split in the Fed? A politicized Fed? A Fed backing special interests? Surely not!” Yes, this is how central banks operate, especially under duress. The BOE Governor last week had to appear on TV and underline he hadn’t helped carry out a coup vs. his own prime minister(!), ironically demonstrating the extent to which DM now act like EM, and that, as in EM, nothing is considered true until it has been officially denied.


Friday saw wild trading and sharp drop in the dollar despite payrolls due to rumours China would soon reopen. This was based on one report from a retired Chinese health official and an anonymous screen shot. People who know something about China were deeply sceptical. And lo and behold, China held a press conference on Saturday and shot down the idea of an end to Covid Zero. That also shoots down the recent bullish trend, and the credibility of many ‘China watchers’; and it shows how susceptible fools are to shills. I also reiterate if China reopens in 2023, then we will get a huge surge in supply-side inflation – in which case the Fed is hiking even more.


A flurry of economic news over the weekend makes the complete opposite case to China bulls. PBOC Vie-Governor Fan Yifei is under serious disciplinary investigation, which alongside rumours that Governor Yi Gang may soon step down too, would underline Western-trained/friendly technocrats are being replaced. China is reviving its pre-reform state sales and marketing co-operatives. Beijing will establish new central SOEs to service its strategic goals, including in international trade, linking upstream to downstream, and by implication the private sector too. Moreover, the CCP insists “Celebrities should consciously practice socialist core values in their advertising endorsements; activities should confirm to social morals and traditional virtues.” Relatedly, Xi stated: “We need to educate people, especially the youths… that China’s socialism is won by hard work, struggles, and even sacrifice of lives. This was not only true in the past but also true in the new era.”

Even October trade data were weak: imports were -0.7% y-o-y and exports -0.3% to boot.


Military build-up needed to protect China’s overseas interests, officials say’, as the Chinse constitution is revised to insist that the country holds world class armed forces. At the same time, the Washington Post quotes “an American who knows the Chinese leadership well” saying Xi is convinced China and the US are heading towards war. From the US side, its nuclear forces chief says Ukraine is ‘just the warmup’ for a larger crisis; “The big one is coming, and it isn’t going to be very long before we’re going to get tested in ways that we haven’t been tested a long time.”

In Ukraine, Pepe Escobar –a serious analyst in the same manner as Lord Haw-Haw, but a useful an indicator for that– is now shrilling Russia will be forced to move against Odessa by Spring. Which is when the bulls say China will open up: which would rather push commodity prices up; and so Fed Funds. There are also whispers that the US wants Zelensky to negotiate.

Serious US strategists underline that due to military scarcity there needs to be an imminent withdrawal of US forces from Europe and reallocation to the Indo-Pacific, with Europe stepping up to the task at hand. Which the comfortable Western part patting itself on the back that climate change has tempered its energy crisis so far refuses to do; and as German industry needed to do so decamps abroad – including to China; and as Chancellor Scholz pens an op-ed saying Berlin will adapt to a multipolar world, rather than openly supporting the US-backed order it has flourished under. (Meaning sell cars to all sides?)


Pentagon acquisition chief Bill LaPlante now says Ukraine has helped him understand what really matters: “Production.” That is GDP by supply, not GDP by demand: commodities, industry, and logistics, not services and finance. Who knew?

“We as a country did our best to not do production. We all accepted that just in time was the way to go. That is why the US cannot produce Stinger missiles fast enough: production was shut down in 2008… I challenge all of you to ask about that if somebody give you a really cool liquored up story… – ask them when it’s entering production, ask them about numbers… is it going to work well against China? Don’t tell me it’s got AI and quantum, I don’t care…. The sausage making is still going on…. we need to do multiyear procurements for munitions.” He adds that NATO standards don’t get to the point of “interchangeable,” and an industry executive told him that they would have to force companies to do so because it makes firms less competitive.

I have stressed for some time that you won’t see Western firms forced to do things by the likes of Jeremy Corbyn or Bernie Sanders, but you will by guys like LaPlante, who concludes: “The tech bros aren’t helping us too much.” On which…


US payrolls didn’t show it, but up to 1/2 of all the well-paid roles at Twitter are apparently going. (And Meta is following the lead; and others will follow.) This matters, and not just for another stab at the Fed pivot play.

Twitter is the modern Town Square for the Western elite. It’s now been bought by one of their own, who says he will back free speech and make ‘blue tick’ status something anyone can buy rather than earn by propagating the ‘right message’. As a result, corporate advertisers are walking away. The same corporations who deal with noxious global regimes are not prepared to associate with a platform sticking to the US First Amendment right to free speech. Even the UN High Commissioner for Human Rights has stepped in(!) Elon, clearly nobody in power is in favour of free speech; or of free markets; or even free trade if they are the net importer; but they are all interested in free money, which Twitter can no longer rely on.


Tomorrow is the US midterm elections. Market analysts who think reading gives them political insight, or that polling firms are not as biased as central banks, are waking up to the fact that the Blue bounce in the summer was a mirage and that Republicans are likely to see a Red Tsunami that wipes out the Democrats’ House majority and 50-50 Senate tie. It would also strongly suggest a strong Red base for a presidential win in 2024 with an even larger Congressional majority… and, yes, led by Donald Trump, as potential rivals already start to drop out, and shots are taken across the bows of others.

The implications of this week’s election will be manifold, even if hysterical claims about the end of democracy look as tragicomically wide of the mark as they are with Twitter. They include that President Biden may become a lame (and impeached?) duck that will only leave him foreign policy to focus on for two years. What that implies against the current geopolitical backdrop, and his recent claim that he wishes to see the people of Iran “freed”, is anyone’s guess. We are also likely to see a continued US trend towards populism, and industrial policy, and neo-mercantilism.

What might this mean for fiscal and monetary policy as interest payments on federal debt soars, but the need for an even more powerful military does in tandem? What you are thinking is probably wrong if you try to frame things in a traditional manner.


To summarise the state of flux we are all in, the Financial Times points to the appeal of neo-Marxism in Japan under the new label of “degrowth”; alongside neo-Marxism in China (which may also mean low growth). It also carries a remarkable op-ed from Jajan Ganesh calling for an end to intra-elite sniping –pointing to Rishi Sunak having a go at cosmopolitan “North London”– because if the mob comes, it won’t be able to differentiate between liberal, rich North and conservative, rich West London. He concludes, “There is a non-trivial chance of civil unrest against the haves in the coming years. How sweet to think that you will be spared because you are merely rich, rather than rich and interesting.” And this is in the FT, not the Morning Star!


COP27 is taking place in Sham el-Chic. Some fossil fuel fans are skipping. The government leaders who are there are burning more fossil fuels than ever. And Greta is trying to get rich from her book telling us how we need to destroy capitalism.


I am not going to tell you exactly what to buy or sell against this slide into metacrisis, just as I am not going to tell you exactly what went up or down. What I can point out is that there are no easy answers and no easy trades anymore. Anyone who tells you otherwise needs to be told “NO!”

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