God Dead Suck It Up and Continue on
- We hardly knew ye, chancellor of the Exchequer
- Europe's energy crisis is inescapable
- Desperate times call for desperate measures (Poland)
- Veteran German politician: Stop your "jammern"!
- A Texas roofer is arrested by "Florida Man."
— "We saw the U.K. hit an air pocket… with the announcement of a new budget," says Paradigm's macro authority Jim Rickards.
Since? "The whole world," he says, has been "beating up on new Prime Minister Liz Truss — from the ECB and Christine Lagarde to the IMF and Paul Krugman.
"When I see all these institutions on one side of an issue," says Jim, "I feel pretty safe on the other side [of the argument] because that's a crowd that's usually wrong about everything."
And although he has "strong disagreements with [Truss'] foreign policy," Jim favors "cutting taxes and reducing other constraints… given the headwinds that the U.K. is facing," he says.
"I was probably the only person in the world, other than new Prime Minister Liz Truss and her chancellor of the Exchequer, saying that the budget was the right budget at the right time."
Umm, make that former chancellor of the Exchequer…
"You have asked me to stand aside as your chancellor. I have accepted," said Kwasi Kwarteng in a letter to PM Truss on Friday afternoon.
Kwarteng wasn't the only one sacked, however…
There's been a general "clearout" of the Treasury not too long after "the 'mini' budget quickly turned into an economic and political disaster," says a Financial Times article, while noting "the tax cuts were very much Truss' policies and featured prominently in her Tory leadership campaign."
According to Jim: "I think Truss got it right from a policy perspective, but the markets took it really badly. Sterling crashed, gilts (benchmark U.K. government bonds) crashed — meaning rates went up — the stock market crashed."
The FT's update: "Government bonds… have already staged a recovery from the lows of the week as markets increasingly anticipate a U-turn on the tax cuts.
"However, a Bank of England emergency bond-buying program to shore up gilt-exposed pension funds expires [today], with investors concerned that if the government does not roll back its tax proposals, more turbulence could follow."
We'll see how events play out in the U.K., but elsewhere in Europe…
Right now, the energy crisis is inescapable. "I know it's early October, but it's already getting cold in Europe," Jim says, which could "be in for a very cold winter… The early signs are that's exactly what's happening."
Poland: By late summer, "Poles [were] sleeping in their cars for days on end," lining up at coal mines, "to haul coal back to their houses because they think they're going to freeze this winter," Jim says.
To wit, 35% of Polish homes still heat their homes using coal; at the same time, about 80% of Poland's electricity is coal-fire generated. "In 2021," Reuters adds, "Poland imported 12 million tonnes of coal, of which 8 million tonnes came from Russia."
Now, to alleviate the massive coal crunch, the Polish government is doing something very un-green… something brown, in fact. "Poland has suspended a ban on use of lignite" — often referred to as brown coal — "for heating homes until April of next year," says Reuters.
And Bloomberg reports Poles have resorted to other measures…
"It's scary to think what happens when it really gets cold," says a Polish 35-year-old mother of three. While a 57-year-old retiree says: "I remember the communist times but it didn't cross my mind that we could return to something even worse."
Czech Republic: "There are pretty intense demonstrations in Prague," says Jim.
"Tens of thousands of people filled Prague's iconic Wenceslas Square on Sept. 28 to demand help from the government amid an energy crisis that has sent household bills skyrocketing," says an article at Foreign Policy.
But demonstrations have organized around larger ideals than simply demanding lower energy bills…
Nevertheless, the way left-leaning Foreign Policy frames it: "The region's support for Ukraine is caving under the pressure of soaring bills." Again with the bills…
"Senior Czech officials, such as Parliament Speaker Marketa Pekarova Adamova… are warning that Russian President Vladimir Putin is using his leverage over Europe's energy supply to create panic and test the resolve of the population."
Back to the protesters: "Their fears are being exploited by extremist fringe political forces that called for an end to the Czech Republic's support for Ukraine and for talks with Russia to resume gas deliveries."
So it's extremist to worry that you and your family might freeze to death this winter? Or fringe to seek the welfare of your homeland? Firebrands and radicals!
As Parliament Speaker Adamova suggested, in order to support the war effort in Ukraine, citizens should just turn the "heat down and put on a sweater." And Europe's powerhouse is riffing on the same theme…
Germany: "Saying Germany is going to have a severe economic contraction is an understatement," Jim says. Germans will be lucky, he says, "to keep even some lights on in homes and [push] thermostats as high as 50 degrees Fahrenheit."
But that's not stopping Germany's control freaks and power trippers from calling (jammern?) for even more wartime sacrifices…
Schäuble: Stop your "jammern"!
We'll see how octogenarian Herr Schäuble fares with his home's thermostat stuck at 50 degrees Fahrenheit. (But we're not holding our breath.)
"Then of course Germany is the fourth-largest economy in the world," says Jim, and if they can't spare any energy for home use, the country will have to "shut down its manufacturing.
"You shut down manufacturing," says Jim, "and not only are you depriving the rest of the world of finished goods, you're sinking the German economy, since much of the country's GDP is pegged to net exports."
Jim concludes: "It's amazing how Ukraine is the black hole at the center of this geopolitical universe, but it's sucking all the economic growth out of the West," he says. "You're looking at social unrest, political turmoil, economic collapse — all coming out of this Ukrainian situation."
[Editorial note: In between war, sanctions, inflation and rate hikes, it seems today's market is bouncing from one extreme shock to the next.
But according to Jim Rickards — former adviser to the White House, Congress and the U.S. intelligence community — what's right around the corner could be much bigger.
And Jim says if you aren't prepared for what's coming, then your portfolio could get blindsided (again). But if you know what to do, you could flip the next financial crisis into an opportunity.
Bottom line? Take a few minutes to watch Jim's urgent briefing now… before the next market shock catches your portfolio unawares.]
To the market where all three major U.S. stock indexes are struggling in the red. The tech-heavy Nasdaq is doing the worst of the three, down 2.4% to 10,395 while the S&P 500 is down 1.85% to 3,600. At the same time, the Dow has shed 1% to 29,730.
- Earnings season is underway with a beat by JPM and a miss by MS. Even JPM's "beat" was hardly great; analysts expected earnings to drop 22% for the third quarter. Instead? Earnings dropped 16%. But Morgan Stanley's expected revenue dropped 12% versus the 10% analysts anticipated
- Move over Walmart: Grocery-store chain Kroger wants to buy a percentage of its rival Albertsons stores for almost $25 billion, leaving a number of Albertsons to operate as a separate entity. This to avoid antitrust regulators, we presume
- Retail sales were virtually flat in September — in contrast with expectations for a 0.3% gain — while the August figure was revised slightly upward to 0.4%. "September retail sales confirm that even with rising interest rates, persistent inflation, political uncertainty and volatile global markets, consumers are spending for household priorities," says the National Retail Federation's CEO Matthew Shay. Spending for household priorities, sure, but we'll see how the NRF's outlook changes as we move into the holiday shopping season.
Checking on commodities, we're also seeing a lot of red with oil down 4% to $85.44 for a barrel of West Texas Intermediate. Precious metals? Gold is down 1.8% to $1,647.50 per ounce, and silver is down 4% to a desultory $18.
As for the crypto market, Bitcoin's taking a breather at $19,365, but Ethereum is up about 1.55% to $1,300.
From the "no good deed goes unpunished" file, after Hurricane Ian ripped through Florida late last month, a Texas roofer thought he might be in a position to help. Or so he thought…
Since 2008, Terence Duque has operated a successful roofing business in Texas; specializing in both commercial and residential construction, Mr. Duque has "an A-plus rating from the Better Business Bureau and has been named a 'preferred contractor' by national roofing supply company Owens Corning," says an article at Reason.
"In the wake of Ian… as cleaning up and repairing the storm's damage will take months, if not years," the article notes, "Duque thought he could help by offering his services to homeowners with damaged roofs in Charlotte County, near where the brunt of the storm hit."
Instead, after being tipped off by Florida's Department of Business and Professional Regulation (DBPR), the Charlotte County Sheriff's Office arrested Duque for "conducting business in Charlotte County without a Florida license."
Mr. Duque says he believed he was allowed to conduct business in the state post-hurricane due to Gov. DeSantis lifting licensing requirements. Duque has since been disabused of this commonsensical notion.
"If charged as a felony, [the offense] could carry up to five years in prison under Florida law — although it's possible that Duque could be charged with only a misdemeanor offense that carries a mere one year of jail time."
Florida's licensing requirements, meanwhile, are notoriously stringent and expensive — taking up to four years to obtain a construction license, in some instances. Which might protect consumers during normal times, but waiving these restrictions "would give consumers more choices (and possibly lower prices)… in [emergency] situations," says Reason.
Nevertheless, Charlotte County Sheriff Bill Prummell says of criminal mastermind Duque's arrest: "These people have been through enough, and I will not allow unlicensed contractors to further victimize them."
Indeed, haven't Floridians been through enough?
Take care, enjoy the weekend… and we'll be back with more of The 5 on Monday.
Best regards,
Emily Clancy
The 5 Min. Forecast
Source: https://5minforecast.com/2022/10/14/suck-it-up-and-double-sweater/
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