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Larry Summers Says Fed Will Need to Boost Rates More Than Markets Expect(Bloomberg) -- Former Treasury Secretary Lawrence Summers warned that the Federal Reserve will probably need to raise interest rates more than markets are currently expecting, thanks to stubbornly high inflationary pressures.“We have a long way to go to get inflation down” to the Fed’s target, Summers told Bloomberg Television’s “Wall Street Week” with David Westin. As for Fed policymakers, “I suspect they’re going to need more increases in interest rates than the market is now judging or than they’re now saying.”Interest-rate futures suggest traders expect the Fed to raise rates to about 5% by May 2023, compared with the current target range of 3.75% to 4%. Economists expect a 50-basis point increase at the Dec. 13-14 policy meeting, when Fed officials are also scheduled to release fresh projections for the key rate.“Six is certainly a scenario we can write,” Summers said with regard to the peak percentage rate for the Fed’s benchmark. “And that tells me that five is not a good best-guess.”Summers was speaking hours after the latest US monthly jobs report showed an unexpected jump in average hourly earnings gains. He said those figures showcased continuing strong price pressures in the economy.“For my money, the best single measure of core underlying inflation is to look at wages,” said Summers, a Harvard University professor and paid contributor to Bloomberg Television. “My sense is that inflation is going to be a little more sustained than what people are looking for.”Average hourly earnings rose 0.6% in November in a broad-based gain that was the biggest since January, and were up 5.1% from a year earlier. Wages for production and nonsupervisory workers climbed 0.7% from the prior month, the most in almost a year.While a number of US indicators have suggested limited impact so far from the Fed’s tightening campaign, Summers cautioned that change tends to occur suddenly.“There are all these mechanisms that kick in,” he said. “At a certain point, consumers run out of their savings and then you have a Wile E. Coyote kind of moment,” he said in reference to the cartoon character that falls off a cliff.In the housing market, there tends to be a sudden rush of sellers putting their properties on the market when prices start to drop, he said. And “at a certain point, you see credit drying up,” forcing repayment problems, he added.“Once you get into a negative situation, there’s an avalanche aspect-- and I think we have a real risk that that’s going to happen at some point” for the US economy, Summers said. “I don’t know when it’s going to come,” he said of a downturn. “But when it kicks in, I suspect it’ll be fairly forceful.” Inflation TargetThe former Treasury chief also warned that “this is going to be a relatively high-interest-rate recession, not like the low-interest-rate recessions we’ve seen in the past.”Summers reiterated that he didn’t think the Fed ought to change its inflation target to, say, 3%, from the current 2% -- in part because of potential credibility issues after having allowed inflation to surge so high the past two years.
Pero la nave europea ya iba mal por un conjunto de circunstancias muy anteriores a esta contienda. Una señal de cómo de “tocada” iba la UE es el informe de la Oficina Mundial de la Propiedad Intelectual de la ONU sobre generación de nuevas patentes y registros de propiedad intelectual. En dicho informe, que durante la pandemia pasó silenciosamente por nuestros medios de comunicación, la UE, con el 5.6% de las solicitudes mundiales de registro, aparece detrás de Corea del Sur con su notable 6.7%. Por delante de Corea estaban Japón, 10%, los EEUU, 19.5%, y China con el 41%. No es la única señal de deterioro pero es muy grave que en una de nuestras históricas fortalezas –éramos líderes mundiales hace ochenta años-- nos encontremos hoy por detrás de un pequeño país como Corea con apenas cincuenta millones de habitantes. Hablando de amenazas existenciales para Europa, esta pérdida de ventaja en la producción intelectual es la más grave, duradera y difícil de revertir.
La misma gente que ha deslocalizado nuestra industria, la misma gente que al imposibilitar la permanencia de lo que era nuestra industria, nos lleva del ronzal a "invertir" en viviendas.
Britain Is Near Bottom of the Heap for Economic Growth Potential*Former BOE official says dip explains high UK tax burden*Labor shortages behind steep collapse in growth ‘speed limit’Britain’s growth potential has fallen behind every large economy except Mexico due to collapsing productivity and severe labor market shortages, according to former Bank of England rate-setter Michael Saunders.Saunders, who finished his term at the UK central bank in August and is now senior economic adviser at Oxford Economics, said his analysis of 43 country forecasts by the Organization for Economic Cooperation and Development showed the UK’s economic “speed limit” will be the second lowest in the group for the period from 2020 to 2024.Potential output, a mixture of productivity and workforce growth, is a measure of how fast an economy can expand before generating inflation. The findings suggest little hope that Prime Minister Rishi Sunak’s government can escape economic stagnation and inflation that are delivering the sharpest squeeze on consumers in memory.“Low potential growth implies low growth in real living standards,” Saunders wrote in a note. “It also implies a sluggish trend in growth of tax revenues and meager growth in real public spending per head or a rising tax burden.”Saunders said the UK will manage an expansion of only 0.5% annually over the four years to 2024. On a per person basis, the Bank of England’s recent forecasts suggest potential output will not grow at all between 2019 and 2025, he added.The dismal picture helps explain why the UK faces a sharp squeeze on household incomes and the highest sustained tax burden since the Second World War.Britain was “roughly in the middle of the pack” of the 43 OECD nations for potential growth between 2010 and 2019, Saunders said. But a steep decline in labor market participation since the pandemic has hit the UK hard. Alongside persistently weak productivity, the workforce is now shrinking as older workers retire early and others drop out with long term illness.The UK workforce is 1% smaller than at the end of 2019 and 3% smaller than it would have been on past trends, the worst collapse in participation of any leading economy. Saunders warned the picture may not improve.“Unless offset by persistently high inward migration, adverse demographics driven by population aging are likely to further limit workforce growth in the coming years,” he said.“Even with a pickup in the next two years, we expect UK workforce growth will slow from an average of 0.8% year on year during 2010-2019 to around zero year-on-year on average in 2020-2024, among the lowest of any industrial country and well below workforce growth in the US and Euro Area.”To help tackle the problem, he called for measures to address the rise in long-term sickness through cutting NHS waiting lists, which have risen above 5 million.
Fed Chair Powell: U.S. ‘housing bubble’ formed during the pandemic and now ‘the housing market will go through the other side of that’(...) On Tuesday, the most powerful economist in the world did just that: Speaking at a Brookings Institute event, Fed Chair Jerome Powell told the audience that the run-up in home prices during the Pandemic Housing Boom qualifies a “housing bubble.”“Coming out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a housing bubble, you had housing prices going up [at] very unsustainable levels and overheating and that kind of thing. So, now the housing market will go through the other side of that and hopefully come out in a better place between supply and demand,” Powell said.According to past statements by Powell, that process of bringing “balance” to the U.S. housing market has already begun. In June, Powell said spiked mortgage rates would help to “reset” the U.S. housing market. Then in September, Powell told reporters that we had officially entered into a “difficult [housing] correction” that would restore “balance” to the market.That “bubble” acknowledgment by Powell comes on the heels of an article published in November by the Federal Reserve Bank of Dallas with the title “Skimming U.S. Housing Froth a Delicate, Daunting Task.” The article argued that policymakers should try to deflate the bubble rather than burst it.(...)
Blackstone’s BREIT defenceThey love their $145bn property trust, and think you should tooAmid all the crypto excitement we missed an update from another one of the more legitimately interesting stories out there: The Blackstone Real Estate Income Trust has published its third-quarter results.Last month we published a big post exploring BREIT’s rampant growth, its growing importance to Blackstone, the increasingly wild divergence between its performance (up ca. 9.3 per cent this year) and publicly listed real estate trusts (down about 28 per cent in 2022) and the outlook at a time of rising rates and weakening property markets. It’s a subject that is getting more and more attention.Unsurprisingly, Blackstone thinks all this chatter is overdone, so in addition to the 10-Q it also released a Q&A with Nadeem Meghji, the company’s head of Americas real estate, which attempts to address all these issues. The tl;dr is that Blackstone is great, they love BREIT, and so should you.CitarBREIT has delivered extraordinary returns to investors since inception nearly 6 years ago. We could not be more proud of the portfolio we have built. Demonstrating our conviction in BREIT, Blackstone employees have over $1 billion of their own money invested in the company, including more than $300 million invested by senior executives over the last four months.The Q&A is worth reading to see how Blackstone’s rationale for why it is doing so much better than publicly traded real estate, its explanation for outflows (driven mostly by wealthy people in Asia, it seems) and how values its real estate.Their emphasis below:CitarBREIT updates its valuations monthly to reflect what’s happening in the private real estate market and has those values reviewed by an independent third party.Higher interest rates have led to materially higher cap rates (lower valuation multiples) which have negatively impacted valuations. BREIT’s valuations reflect this change, and we have increased our assumed rental housing and industrial exit cap rates and discount rates by 14% and 6% YTD, respectively.At the same time, BREIT’s strong cash flow growth, stable income and value increases from our interest rate hedges have more than offset the negative valuation impact from materially higher cap rates.Our 5.4% assumed rental housing and industrial exit cap rate is 160bps above the 10Y treasury yield of 3.8%.So far this year, BREIT has sold $2B of real estate at an average 8% premium to the carrying value that BREIT ascribed to these assets.Our assumed rental housing and industrial exit cap rate today is higher than many non-traded REIT peers, who have not moved their valuation assumptions as meaningfully.For completists, in an accompanying video you can also watch Blackstone president Jonathan Gray talk up the prospects of BREIT despite a “challenging time” for markets. It’s almost as if the vehicle has become essential to Blackstone’s financial results…The third-quarter report and a monthly portfolio update indicates that not everyone is convinced though. After a ferocious stretch of growth since being established, BREIT’s net asset value dipped to $69.5bn at the end of October, from $70.4bn at the end of September. (Its total assets were valued at $144.9bn at the time).Outflows — in the form of repurchases of investor shares — have slowed since the summer, but will continue to be “closely watched as the fund matures in the face of a less constructive backdrop,” as Jefferies analysts noted in a report this morning.The question is still just how sticky money in BREIT will prove if the US real estate market does crack and Blackstone is forced into marking down the value of its holdings. That could made its performance suddenly look a lot less fabulous. We suspect some people at 345 Park Avenue are praying for a Fed pivot.
BREIT has delivered extraordinary returns to investors since inception nearly 6 years ago. We could not be more proud of the portfolio we have built. Demonstrating our conviction in BREIT, Blackstone employees have over $1 billion of their own money invested in the company, including more than $300 million invested by senior executives over the last four months.
BREIT updates its valuations monthly to reflect what’s happening in the private real estate market and has those values reviewed by an independent third party.Higher interest rates have led to materially higher cap rates (lower valuation multiples) which have negatively impacted valuations. BREIT’s valuations reflect this change, and we have increased our assumed rental housing and industrial exit cap rates and discount rates by 14% and 6% YTD, respectively.At the same time, BREIT’s strong cash flow growth, stable income and value increases from our interest rate hedges have more than offset the negative valuation impact from materially higher cap rates.Our 5.4% assumed rental housing and industrial exit cap rate is 160bps above the 10Y treasury yield of 3.8%.So far this year, BREIT has sold $2B of real estate at an average 8% premium to the carrying value that BREIT ascribed to these assets.Our assumed rental housing and industrial exit cap rate today is higher than many non-traded REIT peers, who have not moved their valuation assumptions as meaningfully.
Brexit has fuelled surge in UK food prices, says Bank of England policymakerBritons need to be kept aware of the cost of leaving the EU, says Swati DhingraBrexit is contributing to a surge in food prices as the country heads into recession, a senior Bank of England policymaker has warned.Swati Dhingra – the newest member of the Bank’s monetary policy committee (MPC), which sets interest rates – also used an interview with the Observer to suggest that the coming run of central bank rate rises should peak below 4.5%, which is the level that some City investors are expecting. “The market is probably underestimating what damage that [level of interest rates] might cause to the UK economy,” she said.Dhingra maintains that further aggressive moves to raise the cost of borrowing from the current level of 3% would risk exacerbating Britain’s economic downturn.(...)
https://fortune.com/2022/12/01/housing-market-in-housing-bubble-says-fed-chair-powell/CitarFed Chair Powell: U.S. ‘housing bubble’ formed during the pandemic and now ‘the housing market will go through the other side of that’(...) On Tuesday, the most powerful economist in the world did just that: Speaking at a Brookings Institute event, Fed Chair Jerome Powell told the audience that the run-up in home prices during the Pandemic Housing Boom qualifies a “housing bubble.”“Coming out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a housing bubble, you had housing prices going up [at] very unsustainable levels and overheating and that kind of thing. So, now the housing market will go through the other side of that and hopefully come out in a better place between supply and demand,” Powell said.According to past statements by Powell, that process of bringing “balance” to the U.S. housing market has already begun. In June, Powell said spiked mortgage rates would help to “reset” the U.S. housing market. Then in September, Powell told reporters that we had officially entered into a “difficult [housing] correction” that would restore “balance” to the market.That “bubble” acknowledgment by Powell comes on the heels of an article published in November by the Federal Reserve Bank of Dallas with the title “Skimming U.S. Housing Froth a Delicate, Daunting Task.” The article argued that policymakers should try to deflate the bubble rather than burst it.(...)
Binance has frozen withdrawals of a crypto linked to its own token that looks like it's been hacked, CEO 'CZ' says*Binance froze withdrawals of a staked Ankr protocol token Friday.*The exchange's chief executive Changpeng Zhao said the crypto could have been targeted by hackers.*The Ankr coin's price crashed 99.5% in the past 24 hours, sparking fears of an attack.Binance said Friday that it will freeze withdrawals of a cryptocurrency that derives part of its value from a link to the exchange's own native Binance Coin token.Chief executive Changpeng Zhao said withdrawals of Ankr's Reward Bearing Staked BNB coin would be paused while Binance probed a potential attack by hackers.The token, which held around $123 million of assets and was intended to offer Binance Coin holders returns via staking, crashed 99.5% Friday to trade at $1.51."Initial analysis is developer private key was hacked, and the hacker updated the smart contract to a more malicious one," 'CZ' said on Twitter. "Binance paused withdrawals a few hours ago."Binance has also frozen around $3 million that hackers moved to its centralized exchange, he added.Hackers have relentlessly targeted digital assets in 2022 with more than $3 billion wiped from the sector this year, according to Chainalysis.Binance's freezing of Ankr's token comes at a time when investors are worrying about contagion from the implosion of rival exchange FTX and a brutal crypto winter that has seen bitcoin's price fall 63% year-to-date, with the token trading at just under $17,000 at last check.
Esto tiene muy mala pinta, cada vez peor...https://finance.yahoo.com/news/binance-frozen-withdrawals-crypto-linked-102756697.htmlCitarBinance has frozen withdrawals of a crypto linked to its own token that looks like it's been hacked, CEO 'CZ' says*Binance froze withdrawals of a staked Ankr protocol token Friday.*The exchange's chief executive Changpeng Zhao said the crypto could have been targeted by hackers.*The Ankr coin's price crashed 99.5% in the past 24 hours, sparking fears of an attack.Binance said Friday that it will freeze withdrawals of a cryptocurrency that derives part of its value from a link to the exchange's own native Binance Coin token.Chief executive Changpeng Zhao said withdrawals of Ankr's Reward Bearing Staked BNB coin would be paused while Binance probed a potential attack by hackers.The token, which held around $123 million of assets and was intended to offer Binance Coin holders returns via staking, crashed 99.5% Friday to trade at $1.51."Initial analysis is developer private key was hacked, and the hacker updated the smart contract to a more malicious one," 'CZ' said on Twitter. "Binance paused withdrawals a few hours ago."Binance has also frozen around $3 million that hackers moved to its centralized exchange, he added.Hackers have relentlessly targeted digital assets in 2022 with more than $3 billion wiped from the sector this year, according to Chainalysis.Binance's freezing of Ankr's token comes at a time when investors are worrying about contagion from the implosion of rival exchange FTX and a brutal crypto winter that has seen bitcoin's price fall 63% year-to-date, with the token trading at just under $17,000 at last check.
An outright global recession imminent: IIFThe global association of the financial industry assessed growth across countries and over time with a focus on “true” growth, which is annual average growth adjusted for statistical carryover from the previous yearRaising the alarm about an outright global recession 2023, the Institute of International Finance said on Sunday that worldwide growth in 2023 is expected to be weaker than the Global Financial Crisis of 2009, with weakness triggered by deep contractions in Russia and Ukraine to the rest of the world economy.The global association of the financial industry assessed growth across countries and over time with a focus on “true” growth, which is annual average growth adjusted for statistical carryover from the previous year."We estimate purchasing power parity, or PPP-weighted global statistical carryover at 0.4 per cent in 2023. Coupled with our forecast for annual average global growth of 1.5 per cent, this means ‘true’ growth is 1.1 per cent,” the IIF said in its Global Macro Views."For perspective, annual average growth in 2009 was 0.6 per cent with a base effect of -0.7 per cent. The latter was negative as the Great Recession began in 2008, pulling down GDP levels into 2009. As a result, ‘true’ global growth in 2009 was 1.3 per cent. Seen through this lens, 2023 will be slightly weaker than 2009," Robin Brooks, managing director & chief economist of the IIF said.At a global level, IIF's PPP-weighted aggregate shows “true” growth in 2023 to be slightly weaker than in 2009, with China and Latin America the most important growth drivers."The coming global recession will be more severe in “true” growth terms than the Great Recession," the Washington-based IIF said.Jonathan Fortun, an economist at IIF said after Russia invaded Ukraine, Ukraine’s GDP fell sharply, so that annual average growth in 2023 will be -9.4 per cent. The same is true for Russia, although to a lesser extent."Assuming another contraction in Q4 2022 GDP, we estimate statistical carryover into 2023 at -3.3 per cent," Fortun said."Unlike Ukraine, western carve outs of Russia’s energy exports led to large hard currency inflows, which resulted in a sharp easing of financial conditions. That easing of financial conditions helped Russia avert a steeper GDP decline," Brooks noted.The depth of the coming downturn ultimately depends on one thing: the war. Western reluctance to embargo Russian energy boosted global GDP in 2022, but at the cost of potentially turning fighting in Ukraine into a “forever war,” the IIF said.Earlier this year, the IFF forecast a global growth of 2.2 per cent, substantially below consensus, with weakness radiating out from Europe as Russia’s invasion of Ukraine took its toll.“Since that time, economic activity has surprised on the upside. We are currently tracking global growth around 2.9 per cent. The reason for this outperformance is that we placed a high likelihood on western countries embargoing Russian energy to cut the flow of hard currency to Moscow. That didn’t happen, which buoyed activity versus our forecast,” said the report.The severity of the coming hit to global GDP depends principally on the trajectory of the war in Ukraine.“Our base case is that fighting drags on into 2024, given that the conflict is “existential” for Putin. Earlier this year we flagged survey-based indicators that were starting to deteriorate sharply.”