There was scant comfort available from today’s PCE data. While income was in line, spending was better than expected (0.4% on the month rather than 0.2% forecast), both headline (0.3%) and core (0.6%) inflation were above expectations. That obviously keeps the pressure on the Fed, and by extension financial markets.
Bottom-line: Hot inflation.
The Fed's favored gauge, the core PCE deflator, accelerated more than expected in August to 4.9% from a revised 4.7%, and the headline rate slipped less than forecast to 6.2%. In the euro area, headline CPI accelerated more than expected to an eye-watering 10% this month. Core inflation also sped up more than forecast.
The Fed's favored gauge, the core PCE deflator, accelerated more than expected in August to 4.9% from a revised 4.7%, and the headline rate slipped less than forecast to 6.2%. In the euro area, headline CPI accelerated more than expected to an eye-watering 10% this month. Core inflation also sped up more than forecast.
Market Implication: 중앙은행이 풋옵션처럼 증시 하방을 견고히 해줄 때가 됐다는 기대가 왜 생긴지 직관적으로 보여주는 이야기임. 1990년 이후 현재까지 중앙은행의 정책금리는 기업 이익이 오를 때 같이 인상, 이익이 내려갈 때 인하했음. 그러다보니 90년대 이후 이익 추정치 -1% 이상 하향에서 금리를 인상한게 이번이 처음. 시장 하락을 방어하는 옵션의 수요가 예상보다 적은게 이런 예외적 상황이 곧 ‘Fed Put'에 가까워졌단 반증이라는데, 1990년대 이전 데이터까지 넣어보면 좌측 상단의 이익이 하향되는데 금리를 인상하게 드물지 않음을 알게 됨.
For the first time since 1990, the Fed is raising rates when earnings expectations are declining. In other words, the ‘Fed Put’ protection that prevailed over the past two decades is no longer there. This chart shows the relationship between six-month changes in fed fund rates and the changes in S&P’s earnings estimates since 1990. The Fed hiked when EPS went up, and cut rates when earnings both fell and rose. Yet, there are almost no dots in the upper-left quadrant – the Fed doesn’t hike when EPS is down. In fact, the current period, highlighted as the yellow dot, is the first time since 1990 when Fed has raised rates when EPS was down more than 1%. As my colleague Simon White noted, stock options point to lower demand for crash insurance. He says this suggests the market believes the Fed put is getting closer. To my mind, it doesn’t mean the central bank is eager to come to the market’s rescue any time soon. The Fed’s only has one mandate now: to control inflation. To do so, it needs to weaken its second mandate -- the job market, and by extension GDP and earnings. Bloomberg’s data on estimated EPS only became available in 1990. If we replace the estimates with trailing earnings, the upper-left quadrant in the 1980s was actually not uncommon. The Fed wasn’t afraid of tightening conditions when economy was already weak. There was no such as a thing as Fed put.
Welcome to the brave old world.
For the first time since 1990, the Fed is raising rates when earnings expectations are declining. In other words, the ‘Fed Put’ protection that prevailed over the past two decades is no longer there. This chart shows the relationship between six-month changes in fed fund rates and the changes in S&P’s earnings estimates since 1990. The Fed hiked when EPS went up, and cut rates when earnings both fell and rose. Yet, there are almost no dots in the upper-left quadrant – the Fed doesn’t hike when EPS is down. In fact, the current period, highlighted as the yellow dot, is the first time since 1990 when Fed has raised rates when EPS was down more than 1%. As my colleague Simon White noted, stock options point to lower demand for crash insurance. He says this suggests the market believes the Fed put is getting closer. To my mind, it doesn’t mean the central bank is eager to come to the market’s rescue any time soon. The Fed’s only has one mandate now: to control inflation. To do so, it needs to weaken its second mandate -- the job market, and by extension GDP and earnings. Bloomberg’s data on estimated EPS only became available in 1990. If we replace the estimates with trailing earnings, the upper-left quadrant in the 1980s was actually not uncommon. The Fed wasn’t afraid of tightening conditions when economy was already weak. There was no such as a thing as Fed put.
Welcome to the brave old world.
US stocks suffered their worst monthly rout since March 2020 after markets were repeatedly pummeled by the Federal Reserve’s resolve to keep raising interest rates until inflation is under control.
Bottom-line: 에르메스의 히말라야 켈리백이 파리의 소더비 경매에서 예상보다 세배 이상 높은 값에 낙찰됨. 1956년 모나코 왕자비 그레이스 패트리샤 켈리가 들면서 본래 이름인 ‘삭 아 데페슈‘ 외에 켈리백이라는 별명이 생겼으며, 1977년 공식 명칭을 켈리백으로 변경함. 에르메스 부틱 내에서 소장하기 어려운 가방 중 하나임. 때문에 장기적으로 진정한 소장가치가 있음이 이 번 경매 낙찰가를 통해 다시 한 번 검증됨. 에르메스는 최근 수요가 공급을 앞서고 있어 생산시설 확충을 하고 있음.
A Hermes handbag fetched a record price for a Sotheby’s auction, the latest evidence that rare luxury items are increasingly seen as stores of value by investors and wealthy buyers. The Himalaya Retourne Kelly 25 bag sold for €352,800($346,802) in a Paris auction that ended Thursday, Sotheby’s said. The crocodile-skin handbag in mother-of-pearl white, reminiscent of a snowy mountain landscape, sold for almost three times Sotheby’s pre-sale estimate. This model is viewed as a “real investment for the long term,” said Morgane Halimi, global head of handbags and accessories at Sotheby’s. It’s also “one of the hardest bags to obtain” in a Hermes boutique, helping to explain its resale price, she said. The bag, manufactured this year, cost “a few tens of thousands” of euros at retail, she said. The Kelly started out as Hermes’ sac à dépêches in the 1930s, but got its nickname (and, later, official moniker) after Princess Grace Kelly was photographed carrying one in 1956. The record price for a luxury bag at auction is still held by Christie’s, the Francois Pinault-owned auction house, which sold a Himalaya Retourne Kelly bag for 4 million Hong Kong dollars ($510,000) last November. That one featured diamond hardware and was slightly bigger. Hermes International is trying to boost its production capacity for leather goods because demand exceeds supply.
A Hermes handbag fetched a record price for a Sotheby’s auction, the latest evidence that rare luxury items are increasingly seen as stores of value by investors and wealthy buyers. The Himalaya Retourne Kelly 25 bag sold for €352,800($346,802) in a Paris auction that ended Thursday, Sotheby’s said. The crocodile-skin handbag in mother-of-pearl white, reminiscent of a snowy mountain landscape, sold for almost three times Sotheby’s pre-sale estimate. This model is viewed as a “real investment for the long term,” said Morgane Halimi, global head of handbags and accessories at Sotheby’s. It’s also “one of the hardest bags to obtain” in a Hermes boutique, helping to explain its resale price, she said. The bag, manufactured this year, cost “a few tens of thousands” of euros at retail, she said. The Kelly started out as Hermes’ sac à dépêches in the 1930s, but got its nickname (and, later, official moniker) after Princess Grace Kelly was photographed carrying one in 1956. The record price for a luxury bag at auction is still held by Christie’s, the Francois Pinault-owned auction house, which sold a Himalaya Retourne Kelly bag for 4 million Hong Kong dollars ($510,000) last November. That one featured diamond hardware and was slightly bigger. Hermes International is trying to boost its production capacity for leather goods because demand exceeds supply.
Sotheby's
Blanc Matte Himalaya Niloticus Crocodile Kelly 25 Retourné Palladium Hardware, 2022 | Handbags & Accessories | 2022 | Sotheby's
Hermès Kelly 25 Retourné Himalaya Crocodile Niloticus Mat Blanc Garniture Palladium, 2022Intérieur doublé de cuir de chèvreInclus bandoulière, clochette, cadenas, 2 clés, protection pluie, feutre, dustbag, boiteDimensions 25 x 18 x 10 cmHermès Blanc Matte…
Bottom-line: 인플레이션이 소비에 미치는 영향이 많은 기업들의 증거로 나타났으며, 대표적으로 나이키의 미판매 재고 증가, 페덱스의 배송량 감소, 주요 반도체 생산국인 한국의 출하량이 4년만에 둔화 된 수요로 인해 감소, 애플의 새로운 아이폰 생산량 증가 계획 철회 등이 있음. 세계 경제가 겪고 있는 일련의 충격들(일부는 정책입안자들이 스스로 만든 것)이 또 다른 금융위기의 위험을 높이고 있음. 수십년래 최고치를 기록하는 인플레이션을 예측하지 못한 중앙은행으로 인해 1980년 이후 가장 빠른 속도로 금리를 인상하고 있는 미국 중앙은행과 여타 중앙은행들은 그들의 신뢰 회복과 가격 안정에 초점을 맞추고 있음. 로렌스 서머스는 2007년 8월 사람들이 불안해했던 시기보다 지금 더 불안해 해야 할 때라고 말함.
The world economy is showing signs of a rapid downshift as it contends with a series of shocks -- some of them self-inflicted by policymakers -- increasing the likelihood of another global recession and the danger of major financial disruptions. “We’re living through a period of elevated risk,” former US Treasury Secretary Lawrence Summers told “Wall Street Week” with David Westin on Bloomberg Television, for whom he is a paid contributor. “In the same way that people became anxious in August of 2007, I think this is a moment when there should be increased anxiety.”. At the heart of the strain: The fallout from the most aggressive hiking of interest rates since the 1980s. Having failed to foresee the surge in inflation to multi-decade highs, the Federal Reserve and most peers are now lifting rates at speed in a bid to restore price stability and their own credibility. Evidence of the impact -- and of the blow to consumers’ purchasing power from soaring prices -- is mounting quickly. In the past several days, Nike Inc. reported a surging stockpile of unsold product, FedEx Corp. shocked with a warning on delivery volumes and key chipmaker South Korea saw the first drop in semiconductor output in four years as demand retreats. Apple Inc. is backing off plans to boost output of its new iPhones, Bloomberg reported.
The world economy is showing signs of a rapid downshift as it contends with a series of shocks -- some of them self-inflicted by policymakers -- increasing the likelihood of another global recession and the danger of major financial disruptions. “We’re living through a period of elevated risk,” former US Treasury Secretary Lawrence Summers told “Wall Street Week” with David Westin on Bloomberg Television, for whom he is a paid contributor. “In the same way that people became anxious in August of 2007, I think this is a moment when there should be increased anxiety.”. At the heart of the strain: The fallout from the most aggressive hiking of interest rates since the 1980s. Having failed to foresee the surge in inflation to multi-decade highs, the Federal Reserve and most peers are now lifting rates at speed in a bid to restore price stability and their own credibility. Evidence of the impact -- and of the blow to consumers’ purchasing power from soaring prices -- is mounting quickly. In the past several days, Nike Inc. reported a surging stockpile of unsold product, FedEx Corp. shocked with a warning on delivery volumes and key chipmaker South Korea saw the first drop in semiconductor output in four years as demand retreats. Apple Inc. is backing off plans to boost output of its new iPhones, Bloomberg reported.
Bottom-line: 중앙은행 인사들이 금리인상에 대해 서로 다른 목소리를 내기 시작함. 로레타 메스터와 같이 강경한 측은 여전히 인플레이션을 통제하기 위해 공격적인 금리인상의 필요성을 강조했지만, 브레이너드의 경우 금리인상이 경제에 미칠 수 있는 영향에 대해 논의할 필요성을 제시했음. 메리 데일리 또한 인플레이션 통제를 위해 과한 금리인상을 했을 때 구축효과에 대해 강조하며 그동안 인플레이션 통제에 대해 일관되고 확고했던 주장에 약간의 변화를 만들었음.
Fed Begins to Split on the Need for Speed to Peak Rates. Federal Reserve officials are starting to stake out different views on how fast to raise interest rates as they balance hot inflation against rising stress in financial markets. With Fed target range now at 3% to 3.25% and only a few moves from reaching their forecast peak, officials are starting to speak differently about the urgency with which they need to get there. Hawks like Cleveland Fed chief Loretta Mester say they must keep raising rates aggressively to win the battle against inflation even if that causes a recession. Vice Chair Lael Brainard has offered a slightly softer assessment while continuing to stress the need to tighten policy. Brainard’s speech Friday -- the first from Fed board leadership since officials met last week -- said policy will need be restrictive for some time and avoid the risk of prematurely pulling back. But she injected a note of caution about how fast they need to go, while discussing a number of ways in which the global rate-hiking cycle could spill over on the US economy. Her San Francisco colleague Mary Daly also highlighted the cost of doing too much -- as well as too little -- to cool prices. Their comments injected a slight variation into what has been a uniformed stream of insistence from regional Fed presidents declaring unflinching resolve to crush inflation.
Fed Begins to Split on the Need for Speed to Peak Rates. Federal Reserve officials are starting to stake out different views on how fast to raise interest rates as they balance hot inflation against rising stress in financial markets. With Fed target range now at 3% to 3.25% and only a few moves from reaching their forecast peak, officials are starting to speak differently about the urgency with which they need to get there. Hawks like Cleveland Fed chief Loretta Mester say they must keep raising rates aggressively to win the battle against inflation even if that causes a recession. Vice Chair Lael Brainard has offered a slightly softer assessment while continuing to stress the need to tighten policy. Brainard’s speech Friday -- the first from Fed board leadership since officials met last week -- said policy will need be restrictive for some time and avoid the risk of prematurely pulling back. But she injected a note of caution about how fast they need to go, while discussing a number of ways in which the global rate-hiking cycle could spill over on the US economy. Her San Francisco colleague Mary Daly also highlighted the cost of doing too much -- as well as too little -- to cool prices. Their comments injected a slight variation into what has been a uniformed stream of insistence from regional Fed presidents declaring unflinching resolve to crush inflation.
Market Implication: 경기침체의 위기를 직감함에도 대형 기업들의 이익에서는 그런 것을 감지하기 어려운 이유를 설명하고 있음. 상장기업은 2개 분기 연속 이익 감소라는 오명을 쓰고 싶지 않기에 이익을 낼 방법이 없을 때 최종적으로 회계사를 이용함. 때문에 초기 침체에 앞서 S&P 500 기업 이익과 나머지 기업의 이익이 20% 가까운 괴리가 생김. '창조적 회계'라 불리는 방법으로 한 두개 분기 위기를 모면하지만 오래갈 수 없음. 결국 해당 기업들도 이익이 감소하며 다시 이 괴리는 사라짐. 이 사례는 최근 소프트뱅크에서 나타났는데, 알리바바 지분을 20% 미만(적극적 경영의사 지분 기준)으로 낮추면서 지분에 대한 평가이익을 반영하며 166억 달러의 회계상 이익이 평가됨. 때문에 이 괴리도 지표는 어쩌면 국채 수익률 곡선 역전보다 침체를 예상하는데 유용하게 사용될 수 있음. 이 괴리가 20%를 넘어가는 시기와 해당 시기 이후 경기침체 발생은 차트를 통해 살펴볼 수 있음.
Recessions are rare — or, at least, government statistical bureaus are slow to recognize them. But big corporations don’t take chances. They work hard to avert an earnings recession, usually defined as two consecutive quarters of profit decline. Looking at S&P 500 companies’ earnings, it doesn’t feel like an economic downturn is on the horizon, even as worries about a global economic slump mount. These large companies may be more resilient, with their currency hedging tools and diversified businesses, one could argue. Or perhaps there’s some “creative accounting” at work, suggests Gavekal Research’s Charles Gave, who started his finance career in 1970. He compared S&P 500 earnings to profits from the broader economy and found that, historically, the two data series diverge on the brink of recessions. In fact, this profit divergence may be an even better recession predictor than an inverted Treasury yield curve. Since 1960, on every occasion when S&P 500 earnings climbed at least 20% above broader corporate profits, a recession ensued, notes Gave. We are seeing this divide again. Here’s the logic: As business conditions worsen, big publicly traded companies find it harder to generate profits that would please Wall Street. So their accountants come to the rescue. But accounting magic has its limits, so their earnings inevitably drop, causing the two data series to converge again. I find Gave’s explanation plausible. Here’s a concrete example, played out in Asia. In August, SoftBank Group Corp. said it cut its exposure in Alibaba Group Holding Ltd.’s shares to 14.6% from 23.7%. As a result, it expected to record about 2.4 trillion yen ($16.6 billion) in gains from the revaluation of its remaining Alibaba stake. That would be a welcome cushion. In the first half this year, SoftBank incurred record losses from the poor performance at its two Vision Funds. Already, large companies are revising their guidance at a faster pace than last year. All it takes is a few more profit warnings from global business leaders such as FedEx Corp., and the big corporates’ big profit facade will come crashing down.
Recessions are rare — or, at least, government statistical bureaus are slow to recognize them. But big corporations don’t take chances. They work hard to avert an earnings recession, usually defined as two consecutive quarters of profit decline. Looking at S&P 500 companies’ earnings, it doesn’t feel like an economic downturn is on the horizon, even as worries about a global economic slump mount. These large companies may be more resilient, with their currency hedging tools and diversified businesses, one could argue. Or perhaps there’s some “creative accounting” at work, suggests Gavekal Research’s Charles Gave, who started his finance career in 1970. He compared S&P 500 earnings to profits from the broader economy and found that, historically, the two data series diverge on the brink of recessions. In fact, this profit divergence may be an even better recession predictor than an inverted Treasury yield curve. Since 1960, on every occasion when S&P 500 earnings climbed at least 20% above broader corporate profits, a recession ensued, notes Gave. We are seeing this divide again. Here’s the logic: As business conditions worsen, big publicly traded companies find it harder to generate profits that would please Wall Street. So their accountants come to the rescue. But accounting magic has its limits, so their earnings inevitably drop, causing the two data series to converge again. I find Gave’s explanation plausible. Here’s a concrete example, played out in Asia. In August, SoftBank Group Corp. said it cut its exposure in Alibaba Group Holding Ltd.’s shares to 14.6% from 23.7%. As a result, it expected to record about 2.4 trillion yen ($16.6 billion) in gains from the revaluation of its remaining Alibaba stake. That would be a welcome cushion. In the first half this year, SoftBank incurred record losses from the poor performance at its two Vision Funds. Already, large companies are revising their guidance at a faster pace than last year. All it takes is a few more profit warnings from global business leaders such as FedEx Corp., and the big corporates’ big profit facade will come crashing down.
WSJ
An Earnings Recession Looms
Economic recessions are rare, but periods in which corporate profits fall for at least two consecutive quarters are not.
Bottom-line: 10년물 국채 금리가 1994년 이후 가장 긴 기간인 9주 연속 상승함. 긴 기간의 상승이 주는 메시지는 마침내 채권 투자자들이 중앙은행이 인플레이션을 통제하기 위해 금리를 올리고, 또 올리고, 계속 올릴 것이란 단호함을 깨달은 것임. 일반적으로 이렇게 긴 기간의 국채 수익률 상승은 긴축 사이클의 중간 지점 이후에 발생하기 때문에, 채권의 잔인한 매도나 다른 자산군에 있어 반등의 기회를 줄 수 있음. 다만, 이런 반등은 짧고, 종국적으로 씁쓸할 것임.
Treasury 10-year yields are surging relentlessly higher in a way rarely seen. They just climbed for a 9th-straight week, the longest such streak since early 1994, jumping 1.18 percentage points in that time. That bond sell-off is only the most savage move since the April-May rout that sent yields up 1.4 points in a nine-week span, but its persistence is noticeable. The message is that the bond market has finally realized just how determined the Fed is about raising and raising and raising interest rates to contain and then cool inflation. Long streaks of weekly yield gains have tended to come around or just after the mid-point of tightening cycles, as well as at pivotal moments when the target rate is sitting at the bottom after rate cuts. That underscores the potential both that we get some sort of a rebound in bonds, and perhaps in other assets, though relief is likely to be short, and ultimately bittersweet.
Treasury 10-year yields are surging relentlessly higher in a way rarely seen. They just climbed for a 9th-straight week, the longest such streak since early 1994, jumping 1.18 percentage points in that time. That bond sell-off is only the most savage move since the April-May rout that sent yields up 1.4 points in a nine-week span, but its persistence is noticeable. The message is that the bond market has finally realized just how determined the Fed is about raising and raising and raising interest rates to contain and then cool inflation. Long streaks of weekly yield gains have tended to come around or just after the mid-point of tightening cycles, as well as at pivotal moments when the target rate is sitting at the bottom after rate cuts. That underscores the potential both that we get some sort of a rebound in bonds, and perhaps in other assets, though relief is likely to be short, and ultimately bittersweet.
Bottom-line: 정부와 기업이 부채의 만기를 앞두고 자금을 재조달하는데 드는 비용이 빠르게 높아졌음. 65조 달러에 이르는 정부 및 기업 발행 채권을 모두 재조달한다고 가정하면 이전보다 평균 156bp, 또는 1조 달러 이상의 추가 비용이 들게 됨. 뿐만 아니라 채권자들이 경기침체에 베팅하기 시작하면서 자금 조달이 보다 까다로워지기 시작함.
Governments and companies around the world are facing unprecedented costs to refinance bonds, a burden that’s set to deepen fissures in debt markets and expose more vulnerabilities among weaker borrowers. A corporate treasurer or finance minister looking to issue new notes now would likely have to pay interest that’s about 156 basis points higher on average than the coupons on existing securities, after that gap surged to a record in recent days. That all adds up to about $1.01 trillion in additional costs if all those securities were refinanced, according to calculations using a Bloomberg index tracking some $65 trillion of government and corporate debt across currencies. Rolling over debt is proving increasingly tricky for weaker borrowers as creditors betting on recession become more cautious. While most governments and companies are still able to stomach the higher financing bills, credit markets are starting to buckle as fund outflows and volatility soar. Banks last week had to pull a $4 billion leveraged buyout financing, and even investment-grade debt funds saw one of the biggest cash withdrawals ever.
Governments and companies around the world are facing unprecedented costs to refinance bonds, a burden that’s set to deepen fissures in debt markets and expose more vulnerabilities among weaker borrowers. A corporate treasurer or finance minister looking to issue new notes now would likely have to pay interest that’s about 156 basis points higher on average than the coupons on existing securities, after that gap surged to a record in recent days. That all adds up to about $1.01 trillion in additional costs if all those securities were refinanced, according to calculations using a Bloomberg index tracking some $65 trillion of government and corporate debt across currencies. Rolling over debt is proving increasingly tricky for weaker borrowers as creditors betting on recession become more cautious. While most governments and companies are still able to stomach the higher financing bills, credit markets are starting to buckle as fund outflows and volatility soar. Banks last week had to pull a $4 billion leveraged buyout financing, and even investment-grade debt funds saw one of the biggest cash withdrawals ever.