By Michael Every of Rabobank
It’s Friday: and we should all be freaking out.
If you only focus on the price-on-a-screen we call ‘markets’, freak about chatter of the Fed going 50bp in March or 25bp next week to try to “regain credibility”. How being far too passive for far too long, while talking about social justice and not how supply chains really work, and then far too active, while not talking about social justice nor how supply chains really work, is any kind of credibility-booster is a good question. Especially as the Fed would be acting just as fiscal stimulus died with the end of Build Back Better in whole or part with the latest ‘Nay, nay, and thrice nay’ of Senator Manchin. At this stage, as cynics have long noted, it will probably take a market crash to get the Fed’s attention away from its “credibility”.
If you fully or partly focus on “markets” then, like Bloomberg, solipsistically freak about stocks already slipping as people don’t focus on streaming TV services now lockdowns are ending. Shock! Horror! You thought they were watching streaming because of the content! Have you watched said content?! Or freak *right* out about German PPI for December leaping 5.0% m/m and 24.2% y/y, the highest reading since the series began in 1949(!) Even before we see geopolitical problems come home in the energy market.
If you are into Covid panic then zoonotically focus on “Risks of hamster-to-human Covid transmission” If you aren’t, then don’t; because even given science and Covid have the kind of relationship a lonely 13-year-old nerd does with a ‘girlfriend in Canada or France’, if hamsters have Covid, so do mice and rats. We don’t generally keep them as pets - just in the labs we weren’t allowed to mention because of the soulmate relationship between science and Covid. But if “Hamster Transmission Mechanism” (--Let’s rock!!--) then we need to remove *all* mammalian carriers. Call me when *all* the mice and rats are dead, because we are so good at achieving that. Meanwhile, Bloomberg adds “Bankers Turn Down High-Paying Hong Kong Jobs as Covid Rules Bite”; and an op-ed writer asks, “Where Were You When They Came for the Hamsters?”
If you are ‘focusing’ on China, if that is the right word for MSCI-mandated market people, Beijing has reiterated its intention to crack-down on the power of large firms and will zoom in on “corruption underpinning the disorderly expansion of capital and monopolies”; and on property Bloomberg’s Shuli Ren concludes, “So here’s the lesson to the rest of the pack: Don’t hesitate to sell. Your goal is to survive.” For the record, she’s talking about developers.
If you are focusing on the global picture, then freak out about Blinken and Lavrov meeting in Geneva after a Biden flub required repeated White House underlining it is *not* okay for Moscow to make a “minor incursion” into Ukraine. Likewise, President Macron says he wants a new, more autonomous EU security architecture in place in weeks (!), ironically echoing parts of what Russia says it is trying to achieve(!), even as he also promises to send troops to support Romania. And in the background, ominously:
- The White House accuses Russia of conspiring to take over the Ukrainian government, imposing sanctions on four current and former Ukrainian government officials over this alleged conspiracy. It is also sanctioning Belarus officials over the aviation piracy last year that saw a journalist in-flight seized;
- Russia’s parliament proposes officially recognising the breakaway Russian republics within Ukraine, and politicians argue war will be necessary if there is any resistance from Kyiv;
- US politicians are considering evacuating all Americans from Ukraine, with Russian embassy and consulate staff having already left;
- The Dutch government is willing to send arms to Ukraine if it requests them;
- Russia is starting naval exercises with China and Iran, and has announced a massive 160-vessel exercise in February in the Atlantic, Pacific, Arctic, and Mediterranean;
- The US is to hold carrier group exercises with France and Spain; and
- China warned a US navy vessel in the South China Seas to leave and that “We demand the US cease such provocative activities immediately or face significant consequences from unseen events,” which appears a marked escalation in such rhetoric.
Meanwhile, the FT says the US is leaning on Estonia to change the name of the Taiwanese trade office located there to try to ease tensions, which is also being denied; and Slovenia’s PM is making inflammatory statements on the issue, so two EU members are now tweaking the dragon’s tail. How the US thinks further attempts at de-escalation will help in this environment is also a good question; and if we see a parallel between Taiwan and Ukraine emerge in the minds of EU members looking at Russia with fear, it will likely complicate the Franco-German push for closer EU-China economic relations ahead, to put it mildly.
In short, whatever floats (or sinks) your boat, there is something to freak out about. But try not to take the easy narcotic escape of only reading the boring parts of the blue pill financial press or echoing the usual corporate mantras. As Fat Freddy warns us, “Keed spills!…No, wait a minute,…pill skeeds! Um, um…skill peeds!” Which just about sums up what I think of a lot of what I read on any given day while this is all going on. Things move, and markets will move. Bigly. As the Freak Brothers always warn Fat Freddy - "Don't get burned!"
Happy Fabulous Furry Freaking-Out Friday, brothers and sisters.