“We were stunned by how well the size of the ring agreed with predictions from Einstein’s Theory of General Relativity," said EHT Project Scientist Geoffrey Bower from the Institute of Astronomy and Astrophysics, Academia Sinica, Taipei. 
Although we cannot see the event horizon itself, because it cannot emit light, glowing gas orbiting around the black hole reveals a telltale signature: a dark central region (called a “shadow”) surrounded by a bright ring-like structure. 

The new view captures light bent by the powerful gravity of the black hole, which is four million times more massive than our Sun. 

You were not perfumed,
Yet stood
A delicate fragrance—
Smoking wood. 

Your smell,
And soft wet earth
About your coffin
Being the birth 

Of this cypress I shelter
Under in the rain:
From a farm wood smoke.
Wet earth here
And here you are again. 

I spoke with Russian Minister of Defense Sergey Shoygu today for the first time since February 18th. I urged an immediate ceasefire in Ukraine and I emphasized the importance of maintaining lines of communication.

The war in Ukraine is quintessentially Clausewitzean. And to understand it, we need to return to Carl von Clausewitz, the doyen of modern war, who recognised that war is practically limitless in variety, “complex and changeable,” and noting that every age has its particular kind of war with “its own limiting conditions and its own particular preconceptions.” 

Evidently, the Russian side did not conform to the Western narrative. The ensuing bewilderment threatens to fragment western unity. Not all NATO countries are anymore speaking in one voice. 
The US President Joe Biden and Britain’s Boris Johnson vow that they will be satisfied with nothing less than a Russian defeat. 

The New Europeans — Poland and the Baltic States principally — also demand an apocalyptic end to Russia’s history. 

Somewhat aloof stands Germany’s chancellor Olaf Scholz who merely says he doesn’t want Russia to “win.” 

France’s Emmanuel Macron keeps saying that without engaging Russia, European security architecture cannot be built. 

Then, there are outright sceptics like Greece, Turkey and Hungary. 
Biden and Johnson have the upper hand since they manipulate the current set-up in Kiev and leverage the war. 

But even these two hardened politicians seem to realise lately that things are more complicated. 

The Joint Vision Statement issued in Washington yesterday following the US-ASEAN special summit completely eschews the usual American rhetoric and hyperbole over Russian “aggression.”
It omits any references to Russia or the Western sanctions and instead underlines “the importance of an immediate cessation of hostilities and creating an enabling environment for peaceful resolution.” 

Nonetheless, incredible as it may seem, the fact remains that the US Congress is offering Biden a massive war budget to help Ukraine, which exceeds the state department’s annual budget and is more than what he proposes to spend on green energy projects in the US. 
Equally, the EU, which imposed such harsh sanctions on Russia, are realising belatedly that the sanctions are hurting European economies more than the Russian economy. 

In some European countries, the annual rate of inflation is approaching 20%, while prices in the eurozone increased by over 11%, on average.
Yet, Russia has no timeline for this war. It is taking its own time to systematically destroy Ukraine’s military capabilities, industrial base and infrastructure comprehensively. 

Biden and Johnson thought attrition would set in, as Russia is fighting the “collective West,” after all.  
The EU’s top executives, Commission president Ursula von der Leyen and foreign policy chief Josep Borrell, two ardent Atlanticists and hardcore Russophobes, pushed the envelope too far. 

Will EU unity survive these cracks? Scholz’s call to Putin Friday, which reopened a line of communication after several weeks, needs to be understood against this backdrop. 

Interestingly, US Defence Secretary Lloyd Austin also spoke with his Russian counterpart Sergey Shoigu on Friday — their first conversation since Russian operations began in February. 

Politicians like Biden and Johnson are used to thinking in terms of a Westphalian world, and are taking time to come to terms with anomalies in the existing paradigm when new powerful trends are dramatically altering the concept of war. 
Karl Marx called it the “annihilation of space by time.” The phenomenon of regional conflict has become extinct, and localised violence has global implications thanks to advancement of transportation and communication and technologies. 

The paradigm-shifting present period is caused by a military-industrial revolution, which makes it a period of sharp, discontinuous change where existing military regimes are being upended by new more dominant ones, leaving old ways of warfare behind. 
One would have thought that on a Clausewitzian battlefield, ancient armies arrayed against one another would fire and manoeuver according to the commander’s directions. 

But in Ukraine, by contrast, these have been replaced with ambient forms of physical and nonphysical violence—sniping, lethal drones, hypersonic missiles, electronic attack, spoofing, disinformation on the other and so on. 

Russia is practising a warfare that the West is not used to — where wars aren’t won anymore. It is highly unlikely that there will be a ceremonial occasion bringing the Ukraine war to an end

Parallels between central banks and helicopters are not uncommon: Milton Friedman played with the theme (“helicopter drops of money”) and Chair Ben Bernanke earned a helicopter-themed moniker (“Helicopter Ben”). But then, consider...
...that helicopters are just vehicles. In helicopter analogies, it’s not the vehicle, but their payloads that matter, and payloads can be either money or volatility...
As we discussed in our “Volcker Moment” dispatch on February 16th (see here), there is a strong policy case for the Fed to inject volatility into markets in order to control domestic services inflation (and demand for labor more broadly) through asset prices – stocks, housing, and crypto assets too. 

Then on April 6th, Bill Dudley, the former president of the Federal Reserve Bank of New York, argued that for hikes to be effective, financial conditions have to tighten more – a lot more. 

If that wasn’t clear enough, the former vice chair of the FOMC closed by saying: “one way or another, to get inflation under control, the Fed will need to push bond yields higher and stock prices lower”. The message could not be clearer.
A former vice chair of the FOMC arguing that the Fed needs to shock markets is as close as we will ever get to a former Fed policymaker endorsing the need for a “Volcker Moment”. 

And it’s good to share a conviction with Bill Dudley – the last time we shared a strong conviction was when he asked me to visit him for an interview during the summer of 2008 to join the Markets Group of FRBNY in response to a brief note I sent him describing my concerns about the plumbing. 

It was a formative experience: sitting across a market legend, finishing each other’s half sentences about shared convictions about “skeletons in the closet”.
In today’s dispatch, we’ll explore five topics: first, the Fed call versus the Fed put; second, monetary heroes and anti-heroes; third, the Fed’s impossible trinity and what gives; fourth, the need to “invert” our thinking about recession risks; and fifth, the Fed’s options to inject more volatility to tighten financial conditions.

Our aim today is to highlight the risk that we might be dealing with a Fed that won’t be intimidated by curve inversions and asset price corrections, but will be emboldened by them to do more – a Fed that pushes against a curve inversion by hiking more than what’s priced today to tighten financial conditions further, despite recession risks or perhaps even with a (covert) recession goal in mind in order to maintain price stability. 

To understand our thought process, and to understand the volatility you see on your screens – a volatility by design that is a desired outcome for the Fed – please consider the following observations.
First, as we argued here, the Fed is now in the business of writing a call option on risk assets – not just stocks, but housing and crypto as well. 

Whether we think of the FOMC’s target level for the stock market and financial conditions as a call option or still as a put option just with a lower strike price is semantics. 

The big question of course is that if the Fed is indeed writing a call option, what is the level that it targets? 

Does the Fed want to see the S&P give up only a part of its post-Covid gains or all of them? 

Or does the Fed want to wipe off some of the gains that accumulated before the pandemic? More on this later...
Second, if one of Jay Powell’s professional heroes is the legendary Paul Volcker, it must be that one of his professional “anti-heroes” must be Ben Bernanke, at least in a cyclical sense. 

Allow me to explain: the “art” of Quantitative Easing (QE) was forged under Bernanke’s stewardship, and the original aim of QE was to reflate in order to avoid deflation: reflating house prices, reflating stocks, and reflating the price level were the goals. 

Asset price growth was a target and positive wealth effects were a target too to generate growth and jobs. 

Looking back, QE was essentially monetary policy for the asset rich, with trickle-down benefits for the less wealthy. 

We’ve had several rounds of QE, and during the most recent round, we combined QE with fiscal policy and the government implemented Friedman’s notion of “helicopter drops of money”. 

Something changed. Inflation got high. Some inflation is coming from abroad, but some is coming from home (services). 

No one knows how to slow it down, but one thing is blatantly obvious: fiscal QE was too much and traditional QE is no longer appropriate. 

If the origin of QE is to lean against deflation by generating asset price inflation (positive wealth effects), leaning against inflation must involve generating asset price deflation (negative wealth effects) – the core of Bill Dudley’s arguments. 

If the great Paul Volcker is the cyclical hero, the great Ben Bernanke must be the cyclical “anti-hero”. 

The message is quite clear: QE overstayed its welcome; we need a round of negative wealth effects; we need “shock therapy”; we need a “Volcker Moment”.
Third, a note on the Fed’s mandates. Since we first wrote about the need for a “Volcker Moment” one thing became quite clear from the Fed’s communications: the Fed has a singular mission, which is slaying inflation. 

Central banking with a multitude of mandates is a bit like the life of a working parent: it is impossible to deliver 110% at work, 110% at home playing with Barbies or doing dishes, and 110% at the tennis court as well (if you are lucky to find the time to play). It’s an impossible trinity, but we are trying to do our best. 

Fourth, the market is ripe with narratives about whether rate hikes and commodity price spikes will tip the U.S. into recession. 

I find it puzzling that some argue that the reason why there won’t be a recession is because household and business balance sheets (and in the case of businesses, profits) are so strong. I think the opposite. 

There can be a recession precisely because balance sheets are so strong, and if we follow the line of argument above, strong balance sheets mean the Fed needs to lean against the wind harder to shock demand lower. 

If low rates, QE, and low volatility healed balance sheets, the opposite will hurt balance sheets – by design. 

The negative wealth effect means pain for balance sheets. As Charlie Munger said: “Invert. Always invert”. Strong balance sheets are a “cyclical bad”, not a “cyclical good”. It means more discipline from the Fed. 

More hikes and more volatility injected by the Fed – by design – until financial conditions tighten more and demand slows enough.
Fifth, how is the Fed going to inject volatility? 

and shifting from passive QT to active QT, where the Fed controls the amount of duration each dollar of balance sheet shrinkage delivers into the market, as opposed to the refunding decisions of the Treasury. 

In our “Volcker Moment” piece, we argued for the Fed to do the latter, but the former (verbal) strategy is working wonderfully for the moment. Yields and mortgage rates are higher, stocks are lower, but a comment from President Daly just crossed my screen:
*DALY: WANT TO SEE MORE TIGHTENING OF FINANCIAL CONDITIONS
So we are not quite there yet. As one astute market participant once told me: “volatility is the best policeman of risk assets”. 

Former Federal Reserve Bank of New York President Bill Dudley said the U.S. central bank should stop “sugarcoating” its message on how high interest rates need to go -- and how much pain that will cause -- to get inflation under control.
“I think it’s 4 to 5 (percent) or higher,” Dudley said in an interview with Bloomberg Surveillance on Wednesday on how high the Fed should raise interest rates to cool price pressures. 

Data released earlier on Wednesday showed that consumer prices rose by more than expected in April with the core gauge, which excludes food and energy, increasing 0.6% from a month earlier and 6.2% from April 2021.

The Fed raised rates by a half percentage point last week, to a target range of 0.75% to 1%, and Chair Jerome Powell signaled it would hike by similar amounts at its next two meetings while leaving the door open to doing more if needed. 

Officials say they think they can soft-land the economy and avoid a recession or sharp rise in the jobless rate, but Dudley argued this message could do more harm than good.

This uncertainty is feeding volatility and a sell-off in equities and crypto assets.
And that is a good thing...
...from the perspective of a Fed that wants to see financial conditions tighten. The Fed is keeping the market on the edge. 

As we argued back in February (see here), the best thing the Fed could do to achieve its goals is to “stop talking”: hike 50 bps and sell $50 billion of 10-year notes the day after, and put an end to press conferences – to keep the market on its toes and keep ‘em guessing.
Our message today is this:
Consider the possibility that the Fed, on a singular mission to slay inflation, won’t rest in its pursuit of tighter financial conditions until yields shift higher, stocks fall more, and housing turns as well. 

The crypto sell-off is just an unexpected bonus, albeit one to watch for spillovers into STIR markets through the “par problems” of some stablecoins. 

A Fed that is writing a call option of the stock market needs to see a deeper correction, a correction big enough to slow demand and push unemployment higher. 

We have never achieved a soft landing, so let’s not pretend that the fastest pace of hikes in a generation and an unprecedented shrinkage of the balance sheet will yield one.
As I see it, the risk of recession, whether it is real or merely implied by an inversion of the yield curve, won’t deter the Fed from hiking rates higher faster or from injecting more volatility to build up negative wealth effects, and signs of a recession might not mean immediate rate cuts to ramp demand back up...
...cuts may have to wait until the Fed is certain that inflation is surely dead.
Back to the level of the stock market under the Fed call.
According to President Daly’s comments, the recent stock market correction and the rise in mortgage rates is “great”, but not enough (“want to see more”). 

Chair Powell also noted in his press conference that he wants to see further tightening in financial conditions still. 

At face value, that implies that the Fed won’t stop shaping expectations until we see more damage to stocks and bonds.
Rallies could beget more forceful pushback from the Fed – the new game...
We won’t provide a target for stocks. Our dispatches are about providing a framework for an investor to think about all the noise and volatility that they see on their screens at the moment. 

Our message is that all the noise and volatility is by design and is probably welcomed by the Fed and that the Fed will boldly fan more of it. What’s the Fed’s target for the S&P in light of all of the above?
At 4,000, the Fed does not seem content, and in the grand scheme of things, this is where the Fed would change its tune if it would still be writing a put. 

At 3,500, we would have lost all of the post-pandemic gains in market wealth, but that level for stocks still feels like a put option, just with a lower strike price. 

At 2,500, we would lose not only all of the post-pandemic gains, but would eat into some of the pre-pandemic gains too.

 And if something indeed happened to the supply of labor post-pandemic (and some of that is wealth related), then to cool price pressures, maybe a pre-pandemic wealth level is appropriate indeed.
Stocks of course are not the only egg in the proverbial wealth basket. Housing and crypto assets are in the basket too, and wealth declines there should determine how much damage will need to be done to stocks, that is, how much more financial conditions will have to tighten. 

It’s blatantly clear that this is not an average business cycle. This is not an average inflation backdrop. And this is not an average hiking cycle. 

And this is not about whether balance sheet health and low debt service costs serve as hedges against a recession, but whether balance sheet health and low debt service burdens mean much more pain for stock and bonds – by design – as the Fed tries to slay demand materially.
Lastly, another image and a quote from Apocalypse Now. The below scene follows immediately after the helicopters released their payload on the village. Lieutenant Colonel Bill Kilgore surveys the village and says to a fellow soldier...
Kilgore: Smell that? You smell that?
Lance: What?
Kilgore: Napalm son. I love the smell of napalm in the morning...
Volatility is like napalm for risk assets. 

Consider at least the possibility that the extreme volatility and lack of liquidity you see in markets is by design, and the Fed will not be deterred by it, but rather that it will be emboldened by it in its singular pursuit of price stability. 

If an asset price correction is a desired outcome of hikes, and a big slowdown in growth is necessary to slay inflation, the more the curve inverts on the Fed, the harder it will push back against it.
Again, if this was a “monetary motion picture”...
...Bill Kilgore’s character played by Robert Duvall would be my perfect image of a monetary hero – in the cyclical sense. 

We need to at least start thinking about learning to think that the “Fed loves the smell of volatility in the morning”.
Talk of 75 bps is like Wagner’s Ride of the “Volkyries” playing full blast...
Chair Powell remarking at the latest press conference that “we need to look around and keep going if we don't see that financial conditions have tightened adequately, or that the economy is behaving in ways that says [...] that we're not where we need to be” is like the Ride of the “Volkyries” on full blast too...
Ah, that will never happen because it sounds like a wealth grab you say...
De-basing comes in many shapes and forms. President Roosevelt did it with gold – he made everyone sell gold to the Fed at $20.67 per ounce in 1933, and then in 1934 the government’s price of gold was increased to $35 per ounce, i.e., the dollar was devalued. 

President Nixon closed the gold window for good. Chair Bernanke reflated stock prices. 

We see Chair Powell as trying to deflate them, and that he will keep pushing against rallies and curve inversions until he succeeds.
Finally, consider the fact that the White House is backing the inflation fight...
As President Biden remarked earlier this week, “inflation is a challenge for families across the country and bringing it down is my top economic priority; [...] this starts with the Federal Reserve; [...] I will never interfere with the Fed’s independence [...] and I agree with what Chairman Powell said last week that the number one threat to [the economy] – is inflation”. 

(Bloomberg) -- Surging international food prices will hit Africa’s economies the hardest and may trigger social unrest if governments fail to cushion the blow, according to a report by Oxford Economics Africa.
Food has a heavier weighting in the inflation baskets of African nations than advanced economies -- often exceeding 25% due to purchasing patterns. 

Some countries including Ethiopia, Zambia, Sudan, and Nigeria have food weightings above 50%, economists Jacques Nel and Petro van Eck said in a research note.
The war in Ukraine, bans on food exports such as palm oil, supply-chain glitches and a drought curbing the US wheat crop have sent prices skyrocketing. 

In March, the UN’s FAO food price index soared 13%, the fastest on record, before easing slightly in April.
Higher food prices coupled with soaring fuel bills and rising unemployment make for a volatile political environment on the continent and have prompted governments to react even at the expense of fiscal consolidation, said Nel and van Eck.
Egypt and Nigeria have delayed plans to end costly food and fuel subsides while Morocco, Kenya, and Benin have increased minimum wages. 

South Africa has extended monthly stipends for the jobless and cut its general fuel levy for two months.
Nations that have had their fiscal wings clipped and are unable to provide significant support however, such as Ghana and Tunisia, may face a popular backlash, the authors said.
Data on Wednesday showed Ghana’s inflation rate climbed to an 18-year high in April fueled by food-price growth that surged to 26.6% compared with a year earlier.
Moody’s Investors Service said it expects higher social and political risks over the next 18 months in the Middle East and Africa due to the sustained global food and energy-price shock.
“Although the region may receive some aid from the international donor community, aid is unlikely to fully shield vulnerable households given the likely shortages of basic food staples like cereals,” said Aurelien Mali, a VP-Senior Credit Officer at Moody’s and one of the authors of the report.
Lebanon, Mozambique, Togo, Jordan, Tunisia and Namibia are among the most susceptible to political unrest, given their high import dependency on oil and food, low incomes and already elevated social risks, Moody’s said.

Food prices are soaring at a record pace, rising another 13% in March. @lisaabramowicz1

“But it is a curve each of them feels, unmistakably. It is the parabola They must have guessed, once or twice -guessed and refused to believe -that everything, always, collectively, had been moving toward that purified shape latent in the sky, that shape of no surprise, no second chance, no return.’’

A liter of gasoline will retail at 150.12 shillings ($1.29) in the capital, Nairobi, while diesel prices increased 4.4% to 131 shillings per liter effective May 15, the Energy and Petroleum Regulatory Authority said in an emailed statement. Kerosene jumped by 5.50 shillings to 118.94 shillings a liter.

“The government will utilize the petroleum development levy to cushion consumers from the otherwise high prices,” the agency said.
That’s the highest fuel has touched since Kenya began setting the price of gasoline, diesel and kerosene in December 2010.
Rising fuel prices have been a leading contributor to price growth in East Africa’s biggest economy in the past year, but its effect on inflation had been contained by a stabilization fund that has seen consumers pay artificially low prices.
Kenya’s inflation rate reached a six-month high in April of 6.5% on rising food and fuel prices.
Without the cushion, gasoline would retail at 176.47 shillings per liter from May 15, while diesel would be 174.94 shillings in the capital, according to the regulator.
In the 13 months to April, Kenya pumped about 49.2 billion shillings into subsidies to offset the impact of the war in Ukraine, the energy ministry said in a report tabled in National Assembly last month.
Kenyan consumers pay 5.40 shillings per liter of gasoline and diesel toward the stabilization fund, which has been used to tame prices and keep inflation within the central bank’s targeted range of 2.5% to 7.5%.
Global oil prices continue to rally as a squeeze on refined products push prices higher. 

Diesel exports from Russia fell sharply in April from their prewar level as some buyers seek to punish one of the world’s biggest suppliers.

Par Value:                  1/-
Closing Price:           20.75
Total Shares Issued:          228055504.00
Market Capitalization:        4,732,151,708
EPS:             2.49
PE:                 8.333

Sasini Group reports HY 22 Earnings through 31st March 2022 versus HY through 31st March 2021

HY Revenue 3.346701b versus 2.024023b +65.3% 

HY [Losses]/ Gains arising from changes in fair value of biological assets [45.687m] 

HY results from Operating Activities 547.677m versus 177.890m

HY Finance Income 44.406m versus 30.644m

HY Profit before Tax 582.643m versus 191.861m

HY Profit for the period 421.371m 122.207m

HY EPS 1.84 versus 0.52

HY Interim Dividend Sh1 vs Sh0.5 last year

Conclusions 

strong Earnings.