Big Fed call from Barclays - now sees 75 bps hike next week. @ReutersJamie

"We think the US central bank now has good reason to surprise markets by hiking more aggressively than expected in June... We have also lifted our forecast for the terminal rate by 25bp, to 3.00-3.25%, in early 2023."

The last time the Fed raised rates by 75 bps was in November 1994, and the last time before that was in 1984. @ReutersJamie

Market still going along with Fed's clear guidance for 50 bps hike next week, but CME's Fedwatch tool now showing nearly 20% probability of 75 bps.

Conclusions

The Tequila crisis in 1994

The crawling peg of the Mexican peso (figure 1) is under fire. Not only does the US Federal Reserve raise its policy rate by 250bps during this time span, Mexico also suffers from political homocides in the lead-up to the presidential elections later that year. 

Foreign exchange reserves therefore decline rapidly (figure 3). In April, to stop the outflow of foreign currency, the Mexican government issues short term dollar denominated debt, called tesobonos. 

As investors buying the tesobonos are protected for a potential devaluation of the peso, the outflow of foreign currency stops, while the foreign exchange rate stabilizes. 

However, in November USD 3bn is pulled out of the country, of which USD 1.6bn on a single day (18 November).

The U.S. bond market delivers a Fed rate hike in a single day - the 2-year yield jumps 25 bps, the biggest one-day rise since June 2009. @ReutersJamie

However, that trend could reverse if, after two more 50 basis-point hikes, the Fed blinks and stops hiking or even cuts rates in the fall. @opinion @nfergus 

14-FEB-2022 :: the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond this is a Super Bubble that is going to burst big.

The ostrich economy is heading for a reckoning @NewStatesman @willydunn

Druckenmiller Warns ‘Bear Market Has a Ways to Run’ as Fed Hikes Rates @business via @YahooFinance 

Stanley Druckenmiller has a warning for Wall Street: The sharp decline in the stock market isn’t over just yet.
“My best guess is that we’re six months into a bear market,” Druckenmiller, who runs Duquesne Family Office, said Thursday at the 2022 Sohn Investment Conference. 

“For those tactically trading, it’s possible the first leg of that has ended. But I think it’s highly, highly probable that the bear market has a ways to run.”
The Nasdaq Composite Index has dropped more than 20% from its previous peak -- the traditional definition of a bear market.

While the S&P 500 came within points of that threshold intraday on May 20, a late afternoon rally technically kept the bull market intact for the benchmark, which has since rebounded 3%.
The catalyst for additional losses is that the Federal Reserve has turned aggressive about tackling the highest inflation in decades. That will likely lead to a recession at some point in 2023, Druckenmiller said.
About a year ago, he said the central bank’s policy was totally inappropriate and that “we are in a raging mania in all markets.”
“That period was incredibly costly, because a lot of assets were purchased during that period that a lot of people moving out the risk curve will lose a lot of money on,” said Druckenmiller, 68, who managed money for billionaire George Soros for more than a decade.
Greenlight Capital’s David Einhorn, appearing at the same conference, said inflation is the big problem and that it’s likely to persist, in part because of under-investment in things such as cement, housing, mining oil and paper.
Over the past six to eight months, Druckenmiller said he has bet against fixed income and stocks, avoided doing much with currencies and owned key commodities such as oil, gold and copper. 

During the first quarter, Duquesne exited shares of Google parent Alphabet Inc., Airbnb Inc. and Carvana Co., while adding to its position in Chevron Corp., regulatory filings showed last month.
Because US Treasury yields are so much lower than inflation, he said he’s not confident bonds will hold up in a downturn as they have in the past. So he’s largely taking a break from trading for now.
“While I’m not comfortable owning bonds, I’m much less comfortable being short fixed income to the degree I was three to six months ago,” he said. 

At the same time, “I’ve lived through enough bear markets that if you get aggressive in a bear market on the short side, you can get your head ripped off in rallies.”
Still, Druckenmiller expects to short stocks again if the market presents the right opportunity. He also said he’s looking to bet against the dollar sometime in the next six months.
“If you’re predicting a soft landing, it’s going against decades of history,” he said.

Chinese Defense Minister Wei Fenghe held talks with his US counterpart Loyd Austin in Singapore @StarboyHK

China vows ‘fight to the end’ to stop Taiwan independence @hkfp

“We will fight at all cost, and we will fight to the very end,” Defence Minister Wei Fenghe said. 

“No one should ever underestimate the resolve and ability of the Chinese armed forces to safeguard its territorial integrity.”

“Those who pursue Taiwanese independence in an attempt to split China will definitely come to no good end,” he added.

Wei urged Washington to “stop smearing and containing China… stop interfering in China’s internal affairs and stop harming China’s interests”.
But he also struck a more conciliatory tone at points, calling for a “stable” China-US relationship, which he said was “vital for global peace”.
During his address, Austin stressed the importance of “fully open lines of communication with China’s defence leaders” in avoiding miscalculations.
The pair held their first face-to-face talks on the sidelines of the summit in Singapore on Friday, during which they clashed over Taiwan. 
“Some big power has long practised navigation hegemony on the pretext of freedom of navigation,” he said. 

“It has flexed its muscles by sending warships and warplanes on a rampage in the South China Sea.”

Ukraine is running out of ammunition as prospects dim on the battlefield @washingtonpost 

SLOVYANSK, Ukraine — The euphoria that accompanied Ukraine’s unforeseen early victories against bumbling Russian troops is fading as Moscow adapts its tactics, recovers its stride and asserts its overwhelming firepower against heavily outgunned Ukrainian forces.

08-FEB-2021 ::  The Markets Are Wilding Title: Bar, Las Vegas, Nevada Artist: Robert Frank

27 NOV 17 :: Bitcoin "Wow! What a Ride!".  #Bitcoin

T.S Eliot said in The Hollow Men 

Between the idea
And the reality
Between the motion
And the act
Falls the Shadow
For Thine is the Kingdom.

There are many cryptocurrency schemes which are sold on the same grounds as the greatest South Sea Bubble prospectus: 

“For carrying on an undertaking of great advantage, but nobody to know what it is.”
Let me leave you with Hunter S. Thompson, “Life should not be a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming “Wow! What a Ride!”

Anybody can be decisive during a panic It takes a strong Man to act during a Boom. VS NAIPAUL

“The businessman bought at ten and was happy to get out at twelve; the mathematician saw his ten rise to eighteen, but didn’t sell because he wanted to double his ten to twenty.”

The results of a series of municipal by-elections earlier this month showed what the future may hold for the party that led South Africa’s people to freedom. The ANC’s share of the vote has slumped.

The robbery that could derail Ramaphosa’s presidency @thecontinent_

The biggest scandal of President Cyril Ramaphosa’s presidency erupted this week amid claims that $4-million in cash was stolen from his Phala Phala farm in 2020 – and that he used the power of his office to cover up the crime.
Ramaphosa admits that a robbery took place, but says a lesser amount was stolen. 

He denies claims of a cover-up and money laundering. 

He says the cash came from “the proceeds from the sale of game”. 

The president, a longtime buffalo and ankole cattle aficionado, is known to trade the animals.
The allegations arrive at a bad time for Ramaphosa, and cast some doubt on the future of his presidency. 

Already weakened due to criticism of his handling of the pandemic and a growing economic crisis, he faces a leadership challenge at the ruling African National Congress (ANC) conference in December.
The scandal was made public on Sunday, following a criminal complaint that was laid by former spy chief Arthur Fraser – one of former president Jacob Zuma’s political allies. 
In a 48-page witness statement, Fraser alleged that a gang of Namibians living in South Africa, working in cahoots with Ramaphosa’s domestic worker, broke into Ramaphosa’s Phala Phala game farm in the Limpopo province in February 2020 to steal more than $4-million hidden in couches and mattresses.
According to Fraser: “The mere fact that Ramaphosa had large undisclosed sums of foreign currency in the form of US$ concealed in his furniture at his Phala Phala residence is prima facie proof of money laundering.”
In Fraser’s version of events, Ramaphosa also sought help from Namibia’s President Hage Geingob to find the suspects, using unofficial channels. 

He then quashed any official investigations and paid off the criminals to buy their silence.
Namibian authorities have denied these allegations. South African police have said that they are looking at the claims, as is normal.

There is no legal obligation for Ramaphosa to report the robbery at his farm, which makes money from game auctions.

 Good news: #FDI to Africa was $83 billion in 2021. Not good: 45% was due to just one deal in South Africa. @CelestinMonga

Bad news: Illicit financial flows out of Africa is $88 billion a year.
Most of Africa’s own savings is kept abroad earning low or negative returns.

Bola Tinubu, the former governor popularly known as ‘the godfather of Lagos’, has been chosen as the ruling party’s candidate for president in next year’s election. @thecontinent_

Seventy-year-old Tinubu beat 13 other candidates in the primaries. “I am a thinker and I am a doer,” said Tinubu as he accepted the nomination. 

“We will create wealth. We will turn Nigeria around. It will be our Eldorado.”

 First, though, he will have to defeat opposition leader Atiku Abubakar next February.

Misdiagnosis drives Africa’s terrorism problem @thecontinent_ @SolomonADersso @thecontinent_

Across the continent, attacks and deaths as a result of terrorism rose 400% and 237% respectively between 2012 and 2020. This is according to the African Union’s Algiers-based Centre for the Study and Research on Terrorism.

Groups identified as terrorists are now present in every region of Africa. The Global Terrorism Index in March said 18 countries on the continent are affected by terrorism.

esponding with force to stop terrorist attacks is the default response across most of the continent.
In his recent visit to West Africa, the United Nations secretary general said: “Operating in these circumstances ... calls not for a peacekeeping force, but a strong force to enforce peace and fight terrorism.”
He said a force “from the African Union” was needed, backed by a chapter seven mandate from the UN Security Council and “an obligatory financing”.
But this does not solve the problems that drive terrorism.

Amani said that countries are focused on responding to violence – the symptom of the problem – instead of the “political and socio-economic pathologies” that constitute the core of the problem.

There are two aspects to this misdiagnosis.
The first is the thinking that terrorist groups are the main the problem. 

The second is that these groups are mainly ideologically driven by global jihad.
The reality, according to the report, is that terrorist groups are complex socio- political entities that are embedded in, and feed on, local political, social and security dynamics. 

The grievances and vulnerabilities that these produce on the part of affected communities are the conditions that precipitate the emergence and growth of terrorist groups.
Such misdiagnoses also lead to faulty policy responses.
The Amani Africa report advocates for a human security based approach. 

This puts affected communities at the core of any policy and intervention – seeking to resolve their grievances and the conflict dynamics of which terrorist groups are a part, thereby prioritising a multipronged strategy focusing on governance reforms and development and humanitarian interventions.

The election is scheduled for 9 August. @thecontinent_

There are 246,465 dead people on Kenya’s voters’ roll, said the country’s electoral commission. 

That’s according to an audit by KPMG, which also found that nearly half a million voters had duplicate records and more than 226,000 people were registered with someone else’s documents.

Kenya's government bond slump

A JPMorgan index of Kenya's Eurobonds has plummetted 21% in the past six months, compared to a 14.8% drop for African bonds and a fall of almost a third for Ghana.
At a JPMorgan conference on May 25, Kenyan authorities said they were looking at "financing from multilateral and bilateral partners while syndicated loans may also be an option in the near-term," said JPMorgan frontier markets strategist Ayomide Mejabi.
At 0910 GMT on Friday, Kenya's 2032 Eurobond was trading with a yield of 12.251%, according to Tradeweb data, up 26 basis points from the previous close. 

The yield on its 2028 bond was 12.662%, up 33 basis points.
Eurobond investors cited a pledge by presidential candidate Raila Odinga earlier this week to restructure Kenya's debt as an additional factor putting the bonds under pressure, on top of inflation and rising U.S. interest rates.
However, they said they weren't immediately concerned about its ability to repay its debts.
"Kenya's debt affordability pressures are not yet as acute as some other high yielding names," Scott Fleming, an asset manager at Fideuram, told Reuters by email.
"We need to get through the election, we need to get the winner to reassure markets, then things can start to normalise again," Abrdn emerging market debt investment director Kevin Daly said.