Zerohedge

How do investors’ return expectations differ from those of advisors? How does this expectation gap shift across countries?

Despite 2022 being the worst year for stock markets in over a decade, investors around the world appear confident about the long-term performance of their portfolios. These convictions point towards resilience across global economies, driven by strong labor markets and moderating inflation.

While advisors are optimistic, their expectations are more conservative overall.

In the following graphic, Visual Capitalist’s Dorothy Neufeld shows the return expectation gap by country between investors and financial professionals in 2023, based on data from Natixis.

Expectation Gap by Country

Below, we show the return expectation gap by country, based on a survey of 8,550 investors and 2,700 financial professionals:

Investors in the U.S. have the highest long-term annual return expectations, at 15.6%. The U.S. also has the highest expectations gap across countries, with investors’ expectations more than double that of advisors.

Likely influencing investor convictions are the outsized returns seen in the last decade, led by big tech. This year is no exception, as a handful of tech giants are seeing soaring returns, lifting the overall market.

From a broader perspective, the S&P 500 has returned 11.5% on average annually since 1928.

Following next in line were investors in Chile and Mexico with return expectations of 15.1% and 14.7%, respectively. Unlike many global markets, the MSCI Chile Index posted double-digit returns in 2022.

Global financial hub, Singapore, has the lowest expectations gap across countries.

Investors in the UK and Europe, have the most moderate return expectations overall. Confidence has been weighed down by geopolitical tensions, high interest rates, and dismal economic data.

Return Expectations Across Asset Classes

What are the expected returns for different asset classes over the next decade?

A separate report by Vanguard used a quantitative model to forecast returns through to 2033. For U.S. equities, it projects 4.1-6.1% in annualized returns. Global equities are forecast to have 6.4-8.4% returns, outperforming U.S. stocks over the next decade.

Bonds, meanwhile, are forecast to see 3.6-4.6% annualized returns for the U.S. aggregate market, while U.S. Treasuries are projected to average 3.3-4.3% annually.

While it’s impossible to predict the future, we can see a clear expectation gap not only between countries, but between advisors, clients, and other models. Factors such as inflation, interest rates, and the ability for countries to weather economic headwinds will likely have a significant influence on future portfolio returns.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A Florida real estate agent this week testified in former President Donald Trump’s civil fraud trial in New York that his Mar-a-Lago property is worth at least $1 billion.

Lawrence Moens, who was called as a witness by the defense, testified that the Florida property could be sold as a home, saying he would value it at over $1 billion as of 2021.

“It’s something breathtaking. It’s something amazing to see,” he said of Mar-a-Lago, adding that he had valued it at over $1.2 billion in 2021. He also told the court that President Trump’s company had actually undervalued Mar-a-Lago by about half.

Mr. Moens’s valuation assumes that Mar-a-Lago is a personal residence, a premise that a judge already has rejected in the ongoing civil fraud trial.

“I work very hard to sell rich people property in Palm Beach,” testified Mr. Moens. “I’m on the front lines every day of selling properties, and I have a pretty good handle on what’s happening in the market.”

Spanning 17 acres with waterfront on two sides, the Trump estate and social club is his home, a place where the former president and current Republican 2024 front-runner has conducted high-profile meetings while in and out of office, and the spot where federal special counsel Jack Smith alleges he improperly stashed classified documents, which President Trump denies.

Mar-a-Lago also is a key element of the current New York civil case. State Attorney General Letitia James’ lawsuit claims that the ex-president and his company deceived lenders and others by giving them financial statements that greatly overstated the values of some of his prime assets, including Mar-a-Lago.

Testifying for Trump’s defense, a Florida real estate attorney said the property could be sold as a home, notwithstanding decades-old legal documents in which Trump said he intended to forswear its use as anything but a club. Then a Palm Beach luxury real estate broker testified that he’d value the historic estate at over $1 billion as of 2021.

Judge Arthur Engoron, in a pretrial ruling declaring that Trump and his company engaged in fraud, found that he exaggerated Mar-a-Lago’s worth by as much as 2,300 percent, compared to the Palm Beach County tax appraiser’s valuations. They ranged from $18 million to $28 million.

However, some real estate professionals who aren’t involved in the case expressed concern about the judge’s ruling several months ago, suggesting that he made an error by relying solely on the tax appraiser’s valuations.

Some Palm Beach luxury real estate agents have told The Associated Press that the property would sell for $300 million to $600 million, and possibly $1 billion or more if it sparked a bidding war among uber-wealthy contenders.

During a short cross-examination Tuesday, state attorney Kevin Wallace asked whether he was a member of the Mar-a-Lago club. “I am,” Mr. Moens said, saying that he joined in 1995 or 1996. “I don’t go too often. I don’t like clubs,” he added.

“You’re not running a process that is re-creatable … is that fair?” Mr. Wallace asked about his valuations of Mar-a-Lago. “That’s fair,” Mr. Moens said.

In a pre-trial deposition over the summer, Mr. Moens had said that he “could dream up anyone from Elon Musk to Bill Gates and everyone in between” to purchase Mar-a-Lago. “Kings, emperors, heads of state.” “If they want the best house in the country, that would be one of the top two or three that would be available if they were for sale,” he added.

“I wish he’d let me sell it, but it’s not for sale,” he said.

Another defense witness, Miami-based real estate attorney John Shubin, also testified that “there is absolutely no prohibition on the use of Mar-a-Lago as a single-family residence.”

He noted that the property is simultaneously a club and President Trump’s residence. Mr. Shubin also pointed to a 1993 agreement between the former president and the city that said Mar-a-Lago would revert to private residential use if the club were “abandoned.”

This week, President Trump confirmed that he’ll return to the witness stand on Monday in the New York case.

“I will be testifying Monday in this shameful, NO JURY ALLOWED ‘TRIAL,’” he wrote Tuesday in a Truth Social post. Court was not in session Wednesday, and his son, Eric Trump, won’t be testifying.

“I told my wonderful son, Eric, not to testify tomorrow at the RIGGED TRIAL … Eric has already testified, PERFECTLY,” President Trump wrote Tuesday. “So there is no reason to waste any more of this Crooked Court’s time on having him say the same thing, over and over again.”

The Associated Press contributed to this report.

Authored by Jack Phillips via The Epoch Times,

FBI Director Christopher Wray on Tuesday told lawmakers that the United States is facing unprecedented terrorist threats since the start of the Israel–Hamas conflict in October.

“What I would say that is unique about the environment that we’re in right now in my career is that while there may have been times over the years where individual threats could have been higher here or there than where they may be right now, I’ve never seen a time where all the threats or so many of the threats are all elevated, all at exactly the same time,” the FBI director said in a Senate hearing after he was pressed by Sen. Lindsey Graham (R-S.C.) about the threats facing the United States.

In response, Mr. Graham said that the “blinking red lights analogy about 9/11 … all the lights were blinking red before 9/11, apparently.” He then asked the FBI director: “Would you say there’s multiple blinking red lights out there?”

“I see blinking red lights everywhere,” Mr. Wray answered, without elaborating.

The FBI chief’s comments on Tuesday come as Israeli forces stormed southern Gaza’s main city in what they called the most intense day of combat in five weeks of ground operations against Hamas.

In what appeared to be the biggest ground assault in Gaza since a truce with Hamas ended last week, Israel said its forces reached the heart of Khan Younis.

“We are in the most intense day since the beginning of the ground operation,” the commander of the Israeli military’s Southern Command, General Yaron Finkelman, said in Jerusalem.

He said Israeli forces were also fighting in Jabalia, a large urban refugee camp and Hamas stronghold in northern Gaza next to Gaza City, and in Shuja’iyya, east of the city. “We are in the heart of Jabalia, in the heart of Shuja’iyya, and now also in the heart of Khan Younis,” he said.

Previous Remarks

The Tuesday warning comes several weeks after he told lawmakers that the Hamas–Israel war could spark terrorism within the United States and said that Hamas could inspire ISIS-like attacks. Since the start of the conflict on Oct. 7, multiple designated terrorist groups have called for attacks on U.S. targets, he said.

“The actions of Hamas and its allies will serve as an inspiration the likes of which we haven’t seen since ISIS launched its so-called caliphate several years ago,” Mr. Wray said on Oct. 31

At the time, he told lawmakers that Hamas, a State Department-designated terrorist organization, does not have “the intent or capability to conduct operations inside the U.S., though we cannot, and do not, discount that possibility.”

“This is not a time for panic, but it is a time for vigilance,” Mr. Wray added, responding to public fears about potential terrorist attacks. “You often hear the expression if you see something, say something … that’s never been more true than now,” he added, referring to a slogan that has often been used at U.S. transportation hubs and airports in the aftermath of the Sept. 11, 2001, terrorist attacks.

There has also been a rise in incidents targeting Jewish people across the United States, he said, adding that while the White House has expressed alarm reports of incidents at American universities as tensions have prompted university officials to tighten security.

“This is a threat that is reaching, in some way, sort of historic levels,” Mr. Wray said. He said it’s because “the Jewish community is targeted by terrorists really across the spectrum.”

Tensions Rising?

This week, the United States blamed the Houthi terrorist group in Yemen for a series of attacks in Middle Eastern waters since war broke out between Israel and the Palestinian terrorist group Hamas on Oct. 7.

In several recent incidents over the past weekend, three commercial vessels came under attack in international waters in the southern Red Sea. The Houthis acknowledged launching drone and missile attacks against what they said were two Israeli vessels in the area.

The USS Carney, a U.S. Navy destroyer, shot down three drones on Sunday as it answered distress calls from the commercial vessels. The U.S. military says the three vessels were connected to 14 separate nations.

“The Carney took action as a drone was headed in its direction. But again, we can’t assess that the Carney at this time was the intended target,” said Pentagon spokesperson Sabrina Singh.

The Houthi group, which controls most of Yemen’s Red Sea coast, had previously fired ballistic missiles and armed drones toward Israel and vowed to target more Israeli vessels.

The organization was taken off the U.S. State Department’s terror list in 2021. But White House officials have said this week that they are leaving open the possibility of potentially designating the Houthis as a terrorist organization again.

Money-market funds saw another large ($61.5BN) inflow last week. That is the sixth straight week of inflows, adding $290BN in that time to a new record high of $5.9TN…

Source: Bloomberg

In a breakdown for the week to Dec. 6, government funds – which invest primarily in securities like Treasury bills, repurchase agreements and agency debt – saw assets rise to $4.829TN, a $56.1BN increase. 

Prime funds, which tend to invest in higher-risk assets such as commercial paper, meanwhile, saw assets climb to $946BN, a $6.1BN increase

Institutional funds saw the bulk of the inflows once again (+$43BN) while the unbroken trend of inflow into Retail funds continues (+$18.5BN)…

Source: Bloomberg

The resurgence in money-market fund inflows is diverging parabolically from bank deposits (which are basically flat on a seasonally-adjusted basis)…

Source: Bloomberg

Meanwhile, after a small uptick into month-end, November’s exodus from The Fed’s reverse repo facility continued in December…

Source: Bloomberg

While reserve scarcity is not evident quite yet, we did get some angst this week. as SOFR spiked relative to O/N RRP.

For now, The Fed balance sheet contraction accelerated last week, dropping $58.8BN (the biggest weekly decline since September)…

Source: Bloomberg

QT continued with a slight acceleration as ‘securities held’ fell $30.4BN…

Source: Bloomberg

And usage of The Fed’s Bank Term Funding Program (expensive bank bailout fund) exploded higher by $7.8BN (biggest increase since April) to $122BN (a new record high)…

Source: Bloomberg

For banks tapping the Fed’s BTFP, there’s an arbitrage to be deployed where institutions borrow from the facility and park the proceeds in their account at the central bank, according to Bill Nelson, chief economist at the Bank Policy Institute in Washington and a former Federal Reserve economist.

The interest rate on BTFP loans was about 5.18% as of Dec. 1 — one-year OIS swap rate +10bp, while interest on reserve balances is 5.40%

BTFP loans have a term of one-year and the rate is fixed for the term of the loan and can be repaid without penalty, and only backed by securities the bank owned as of March 12

“So borrow from the BTFP, leave the proceeds on deposit at the Fed, and collect the 22bp spread,” Nelson wrote.

If the BTFP rate falls further, banks can repay the loan early and take out a new loan. If IORB falls below the rate on the BTFP loan, institutions can repay the loan

“A similar arbitrage opened up for AMLF loans in May 2009 and the Fed quickly adjusted the program to close it,” he said

And for now, regional bank stocks continue to surge higher as their usage of The Fed’s bailout facility also soars. Is the market betting on a big enough collapse in yields that this $100BN-plus hole in bank balance sheets is miraculously heeled? Just what kind of economic contraction would that take? (and what would that great depression-like scenario do for banks loan books?) Asking for a friend…

Source: Bloomberg

Finally, equity market caps continue to rebound after recoupling with bank reserves at The Fed (as the latter also expands once again thanks to the RRP drawdowns)…

Source: Bloomberg

The Fed’s “temporary” bailout fund is up in March… and at the pace of exodus from the RRP facility, that could be the same time that reserve scarcity starts to rear its ugly head.

For decades, our elite institutions and media have treated free speech as increasingly dangerous.

As Alex Berenson highlights in an excellent summary of the situation, they have used their power to put topics off-limits, especially those that expose racial differences.

Like most evils, censorship metastasizes. Universities now police even the smallest offenses against minority or self-declared marginalized groups.

Last year, Harvard declared “misgendering” – that is, referring to transgender people by the pronouns of their actual birth gender – as a form of abuse.

The year before, Columbia had declared it a fireable offense.

This attitude – this “context,” to use a word heard frequently on Tuesday – is what makes Tuesday’s Congressional testimony by three presidents of elite American universities so shameful, fraught, and hypocritical.

At Harvard, “fatphobia” constitutes violence; but now, as Bari Weiss exclaims (Editor of The Free Press), “globalize the intifada” requires context.

Weiss summarizes the utter farce and hypocrisy on display this week in 240 seconds…

At Harvard, “fatphobia” constitutes violence.
But “globalize the intifada” requires context.

WATCH: pic.twitter.com/tEvg9IVVXS

— Bari Weiss (@bariweiss) December 7, 2023

But, the question is – how did we get here?

Victor Davis Hanson’s latest essay, “How Were The Universities Lost?” lays out the how and the why, and the fact that the Ivy league and their kindred so-called elite campuses may soon go the way of Disney and Bud Light…

After October 7, the public was shocked at what they saw and heard on America’s campuses.

Americans knew previously they were intolerant, leftwing, and increasingly non-meritocratic.

But immediately after October 7—and even before the response of the Israeli Defense Forces—the sheer student delight on news of the mass murdering of Israeli victims seemed akin more to 1930s Germany than contemporary America.

Indeed, not a day goes by when a university professor or student group has not spouted anti-Semitic hatred. Often, they threaten and attack Jewish students, or engage in mass demonstrations calling for the extinction of Israel.

Why and how did purportedly enlightened universities become incubators of such primordial hatred?

After the George Floyd riots, reparatory admissions—the effort to admit diverse students beyond their numbers in the general population—increased.

Elite universities like Stanford and Yale boasted that their so-called “white” incoming student numbers had plunged to between 20 and 40 precent, despite whites making up 68-70 percent of the general population.

The abolition of the SAT requirement, and often the comparative ranking of high school grade point averages, have ended the ancient and time-proven idea of meritocracy. Brilliant high school transcripts and test scores no longer warrant admissions to so-called elite schools.

One result was that the number of Jews has nosedived from 20-30 percent of Ivy League student bodies during the 1970s and 1980s to 10-15 percent.

Jewish students are also currently stereotyped as “white” and “privileged”—and thus considered as fair game on campus.

At the same time, the number of foreign students, especially from the oil-rich Middle East, has soared on campuses. Most are subsidized by their homeland governments. They pay the full, non-discounted tuition rates to cash-hungry universities.

Huge numbers of students have entered universities, who would not have been admitted by the very standards universities until recently claimed were vital to ensure their own competitiveness and prestige.

Consequently, they are no longer the guarantors of topflight undergraduates and professionals from their graduate programs.

Faculty are faced with new lose/lose/lose choices of either diminishing their course requirements, or inflating their grades, or facing charges by Diversity/Equity/Inclusion commissars of systematic bias in their grading— or all three combined.

The net result is that there are now thousands of students from abroad, especially from the Middle East, far fewer Jewish students, and student bodies who demand radical changes in faculty standards and course work to accommodate their unease with past standards of expected student achievement.

And, presto, an epidemic of anti-Semitism naturally followed.

In such a vacuum, advocacy “-studies” classes proliferated, along with faculty to teach them.

“Gender, black, Latino, feminist, Asian, Queer, trans, peace, environmental, and green”-studies  courses demand far less from students, and arbitrarily select some as “oppressed” and others as “oppressors”.  The former “victims” are then given a blank check to engage in racist and anti-Semitic behavior without consequences.

Proving to be politically correct in these deductive gut-courses rather than pressed to express oneself coherently, inductively, and analytically from a repertoire of fact-based-knowledge explains why the public witnesses faculty and students who are simultaneously both arrogant and ignorant.

At some universities “blacklists” circulate warning “marginalized” students which professors they should avoid who still cling to supposedly outdated standards regarding exam-taking, deadlines, and absences.

All these radical changes explain the current spectacle of angry students citing grievances, and poorly educated graduates who have had little course work in traditional history, literature, philosophy, logic, or the traditional sciences.

Universities and students have plenty of money to continue the weaponization of the university, given their enormous tax-free endowment income. Nearly $2-trillion in government-subsidized student loans are issued without accountability or reasonable demands that they be repaid in timely fashion.

Exceptions and exemptions are the bible of terrified and careerist administrators.

Faced with an epidemic of anti-Semitism, university administrators now claim they can do little to curb the hatred. But privately they know should the targets of similar hatred be instead blacks, gays, Latinos, or women, then they would expel the haters in a nanosecond.

What is the ultimate result of once elite campuses giving 70-80 percent of their students As, becoming hotbeds of dangerous anti-Semitism, and watered-down curricula that cannot turn out educated students?

The Ivy league and their kindred so-called elite campuses may soon go the way of Disney and Bud Light.

They think such a crash in their reputations is impossible given centuries of accustomed stature.

But the erosion is already occurring—and accelerating.

At the present rate, a Stanford law degree, a Harvard political science major, or a Yale social science BA will soon scare off employers and the general public at large.

These certificates will signify not proof of humility, knowledge, and decency, but rather undeserved self-importance, vacuousness, and fanaticism—and all to be avoided rather than courted.

*  *  *

The backlash after the hearings was massive enough to prompt back-pedaling from Harvard…

…and Penn

A Video Message from President Liz Magill pic.twitter.com/GlPE3QZU4P

— Penn (@Penn) December 6, 2023

But, Penn alum Musk is ashamed…

I am a Penn alum and this is indeed shameful

— Elon Musk (@elonmusk) December 7, 2023

And Harvard donor Bill Ackman is waking up to the ‘woke’ issue…

I learned from someone with first person knowledge of the @Harvard president search that the committee would not consider a candidate who did not meet the DEI office’s criteria.

The same was likely true for other elite universities doing searches at the same time, creating an…

— Bill Ackman (@BillAckman) December 7, 2023

The hypocrisy is inescapable and infuriating.

Meanwhile, Harvard antisemitism adviser David Wolpe has resigned following Gay’s “painful” hearing.

2/3

However, the system at Harvard along with the ideology that grips far too many of the students and faculty, the ideology that works only along axes of oppression and places Jews as oppressors and therefore intrinsically evil, is itself evil. Ignoring Jewish suffering is…

— David Wolpe (@RabbiWolpe) December 7, 2023

3/3 Battling that combination of ideologies is the work of more than a committee or a single university. It is not going to be changed by hiring or firing a single person, or posting on X, or yelling at people who don’t post as you wish when you wish, as though posting is…

— David Wolpe (@RabbiWolpe) December 7, 2023

Update (1600ET): The situation in Guayana is rapidly deteriorating, as Venezuelan President Nicolas Maduro has issued arrest warrants for opposition politicians who are challenging his move to annex oil-rich Essequibo.

As Charles Kennedy of OilPrice.com reports; Maduro has officially placed the disputed territory of oil-rich Essequibo under military jurisdiction, putting oil exploration and production operations of Exxon and Chevron at risk. 

Following a Sunday referendum, Venezuelan President Nicolas Maduro has declared the return of Essequibo, which represents some two-thirds of Guyana’s territory, to Venezuela. 

According to T&T News, Venezuela’s Prosecutor’s Office has issued arrest warrants for a dozen opposition members, including former National Assembly head Juan Guaido and three members of staff of opposition presidential candidate Maria Corina Machado. The three are charged with conspiring against the Sunday referendum to annex Essequibo.

Dear @WhiteHouse are you aware that @JoeBiden‘s new oil BFF Maduro has issued arrest warrants for a dozen opposition members, including Juan Guaido

How is that sanctions easing going by the way?https://t.co/CBvWjdXiT5

— zerohedge (@zerohedge) December 7, 2023

The recent temporary easing of U.S. oil sanctions on Venezuela were conditioned on the holding of free and fair elections in 2024.
.
While the U.S. has offered Guyana “unwavering support for Guyana’s sovereignty”, there has been no concrete talk of reversing the easing of sanctions based on Maduro’s actions.

Exxon, which is targeting 1.2 million barrels per day of crude output from Guyana’s offshore Stabroek oil block by the end of 2027, has refrained from commenting on the developing situation, telling journalists earlier this week only that it believes “border issues are matters for governments and appropriate international organizations to address”.

In a comment shared with IBT on Wednesday, Chevron said: “Chevron has a long history and excellent record of being a partner of choice in the countries in which we have operations. We always aim to be, and we are a constructive presence in the countries where we operate.”

A consortium controlled by ExxonMobil holds a 45% in the Stabroek block, with Chevron, which recently acquired Hess, holding a 30% stake and China’s CNOOC holding a 25% stake. 

On Tuesday, Maduro vowed to begin handing out exploration and extraction licenses “immediately” and ordered full compliance from foreign oil companies operating in the area. 

Both U.S. and Guyanese officials have shared their hopes for a peaceful resolution with Venezuela. Guyana’s president, Irfaan Ali, told CBS News in a Tuesday interview that the country would prepare military assets with its allies to ready itself for “the worst case scenario,” but said he hopes the conflict does not come to that.

“Our first line of defense is diplomacy,” Ali told CBS News, adding that Guyana has reached out to leaders abroad, including in the U.S., India and Cuba, hoping that “they can encourage Venezuela to do what is right, and ensure that they do not act in a reckless or adventurous manner that could disrupt the peace within this zone.” -CBS News

The Maduro administration, meanwhile, has blasted the drills as a “provocation.”

“This unfortunate provocation by the United States in favor… of ExxonMobil in Guyana is another step in the wrong direction. We warn that we will not be diverted from our future actions for the recovery of the Essequibo,” said Venezuelan Defense Minister Vladimir Padrino Lopez in a post to X.

*  *  *

Meanwhile, the United States announced joint military drills in Guyana on Thursday.

“In collaboration with the Guyana Defense Force, the U.S. Southern Command will conduct flight operations within Guyana on December 7,” the US Embassy in Guyana said in a statement, calling the flights part of “routine engagement and operations to enhance security partnership” between the US and Guyana and “to strengthen regional cooperation.”

“The U.S. will continue its commitment as Guyana’s trusted security partner and promoting regional cooperation and interoperability,” the statement continued.

 

*  *  *

To recap the rapidly evolving situation in Guyana…

• Neighboring Venezuela now considers around three-quarters of the oil-rich nation theirs – with President Nicolás Maduro presenting a map on television that shows Guyana’s Esequibo region  as under the jurisdiction of Caracas.

• Maduro vowed to create a Venezuelan state known as Guyana Esequibo, for which he will grant Venezuelan citizenship to Guyanese residents there.

• Maduro will has granted licenses and ordered state oil company PDVSA and state metal conglomerate CVG to drill for oil in the area.

• A special military unit will be created for the territory.

• Energy companies in the Esequibo region such as Exxon Mobil will “have three months to withdraw.”

• Guyanese President Irfaan Ali said he would report the matter to the UN Security Council, saying in a late-night televised address “The Guyana Defense Force is on high alert,” adding “Venezuela has clearly declared itself an outlaw nation.”

• The UN Security Council will hold a closed-door meeting on the issue Friday, Bloomberg reports.

And last night, a Guyana army helicopter was reported missing near the border with Venezuela.

Guyana army helicopter reported missing near border with Venezuela: govt

Here we go

— zerohedge (@zerohedge) December 7, 2023

Now, the US State Department is involved.

“Secretary of State Antony J. Blinken spoke with Guyanese President Dr. Mohamed Irfaan Ali to reaffirm the United States’ unwavering support for Guyana’s sovereignty,” said the State Department in a late Wednesday news release.

Department spokesman Matthew Miller also told reporters that the Biden administration supports a peaceful resolution.

As we noted on Friday – why would Maduro do this now, when Caracas has for more than 200 years claimed rights over Esequibo, a vast swath of the territory Guyana? Simple: because as we said several days ago, it was only a few months ago that Maduro realized he has leverage over the US president of the “most powerful nation in the world” and get away with anything… even invading a sovereign nation.

Venezuela has long claimed the 61,000-square-mile region. Guyana has repeatedly rejected those claims, saying an 1899 international arbitration resolved the dispute. Venezuela has in turn questioned the validity of that ruling. Just last week, the International Court of Justice urged both sides to refrain from “any action which might aggravate or extend the dispute.” –WaPo

As Austin Bay writes at The Epoch Times, the region has a legacy of overlapping claims.

Spain claimed the Essequibo region was within the borders of Venezuela, but Great Britain and the Netherlands disputed that. Guyana was a British colony. In 1899 an arbitration tribunal in Paris, with the U.S. mediating, ruled that the region belonged to Britain.

Maduro portrays himself as a warrior seeking to right great historical wrongs. Well, playing drama king is easier than fixing a broken economy.

Maduro may be toying with a replay of 1982 when another shaky dictator thought a foreign war to distract his citizens was a dandy idea. The shaky dictator was Argentina’s Gen. Leopoldo Galtieri who proceeded to invade the Falkland Islands (Las Malvinas). He bet seizing the islands from the British “imperialists”—“recovering” them Galtieri called it—would unite Argentinians.

Britain, led by Margaret Thatcher, counterattacked, Argentina lost, and Galtieri’s regime collapsed.

All bark, no bite?

Interestingly, oil is nonplussed by the recent moves. Maybe because Venezuela won’t be able to occupy the “new state?”

This is the effective end of this #Venezuela temper tantrum. With even a tiny deployment of US drones and airpower, occupying the “new state” will be impossible for VZ and their decrepit army and air force.

This is why the #oil market is ignoring this. Its just Maduro pulling… https://t.co/CaT1RXeZem pic.twitter.com/PTtB0S2SZ7

— Volte-Face Investments (@VolteFaceInvest) December 7, 2023

As WaPo further notes;

Exxon Mobil CEO Darren Woods was similarly nonplussed. In a Thursday CNBC interview, he suggested that Maduro is going to have a fight on his hands.

“There’s concern that Venezuela is going to invade a certain part of the country,” said host David Faber.

“I’d put it in the context of what’s been happening for many, many years,” Woods responded. “It is a matter between nation states… I’m not sure Guyana is standing on its own, to tell you the truth. We’ve all seen what happens when nations’ sovereignties are challenged, and uniliteral action is taken. The world and the outside community is pretty sensitive to that, so my expectation is that there is more broad support in the international community to make sure that the right processes are followed to resolve this dispute.”

Neighboring Brazil, meanwhile, has reinforced its northern border in the state of Roraima, adding armored vehicles and more troops, according to Reuters.

For a change, the big moves were in FX-land today… and oh my, the irony that Japan would spark the market chaos on this ‘infamous day’.

USDJPY dumped overnight after shockingly hawkish comments from BoJ officials hinting at the end of NIRP. That tumble then morphed into a flash crash as it broke 144 (instantly slammed to a 141 handle)…

Source: Bloomberg

…but despite the bounce back, it was still an ugly day and USDJPY broke its 2023 trendline (inverted to show JPY strength upwards in chart)…

Source: Bloomberg

At the same time, Swissy stormed to new highs (before the Japanic hit the dollar). But overall, the franc has been a one-way train against its European peers for decades…

Source: Bloomberg

All of which meant the dollar was clubbed (lower) like a baby seal (biggest intraday drop in three weeks)…

Source: Bloomberg

Magnificent 7 stocks soared higher today (after 5 down-days in the last 6), thanks in large part to GOOGL’s biggest daily gain since July (on another AI chatbot). This surge also comes ahead of tomorrow’s start of the buyback blackout window…

Source: Bloomberg

That surge smashed Nasdaq and S&P higher (but all the majors ended green). The S&P and Dow snapped a three-day losing streak…

Interestingly, this is the first day in December that “AI-favored” names have outperformed “AI-at-risk” names…

Source: Bloomberg

But, Anti-Obesity drug names have been December’s losers as ‘Pro-Obesity’ stocks (not sure if that’s the best way to describe them) have rallied…

Source: Bloomberg

VIX was marginally higher ahead of tomorrow’s payrolls data (despite stocks being up) but it was 0-DTE Vol that did the usual spike above ‘VIX’ ahead of an event…

Source: Bloomberg

Treasuries were mixed today with the short-end outperforming (2Y -1bp, 30Y +4bps). 2Y yields remain the only part of the curve higher on the week with 30Y yields down around 15bps…

Source: Bloomberg

Ethereum outperformed Bitcoin (for a change) today (hitting $2350 – highest since May 2022)…

Source: Bloomberg

This pushed ETH total market cap above that of Adobe and Chevron…

…with the ETH/BTC cross bouncing off serious support…

Source: Bloomberg

Gold continued to tread water in a tight range (despite the dollar dump), with spot prices still holding above $2020…

Source: Bloomberg

After 5 straight days lower, oil prices managed a gain today (albeit very marginal) as WTI desperately trying to hold on to $70 handle…

Source: Bloomberg

Finally, some good news… maybe? Mortgage rates have plunged for a sixth straight week, now at their lowest level since August…

Source: Bloomberg

Time for another home-buying-panic?

But the divergence between stocks, commodities, and macro continues to widen…

Source: Bloomberg

Who will be right on ‘growth’?

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is not to suggest living/working overseas is a panacea or easy… it isn’t.

There is an inescapable irony in The American Dream no longer being affordable in America for the majority of Americans. Definitions vary, of course, but The American Dream typically includes being able to obtain higher education, a home, a family, a family enterprise and some measure of ownership of assets that provide financial security, on wages / salaries that are within reach of the bottom 80% of workers.

Put another way: if The American Dream is only affordable to those earning $250,000 a year and up or those who inherit family wealth, it isn’t The American Dream. The American Dream is defined as starting with nothing but ambition and a willingness to work hard and save money and acquire all of the good things listed above without borrowing a small fortune for each one.

It seems taboo to say this, but The American Dream implicitly includes a goal of no debt: no student loan debt, no home mortgage, no medical debt, no debt at all: assets are owned free and clear, and college is paid out of earnings or student loans are paid off in the first few years of full-time work.

Anything less isn’t The American Dream, it’s a debt-dependent facsimile, a travesty of a mockery of a sham of The American Dream.

The other irony is The American Dream is still affordable overseas in what is generally referred to as developing economies or the Global South, where as a general rule, dollars go a lot farther than they do in the U.S.

Richard Bonugli and I discuss the advantages and challenges of living and working overseas in our podcast the Opportunities in Living Overseas (31:26 min).

This isn’t necessarily an all-or-nothing option; many people maintain a place in the U.S. and work/live overseas for periods of time and then return home. Others are digital nomads who move from nation to nation, continuing to work remotely.

Let’s start with the barriers and challenges. While the vast expansion of global travel has fostered cosmopolitan zones in most large cities where English is in common use, smaller cities and rural areas are not so easy to navigate without some local language. Yes, digital smartphone tools offer instant translation, but this only goes so far in terms of learning different cultures, adapting to a new set of expectations, etc.

Moving overseas with children and elderly parents offer obvious additional challenges: finding schools, senior care, etc. It can strain relationships, as one partner may love it all and the other longs to return home.

As the global order changes, social and political instability is on the rise. Things can get dicey very quickly, and those without local family connections may find their exposure to all sorts of unexpected risks has increased geometrically.

Learning how a new culture works is not easy, especially for those who mistake the Americanized cosmopolitan zones as representative of the entire culture. Buying a house in rural Japan for the often-referenced low price ($100, etc.) entails far more than plopping down a Benjamin and moving your stuff in. The odds of the elderly locals speaking English is low, and there is more to restoring the house than newcomers might imagine.

On the advantage side of the ledger, there are career opportunities, affordable rent and healthcare and adventure. We have 20-something friends who say they can’t afford healthcare in the U.S. so they are forced to live somewhere where it is affordable, for example, Thailand.

For those with globally in-demand skills, the barriers to international work are lower now than they were in generations past. As correspondent Eric C. recently observed: “Nowadays is the greatest time in the history of the world for the high-earning, educated, individual person. If they have money or a valuable skill, they can go wherever they want and sexism, racism, nationalism, will not stop them. That is a triumph of the individual.”

The developing world’s hunger for infrastructure improvements offers opportunities, and there may also be an openness to new enterprises that has been worn thin in many of the developed economies.

This is not to suggest living/working overseas is a panacea or easy–it isn’t. But with the cost of living so high in the developed economies, it’s one option for those willing to invest in researching possibilities, accepting risks and exploring cultures quite different than that of the U.S.

*  *  *

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The latest data on consumer credit data for October confirmed the slowdown seen in September, as total debt increased by just $5.13 billion (below consensus estimates of $8.5 billion).

This is a clear regime shift lower from recent months when the monthly increase was in the $20/$30BN range.

Looking at the composition, both revolving and non-revolving credit were weak.

Starting with the former, in October, credit card debt rose by just $2.9 billion, which with the exception of June’s freak negative revolving credit print, was the lowest monthly increase since April 2021 (amid the COVID lockdown crisis).

As for non-revolving credit, or student and auto loans, here too things have gotten bogged down, rising just $2.3 billion in October…

Of course, the slowdown in debt, and especially credit-card debt, should not be a surprise since the average rate on credit cards across US financial institutions just hit a record high of 22.77%.

And with consumers increasingly reluctant to max out their credit cards due to record high rates, at a time when the personal savings rate in the US has collapsed back near multi-decade lows in recent months…

… it is now only a matter of time before US GDP prints deep negative now that that pillar supporting 70% of the US economy, consumer purchases, is about to crack.

By Charles Kennedy of OilPrice.com

Russia has promised oil-flow tracking companies and price reporting agencies to provide data about its production, inventories, and fuel output after OPEC+ asked Moscow for more transparency in tracking its compliance with the cuts, Reuters reported on Thursday, citing sources at OPEC+ and ship-tracking consultancies.

Since the invasion of Ukraine, Russia has classified its oil production and export data, saying it would not provide detailed information about its oil sector which could be used by the West to track down and clamp down on Russia’s oil exports, or oil revenues.

During a recent call with six oil-flow tracking companies and price reporting agencies – Argus Media, Energy Intelligence, S&P Global Platts, Rystad, Kpler, and Wood Mackenzie – Russia’s Deputy Energy Minister Pavel Sorokin offered to provide more information about Moscow’s oil production and exports, according to Reuters’ sources.

These six companies have been tasked by OPEC+ to work with Russia for more transparent data to assess compliance.

“Sorokin was trying to persuade the trackers that Russia fully complied with the deal,” one of the sources told Reuters.

Russia has always been evasive about its compliance with the OPEC+ agreement, even before the Russian invasion of Ukraine.

But after the start of the war, even the little transparency was removed and the market has been largely relying on guesstimates and ship-tracking to assess Russian supply.

Russian Deputy Prime Minister Alexander Novak said in October that Russia’s commitment to reduce its oil exports by 300,000 barrels per day (bpd) includes oil products, in remarks that sowed further confusion about how much oil supply Russia is really withholding from the market.

Russia has pledged to reduce its oil exports by 300,000 bpd until the end of 2023, in a show of solidarity with its OPEC+ partner Saudi Arabia, which is voluntarily reducing its oil production by 1 million bpd until 2023.

At last week’s OPEC+ meeting, Russia said it would deepen the export cut to 500,000 bpd in the first quarter of 2024, with May and June of 2023 being the reference export levels for the cut, which will consist of 300,000 bpd of crude and 200,000 bpd of refined products.