Week InReview
Friday | Jul , 2022
Recession rumblngs.
Federal Reserve Chair Jerome Powell says there's a risk the Fed could go too far on rate hikes but it's not a top risk to the economy. Photo: Bloomberg
Recession fears continue to ratchet higher even as Fed Governor Jay Powell hopes the US can avoid one. Powell, speaking at the ECB's annual policy forum in Sintra, Portugal, said: "We hope that growth will remain positive," even as the Fed hikes rates to curb the highest inflation in 40 years. Inflation is continuing to reverberate through the market, with high-end furniture retailer RH slumping in extended trading after slashing its forecast for the second time in less than a month, blaming soaring mortgage rates and shrinking sales of luxury homes. Meanwhile, China’s economy showed further signs of improvement in June.
let's recap...
A trader on the floor of the New York Stock Exchange (NYSE) on Monday, June 27, 2022. Money managers betting on a sustained global rebound will be left sorely disappointed in the second half of this crushing year as a protracted bear market looms, even if inflation cools. Photo: Michael Nagle | Bloomberg
From Wall Street to the crypto exchanges, bond markets to retail-trading platforms, the “vibe” in investing has undeniably shifted. It’s gone from mania to miserable. And it looks like the dour markets, high inflation and persistent uncertainty aren’t going away anytime soon. So much for my eternal optimism. (Bloomberg Wealth | Jun30)

The Federal Reserve Bank of New York will publish monthly updates on the U.S. corporate bond market to help identify signs of market distress similar to those seen during the global financial crisis and in early 2020. The launch of the Corporate Bond Market Distress Index (CMDI) comes after U.S. credit market investors suffered heavy losses this year, as companies' debt lost value due to rising interest rates and economic concerns. (Reuters | Jun 29) see also New Fed tracker shows rising strains in corporate debt (The Wall Street Journal | Jun 3)

Federal Reserve Chair Jerome Powell said he was more concerned about the risk of failing to stamp out high inflation than about the possibility of raising interest rates too high and pushing the economy into a recession. “Is there a risk we would go too far? Certainly there’s a risk,” Powell said Wednesday. “The bigger mistake to make – let’s put it that way – would be to fail to restore price stability.” (The Wall Street Journal | Jun 29)

US investment-grade corporate bond spreads have breached a key 150 basis point threshold that analysts and investors say could start to disrupt the flow of credit. The figure, which measures the extra yield investors demand to own corporate bonds instead of US Treasuries, is the highest in two years, according to data compiled by Bloomberg. (Bloomberg Markets | Jun 29)

One factor aggravating volatility in munis this year: Asset managers’ increasing share of a $4 trillion market once dominated by buy-and-hold individual investors. The share of outstanding municipal bonds held by U.S. households fell to 40% in the first three months of the year from 46% in 2020, according to a Municipal Securities Rulemaking Board report released Wednesday. The board, a self-regulatory body overseeing the muni market, analyzed Federal Reserve data and determined that the market is shifting from direct ownership of bonds to investment through funds. (The Wall Street Journal | Jun 29)
the cyber cafe
CISA, FBI, Treasury & FinCEN release joint ransomware advisory
Cybersecurity & Infrastructure Security Agency (CISA), the Federal Bureau of Investigation (FBI), the Department of the Treasury (Treasury), and the Financial Crimes Enforcement Network (FinCEN) have released a joint Cybersecurity Advisory (CSA), #StopRansomware: MedusaLocker, to provide information on MedusaLocker ransomware. MedusaLocker actors target vulnerabilities in Remote Desktop Protocol (RDP) to access victims’ networks.

Treasury's cyber war moves financial sector beyond 'Shields Up'
With global tensions rising over Ukraine, the cutthroat competitiveness of the US financial sector is yielding to partnership over the conviction that a cyberattack against even a group of minor banks – or a third-party service provider – could imperil everyone in a highly connected system. Some of the nation’s largest banks are now working with the Treasury Department, engaging in role play and sharing information they would have guarded closely in the past.

A new, remarkably sophisticated malware is attacking routers
An unusually advanced hacking group has spent almost two years infecting a wide range of routers in North America and Europe with malware that takes full control of connected devices running Windows, macOS, and Linux. So far, researchers say they've identified at least 80 targets infected by the stealthy malware, including routers made by Cisco, Netgear, Asus, and DrayTek. Dubbed ZuoRAT, the remote access Trojan is part of a broader hacking campaign that has existed since at least the fourth quarter of 2020 and continues to operate.
— Wired
binge reading disorder
This supply glut at retail is the Bullwhip Effect. Google it. Worth understanding for your investing endeavors. Deflationary pulses from this- -> disinflation in CPI later this year --> Fed reverses itself on rates and QT --> Cycles.  

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“Big Short” guy says something
Michael Burry, the founder of Scion Asset Management who was made famous by Christian Bale in the movie “The Big Short,” suggested on Twitter that the “Bullwhip Effect” happening in the retail sector may lead to the Federal Reserve reversing rate increases and its Quantitative Tightening policy.

Why some people are driving 7 hours to business meetings
This summer’s air-travel disruptions are leading some business travelers to change plans and hit the road. As the nation’s travel system strains under staffing shortages, cancellations and Covid-19 absences, some frustrated professionals are opting to drive instead of fly for work trips, booking companies and travelers say. Meeting and conference organizers say they’re changing schedules to account for flight delays, for example putting keynote speakers on the second or third day of events, rather than the opening sessions.

Google warns of new spyware targeting iOS and Android users
On Thursday, Google's Threat Analysis Group and Project Zero vulnerability analysis team published findings about the iOS version of a spyware product attributed to the Italian developer RCS Labs. In hearings last week, the notorious spyware vendor NSO group told European legislators that at least five EU countries have used its powerful Pegasus surveillance malware.
— Wired