Geopolitics Is Back, Baby

We're only 9 months away from a US election. Trump is the only likely candidate for the Republicans. Biden and Yellen's irresponsible fiscal spending has resulted in US$34T debt and an exploding budget deficit. And America needs a change.

Even hard men like Putin and Xi must be wondering what's in store, with a re-energised Trump.

The Russian initiative to finish the war in Ukraine with new territories for Russia, is timely because Putin won't want a war with someone as unpredictable as Trump.

Astonishingly Xi is in no condition to help Putin. He's far too busy putting out fires at home.

Breaking Tucker Carlson Interview With Putin

Chinese Deflation?

Deflation arrives in China.?

Here's why this is really bad for the second biggest economy in the world. From Investopedia

KEY TAKEAWAYS

• Deflation is when the general price levels in a country are falling—as opposed to inflation when prices rise.
• Deflation can be caused by an increase in productivity, a decrease in overall demand, or a decrease in the volume of credit in the economy.
• Most of the time, deflation is unambiguously a positive trend for the economy, but it can also under certain conditions occur along with a contraction in the economy.?
• In an economy dominated by debt-fueled asset price bubbles, deflation can lead to a temporary financial crisis and a period of liquidation of speculative investment known as debt deflation.

The last point hits the nail on the head

Xi Set to Discuss China Stock Market With Financial Regulators [bloomberg]

A good volume to inflows into Chinese markets helped stabilise them. Much of these flows will have come from publicly owned Chinese companies abroad, per the stabilisation fund message, and short covering in front of official intervention.

China is shut for a week as it's their New Year.

CRE Contagion Spreads to Europe

China’s Property Crisis Is Starting to Ripple Across the World [Bloomberg]

I'd almost forgotten about the Chinese real estate crisis. It's been eclipsed by their stock markets crashing and the deflationary spiral now taking place. But it's real estate that started it.? And now we're seeing forced selling by Chinese owners globally.

Even though hot money is escaping from China and has powered insane US and Japanese stock markets moves, Chineses owners of commercial real estate abroad are being forced to take massive haircuts on their investments.

It's coinciding with the US CRE collapse and subsequent liquidity problems for US regional banks and non-bank lenders.

Yellen Eyes Nonbank Mortgage Lenders, Warns of Potential Failure [Bloomberg]

And the NYCB story continues as it gets sued by it's own shareholders and now downgraded to junk status by Moodys.

It's stock price may be still $5, down from $35, but those of us that have seen this movie before, know a forced takeover is on the way. It's bankrupt.

New York Community Bancorp is sued by shareholders as stock tumbles {Reuters]

Moody's cuts NYCB ratings to junk, warns of more downgrades [Reuters]

And here's another bank we've never heard of

Deutsche Pfandbriefbank AG

Greatest real estate crisis since the financial crisis’: German bank alerts the market on exposure to commercial real estate [Fortune]

An office building just sold at a shocking 73% 'discount' to what it sold for just 2 yrs ago [X]

Biden being forced out

Following last week's suggestion by News Corp that Michelle Obama is being prepared to take over from Biden before the election in November:

Biden defends his mental acuity after damaging DoJ report [FT]

With a resurgent Trump, who wasn't on the ballet paper in Nevada, Republicans decided to vote for "None of the candidates on the ballet paper"

Amusing as this is, the world, as Christine Lagarde said, needs to Trump-proof its' economies.

In The Background

Despite a strong rebound in German Factory Orders in December, strong deflationary forces prevail.

Particularly worrisome is a good, solid German trade balance but exports down 4% and imports down 6% month on month.

Retail sales and industrial production suggest EU economies are contracting sharply now.

In Case You Missed It

We started the week started with Jerome Powell on 60 Minutes.

Jay Powell says Fed expects to make three rate cuts this year [FT]

Unsurprisingly it's the same message that came from the FED presser a week ago. 3 rate cuts this year but not yet.

He also doubled down on the message to congress regarding unsustainable fiscal debt.

Average interest rate on a 30-year mortgage rises back above 7.0% after the Fed dismisses a March rate cut [X]

Surging stock markets and over a trillion dollars of US credit card debt suggest a bad ending is near. Stock markets are anticipating rate cuts which make running businesses easier. But the need to cut aggressively suggests something else entirely.

30-Year Government Bond Sees Solid Demand

Australia

This week the RBA kept rates unchanged?

RBA Minutes [RBA]

Points to mention

• Inflation back to middle of acceptable band now pushed back to 2026
• Reflecting weak consumer spending, the economy was now expected to expand at an annual 1.3% pace in the June quarter this year, down from 1.8% previously. Growth for end 2024 was lowered to 1.8%, while the forecast for late 2025 and June 2026 were the same at 2.4%.
• That in turn meant unemployment rate - which was running at 3.9% - is now seen to hit 4.4% in June 2025 and to remain there for the rest of the forecast period.?
• Could be cuts, could be hikes
• "The forecasts were consistent with a return to full employment without adding to inflationary pressures"

There's no strategy and an assumption of a perfect ending.

This Week's Important Economic Indicators [London time]

Key Economic Releases: https://suberia.capital/economic-indicators-by-country

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