Lo dice lo stesso Jerome Powell, il capo supremo della Banca Centrale più potente al Mondo: le Banche Centrali hanno necessità della fiducia del pubblico.

Necessità: fate attenzione alla scelta dei termini.

Powell questa settimana, durante l’Audizione al Congresso, ha detto: our need to sustain public trust is essence of our work. Ovvero: l’essenza del nostro lavoro è sostenere la fiducia del pubblico.

Si parla della fiducia in senso generale, ovviamente: ma non può esserci fiducia del pubblico se non c’è fiducia in quella Banca Centrale che deve sostenerla, la fiducia.

Per questo, ai nostri lettori noi suggeriamo di valutare le recenti tensioni sui mercati finanziari anche alla luce di ciò che è successo pocchi giorni fa dentro il Consiglio della Federal Reserve.

Si tratta di eventi che non hanno precedenti: la prima volta nella storia. Nella medesima giornata, ben due membri del Consiglio della Fed si sono dimessi per la medesima ragione, ovvero per avere fatto intensa attività di trading sul mercato azionario.

Quel mercato azionario che, negli ultimi dieci anni, si è mosso soprattutto andando dietro a decisioni ed indiscrezione e voci e dichiarazioni dei membri del Consiglio della Federal Reserve.

Immediatamente, molti operatori e molti commentatori si sono addentrati nelle analisi dei cambiamenti all’interno del Consiglio: come cambieranno gli equilibri? Aumenterà il numero dei “falchi” oppure il numero delle “colombe”?

A noi di questo aspetto importa ben poco: abbiamo già scritto, fin dall’inizio del 2021, che a causa delle sue scelte la Federal Reserve si è messa da sola in un angolo, non ha più spazio per manovrare, non può più scegliere e quindi non può più incidere. In sostanza, oggi per i mercati finanziari quello che fa e dice la Federal Reserve è già del tutto scontato, e quindi non ha importanza per ciò che riguarda il futuro. Falchi o colombe, alla Fed tutti sono costretti a fare e dire le sole cose che possono fare e dire, data la attuale situazione.

A noi, quindi, l’aspetto della composizione del Board della Fed interessa pochissimo: invece ci interessano moltissimi i cambiamenti sul piano della fiducia (la fiducia citata da Powell qui sopra) e della politica.

A noi sembra importante sottolineare che è finita la fase nella quale gli uomini della Federal Reserve erano intoccabili, ed erano visto dai media e dalla maggior parte della pubblica opinione come “gli uomini che hanno salvato il Mondo”.

Come leggete qui a fianco, le dimissioni di questa settimana hanno già portato alla prima richiesta di interventi legislativi sulle attività private dei membri del Consiglio. A nostro giudizio, questo è solo l’inizio: è il segnale di un cambiamento di clima politico, ed anche della fina della fase nella quale i membri del Consiglio sono stati trattati come gli Onniscenti e gli Onnipotenti.

Per noi investitori questo cambiamento è significativo: le Banche Centrali (non solo la Fed) da almeno un decennio agiscono come un potere non solo autonomo ma pure esente da ogni verifica. Implicitamente si assume che i banchieri centrali “ne sappiano di più” dei politici, e che per questa ragione non debbano mai rispondere delle loro scelte a nessuno.

Questo cambierà: e per questa spinta, arriveranno cambiamenti anche al modo di condurre la politica monetaria

C’è poi un secondo tema che vogliamo mettere all’attenzione dei nostri lettori: da almeno tre decenni, la società americana in ogni sua componente è stata colpita da una ossessione, che noi vorremmo definire “l’ossessione della Finanza”. Il fenomeno è un fenomeno di massa: ad ogni livello, tutti vogliono partecipare al gioco della Finanza, ed anche per questo chi lavora nella Finanza viene presentato da film e libri si successo come un Superuomo.

A nostro giudizio, così come gli eccessi del 2020-2021 chiuderanno la fase della “bolla di tutto” sui mercati, allo stesso modo gli eccessi del 2020-2021 decretano anche la fine della “ossessione della Finanza” presso il pubblico.

Un esempio concreto di questo lo trovate nell’articolo del Wall Street Journal che segue qui sotto, che mette all’attenzione del pubblico i conflitti di interesse di ben 131 giudici federali.

Perché associare i giudici federali alle dimissioni nel Board della Federal Reserve? Per raccontare al pubblico che l’ossessione della finanza colpisce anche quelle figure (giudici e banchieri centrali) che il pubblico immagina super partes e che invece non lo sono e proprio a causa del loro coinvolgimento nella “ossessione della Finanza”. Questo articolo che vi proponiamo in lettura è un segno dei tempi che cambiano.

More than 130 federal judges have violated U.S. law and judicial ethics by overseeing court cases involving companies in which they or their family owned stock.

A Wall Street Journal investigation found that judges have improperly failed to disqualify themselves from 685 court cases around the nation since 2010. The jurists were appointed by nearly every president from Lyndon Johnson to Donald Trump. About two-thirds of federal district judges disclosed holdings of individual stocks, and nearly one of every five who did heard at least one case involving those stocks.Alerted to the violations by the Journal, 56 of the judges have directed court clerks to notify parties in 329 lawsuits that they should have recused themselves. That means new judges might be assigned, potentially upending rulings.

When judges participated in such cases, about two-thirds of their rulings on motions that were contested came down in favor of their or their family’s financial interests.

In New York, Judge Edgardo Ramos handled a suit between an Exxon Mobil Corp. unit and TIG Insurance Co. over a pollution claim while owning between $15,001 and $50,000 of Exxon stock, according to his financial disclosure form. He accepted an arbitration panel’s opinion that TIG should pay Exxon $25 million and added $8 million of interest to the tab.

In Colorado, Judge Lewis Babcock oversaw a case involving a Comcast Corp. subsidiary, ruling in its favor, while he or his family held between $15,001 and $50,000 of Comcast stock.At an Ohio-based appeals court, Judge Julia Smith Gibbons wrote an opinion that favored Ford Motor Co. in a trademark dispute while her husband held stock in the auto maker.

After she and the others on the three-judge appellate panel heard arguments but before they ruled, her husband’s financial adviser bought two chunks of Ford stock, each valued at up to $15,000, for his retirement account, according to her disclosure form.

Edgardo Ramos, Lewis Babcock, Julia Smith Gibbons

The hundreds of recusal violations found by the Journal breach a bedrock principle of American jurisprudence: No one should be a judge of his or her own cause. Congress first laid out that principle in 1792 to guarantee litigants an impartial judge and reassure the public that courts could be trusted.Judge Ramos, who oversaw the Exxon case, was unaware of his violation, said an official of the New York federal court, because his “recusal list”—a tally judges keep of parties they shouldn’t have in their courtrooms—listed only parent Exxon Mobil Corp. and not the unit, whose name includes the additional word “oil.” The official said the court conflict-screening software relied on exact matches.The unit had informed the court at the outset of the case that it was a subsidiary of Exxon Mobil so Judge Ramos could “evaluate possible disqualification or recusal,” a court filing shows.

After the Journal contacted Judge Ramos, who was named to the court by former President Barack Obama, the court’s clerk notified the parties of his stockholding. TIG attorneys asked the court to set aside his ruling and send the case to a new judge because of “the inevitable appearance of partiality.” Exxon opposed assigning a new judge, calling that a “manifest unfairness, gross inefficiency, and waste of judi” An appellate court has put a hearing on hold until the district court decides what to do.

In the Comcast case, a Colorado couple asked Judge Babcock to issue an order blocking Comcast from accessing their property to install fiber-optic cable. Representing themselves in court, Andrew O’Connor and Mary Henry accused Comcast workers of bullying them, scaring their 10-year-old daughter and injuring their dog, Einstein, allegations the company denied. Judge Babcock, who was appointed to the court by former President Ronald Reagan, ruled the couple had “continually blocked Comcast’s access to the easement.” He sent the case back to state court, as Comcast wanted. “I dropped the ball,” Judge Babcock said when asked about the recusal violation. He blamed flawed internal procedures. “Thank you for helping me stay on my toes the way I’m supposed to,” he said. A Comcast spokeswoman declined to comment. Mr. O’Connor, who settled his case in state court, said, “If you are a federal judge, you should not be holding individual stocks.”

Judge Gibbons from the Ford trademark case, appointed to the appeals court by former President George W. Bush, said she had mistakenly believed holdings in her husband’s retirement account didn’t require her recusal. She later directed the clerk of the Sixth U.S. Circuit Court of Appeals to notify the parties of the violation and said that her husband has since told his financial adviser not to buy individual stocks. “I regret my misunderstanding, but I assure you it was an honest one,” she said. A spokesman for Ford said: “A fair and impartial judiciary is critical to the integrity of our legal system. In this case, the violation of Ford’s trademarks was clear.” “I dropped the ball. Thank you for helping me stay on my toes the way I’m supposed to.” — Judge Lewis Babcock, when asked about his violations

Nothing bars judges from owning stocks, but federal law since 1974 has prohibited judges from hearing cases that involve a party in which they, their spouses or their minor children have a “legal or equitable interest, however small.” That law and the Judicial Conference of the U.S., which is the federal courts’ policy-making body, require judges to avoid even the appearance of a conflict. Although most lawsuits don’t directly affect a company’s stock price, the Supreme Court in 1988 said the law’s purpose is to promote confidence in the judiciary. Conflict-of-interest rules are common for state and federal employees as well as for lawyers, journalists and corporate executives. U.S. government workers may not participate “personally and substantially” in matters in which they have a financial interest.

The Journal reviewed financial disclosure forms filed annually for 2010 through 2018 by roughly 700 federal judges who reported holding individual stocks of large companies, and then compared those holdings to tens of thousands of court dockets in civil cases. The same conflict rules apply to criminal cases, but large companies are rarely charged, and the Journal found no instances of judges holding shares of corporate criminal defendants in their courts.It found that 129 federal district judges and two federal appellate judges had at least one case in which a stock they or their family owned was a plaintiff or defendant. Judges’ stockholdings exceeded $15,000 in 173 cases and $50,000 in 21 of those cases, although under the law, the amount doesn’t matter.

The Journal found 61 judges or their families not only holding stocks in companies that were plaintiffs or defendants in the judges’ courts but also trading the stocks during cases.Judges offered a variety of explanations for the violations. Some blamed court clerks. Some said their recusal lists had misspellings that foiled the conflict-screening software. Some pointed to trades that resulted in losses. Others said they had only nominal roles, such as confirming settlements or transferring cases to other courts, though there is no legal exemption for such work.The ethics code for federal judges “requires recusal when a judge has a financial conflict, regardless of the substance of the judge’s actual involvement in the case,” the Judicial Conference’s Committee on Codes of Conduct wrote in a letter to a judge this month. Some blamed court clerks. Some said their recusal lists had misspellings. Some pointed to trades that resulted in losses.

In response to the Journal’s findings, the Administrative Office of the U.S. Courts said: “The Wall Street Journal’s report on instances where conflicts inadvertently were not identified before a case was resolved or transferred is troubling, and the Administrative Office is carefully reviewing the matter.”It said the federal judiciary “takes very seriously its obligations to preclude any financial conflicts of interest” and has taken steps, such as conflict-screening software and ethics training, to prevent violations. “We have in place a number of safeguards and are looking for ways to improve,” the office said. Chief Justice John Roberts, who heads the federal judiciary, didn’t respond to requests for comment. The nation’s roughly 600 full-time federal trial judges, supplemented by about 460 semiretired jurists called senior judges, wield enormous power.

Holding lifetime appointments, they preside over hundreds of thousands of civil and criminal cases each year in 94 court districts. They have soup-to-nuts control over all elements of their courtrooms, from pretrial process and trial to criminal pleas, judgments and sentencing. Judges have wide latitude for fact findings and evidentiary rulings, most of which can be overturned only for abuse of discretion, a high hurdle.

Violations of the 1974 law almost never become public. Judges’ financial disclosures aren’t online, are cumbersome to request and sometimes take years to access.Judges are informed if anyone requests to see their disclosures, creating a disincentive for lawyers who might fear annoying judges in whose courtrooms they frequently appear. Judges rarely make public the lists of companies on whose cases they shouldn’t work.

When judges disqualify themselves from cases, they typically don’t disclose details. No judges in modern times have been removed from the federal bench solely for having a financial interest in a plaintiff or defendant that appeared in their courtroom.

“I just blew it. I regret any question that I’ve created an appearance of impropriety or a conflict of interest.” — Judge Timothy Batten Sr., when notified of his violations

The Journal analyzed data from the Free Law Project, a nonpartisan legal-research nonprofit that is planning to post judicial disclosure forms online. The findings amount to a pervasive disregard for the judicial conflict-of-interest laws, legal experts said.

A recusal violation in isolation could be viewed as an oversight, but the Journal’s investigation “raises a more systemic problem of judges chronically neglecting their duty to disqualify in such cases,” said Charles Geyh, a law professor at Indiana University, who specializes in judicial conduct, ethics and accountability.The findings “are both surprising and disappointing,” said Timothy Batten Sr., chief judge of the U.S. District Court for the Northern District of Georgia and a member of the Committee on Codes of Conduct for the Judicial Conference of the U.S.“I believe in the vast majority of these cases, it is an oversight and indolence,” he added.Judge Batten himself owned shares of JPMorgan Chase & Co. while he heard 11 lawsuits involving the bank, most of which ended in the bank’s favor, the Journal’s analysis shows. “I am mortified,” Judge Batten said in a phone interview when notified about his violations, which occurred in 2010 and 2011, before he joined the Codes of Conduct committee in 2019. “I had no idea that I had an interest in any of these companies in what was a most modest retirement account” managed by a broker.“I just blew it. I regret any question that I’ve created or appearance of impropriety or a conflict of interest,” he said.

Timothy Batten Sr., Janis Sammartino, Rodney Gilstrap

Judge Batten, appointed by former President George W. Bush, said he stopped investing in individual stocks in 2012 and moved his portfolio to mutual funds, which don’t require recusal, and has since closed the account.The Journal analyzed cases to determine whether judges made rulings on contested motions, such as those seeking dismissal or summary judgment. Judges ruled on contested motions in 21% of the nearly 700 cases in question. Those rulings favored the judges’ financial interests in 94 cases, went against the judges’ interest in 27 cases and had mixed outcomes in 24 cases. Already, several parties on the losing side of the rulings have petitioned for a new judge to hear their cases after they were alerted to the violations identified by the Journal.

Several judges misunderstood the law, initially saying that they didn’t have to recuse themselves because their shares were held in accounts run by a money manager.The ban on holding even a single share of a company while presiding in a case involving the firm means judges must be vigilant. The 1974 law requires judges to inform themselves about their own financial interests and make a “reasonable effort” to do the same for their spouses and any minor children. The Judicial Conference of the U.S. requires courts to use conflict-checking software to help identify cases where judges should bow out.

Judge Janis Sammartino of California traded in stocks of Bank of America Corp., CVS Health Corp., Deutsche Bank AG , Hartford Financial Services Group Inc., HSBC Holdings PLC, JPMorgan, Pfizer Inc., Public Storage, Wells Fargo & Co. and Microsoft Corp. while hearing 18 lawsuits involving one or more of those companies, the Journal found. In all, she heard 54 cases involving companies held in her family’s trusts.In the Microsoft case, a Chicago man alleged the software giant violated the Telephone Consumer Protection Act by sending an unsolicited text about its Xbox gaming console to his mobile phone. He filed suit in 2011. One of Judge Sammartino’s family trusts bought Microsoft stock twice in 2012 and added three purchases in 2013.

The plaintiff’s lawyers sought in 2013 to turn the case into a class action involving 91,708 people who allegedly received the text messages. Microsoft said that it had received permission to send the texts but that records confirming this had been destroyed. Had a class been approved, the case could potentially have cost Microsoft more than $45 million, according to court filings by the plaintiff.Judge Sammartino denied the class-action motion as well as Microsoft’s motion to dismiss the case. She ruled that the law permitted the plaintiff to seek damages of $500 for one alleged violation, potentially tripled. He appealed but settled before the appeal was heard. A spokesman for Microsoft declined to comment. One of the plaintiff’s lawyers also declined to comment.

Judge Sammartino, an appointee of former President George W. Bush, initially referred questions from the Journal to William Cracraft, a spokesman for the Ninth U.S. Circuit Court of Appeals. “She asked me to let you know” her stocks “are in a managed account, so she’s not seeing as how there could be a conflict,” Mr. Cracraft said. “She’s not inclined to discuss her private business with you since it is all in managed accounts, and she thinks that’s sufficient.”An opinion by the Judicial Conference’s Committee on Codes of Conduct in 2013 confirmed that judges must bow out of cases involving stocks they own in accounts run by money managers.Judge Sammartino later informed the court clerk’s office of the conflicts, and the office filed a letter notifying parties to the Microsoft case and other cases with violations identified by the Journal.

“Judge Sammartino was not aware of this financial interest at the time the case was pending,” the letter said. “The matter was brought to her attention after disposition of the case. Thus, the financial interest neither affected nor impacted her decisions in this case. However, the financial interest would have required recusal.”

Before the Journal contacted Judge Sammartino about her recusal violations, she disqualified herself in at least 10 other cases involving companies whose stocks were listed on her disclosure forms, a review of her cases shows.Judge

Rodney Gilstrap, chief of the U.S. District Court for the Eastern District of Texas, had the largest number of conflicts in the Journal’s analysis: 138 cases assigned to him involving companies in which he or his wife held an interest.Judge Gilstrap said he believed he didn’t need to recuse himself from some cases because they required little or no action on his part, and in other cases because the stocks were in a trust created for his wife. Legal-ethics experts disagreed on both counts.“I take my obligations related to potential conflicts/recusals seriously,” he said in an email. “Throughout my judicial career, I have endeavored to comply with all such obligations, and I will continue to do so.” Judge Sammartino’s 54 conflicts were the second-most recusal violations.

Brian Martinotti in New Jersey ranked third, handling 44 cases involving companies in which he had invested. Among his biggest holdings was Alphabet Inc., the parent of Google. He disclosed in 2016, 2017 and 2018 that he owned $15,001 to $50,000 of Alphabet shares. Brian Martinotti, Gershwin Drain, Emily MarksIn 2017, the judge threw out a lawsuit against Google alleging that videos on its YouTube unit falsely said the plaintiff was a sex offender, ruling that the Communications Decency Act let Google off the hook.Judge Martinotti, an Obama appointee, didn’t respond to requests for comment, but after the Journal inquired, the district court clerk notified parties to 44 cases of Judge Martinotti’s stock ownership. His Alphabet holding didn’t affect the judge’s decisions but would have required recusal, the clerk wrote. A spokesman for Google declined to comment.“I would like my case to be re-opened as Judge Brian R. Martinotti was unfairly biased and should have recused himself from my case,” the plaintiff, Nuwan Weerahandi, wrote in an August 2021 letter to the court, after receiving notice of Judge Martinotti’s violation.

The chief judge of the New Jersey federal court, Freda Wolfson, denied Mr. Weerahandi’s request on Sept. 2, saying the Communications Decency Act bars defamation-related claims against computer services such as Google. “Importantly, in making this purely legal determination, Judge Martinotti did not engage in any factfinding that would bear on the credibility of any party, including you,” Judge Wolfson wrote. In at least 18 instances, judges disqualified themselves over conflicts, only to have the case reassigned to a judge who also had a conflict but didn’t recuse.In 2015, Judge Robert Cleland in Michigan, a George H.W. Bush appointee, bowed out of a suit by an injured motorist against insurer Allstate Corp., whose stock the judge had been buying and selling that year.

The case was reassigned to Judge Gershwin Drain, who also owned Allstate shares. Judge Drain heard the case—and six others involving Allstate—and wrote a ruling denying a request by the motorist to move the dispute to state court. The case then settled on undisclosed terms.Presented with his conflicts in 42 cases, Judge Drain, an Obama appointee, said he had added notices to the court’s public docket for each suit.“I can say with absolute certainty that I never made any decision in favor of a company because I owned stock and was invested in that company,” Judge Drain said in an email. “To prevent any future issues, however, I have taken steps to review any new cases and if I am invested in any of the companies among the new cases that are assigned to me I will immediately recuse myself.” Allstate didn’t respond to requests for comment. A lawyer for the motorist declined to comment.Frequent recusals can upset courts’ random drawing of judges for cases and lead to a smaller pool.

In 20 federal districts, a third or more judges owned the same stock in the same year. In the U.S. District Court for the Eastern District of Virginia in 2017, fully a third disclosed a Microsoft stock holding. More than 340 federal appellate and trial judges reported holdings in Apple Inc. at some point from 2010 to 2018 and 300 in Microsoft. About 500 judges owned Bank of America, Citigroup Inc., JPMorgan or Wells Fargo shares at some point. Those numbers reflect only stock ownership, not recusal violations. However, the Journal found 37 judges who owned a bank stock while improperly hearing a case involving that bank.

Judge Emily Marks bought Wells Fargo stock two weeks after she was assigned a Wells Fargo case, a conflict that now threatens to upset a ruling she made.In the suit, Jacob Springer and Jeanetta Springer of Roanoke, Ala., acted as their own attorneys in challenging Wells Fargo’s foreclosure of Ms. Springer’s father’s home. In court filings, they said her ailing father missed a mortgage payment three months before he died, after which his daughter, who inherited the home, made payments. Wells Fargo foreclosed, saying the Springers missed payments of about $4,100 on an outstanding mortgage of more than $80,000; they said they had missed just one $695 payment. “This is outrageous. How am I supposed to know she owns stock in Wells Fargo?” — Jacob Springer, when told of the judge’s violation in the case he lost

Judge Marks, chief judge of the U.S. District Court for the Middle District of Alabama and an appointee of former President Donald Trump, was assigned the case in mid-August 2018. The judge bought Wells Fargo stock at the end of the month. In September, she adopted a magistrate judge’s recommendation to dismiss the Springers’ suit, a decision affirmed on appeal. Judge Marks declined to comment. The court clerk told parties to the case that the judge had informed her of having owned the bank stock and directed the clerk to notify the parties. The clerk told them Judge Marks’s stock ownership didn’t affect her decisions in the case but would have required recusal. Mr. Springer said, “This is outrageous. How am I supposed to know she owns stock in Wells Fargo?”The Springers asked the court to reopen the case, saying in a filing that “a non-interested Judge” might have let them amend their pleadings. The court assigned a new judge to their suit in July. A spokesman for Wells Fargo declined to comment.

The nation’s 94 district courts are organized into 12 circuits, or regions. The Journal identified recusal violations in each region.The U.S. Supreme Court wasn’t part of the Journal’s analysis. Nor did it include bankruptcy or magistrate judges. Half of all federal trial and appellate judges in the Journal’s review disclosed minimum financial assets of $775,000 in 2018, while 31 reported a minimum of $10 million of assets. Some jurists joined the bench after lucrative careers in private practice.

Federal district judges draw an annual salary of $218,600, which isn’t much more than a first-year attorney at a top-tier law firm earns. Some judges said their salary level makes stock investments an attractive option.

Susan Webber Wright, Donald Graham, Benjamin Settle“

I have my judicial salary, but the law really restricts what else judges can do for additional income,” said Judge Susan Webber Wright in Arkansas. She said she held more stock when she was younger and trying to build a nest egg for her family.Judge Wright, an appointee of former President George H.W. Bush, oversaw 2005 and 2006 cases involving Eli Lilly and Co. and Home Depot Inc. while owning shares of those companies. She issued no major rulings before one case settled and the other was transferred to another district.“A judge has to be on her toes, and obviously I was not,” Judge Wright said.Judges who have many conflicts are “either being careless or have people working for them who are not exercising due diligence,” she said, though she added that judges bear the ultimate responsibility for steering clear of conflicts.

Judge Donald Graham in Florida held American depositary receipts of Alcatel-Lucent while assigned to a case involving the French telecom maker. He sold the ADRs in 2010, a day after he approved a $45 million civil settlement between the U.S. Securities and Exchange Commission and Alcatel-Lucent over allegations the company bribed foreign officials. The company neither admitted nor denied the allegations.After being contacted by the Journal, Judge Graham, a George H.W. Bush appointee, notified the court clerk of the violation. In a publicly filed letter to the parties, the clerk said Judge Graham’s holding didn’t affect his decisions.A lawyer for the SEC told the court the agency didn’t believe any further action was required. Alcatel-Lucent’s current owner, Nokia Corp., declined to comment.

Judge Benjamin Settle in Washington state sold as much as $15,000 of Amgen Inc. stock during a case that was settled in 2012. He sold the stock in 2008, while the suit was under seal, giving him access to nonpublic information about an allegation of kickbacks to doctors. The case contributed to a $762 million penalty against the biotech company in 2012.Judge Settle, a George W. Bush appointee, said he hadn’t included all of his holdings on his recusal list when he inherited the case in 2007 as a newly commissioned federal judge. “Amgen was among those mistakenly omitted,” he said. Judge Settle said he directed his broker in 2008 to sell all of his stocks. A spokesman for Amgen declined to comment.The Journal’s tally of recusal violations is likely an undercount. In Mississippi, Judge Sharion Aycock’s husband owned as much as $15,000 in shares of Dollar General Corp. at a time when the Journal found two cases she heard involving the retailer. After being asked about the matter, Judge Aycock found five more violations involving Dollar General and notified the clerk about all seven.

A few of the judges with violations the Journal identified had legendary careers, including Jack Weinstein and Arthur Spatt in the U.S. District Court for the Eastern District of New York. Judge Weinstein, a Lyndon Johnson appointee, oversaw four cases involving Medtronic PLC or Target Corp. while he or his family held their shares. Judge Spatt, who was named to the court by former President George H.W. Bush, had a violation involving Johnson & Johnson. Judge Spatt died in 2020 and Judge Weinstein died earlier this year, both having served into their 90s.

Judge Margo Brodie, chief of the Eastern District, which includes New York City’s Brooklyn and Queens boroughs, acknowledged the conflicts but said the judges’ “involvement was minimal, limited to ministerial actions” such as approving settlements or opinions by magistrate judges.“These two judges have been revered by the practicing bar for their integrity and even handedness,” Judge Brodie said in an email. “There has never been a suggestion, much less an accusation, that either ever acted inappropriately.”

The Journal identified 36 conflicts by one judge in Colorado, R. Brooke Jackson. The cases included Apple, Chevron Corp., Eli Lilly, Facebook Inc., General Electric Co., Home Depot, Honeywell International Inc., Johnson & Johnson, JPMorgan, Pfizer and Wells Fargo.

“I have preferred to stay unknowledgeable about it.” — Judge R. Brooke Jackson, on the stocks in his and his wife’s portfolio

Reached by phone, Judge Jackson said he had no idea which stocks he owns because a money manager handles them and because his wife fills out his disclosure forms. He said that because he doesn’t know, he couldn’t have a conflict of interest.“I’ve never really paid much attention to it,” Judge Jackson said of his and his wife’s investments. “I have preferred to stay unknowledgeable about it.”Told he was required to know under the law, he said: “That’s news to me.” In a later email, Judge Jackson, an Obama appointee, admitted his mistake. “I am taking immediate steps to provide a current list of stocks and other investments held by my wife and by me to our Clerk’s Office so that we can create an appropriate conflicts list and be sure that this does not happen again,” he wrote. In a subsequent 21-page letter to the Journal,

Judge Jackson said he should have recused himself in most if not all of the 36 cases.“I am embarrassed that I did not properly understand and apply the stock ownership rule,” he wrote. “Being informed of what could be viewed as an ethical violation, even a technical one, is no fun.”

R. Brooke Jackson, David Norton, Sharion Aycock

Judge David Norton in South Carolina presided over six asbestos suits beginning in 2012 while his disclosures show he held between $95,004 and $250,000 of stock in two defendants, 3M Co. and GE. In 2015 he heard a case filed by James Chesher, who alleged that he developed cancer from exposure to asbestos in the Navy. Mr. Chesher and his wife sought damages from 3M, GE and about two dozen other companies. They reached settlements with 3M and GE in 2016.Mr. Chesher died in 2017. His widow, Cheryl Ann Chesher, was surprised to learn from the Journal of the judge’s financial interest in GE and 3M.“He should have policed himself,” Ms. Chesher said. “He knows what the law is on that and he should have followed through,” she said, adding: “You have to wonder if he’s looking out for himself...rather than the clients.” In an emailed statement, Judge Norton said he didn’t recuse himself because 3M and GE played no significant role in the suits and were “defendants in name only.” He added: “At the outset the lawyers involved in these cases assured me that 3M and GE would be dismissed and not involved in the case pursuant to a pre-existing agreement between the plaintiffs’ lawyers and GE and 3M.” Peter Kraus, an attorney for the Cheshers, said he and his co-counsel “have no recollection about making any assurances to the judge that GE and 3M would be dismissed.” They “were sued because the evidence in the case implicated them, and were certainly not ‘defendants in name only,’ ” he said, adding that attorneys for both companies participated in depositions.

A 3M spokeswoman said neither the company nor its attorneys ever assured the judge regarding any dismissals. A spokeswoman for GE didn’t respond to questions about whether it had conveyed such an assurance. An attorney for GE said she didn’t recall the case.Told what 3M and the plaintiffs’ attorney said, Judge Norton reiterated his recollection of the case.

As remaining asbestos defendants moved toward trial, Judge Norton, a George H.W. Bush appointee, issued rulings that broadly benefited companies with asbestos liabilities.In hearings, he took aim at the theory behind the cases: that any exposure to asbestos was significant enough to contribute to their cancer.

The defendants said the plaintiffs’ expert witness shouldn’t be allowed to testify because he was unable to show that the men more likely than not would have avoided the disease but for their exposure to the asbestos. Judge Norton sided with the companies, ruling that the expert witness’s testimony—“scientifically sound as it may be”—couldn’t be presented to a jury.

The ruling drew national attention. Plaintiffs’ lawyers denounced it, while lawyers who often defend corporations embraced it as common-sense analysis. A Harvard Law Review article blasted it, saying that “unrealistic legal expectations of science could do great injustice.”Mr. Kraus, the Cheshers’s attorney, called the decision out of sync with court precedent on liability in asbestos cases.

Other courts have adopted Judge Norton’s analysis, including the Ohio Supreme Court. Mr. Kraus said he has never asked to see a judge’s financial disclosure form. He said he wasn’t sure he ever would. “If a judge who is considering a matter you have before him finds out that you’ve been snooping around about his finances, I’d be very concerned as a practitioner that it would cause a negative backlash that would affect my clients’ rights in the court,” Mr. Kraus said.

Judge Norton also violated an ethics rule when he bought a box of cuff links at an auction of the government-seized property of a man he earlier sentenced to prison for a Ponzi scheme, according to the chief judge of the Fourth U.S. Circuit Court of Appeals.“The judge’s purchase did create an appearance of impropriety,” though it didn’t affect the sentence imposed, Chief Judge Roger Gregory wrote in 2017, without identifying the cuff links buyer.

Judge Gregory quoted the unnamed judge as saying he tried to “keep current on all ethical rules and take the yearly ethics test prepared by the Administrative office” but was unaware that his participation in the auction could create the appearance of impropriety.

Judge Norton, who confirmed in a separate filing that he bought the cuff links, told the Fourth Circuit: “Now that I have been made aware of this, my actions will not be repeated.”

Nell’ottobre del 2020, ovvero 12 mesi fa, noi scrivemmo ai lettori del Blog che erano maturi i tempi per mettere da parte il vecchio slogan “Don’t fight the Fed” e sostituirlo invece con “Fight the Fed!”.

Nell’ottobre 2020, quella nostra affermazione fece, probabilmente, sollevare qualche sopracciglio. Immaginiamo anche qualche risatina di sufficienza.

A distanza di 12 mesi possiamo però ritrovare quella nostra affermazione, formulata con parole diverse, in numerosi commenti e analisi di operatori e studiosi dei mercati finanziari.

Nel corso degli ultimi tre mesi, in questo Blog, vi abbiamo documentato che si è rafforzata, sui mercati finanziari ma pure tra il pubblico, la perplessità sull’atteggiamento scelto dalla Federal Reserve, che a tutto oggi è quello di negare l’evidenza, di chiudere gli occhi, di affermare che non esiste ciò che tutti possono vedere che esiste.

Lo scetticismo sulle capacità della Federal Reserve di gestire senza difficoltà questa fase, con in particolare un’inflazione che fino a marzo 2021 “non esisteva” e che successivamente è diventata “transitoria” per poi finire per essere oggi “qualcosa che durerà almeno due anni”, si manifesta anche nelle tensioni sui mercati finanziari (oltre che nelle dichiarazioni contradditorie degli stessi Governatori della Federal Reserve).

Oggi regaliamo al nostro lettore un recente commento su questa situazione, articolo che in modo molto informale ci restituisce però il clima che si respira tra le famiglie degli Stati uniti, stordite prima dall’ondata (abnorme) di aiuti e di guadagni di Borsa, e successivamente della comparasa dei cosiddetti “effetti non desiderati e non intenzionali”..

Per Recce’d si tratta però, lo ripetiamo, di un argomento del passato, a proposito del quale i nostri portafogli ed i nostri Clienti sono pronti ormai da mesi.

In an attempt to take advantage of the housing bubble, in 2005 we sold our home in Jacksonville Beach, Florida and rented a home in Ponte Vedra Beach, Florida. After home prices fell, we bought a house in Ponte Vedra, where we live today. In addition to being a great place to live and raise a family, Ponte Vedra is also a popular retirement destination. In fact, most of our neighbors are elderly or retired. While we couldn’t ask for better neighbors, the supply of children on our street is limited, making it difficult for our kids to make friends.

The most common solution for finding something for kids to do in Ponte Vedra is to either join a country club or enroll your children in activities where they can meet and play with other kids. We went with the activities or sports route—specifically, travel baseball and softball.

Before spending much of our free time at baseball and softball fields, our social circle consisted of mostly white-collar professionals. As the years have passed and we’ve made friends with a growing number of travel ball parents, our social circle has shifted.

Travel ball parents are a unique group. They’re passionate, determined, competitive, and for the most part, very hard working. Many of their occupations are essential to the economy, such as nurses, electricians, plumbers, truck drivers, IT technicians, and construction workers. They are on the economy’s front line and have been a great source of information for me regarding current business trends.

While we see each other less frequently, I’ve remained in touch with my former social circle, which mainly consists of lawyers, marketing executives, real estate specialists, asset allocators, and business owners. Interestingly, over the past few months I’ve had an unusually high number of conversations with old friends. Historically, these well-to-do friends typically contact me during sharp declines in the stock market, asking me when their net worth is going to rebound! However, much of their recent uneasiness is related to soaring asset prices. Increases in their net worth have been staggering and, in many cases, life altering.

For those wondering why so many people have not returned to work, look no further than my friend who sold his business and house for enormous gains and is now retired. Instead of being a productive member of the workforce, he’s roaming the beach searching for shark teeth! Another friend recently asked me about his retirement account. He wasn’t bragging—he was just in disbelief about how much money he’s made and was wondering if he should take profits. Another friend asked if it’s a good time to trade in some of his unrealized gains for a new pool. I said, “Sure, but good luck finding an available pool construction crew!” He joked and said, “What’s the point of having all of this money if it doesn’t buy anything.” He pointed to the product and service shortages he’s experiencing personally, noting that it’s no longer just about price, but about availability.

While my wealthy friends riding the asset inflation wave have seen their net worth increase considerably, there is growing apprehension that their gains, and the trajectory of asset prices, are unsustainable and possibly artificial. “When does it end?” is a common question, followed by, “Should I cash in and retire?” and “Where can I invest my cash? Currently I’m getting nothing!” And my favorite, “Where is all of this money coming from?” For those that understand where the money is coming from, they ask, “They can’t keep printing forever, can they?”

As my professional friends ponder what to do with their growing investment portfolios, the mood and concerns within my travel ball social circle is far different. While they too feel that something isn’t quite right, they are much more focused on getting through the workweek than contemplating the direction of the financial markets. Instead of telling me about their equity portfolios, they enlighten me on labor and supply shortages, growing backlogs, and a succinct description of the current operating environment—“We’re slammed!”

Examples include a contractor who told me he can name his price on home renovations. He said he’s backed up six months just giving quotes and said a lady recently hugged him for simply showing up! A window and door distributor had similar stories, saying she’s backed up six to nine months on deliveries and is having trouble obtaining product. Another parent, a nurse, recently arrived to practice late. She was exhausted and saddened after losing two middle-aged patients to COVID during her shift. An owner of a smoothie store informed me about his difficulty finding labor, causing him to work longer hours and weekends. He said finding and keeping workers at the new unofficial minimum wage ($15/hour) has been practically impossible. Another parent who works for UPS just laughed when I asked if he was busy. After a plumber told me about his hectic day, I advised him to ask for a raise. I informed him of the generous signing bonuses plumbers were receiving for job hopping. And that’s been my advice to every person I speak with who is doing the heavy lifting in today’s economy—ask for a raise or promotion. And for business owners with overwhelming backlogs, I suggest increasing prices until some sense of control is regained, or business is lost. A travel ball parent who owns a home restoration company told me that’s exactly what he’s been doing. He said he can’t keep up with his workflow and is so far behind he’s raising prices and turning away business. And for what it’s worth, he said if you’re in the market for new cabinets, good luck!

Regardless of the social circle I speak with, one thing is clear—the economy and financial markets could use a break from the Federal Reserve’s “full-throttle” monetary policies. Stress is building with the economic and asset price wheels spinning so fast there is a sense that at any moment something could break. The Federal Reserve, in our opinion, has “QE’d” so hard and for so long that their policies have become counterproductive. Meanwhile, Fed members attempt to justify current policies by claiming there is too much slack in the labor market and inflation is transitory. The Fed’s views conflict with some of the most pressing challenges workers and business owners are experiencing. In fact, if you want to hear a good laugh, tell a business owner there is too much slack in the labor market! And if the business owner isn’t laughing hard enough, tell them inflation isn’t a problem and is transitory.

As we watch inflation build throughout our opportunity set of small cap businesses, we believe the odds of inflation being the catalyst for the next bear market are increasing. Instead of being transitory, we see signs of inflation persisting, with many of the companies we follow announcing additional price increases heading into 2022. Assuming current trends continue, we expect the transitory inflation narrative will eventually succumb to reality and threaten the Federal Reserve’s ability to monetize debt and maintain negative real interest rates. Without the Fed’s intrusive interference in the free markets, interest rates would once again move freely, allowing asset prices to properly reflect their underlying fundamentals. Ironically, instead of the Federal Reserve saving us from inflation, we believe it will be inflation that saves us from the Federal Reserve.

Although there are many uncertainties in the current environment, we’re certain of one thing—the economy and financial markets do not need more money stuffed into their gears. Based on conversations with friends, parents, business operators, and investors, money creation is no longer the solution—it is the problem. Considering money creation is currently the only thing the Federal Reserve has to offer, we believe further “help” will only add to the challenges facing our economy and its exhausted workforce. If Fed members are having difficulty seeing this, we suggest they step away from their Bloomberg screens and tightly knit social circles. To get a clearer picture of what’s happening in the real economy, attending a youth baseball or softball game this weekend would be a good start!

Come abbiamo detto anche in un altro dei Post odierni, il nostro atteggiamento di gestori di portafoglio verso la vicenda Lehman è il solo che a noi pare possibile: giorno dopo giorno seguiamo, insieme al nostro Cliente, lo sviluppo di questa vicenda, appunto parlandone con i Clienti, e avendo in mano un portafoglio titoli che già tiene conto dei diversi scenari possibili da oggi in avanti.

Commenti di carattere generale ne avrete letti già anche troppi, e non vi faremo perdere altro tempo. A noi sembra che i termini della questione siano ormai chiari, e li riassumiamo con l’immagine che segue.

El Erian spiega benissimo che il problema è tutto politico: il Governo cinese può scegliere la strada del salvataggio, che però lo obbligherebbe a salvare un certo numero di altri grandi gruppi del settore edilizia, oppure può scegliere la strada del fallimento e del segnale da mandare a tutto il sistema economico cinese (ed oltre).

Abbiamo messo opportunamente in evidenza, in un secondo Post, che tutta l’industria del risparmio e della Finanza, con in testa le banche globali di investimento e i gruppi che vendono Fondi Comuni, è schierata in modo compatto a favore del salvataggio.

Anche perché sono loro ad avere in mano i titoli di Evergrande, e degli altri gruppi avviati al fallimento in Cina.

Goldman Sachs qui sopra esprime una assoluta, e cieca, fiducia nel fatto che il Governo “sa che cosa fare”. ma lo sa veramente? E che cosa vuole fare?

La linea di Goldman Sachs per ora ha prevalso: lo dimostra la reazione dei mercati finanziari globali nella settimana del 20 settembre 2021.

Nelle chat e sui siti di trading si spera (sogna) di rivedere le vicende di Gamestop e AMC; l’Azienda è fallita, ma il titolo sale ugualmente, e sale magari del 100%.

Ovvio che si tratta di ragazzini, o comunque di investitori con la psicologia dei ragazzini, che credono nelle storie con i Supereroi.

Questa di Evergrande invece non è una storia con l’Uomo Ragno e Superman: è una storia vera ed una storia grave.

Il nostro compito di gestori professionali è proprio quello di soppesare tutti i possibili scenari, ed attribuire ad ogni scenario un coefficiente di probabilità, sulla base dei fatti e non delle favole con i supereroi. E neppure sulla base di ciò che dice Goldman Sachs.

Ed è questo che facciamo ogni mattina per i nostri Clienti. Per voi lettori, offriamo in lettura un interessante articolo, nel quale un notissimo gestore di portafoglio esprime un modo di vedere le cose alternativo a quello dominante tra le banche di investimento.

Vi sarà utile fare entrare, nel vostro processo di decisione, un po’ di aria fresca.

Kyle Bass: President Xi Wants Evergrande Blowup To Help Lower Housing Prices

Tuesday, Sep 21, 2021 - 07:45 PM

Shortly before two Evergrande creditors confirmed to Bloomberg (under the guise of anonymity) that the Chinese developer-giant had missed bond payments due Monday, Hayman Capital founder Kyle Bass returned to CNBC for an interview Tuesday morning for a telephone discussion with CNBC's Joe Kernen to discuss the toxic Chinese economy and its unsustainable debt pile.

Bass, one of the most vocal China hawks on Wall Street, has said it's important to understand what, exactly, President Xi is looking for. According to Bass, China is "experiencing similar problems that we are in the US" when it comes to housing prices.

Xi has been managing a broad-based crackdown on the Chinese economy all summer. Now, it's time to confront the issue

Now, China is entering this period of weakness with over $50 trillion worth of credit in their system, with their annual GDP at around $15 trillion.

Compared with China, the US had GDP of $17 trillion with another $12 trillion off-balance-sheet when Lehman collapsed. China is at 3.6x ahead of its "Lehman moment", while the US was only about 1.7x.

What's more, China is still a relative newcomer to the capital markets business, Bass said. China adopted a western-style financial system in 2001 after they joined the WTO.

Around the same time, Beijing's population-control policies started to really bite, as China saw its birth rate dwindle.

There are now 1.3 births per woman in China and you need to be at 2.1 to actually just sustain your population, Bass said. So for many working-age Chinese males, population dynamics are at a critical level and the reason being is the Chinese men can't afford houses so they're all living with their parents and the fact that Evergrande went on a credit binge and built all of the housing and Chinese property took off because their central bank continued to print so much money. Now, it's trying to rein in property prices and he's trying to do it as quickly as possible because China's on an unsustainable path lower.

"Right now," Bass says, everyone who believes China's going to grow at 6% a year ad infinitum "is just dead wrong," but if we just divorce ourselves from any value judgments about China and think about the the future of the plan of the globe - if we always think about the Chinese consumer and we all at one point wanted to move forward in a symbiotic way where we sell things to China, and their consumers buy things from us.

It's nice to think about, but this unfortunately just isn't how China works. Investors must realize that they're not investing  "in a real market."

Bass added: "You still have an economy with a closed capital account they have one-way capital flows dollars in. Now, imagine if dollars start heading out."

Nella Commedia dell’Arte, da sempre c’è un posto per il servo sciocco, c, personaggio ricorrente perché gradito al grande pubblico perché capace di suscitare la risata. Un tipo divertente perché sciocco.

A volte con frasi sciocche, a volte con atteggiamenti goffi, a volte con interventi fuori tempo e fuori luogo, altre volte per affermazioni sconclusionate. Comunque, fa ridere.

Nelle diverse regioni d’Italia, a questo personaggio della Commedia dell’Arte sono stati dati nomi diversi, tra i quali Arlecchino a Bergamo e Zanni soprattutto Roma

La Finanza globale è, da molti anni, scivolata nella Commedia: si vedono e si sentono cose sconclusionate, prive di senso, prive di agganci con la realtà. Noi di Recce’d le abbiamo messe alla vostra attenzione più e più volte, utilizzando anche questo Blog che state leggendo.

Nella commedia della Finanza globale del Nuovo Millennio, il ruolo dello servo sciocco se lo sono attribuite, da sole, le banche globali di investimento.

Istituzioni cresciute con una velocità che ha pochi termini di paragone dagli Anni Ottanta agli Anni Duemila, sono tutte di fatto fallite con la crisi dei subprime tra il 2006 ed il 2008. Con i soldi del pubblico (e quindi, anche con i vostri soldi: che li abbia stampati la Banca Centrale fa nessuna differenza) queste Istituzioni hanno continuato a vivere, o meglio a sopravvivere, a patto di diventare una cinghia di trasmissione dei desiderata del potere politico dominante.

Accade così che Istituzioni un tempo prestigiose, proprio perché capaci di IMPORRE un criterio critico nella valutazione degli asset finanziari si sono trasformate in servi sciocchi del disegno politico in quel momento prevalente.

Noi di Recce’d abbiamo regalato, attraverso questo Blog, una serie di documentate analisi che sostengono questa lettura dei fatti: episodi del passato nei quali le banche globali di investimento hanno supportato, fino all’ultimissimo momento, scelte azzardate, emittenti fragili o peggio dannosi, e Governi alla deriva che compiono scelte ai danni del pubblico degli investitori.

Oggi, il solo imperativo al quale queste banche globali di investimento rispondono è: vendere qualsiasi cosa ai risparmiatori, vendere comunque e dovunque, piazzare nei portafogli degli investitori anche la spazzatura, e sempre a prezzi elevatissimi.

In questo Post Recce’d vi regala un esempio ulteriore.

Noi in Recce’d non abbiamo la minima idea, di come andrà a finire la vicenda Evergrande. Ci pare però sia una vicenda di grande dimensione , di grande complessità, e poco decifrabile proprio perché si svolge in Cina.

La vicenda viene seguita per i Clienti ogni mattina attraverso il The Morning Brief: a noi sembra utilissimo effettuare un monitoraggio quotidiano, anziché tentare di arrivare a conclusioni (campate per aria) in anticipo su tutti, e prima che si conoscano le mosse dei giocatori che oggi stanno intorno al tavolo.

C’è al contrario che, ogni mattina, si presenta al Mondo raccontando che “lui lo sa già, come andrà a finire”.

A noi sembra notevolissimo il fatto che non solo tutte le banche globali di investimento la vedono esattamente allo stesso modo, ma pure che il modo in cui tutte leggono questa vicenda porti tutte le banche del mondo alla medesima conclusione (almeno, in pubblico): “il Governo cinese ha il pieno controllo, non c’è alcun rischio che la cosa degeneri, e tutti gli investitori devono soltanto stare tranquilli ed attendere che le cose vadano a posto”.

Tutte queste banche sanno, con anticipo, quali saranno le decisioni della Banca Centrale di Cina, e del Presidente Xi.

Un esempio, concreto, di ciò che significa l’espressione “cervelli mandati all’ammasso”.

Ovvio ed evidente che le grandi banche globali, le Goldman Sachs, le Morgan Stanley, le UBS e le BNP Paribas e le JP Morgan (soltanto per citarne alcune) ma pure i gestori di Fondi Comuni come Blackrock e Fidelity, fanno tutti affari con il Governo cinese, e fino a ieri facevano grandi guadagni proprio piazzando il debito di Evergrande.

Per documentare quello che abbiamo scritto fino a qui in questo Post, vi invitiamo a leggere questa sintesi delle opinioni espresse dalle grandi banche di investimento su Evergrande la settimana scorsa. La sintesi è stata pubblicata sul sito di Bloomberg. Fatevi la vostra opinione in merito.

Wall Street analysts are putting their faith in the Chinese Communist Party.

After a harrowing Monday that saw risky assets tumble globally on fears of a collapse in China Evergrande Group, some of the world’s biggest banks and money managers raced to assure investors that this is no Lehman moment.

The message from firms including Citigroup Inc., Fidelity International Ltd. and AllianceBernstein Holding LP: Evergrande may indeed default, but Chinese authorities will take steps to prevent the property giant’s crisis from destabilizing the financial system and the economy.

Here’s a sampling of what strategists and money managers are saying about the prospect of contagion:

Ajay Rajadhyaksha, Barclays

So, is this China’s Lehman moment? Not even close, in our opinion.

Yes, Evergrande is a large property firm. And yes, there could (probably will) be spill-over effects on China’s property sector, with economic implications. And yes, it comes at a time when China’s growth has already started to disappoint. But a true ‘Lehman moment’ is a crisis of a very different magnitude. One would need to see a lenders’ strike across large parts of the financial system, a sharp increase in credit distress away from the real-estate sector, and banks being unwilling to face each other in the interbank funding market. And with all that, we would also need to see massive policy mistakes on the part of Chinese authorities. In our view, the conditions are simply not in place for even a large default to be China’s Lehman moment.

Judy Zhang, Citigroup

We do not see the Evergrande crisis as China’s Lehman moment given policy makers will likely uphold the bottom line of preventing systematic risk to buy time for resolving the debt risk, and push forward marginal easing for the overall credit environment.

We believe regulators may buy time to digest Evergrande’s NPL problem (e.g., guiding banks not to withdraw credit and extend interest payment deadline).

Kenneth Akintewe, Aberdeen Standard Invest Asia 

Our base case is that there will be a relatively orderly restructuring, it’s not in the interest of policy makers, economy or the market to go into a destabilized uncontrollable spillover, and have this impacting other parts of the economy.

Near term there will be uncertainty and volatility, but outside of Evergrande, policy makers will be able to engineer some sort of recovery from this.

Bhanu Baweja, UBS

I don’t think this is a Lehman moment. I think when you try to reduce moral hazard after four major credit cycles, it is going to be messy. The biggest risk out here is not what happens to suppliers or what happens to the financial system in the near term, I don’t think that’s an issue. I think China has managed that reasonably well. Default levels are pretty low in the overall economy and the capital adequacy for banks, particularly the large banks, is quite high.

I think the most important issue is what this does to the collateral of the entire credit boom -- which is property prices -- and therefore confidence in property itself. 

Catherine Yeung, Fidelity International

If we look at the past three years, we have seen restructuring that the government or regulators have been involved in, whether it’s Huarong, China Fortune Land, and other single credit events. So they have the confidence in terms of this potential restructuring. 

The likely scenario is that they will avoid bankruptcy when it comes to Evergrande [and] seek restructuring with strategic investors or bridge investors. The priority from a domestic perspective and a sentiment perspective is projection completion and supply chain cash settlements.

Vishwanath Tirupattur, Morgan Stanley

The expectations of a broad contagion may be overdone. Clearly the impact on growth is there. But I think the key point here is I continue to believe this is not a moment like what we had in 2008. There has certainly been a subtle change of signal from the policy makers in China. A lot of that we think is already reflected in price.

Marko Kolanovic, JPMorgan Chase

[The market sell-off] is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks. Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip.

Risks are well-flagged and priced in, with stock multiples back at post-pandemic lows for many reopening/recovery exposures. We look for cyclicals to resume leadership as delta inflects.

Shujin Chen, Jefferies

Against the market view, we see regulators keeping a close eye on Evergrande and think it could soon put forward a plan or meaningful progress to reduce the impact.

We expect a plan to resolve the issues, or help make meaningful progress to be out by the end of the year (also possible within 1-2 months) as China will focus on boosting 1Q22 economic growth starting from 4Q21.

Larry Hu, Macquarie

A major concern is the contagion risk for other high-leveraged developers, as banks, suppliers and homebuyers would all turn more cautious in view of the Evergrande saga. As the result, a self-fulfilled liquidity crunch could happen to other high-leveraged developers. That said, the government has the will and capability to intervene, if the market goes panic. 

It could break the negative feedback loop by easing liquidity, as what it did during the interbank credit crunch in 2013. Moreover, given property policy is unprecedentedly tight at this moment, policy makers have plenty of room to loosen if they want. It seems that they are willing to wait a bit longer to reduce the moral hazard in the future, but they could step in anytime for the sake of financial and social stability.

John Lin, AllianceBernstein

There is very little likelihood of default spilling over into a systematic crisis. First, Chinese regulators are the ones triggering the most recent fall of Evergrande.  The regulators have prepared for it, and they will be able to manage through it.

Because there is low likelihood of a systematic crisis, many of the Chinese developers – particularly the higher quality companies with strong balance sheet, capable management and good product reputation – will survive this round of correction.  In the market panic over the last two weeks, their valuations have already overshot on the down side.  In our opinion, these select quality developers present compelling return opportunities for long-term minded investors.

Tommy Wu, Oxford Economics

Concerns over the rising default risk of Evergrande, the property developer, have roiled financial markets over the last week. While we think the government doesn’t want to be seen as engineering a bail out, we expect it to step in to conduct a managed restructuring of the firm’s debt to prevent disorderly debt recovery efforts, reduce systemic risk, and contain economic disruption.

— With assistance by Abhishek Vishnoi, Chloe Lo, Sofia Horta e Costa, Jan Dahinten, Ishika Mookerjee, and Low De Wei

Il lavoro di Recce’d è essenzialmente questo: anticipare per conto del Cliente ciò che nella realtà sta per accadere, a distanza di qualche mese o magari di un anno, e modificare il portafoglio in titoli nel modo più redditizio, più profittevole e più performante. Il vostro portafoglio deve essere preparato ed organizzato PRIMA degli eventi. Dopo, non servirà più a nulla.

Recce’d agisce in modo tale da mettere il proprio Cliente almeno un passo avanti agli altri investitori, consulenti, private banker, banche globali di investimento, wealth manager e robot advisor.

Per questa ragione i nostri Clienti ci riconoscono le commissioni di gestione.

Recce’d scrisse quindi mesi fa di stagflazione, in sede pubblica (ad esempio qui in questo Blog, e poi anche su Soldionline.it ed in altre sedi pubbliche), ma soprattutto ai propri Clienti

Poi nella pratica abbiamo fatto del tema stagflazione il tema centrale della nostra gestione del portafoglio: così che oggi, 25 settembre 2021, i nostri portafogli sono perfettamente posizionati per ciò che adesso tutti leggono sul proprio quotidiano o settimanale .

Perché oggi, nel settembre 2021, chi ha un minimo, ma proprio un minimo, di conoscenza delle economie e dei mercati finanziari, e chi ha un minimo, ma proprio un minimo, di competenza e decenza professionale, oggi parla di stagflazione.

E questo è precisamente il nostro lavoro quotidiano. Parlarne con un ampio anticipo con i nostri Clienti.

Considerato il fatto che oggi, nel settembre 2021, quel tema che noi abbiamo messo alla vostra attenzione nell’estate del 2020 è diventato il tema al centro di ogni dibattito e discussione sui mercati finanziari, noi preferiamo non ripetere i nostri (forti e solidi) argomenti già pubblicati qui nel Blog ed offrire al lettore qualche squarcio su quello che si dice appunto dui mercati in questi giorni.

Pochi commentatori oggi dispongono dell’autorevolezza, della credibilità e dell’influenza di Mohamed El Erian, nel mercato internazionale.

Ecco la ragione per la quale noi oggi vi proponiamo in lettura il suo più recente articolo, che (non a caso) è dedicato proprio al tema della stagflazione.

El Erian dice nell’articolo: visto che la stagflazione ormai è arrivata qui ed ora, vediamo quali sono le mosse da fare e le iniziative che andrebbero prese.

El Erian si concentra sulle iniziative, sulle mosse e sulle contromisure da prendere a livello di politica monetaria e di politica fiscale: per ciò che riguarda invece le mosse più opportune in termini di gestione del risparmio e del proprio portafoglio titoli, noi siamo ovviamente disponibilissimi a dialogare coi lettori che ci contatteranno attraverso il sito.

Sep 22, 2021 Mohamed A. El-Erian

Rising inflation and declining growth are more likely to be a part of the global economy’s upcoming journey than features of its destination. But how policymakers navigate this journey will have major implications for longer-term economic well-being, social cohesion, and financial stability.

CAMBRIDGE – A stream of recent data suggests that the global economy is showing signs of stagflation, that odd 1970s-style mixture of rising inflation and declining growth. Those who have noticed it – and there are still too few of them – fall into two broad camps. Some see the phenomenon as temporary, and quickly reversible. Others fear that it will lead to a renewed period of unsatisfactory growth, but this time with unsettlingly high inflation.

But a third scenario, which draws on both of these views, may well be the most plausible. Stagflationary winds are more likely to be a part of the global economy’s upcoming journey than a feature of its destination. But how policymakers navigate this journey will have major implications for longer-term economic well-being, social cohesion, and financial stability.

The much-needed global economic recovery has recently been losing steam as growth in its two major locomotives, China and the United States, has undershot consensus expectations. The more contagious Delta variant of the coronavirus has dampened spending in some sectors, such as leisure and transportation, while hampering production and shipments in others, particularly manufacturing. Labor shortages are becoming more widespread in a growing number of advanced economies. Add to that a shipping-container shortage and the ongoing reordering of supply chains, and it should come as no surprise that the headwinds to a strong and sustainable global recovery are being accompanied by higher and more persistent inflation.

Higher inflation is putting pressure on those central banks that wish to maintain an exceptionally loose monetary policy. At the same time, decelerating economic growth presents a problem for central banks that are more inclined to scale back stimulus measures. All this also risks eroding political support for much-needed fiscal and structural policies to boost productivity and long-term growth potential. Some economists, and the majority of policymakers, believe that current stagflationary trends will soon be muted by a combination of market forces and changes in human behavior. They point to recent declines in previously spiking lumber prices as indicative of how competition and increased supply will dampen inflation. They think the sharp fall in Delta-variant cases in the United Kingdom foreshadows what lies ahead for the US and other countries still in the grips of the latest COVID-19 wave. And they take comfort from multiplying signs of booming corporate investment in response to supply disruptions. Others are more pessimistic. They argue that demand headwinds will intensify due to reductions in fiscal schemes that were supporting household income, citing the expiration of supplementary unemployment benefits and direct cash transfers. They also worry about the gradual exhaustion of the cash buffers that many households unexpectedly accumulated as a result of exceptionally generous government support during the pandemic.

On the supply side, the stagflation pessimists welcome higher business investment but fear that its benefits won’t come fast enough, especially as supply chains are redirected. Supply disruptions will therefore persist for much longer, in their view, and central banks will fall behind with the needed policy response.

I suspect that neither of these scenarios is likely to dominate the period ahead. But they will influence the alternative that does materialize. Ideally, policymakers would respond in a timely and self-reinforcing manner to the increasing evidence of stagflation. The US would lead by progressing faster on a policy pivot, with the Federal Reserve already unwinding some of its ultra-loose monetary policy and Congress enabling President Joe Biden’s administration to advance its plans to enhance US productivity and longer-term growth by boosting investments in physical and human infrastructure.

Meanwhile, national and international financial authorities would coordinate better to strengthen prudential regulation, especially as it pertains to excessive risk-taking among non-bank market participants. These measures would lead to declining inflationary pressures, faster and more inclusive growth, and genuine financial stability. And such a desirable outcome is attainable provided the needed policy response proceeds in a comprehensive and timely manner. Absent such a response, supply-side problems will become more structural in nature, and therefore more prolonged than the transitory camp expects. The resulting inflationary pressures will be amplified by the higher wages that many firms will have to offer to attract the workers they currently lack and retain the ones they have. With central banks lagging in their policy response, inflationary expectations risk being destabilized, directly undermining the low-volatility paradigm that has helped push financial-asset prices ever higher.

Because the Fed would then be forced to hit the policy brakes, higher inflation would be unlikely to persist. Unfortunately, reducing it would come at the cost of lower and less inclusive growth, especially if the Biden administration’s plans remain stuck in Congress (which would be more likely in the high-inflation scenario). Rather than prolonged stagflation, the global economy would repeat what it experienced in the aftermath of the 2008 global financial crisis: low growth and low inflation.

The recent appearance of stagflationary tendencies serves as a timely reminder of the urgent need for comprehensive economic-policy measures. The faster such a response materializes, the greater the probability of anchoring economic recovery, social well-being, and financial stability. But if policymakers delay, the global economy will neither be saved by self-correcting forces nor pushed into a prolonged stagflationary trap. Instead, the world will return to the previous “new normal” of economic underperformance, stressed social cohesion, and destabilizing financial volatility.