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Inflation .. the story of a shelter | financial times




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good morning. An absolutely epic swing in stocks yesterday – from a miserable open after a hot CPI report to a heavy close – was left unhedged like everyone else. short coverage? decoder derivatives hedge? Technical sorcery? We don’t know, but a big stock rally on a day when the futures market price of another 25 basis points from the Fed rate hike wasn’t on our bingo card. If you have a theory, we’re all ears: And the

Inflation is still hot

Sure, it’s hot, but didn’t we already know that? That’s what Unhedged wondered when we read the latest CPI numbers, which showed a dip in headline numbers but a sharp core inflation of 0.6 percent (pre-F&E) for September. It was a big loss for inflation analysts, who collectively estimated core inflation at 0.4 percent.

Some highlights:

  • Inflation is still a service story. Prices for essential services rose 0.8 percent last month, above the 0.6 percent August reading.

  • Services inflation remains primarily related to the shelter category, a reliably hot category (0.7 percent in both August and September) that makes up more than half of essential services.

  • Finally, commodity inflation is starting to appear. Falling shipping costs, commodity prices and ballooning inventories provided hints that this was going to happen, but any impact on the CPI was subtle. not longer:

    Line chart of commodity inflation, m/m% showing deflation, finally
  • Medicare (12 percent of essential services) rose unexpectedly, driven by the rising cost of eye appointments. Odds are that this will fade. as we are writtenInflation report next month will update annual insurance data used in pricing medical services, flipping it down to inflation.

  • Transportation services (10 percent of basic services) rose 1.9 percent, well above 0.5 percent in August. It’s hard to know how much this means. The category has been much more volatile, in both directions, since 2020:

    Line chart of transportation service inflation, on a monthly basis% showing the epidemic spot

Little in the report indicates that inflation is about to rise. On the contrary, the deflation of commodities caused another handicap. What happens in the services is more debatable, but we saw Is that components of services such as medical care and transportation moderate, inflation will move from one story about services to another about shelter.

And that raises the question, hotly debated Thursday, where housing inflation is heading. Remember that the shelter CPI is calculated from the rental data. Doves argue that private rental indices have already flipped, but the CPI is lagging the rental market by about nine months or so. This lag stems from the CPI incorporation of the entire universe of new and existing leases, while private indices only consider new leases. If history repeats, CPI shelter (red line below) should start soon after market rentals (gray and blue lines). From Nomura:

Nomura chart showing normal CPI rental data

But there is another way to look at it, as Adam Ozymec of the Economic Innovation Group points out to us. The chart above shows rent growth, but rent levels are also important. Ozimek shared this Schedule On Twitter he shows the widening gap between private market rents and CPI rents since the coronavirus pandemic:

rent inflation scheme

In the long run, Ozymec found that CPI rent levels catch up with private market rent levels, but market rent shocks – such as the pandemic – are only reflected in the CPI after a delay. He considers this to mean that there is now built-in momentum in the shelter CPI, even as rental growth has slowed. Methodological issues make estimating the amount of momentum difficult.

Ozimek panics, and Unhedged does not panic. But we fear falling inflation will be a long drag, and the home price story in the first place won’t change that. In other words, Thursday gave the Fed few new reasons to slow down. (Ethan Wu)

Gold Market: Is the problem solved?

The “mini” budget crisis may end with a sob, not a bang, according to Thursday’s markets. The pound is now stronger than the day before the budget was announced:

The line graph of the dollar/pound exchange rate shows that this is better

Thirty-year gold yields are still much higher than they were before the announcement, but they fell on Thursday:

The line graph of the 30-year gold bond yields shows that this is a bit better

Index-linked securities – a particularly important asset in the current crisis, for which pension funds dominate the market – rose only slightly:

30-year inflation-linked gold yield line graph showing that it's not that bad?

Bank of England Governor Andrew Bailey can shake his head at these charts with relief. His ultimatum to the markets seems to have pushed sellers of staggering pension funds into the Bank of England’s bond-buying program and calmed the markets. The bank bought another £4.7 billion in gold bonds yesterday, mostly bonds, and had no more day left to buy (she says). But Thursday’s relative calm was not, of course, the result of Bailey’s toughness. this is Assistvery:

Liz Truss was on Thursday mired in discussions of a major shift in the government’s “mini” budget, sending the market rushing amid expectations of the collapse of a package of unfunded £43 billion tax cuts.

Government insiders confirmed that talks are underway over whether to resolve parts of Chancellor Kwasi Quarting’s financial statement, with speculation it could include scrapping a planned £18 billion tax cut for the company. . .[a] “No decisions have been made,” said someone close to the government’s discussions on the “mini-budget”.

The director of LDI pensions told Unhedged that the mood was “more calm” but he expects the market to follow policy. He mentioned another factor as well. Speculators have benefited from the crisis in long bonds and may want to cover them soon, giving the market a boost over the next few days.

The bigger question is whether pension funds as a group are now out of the woods: if they have sold enough liquid assets to meet margin calls, and started to readjust their portfolios for higher rates and price swings. I don’t know how to estimate how close the funds are, but if the liquidity crunch passes without permanently damaging balance sheets, pensions may appear in better shape than before, like Toby Nagel (the man who saw This next mess) just written in Alphaville.


The real test for the gold market will be on Monday, when the Bank of England exits the market; The markets on Fridays tend to act like Monday and it will never come. Fingers intertwined.

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US Equity Funds Record Largest Weekly Outflow In About 1-1/2 Years By Reuters




© Reuters. FILE PHOTO: One hundred US dollar banknotes are seen in this illustration taken in Seoul on February 7, 2011. REUTERS/Lee Jae-won/File Photo

(Reuters) – US equity funds posted massive outflows in the week ending Dec. 7 as investors worried about the Federal Reserve’s interest rate hike, as data showed a rebound in employment and a recovery in the services sector.

According to data from Refinitiv Lipper, US equity funds recorded withdrawals of $26.66 billion, the largest weekly outflow since April 2021.

Graph: Money Flows: US Stocks, Bonds, Money Market Funds, Reports Show Upbeat US service industry activity and higher-than-expected additions to non-farm payrolls in November raised bets that the Federal Reserve will remain more hawkish than expected.

Investors were also worried because the largest U.S. banks including Goldman Sachs (NYSE: ), JP Morgan, and Bank of America (NYSE: 100) have warned of a recession as inflation threatens consumer demand.


US equity growth funds saw $9.91 billion in withdrawals, while value funds saw a net sell-off of $2.03 billion, as selling continued for the third straight week in every sector.

Graph: Fund Flows: US Growth and Value Funds, Sector fund data showed technology, financials and fund losses Estimated consumers are $1.27 billion, $761 million, and $527 million, respectively, in outflows.

Graph: Fund Flows: US Equity Sector Funds, Meanwhile, US bond funds received a net 992 million dollars in inflows after seeing weekly outflows for four weeks.

Taxable US bond funds made net purchases of $886 million after three consecutive weeks of selling, although municipal bond funds experienced small outflows of $53 million.

US investors bought $318 million in high-yield bond funds and $1.06 billion in government bond funds in their biggest weekly net purchases since November 16. However, domestic public taxable fixed income funds recorded $794 million worth of outflows.


Graph: Fund Flows: US Bond Funds, Meanwhile, US money market funds took in $36.19 billion of inflows, the largest amount for a week since November 2.

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FirstFT: The FTC is flexing its muscles on the Microsoft-Activision deal




good morning. This article is an in situ version of our website FirstFT the news. Subscribe to our site AsiaAnd the Europe/Africa or The Americas A release to send straight to your inbox every weekday morning

The US Federal Trade Commission will file a lawsuit to block Microsoft $75 billion acquisition of video game maker Activision Blizzard Because of concerns that the deal could hurt competitors to the Xbox consoles and cloud gaming business.

Deal, which was announced in JanuaryIt will be Microsoft’s largest acquisition ever and will make it the third largest game company by revenue, after China’s Tencent and Japan’s Sony.

But the Federal Trade Commission said yesterday that the deal would harm competition in the gaming sector, highlighting the fact that Activision is one of the few video game developers that produces and publishes the best video games for many devices such as PCs, consoles and mobile phones.

Microsoft moved to head off a regulatory backlash this week By signing a contract for 10 years To bring Call of dutythe blockbuster that brought in $30 billion in lifetime sales for Activision, has moved to Nintendo platforms instead of turning it into an Xbox exclusive.


The measure is one of the biggest tests yet for Lena Khan, the chair of the Federal Trade Commission appointed by President Joe Biden, who has He vowed to crack down on Big Tech’s market power.

Microsoft CEO Satya Nadella hoped the deal would give the US software company a head start in the race to build the next version of the Internet and saw no reason for competition concerns when He spoke to the Financial Times in February.

“Even after this acquisition, we’ll be in third place with kind of a lower teen share[of the video games market]. . . “We’re going to be a bit of a player in a place that’s going to be very fragmented,” he said.

1. Pro-left appointed as Brazilian Finance Minister Luis Inacio Lula da Silva Fernando is expected to name HaddadThree well-informed sources reported that a loyalist from the left-wing Labor Party as Finance Minister today. The decision is likely to disappoint financial markets and reignite investor fears that the Lula administration, which takes office on January 1, will pursue a looser fiscal policy.

2. The US House of Representatives passes a defense bill worth $858 billion in financing weapons for Taiwan passed by the US House of Representatives A comprehensive defense spending bill of $858 billion That provides $10 billion in funding to provide arms to Taiwan as the country comes under increasing pressure from China. It is the first time that the US government has funded weapons for Taiwan.


3. The United Kingdom, Japan and Italy agree to jointly build advanced combat aircraft The three countries will joint construction One of the most advanced combat aircraft in the world by 2035, to expand its defense capabilities to counter the growing threats from China and Russia. They will share development costs estimated at tens of billions of dollars.

A mock-up of the Tempest jet at the 2018 Farnborough Airshow
The UK and Italy’s Tempest fighter program will be integrated with Japan’s FX project © Peter Nicholls / Reuters

4. Airlines are feeling the pressure as charter groups raise rents Airlines return to profitability, but one cloud looms: Sharp increases in rental costs. More than half of the world’s commercial aircraft are owned or operated by leasing companies, and their fees are rising, which is another consequence of rising interest rates.

5. The Faustian agreement between Joe Biden and Russia to secure the release of Brittney Greener Brittney Griner’s release was greeted with joy from the basketball star’s family and supporters. But the exchange with Viktor Bout, a notorious arms dealer, drew criticism and raised questions about how America’s adversaries would deal with them. It may benefit from the arrest of its own citizens in the future.

How good is it to keep up with the news this week? Take our test.

Coming days

Economic data The US Department of Labor will update the Producer Price Index. The producer price index is expected to have risen 0.2 percent in November from the previous month, but the annual pace of wholesale inflation is expected to have eased to 7.2 percent, from 8 percent in October. The University of Michigan preliminary reading on consumer confidence is expected to have risen to 56.9 in December from 56.8 last month.

UK to launch financial services reforms Chancellor Jeremy Hunt would Unveil changeswhich include raising the ceiling on bankers’ bonuses and removing the requirement to separate risky investment banks from retail operations, in a speech in Edinburgh later in the day.


Putin in Kyrgyzstan Russian President Vladimir Putin has arrived in Bishkek, the capital of Kyrgyzstan, to participate in the Eurasian Economic Union summit. The leaders are expected to discuss the establishment of a joint gas market and the establishment of an intergovernmental council in the field of energy. According to the Russian news agency TASS.

world Cup The quarter-final matches kick off in Qatar today, with Croatia playing Brazil in the first match, followed by the Netherlands and Argentina. Tomorrow, the surprising Moroccan team will meet Portugal at the start of the match, and England will meet France at a later time.

  • Read more: Simon Cooper, who grew up in the Netherlands, explains how the Dutch do it They abandon tradition under their coach Louis van Gaal in a bid to win the World Cup.

What else do we read?

Light needs to illuminate the black hole on dollar swaps An ordinary person might assume the dollar swap market It is a transparent angle of financing, given that the US currency underpins much of the global industry and these contracts are used by most of the major corporations and investment groups. Not so, writes Gillian Tate, as a recent report from the Bank for International Settlements shows.

Has inflation peaked? Central banks in the developed world have cautiously raised interest rates to curb demand and crush inflation this year, but, says the Financial Times editorial board, Now is not the time to hold back or cut back borrowing costs.

‘Hell. Hell: The War of Attrition on Bakhmut With Russia desperate for victory, wave after wave of infantry began Thrown in the city of Bakhmut on the front line In the Donetsk province, only to be cut down by the Ukrainian defenders. “They are just meat for Putin, and Bakhmut is a meat grinder,” said Kostyantyn, an exhausted Ukrainian machine gunner.

Maps show that there was relatively little movement on the front line around Bakhmut

Why the price of oil has fallen despite new restrictions on Russian supply This week saw a pivotal moment in global geopolitics, as the European embargo and G7 cap on Russian crude oil prices came into effect. Within hours, supply disruptions set in as the piling up oil tankers queued up in the Bosphorus Strait. All of this would normally lead to a sharp rise in oil prices. However, yesterday they reached a new low of 2022. What is going on? Our energy editors explain.

It’s time to hunt down the dragons of the Asia Corporation I learned the hard way during years of managing Japanese equity portfolios, writes the Financial Times’ new investment columnist Stuart Kirk, the country’s corporate bosses were obsessed with market share, quality, innovation, culture and hard work. But did they sleep at night dreaming of my equity returns, Stewart asks, no they did not. That’s changing, he says, but local conditions are still very important.

the television

There are explosive royal TV shows out there, writes lead writer Henry Mance. But so far the new Netflix series Harry and Megan Not them. He argues that the Sussexes are both an ambitious couple and a cautionary tale about ambition.

The Duke and Duchess of Sussex
Harry & Meghan is produced by the couple’s company Archewell © Courtesy Prince Harry and Meghan, the Duke and Duchess of Sussex

Thank you for reading and remember that you can Add FirstFT to myFT. You can also choose to receive a FirstFT push notification every morning on the app. Send your recommendations and feedback to

Climate chart: an explanation – Learn about the most important weather data for the week. Participation over here

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What is the ChatGPT policy?




Rob Lonnie She claims to be a “left-liberal”. David Rosado I applied the political compass test He concluded that ChatGPT is a mixture of left and liberal leanings, eg: “anti-death penalty, pro-abortion, skeptical of free markets, corporations exploiting developing countries, more taxes for the rich, government subsidies, pro-benefits for those who refuse to work, Pro-immigration, sexual liberation, morality without religion, etc.”

Produce this image from the test results:

Rosado also ran several other political tests with largely similar results. However, I would like to stress a few different points. Most of all, I see ChatGPT as “pro-Western” in its perspective, while giving different visions of what this means. I also see ChatGPT as a “discord minimization”, for business reasons but also simply to want to get on with substantive work with a minimum of external fuss. I wouldn’t have built it myself So differently, and note that the bias may lie in the training data rather than any biases of the creators.


Marc Andreessen has received a number of tweets suggesting that AI engines will host the “mother of battles” over content, censorship, bias, etc. – outside of the current battles on social media.

I agree.

I saw someone ask ChatGPT if Israel is an apartheid state (I can’t reproduce the answer because chat is now broken for me – unfortunately! But try for yourself.). Basically, ChatGPT answered no, that only South Africa was an apartheid country. Not many people will be unhappy with this answer, including many supporters of Israel (Israel’s moral defense, on the one hand, was not weighty enough for many tastes). Many Palestinians will object, for obvious reasons. And what about all those Rhodesians who suffered under their apartheid regime? Are they simply to be forgotten?


When it comes to politics, the AI ​​engine simply cannot win, or even win a draw. However, there is no simple way to keep them out of politics either. By the way, if you get frustrated with ChatGPT wrapping your question, rephrase it in terms of asking them to write a dialogue or speech on a topic, in someone else’s voice or style. Often it will go further in this way.

The world has yet to realize how powerful ChatGPT is, and thus Open AI can still live in a kind of relative peace. I’m sorry to say that it won’t last long.

the post What is the ChatGPT policy? Debuted marginal revolution.

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