A Frightening Map

Beware the algorithms driving up oil prices.

This weekend’s edition of News Items will be distributed Sunday morning, not Saturday morning.

1. What would happen if financial markets crashed? America’s new-look financial system is still loaded with risks. Asset prices are high: the last time shares were so pricey relative to long-run profits was before the slumps of 1929 and 2001, and the extra return for owning risky bonds is near its lowest level for a quarter of a century. Many portfolios have loaded up on “long-duration” assets that yield profits only in the distant future. And central banks are raising interest rates to tame inflation. America’s Federal Reserve is expected to make five quarter-point increases this year. German two-year Bund yields leapt 0.33 points last week, their biggest jump since 2008. The mix of sky-high valuations and rising interest rates could easily result in large losses, as the rate used to discount future income rises. If big losses do materialize, the important question, for investors, for central bankers and for the world economy, is whether the financial system will safely absorb them or amplify them. The answer is not obvious, for that system has been transformed over the past 15 years by the twin forces of regulation and technological innovation. (Source: economist.com)

2. Federal Reserve officials are in no rush to raise interest rates prior to their scheduled policy meeting next month, nor is a half percentage-point move in March yet likely, despite a bigger-than-expected jump in consumer prices that stoked speculation about such options. An emergency increase risks signaling panic and cementing criticism that the central bank is too far behind in reining in inflation, while Chair Jerome Powell only last month predicted the pace of price increases would cool later this year. Powell also has shown a preference for building consensus within the policy-setting committee, and no Fed officials are now signaling a race to act before its March 15-16 gathering. (Source: bloomberg.com)

3. The average U.S. household is spending an additional $276 a month because of inflation that is rising at its fastest rate in 40 years, a new economic analysis showed. The squeeze stems from higher prices across a range of products and services, including cars, gasoline, furniture and groceries. Inflation accelerated to a 7.5% annual rate in January, the Labor Department said Thursday, reaching a new four-decade high as consumer demand and supply constraints continued to push prices higher. Inflation has been above 5% for the past eight months. “A lot of people are hurting because of high inflation. $276 a month—that’s a big burden,” said Ryan Sweet, a senior economist at Moody’s Analytics who conducted the analysis. “It really hammers home the point of ‘what is the cost of inflation?’” (Source: wsj.com)

4. CNN's latest polling is simply brutal for the President. Just 41% of those asked approve of the way Biden is handling his job. His approval rating on the economy has dropped to 37% -- down 8 points since early December alone. Only 45% approve of his handling of the pandemic he was elected to end. When those who disdain Biden's overall performance were asked to name a single thing he'd done that they approved of, 56% had nothing positive to say. "I'm hard pressed to think of a single thing he has done that benefits the country," wrote one respondent. Full poll results are here. (Source: cnn.com)