“You only learn who has been swimming naked when the tide goes out.” — Warren Buffett

1. Turkey Rolls Out Economic Rescue Plan, Reversing Lira’s Spiral — Turkey’s currency mounted a dramatic, partial reversal from a monthslong collapse after President Recep Tayyip Erdogan announced a rescue plan to encourage Turks to put their money back into the lira. Economists and investors said the plan was a risky strategy to stabilize the currency, one that will use government funds to motivate investments in the lira. The government also hasn’t specified how it will pay for the new policy over the long term and some fear the effort will require heavy government borrowing or de facto money printing from the central bank.
2. Biden Administration to Combat Omicron By Distributing 500 Million At-Home Covid-19 Test Kits — The Biden administration is preparing to distribute 500 million free at-home Covid-19 testing kits to Americans and deploy military doctors and nurses to overburdened hospitals this winter, as the Omicron variant becomes the dominant form of the virus in the U.S. His remarks came as the Centers for Disease Control and Prevention said Omicron had overtaken the Delta variant of the coronavirus in the U.S., accounting for an estimated 73% of infections for the week ending Dec. 18.
3. FDA Authorizes Pfizer Antiviral Pill to Fight Covid — The Food and Drug Administration authorized the Covid-19 antiviral pill from Pfizer , adding a new weapon against the pandemic as the Omicron wave crashes into the U.S. Pfizer ‘s (ticker: PFE) drug, called Paxlovid, decreased the risk of hospitalization and death in a trial of unvaccinated, high-risk adults by 89% when taken within three days of when symptoms began. The FDA said that the pill was authorized for treatment of mild-to-moderate Covid-19 in adults and children aged 12 and up at high risk for progressing to severe Covid-19. The drug is not authorized for post-exposure prevention, or in people who are hospitalized, and treatment must be started within five days of when symptoms begin.
4. Omicron Starts to Slow U.S. Economy as Consumer Spending Flags — signs are mounting that the U.S. economy is losing some steam as the Omicron variant of the Covid-19 virus spreads rapidly through parts of the country. The number of diners seated at restaurants nationwide was down 15% in the week ended Dec. 22 from the same period in 2019, a steeper decline than in late November, data from reservations site OpenTable show. U.S. hotel occupancy was at 53.8% for the week ended Dec. 18, slightly below the previous week’s level, according to STR, a global hospitality data and analytics company.
Rising case numbers are leading many businesses to close for a short period, entertainment venues to cancel shows, universities to shift classes online and offices to delay or reverse reopening plans.

“Seen through the lens of human perception, cycles are often viewed as less symmetrical than they are. Negative price fluctuations are called “volatility,” while positive price fluctuations are called “profit.” Collapsing markets are called “selling panics,” while surges receive more benign descriptions (but I think they may best be seen as “buying panics”; see tech stocks in 1999, for example). Commentators talk about “investor capitulation” at the bottom of market cycles, while I also see capitulation at the top, when previously prudent investors throw in the towel and buy.” ― Howard Marks

1. Fed Project Three Interest Rate Rises in 2022 and Accelerate Stimulus Wind Down — most Federal Reserve officials signaled Wednesday they were prepared to raise their short-term benchmark rate at least three times next year to cool high inflation. Fed officials in early November agreed to reduce their then-$120-billion-a-month in bond purchases by $15 billion a month, to $90 billion this month. Officials said they would accelerate that wind down beginning next month, reducing purchases by $30 billion a month. As a result, they will purchase $60 billion in Treasury and mortgage securities in January, putting the program on track to end by March.
2. U.S. Retail Sales Slow With Holiday Shoppers Facing Inflation, Shortages — Sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally-adjusted 0.3% in November from the previous month, the Commerce Department said Wednesday. That was smaller than last month’s increase in consumer prices, and a slowdown from October’s robust 1.8% sales increase. Broadly consumer demand is strong, and well above last year’s levels. Retail sales rose 18.2% in November from a year earlier, showing low unemployment, rising wages and savings from stimulus payments are giving Americans the capacity to spend more this year. That gain well outpaced the 6.8% increase in consumer prices in November from a year earlier, according to the Labor Department.
3. CDC Advisors Recommend Pfizer and Moderna’s Vaccines Over J&J’s — the 15 members voted in support of a resolution Thursday that stated the messenger RNA-based vaccines “are preferred” over J&J’s shot. The updated guidance came amid new findings from the agency about cases of a rare but serious blood clotting condition that has occurred in a small number of people who received the vaccine. In the U.S., 54 people are known to have developed the condition, known as thrombosis with thrombocytopenia, after receiving the J&J vaccine between early March and the end of August, according to a presentation made to the expert panel by CDC staffers. All of those people were hospitalized, 36 were admitted to an intensive care unit, and eight died.
4. Bitcoin Drop Risks Extending Slide to a Fifth Consecutive Week — Bitcoin fell as much as 4.3% to $46,501, and is down about 32% since reaching a record of almost $69,000 on Nov. 10. It has still gained about 60% this year. Ether, which is also coming off an all-time high set last month, declined for a second day. Central banks globally are prioritizing the fight against elevated inflation by tightening monetary settings, while also keeping a wary eye on the impact of omicron. That backdrop has investors questioning whether so-called risk assets such as cryptocurrencies and technology shares are due for a rougher patch after surging from pandemic lows.

The week ahead — Economic data from Econoday.com:

“The key to building wealth is to preserve capital and wait patiently for the right opportunity to make the extraordinary gains.” — Victor Sperandeo

1. Early Lab Test Shows Omicron Weakening Vaccine Effectiveness — the Omicron variant of coronavirus can partially evade the protection afforded by vaccines, according to laboratory tests conducted in South Africa that give one of the first indications of vaccine effectiveness against the variant, but scientists say the shots should still defend those inoculated from severe disease. They found the vaccine generated one-fortieth of the infection-fighting antibodies against Omicron compared with its performance against the original version of the virus. That is a big reduction but doesn’t mean the variant can escape vaccines completely, said Alex Sigal, the virologist who led the study.
2. Pfizer Says Booster Neutralized Omicron but Variant May Elude Two Doses — Pfizer Inc. and BioNTech said that a third dose of their Covid-19 vaccine neutralized the Omicron variant in lab tests but that the two-dose regimen was significantly less effective at blocking the virus. A third dose increased antibodies 25-fold compared with two doses against the Omicron variant, the companies said. Still, two doses may prove effective in preventing severe illness from Covid-19, they said, because immune cells are able to recognize 80% of parts of the spike protein that the vaccine targets.
3. Turkey’s Economic Turmoil Sends Desperation and Inflation Soaring — the Turkish lira has lost as much as 45% of its value this year, making ordinary Turks poorer. The pandemic-era consumer-price increases that have plagued economies across the world are supersize in Turkey, where inflation stands at more than 21%. People here are rushing to trade their shrinking wages for dollars and gold, are eating out less and are having more trouble finding imported goods, including medicine. Mr. Erdogan has successfully pressured the central bank to slash interest rates despite rapid inflation. Normally, central banks raise rates to encourage saving, discourage borrowing and cool off inflation. But Mr. Erdogan has called for lower interest rates and blamed rising costs on foreign interests.
4. Evergrande Declared in Default as Huge Restructuring Looms — China Evergrande Group has officially been labeled a defaulter for the first time, the latest milestone in months-long financial drama that’s likely to culminate in a massive restructuring of the world’s most indebted developer. The downgrade came just minutes after Fitch applied the same default label to Kaisa Group Holdings Ltd., which failed to repay a $400 million dollar bond that matured Tuesday. Together, the two companies account for about 15% of outstanding dollar bonds sold by Chinese developers. Long considered by many investors as too big to fail, Evergrande has now become the largest casualty of Chinese President Xi Jinping’s campaign to tame the country’s overindebted conglomerates and overheated property market. Before this week, Chinese borrowers had defaulted on $10.2 billion of offshore bonds in 2021, with real estate firms making up 36% of the total, according to data compiled by Bloomberg.

The week ahead — Economic data from Econoday.com:

“The fact that a thesis is flawed does not mean that we should not invest in it as long as other people believe in it and there is a large group of people left to be convinced. The point was made by John Maynard Keynes when he compared the stock market to a beauty contest where the winner is not the most beautiful contestant but the one whom the greatest number of people consider beautiful. Where I have something significant to add is in pointing out that it pays to look for the flaws; if we find them, we are ahead of the game because we can limit our losses when the market also discovers what we already know. It is when we are unaware of what could go wrong that we have to worry.” ― George Soros

1. Powell Weighs Earlier End to Bond Tapering Amid Hot Inflation — Federal Reserve Chair Jerome Powell said officials should weigh removing pandemic support at a faster pace and he retired the word “transitory” to describe stubbornly high inflation, though a new Covid-19 strain remains a risk. The U.S. central bank is currently scheduled to complete its asset-purchase program in mid-2022 under a plan announced at the start of November to slow buying by $15 billion a month. The next gathering of the policy-setting Federal Open Market Committee is Dec. 14-15, where they could make a decision to accelerate the tapering.
2. House Approves Funding Bill in Bid to Avert Government Shutdown — The House passed an extension of government funding through Feb. 18 to avoid a partial shutdown this weekend, but a hangup in the Senate over vaccine rules threatened to slow the bill’s progress to President Biden’s desk. With current funding set to lapse at 12:01 a.m. on Saturday, Dec. 4, the legislation would also have to rapidly clear the Senate to avert a shutdown. Top Democrats and Republicans reached an agreement on the terms of the extension early Thursday. However, some Republicans are pushing to amend the bill so that it bars the Biden administration from enacting rules requiring many employers to ensure that their workers are vaccinated or tested weekly for Covid-19. The Republican demand to change the bill has raised the possibility of a drawn-out procedural process that could take several days and cause a brief shutdown. Lawmakers indicated Thursday that an amendment vote on the vaccine issue would likely clear the way to an accelerated process for the funding extension.
3. China Sets Boeing 737 MAX Directive for Flight Resumption — the Civil Aviation Administration of China required in an order released Thursday certain software installation and a revision of the jet’s flight manual, among other changes. It didn’t specify when China would allow MAX flights to resume. China was the first to ground the plane in the wake of the second of two fatal MAX crashes in March 2019. Boeing has said it hopes to resume deliveries of new MAX jets to China in the first quarter of next year, making final approval crucial to its plans to increase production and generate cash to cut its debt. While Chinese regulators are bringing the country’s current 737 MAX fleet closer to again carrying passengers, Boeing still faces other hurdles in handing over built aircraft awaiting delivery to the country’s airlines.
Despite actions by China’s aviation authority, a Chinese official with knowledge of the matter said approval from Beijing’s top economic planning agency, the National Development and Reform Commission, will also be required for the country’s airlines to take Boeing jet.
4. Omicron Variant Detected in at Least Nine U.S. States — the new Omicron variant was identified in more than a dozen people in at least nine states, early evidence of its presence across the U.S. While some of the people in the U.S. who have contracted the Omicron variant of the coronavirus that causes Covid-19 had recently traveled to southern Africa, where it was first identified last week, at least two states reported community spread of the new variant. States to report Omicron cases span the country from Hawaii to California and New York. Drug researchers and health authorities have been racing to figure out how the new variant could affect people, drugs and vaccines. Studies into those matters will take days to weeks, scientists have said. The World Health Organization has said preliminary evidence showed that people previously infected with Covid-19 may be at greater risk of re-infection with Omicron than with other variants. The variant also could be more transmissible than o5. Didi Hunts for Way to Delist in New Yorkthers, the WHO said.
5. DIDI Looks to Delists in the US, Rocking Other Chinese ADRs — the Chinese ride-hailing giant’s decision to delist its American depositary shares from the New York Stock Exchange and pursue a listing in Hong Kong marked a new stage in the decoupling of Chinese companies from U.S. markets. Didi didn’t give any rationale for the delisting, which it said has received support from its board and would later require a shareholder vote. The company ran into trouble with Beijing almost immediately after its $4.4 billion initial public offering. The IPO blindsided Chinese regulators, who launched a data-security review, pulled Didi products from Chinese app stores and began a broader overhaul of the framework for international listings by Chinese companies. Didi’s announcement came as Washington has been taking a hawkish stance on Chinese companies listed in the U.S. and Beijing is calling its companies to return home. The U.S. Securities and Exchange Commission adopted rules that will formalize the process for Chinese companies to be expelled from the U.S. stock market, if they fail to hand over their audit working papers for three years in a row.

The week ahead — Economic data from Econoday.com: