Sive Morten
Special Consultant to the FPA
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Fundamentals
This week, no doubts, NFP report has taken the primary place. Numbers are not surprising. In fact, they are almost in spot with expectations, including such indicators as unemployment, hourly earnings and others. But in the smoke of positive NFP report somehow, investors have spent unsigned another important data - JOLT's numbers that we will take a look below.
In general, markets now have changed their sentiment. If previously everybody were waiting for the good numbers, hoping that Fed maybe will not start rate hiking cycle, and maybe recession will not happen. Now - it is quite different story, as markets are scaring of good numbers, because good numbers is a direct road to more Fed tightening. That's definitely will happen in near term.
The data cemented another jumbo-sized, 75 basis-point rate hike in November as "the labor market is still way too hot for the Fed's comfort zone," said Bill Sterling, global strategist at GW&K Investment Management.
Market overview
U.S. stocks fell while the dollar and Treasury yields jumped on Thursday as Federal Reserve officials showed little sign of backing away from interest rate hikes ahead of Friday's monthly U.S. jobs report. U.S. stocks seesawed during the trading day, but ended lower after multiple Fed officials continued to emphasize that rates would continue to go up until inflation was under control.
For their part, Fed officials' remarks have undercut any fledgling hope the central bank may be preparing to step away from ongoing rate hikes. A trio of officials hit the same tone on Thursday, with Fed Governor Lisa Cook, Chicago Fed President Charels Evans, and Minneapolis Fed President Neel Kashkari all emphasizing in remarks that the inflation fight was ongoing and they were not prepared to change course.
The Fed has delivered a string of supersized three-quarters-of-a-percentage point interest rate increases to bring down decades-high inflation, and is expected to do so again when it meets early next month. Fed policymakers now anticipate short-term borrowing costs, currently at 3%-3.25%, will rise to 4.6% by early next year.
New York Federal Reserve President John Williams said on Friday the U.S. central bank has more work to do to lower inflation and rebalance economic activity in a more sustainable way, and he warned that the unemployment rate will most likely rise as part of that process.
He added that there was an economic slowdown underway, especially in the housing market. But he said he doesn't expect the economy to tip over into a contraction, a fear that is common in financial markets.
Most other world central banks are also raising interest rates to fight inflation made worse in many cases by the stronger dollar, and some have intervened in their own financial markets to address dislocation amid that policy tightening.
South Korea's foreign exchange reserves shrank by nearly $20 billion in September, the second-biggest monthly drop on record, as authorities stepped up dollar-selling intervention to counter the won's slump to a 13-1/2-year low. The country's FX reserves stood at $416.77 billion at the end of September, down $19.66 billion from $436.43 billion a month earlier, the Bank of Korea said on Thursday.
Indonesia's foreign exchange reserves fell by $1.4 bln last month to $130.8 bln due to payments of foreign debt and the central bank's effort to stabilise the rupiah currency, Bank Indonesia (BI) said on Friday.
The Reserve Bank of India likely sold dollars via state-run banks on Friday after the rupee slid below 82 to a record low against the dollar on concerns over the U.S. Federal Reserve rate outlook, traders told Reuters.
Japan's foreign reserves fell by a record $54 billion in September, official data showed on Friday, as global market ructions dented the value of foreign bonds and prompted dollar-selling intervention to arrest a steep decline in the yen. The reserves stood at $1.238 trillion at the end of September, the lowest amount since the end of March 2017, according to the Ministry of Finance (MOF) data.
The Swiss National Bank's foreign exchange reserves fell in September, data showed on Friday. The SNB held 807.130 billion Swiss francs ($815.04 billion) in foreign currency at the end of September, compared with 859.340 billion francs in August, revised from an originally reported 859.639 billion, preliminary data calculated according to the standards of the International Monetary Fund showed.
The euro fell against the dollar on Friday, while European stocks dropped and bond yields rose after data showed the U.S. economy created roughly as many jobs in September as expected, reinforcing expectations for more aggressive rate rises. Data from the Labor Department showed 263,000 workers were added to non-farm payrolls in September, compared with expectations for a rise of 250,000 and a 315,000 increase in August.
While government data this week showed job openings dropped by 1.1 million, the largest decline since April 2020, to 10.1 million on the last day of August, there are still 4 million more vacancies than there are unemployed Americans. An Institute for Supply Management survey on Wednesday also showed several services industries reporting labor shortages in September.
But with the headwinds from higher borrowing costs and slowing demand rising, economists expect companies will significantly pull back on hiring, with negative payrolls likely next year. Economists say businesses have been backfilling open positions as they struggled to expand headcount to match increased demand for their products, driving up job gains.
Layoffs began to rise, breaking the record at the highest level since March 2021.
The U.S. central bank has hiked its policy rate from near-zero at the beginning of this year to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.
September's consumer price report next Thursday will also help policymakers to assess their progress in the battle against inflation ahead of their Nov. 1-2 policy meeting.
Noise around Credit Suisse
It seems SNB was able to calm down investors a bit, providing $5 Bln support, as well as Credit Suisse has promised to paid out 3 Bln debt to prove investors its solvency. After an online storm of rumours over Credit Suisse's future sent its stock tumbling and default insurance cost soaring, the embattled lender will be keeping its fingers crossed the coming days stay calm. In a bid to reassure investors, Credit Suisse ended the week by announcing a bond buyback of up to 3 billion Swiss francs ($3 billion).
The bank, beset by a series of scandals and losses, wants time to work out the final details of an overhaul to claw back the trust of sceptical investors and is set reveal its revamp plan on Oct. 27. The only difficulty: this vision requires another throw of the dice and potentially further billions of francs in fresh capital.
And the bank's woes cast a pall over Europe's financial sector, already in the spotlight over how lenders will cope with the latest market fallout. Germany's Deutsche Bank is among those feeling the heat.
Credit Suisse is just a top of the Iceberg. With additional 1.25% rate change within two meetings, Fed will strongly contract profit margin for commercial banks, especially non-domestic, making them paid more on US Dollar overseas loans. In fact, all big european banks stand in trouble more or less.
Spanish banks to increase provisions to cover potential losses, Bank of Spain Governor Pablo Hernandez de Cos said on Tuesday.
The collateral against potential losses posted on derivatives trades at Eurex has risen to a record high of around 130 billion euros ($128 billion) in the face of highly volatile markets and stubborn inflation, Erik Mueller, CEO of Eurex Clearing, told Reuters on Thursday. This is up from around 100 billion euros needed during the COVID-19 outbreak that wreaked havoc on world markets in early 2020. Mueller told Reuters that risk models at Eurex Clearing suggested that the current environment meant there was a greater need to bolster liquidity.
He added that roughly 40% of the total requirement is due to use of interest rate swap. Analysts say that increased demand for collateral could be one sign of heightened investor angst given decades-high inflation and aggressive rate hikes from major central banks, not to mention Russia's invasion of Ukraine which is driving an energy crisis in Europe.
Top-rated government bonds such as U.S. Treasuries or German bonds are often used in markets as collateral to raise cash. That has at times created a squeeze on triple-A rated German debt given how scarce it is after years of European Central Bank bond-buying.
Many pension funds were caught out during a surge in British government bond yields last week that forced the Bank of England to step in. The funds had to stump up cash to meet collateral demands. Yields on 10-year Bunds start rising and could repeat the performance of Gilts. The German bailout plan could trigger a UK-style collapse of European countries' bonds. German Chancellor Scholz last week announced a 200 billion euro package designed to help in the face of a sharp rise in energy prices, including lower gas prices and a reduction in fuel sales tax.
It will take more than $5 billion to save Credit Suisse. This is more than 52% of the bank's capitalization. In 18 months, the capitalization has fallen 3 times from $30 billion to $9.6 billion. In 6 months, the paper fell by 50%. With a similar model, Deutsche Bank will need more than $6.5 billion. Germany's largest bank has reduced its capitalization to €15.54 billion ($15.2 billion). Securities have fallen in price by 36% in 6 months. The driver of the bank's weakening is the economy. The risk of a German default in 2023 has increased by 203%.
Credit Suisse is currently selling a 5-star hotel in Zurich for 400 million Swiss francs. A top manager recently said that their capital and liquidity are normal... Now they're selling a 184-year-old hotel? Apparently things are really bad. Credit Suisse risks have taken off like a rocket, the systemic risk is higher than that of the non-existent Lehman Brothers. The bank is closely intertwined with the US financial system. We are not being told the truth about the possible systemic risk.
UBS credit default swaps hit decade high after Credit Suisse blow out
Guys, we're not occasionally mentioned Banks problems, short of margins on exchange, especially on interest rates swaps and bank big involvement in derivative trading. Now it is around 600+ Trln of derivative, mostly on a balance of top banks, and most of them interest rates and currency derivatives. 2.3 Quadrillion Derivative Financial Instruments. Why, even if only one collapses, the rest can take after themselves as a domino effect. This is the definition of financial instability. The Fed will have to intervene, otherwise a systemic collapse is inevitable, which will make inflation completely uncontrollable. The Swiss National Bank reported losses in the first half of the year in the amount of $ 100.08 billion, and now they are closely monitoring one of its largest banks, Credit Suisse, now everything is becoming real.
The Fed's reverse repo use just hit a fresh record of $2.4 trillion — why that's one of the clearest 'bad signs' for the market
There’s been yet another record-high uptake in the amount of cash investors are stashing in a major Federal Reserve facility. The Fed parks excess cash reserves from banks in the Overnight Reverse Repurchase Facility. A reverse repo, or RRP, helps the central bank conduct monetary policy by selling securities to counterparties to be bought back for a higher price later on — essentially working as a short-term loan.
The Fed is currently paying an overnight rate of 3.05% as of Sep. 22 — the highest yield since 2013. It increased from 2.30% after the central bank recently lifted interest rates by 0.75 percentage points. An increase in the reverse repo rate restricts cash supply and helps to correct inflation.
However, whenever banks and other financial institutions have turned to the Fed’s major lending facilities in the past, this has been a clear indicator of economic instability. It was strains on the repo market in back 2007 that brought about the financial panic of that year that led into the 2008 financial crisis.
Uptake in the RRP facility could continue to increase depending on the supply of short-term investments and demand from money market funds, Fed officials noted in the July meeting. Bank of America strategists recently reported that investor sentiment is the worst it's been since 2008. And the bank anticipates that cash and commodities will continue to outperform bonds and stocks. For the week through Sep. 21, cash had inflows of $30.3 billion, according to EPFR Global data.
Experts forecast the market will remain volatile for the rest of the year, while fears of a recession next year continue to loom, further spooking investors.
Where we are in a global crisis?
2022 began with a sharp and rapid decline, which lasted until the middle of the year. With extremely bearish sentiment, there was a rebound in July and August, which partially played back this decline. However, now that this correction is over, the concern is that the third phase of the super-bubble has not yet begun. This third phase represents a slower and sharper decline, which coincides with the deterioration of fundamental indicators
Indeed, despite that market has dropped more than 25 % from ATH, it is still above tops of 2000 and 2007 bubbles. It is surprising that even with the stock market crash and the beginning of the housing correction, the value of assets is still 319% of GDP today. Although this is below the highs of early 2022, it is still above the peaks of the bubbles of 2007 and 2000. There will be more pain... Well, in order to simply return to the "normal" level of asset prices/GDP, we will need another 40% correction in the housing and equity markets.
This week, no doubts, NFP report has taken the primary place. Numbers are not surprising. In fact, they are almost in spot with expectations, including such indicators as unemployment, hourly earnings and others. But in the smoke of positive NFP report somehow, investors have spent unsigned another important data - JOLT's numbers that we will take a look below.
In general, markets now have changed their sentiment. If previously everybody were waiting for the good numbers, hoping that Fed maybe will not start rate hiking cycle, and maybe recession will not happen. Now - it is quite different story, as markets are scaring of good numbers, because good numbers is a direct road to more Fed tightening. That's definitely will happen in near term.
The data cemented another jumbo-sized, 75 basis-point rate hike in November as "the labor market is still way too hot for the Fed's comfort zone," said Bill Sterling, global strategist at GW&K Investment Management.
"This was a classic case of good news is bad news," he said. "The market took the good news of the robust labor market report and turned it into an ever-more vigilant Fed and therefore potentially higher risks of a recession next year."
Market overview
U.S. stocks fell while the dollar and Treasury yields jumped on Thursday as Federal Reserve officials showed little sign of backing away from interest rate hikes ahead of Friday's monthly U.S. jobs report. U.S. stocks seesawed during the trading day, but ended lower after multiple Fed officials continued to emphasize that rates would continue to go up until inflation was under control.
For their part, Fed officials' remarks have undercut any fledgling hope the central bank may be preparing to step away from ongoing rate hikes. A trio of officials hit the same tone on Thursday, with Fed Governor Lisa Cook, Chicago Fed President Charels Evans, and Minneapolis Fed President Neel Kashkari all emphasizing in remarks that the inflation fight was ongoing and they were not prepared to change course.
"I'm not comfortable saying we are going to pause" until there is evidence that underlying inflation is cooling, Kashkari said at the Bremer Financial Corporation Fall Leadership Conference. There is "almost no evidence" that inflation has peaked, he said.
The Fed has delivered a string of supersized three-quarters-of-a-percentage point interest rate increases to bring down decades-high inflation, and is expected to do so again when it meets early next month. Fed policymakers now anticipate short-term borrowing costs, currently at 3%-3.25%, will rise to 4.6% by early next year.
Kashkari said he believes there could be some "cracks" in financial markets as investors adjust to the higher rate environment. The bar for the Fed to shift its policy stance to rescue markets here "is very high."
New York Federal Reserve President John Williams said on Friday the U.S. central bank has more work to do to lower inflation and rebalance economic activity in a more sustainable way, and he warned that the unemployment rate will most likely rise as part of that process.
"We need to get interest rates up further and basically get interest rates above where inflation is," and that could lead the central bank towards a target rate of around 4.5%, Williams said at a gathering held at SUNY Buffalo State in Buffalo, New York. Doing so will better balance supply with demand "in a way that brings down inflation quickly."
Williams said the U.S. economy has "a very strong labor market, which is a good thing except for very high inflation," which is being countered by central bank rate rises. He added over time, "you are likely going to see the labor market, you know, maybe not be as strong in terms of the job growth we've been seeing."
He added that there was an economic slowdown underway, especially in the housing market. But he said he doesn't expect the economy to tip over into a contraction, a fear that is common in financial markets.
"I do see positive growth next year" and "I see the unemployment rate coming up somewhat, but most importantly, I see inflation coming down pretty significantly next year," Williams said.
"I've read some speculation recently that financial stability concerns could possibly lead the FOMC to slow rate increases or halt them earlier than expected," Fed Governor Christopher Waller said on Thursday, adding "let me be clear that this is not something I'm considering or believe to be a very likely development."
Most other world central banks are also raising interest rates to fight inflation made worse in many cases by the stronger dollar, and some have intervened in their own financial markets to address dislocation amid that policy tightening.
South Korea's foreign exchange reserves shrank by nearly $20 billion in September, the second-biggest monthly drop on record, as authorities stepped up dollar-selling intervention to counter the won's slump to a 13-1/2-year low. The country's FX reserves stood at $416.77 billion at the end of September, down $19.66 billion from $436.43 billion a month earlier, the Bank of Korea said on Thursday.
Indonesia's foreign exchange reserves fell by $1.4 bln last month to $130.8 bln due to payments of foreign debt and the central bank's effort to stabilise the rupiah currency, Bank Indonesia (BI) said on Friday.
The Reserve Bank of India likely sold dollars via state-run banks on Friday after the rupee slid below 82 to a record low against the dollar on concerns over the U.S. Federal Reserve rate outlook, traders told Reuters.
Japan's foreign reserves fell by a record $54 billion in September, official data showed on Friday, as global market ructions dented the value of foreign bonds and prompted dollar-selling intervention to arrest a steep decline in the yen. The reserves stood at $1.238 trillion at the end of September, the lowest amount since the end of March 2017, according to the Ministry of Finance (MOF) data.
The Swiss National Bank's foreign exchange reserves fell in September, data showed on Friday. The SNB held 807.130 billion Swiss francs ($815.04 billion) in foreign currency at the end of September, compared with 859.340 billion francs in August, revised from an originally reported 859.639 billion, preliminary data calculated according to the standards of the International Monetary Fund showed.
The euro fell against the dollar on Friday, while European stocks dropped and bond yields rose after data showed the U.S. economy created roughly as many jobs in September as expected, reinforcing expectations for more aggressive rate rises. Data from the Labor Department showed 263,000 workers were added to non-farm payrolls in September, compared with expectations for a rise of 250,000 and a 315,000 increase in August.
While government data this week showed job openings dropped by 1.1 million, the largest decline since April 2020, to 10.1 million on the last day of August, there are still 4 million more vacancies than there are unemployed Americans. An Institute for Supply Management survey on Wednesday also showed several services industries reporting labor shortages in September.
But with the headwinds from higher borrowing costs and slowing demand rising, economists expect companies will significantly pull back on hiring, with negative payrolls likely next year. Economists say businesses have been backfilling open positions as they struggled to expand headcount to match increased demand for their products, driving up job gains.
Layoffs began to rise, breaking the record at the highest level since March 2021.
The U.S. central bank has hiked its policy rate from near-zero at the beginning of this year to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.
September's consumer price report next Thursday will also help policymakers to assess their progress in the battle against inflation ahead of their Nov. 1-2 policy meeting.
Noise around Credit Suisse
It seems SNB was able to calm down investors a bit, providing $5 Bln support, as well as Credit Suisse has promised to paid out 3 Bln debt to prove investors its solvency. After an online storm of rumours over Credit Suisse's future sent its stock tumbling and default insurance cost soaring, the embattled lender will be keeping its fingers crossed the coming days stay calm. In a bid to reassure investors, Credit Suisse ended the week by announcing a bond buyback of up to 3 billion Swiss francs ($3 billion).
The bank, beset by a series of scandals and losses, wants time to work out the final details of an overhaul to claw back the trust of sceptical investors and is set reveal its revamp plan on Oct. 27. The only difficulty: this vision requires another throw of the dice and potentially further billions of francs in fresh capital.
And the bank's woes cast a pall over Europe's financial sector, already in the spotlight over how lenders will cope with the latest market fallout. Germany's Deutsche Bank is among those feeling the heat.
Credit Suisse is just a top of the Iceberg. With additional 1.25% rate change within two meetings, Fed will strongly contract profit margin for commercial banks, especially non-domestic, making them paid more on US Dollar overseas loans. In fact, all big european banks stand in trouble more or less.
Spanish banks to increase provisions to cover potential losses, Bank of Spain Governor Pablo Hernandez de Cos said on Tuesday.
De Cos said a complex macro-financial situation, marked by energy price hikes and tighter financing conditions, was already hurting households and companies, leading to a slowdown in economic activity "in the third quarter and a general downward revision of the growth outlook for the following quarters. The potential impact of the current uncertain environment on the banking sector requires extreme caution. Banks will have to increase their provisions to cover potential losses," De Cos told a financial event in Madrid.
The collateral against potential losses posted on derivatives trades at Eurex has risen to a record high of around 130 billion euros ($128 billion) in the face of highly volatile markets and stubborn inflation, Erik Mueller, CEO of Eurex Clearing, told Reuters on Thursday. This is up from around 100 billion euros needed during the COVID-19 outbreak that wreaked havoc on world markets in early 2020. Mueller told Reuters that risk models at Eurex Clearing suggested that the current environment meant there was a greater need to bolster liquidity.
He added that roughly 40% of the total requirement is due to use of interest rate swap. Analysts say that increased demand for collateral could be one sign of heightened investor angst given decades-high inflation and aggressive rate hikes from major central banks, not to mention Russia's invasion of Ukraine which is driving an energy crisis in Europe.
"In fixed income, as a guide very roughly, the requirements (for collateral) have doubled," Mueller told Reuters during a briefing.
Top-rated government bonds such as U.S. Treasuries or German bonds are often used in markets as collateral to raise cash. That has at times created a squeeze on triple-A rated German debt given how scarce it is after years of European Central Bank bond-buying.
"Because of the demands on collateral and the scarcity of high-quality collateral, firms are having to make sure they maximize the opportunity they have with the collateral they’ve got," Mueller said.
Many pension funds were caught out during a surge in British government bond yields last week that forced the Bank of England to step in. The funds had to stump up cash to meet collateral demands. Yields on 10-year Bunds start rising and could repeat the performance of Gilts. The German bailout plan could trigger a UK-style collapse of European countries' bonds. German Chancellor Scholz last week announced a 200 billion euro package designed to help in the face of a sharp rise in energy prices, including lower gas prices and a reduction in fuel sales tax.
It will take more than $5 billion to save Credit Suisse. This is more than 52% of the bank's capitalization. In 18 months, the capitalization has fallen 3 times from $30 billion to $9.6 billion. In 6 months, the paper fell by 50%. With a similar model, Deutsche Bank will need more than $6.5 billion. Germany's largest bank has reduced its capitalization to €15.54 billion ($15.2 billion). Securities have fallen in price by 36% in 6 months. The driver of the bank's weakening is the economy. The risk of a German default in 2023 has increased by 203%.
Credit Suisse is currently selling a 5-star hotel in Zurich for 400 million Swiss francs. A top manager recently said that their capital and liquidity are normal... Now they're selling a 184-year-old hotel? Apparently things are really bad. Credit Suisse risks have taken off like a rocket, the systemic risk is higher than that of the non-existent Lehman Brothers. The bank is closely intertwined with the US financial system. We are not being told the truth about the possible systemic risk.
UBS credit default swaps hit decade high after Credit Suisse blow out
Guys, we're not occasionally mentioned Banks problems, short of margins on exchange, especially on interest rates swaps and bank big involvement in derivative trading. Now it is around 600+ Trln of derivative, mostly on a balance of top banks, and most of them interest rates and currency derivatives. 2.3 Quadrillion Derivative Financial Instruments. Why, even if only one collapses, the rest can take after themselves as a domino effect. This is the definition of financial instability. The Fed will have to intervene, otherwise a systemic collapse is inevitable, which will make inflation completely uncontrollable. The Swiss National Bank reported losses in the first half of the year in the amount of $ 100.08 billion, and now they are closely monitoring one of its largest banks, Credit Suisse, now everything is becoming real.
The Fed's reverse repo use just hit a fresh record of $2.4 trillion — why that's one of the clearest 'bad signs' for the market
There’s been yet another record-high uptake in the amount of cash investors are stashing in a major Federal Reserve facility. The Fed parks excess cash reserves from banks in the Overnight Reverse Repurchase Facility. A reverse repo, or RRP, helps the central bank conduct monetary policy by selling securities to counterparties to be bought back for a higher price later on — essentially working as a short-term loan.
The Fed is currently paying an overnight rate of 3.05% as of Sep. 22 — the highest yield since 2013. It increased from 2.30% after the central bank recently lifted interest rates by 0.75 percentage points. An increase in the reverse repo rate restricts cash supply and helps to correct inflation.
However, whenever banks and other financial institutions have turned to the Fed’s major lending facilities in the past, this has been a clear indicator of economic instability. It was strains on the repo market in back 2007 that brought about the financial panic of that year that led into the 2008 financial crisis.
Uptake in the RRP facility could continue to increase depending on the supply of short-term investments and demand from money market funds, Fed officials noted in the July meeting. Bank of America strategists recently reported that investor sentiment is the worst it's been since 2008. And the bank anticipates that cash and commodities will continue to outperform bonds and stocks. For the week through Sep. 21, cash had inflows of $30.3 billion, according to EPFR Global data.
Experts forecast the market will remain volatile for the rest of the year, while fears of a recession next year continue to loom, further spooking investors.
Where we are in a global crisis?
"The bear market consists of three stages - a sharp fall, a reflex rebound and a protracted fundamental downtrend," Bob Farrell of Merrill Lynch
2022 began with a sharp and rapid decline, which lasted until the middle of the year. With extremely bearish sentiment, there was a rebound in July and August, which partially played back this decline. However, now that this correction is over, the concern is that the third phase of the super-bubble has not yet begun. This third phase represents a slower and sharper decline, which coincides with the deterioration of fundamental indicators
"One of the features of the bear market is the rally after the initial stage of decline, but before the economy began to deteriorate. In all previous cases, the market recovered more than half of the initial losses, luring unwary investors back so that the market turned around again and the economy weakened. This summer's rally has so far perfectly matched the template"
Indeed, despite that market has dropped more than 25 % from ATH, it is still above tops of 2000 and 2007 bubbles. It is surprising that even with the stock market crash and the beginning of the housing correction, the value of assets is still 319% of GDP today. Although this is below the highs of early 2022, it is still above the peaks of the bubbles of 2007 and 2000. There will be more pain... Well, in order to simply return to the "normal" level of asset prices/GDP, we will need another 40% correction in the housing and equity markets.