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Goldman Trader: After A Brutal Week, Here Is The "Cat And Mouse" Question That Needs To Be Answered

Goldman Trader: After A Brutal Week, Here Is The "Cat And Mouse" Question That Needs To Be Answered From Tony Pasquariello, Goldman head of hedge fund coverage Cat and Mouse A brutal week in the markets, with no shortage of blame to go around: the persistence of global central bank hawkishness, gathering recession concerns, ongoing retail liquidation (and, an element of reflexivity). Here’s the central question that I’m trying to work out: if the interest rate market is correct, and terminal Fed Funds rate is going to be somewhere around 3%, at what point is that fully priced into the broader markets? On one hand, there’s already been a very significant tightening of US financial conditions, so you could argue that we’re getting close.   Said another way: you know that financial markets live in the future ... so, when the day comes where everyone can clearly see the end of the tightening cycle, the trading community will be ahead of it and assets will already be on the move. On the other hand, the target rate is still south of 1% and core PCE is still north of 5%, so you could also argue that we’re still much closer to the start of this tightening cycle than to the end of it [for a more detailed discussion, see "The Fed Has Crossed The "Hard Landing" Rubicon So How High Will It Hike? One Bank Crunches The Numbers"]. Said yet another way: as long as inflation is running hot and the labor market is too tight ... again, the inconvenient truth is the Fed has more wood to chop and the markets have more risk to sort out. In a related vein: at what point does the FOMC view an easing of financial conditions and decide that they DON’T need to beat it back? In that spirit, cue Bill Dudley (link): “the Fed has to be happy with the fact that financial conditions have tightened ... they’re getting traction ... they still have to do what they said they’re going to do.” With apologies for thinking out loud here, it’s these type of cat-and-mouse questions that illustrate the difficulty of assessing the current interplay between the Fed and the asset markets.   To be sure, the task of culling jobs is hugely unenviable, but the Fed is still so far off the inflation mark; at the very least, they need to demonstrate the trajectory of core inflation is clearly headed lower, even if they ultimately lose their nerve before reaching 2.0% [maybe the Fed is not so far off: see "Fed Mission Accomplished: Real-Time Indicators Show The Labor Market Just Cratered"]. On that last point, as Joe Briggs in GIR pointed out to me, the FOMC actually sent a similar signal with their March SEP dots, which showed 3½ hikes in 2023 and 0 hikes in 2024 ... despite median inflation forecasts of 2.6% in 2023 and 2.3% in 2024. Here’s where I’m going with all of this: even though financial conditions have tightened considerably ... and, even though this Fed will likely back off once the jobs losses begin to mount (they’re the same folks who ran the AIT play, after all) ... the fact is there’s still a lot of ground to cover before they can declare victory over inflation ... which should keep some pressure on risk assets a bit longer. To add another layer of complexity: as Dominic Wilson in GIR pointed out to me, the stock market usually bottoms when the Fed flinches (see early ’16, early ’19) ... or, if there’s a real growth problem, when the second derivative of economic activity turns (see Mar ’09, Apr ’20).    In that context, again my instinct is we’re just not there yet -- not only does the Fed put feel both smaller and farther out of the money than we’ve been accustomed to for a long time (arguably since the post-1994 era began), but the longer the tightening cycle rolls along, and the higher the unemployment rate goes, the more the markets will rightly worry about a recession (even if you believe, as I do, that the US economy is durable with plenty of nominal GDP still sloshing around). I’ll conclude this narrative with a chart, to followed by quick points and more charts ... I can find no better illustration of what’s currently challenging the stock market than this (link): 1-a. on the positioning front, the glaring wedge between hedge funds and households persists: i. GS Prime Brokerage data reflects some of the largest reduction of leverage on record (link).  n/b: I suspect the huge underperformance of implied volatility traces back to this point (which, for those watching, has been an immense oddity -- over the past 15 years, there have been 36 daily selloffs of 4% or more, and the VIX was never as low as it was on Wednesday). ii. that said, I continue to worry about the impact of US households de-risking.   here’s one way to frame it: total fund inflows from November of 2020 through March of 2022 were $1.34tr ... since the tide turned seven weeks ago, we’ve only unwound $47bn.   iii. given immense ownership differentials -- see chart 11 below for an illustration of how huge households are -- to my eye this nets out in favor of the bears.   now, if there’s a group who can help diffuse the supply/demand problem, it’s US corporates (yes, buyback activity through our franchise has picked up meaningfully over recent weeks).  1-b. A related point: as detailed by the WSJ (link) and our own team (link), the retail investor is quickly exiting the call option party.  to make the point: in the pre-COVID era, average daily notional in call options on US single stocks was around $100bn. At the peak in November of 2021 -- which is when a number of high velocity stocks put in their highs -- it was around $500bn. Fast forward to today, and we’re back down to $185bn/day. 2. The recent period has been a textbook illustration of the stark difference between volume and liquidity: volume in cash equities has never been higher (e.g. an average of 12.7bn shares per day in 2021, which is nearly 2x the run rate of 2019) ... yet, top-of-book liquidity in S&P futures registers in just the 3rd percentile of the past six years.   3. despite the ongoing selloff, the past few weeks have also brought moments that illustrate the difficulty of trading stocks from the short side, even if this is a bear market.  see chart 12 below, or witness daily price action in a custom basket of popular shorts, ticker GSCBMSAL. For the most short-term macro traders amongst you, if you want to play S&P from the short side, my sincere advice is to go home flat each night and reassess tomorrow morning -- this is a market to be traded, aggressively, but with extreme discipline. An alternative to this ultra-tactical approach is to utilize put spreads or 1-day gamma (ideas available). 4. I’m no expert in crude oil, but I’ve probably spent 10,000 hours with those who are, so here’s a bullish take: despite a record SPR release, a very strong dollar, shutdowns in the second largest economy on the planet and a break lower in most all risky assets, crude oil has largely stood its ground ... you can probably see where I’m going with this.  For the take of an expert, this note is worth a glance, the (surprising) punch line as I read it: “own commodities as financial conditions tighten.  in the past, spot and roll returns performed well when real rates rose, and particularly when financial conditions additionally tightened” (link). 5. US consumption: again, I worry a lot about building pressures on the low end consumer. While parts of this week’s data set were encouraging -- namely HD and government retail sales data -- what we heard from WMT and TGT was brutally clear: in addition to shipping and inventory issues, the cost of food and fuel is impinging on the US consumer.  This, as much as anything, was THE story of the week. On the other end of the spectrum, high end consumption is still off the charts (witness recent news stories on Manhattan real estate, art or fine wines).  I continue to think the medium-term reckoning of this wedge takes the form of ... higher taxes. 6. on US housing, I admit that a profoundly positive story has gotten a lot more complicated. On one hand, supply/demand favors ongoing strength. On the other hand, affordability seems to be a serious issue, and the move in mortgage rates is very significant.  Where do we come out? As Jan Hatzius in GIR put it to me, informally, there’s not necessarily a clear conclusion: “We cut our forecasts on homebuilding activity and house prices modestly, but the shortage of houses and overall tightness of the market should substantially dampen pressure on the sector.” If you’re interested, we have some interesting charts on this topic.  7. China: the data is so bad, it’s simply eye-popping (witness the worst IP print on record). In fact, GIR has cut our expectation of 2022 Chinese GDP growth to just 4%, which ex-2020 would be the slowest growth rate since ... 1990 (link).  for the sake of balance, Shanghai is set to reopen on June 1st and I suspect foreign trading length is approaching rock bottom.  For a balanced and comprehensive assessment of the regional economic outlook, this is worth a glance: link.   8. This is, if nothing else, some interesting brain food.  I asked Daniel Chavez in GIR to mark the moves in the COVID era in some popular assets. There are a lot of ways to approach this choose-your-own-adventure; the way we cut it was total returns from the lows of March 2020 to the highs (in NDX) of November of 2021 ... then from the November highs to today ... and then from the pre-COVID highs to today. A few things stick out to me, here’s one: point-to-point across the full COVID era, US energy stocks have far outperformed the stay-at-home stocks: 9. In a related spirit, and with credit to sales & trading colleague Brian Friedman, if you look the overlay of NDX P/E (white) with inverted 30-year US real yields (yellow), equities are doing what the move in real rates would suggest they should be doing: 10. With credit to David Kostin in GIR, here’s a bigger picture on tech.  For all of the recent troubles, you still have to marvel at the sustained growth of US mega cap names.  now I suppose the mega question is ... would you be willing to fade the broad pattern of this chart: 11. Another level set from GIR ... which, again, illustrates the size of households vs hedge funds (** 2% **) in the domestic equity market:  12. with credit to a client, an analog from the aftermath of the immediate aftermath in the LEH period, which again illustrates the difficulty of being short in the middle or late stages of a bear market: 13. Finally, and to continue the recent thread, this is a powerful chart of de-globalization ... If this were a chart of a security, I’d be inclined to sell it (link) Tyler Durden Sun, 05/22/2022 - 13:50.....»»

Category: smallbizSource: nytMay 22nd, 2022

QT2 Officially Begins: What Happens Next?

QT2 Officially Begins: What Happens Next? For the second time in the past decade, the Fed will try (and fail) to shrink its balance sheet to some "reasonable" size, a process known as Quantitative Tightening 2. What this means in theory is that, as shown below, the Fed's balance sheet will shrink by $95BN or so every month for the foreseeable futures as existing TSYs ($60BN/month) and MBS ($35BN/month) matures. What it means in practice, is that we will get a brief period of BS shrinkage for a few months before the "next big crisis" emerges and the Fed blows up the balance sheet again. We know this will happen with 100% certainty and without a trace of doubt, if for no other reason than the green agenda of the anti-climate change crusaders, the one event that western politicians have been salivating over for decades, will cost $150 trillion over the next 50 years, of which roughly $2 trillion will come in the form of global QE every year (as we explained in "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change".) But while everyone knows what happens in the medium-to-long term, traders are more focused on how to trade the next few weeks. For one answer we go to the latest note from JPMorgan flow trader Andrew Tyler who writes that "the question the market needs answered is whether growth is stabilizing after a move lower or if there is more decay to come.... I think it is premature to call the bottom in stocks, which appears to be a consensus view, given QT is about to launch and we are going to get another 100bps in rate hikes over the next 8 weeks." We wonder if his permabullish "buy the dip, any dip" co-worker Marco Kolanovic has read this... we doubt it. Tyler then pivots to JPM's preview of QT2, as follows: QT2 kicks off tomorrow Today, on the Rates Sales podcast, they hosted JPM Economist Peter McCrory, who discuss the impact of QT on markets. Podcast is here. The TL; DR version is that QT2 could act as a 25bps rate hike in 2022. Mike Feroli had published a note, A Roadmap for QT2 (full note available to pro subscribers). The note contains information on the mechanics, impact on financial conditions, the long pathway to normalization, and some thoughts on bank deposits. As noted above, by the end of 2023, the Fed is set to shed over $1T in longer-duration assets (in theory), with JPM speculating that "the reduction in bank reserves should have little effect on lending or deposit growth" (it's very wrong). And here it gets really funny: JPM calculates that "to get back to a “normal” size balance sheet, QT2 may last until 2026 or 2027." Uh, we have some bad news: by 2027, the US will have been in at least one depression, and we will be lucky if the Fed's balance sheet is only twice as large as it is now (and the price of cryptos will be about 10-100x higher than it is now). In any case, readers can track the Fed's activities in real-time in Treasuries (here) and MBS (here). QT2 aside, there is still the question of the Fed's rate hikes, at least until the Fed pulls a 180 some time around the August Jackson Hole symposium and the Fed "pauses" in September. According to JPM, here's what to look for: the market continues to price according to Fed guidance (50bps hikes in June and July; 50% of maximum QT pace). Currently, the market has a ~50% probability of a 25bps hike in Sept and 50% probability of a 50bps hike. The market then prices in 25bps in both November and December. This week, keep an eye on whether Waller’s narrative is echoed by other speakers; or, if the Bostic mention of a September pause remains. If we see the Fed pivot and/or turn dovish, then this would benefit stocks. * * * Finally, going back to square one, the question is how does all of this impact the market in the coming days and weeks? According to Andrew Tyler, "the question is one of whether the US bounce is a bear market rally or the continuation of the longer-term bull trend. It is tough to say that we have seen the bottom in stocks given that we have seen a bottom when we still have potential for the Fed to increase its hawkish behavior due to the uncertainty surrounding the next few inflation prints. That said, if an investor wants to short this market, there are challenges given the relatively light positioning among hedge funds and the potential for vol-targeting funds to re-gross and for CTAs to reverse from short to long. Tactically, I think you ride the momentum higher which should be led by Tech and Energy; but, Energy is an idiosyncratic long play given the supply/demand dynamic and supercycle hypothesis." Tyler Durden Tue, 05/31/2022 - 22:40.....»»

Category: blogSource: zerohedgeJun 1st, 2022

Goldman Trader: After A Brutal Week, Here Is The "Cat And Mouse" Question That Needs To Be Answered

Goldman Trader: After A Brutal Week, Here Is The "Cat And Mouse" Question That Needs To Be Answered From Tony Pasquariello, Goldman head of hedge fund coverage Cat and Mouse A brutal week in the markets, with no shortage of blame to go around: the persistence of global central bank hawkishness, gathering recession concerns, ongoing retail liquidation (and, an element of reflexivity). Here’s the central question that I’m trying to work out: if the interest rate market is correct, and terminal Fed Funds rate is going to be somewhere around 3%, at what point is that fully priced into the broader markets? On one hand, there’s already been a very significant tightening of US financial conditions, so you could argue that we’re getting close.   Said another way: you know that financial markets live in the future ... so, when the day comes where everyone can clearly see the end of the tightening cycle, the trading community will be ahead of it and assets will already be on the move. On the other hand, the target rate is still south of 1% and core PCE is still north of 5%, so you could also argue that we’re still much closer to the start of this tightening cycle than to the end of it [for a more detailed discussion, see "The Fed Has Crossed The "Hard Landing" Rubicon So How High Will It Hike? One Bank Crunches The Numbers"]. Said yet another way: as long as inflation is running hot and the labor market is too tight ... again, the inconvenient truth is the Fed has more wood to chop and the markets have more risk to sort out. In a related vein: at what point does the FOMC view an easing of financial conditions and decide that they DON’T need to beat it back? In that spirit, cue Bill Dudley (link): “the Fed has to be happy with the fact that financial conditions have tightened ... they’re getting traction ... they still have to do what they said they’re going to do.” With apologies for thinking out loud here, it’s these type of cat-and-mouse questions that illustrate the difficulty of assessing the current interplay between the Fed and the asset markets.   To be sure, the task of culling jobs is hugely unenviable, but the Fed is still so far off the inflation mark; at the very least, they need to demonstrate the trajectory of core inflation is clearly headed lower, even if they ultimately lose their nerve before reaching 2.0% [maybe the Fed is not so far off: see "Fed Mission Accomplished: Real-Time Indicators Show The Labor Market Just Cratered"]. On that last point, as Joe Briggs in GIR pointed out to me, the FOMC actually sent a similar signal with their March SEP dots, which showed 3½ hikes in 2023 and 0 hikes in 2024 ... despite median inflation forecasts of 2.6% in 2023 and 2.3% in 2024. Here’s where I’m going with all of this: even though financial conditions have tightened considerably ... and, even though this Fed will likely back off once the jobs losses begin to mount (they’re the same folks who ran the AIT play, after all) ... the fact is there’s still a lot of ground to cover before they can declare victory over inflation ... which should keep some pressure on risk assets a bit longer. To add another layer of complexity: as Dominic Wilson in GIR pointed out to me, the stock market usually bottoms when the Fed flinches (see early ’16, early ’19) ... or, if there’s a real growth problem, when the second derivative of economic activity turns (see Mar ’09, Apr ’20).    In that context, again my instinct is we’re just not there yet -- not only does the Fed put feel both smaller and farther out of the money than we’ve been accustomed to for a long time (arguably since the post-1994 era began), but the longer the tightening cycle rolls along, and the higher the unemployment rate goes, the more the markets will rightly worry about a recession (even if you believe, as I do, that the US economy is durable with plenty of nominal GDP still sloshing around). I’ll conclude this narrative with a chart, to followed by quick points and more charts ... I can find no better illustration of what’s currently challenging the stock market than this (link): 1-a. on the positioning front, the glaring wedge between hedge funds and households persists: i. GS Prime Brokerage data reflects some of the largest reduction of leverage on record (link).  n/b: I suspect the huge underperformance of implied volatility traces back to this point (which, for those watching, has been an immense oddity -- over the past 15 years, there have been 36 daily selloffs of 4% or more, and the VIX was never as low as it was on Wednesday). ii. that said, I continue to worry about the impact of US households de-risking.   here’s one way to frame it: total fund inflows from November of 2020 through March of 2022 were $1.34tr ... since the tide turned seven weeks ago, we’ve only unwound $47bn.   iii. given immense ownership differentials -- see chart 11 below for an illustration of how huge households are -- to my eye this nets out in favor of the bears.   now, if there’s a group who can help diffuse the supply/demand problem, it’s US corporates (yes, buyback activity through our franchise has picked up meaningfully over recent weeks).  1-b. A related point: as detailed by the WSJ (link) and our own team (link), the retail investor is quickly exiting the call option party.  to make the point: in the pre-COVID era, average daily notional in call options on US single stocks was around $100bn. At the peak in November of 2021 -- which is when a number of high velocity stocks put in their highs -- it was around $500bn. Fast forward to today, and we’re back down to $185bn/day. 2. The recent period has been a textbook illustration of the stark difference between volume and liquidity: volume in cash equities has never been higher (e.g. an average of 12.7bn shares per day in 2021, which is nearly 2x the run rate of 2019) ... yet, top-of-book liquidity in S&P futures registers in just the 3rd percentile of the past six years.   3. despite the ongoing selloff, the past few weeks have also brought moments that illustrate the difficulty of trading stocks from the short side, even if this is a bear market.  see chart 12 below, or witness daily price action in a custom basket of popular shorts, ticker GSCBMSAL. For the most short-term macro traders amongst you, if you want to play S&P from the short side, my sincere advice is to go home flat each night and reassess tomorrow morning -- this is a market to be traded, aggressively, but with extreme discipline. An alternative to this ultra-tactical approach is to utilize put spreads or 1-day gamma (ideas available). 4. I’m no expert in crude oil, but I’ve probably spent 10,000 hours with those who are, so here’s a bullish take: despite a record SPR release, a very strong dollar, shutdowns in the second largest economy on the planet and a break lower in most all risky assets, crude oil has largely stood its ground ... you can probably see where I’m going with this.  For the take of an expert, this note is worth a glance, the (surprising) punch line as I read it: “own commodities as financial conditions tighten.  in the past, spot and roll returns performed well when real rates rose, and particularly when financial conditions additionally tightened” (link). 5. US consumption: again, I worry a lot about building pressures on the low end consumer. While parts of this week’s data set were encouraging -- namely HD and government retail sales data -- what we heard from WMT and TGT was brutally clear: in addition to shipping and inventory issues, the cost of food and fuel is impinging on the US consumer.  This, as much as anything, was THE story of the week. On the other end of the spectrum, high end consumption is still off the charts (witness recent news stories on Manhattan real estate, art or fine wines).  I continue to think the medium-term reckoning of this wedge takes the form of ... higher taxes. 6. on US housing, I admit that a profoundly positive story has gotten a lot more complicated. On one hand, supply/demand favors ongoing strength. On the other hand, affordability seems to be a serious issue, and the move in mortgage rates is very significant.  Where do we come out? As Jan Hatzius in GIR put it to me, informally, there’s not necessarily a clear conclusion: “We cut our forecasts on homebuilding activity and house prices modestly, but the shortage of houses and overall tightness of the market should substantially dampen pressure on the sector.” If you’re interested, we have some interesting charts on this topic.  7. China: the data is so bad, it’s simply eye-popping (witness the worst IP print on record). In fact, GIR has cut our expectation of 2022 Chinese GDP growth to just 4%, which ex-2020 would be the slowest growth rate since ... 1990 (link).  for the sake of balance, Shanghai is set to reopen on June 1st and I suspect foreign trading length is approaching rock bottom.  For a balanced and comprehensive assessment of the regional economic outlook, this is worth a glance: link.   8. This is, if nothing else, some interesting brain food.  I asked Daniel Chavez in GIR to mark the moves in the COVID era in some popular assets. There are a lot of ways to approach this choose-your-own-adventure; the way we cut it was total returns from the lows of March 2020 to the highs (in NDX) of November of 2021 ... then from the November highs to today ... and then from the pre-COVID highs to today. A few things stick out to me, here’s one: point-to-point across the full COVID era, US energy stocks have far outperformed the stay-at-home stocks: 9. In a related spirit, and with credit to sales & trading colleague Brian Friedman, if you look the overlay of NDX P/E (white) with inverted 30-year US real yields (yellow), equities are doing what the move in real rates would suggest they should be doing: 10. With credit to David Kostin in GIR, here’s a bigger picture on tech.  For all of the recent troubles, you still have to marvel at the sustained growth of US mega cap names.  now I suppose the mega question is ... would you be willing to fade the broad pattern of this chart: 11. Another level set from GIR ... which, again, illustrates the size of households vs hedge funds (** 2% **) in the domestic equity market:  12. with credit to a client, an analog from the aftermath of the immediate aftermath in the LEH period, which again illustrates the difficulty of being short in the middle or late stages of a bear market: 13. Finally, and to continue the recent thread, this is a powerful chart of de-globalization ... If this were a chart of a security, I’d be inclined to sell it (link) Tyler Durden Sun, 05/22/2022 - 13:50.....»»

Category: smallbizSource: nytMay 22nd, 2022

What Will The Next "Market Bottom" Look Like

What Will The Next "Market Bottom" Look Like Liquidity is dismal, with even Goldman warning that "this chart should be on everyone's radar. This is the top of book depth of S&P futures divided by 1mo ATM vol. It is flashing red. The set up for an equity market crash is as high as I have seen it." ... Meanwhile, predictably, volatility is explosive and refuses to ease amid the continued selling... ... which means that one week after the S&P 500 fell by 9% in the month of April - its worst month since March 2020 - the bloodbath has continued, with the S&P tumbling below 4,000 for the first time in over a year. Discussing the latest market dynamics, Morgan Stanley - which has been quite bearish on risk over the past year - thinks that in the medium-term, the market is likely to trend lower, but near-term, the market could be due for a quick squeeze higher. It does say that any short squeeze should be faded as it is unlikely to be sustained (as it should be interpreted as a bear market rally). As such the bank's Quants and Derivatives desk (QDS) still prefers to lean short the market but to hedge with long upside calls. Why? Here's how QDS views the recent price action and why it sees odds for a major bounce here as modest. The recent price action and much of QDS’s forward-looking view can be best understood through the lens of positioning. Positioning of "fast money" market participants, such as Hedge Funds and systematic macro strategies (trend following CTAs, vol control funds, and risk parity funds), is very light, both sitting in the sub-10th percentile over the past 5Y. And while short interest is no longer as extreme as it was a couple of months ago, extremely light net positioning + a touch of ‘FOMO’ + challenging P/L suggests that there could be plenty of interest to chase the market higher on any rally. On the other side of this fast money are the "slower money" market participants – institutional real money plus retail: as discussed yesterday when we noted that Monday was the 5th biggest selling day on record, they have reversed their recent dip-buying and have been been driving more of the sell pressure and, according to Morgan Stanley, are likely to continue to drive price action in the medium-term. That's a problem since retail demand has begun to slip... ... and retail will likely be less supportive to the broader equity market going forward especially since all post covid gains - including the meme stock frenzy - is now gone. Retail demand has been weaker than expected relative to seasonal trends post-tax day, estimated retail P/L is deteriorating, and inflation is eating away at individuals’ disposable income. Retail has been an important buyer of dips, and with the retail bid dissipating just a lack of buying is likely enough to create an air pocket in the medium-term. Which bring us to the question everyone wants answered: what could the next ‘market bottom’ look like given these positioning dynamics?  According to MS, signs of a market bottom are unlikely to resemble traditional "capitulation" that’s played out in the last few years. Why? Because traditional capitulation is typically marked by a quick de-grossing by hedge funds + systematic macro strategies, where positioning is already light. Instead, the next leg of de-risking is likely to be more gradual, coming from asset allocators/real money/retail and is therefore likely slower to play out, making a precise bottom more difficult to call. JPMorgan, always far more cheerful than Morgan Stanley, as the following S&P chart annotated with Marko Kolanovic's weekly recos to buy each and every dip shows... ... is obviously more bullish, and also takes a stab at answering the question "how close are we to the bottom and is Wednesday’s CPI a positive catalyst?" Here is JPM's Andrew Tyler response who notes that "those were the two most asked client questions on Monday": Before trying to answer those question, let’s take a look at markets. Yesterday’s moves, which included a 3 standard deviation sell-day by Retail make some feel better but the SPX failing to hold 4k will make others nervous. Marko points out that ARKK is trading where it was the second week of Marcy 2020. Biotech is trading below pandemic lows. R2K is trading near the level of Summer 2018. All of these data points were before Fed Liquidity and stimmy. Combined this is a likely oversold condition. Returning to those client questions, they do not have to be mutually exclusive. Did we see a bottom? I have no idea but on a 2-3 month basis, I think buying at these levels makes some sense but it is tough to think one should be putting on material risk ahead of the CPI print. For CPI, Feroli is above the Street and it is entirely possible that we may have one or more elevated prints before we start to see a significant decline in official measures of inflation. Overall, I think there are some opportunities but still prefer to hold a market-neutral portfolio. I agree with Marko’s assessment that there is a ton of irrational behavior surrounding the growthier parts of the market. BUT. I am sure we all remember the quote about markets, irrationality, and solvency. That said, a near-term play that makes sense is the Energy complex. While the recent move higher was fueled by sentiment surrounding an energy embargo, there supply/demand dynamic is supportive of prices and it is tough to see WTI spending much time below $95-100 range as we approach seasonal demand. And there you have it: one bearish take, one bullish. Ironically, even the bulls are now tripping over themselves to build a narrative, because in the same note that JPM tries to cobble together a feeble bullish case, another trader goes back to what we have long claims is the biggest and most important variable for any sustained rally - lilquidity... or the lack thereof. Here is JPM flow trader Joel Nyback discussing - what else - market liquidity: ESM2 top level averaged 13 contracts today and spent 25% of the day ≥2ticks. To put that market width in context, there have been three periods since Jan 2020 where more than 20% of the day was spent ≥2ticks. The first was during the COVID selloff and the other two were earlier this year. The precedents suggest it will be a while before we see the environment meaningfully improve. Intraday realized volatility was 23v and volumes marginally lower than last week. We shouldn’t expect anything helpful here for at least the next week. In other words, bias and narrative aside, the only thing that matters to markets right now is liquidity (i.e., confidence), and without at least a modest bounce there, stocks will have an extremely difficult time bottoming, let alone rising. For more, please read the full MS and JPM notes available to professional subs in the usual place. Tyler Durden Tue, 05/10/2022 - 11:40.....»»

Category: dealsSource: nytMay 10th, 2022

Ferguson: Omicron Sounds The Death Knell For Globalization 2.0

Ferguson: Omicron Sounds The Death Knell For Globalization 2.0 Authored by Niall Ferguson, op-ed via Bloomberg.com, On top of an intensifying cold war between the U.S. and China and other seismic changes, the rapid spread of Covid-19’s newest variant could finish off our most recent phase of global integration. “Somewhere out there,” I wrote here two weeks ago, “may lurk what I grimly call the ‘omega variant’ of SARS-CoV-2: vaccine-evading, even more contagious than delta, equally or more deadly. According to the medical scientists I read and talk to … the probability of this nightmare scenario is very low, but it is not zero.” Indeed. Little did I know, but even as I wrote those words something that appears to fit this description was spreading rapidly in South Africa’s Gauteng province: not the omega variant, but the omicron variant. As I write today, major uncertainties remain, but what we know so far is not good. People are emotionally predisposed to look on the bright side — we are all sick of this pandemic and want it to be over — so it pains me to write this. Nevertheless, I’ll stick to my policy of applying history to the best available data, even if it means telling you what you really don’t want to hear. First the data: South African cases were up 39% on Friday, to 16,055. The test positivity rate rose from 22.4% to 24.3%, suggesting that the true case number is rising even faster. A Lancet paper suggests that Omicron is likely by far the most transmissible variant yet. There are three possible explanations for this: A higher intrinsic reproduction number (R0), An advantage in “immune escape” to reinfect recovered people or evade vaccines, or Both of the above. An important preprint published on Dec. 2 pointed to immune escape. South Africa’s National Institute for Communicable Diseases has individualized data on all its 2.7 million confirmed cases of Covid-19 in the pandemic. From these, it identified 35,670 suspected reinfections. (Reinfection is defined as an individual testing positive for Covid-19 twice, at least 90 days apart.) Since mid-November, the daily number of reinfections in South Africa has jumped far faster than in any previous wave. In November, the hazard ratio was 2.39 for reinfection versus primary infection, meaning that recovered individuals were getting Covid at more than twice the rate of people who had never had Covid before. And this was when omicron made up less than a quarter of confirmed cases. By contrast, the same study found no statistically significant evidence that the beta and delta variants were capable of reinfection. And, crucially, at least some of these new infections are leading to serious illness. On Thursday, the number of Gauteng patients in intensive care for Covid almost doubled from 63 to 106. Data from a private hospital network in South Africa that has over 240 patients hospitalized with Covid indicate that 32% of the hospitalized patients were fully vaccinated. Note that around three-quarters of the vaccinated in South Africa received the Pfizer Inc.-BioNTech SE vaccine. The rest got the Johnson & Johnson vaccine. Yet these are not the data that worried me the most last week. Those had to do with children. Between Nov. 14 and 28, 455 people were admitted to hospital with Covid-19 in Tshwane metro area, one of the largest hospital systems in Gauteng. Seventy (15%) of those hospitalized were under the age of five; 117 (25%) were under 20. And this is not just a story of precautionary hospitalizations. Twenty of the 70 hospitalized toddlers progressed to “severe” Covid. Up until Oct. 23, before experts estimate omicron began circulating, under-fives represented only 1.8% of cumulative Covid hospital admissions in South Africa. As of Nov. 29, 10% of those now hospitalized in Tshwane were under the age of two. If this trend holds as omicron spreads to advanced economies — and it is spreading very fast, confirming omicron’s high transmissibility — the market impact could be much bigger than is currently priced in. Unlike with the delta wave, many schools would return to hybrid instruction, parents would withdraw from the labor force to provide childcare and consumption patterns would again shift away from retail, hospitality and face-to-face services. Hospital systems would also face shortages of pediatric intensive care beds, which have not been much needed in prior Covid waves. South Africa’s top medical advisor Waasila Jassat noted on Dec. 3 that hospitalizations on average are less severe than in previous waves and hospital stays are shorter. But she also noted a “sharp” increase in hospital admissions of under-fives. Children under 10 represent 11% of all hospital admissions reported since Dec. 1. Here’s what we don’t know yet. We do not know how far prior infection and vaccination will protect against severe disease and death in northern hemisphere countries, where adult vaccination rates are much higher than in South Africa (just 24%). And we do not know if omicron will prove as aggressive toward children in those countries, especially the very young children we have not previously contemplated vaccinating. (Because South Africa has limited testing capacity, we do not know the total number of under-fives infected with omicron in Gauteng, so we do not know what percentage of children are falling sick.) We may not know these things for another week, possibly longer. So panic is not yet warranted. Nor, however, is wishful thinking. It may prove a huge wave of mild illness, signaling the final phase of the transition from pandemic to endemic. But we don’t know that yet. Now the history. First, it makes all the difference in the world whether or not children fall gravely ill in a pandemic. Covid has so far spared the very young to an extent rarely seen in the recorded history of respiratory disease pandemics. (The exception seems to be the 1889-90 “Russian flu,” which modern researchers suspect was in fact a coronavirus pandemic.) The great influenza pandemics of 1918-19 and 1957-58 killed the very young as well as the very old. The former also carried off young adults in the prime of life. The latter caused significant excess mortality among teenagers. Up until this point, Covid was the social Darwinist disease: It disproportionately killed the old, the sick and the gullible (the vulnerable people who allowed themselves to be persuaded that the vaccine was more dangerous than the virus). A hundred years ago, many experts would have hailed such a disease for the same reasons they promoted eugenics. We think differently now. However, emotionally and rationally, we still dread the deaths of children much more than the old, the sick and the foolish. The moment children become seriously ill — as has already happened in Gauteng — the nature of the pandemic fundamentally alters. Risk aversion will be far higher in the Ferguson family, for example, if its youngest members are vulnerable for the first time. The second historical point is that this may be how our age of globalization ends — in a very different way from its first incarnation just over a century ago. The first age of globalization, from the 1860s until 1914, ended with a bang, not a whimper, with the outbreak of World War I. Within a remarkably short space of time, that conflict halted trade, capital flows and migration between the combatant empires. Moreover, the war and its economic aftershocks strengthened and ultimately empowered new political movements, notably Bolshevism and fascism, that fundamentally repudiated free trade and free capital movements in favor of state control of the economy and autarky. By 1933, the outlook for liberal economic policies seemed so utterly hopeless that, in a lecture he gave in Dublin, even John Maynard Keynes threw in the towel and embraced economic self-sufficiency. Now, there is an argument (made by my Bloomberg colleague and occasional editor James Gibney) that the pandemic will not kill globalization. I am not so sure. Defined too broadly, to include any kind cross-border interaction, the word loses its usefulness. Yes, there were all kinds of “transnational networks in science, health, entertainment,” as well as increasingly ambitious international agencies between the wars. But the fact that (for example) the Pan European movement was founded by Richard von Coudenhove-Kalergi in the 1920s does not mean that the subsequent decades were a triumph of European integration. There was a great deal of international cooperation and cross-border activity between 1939 and 1945, too. That does not mean that the 1940s were a time of globalization. For the word to be meaningful, globalization must refer to relatively higher volumes of trade, capital flows, migration flows and perhaps also cultural integration on a global scale.   On that basis, globalization peaked — or maybe “maxed out” would be more accurate — in around 2007. Calculate it how you like: Whether the ratio of global exports to GDP, the ratio of gross foreign assets to GDP, global or national migrant flows in relation to total population, they all tell the same story of a sustained rise of globalization hitting a peak around 14 years ago. The economic historian Alan M. Taylor has long argued that we should measure globalization by looking at current account imbalances, which tell us when a lot of trade and lending are happening. On that basis, too, globalization peaked in 2007. Even Before Covid, Trade and Lending Were Trending Down Source: Our World in Data from Maurice Obstfeld and Alan M. Taylor, "Global Capital Markets: Integration, Crisis, and Growth," Japan–US Center UFJ Bank Monographs on International Financial Markets; and International Monetary Fund, World Economic Outlook Database. Note: The data shown is the average absolute current account balance (as a percentage of GDP) for 15 countries in five-year blocks. The countries in the sample are Argentina, Australia, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, U.K., U.S.. Since the financial crisis of 2008-9, however, the volume of world trade has flatlined relative to the volume of industrial production. The U.S. current account deficit peaked in the third quarter of 2006 at -6.3% of GDP. The latest read? -3.3%. The same story emerges when one turns to migration. The foreign-born share of the U.S. population rose rapidly from its nadir in 1970 (4.7%) to a peak of 13.7% in 2019. But the rate of growth clearly slowed after 2012. It remains below its historic peak of 14.7%, back in 1890. Data for net migration similarly point to peaks prior to the financial crisis. Net emigration from South Asia peaked in 2007, for example. So did net immigration to the United Kingdom. Not-So-Open Borders Source: United Nations Population Division What about cultural globalization? My guess is that peaked in 2012, which was the last year that imported films earned more at the Chinese box office than domestic productions. The highest-grossing movie in the history of the People’s Republic is this year’s “Battle of Lake Changjin,” a Korean War drama in which heroic Chinese troops take on the might of the U.S. Army—and win. (Watch the trailer. Then tell me globalization is going to be fine.) What has caused globalization to recede? Let me offer a six-part answer. First, global economic convergence. This may come as a surprise. An influential story over the past two decades was Branco Milanovic’s thesis that globalization had increased inequality. In particular, Milanovic argued in 2016 that “large real income gains [had] been made by people around the median of the global income distribution and by those in the global top 1%. However, there [had] been an absence of real income growth for people around the 80-85th percentiles of the global distribution.” He illustrated this argument with a famous “elephant chart” of cumulative income growth between 1988 and 2008 at each percentile of the global income distribution. On closer inspection, the elephant was a statistical artifact. Strip out the data for Japan, the former Soviet Union and China, and the elephant vanishes. The story Milanovic’s chart told was of the decline of ex-Soviet and Japanese middle-class incomes following the collapse of the USSR and the bursting of Tokyo’s bubble in 1989-90, and the surge of Chinese middle-class incomes, especially after China’s entry into the World Trade Organization in 2001. The real story of globalization turns out to be a sustained reduction in global inequality as Chinese incomes caught up rapidly with those in the rest of the world, combined with big increases in national inequality as the “one percent” in some (not all) countries got a whole lot richer. At the heart of globalization was what Moritz Schularick and I called “Chimerica”—the symbiosis between the Chinese and American economies that allowed American capital to take advantage of low-cost Chinese labor (offshoring or outsourcing), American borrowers to take advantage of abundant Chinese savings, and American consumers to take advantage of cheap Chinese manufactures. It could not last. In 2003 Chinese unit labor costs were around a third of those in the U.S. By 2018 the two were essentially on a par. In that sense, the glory days of globalization were bound to be numbered. For as Chinese incomes rose, the rationale for relocating production to China was bound to become weaker. Secondly, and at the same time, new technologies — robotics, three-dimensional printing, artificial intelligence — were rapidly reducing the importance of human labor in manufacturing. With the surge of online commerce and digital services, globalization entered a new phase in which data rather than goods and people crossed borders, even if the Great Firewall of China partly cordoned off China’s internet from the rest of the world’s. Chimerica, as Schularick and I argued back in 2007, was in many ways a chimera — a monstrous creature with the potential to precipitate a crisis, not least by artificially depressing U.S. interest rates and inflating a real estate bubble. When that crisis struck in 2008-9, it was the third blow to globalization. For those who suffered the heaviest losses in the United States and elsewhere, it was not illogical to blame free trade and immigration. A 2015 study by the McKinsey Global Institute showed clearly that people in the U.S., U.K. and France who saw themselves as “not advancing and not hopeful about the future” were much more likely than more optimistic groups to blame “legal immigrants,” “the influx of foreign goods and services,” and “cheaper foreign labor” for, respectively, “ruining the culture and cohesiveness in our society,” “leading to domestic job losses” and “creating unfair competition to domestic businesses.” The only surprising thing was that these feelings took as long as seven years to manifest themselves as an organized political backlash against globalization, in the form of Britain’s vote to exit the European Union and America’s vote for Donald Trump. Dani Rodrik’s famous trilemma — which postulated that you could have any two of globalization, democracy and sovereignty — was emphatically answered in 2016: Voters chose democracy and sovereignty over globalization. This was the fourth strike against “the globalists,” a term invented by the populists to give globalization a more easily hateable human face. The financial crisis and the populist backlash didn’t sound the death knell for globalization. They merely dialed it back — hence the plateau in trade relative to manufacturing and the modest decline (not collapse) of international capital flows and migration. The fifth blow was the outbreak of Cold War II, which should probably be dated from Vice President Mike Pence’s October 2018 Hudson Institute speech, the first time the Trump administration had taken its anti-Chinese policy beyond the confines of the president’s quixotic trade war (which only modestly reduced the bilateral U.S.-Chinese trade deficit). Not everyone has come to terms with this new cold war. Joseph Nye (and the administration of President Joe Biden) would still like to believe that the U.S. and China are frenemies engaged in “coopetition.” But Hal Brands and John Lewis Gaddis, John Mearsheimer and Matt Turpin have all come round to my view that this is a cold war — not identical to the last one, but as similar to it as World War II was to World War I. The only question worth debating is whether or not, as in 1950, cold war turns hot. There is no Thucydidean law that says this is inevitable, as Graham Allison has shown. But I agree with Mearsheimer: The risk of a hot war in Cold War II may actually be higher than in Cold War I. Nothing would kill globalization faster than the outbreak of a superpower war over Taiwan. (And “The Battle of Lake Changjin” is blatantly psyching Chinese cinemagoers up for such a conflict.) The decoupling of the U.S. and Chinese economies would almost certainly have continued even if the sixth blow — the Covid pandemic — had not struck. It has been astounding how little the Biden administration has changed of its predecessor’s China strategy. However, the pandemic has delivered the coup de grace — “a brutal end to the second age of globalization,” as Nicholas Eberstadt put it last year. True, the volume of merchandise trade has recovered even more rapidly in 2021 than the World Trade Organization anticipated back in March. But the emergence of a new, contagious and lethal coronavirus has caused a collapse of international travel and tourism. The number of passengers carried by the global airline industry plunged by 60% in 2020. It will be not much better than 50% of its pre-pandemic level this year. International tourist arrivals are down by even more this year than last year — close to 80% below their 2019 level. In Asia, international tourism has all but ceased to exist this year. Meanwhile, both the U.S. and the Chinese governments keep devising new ways to discourage their nationals from investing in the rival superpower. Didi Global Inc., the Chinese Uber, just announced it is delisting its shares from the New York Stock Exchange. And the pressure mounts on Wall Street financiers — as Bridgewater Associates founder Ray Dalio discovered last week — to wind up their “long China” trade and stop turning a blind eye to genocide in Xinjiang and other human rights abuses. Next up: the campaign to boycott the 2022 Winter Olympics in Beijing. Strikingly, a growing number of Western sports stars and organizations such as the Women’s Tennis Association are already willing to defy Beijing — in the case of the WTA by suspending tournaments in China in response to the disappearance of the tennis star Peng Shuai, who accused a senior Communist Party official of sexually assaulting her. China’s leaders should be even more worried by a recent Chicago Council of World Affairs poll, which showed that just over half of Americans (52%) favor using U.S. troops to defend Taiwan if China invades the island — the highest share ever recorded in surveys dating back to 1982. Last month I asked a leading American lawmaker how he explained the marked growth in public hostility toward the Chinese government. His answer was simple: “People blame China for Covid.” And not without reason, as Matt Ridley’s new book “Viral” makes clear. For the avoidance of doubt, I do not foresee as complete a collapse of globalization as happened after 1914. Globalization 2.0 seems to be going out with a whimper — or perhaps a persistent cough — rather than with a bang. Income convergence and technological change were bound to reduce its utility. Having overshot by 2007, globalization settled at a lower level after the financial crisis and was less damaged by populist policies like tariffs than might have been anticipated. But the advent of Cold War II and Covid-19 struck two severe blows. How far globalization is rolled back depends on how far the two phenomena persist or worsen. Maybe — let us pray — the alarming data from Gauteng will not imply a major new wave of illness and death in the wider world. Maybe the omicron variant will not, after all, be that nightmare variant I have feared: more infectious, more lethal, vaccine-evading, not ageist. But omicron is only the 15th letter in the Greek alphabet. In all of Africa only 7.3% of the population are fully vaccinated and there are countless immunocompromised individuals with HIV. Even if omicron turns out to be, like delta, a variant we can live with, there is still some non-zero chance that at some point we get my “omega variant.” In that scenario, the pandemic does not oblige us, weary as we are of it, by ending, but recurs in a succession of waves extending for years. One begins to wonder if China will ever lift its stringent restrictions on foreign visitors. Under such circumstances, I see little chance of Cold War II reaching the détente phase earlier than Cold War I.   In addition to applying history, I have come to believe that we should also apply science fiction, on the principle that its authors are professionally incentivized to envision plausibly the impact of social, technological and other changes on the future. (Fact: an Italian sci-film called “Omicron,” in which an alien takes over a human body, was released in 1963.) No living author is better at this kind of thing than Neal Stephenson, whose “Snow Crash” coined the word “metaverse,” and whom I got to know — appropriately via Zoom — through my friends at the Santa Fe Institute. When Stephenson and I met for a late-night Scotch at a bar in Seattle a few weeks back, we swiftly found common ground. Never have I seen a longer list of wines and spirits: We could have scrolled down on the iPad the server handed us for an hour and still not reached the end. Eventually, we found the malt whisky. And immediately we agreed: Laphroaig — the standard 10-year-old version. Stephenson’s latest novel is “Termination Shock.” Buy it. You will be catapulted into a future Texas of intolerable heat, man-eating hogs, and other nightmares, the effect of which will be to make your present circumstances seem quite tolerable. Part of Stephenson’s genius is his use of the throwaway detail. “RVs,” he writes, were “already at a premium because of Covid-19, Covid-23 and Covid-27.” It’s not really part of the plot, but it stopped my eyeballs in their tracks. And remember: He predicted the metaverse. In 1992. Tyler Durden Mon, 12/06/2021 - 05:00.....»»

Category: worldSource: nytDec 6th, 2021

The timeline of Trump"s ties with Russia lines up with allegations of conspiracy and misconduct

Trump listens to a question from a reporter at a campaign fundraiser at the home of car dealer Ernie Boch Jr. in Norwood, Massachusetts August 28, 2015.REUTERS/Brian SnyderPresident Donald Trump and several associates continue to draw intense scrutiny for their ties to the Russian government.A dossier of unverified claims alleges serious conspiracy and misconduct in the final months of the 2016 presidential campaign.  The White House has dismissed the dossier as fiction, and most of the claims remain unverified. The timeline of major events, however, lines up.The document includes one particularly explosive allegation — that the Trump campaign agreed to minimize US opposition to Russia's incursions into Ukraine in exchange for the Kremlin releasing negative information about Trump's opponent, Hillary Clinton. The timing of events supporting this allegation also lines up.Editor's note: This article was updated after a Nov. 3, 2021 federal indictment accused Igor Danchenko, a Russia expert who contributed to the so-called Steele dossier, of lying to investigators about receiving information from Sergei Millian. Millian repeatedly denied he was a source for any material in the dossier.The timeline of claims made in an unsubstantiated dossier presented by top US intelligence officials to President Donald Trump and senior lawmakers last month has increased scrutiny of events that unfolded in the final months of the Trump campaign.The dossier alleges serious misconduct and conspiracy between the Trump campaign and Russia's government. The White House has dismissed the dossier as fiction, and some of the facts and assertions it includes have indeed been proven wrong.Other allegations in the dossier, however, are still being investigated. According to a recent CNN report, moreover, US intelligence officials have now corroborated some of the dossier's material. And this corroboration has reportedly led US intelligence officials to regard other information in the dossier as more credible.Importantly, the timeline of known events fits with some of the more serious alleged Trump-Russia misconduct described in the dossier. And questions about these events have not been fully answered, including the sudden distancing of Trump associates from the campaign and administration as the events and Russia ties became public.The dossier's allegations of Trump-Russia ties and conspiracyThe dossier was compiled by veteran British spy Christopher Steele, who was hired to investigate Trump's ties to Russia by the Washington, DC-based opposition research firm Fusion GPS. Steele developed a network of sources while working on the Moscow desk of UK intelligence agency MI6.Steele, citing these sources heavily, wrote a series of memos detailing alleged coordination between the Kremlin and Trump's campaign team. Fusion then compiled the information into a 35-page dossier that has been circulated among lawmakers, journalists, and the US intelligence community since last year. The dossier was published in January by BuzzFeed.Fusion was initially hired by anti-Trump Republicans to conduct opposition research on Trump in late 2015, and Democrats took over funding for the project after the Republicans pulled out. Fusion's cofounder, Glenn Simpson, a former investigative reporter for the Wall Street Journal, continued the project with Steele even after Democrats pulled funding when Trump won the election.Trump and his inner circle have condemned the dossier as "fake and fictitious."But US investigators, who have opened investigations into several members of Trump's inner circle and their ties to Russia over the past year, say they have been able to corroborate some of the details in the dossier by intercepting some of the conversations between some senior Russian officials and other Russians, CNN reported on Friday. That has given the investigators "greater confidence" in the credibility of the some aspects of the memos, CNN's sources said.Events that unfolded in the final months of the election — especially as they related to key players linked to and within Trump's inner circle — are illuminated by some of the allegations contained in the dossier. Four of these players and their role in these events warrant closer examination.Skye Gould/Business InsiderPaul Manafort: A language change on Ukraine, and a resignationAn American consultant named Paul Manafort, who was mentioned throughout Steele's dossier, served as Donald Trump's campaign manager until August 2016. He is said to have close ties to Ukraine and Russia. What the dossier saysThe dossier alleges that the Trump campaign made a secret deal with Russia in which Trump "agreed to sideline" the issue of Russian intervention in Ukraine. In return, the document claims, Russia promised to feed the emails it stole from prominent Democrats' inboxes to WikiLeaks to damage Hillary Clinton's candidacy.The "well-developed conspiracy of cooperation between [the Trump campaign] and the Russian leadership was managed on the Trump side by the Republican candidate's campaign manager, Paul Manafort," the dossier says.Manafort had advised Russia-friendly Ukraine leader Viktor Yanukovych, who he helped win the Ukrainian presidency in 2010. The dossier alleges that Manafort was still receiving "kickback payments" from the former Ukrainian leader last year, a charge Manafort has denied.What happenedIn July 2016, while Manafort was still Donald Trump's campaign manager, a change was made to the Republican Party's policy on Ukraine. The change fits with the dossier's assertion that the Trump campaign agreed to soften US support for Ukraine in exchange for the Kremlin releasing damaging information about Hillary Clinton.The Republican National Committee's original draft language on Ukraine proposed sending "lethal weapons" to the Ukrainian army to fend off Russian aggression. But after a sub-committee meeting at the convention, the "lethal weapons" line was softened significantly and changed to "provide appropriate assistance."In this July 18, 2016, file photo, Trump campaign chairman Paul Manafort walks around the convention floor before the opening session of the Republican National Convention in Cleveland.AP Photo/Carolyn Kaster, FileAs Business Insider has previously reported, the circumstances around this language change are controversial.  The reason for the language change has also not been well explained.The Ukraine language change was orchestrated by two national-security experts sent to sit in on the subcommittee meeting on behalf of the Trump campaign, according to the original amendment's author, Diana Denman, who was also in the meeting.One of the Trump campaign representatives present at the meeting, JD Gordon, has since denied intervening in the platform hearing. Gordon has also denied that Trump or Manafort were involved in the language change and that there was anything nefarious about it.A member of the Republican National Committee present at the meeting, however, confirmed to Business Insider that the change "definitely came from Trump staffers."The altered Ukraine policy amendment, with the softer language, ultimately was included in the new GOP platform. A few days later, WikiLeaks began publishing the emails stolen from the Democratic National Committee and Clinton campaign. The timing coincided with the start of the Democratic National Convention the following week.A month after the Republican convention, on August 14, The New York Times reported new details about Trump campaign manager Manafort's involvement with Ukraine. The paper reported that Ukraine leader Yanukovych's pro-Russia political party had earmarked $12.7 million for Manafort for his work between 2007-2012. Manafort has said he never collected the payments. The New York Times story thrust the Trump campaign's connections with Russia into the international spotlight. Five days later, on August 19, for reasons that are still unclear, Manafort resigned as Trump's campaign manager. The dossier further alleges that Russia's president, Vladimir Putin, became concerned when Yanukovych informed him on August 16 — two days after the Times report was published — of "kickback payments" being funneled to Manafort. This was three days before Manafort resigned from the Trump campaign.Michael Flynn: A trip to Moscow, a distraction from Ukraine, and secret phone callsMichael Flynn, the former head of the Defense Intelligence Agency, is now Trump's national security adviser. Flynn was paid by the Kremlin to speak at a gala in December 2015, and is believed to have regularly communicated with the Russian ambassador to the US before Trump was sworn in.What the dossier saysAccording to the dossier, a Kremlin official involved in US relations said that Russia attempted to cultivate US political figures by "funding indirectly their recent visits to Moscow."These political figures, the dossier alleges, included "a delegation from Lyndon LaRouche, presidential candidate Jill Stein of the Green Party, Trump foreign policy adviser Carter Page, and former DIA director Michael Flynn." The dossier went on to say that the effort to cultivate these figures had been "successful in terms of perceived outcomes."In this file photo taken on Thursday, Dec. 10, 2015, Russian President Vladimir Putin, center right, with retired U.S. Lt. Gen. Michael T. Flynn, center left, and Serbian filmmaker Emir Kusturica, obscured second right, attend an exhibition marking the 10th anniversary of RT (Russia Today) 24-hour English-language TV news channel in Moscow, Russia.Mikhail Klimentyev/Sputnik, Kremlin Pool Photo via APThe dossier alleges that the Trump campaign pledged to "raise defense commitments in the Baltics and Eastern Europe to deflect attention away from Ukraine." Recent reporting indicates that Flynn, now Trump's national security advisor, is poised to make good on that pledge.What happenedIn December 2015, Flynn, then recently retired from the Defense Intelligence Agency, traveled to Moscow to speak at a gala celebrating the 10th anniversary of state-sponsored news agency Russia Today.Flynn later told The Washington Post that he had been paid to speak at the gala, where he was photographed sitting next to Putin at dinner.Top Democratic lawmakers are now calling on the Defense Department to investigate whether Flynn ran afoul of the US Constitution by accepting money from the Kremlin. Since the dinner in Moscow, Flynn has toed a Russia-friendly line that's out of line with his more hawkish former US defense colleagues. He has appeared on Russia Today (RT) several times as a commentator. He also suggested last year that he saw no difference between the state-run RT and other news networks like CNN, MSNBC, and Al Jazeera.One of Flynn's appearances on RT in October 2015 ran under the headline: "Former DIA Chief Michael Flynn Says Rise Of ISIS Was A 'Willful Decision' Of US Government."Michael Flynn.Drew Angerer/Getty ImagesLast Tuesday, Politico reported that Flynn will recommend that Trump support the ascension of Montenegro, a small Balkan nation, into NATO. Russia officially opposes such a move. But it aligns with the dossier's suggestion that the Trump White House would support raising commitments "in the Baltics and Eastern Europe to deflect attention away from Ukraine."Last Thursday, moreover, both The Washington Post and The New York Times reported that Flynn had spoken with Russia's ambassador to the US, Sergey Kislyak, about the US economic sanctions on Russia before Trump was sworn in — including at least one call on the day President Barack Obama imposed new penalties on Russia for its election-related meddling.Both Flynn and Vice President Mike Pence initially denied that Flynn and Kislyak discussed US sanctions during these calls. But counterintelligence officials told the Times that they have transcripts of the conversations and that the sanctions were discussed. Flynn has since backtracked on his denial, saying that he doesn't recall exactly what they spoke about.Carter Page: Two trips to Moscow, and a 'leave of absence'Carter Page, a former investment banker with Merrill Lynch, was an early foreign policy adviser to Trump. Page also served as an adviser "on key transactions" for Russia's state-owned energy giant Gazprom before setting up his own energy investment fund, Global Energy Capital, with former Gazprom executive Sergei Yatesenko.What the dossier saysThe dossier claims that Carter Page was used by Manafort as an "intermediary" between the campaign and high-level Kremlin officials.Specifically, the dossier alleges that Page traveled to Moscow in July 2016, where he met with the president of Russia's state oil company Rosneft, Igor Sechin. An associate of Sechin's, the dossier claims, "said that the Rosneft President was so keen to lift personal and corporate Western sanctions imposed on the company, that he offered Page and his associates the brokerage of up to a 19 percent (privatised) stake in Rosneft."The dossier says that Page "expressed interest" in the offer but was "noncommittal." It also says that Page promised that "sanctions on Russia would be lifted" if Trump were elected.What happenedThe timing of the alleged meeting between Page and Sechin aligns with a Page trip to Moscow in July 2016, where he delivered the commencement speech for the New Economic School."Washington and other Western capitals have impeded potential progress through their often hypocritical focus on ideas such as democratization, inequality, corruption and regime change," Page said in the speech, which was heavily critical of NATO, the US, and other Western countries. In this Friday, July 8, 2016, file photo, Carter Page, then adviser to U.S. Republican presidential candidate Donald Trump, speaks at the graduation ceremony for the New Economic School in Moscow, Russia.Associated Press/Pavel GolovkinPage has criticized the US sanctions on Russia as "sanctimonious expressions of moral superiority," and he praised Rosneft CEO Sechin in May 2014 for his "accomplishments" in advancing US-Russia relations.Page was in Moscow for three days in mid-July. It's unclear what he did or who he met with before and after giving the speech, but Yahoo's Michael Isikoff, citing a Western intelligence source, reported in September that Page met with Igor Sechin during his trip.As happened with Paul Manafort, Page's role within the Trump campaign changed after news of his Russia connections became public. Page, who denied meeting with any sanctioned officials while he was in Russia, took "a leave of absence" from the Trump campaign shortly after the Yahoo report. The Trump campaign subsequently distanced itself from Page.Rosneft, meanwhile, ultimately signed a deal that was similar to the one the dossier described: On December 7, the oil company sold 19.5% of shares, worth roughly $11 billion, to the multinational commodity trader Glencore Plc and Qatar's state-owned wealth fund. Page was back in Moscow on December 8, one day after the deal was signed, to "meet with some of the top managers" of Rosneft, he told reporters at the time.Page's extensive business ties to state-owned Russian companies were investigated by a counterintelligence task force set up last year by the CIA, according to several media reports. The investigation, which is reportedly ongoing, has examined whether Russia was funneling money into Trump's presidential campaign — and, if it was, who was serving as the liaison between the Trump team and the Kremlin.Sergei Millian: From touting Trump to downplaying tiesSergei Millian, a Belarus-born businessman who is now a US citizen, founded the Russian-American Chamber of Commerce in 2006. He has described himself as an exclusive broker for Trump's family business, the Trump Organization, with respect to real-estate dealings in Russia.What the dossier saysOne of the dossier's sources, "Source E," told a compatriot in July 2016 that the "conspiracy of cooperation" between Russia and Trump involved hacking prominent Democrats. The hacking campaign "depended on key people in the US Russian émigré community for its success," the dossier states.The Kremlin recruited "hundreds of agents" both in Russia and in the US who were either "consciously cooperating with the FSB or whose personal and professional IT systems had been compromised," the dossier says, citing "a number of Russian figures with a detailed knowledge of national cyber crime.""Many were people who had ethnic and family ties to Russia and/or had been incentivized financially to cooperate," the dossier says. Source E allegedly told his compatriot that agents were compensated by "consular officials in New York, DC, and Miami," who issued "pension disbursements to Russian émigrés living in the US as cover...tens of thousands of dollars were involved."In return for this effort, the dossier says, Putin wanted information from Trump on Russian oligarchs living in the US, Source E said.  The same source is quoted in the dossier as saying the Trump campaign was "relatively relaxed" about the attention on Trump's reported ties to Russia "because it deflected media and the Democrats' attention away from Trump's business dealings in China.""Unlike in Russia, these [dealings] were substantial and involved the payment of large bribes and kickbacks which, were they to become public, would be potentially very damaging to their campaign."What happenedThe CIA established a US counterintelligence task force last spring to investigate whether the Trump campaign received funds from Russia. John Brennan, the former director of the CIA, also received a recording of a conversation last year from one of the Baltic states' intelligence agencies suggesting that money from the Kremlin had gone to the Trump campaign, the BBC reported."Source E," according to recent reports by the Wall Street Journal and ABC, is Sergei Millian.Millian, who attended several black-tie events at Trump's inauguration last month, denies this. Following the now-common Trump White House communications strategy, he told Business Insider that the author of the Wall Street Journal report "is the mastermind behind fake news." More doubt about Millian's connection to the dossier emerged in a Nov. 3, 2021 federal indictment that charged Igor Danchenko, a Russia expert who contributed to the Steele dossier, with lying to investigators about receiving information for the dossier from Millian.Millian described himself as an "exclusive" broker for the Trump Organization's real-estate dealings in Russia in an interview with Russian news agency RIA Novosti last April. "I think partnership is based on friendship, mutual respect and mutual understanding, and business is based on buyer-seller relationships," he said of his work with the Trump Organization.But Millian appears to have begun downplaying his ties to the Trump Organization after Western reporters started digging into Trump's Russia ties last summer. Whereas Millian told RIA that he had been in touch with the Trump Organization as late as April 2016, he said in an email to Business Insider that the last time he worked on a Trump brand project was "in Florida around 2008." He did not respond to a request to clarify the discrepancy.Millian, on his LinkedIn page, says he is the Vice President of the World Chinese Merchants Union Association. He wrote last April that he traveled to Beijing to meet with a Chinese official and the Russian ambassador to the Republic of San Marino. Millian has also worked with Rossotrudnichestvo, a Russian government organization whose "fundamental" goal is to familiarize "young people from different countries" with Russian culture through exchange trips to Moscow. The FBI has investigated whether Rossotrudnichestvo is a front for the Russian government to cultivate "young, up-and-coming Americans as Russian intelligence assets" — a theory Rossotrudnichestvo has strongly denied.In December 2011, Millian wrote to Dmitry Medvedev, then the Russian president, to thank him "on behalf of the fifty American entrepreneurs invited by Rossotrudnichestvo to attend the first edition of the Russian-American Business Forum in Moscow."Last month, however, Millian told Mother Jones he "never got any business with Rossotrudnichestvo." He did not respond to requests from Business Insider to clarify that discrepancy, either.Millian told ABC last July that he is "one of those very few people who have insider knowledge of Kremlin politics who has the ability to understand the Russian mentality and who has been able to successfully integrate in American society.""American citizens voted for President Trump and thus performed God's will," Millian told Business Insider in an email on Thursday. "Your salvation is to pray for good health for the US President Trump and give your best efforts to help him make our country great again."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 16th, 2021

Digital Cancer – Will Facebook Go The Way Of Big Tobacco?

Digital Cancer – Will Facebook Go The Way Of Big Tobacco? Authored by Bill Blain via MorningPorridge.com, “There is something rotten in the state of Denmark…” The market has apparently shrugged off the platform outages and whistleblower testimony on Facebook’s prioritisation of profits over people. Or is Facebook mortally wounded and a regulatory quietus inevitable? Can the social media genie be put back in the bottle? The big story this week should be Facebook. Whistleblower Frances Haugen was in the papers earlier this week saying she didn’t want to kill Facebook, but make it safer… Then she did a pretty brutal hatchet job on the firm in her US Senate testimony – describing a corporate culture that won’t change unless it is forced to. She blamed founder (and Global Business Personality most likely to be an actual Bond Villain), Mark Zuckerberg by name, accusing him of “profits over people”. Her comments about the company increasingly caught in a negative feedback loop of employee dis-satisfaction and client disengagement were fascinating in themselves – and speak of a company we should be worried about – although the main threat is regulatory. But, take a look at the following day’s stock price action and you wouldn’t know there was a problem. The market is ignoring the existential threat to Facebook – shrugging off any doubt. Instead the stock climbed from its low after Monday’s 6 hour unexplained platform outage – which itself is another reason to wonder what the devil is really going on in Menlo Park. But first… a digression on corporate failure: The one thing we can say for certain about being caught up in the death-throes of a corporate is its never anyone else’s fault. Sometimes – very rarely – it’s a single “no-see-um” unpredictable event that causes a company to spiral into oblivion. As hard as I tried, I could only think of one: Barings Bank in the 1990s, brought down by the actions of a single rogue trader. Every single other corporate collapse leaves a trail of forensic clues as to why its end became inevitable. More often than not it’s something fundamentally mistaken or rotten at the failing firm’s core that investors should have noticed, analysed, understood and sold out on. It might be accounting fraud like Enron and Wirecard– the first of which ultimately brought down their accountants Arthur Andersen for failing in their duties, and the second of which has made German regulatory oversight a laughing stock! (Both of which are lessons: don’t trust professionals like bean counters, bureaucrats and especially not rating agencies. Key mantra: you’ve naebody to blame but yourself if you don’t keep doing the diligence.) Or it might be recognising a brilliantly performing investment is actually a Ponzi scheme like Madoff – before it unravels. It may be sniffing out bad actors like Robert Maxwell raiding the pension fund, or Asil Nasir stealing Polly Peck’s company assets. It might be recognising overexpansion and bubbles – like Evergrande. It might be understanding dangerous politics – again Evergrande. It might be spotting the outright lies spouted by the Theranos pair. It might be not being sucked in by bluff and bluster about massive riches just over the horizon – a common factor since the South Sea bubble, encompassing Gold Mines that never hit the motherload, and all the way to dot.coms with no profit potential. It might be that greedy management that cause company values to collapse – like has happened to Boeing, although it hasn’t gone bust yet. Occasionally I get it right… I called the implausibility of WeWork’s profit expectations spot on. I called Tesla wrong – I expected it would fail, swamped by debt. Instead, it’s equity rose so high it was able to refinance itself. Bubbles fuel bubbles. I remain unconvinced on the viability of many disruptive firms to ever achieve meaningful profits, and believe the “adoption” of cryptocurrencies is fuelled entirely by the desperate hopes of get-rich-quick speculators praying someone else will ultimately buy them. (Which is why the con artists behind them keep reminding the greater fools to HODL while they exit…) So…. What about Facebook? There is something rotten in the state of Menlo Park, and I’m trying to work out what it might be…. The charge is it fosters, enables and disseminates false information that causes actual damage and hurt to platform users. The testimony suggests it’s a proven case. I am trying to work out if Facebook’s deathblow might have already been delivered in Washington – or will it continue to dodge regulatory bullets? If its a proven social ill it is doomed. If so, then Facebook’s approaching quietus is going to be very, very different from all the cases I’ve listed above. It will likely be a judicial killing, but you can bet the stock price will have shattered long before the long-drop trapdoor opens. It begs a host of questions, including: can you hang a concept? The concept in question is Facebook’s dominance in the field of being able to sell our digital selves to the highest bidder.. If Facebook isn’t doing it – someone else likely will. At its heart is privacy and who owns our digital selves? I’m not pleased to think Zuckerberg owns mine… This morning I’ve tried to unthink everything I previously thought about Facebook, its revenues, the model and its personalities to work out the essentials of what Facebook has actually become. I started from the basic proposition – no one gives anything valuable away for free. That’s been implicit with Facebook since its inception. In return for free access, they get your valuable data. We perceived the model as 2 headed, the essentially harmless Dr Jekyll and the somewhat evil Mr Hyde: It’s a “harmless” addictive social pastime. Who can resist pretty kitten pictures, checking your messages and seeing what your chums are doing on FB? The money comes from monetising these platforms – they are designed to categorise, profile and sell us. It’s a money making machine that works out what we are, our needs and desires and then sells these to whomever will pay the most for access. Now we are beginning to understand the social harms and distortions from the addiction and the information it feeds us. Now we recognise the unintended consequences of digital access – fake news fed to the most likely believers. The whistleblower revelations expose the platforms for what Facebook has allowed them to become: digital cancer. Simply put, Facebook is guilty of peddling addictive social platforms in the pursuit of profit over the protection of the public. It struck me its broadly similar to the Tobacco Companies. For all the tobacco firms once told us how manly, how medically proven cigarettes were – we now realise they were peddling poison. They have rightly been cracked down upon. The algorithmic addictions Facebook feeds its money making machine are no different from a tar-laden cigarette. It was 1962 when the Royal College of Physicians finally exposed the Tobacco industry lie that cigarettes were good. It then took years for advertising bans to be enforced. “Voluntary agreements” with the tobacco Barrons proved hollow shams. It took 10 years to put health warnings on packets. Lunch cancer deaths continued to rise for decades. 20 years after the news smoking was bad broke, players were still wearing tobacco logos at Wimbledon. Can we now close the door on Facebook, and the explosion in social media has opened to targeted fake news, advertising, digital coercion and other social ills? Can we ever control the way in which conspiracy is marketed and sold across Facebook and its clones? Or lessen the anxieties it creates? I suspect that genie is out the bottle and is not going back in. But, the market will wake up and listen… Facebook now looks a proven social ill – any firm that claims it’s an ESG focused investor should be carefully considering whether Facebook meets their ethical investment parameters. Any firm advertising on Facebook should be taking a long hard look at it… and do it before government does it for them. Tyler Durden Fri, 10/08/2021 - 11:30.....»»

Category: smallbizSource: nytOct 8th, 2021

Market Staring Down The Abyss Of Contraction

Market Staring Down The Abyss Of Contraction Two days ago Nomura's Charlie McElligott laid out the market's pernicious recession/non-recession feedback loop as well as the conditions tracked by traders to gauge if the "all-clear" has arrived, to wit: A flush down to 3300-3400 is the perceived “all-clear” on the valuation case for Equities, with the whole world seemingly bid “out loud” down there for size, which means it either, i) it doesn’t happen and we don’t trade low enough, or conversely, or ii) we do trade down there, but the supposed size demand doesn’t materialize, and we get the puke through 3k. Today, McElligott doubles down with some "gory details" on how the quad diagram shows the economy careening into contraction (more below) starting with European inflation which continues its escalation, perversely increasing the likelihood of an “accident” there against a still-toiling ECB who risks a “catch-up” hiking spasm into a hard recession—and accordingly EUR Credit markets are staring into the abyss, with Xover earlier printing through 600bps for the first time since “peak COVID” stress Well, as we have been saying for months, Charlie notes that the market “gets the joke” on Central Banks being incapable of address “supply side” issues — so they pull the only lever they have on the “demand” side, hence “Recession” gap-risk repricing hard and fast. And this, according to Elligott, is the brutal truth (something we have been saying since 2020): in the absence of being able to print oil and gas, refinery capacity, very large crude carriers (VLCCs), fertilizers, grains, rare earth metals for EVs etc…Central Banks are really left with no choice but to drive economies into recession in order to curtail “demand” -pressure on prices, even though they’re a much smaller attributing factor to inflation. Indeed, with “Demand” the only “lever” they can pull here, since governments (particularly due to their ‘pie-in-the-sky’ aspirational climate goals, but without viable energy transition alternatives in the meantime) and industry (burned in the past from overzealous cash-burning overbuilding and overcapacity, into a future state where western governments are actively seeking to erase them) are unable to come to terms on addressing “supply” side dynamics. So it is a “pick your poison” trade: Stomp inflation from the “demand” side while global economies still show a remaining semblance of “juice,” but cause a recession and loss of employment—because the alternative case of “unanchored” forward inflation is being painted as an even uglier long-term economic outcome. As an aside, Biden "punishing" Putin for unleashing global commodity hyperinflation by sending the US economy into a recession and starting a harrowing bear market and the worst tech crash since Lehman is so... 2022. As for a recession with mass layoffs being uglier than inflation, well... we give Biden's handlers a few more days before they completely change their mind on this once the violent protests break out. This slide into recession is manifesting itself across recent destruction in Cyclicals, Commods and Inflation Breakevens (which have collapsed to 2018 levels), along with resumption of widening in Corp Credit despite the Equities bounce off the cycle lows over the past 2 weeks To this point, Nomura's Economics team “upped the ante” regarding the risk of unanchored inflation and again, increases the risk of Fed tightening induced “accident” (in a note titled "The Fed’s Inflation Expectations Angst Grows" available to pro subscribers). And accordingly, the STIRs market is anticipating this “breakage” due to the final throes of this “tightening into a Contraction” dynamic then leading to a 4Q22 recession and 2023 policy reversal: EDZ2EDZ3 (Dec22-Dec23) now shows 53.5bps of CUTS priced in the US for next year, where even Z2H3 (Dec22-Mar23, aka Q1 2023 ) shows a -5bps inversion as of today... ... and the H3M3 (Mar23-Jun23) inversion goes to -15.5bps; while H3H4 (Mar23-Mar24) extends to -60bps vs -44.5bps Tuesday Looking at markets, equities risk-premia continues to trade this “recession” dynamic as currently expressed by “Momentum,” “Defensive Value,” “Low Risk,” “Quality” and “Dividends” leadership, versus renewed moves lower this week in the prior YTD “losers” of “High Short Interest,” “Leverage,” “Hedge Fund Crowding” and “ISM Manufacturing PMI” (weak balance sheet / high realized vol / unprofitable / low quality / growth sensitive -stuff). This also matches the current economic quadrant trajectory (see above) which shows us “careening into Contraction” from what is an already embedded “Slowdown” phase... ... which then too corresponds with historical precedent for the next Yield Curve phase-shift into a likely “Bull-Flattener.” Meanwhile, as discussed earlier this week, equities also now too feeling that “next shoe to drop” of the long-overdue “negative earnings revisions” transition, which is finally kicking-off with a bang as the Street suddenly spasms into taking down estimates in a number of key sectors / industries. Nonetheless from the Vol side, there remains almost no demand for new “Crash” here (hence VVIX sub-90), as with fund exposures so low, clients are more worried about missing the “right tail” (e.g. some sort of “dovish pivot” scenario from the Fed) than “left tail.” As such, a part of the “extreme flat Skew” dynamic is wingy Calls looking relative to wingy Puts, and that is “skewing Skew” (and Put Skew) to look so incredibly, historically low / flat, despite SPX ATM Vols remaining historically high. Finally and tactically with Equities, McElligott reminds us that today is the roll of the infamous JPM Put/Spread Collar which is "gonna be fun" - per Nomura index trader Jordan Farkas, the new structure should look like them selling 42k 6/30 4285 Puts to buy 42k 9/30 3000-3575-3875 PS Collar. This will sell a massive 16mm Vega and will buy 4.7B of Delta, but they will structure the trade such that its neutral at time of trade and will shift Delta to MOC Tyler Durden Thu, 06/30/2022 - 14:45.....»»

Category: blogSource: zerohedgeJun 30th, 2022

Stocks Rally As China Eases COVID Rules And As Banks Raise Dividends

Stocks rally as China eases COVID rules and as banks raise dividends, Oil rallies, Gold steady, Bitcoin stuck in the mud – OANDA US stocks are rallying after several banks boosted their dividends and China pivoted away from their strict COVID policy. ​ Wall Street seems to be close to figuring out how high central banks […] Stocks rally as China eases COVID rules and as banks raise dividends, Oil rallies, Gold steady, Bitcoin stuck in the mud – OANDA US stocks are rallying after several banks boosted their dividends and China pivoted away from their strict COVID policy. ​ Wall Street seems to be close to figuring out how high central banks may take rates over in the short-term and that is supportive for long-term investors to scale into positions. ​ We will see if the peak of inflation is in place, but for now some traders are comfortable with the idea that the ECB will bring rates to positive territory and as Fed easily has a couple more massive rate hikes on the table. ​ if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Banks A lot of the major US banks celebrated stress test results with a strong boost with their respective dividends. Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) raised their dividends, while JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) kept their dividends unchanged. ​ Given the uncertain economic environment, you can’t blame the decision to refrain from boosting payouts as a severe slowdown with economic activity could lead to the need for additional capital. JPMorgan and Citigroup might need to free up some cash later this year for the new required capital levels, which might make them the least attractive of the banking giants. Oil Crude prices rallied after China reduced the quarantine time for inbound visitors and as Beijing and Shanghai declared zero COVID cases for the first time in months. ​ China is showing they realize they can’t keep their strict COVID controls. Earlier, Chinese authorities triggered some alarm after noting that the zero-COVID policy could be in place for the next five years. ​ The crude demand outlook is getting a major boost after China cut the mandatory isolation time in half to seven days. ​ The easing of China’s quarantine times could support the idea that Beijing might be getting closer to pivoting away from their zero-COVID policy, but that shift probably can’t happen till closer to the end of the year. Earlier oil edged higher over expectations Libya would not be able reliably export crude as protests spread and as risk appetite returned to Wall Street. The supply side of the oil equation should remain supportive for prices even if OPEC+ sees the Saudis deliver a little more crude to help cover the shortfall from Nigeria and Angola. ​ President Biden’s July trip to Saudi Arabia is mostly for political theater and won’t really lead to a meaningful increase beyond the planned OPEC+ boost of 648K b/d of supply in July and August. ​Gold Gold is struggling for direction today as risk appetite returns to Wall Street as global bond yields rise. ​ Fixed income has been under pressure after ECB’s Lagarde affirmed they are poised to raise rates by 25 bps in July while they can kick off their new bond-purchasing operation. The G7 actions against Russia aren’t hard hitting as they won’t see involvement from China. Gold seems like it will struggle until the peak inflation question is answered. If Treasury yields can retest the earlier highs seen this month, gold might be vulnerable to one last test sub-$1800 before the bullish bets return. ​ Crypto One of last week’s crypto saga occurred when physical futures crypto exchange CoinFLEX halted all withdrawals. This week, the crypto exchange announced they will launch a Recovery Value USD token. ​ They are relying on private investors to cover half of the issuance and that if that holds, they appear on their way to survive this liquidity crisis. It will take some time for investors to feel the liquidity concerns are in the rear-view mirror. Bitcoin remains anchored at around the $20,000 level and won’t breakout until Wall Street is confident a broader slowdown is not happening. ​ ​ Article By Edward Moya, OANDA Updated on Jun 28, 2022, 12:21 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 28th, 2022

Is Crude Oil About To Pivot Into Bearish Territory?

What outcome or outlook for crude oil should we expect when looking at the current (macro-)economic environment? Recession Fears Oil prices were up slightly during the European session on Friday as fears of insufficient crude oil supply to meet demand during the summer took precedence over those of a recession amid runaway inflation. Markets fear […] What outcome or outlook for crude oil should we expect when looking at the current (macro-)economic environment? Recession Fears Oil prices were up slightly during the European session on Friday as fears of insufficient crude oil supply to meet demand during the summer took precedence over those of a recession amid runaway inflation. Markets fear that the slowdown in economic activity will lead to lower global demand. In addition, growth in economic activity in the Eurozone slowed sharply in June – notably in the private sector – to its lowest level in 16 months due to inflation, according to the composite PMI index published on Thursday by S&P Global. It must also be said that comments by Federal Reserve Chairman Jerome Powell have fueled fears of a global slowdown since J. Powell has not ruled out the risk of recession in the United States. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Indeed, the head of the US Federal Reserve, who was heard Thursday by the Finance Committee of the House of Representatives, repeated that his priority remained the fight against inflation. “We’re going to want to see evidence that it really is coming down before we declare ‘mission accomplished," said Jerome Powell. Finally, whilst addressing an audience’s question as to whether war was responsible for inflation, Powell answered: “No, inflation was high before – certainly before the war in Ukraine broke out.” Here is an interesting article just published on FXStreet that summarizes some of Powell’s remarks in Congressional testimony. In addition, according to several media, Joe Biden's proposal to temporarily lift the federal tax on gasoline and diesel did not have sufficient support to be adopted in Congress (a mandatory step). Fundamental Analysis In a rare occurrence, plagued by technical issues, the US Energy Information Agency (EIA) has announced that it will not release weekly US oil inventory and oil inventory figures this week. So, let’s look at the figures from the American Petroleum Institute. U.S. API Weekly Crude Oil Stock The weekly commercial crude oil reserves in the United States increased by over 5.607M barrels while the forecasted figure was expected to be in negative territory (-1.433M), according to figures released on Wednesday by the US American Petroleum Institute (API). US crude inventories have increased by over 5.607 million barrels, which firmly confirms slowing demand and could be considered a strong bearish factor for crude oil prices. This figure would indeed signal a drop in Americans' appetite – at least at the current fuel prices – for petroleum products. (Source: Investing.com) WTI Crude Oil (CLQ22) Futures (August contract, daily chart) Brent Crude Oil (BRNQ22) Futures (August contract, daily chart) – Here it is represented by its Contract for Difference (CFD) UKOIL To conclude, is it even worth pointing out that in the event of a recession, the demand for petroleum products would fall, the current astronomical refinery margins would collapse, and therefore, a key bullish factor for crude oil would certainly vanish? Have a nice weekend! Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien Bischeri Oil & Gas Trading Strategist The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Updated on Jun 24, 2022, 12:36 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 24th, 2022

This Still Isn’t A Buyable Bottom For Stocks

There’s Hope In The Market But The Technical Outlook Is Gloomy Equities began the week with a strong bounce and the S&P 500 (NYMARKET:SPY) gained more than 2.6% by midday. As strong as the bounce looks, however, we still don’t think this is the buyable bottom. While there is some indication that a bottom may […] There’s Hope In The Market But The Technical Outlook Is Gloomy Equities began the week with a strong bounce and the S&P 500 (NYMARKET:SPY) gained more than 2.6% by midday. As strong as the bounce looks, however, we still don’t think this is the buyable bottom. While there is some indication that a bottom may form during the Q2 reporting season that season is still a few weeks away and there is great risk in the outlook. The consensus estimates for Q2, Q3, and Q4 earnings have ticked higher over the last two weeks the updraft is tepid and almost 100% due to the energy sector. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more If we’ve said it once, we’ve said a dozen times that higher oil prices in the face of rising demand are driving windfall profits in the energy sector that should be sustained into calendar 2023 at least. The fundamental picture in the energy sector is dwindling capacity and supply and that can only lead to higher prices. The takeaway is the energy sector should do well this year and the better they do the worse it is for every other sector. The S&P 500 Broke Out Of A Downward Sloping Channel We’ve been tracking several technical conditions in the S&P 500 that suggest a downward bias in price action if not a continuation of the downtrend that began earlier this year. The major pattern that is dominating the price action is a Head & Shoulders Reversal that should take the S&P 500 down to the 3480 level and it is still well above there. The most recent pattern we’ve been tracking is a downward sloping channel that demarcates the downtrend that began at the end of 2021/beginning of 2022. That channel should take the price down to our 3,480 price target on its own but the price action broke out of this channel to the downside. In this scenario, we see the S&P 500 decline accelerating, not reversing, and moving quickly down to the 3,480 level if not surpassing it. The risk for the market lies in the Q2 earnings and there is a large amount of risk. There is a chance the season will come in better than expected (which is the most likely scenario based on historical evidence) and that should put a bottom in the market. The question that will need to be answered then is what kind of bottom is it? If the outlook for the second half of the year brightens, even a little, it may be a permanent bottom that leads to higher prices for the S&P 500. If, however, inflation remains a problem, the FOMC stays uber-aggressive, and the outlook for earnings ex-energy sector darkens the downtrend will continue. The Analysts And The Gurus Aren’t Sanguine About The Market A look at the Marketbeat.com daily analysts' coverage is telling. While some companies, particularly in the consumer staples sectors, not to mention the energy companies, are getting upgrades and price target increases the bulk of analyst activity is negative. The takeaway is the analysts still see an upward bias for the market but their sentiment is slipping and that is a weak foundation for the market. There are other influential names giving gloomy forecasts as well. So far, we’ve seen Wharton professor Jeremy Seigel, JPMorgan Chase CEO Jamie Dimon, bond-guru Mohamed El-Erian, and even Jim Cramer give dire forecasts for stocks and the economy. The takeaway here is that fear of a major recession is growing and it’s time to be frugal with cash. As for the minor recession? It’s already here. Article by Thomas Hughes, MarketBeat Updated on Jun 21, 2022, 4:33 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 22nd, 2022

Morgan Stanley"s Mike Wilson says US stocks could crash another 20% as the risks of a recession rise

Wilson, who predicted the current sell-off, said stocks still have further to fall as company earnings come under pressure from inflation. A trader works on the floor of the New York Stock ExchangeAndrew Burton/Getty Images Morgan Stanley's Mike Wilson has said the risks of a recession are rising and stocks could fall another 20% if growth goes into reverse. The chief US equity strategist said that even if the economy avoids recession, stocks still likely have a way still to fall. Wall Street analysts have downgraded their forecasts for the US economy after the Fed hiked rates by 75 basis points last week. Morgan Stanley's chief US equity strategist has said the risks of a recession are rising and that stocks could tumble another 20% if economic growth goes into reverse."At this point, a recession is no longer just a tail risk given the Fed's predicament with inflation," Mike Wilson, who was ahead of much of Wall Street in predicting a sharp drop in stocks, said in a note Tuesday.Wilson said Morgan Stanley's economists now put the chance of a recession over the next year at 35%, up from 20% previously. But he said he personally thinks the chances are a bit higher.The strategist said that although stocks have fallen sharply, they are not yet at levels reflecting a recession.He said the S&P 500 would likely tumble to 3,000 if the US economy started to go backwards — roughly 20% lower than Tuesday's price.But Wilson said he sees more downside for equities even if the US economy manages to avoid a recession.He said the S&P 500, the US benchmark index, is likely to fall by another 7% to 10% — to around 3,400 to 3,500 from roughly 3,770 on Tuesday — as company earnings suffer under the weight of inflation.The index has already tumbled more than 20% from its recent high in early January, as the Federal Reserve hikes interest rates to tame the strongest inflation in 41 years."We recognize a lot of pain has already been inflicted during this bear market. Nevertheless, we can't yet get bullish," Wilson said in the note."We see a pretty poor risk reward over the next 3-6 months with recession risk rising in the face of very stubborn inflation readings."Wall Street analysts have lowered their expectations for US growth following the Fed's 75 basis point interest rate hike last Wednesday, which was the biggest increase since 1994.In recent days, Goldman Sachs said the risk of a recession within the next year has doubled to 30%. Nomura said the US would now enter a long but shallow recession before 2022 is out, and Deutsche Bank said growth would now grind to a halt earlier than it previously expected.Nonetheless, Wilson said many analysts still expect company earnings to be too strong, given issues including high inflation and slowing consumer spending.Read more: After another brutal week for stocks and a big rate hike by the Fed are we closing in on a market bottom? 3 experts weigh in on where all this leaves investorsRead the original article on Business Insider.....»»

Category: smallbizSource: nytJun 21st, 2022

DEFCON 2... Or Cutting Off The Nose To Spite The Face

DEFCON 2... Or Cutting Off The Nose To Spite The Face By Peter Tchir of Academy Securities I had difficulty choosing a title for today. DEFCON 2 made a lot of sense as I’m increasingly worried about the economy and the market – for this summer. On the one hand I’m so perplexed by the messaging that the Fed is prepared to trigger a recession in its fight with inflation that I can’t help but think about cutting off your nose to spite the face. I could almost see Powell starting the press conference with “this is going to hurt me more than it is going to hurt you,” which based on my experience, is rarely true. Inflation - Food To expect monetary policy to reduce food prices seems like a stretch. We all must consume some basic level of food regardless of our income level. Sure, maybe the rich eat more Kraft dinners with fancy ketchup [apologies to the Barenaked Ladies], but food consumption seems relatively inelastic. Maybe lowering the cost of fuel will help reduce the cost of food [shipping, the farmer's use of diesel, etc.], but I'm not sure that will happen quickly enough [or be impactful enough] to help the average consumer in the meantime. Many of those consumers are now facing higher costs of funding - anything from credit cards to ARMs, or any new loan that they are looking at. The supply chain disruption in primarily wheat [and other basic groins due to the Russian invasion of Ukraine] is real and is likely to lost into next year. The longer that lasts, the more stockpiles will be eroded. That is a problem not impacted much one way or the other by interest rates. The shortage of fertilizer [a topic of conversation] will admittedly be helped by reduced energy prices [if the Fed achieves that], but again, I'm not sure this provides much near-term relief, Food, which may or may not be accurately reflected in official inflation measures [when I write may or may not I mean definitely not, but don't want to sound too aggressive] is unlikely to see price declines to the point where the consumer is helped materially. While the official data may or may not be accurate, the consumers know the "real world'' costs and that is affecting their behavior, their sentiment, their outlook, and ultimately their spending, I remain extremely worried about food inflation. Inflation - Energy I'm not sure that even the "after school" specials that used to air on broadcast TV [that always had a morality message] could come up with a plot where the "hero" beats up on the "villain" for most of the show, only to realize that the "villain" has something they need, Then the "hero" reaches out to the "villain" to strike a "mutually" beneficial deal and the "villain," which is so overjoyed to become part of the "good team," immediately acquiesces to that and ignores all the previous messaging, Weirdly, it is a plot too unbelievable for a children's special, but one that "we" (collectively] seem to think will work with Iron, Venezuela, and the Saudis. I won't even touch on the "side plot" of the long-overlooked friend, eagerly waiting for o word of encouragement from the "hero" and ready to step up and deliver, finding itself being treated worse than the "villain" at a time of need. If you missed the Academv Podcast that was "dropped" (I think that's the cool term for it] on Friday, I highly recommend listening to it, General Kearney [ret,] leads the conversation, along with Rachel Washburn, Michael Rodriguez [from an ESG perspective], and me, on nuclear proliferation, the nuclear geopolitical landscape, and also, crucially important, thoughts on the future of nuclear energy, But I've digressed, as those energy issues are really more issues related to D.C. and policy rather than anything controlled by interest rates and Fed policy, But maybe after all I didn't digress that much because I don't see how Fed policy helps reduce energy prices, other than if they are "successful” in derailing the economy. Again, much like food, individuals can only tinker with their need for energy. All of this has a limited impact on overall consumption: keeping the house warmer in the summer, colder in the carpooling a winter, carpooling a bit more, being more organized on errands, convincing the bosses that WFH is good for the environment, etc. Higher energy costs are already causing the demand shrinkage from consumers and I don't see any direct way that higher rates will help reduce gas demand or prices, unless, again, the Fed is "successful" in making the economy worse by a significant margin. On the other side of the coin, higher interest rates seem likely to increase the cost of new production and storage. Any company tying up working capital or expanding production is now experiencing higher interest costs and logic dictates that they will try and pass some of those costs on or not embark on some projects due to the higher cost of funds, So, the rate hikes’ direct impact on energy prices is to probably push them higher as the production and distribution systems face higher costs. Reducing Energy Prices, aka, Hitting the Economy Hard If interest rates are going to reduce energy prices it is going to come from cratering demand for anything and everything that uses energy that can be affected by interest rates! Housing/Real Estate/Construction. I have no idea how much energy goes into building a new home, but I assume a non-trivial amount, The materials that go into constructing a building can be energy intensive [copper piping, etc,], The transportation of these materials to the building site is also expensive, We are already seeing negative data in the housing sector [new home permits are down, expectations for new home sales are declining, the Fannie Mae Home Purchase Sentiment Index is at its lowest level in a decade [except very briefly in March 2020 during the Covid lockdowns], I'm sure I could find more dato pointing to housing slowing, but maybe highlighting that the Bankrate.com 5/1 ARM national average is at 4.1% versus 2.75% at the start of the year, is sufficient, We could look at 30-year mortgages and really shock you, but I think that the 5/1 is as interesting as the rate environment because it demonstrates that there is little relief anywhere along the curve for those needing new mortgages. Autos. Annualized total U.S, auto sales [published by WARD'S automotive] have fallen recently. This measure has been "choppy" to say the least as auto sales have clearly been hit by supply issues. For many makes and models, I'm hearing the wait time is 6 months for a car where you pick the features and it is built to your specifications [which had become the "normal" way of buying cars]. So, maybe, just maybe, the sales here are still being impacted by that, but I’d have to guess that rising auto loan costs are playing a role as well. The Manheim used vehicle value index is still very high, but has stabilized of late. If that stabilization is related to higher loan costs, then it is bad for the auto industry. If it is related to new cars and trucks being more readily available, it isn't a great sign, since that means the new auto sales indications cannot be entirely explained away by supply constraints. My understanding, given the steel and other components, is a lot of energy goes into producing a new automobile. So, I guess it is "good" news that slowing auto sales [and presumably production] will curb energy demand? Consumer Purchases and Delivery, Everywhere you turn there are stories and anecdotes about consumer purchasing slowing down, CONsumer CONfidence [as discussed last weekend] is atrocious! Not only does energy go into the production of the goods that the consumer was purchasing, but with home delivery being such a feature of today's purchasing behavior, energy consumption should go down as delivery services slow down [and as they continue to become more efficient - a process spurred on by higher gas prices]. I’m not sure whether to laugh or cry. Higher interest rates will "help" reduce demand for autos, housing, and general consumer consumption, Apparently, that is good, because it reduces demand for energy and energy inflation [as well as inflation for those products]. I can see that, but I cannot help but think that we need to Be Careful What You Wish For! A Special Place in Hell for Inventories I fear that inventories were a big part of the rise in inflation and would contribute to stabilizing prices [all else being equal] and that recent rate hikes are going to turn a "normal" normalization into something far more dangerous, Manufacturing and Trade Inventories grew from 2014 until COVID at a steady pace, This seemed to correlate nicely with the growing U.S. and global economy. They dropped with supply chain issues, but were back to pre-COVID levels by last summer. Then, from late last summer until the end of April [most recent data point for this series], these inventories grew rapidly! Companies worried about supply chain issues overstocked. This could lead to much lower future orders. Companies shifting to "just in case" from "just in time" need higher inventories, so that part would be stable, but costs of carrying inventory have increased, Maybe companies used straight line extrapolation to accumulate inventory to meet expected consumer demand. That is bad for inventories if the demand isn't materializing! It is extra bad if consumers pulled forward demand in response to their supply chain concerns, meaning that any simplistic estimate of future demand [always problematic, though easy] is even further off the mark as the extrapolation was based on a faulty premise [which is not thinking consumers responded to supply chain issues]. We may have an inventory overhang in the economy. While inventories are significantly higher than pre-COVID levels, the number of people working has still not returned to pre-COVID levels, Yeah, I get that it is far easier to "spend now, pay later" than it used to be through a variety of fintech solutions [ignoring rising interest costs] and that the "wealth effect" and "gambling" culture allows for more spending per job [or maybe it did a few months ago, but not now?] Maybe I'm just a stick in the mud, but... When I look at this chart, I see the correlation between total number of people working and inventory has been completely dislocated! [It also makes me question some of the supply chain issues we allegedly have]. Again, this potential inventory overhang is "amazing" if you want to slow orders and "fix" inflation by having to work off excess inventory rather than adding more. Apologies, if you're tired of reading my snarky comments about things being "good" for inflation fighting. I'm tired of writing them, but cannot think of what else to do. But the Economy is So Resilient? More on this later,,. The "Disruptive Portfolio" Wealth Destruction We have examined the concept of Disruptive Portfolio Construction and continue to think that this is playing a major role in how markets are trading, but increasingly this creates a potential shock to the economy, Let's start with crypto, Bitcoin briefly dropped below $19,000 Saturday morning. I have no idea where it will be by the time you are reading this, but I am targeting $10,000 or less for bitcoin within a month or so. First the "altcoins" [some of which are derisively referred to as "sh*t-coins"] are a complete mess. Solana is down 88% from its November 2021 highs and is roughly back to where it "debuted" in June 2012. Dogecoin, which I think was originally created as a joke, but rose to 70 cents [I think the weekend of Elon Musk's Saturday Night Live appearance] is back to 5 cents, which I guess is still good for something that was originally created as a joke. Ethereum, a "smart contract" that has some use cases very different than bitcoin and was often talked about as a superior product, is down 80% from its November 2021 highs. Under the Bloomberg CRYP page there are 25 things listed as "Crypto Assets". Maybe if I looked at each one I'd find some with a different story, but somehow, I doubt it. Okay, I lied, I couldn't resist, I had never heard of Polkadot, but it looks like it was launched in April 2021 at $40, declined to $11, rallied to $54 in November 2021, and is now down to $7 [at least the name is still cute]. But bitcoin is the story I’m looking at because it is the biggest and the one that seems to have the most direct ties to the broader market. Crypto, to me, is often about adoption. It was why I got bullish a couple of years ago and caught at least part of the wave. Back then, every day some new, easier, better way to own crypto was being announced. Companies and famous billionaires were putting it on their corporate balance sheets. FOMO was everywhere with people racing to put ever higher targets on its future price and those who didn't have anyone to jump on to the bandwagon with were hiring people who could put on an ever-higher price target with a straight face. That ended a while ago and we are in the "disadoption" phase [spellcheck says disadoption isn't a word, but I'm sticking with it]. Or as I wrote the other day, which the FT picked up on, we have moved from FOMO [Fear Of Missing Out] to FOHO [Fear of Holding On]. Even more concerning is a world where HODLING [originally either a mistype of HOLDING that gained traction or short for Holding On for Dear Life] is more prevalent and many people are now unable to exit their positions even if they wanted to. There are some serious "plumbing" issues right now in the crypto space. Maybe the decentralized nature of crypto will work and be extremely resilient [I cannot fully discount that possibility] but maybe, just maybe, there is a reason banks and exchanges have regulators who enforce rules to protect everyone [yes, I can already see the flame mail accusing me of FUD and not understanding how self-regulating is better, etc, but then all I do is spend about 10 minutes looking at some of the shills out there and fall back to thinking "adult supervision" might be wise]. Stablecoins. Stablecoins are what I would call a "thunk" layer in programming language, It is an intermediate layer between two things, in this case, cryptocurrencies and fiat, Terra/LUNA got wiped out, but it was an "algo" based stablecoin which many, in hindsight, say was a flawed design [clearly it was], but that didn't stop it from growing to $20 billion with some big-name investors engaged. Tether is the one garnering a lot of attention now. It is still the largest stablecoin and it did survive on "attack" of sorts after the Terra/LUNA fiasco. The issue with Tether is that it purports to be fully backed by "safe" assets, yet will not produce audited financials. The disarray in stablecoins should at the very least slow adoption. Freezing Accounts. Celsius blocked withdrawals 5 days ago and as of the time I'm typing this, it was still frozen. Babel Finance announced Friday that it would stop withdrawals. I found this one particularly interesting, as in May, according to news reports, it raised $80 million in a Series B financing, valuing it at $2 billion. Maybe needing to suspend withdrawals isn't a big issue, or maybe it is a sign of how rapidly things can change in the space? Right now, I’d be more worried about extracting value from the system rather than adding to the system. Yes, these are isolated cases [so far] and there are some big players in the space which presumably are not at risk of such an event, but having lived through WorldCom and Enron, and then the mortgage fiasco of 2008, I'm heavily skewed to believing that the piping issues will spread and get worse before they get better. Industry Layoffs. In a rapidly evolving industry, one with so much potential, it makes me nervous how quickly we are seeing layoffs announced publicly or finding out about them privately. Maybe I'm cynical, but to me that signals that the insiders aren't seeing adoption increase, which for anything as momentum dependent as crypto has been, seems like a signal for more pain. The big question is how many of the "whales" and big "hodlers" will buy here to stabilize their existing holdings or whether some level of risk management is deemed prudent. You cannot go more than two minutes talking to a true believer without "generational wealth" being mentioned [trust me, I've tried]. At what point does wanting to stay really rich become the goal rather than trying for generational wealth, even if it means converting back ("cringe") to something as miserable as fiat? I expect more wealth destruction in crypto and that will hurt the economy! The wealth itself is gone, curbing spending [I'm already noticing how much I miss the Lambo photos all over social media]. The jobs are now disappearing, curbing spending. The advertising will likely slow down [though not having to watch Matt Damon or LeBron wax on about crypto might be a good thing for our sanity]. But seriously, ad dollars from this lucrative source [I'm assuming it's lucrative given how often ads appear in my social stream, during major sporting events, and even in an arena [or two] could be drying up just as retailers are also struggling. It seems that every week there is a conference somewhere dedicated to crypto [with Miami and Austin seemingly becoming a non-stop crypto conference/party]. This could turn out to hurt many companies and even some cities, Semiconductor purchases could decline. Mining rigs have been a big user of semiconductors, All you have to do is pull up a chart of bitcoin versus some select semi-conductor manufacturers and the correlation is obvious, Energy usage could decline. If mining slows [as a function of lower prices and less activity] then we might see less energy used by the crypto mining industry [the public miners are in some cases down almost 90% from their November 2021 highs, presumably because the industry is less profitable]. Ultimately this could reduce energy prices and semiconductor prices/backlogs, which would generally be good for the broader economy and would help the Fed on their inflation fight, but could hurt some individual firms that rely on this industry. My outlook for crypto is that we have more downside in sight and that will hurt broader markets and might do far more damage to the economy than many of the crypto haters realize. It is fine to dislike crypto, but it is naïve not to realize how much wealth was there helping spending and how impactful a slowdown on this industry could be! Which brings me briefly to "disruptive" stocks. The wealth created by these companies was simply astounding, Whether remaining in the hands of private equity or coming public through IPOs or via a SPAC, there was incredible wealth generated, Investors were rewarded, but so were the founders, sponsors, and employees! There was great wealth created as these innovators and disruptors [along with a mix of more traditional companies] were rewarded. I am extremely concerned about the employee wealth lost. I cannot imagine the personal wealth destruction that has occurred for many, especially mid-level to mildly senior employees. Just enough of a taste of the equity exposure to do well.  Many have restrictions so have not exited and many had options, not all of which were struck at zero, so they may be back to zero, That wealth lost has to translate into lower economic activity, especially as the losses seem more persistent than they might have been a few months ago! But investors have also been hit hard, and possibly harder than most people factor in. I will use ARKK here to illustrate an important point and why a subset of investors is in far more financial difficulty than might be apparent [assuming "traditional" portfolio construction]. ARKK, not accounting for dividends, is back to where it traded in the aftermath of the COVID shutdowns in March 2020. The number of shares outstanding have almost tripled since then. Yes, the number of shares traded daily is large and they frequently change hands, but on average, this shows that some large number of shares were issued as the fund price rallied. Many of those investors [on average] were originally reworded, but now, on average, those shares are somewhere between small losses and serious carnage. ARKK is down to $7.7 billion in AUM as of Friday from a peak of $28 billion in March 2021. The bulk of that change in market cap can be attributed to performance as shares outstanding are still near their peak. I highlight ARKK because I don't feel like talking about individual companies, the portfolio has changed so much, the performance is more generic than company specific, and ETFs are often just the observable "tip of the iceberg" of major trends that are more difficult to observe, but are still happening, TQQQ, the triple leveraged QQQ, exhibits a similar pattern and all the gambling stocks are doing poorly, which I attribute to incredible wealth destruction for a subset of investors, The three groups that I believe were most hurt are: Relatively young people, who took a very aggressive approach to trading/gambling [with relatively small amounts of money] that they can make back via their job earnings over time [or they might now need a job if they were living off of the trading/gambling money]. I don't see a material economic impact from this group, It may even encourage workforce participation, Aggressive disruptive investors. Many people went all-in on some version of a disruptive portfolio [I didn't even bring up those who treated mega-tech stocks as a bank account with dividends and upside], There could be some serious wealth lost here that will affect the economy [and is likely already affecting the economy], Employees, some of whom also adopted disruptive portfolios. As the likelihood of a near-term rebound recedes, there will be wealth preservation as a focus. The number of IPOs and SPACs that are not just below their all-time highs, but below their launch prices, is scary, and that really hurts the employees, or at least those who couldn't sell, didn't sell, or sold, but diversified into a disruptive portfolio. This is all deflationary (which I’m told is a good thing] but I cannot see how this is a good thing for the economy or broader markets! But the Economy is So Resilient? I challenge this. If we have an inventory overhang, the economy may grind to a halt far quicker than many are expecting. If banks start tightening lending practices [clear evidence this is occurring and will likely get worse than better] we will see credit contraction and that will feed into the economy, rapidly. We have NEVER gone from low rates and QE to higher rates and QT successfully [we haven't had many attempts, but I remain convinced that QE is very different than rate cuts and that it affects asset prices quite directly - see Stop Trying to Translate Balance Sheet to BPS. The wealth effect must be bad overall and devastating to some segments. My view is that: Things definitely hit faster than people realized. Often the inflection point has already occurred while many are still applying straight line extrapolation to what they perceive to be the still “existing" trend. "Gumming" up the piping often leads to more problems, rather than a quick solution [and I completely believe the current high levels of volatility in markets and lack of depth in liquidity is a form of gumming up the pipes]. If the problem hits the financial sector it is too late (unless immediate/strong support from central banks is provided). So far, the banking sector is looking good, though Europe is lagging the U.S, in that respect. The ECB came up with half-hearted efforts to reduce Italian bond yields relative to others. The JGB stuck to their yield curve targeting, but markets will soon just expect that to get reversed at their next meeting. Finally, the Fed, unlike in March 2020, will have difficulty reversing course and helping. The good news is so far this isn’t hitting the banking system, but I am watching this sector closely, especially in Europe. Risk happens fast! It's a phrase often said, but often ignored. I'm not ignoring it right now. Commodity Wars? This is a bigger question, and one that is coming up more frequently, but have we entered into a global "war" to secure natural resources? I think that, increasingly, this is the reality we live in and that will be inflationary, just like reshoring, onshoring, securing supply chains, and “transforming“ energy production/ distribution, etc., will all be inflationary longer-term as well, But I've taken up too much space already today and that isn’t a question that needs to be answered to drive my current thinking, Bottom Line I am including what I wrote last week because it largely worked and my views haven't materially changed, I added some color and exactness on the views while definitely shifting from DEFCON 3 to DEFC0N2. I want to own Treasuries here at the wide end of the range, but for the first time, I'm scared that we could break out of this range (big problem]. The 10-year finished almost unchanged on the week, going from 3.16% last Friday to close at 3.23% (it did gap to 3.48% on Tuesday]. The swings in the 2-year were even more "insane" given the level and maturity. So, as recession talk heats up, yields should go down, but I’d spend a bit of option premium protecting against a rapid gap to higher yields. Credit spreads should outperform equities here, though both may be weak, (Verbatim from last week]. Equities could be hit by the double whammy of earnings concerns and multiple reduction. I am told there is a lot of support, but I think that we see new lows this week unless central banks change their tune, which seems incredibly unlikely). I still find it mind boggling that we prefer recession to inflation. Crypto should remain under pressure. I think bitcoin will be sub $20k< before it reaches $35k. Now I think it will be $12,000 before $24,000. Have a great Father's Day and enjoy the Juneteenth long weekend! (Though, I have to admit, I kind of wish markets were open on Monday because this is the trading environment that deep down, I have to admit, I enjoy!] Tyler Durden Tue, 06/21/2022 - 07:20.....»»

Category: dealsSource: nytJun 21st, 2022

"Nasty Squeeze" On Deck: Last Week"s Shorting By Hedge Funds Was "The Second Largest Ever"

"Nasty Squeeze" On Deck: Last Week's Shorting By Hedge Funds Was "The Second Largest Ever" Last week, when we observed that Monday (the day the S&P finally tumbled into a bear market) saw the the fifth largest 'sell program' in history... ... which was promptly surpassed by even more furious selling on Thursday when the TICK hit -2,057, the 4th biggest selling program on record... ... we quoted Goldman's Prime Brokerage according to which hedge funds - the so-called "smart money" at least until Melvin Capital showed everyone just how dumb said money really was - not only sold US stocks for a seventh straight day Monday but the dollar amount of selling over the last two sessions (Friday and Monday) exploded to levels never before seen by Goldman, which is remarkable because the bank's records go back to April 2008 which means they capture the chaos from the Global Financial Crisis. In other words, we just saw a more frenzied liquidation than what took place in the immediate aftermath of Lehman! The data also prompted us to question how much of this was actual normal selling (i.e., closing out existing positions) vs short selling (betting on more downside). We now have the answer: according to Friday's post-mortem note by Goldman trader John Flood (available to ZH professional subs) "in notional terms, this week’s shorting activity on our PB book was the second largest ever on our record (second only to the week ending June 12, 2008)." Here are some more details on recent hedge fund performance from Goldman's Prime Brokerage courtesy of Flood: The Goldman Sachs Equity Fundamental L/S Performance Estimate fell -4.61% between 6/10 and 6/16 (vs MSCI World TR -8.47%), the worst weekly returns since Jan ‘21, driven by beta of -3.99% (from market exposure and market sensitivity combined) and to a lesser extent alpha of -0.62%. L/S Equity HFs now down 19.02% on the year. Fundamental L/S Gross leverage -3.6 pts to 166.1% (3rd percentile one-year) and Net leverage -3.6 pts – the largest week/week decrease since early January – to 46% (lowest since Oct ‘19). But here is the punchline: "In $ terms, this week’s shorting activity was the second largest ever on our record (behind week ending 6/12/08). Single Stocks/Macro Products were both shorted and made up 83%/17% of the $ short sales."  For perspective, 9 of the 10 largest stock shorting weeks in Goldman's record occurred in 2008 (weeks ending 6/12, 5/8, 6/5), 2020 (weeks ending 4/5, 3/5, 3/12), and 2022 YTD (weeks ending 6/16,1/6, 6/9); the week ending 2/25/21 was the other one. And predictably, following such massive shorting episodes, what follows traditionally has been a major squeeze: as Goldman's table below shows, returns following 20% S&P 500 declines have typically been positive And while a squeeze now appears inevitable, the market will need much more than just technicals and positioning to recover, as the following chart shows: the current bear-market selloff has been the most violent and vicious ever! As Flood concludes, "while it certainly feels like we are primed for a nasty squeeze early next week.... I think play book remains to sell the low quality bear mkt squeezes whenever they appear.....and I think we will see more than our fair share of them." His full note is available to professional subs in the usual place. Tyler Durden Sun, 06/19/2022 - 14:00.....»»

Category: blogSource: zerohedgeJun 19th, 2022

Another crypto lending platform is freezing withdrawals as the industry"s downward spiral continues

Babel Finance will temporarily stop allowing users to take out their crypto holdings, the second lending firm to do so this week behind Celsius. A trader works at the New York Stock Exchange NYSE in New York, the United States, on March 9, 2022.Michael Nagle/Xinhua via Getty Crypto lender Babel is freezing withdrawals for users due to "unusual liquidity pressures." It's the second major platform to do so this week as the crypto market faces a massive selloff.  Celsius previously stopped letting customers withdraw their holdings on Sunday.  Another major crypto lending platform has stopped letting people take out their holdings.Babel Finance, which is based in Hong Kong and boasts a customer base of 500, said Friday that withdrawals from its services will be "temporarily suspended" as cryptocurrencies face a brutal and widespread selloff."The crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events," Babel said on its website. "Due to the current situation, Babel Finance is facing unusual liquidity pressures."Babel did not immediately respond to Insider's request for comment.The firm was last valued at $2 billion in May, Reuters reported, and only allows the trading and lending of bitcoin, ethereum, and stablecoins.It's also not the only lending platform to halt withdrawals as liquidity pressures mount amid a worsening market rout. Celsius Network said Sunday that it was doing the same for its 1.7 million customers, citing "extreme market conditions." Celsius users told Insider this week that they're anxious about their holdings currently trapped on the platform. One user said he has $105,000 worth of crypto stuck on the app. Another said she may have lost two years' worth of income.The price of bitcoin, still the largest and most well-known cryptocurrency, has declined 70% from a November 2021 peak. The slump has dragged down the entire market's value below $1 trillion for the first time since February 2021. The rout's also impacted hedge funds like the 10-year-old, crypto-focused Three Arrows Capital, also known as 3AC. The firm has hired "legal and financial advisers," the Wall Street Journal reported, following massive losses sparked by a major investment in stablecoins that later tanked. 3AC is also now faced with $400 million in liquidations, according to The Block. Founders Zhu Su and Kyle Davies, meanwhile, have "ghosted" their business partners as they grapple with concerns over insolvency, Vice reported.Read the original article on Business Insider.....»»

Category: smallbizSource: nytJun 17th, 2022

Elon Musk told employees at the Twitter all-hands meeting that workers who are "exceptional" can sometimes work remotely

Not everyone likes working from home. Elon Musk, potential Twitter owner, said the "bias definitely needs to be strongly toward working in person." Elon Musk attends the 2022 Costume Institute Benefit celebrating In America: An Anthology of Fashion at Metropolitan Museum of Art on May 02, 2022 in New York City.Sean Zanni/Patrick McMullan via Getty Images Elon Musk has taken a strong stance on office work, requiring it from his Tesla employees. Musk might soon own Twitter and had a town hall with employees Thursday. Pushing back on the company's current hybrid structure, he said people should be in the office.  Elon Musk prefers employees in the office, for the most part, he told Twitter employees.At a town hall with Twitter workers on Thursday, Elon Musk — who submitted a bid to buy the social media company for $44 billion but has publicly wavered over the issue of spambots — answered questions about how he would run the business, from layoffs to product management. One major thing: He really prefers in-person work, Insider reported  "You want to aspire to do things in person," he said at the meeting, per a recording an attendee shared with Insider. Leslie Berland, who serves as Twitter's head of people and CMO, said at the town hall 1,500 "tweeps" (aka Twitter employees) are completely remote. The rest, about 6,000, are hybrid, by and large. Musk said he thinks only high-power employees should be able to skip the office, generally speaking."If somebody is exceptional at their job, then it's possible for them to be effective, even working remotely," he said.Musk added that he asked his Tesla leaders to provide a list of people who are "excellent contributors," and then they figure out if remote work would work or not. Still, in the case of approving someone to work from home, Musk would want them to come in to get to know coworkers. "If you're walking down the street and pass your colleague and you don't recognize them, that would not be good," he added. "The bias definitely needs to be strongly toward working in person," he said later, in response to a follow-up question from Berland. Musk acknowledged Twitter is not making the same product as Tesla, his electric vehicle company. But he's been pretty firm with employees there.  Musk reportedly told Tesla executives in late May to come into the office or quit. He later said on Twitter that, "They should pretend to work somewhere else." The Washington Post said it verified the email with a Tesla employee.Insider obtained an email Musk sent to Tesla employees about working in person"Everyone at Tesla is required to spend a minimum of 40 hours in the office per week," the email said. "If you don't show up, we will assume you have resigned." Twitter offered a permanent work-from-home option in 2020, and the potential change under a new owner seemed to alarm employees.A source who was at the meeting told Insider that the company Slack began to "go off" about Musk's stated stance on working from home. Twitter and Elon Musk did not immediately respond to a request for comment. Read all of Insider's takeaways from Elon Musk's town hall with Twitter here. Read the original article on Business Insider.....»»

Category: smallbizSource: nytJun 16th, 2022

JPM Trader: S&P Drops To 3,000 In Worst Case, And Three Other Scenarios

JPM Trader: S&P Drops To 3,000 In Worst Case, And Three Other Scenarios Readers may be excused if they burst out laughing when they hear yet another optimistic forecast from JPMorgan after disasters such as this one from a week ago... ... or Marko Kolanovic urging clients to buy the dip weekly, until most if not all of them are broke, with the S&P now down about 25% from his first BTFD reco. Still, JPMorgan is JPMorgan, the bullish (or is that bullshit) propaganda mouthpiece of bulls everywhere, and even though its own CEO now warns to "brace" for an economic hurricane, his bearish sentiment apparently has not trickled down to the bank's rank and file, who fail to grasp that being blindly bullish in this market is just grounds for perpetual ridicule and mockery. That appears to be changing, however, because we have yet to hear Marko, or as we sometime affectionately call him, mARRKo, deliver his weekly permabullish sermon and as a reminder, the moment he turn bearish is when everyone should buy... This crash won't stop until Marko turns bearish — zerohedge (@zerohedge) May 11, 2022 ... while in his daily market note (available to pro subs in the usual place), JPM trader Andrew Tyler focuses not on the market's upside - but rather on how much it can drop, and - not surprisingly - reaches a conclusion almost identical to BofA's uber bear Michael Hartnett (who is also the most accurate analyst on Wall Street), and Goldman's recession case. Specifically, he writes that by the Fed's own projections, another 175bps in rate hikes is coming this year while the market is pricing in 200bps (75bps in July, 50bps in Sept/Nov, and 25bps in Dec). He than writes that for fundamental investors, the question is valuation and (i) where are FY2023 EPS estimates and (ii) what is the appropriate multiple? To answer, he plots the S&P's PE ratio below, where one can see that market index has spent little time below 15x this century and had a pandemic low ~14.7x. So, hypothetically, Tyler writes, "if you cut consensus FY2023 EPS estimates by 20% ($250 to $200) and apply a 15x multiple you get to 3,000 in SPX." Incidentally, this is nothing new to regular ZH readers, who have known for over a month that "Today's Bear Market Ends In October With The S&P At 3,000" (see here) while we also showed that the Goldman recession scenario is 3,150. JPM's client conversations reveal as much, with prevailing consensus views on the market bottom existing in the 3,200 – 3,400 range. As such, Tyler concludes, "this earnings season becomes critical in understanding this situation and whether investors require a heavier P/E discount given the uncertainty around the Fed." Looking ahead, JPM - which always parrots the consensus view and is terrified of coming up with original, correct views - echoes Goldman (if not Barclays which correctly first called for a 75bps rate hike and now expects 50 in July) and also sees a 75bps hike in July unless the July 13 CPI prints above 9.5% (in which case the Fed will hike 100bps), between 7-8% (go 50bps), or below 7.0% (go 25bps). JPM also notes that "we learned that CPI + Univ. of Michigan (Consumer expectations) were the game changing data." Fed aside, the bank looks back and reminds readers that "the May FOMC saw stocks rally Mon – Weds by 4.0% and then fell 7.3% over the next three sessions." What happens next? Well, besides reminding readers that the pain trade is a swift rally to 4100+, here are the three parting thoughts from the JPM trader, including two market scenarios: BEAR RALLY CONTINUES - I think you see a Tech-led rally with folks covering and then chasing the most downtrodden areas of the market. It would not surprise me to see Energy underperform as part of what fuels this rally is the belief that the Fed has inflation under control, aided by a rally in bonds that could push the 10Y closer to 3.0%. BEAR MARKET CONTINUES – Fedspeak becomes increasingly hawkish to re-anchor longer-term inflation expectations (think 5Y and 10Y breakevens). Yields resume their march higher, Energy outperforms and Tech gets re-shorted. ADDITIONAL THOUGHTS – I have heard of several clients doing a Tech vs. Energy pairs-trade in lieu of factors, which appear to be too broad a tool in this environment. As we go through Q2 earnings, I think we’ll see a bit more dispersion as there are likely defined winners/losers from COVID and elevated inflation. More generally, companies that have a competitive advantage, pricing power, and earnings support are likely to perform the best as we traverse the summer. One final thought from JPM FICC trader Steve Bruner: "I am pretty sure he didn't specifically try to accomplish this, but Powell's presser has driven Madame Market's top of the cycle 4.05% rate (March'23) down 25 bps to hit the 3.80% median Dot bogey; now trading 3.84% (May'23). There is a lot of head scratching in this room with respect to how/why Powell was so intent on telling the market (effectively) don't get used to 75 bps moves, when in reality, only one more was in the price. If anyone has any ideas on what the possible motivation was there, please share them." Tyler Durden Thu, 06/16/2022 - 13:44.....»»

Category: worldSource: nytJun 16th, 2022

What Can We Learn From LUNA’s Collapse?

Lehman Brothers’ collapse was the largest corporate bankruptcy in US history, having accrued $619 billion in debt. So large were Lehmnan’s liabilities that it presaged the Great Recession of 2008 – 2009, making it necessary for the Federal Reserve to step in. On the same level of fallout is Terra’s collapse for the crypto space. […] Lehman Brothers’ collapse was the largest corporate bankruptcy in US history, having accrued $619 billion in debt. So large were Lehmnan’s liabilities that it presaged the Great Recession of 2008 – 2009, making it necessary for the Federal Reserve to step in. On the same level of fallout is Terra’s collapse for the crypto space. On the heels of Ethereum, at a $41 billion market cap in April, Terra (LUNA) was supposed to usher Finance 2.0 by providing a blockchain counterpart to the VISA payment system. Additionally, one of its main dApps, Anchor Protocol, enticed users with up to 19.5% yields on savings accounts. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Unfortunately, Do Kwon’s Terra foundation relied on an algorithmic stablecoin TerraUSD (UST). Without having a real 1:1 cash backing, UST maintained its peg to the dollar by LUNA overcollateralization. When the bearish market devalued LUNA, Terra went into a death spiral, wiping out $44 billion of wealth from May 5th to May 12th. Just as Lehman Brothers’ collapse brought in the Dodd-Frank Act, lessons from Terra’s collapse will be long-lasting. Dead End for Algorithmic Stablecoins How can decentralized finance (DeFi) be truly decentralized by relying on stablecoins run by corporations? For instance, USD Coin (USDC) is run by Circle and Coinbase. Each USDC stablecoin is backed by one dollar, which is regularly audited by an accredited accounting firm. For this reason, if all USDC were suddenly redeemed, nothing would happen. Meaning, there would be no collapse spiral akin to a bank run. In contrast to these classically backed stablecoins, algorithmic stablecoins are supposed to be self-governed and self-contained within the ecosystem. This way, they achieve decentralization by not relying on cash reserves. Instead, their peg to the dollar is collateralized by the network’s native token. In fact, due to inherent volatility of low market cap cryptocurrencies, algorithmic stablecoins need to be overcollateralized. Yet, their history is full of bank run failures: IRON stablecoin was collateralized by TITAN, native DeFi token for Titan Finance lending protocol. Despite being backed by 75% from USDC and 25% from TITAN, rapid withdrawal (bank run) of TITAN deposits caused its price to collapse. In turn, IRON stablecoin collapsed its peg to the dollar as well. Fantom’s fUSD stablecoin that is 500% overcollateralized with the blockchain’s native FTM token. It has yet to reach the 1:1 peg to the dollar despite Andre Cronje’s best efforts. Basis Cash (BAC) was revealed to be Do Kwon’s first algorithmic stablecoin project. Of course, it too is an abandoned failure just like UST is now. Now that the brutal wipeout of Terra’s UST exposed the vulnerability of algorithmic stablecoins, it is likely that investors will avoid such projects. After all, Do Kwon’s new Terra 2.0 has no stablecoin at all. If anything, due to rampant inflation, we may see the rise of commodity-backed stablecoins, such as gold-backed Pax Gold (PAXG), Tether Gold (XAUT), DigixGlobal (DGX) and others. This also means that full decentralization will have to take a back seat in favor of financial security. The End of Suspiciously High Staking Yields Many people don’t realize that stablecoins often yield the highest APY rates on more centralized platforms such as BlockFi. Even with the national average interest rate for savings accounts at 0.07%, this is nothing compared to stablecoin yields. Staking $1,000 in USDC stablecoin generates drastically higher yields than putting dollars in banks.Image credit: DeFiRate.com The question then is, why would a dollar-backed stablecoin like USDC yield so much but the dollar itself so little? The simple reason is - higher demand than supply. While there are trillions of dollars, there are only billions of tokenized dollars. And their stability, especially when it is vetted, is a prized commodity. So far, big market upheavals have slightly destabilized the largest stablecoin by market cap, Tether (USDT) by $0.05 cents. However, USDT swiftly recovered by expanding its reserves. More importantly, both stablecoin and cryptocurrency yields are market-driven. Their falls and downs depend on market performance. This is another thing that Kwon’s algorithmic UST stablecoin short circuited. Up until the crash, Terra’s Anchor Protocol offered up to 19.5% yield rate for staked UST. The rate was set artificially to rapidly expand growth. The rapid growth indeed happened, as Terra went from less than 1% DeFi market share in March 2021, to over 13% up until this May. However, because it was based on anti-market behavior it deflated even more rapidly. Case in point, Anchor Protocol was artificially boosted by the Luna Foundation Guard (LFG) in February by $450 million. That is how Anchor Protocol managed to pay out the high yield, at least initially. It turns out, not only was nothing decentralized, but Terra artificially kept up appearances to widen its pyramid bottom. In the end, wider bearish market winds eroded the bottom despite the boosts. The lesson? If a single protocol offers double the staking yields than anyone else, something is going on, and it's likely not an ingenious cutting edge innovation but a pyramid scheme. Lack of Accountability Just like Ethereum has its own foundation, so did Terra with its Luna Foundation Guard (LFG). However, it appears that the latter used the veneer of decentralization as a mandate to act in the shadows. LFG had 80k Bitcoin (~$3.5b) at its disposal to defend the UST peg, yet there is little clarity on whether the money was used for this purpose. Dr. Tom Robinson of Elliptic research showcased there is no way to positively determine if BTC was sold or used to defend UST against de-pegging. By the same token, Terra validator leaks revealed disturbing behavior on the part of Terraform Labs’ leadership. Terra’s opacity alone goes against the common fiduciary obligation practices. No matter what the ongoing investigation by South Korean authorities reveals, it is clear that DeFi projects need more transparency and scrutiny. Otherwise, the spirit of decentralization will just be abused as a gimmick. Imposed Fiduciary Duty? To protect from bad actors and experiments that are doomed to fail, a balance has to be reached between responsibility and innovation. In the immediate aftermath of Terra’s meltdown, Treasury Secretary Janet Yellen called for additional federal regulation. Of course, the $40B+ wipeout is peanuts compared to trillions in equities alone, but Yellen still sees a need to preemptively set the rules for digital assets. “I wouldn’t characterize it at this scale as a real threat to financial stability, but they’re growing very rapidly, and they present the same kind of risks that we have known for centuries in connection with bank runs.” Most recently, on Tuesday, Sen. Cynthia Lummis (R-WY) and Sen. Kirsten Gillibrand (D-NY) introduced a comprehensive crypto bill dubbed the Responsible Financial Innovation Act. Not only would it classify digital assets as commodities but it would legally define stablecoins as “indebtedness”. Likewise, stablecoins would be issued by a depository institution that would have to maintain high liquidity to back them up, “not less than 100 percent of the face amount of the liabilities”. This will go a long way in securing investor confidence. However, one has to keep in mind that CBDCs - central bank digital currencies - may render the entire stablecoin issue a moot point. Closing Thoughts Without innovation, we wouldn’t even have conversations about alternative money like Bitcoin, or revolutionary smart contracts that render banking services obsolete. However, by pushing the envelope, we should be careful to not lose the core reason for such innovation to begin with - financial liberation. If it leads in the opposite direction, we are on the wrong road. Moreover, the algorithmic stablecoin story is not over. Amid Terra’s demise, NEAR Protocol launched its USN. However, with all the lessons behind us, investors should treat such projects as risky experiments. Want to stay up to date on the world of digital assets? Subscribe to Tokenist’s newsletter, Five Minute Finance. Receive one email, every Friday, with the week’s most important trends in the converging worlds of traditional and digital finance. Updated on Jun 13, 2022, 12:17 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 13th, 2022

S&P 500 slips into a bear market as US stocks plunge on fears of a big rate hike after brutal inflation reading

In a Financial Times poll, nearly 70% of economists said they expect the US to tumble into a recession as the Fed moves to combat inflation. A trader works on the floor of the New York Stock ExchangeAndrew Burton/Getty Images The S&P 500 opened in bear market territory Monday amid a broad sell-off across markets.  Investors are bracing for the potential for a larger rate hike than expected after a tough inflation reading.  Cryptocurrencies cratered, with bitcoin falling under $24,000, 63% below its record high seen last year.  US stocks dropped Monday, with a broad sell-off putting the S&P 500 in bear-market territory — 20% down from its most recent high — as investors anticipate a big rate hike from the Federal Reserve this week after last Friday's grim inflation reading. Stocks sold off with the S&P 500 opening 2.4% lower. The Nasdaq Composite fell nearly 3% and the Dow Jones Industrial Index dropped by more than 600 points. In cryptocurrency markets, major tokens began selling off over the weekend, with bitcoin on Monday piling up additional losses to sink below $24,000. The total crypto market cap is under $1 trillion for the first time since February 2021. Investors are reacting to the May Consumer Price Index reading released on Friday which showed inflation rising at the highest rate in 41 years. The reading has caused a revision upward of many rate hike forecasts, with some observers now expecting an increase of 75 basis points this week. The expectation before Friday's CPI report was for the central bank to hike by 50 basis points. In a Financial Times poll, nearly 70% of economists said they expect the US to tumble into a recession as the Fed moves to combat inflation. Respondents largely expect the downturn to be officially declared in the first half of 2023. Here's where US indexes stood as the market opened 9:30 a.m. on Monday: S&P 500: 3,805.77, down  2.44% Dow Jones Industrial Average: 30,746.98, down 2.06% (645.81 points)Nasdaq Composite: 11,003.08, down 2.97% "Big Short" investor Michael Burry warned that inflation is set to surge even higher, and that more pressure will mount on the housing market. "Transitory, no. Peak, no. To the moon? If you mean a cold dark place,"Burry said in a since-deleted tweet.Wharton professor Jeremy Siegel, for his part, said that even as hot inflation rocks the stock market, the index has probably already priced in a "mild recession," so "we're closer to the lows than the highs."Meanwhile, bitcoin tumbled to an 18-month low as investors flee from riskier assets. It's now about 63% below last year's record high of $69,000. Crypto lender Celsius paused all account withdrawals and transfers amid the crypto sell off Monday. The company said the action was "for the benefit of our entire community in order to stabilize liquidity and operations."MicroStrategy plunged 26% Monday, as the bitcoin meltdown dragged the crypto market cap below $1 trillion. The company, led by crypto-bull Michael Saylor, faces a margin call if bitcoin falls to $21,000. Overseas, the yen dropped to a 24-year low against the dollar as investors bet the Bank of Japan will stick with ultra-low rates. Oil slipped, with West Texas Intermediate down 1.51%% to $118.81 a barrel. Brent crude, the international benchmark, moved down 1.37% to $120.34 a barrel. Gold edged lower 1.47% to 1,847.20 per ounce. The 10-year Treasury yield rose 10.6 basis points to 3.263%.Bitcoin fell 14.39% to $23,553.85.Read the original article on Business Insider.....»»

Category: personnelSource: nytJun 13th, 2022

Tchir: "Getting Very Nervous", Moving From DEFCON 4 To DEFCON 3

Tchir: "Getting Very Nervous", Moving From DEFCON 4 To DEFCON 3 Authored by Peter Tchir via Academy Securities, Why is DEFCON 1 Higher Than DEFCON 5? I came across this line watching the latest season of Ozark this weekend. Somehow it seemed appropriate given Friday’s economic data and the fact that Andy Robinson, Rachel Washburn, General (ret.) Kearney, and I recorded a podcast on Friday focused on nuclear weapons, proliferation, and nuclear power. It was not the most “uplifting” podcast I’ve been a part of (as you will hear next week when it is released), but it is necessary to think about. Friday’s data and price action also didn’t do anything to raise one’s spirits. The one bright spot, for me, was being able to really introduce the concept of “energy transformation” rather than “energy transition.” One of the energy companies Academy works with got me fixated on the difference between energy transformation vs energy transition. The difference seems subtle, but it is actually quite profound. In the meantime, I’m writing this T-Report having chosen to buy the dip on Friday (T-Report link). Since the S&P 500 hit almost 3,900 by 10:25 am and finished there, I haven’t been hurt by that tactical trade. While I think that it is the right trade coming into the Fed, I’m very nervous now about the state of the economy and markets. I highlighted many of those issues in Friday’s note and the more I dig into them, the worse it looks. CONsumer CONfidence I tend to ignore CONsumer CONfidence (I give credit to Bob Janjuah for putting the CON in consumer confidence), but Friday’s number was so brutal that it is impossible to ignore. As Ian Burdette (Academy’s agency trader) pointed out, Friday’s University of Michigan report was the worst report going back to 1990, which encompasses several periods that we now refer to as “crises”. I don’t think anyone has said that we are “currently” in a “crisis” but maybe the data tells a different story?  That trajectory makes even Phil Mickelson’s recent career decisions look good. When digging into the data, I went straight to the breakout by political affiliation. One year ago, Democrats were at 104.2 and Republicans were at 60.3. While that large disparity still exists, the gap has narrowed as Democrats are down to 71.3 and Republicans are at an almost shocking level of 33.5. I do like looking at the “independent” breakout as well, which was 83.5 a year ago and is down to only 46.5 right now! None of that is any good. The Economic Horserace Scenario As discussed on Friday, Soft Landing has fallen off the lead with Recession Next Year looking strong, but from deep in the pack, Summer Recession is making a move! I remember during the financial crisis that we only “found out” we were in a recession AFTER the group that provides such calculations revised their data. It is, sadly, not unchartered territory to be in a recession and not “officially” know it. Every person living during that time knew it, but the data gods were a little behind. I’m increasingly worried that is the case right now. Just look at the rest of the field in the economic horserace. At this point, European Recession looks like a sure bet to place or show. Bigger Problems in Europe (a late entry) also seems to be gaining momentum (I don’t like what is going on in financials, especially in Europe where the iShares MSCI Financial Index ETF is below where it was at the start of 2019). Relative credit spreads aren’t exactly making anyone feel warm and cozy in Europe. Europe is trading wider than the U.S. which has not been the norm of late. Something to watch. The commodity stables have two contenders with High Energy Prices (an early betting favorite and still running well) starting to look nervously at his stablemate, High Food Prices. They chose not to enter Food Crisis because it seemed too early for that horse to have a shot, but I’m sure the owners are reconsidering that decision now. Inflation was scratched because no one wanted to race against it, but I do believe that the theme of high prices will be even more important than inflation in the coming weeks and months because even if inflation were to slow, prices are still too high! Sadly, China Rebound, after a brief recent surge, has given up a lot of ground. Maybe it can shake off this latest setback and change the trajectory of this race. Finally, Peace in Ukraine has pulled up lame and it is beginning to look like that horse will have to try again next year. Job Growth is still running near the top of the pack but seems to be suffering right now. I can’t tell what is wrong with the horse, but it just doesn’t look right from this announcer’s perspective. The race isn’t over, but looking at the horses that are rising versus those that are faltering, it doesn’t bode well for the markets or the economy. The Fed and Financial Conditions All else being equal, financial conditions are reaching levels where the market might start to expect support. “Easy” financial conditions have been the “norm” for most of the past few decades. In the Chicago study, financial conditions were only “tight” (above 0) in the early 1990’s, during the financial crisis, and during Covid. Certainly from 2007 until 2010, the Fed did everything possible to ease financial conditions. Ditto with Covid. While we still are “easy” (-ve on this chart), the market has been doing a lot of tightening and is far ahead of the Fed already (mortgage rates, in particular, scare me because of what that means for the economy). I understand that the Fed has to fight inflation, so we will get QT and will see hikes, but that seems awkward given what has happened to financial conditions. Remember, the Fed continued with QE all last summer, often pointing to aiding liquidity. Based on financial conditions alone (and yes, I’m aware there are other factors, but sometimes I’m stubborn), the Fed should be more worried about liquidity today than they were last summer. Truly caught in the Damned if You Do, Damned if You Don’t cycle. I won’t even bother drawing a chart showing the number of 1% or more intraday moves the stock market has seen in the past few weeks because it would take too long and we are all (sadly) too well aware of it. The Bond Yield “Glass” Ceiling I’m not there (yet) on this subject, but how high could bond yields go? This fear of much higher bond yields that I’m developing has little to do with central bank policies and everything to do with positioning and lack of liquidity. European bond yields are rising rapidly and changing the “we are the only game in town” narrative for Treasuries. What concerns me more than rising bond yields is the underperformance of Italy versus France. Last summer, the yield difference was ~50 bps. Now it is almost 170 bps. That, coupled with the chart showing credit spreads in Europe versus the U.S., is not comforting. However, I don’t like how Treasuries traded on Friday. Immediately after the CPI number, 2-year yields spiked (more rate hikes). The 10-year yield dropped briefly. Presumably, slower economy, so longer yields are protected. But that didn’t last. Over the course of the day yields crept higher and higher and the 10-year closed at 3.16%, its highest closing yield since 2018. DEFCON 3 I was probably sitting at DEFCON 4 and now have to move us to DEFCON 3. I don’t like what I’m seeing out there. Yes, I’m long for a trade (if markets were open right now, I’d probably close that out), but I’m increasingly concerned that there is a lot more downside for the market. I am less worried about inflation than I am about high prices (similar, but not the same). I am more worried about central banks stifling the economy as they fight the last battle (inflation) when they may need to be focusing on the next battle (an economy wedded/addicted to low yields and leverage may not behave “normally” as those things are taken away). I’ve always felt that QT has the most impact on asset prices and shouldn’t be “translated into some number of hikes” (Rube Goldberg on Translating QT to BPS) and we are now in a period of QT. Bottom Line I want to own Treasuries here at the wide end of the range, but for the first time, I’m scared that we could break out of this range (big problem). Credit spreads should outperform equities here, though both may be weak. Equities could be hit by the double whammy of earnings concerns and multiple reduction. Did I mention I’m regretting buying Friday’s dip? Crypto should remain under pressure. I think bitcoin will be sub $20k before it reaches $35k. Tyler Durden Mon, 06/13/2022 - 09:04.....»»

Category: blogSource: zerohedgeJun 13th, 2022

Greenwald Opines On Biden"s "Submissive - And Highly Revealing - Embrace Of Saudi Despots"

Greenwald Opines On Biden's "Submissive - And Highly Revealing - Embrace Of Saudi Despots" Authored by Glenn Greenwald via greenwald.substack.com, In 2018, President Trump issued a statement reaffirming the U.S.'s long-standing relationship with the Saudi royal family on the ground that this partnership serves America's “national interests.” Trump specifically cited the fact that “Saudi Arabia is the largest oil producing nation in the world” and has purchased hundreds of billions of dollars worth of weapons from U.S. arms manufacturers. Trump's statement was issued in the wake of widespread demands in Washington that Trump reduce or even sever ties with the Saudi regime due to the likely role played by its Crown Prince, Mohammed bin Salman, in the brutal murder of Washington Post columnist Jamal Khashoggi. Then-Saudi Foreign Minister Prince Saud al-Faisal (2nd R) welcomes then-US Vice President Joe Biden (C) at the Riyadh airbase on October 27, 2011, upon his arrival in the Saudi capital with a US official delegation to offer condolences to the King Abdullah bin Abdul Aziz following the death of his brother, Crown Prince Sultan. AFP PHOTO/STR (Credit: AFP via Getty Images) What made these Trump-era demands somewhat odd was that the Khashoggi murder was not exactly the first time the Saudi regime violated human rights and committed atrocities of virtually every type. For decades, the arbitrary imprisonment and murder of Saudi dissidents, journalists, and activists have been commonplace, to say nothing of the U.S./UK-supported devastation of Yemen which began during the Obama years. All of that took place as American presidents in the post-World War II order made the deep and close partnership between Washington and the tyrants of Riyadh a staple of U.S. policy in the Middle East. Yet, as was typical for the Trump years, political and media commentators treated Trump's decision to maintain relations with the Saudis as if it were some unprecedented aberration of evil which he alone pioneered — some radical departure of long-standing, bipartisan American values — rather than what it was: namely, the continuation of standard bipartisan U.S. policy for decades. In an indignant editorial following Trump's statement, The New York Times exclaimed that Trump was making the world "more [dangerous] by emboldening despots in Saudi Arabia and elsewhere,” specifically blaming “Mr. Trump’s view that all relationships are transactional, and that moral or human rights considerations must be sacrificed to a primitive understanding of American national interests.” The life-long Eurocrat, former Swedish Prime Minister Carl Bildt, lamented what he described as Trump's worldview: “if you buy US weapons and if you are against Iran - then you can kill and repress as much as you want.” CNN published an analysis by the network's White House reporter Stephen Collinson— under the headline: “Trump's Saudi support highlights brutality of 'America First' doctrine” — which thundered: “Refusing to break with Saudi strongman Mohammed bin Salman over the killing in the Saudi consulate in Istanbul, Trump effectively told global despots that if they side with him, Washington will turn a blind eye to actions that infringe traditional US values." Trump's willingness to do business with the Saudis, argued Collinson, “represented another blow to the international rule of law and global accountability, concepts Trump has shown little desire to enforce in nearly two years in office.” Perhaps the most vocal critic of Trump's ongoing willingness to maintain ties with the Saudi regime were then-Democratic presidential candidates Joe Biden and Kamala Harris. As a recent CNN compilation of those statements demonstrates: “In the years prior to taking office, President Joe Biden, Vice President Kamala Harris, and many of their administration's top officials harshly criticized President Donald Trump's lack of action against Saudi Arabia and Crown Prince Mohammed bin Salman for the 2018 murder of Saudi journalist and Washington Post columnist Jamal Khashoggi.” In a 2019 Democratic primary debate, Biden vowed: “We were going to in fact make them pay the price, and make them in fact the pariah that they are,” adding that there is “very little social redeeming value in the present government in Saudi Arabia.” Harris similarly scolded Trump for his ongoing relationship with the Saudis, complaining on Twitter in October, 2019, that "Trump has yet to hold Saudi officials accountable," adding: "Unacceptable—America must make it clear that violence toward critics and the press won't be tolerated." That Joe Biden was masquerading as some sort of human rights crusader who would sever ties with the despotic regimes that have long been among America's most cherished partners was inherently preposterous. As Obama's Vice President, Biden was central to that administration's foreign policy which was driven by an embrace of the world's most barbaric tyrants. So devoted was Obama to the U.S.'s long-standing partnership with Riyadh that, in 2015, he deeply offended India — the world's largest democracy — by abruptly cutting short his visit to that country in order to fly to Saudi Arabia, along with leaders of both U.S. political parties, to pay homage to Saudi King Salman upon his death. Adding insult to injury, Obama, as The Guardianput it, boarded his plane to Riyadh “just hours after lecturing India on religious tolerance and women’s rights.” The Guardian, Jan. 27, 2015 The unstinting support of the Saudi regime by the Obama/Biden White House was not limited to obsequious gestures such as these. Their devotion to strengthening the despotic Saudi ruling family was far more substantial — and deadly. Obama's administration played a vital role in empowering the Saudi attack on Yemen, which created the world's worst humanitarian crisis: far worse than what has been taking place in Ukraine since the Russian invasion on February 24. In order to assuage the Saudis over his Iran deal, “Obama’s administration has offered Saudi Arabia more than $115 billion in weapons, other military equipment and training, the most of any U.S. administration in the 71-year U.S.-Saudi alliance,” reported Reuters in late 2016, just months before Obama and Biden left office. Beyond the enormous cache of sophisticated weapons Obama/Biden transferred to the Saudis to use against Yemen and anyone else they decided to target, the Snowden archive revealed that Obama ordered significant increases in the amount and type of intelligence technologies and raw intelligence provided by the NSA to the Saudi regime. That intelligence was — and is — used by Saudi autocrats not only to identify Yemeni bombing targets but also to subject its own domestic population to rigid, virtually ubiquitous, surveillance: a regime of monitoring used to brutally suppress any dissent or opposition to the Saudi regime. In sum, no hyperbole is required to observe that the Obama/Biden White House — along with their junior British counterparts — was singularly responsible for the ability of the Saudi regime to survive and to wage this devastating war in Yemen. But that is nothing new. The centerpiece of U.S. policy in the Middle East for decades has been to prop up Saudi despots with weapons and diplomatic protection in exchange for the Saudis serving U.S. interests with their oil supply and ensuring the use of the American dollar as the reserve currency on the oil market. That is what made the hysterical reaction to Trump's reaffirmation of that relationship so nonsensical and deliberately deceitful. Trump was not wildly deviating from U.S. policy by embracing Saudi tyrants but simply continuing long-standing U.S. policy of embracing all sorts of savage despots all over the world whenever doing so advanced U.S. interests. Indeed, what angered the permanent ruling class in Washington was not Trump's policy of embracing the ruling Saudi monarchs, but rather his honesty and candor about why he was doing so. American presidents are not supposed to admit explicitly that they are overlooking the human rights abuses of their allies due to the benefits that relationship provides, even though that amoral, self-interested approach is and for decades has been exactly the foundational ideological premise of the bipartisan U.S. foreign policy class. But this has been the core propagandistic framework employed by the DC ruling class since Trump was inaugurated. They routinely depicted him as an unprecedentedly monstrous figure who has vandalized American values in ways that would have been unthinkable for prior American presidents when, in fact, he was doing nothing more than affirming decades-old policy, albeit with greater candor, without the obfuscating mask used by American presidents to deceive the public about how Washington functions. Reuters, Sept. 7, 2016 Beyond the Saudi example, this same manipulative media scam could be seen most vividly when Trump welcomed the brutal Egyptian dictator Abdel Fattah el-Sisi to the White House. As I reported at the time, the mainstream Washington commentariat depicted Trump's meeting with and praise for the Egyptian strongman as some sort of shocking violation of bedrock American principles. In fact, the U.S. has been by far the largest benefactor of Egyptian tyranny for decades. It armed and supported the Mubarak regime up until the very moment it was overthrown. Obama's Secretary of State, John Kerry, praised the military coup engineered by Gen. Sisi against the country's first democratically elected leader, as an attempt to protect democracy. And shortly before the Arab Spring began, Kerry's predecessor, Hillary Clinton, declared her personal affection for Sisi's predecessor, the monstrous dictator who ruled Egypt for three decades: “I really consider President and Mrs. Mubarak to be friends of my family, so I hope to see him often here in Egypt and in the United States,” Clinton gushed in 2009, while Obama ensured that the flow of money and weapons to Mubarak never ceased. While the bipartisan political and media class has spent decades insisting, and still insists, that the core foreign policy goal of the U.S. is to defend freedom and democracy and fight tyranny around the world, the indisputable reality is the exact opposite: propping up the world's most brutal dictators who serve U.S. interests has been a staple of U.S. foreign policy since at least the end of World War II. The only attribute that differentiated Trump from his predecessors and the rest of the mainstream D.C. ruling class was not his willingness to do business and partner with despots. There are few policies official Washington loves more than that. It was his honesty about admitting that he was doing this and his clarity about the reasons for it: namely, that the real goal of U.S. foreign policy is to generate benefits for the U.S. (or, more accurately, ruling American elites), not to crusade for democracy and human rights. To the extent that one attempted to isolate any other difference between Trump and official Washington, it was that he was often insistent that “American interests” be defined not by "what benefits a small sliver of U.S. arms manufacturers and the U.S. Security State” but rather “what benefits the American people generally” (hence his eagerness, and his ultimate success, to be the first U.S. president in decades to avoid involving the U.S. in new wars). In sum, the U.S. always has been, and continues to be, not just willing but eager to support and embrace foreign dictators whenever doing so serves those interests. They are just as willing and eager to overthrow or otherwise undermine and destabilize democratically elected leaders who are judged to be insufficiently deferential to American decrees. What determines U.S. support or opposition toward a foreign country is not whether they are democratic or despotic, but whether they are deferential. Thus, it was not Trump's embrace of long-standing U.S. partnerships with Saudi and Egyptian despots that represented a radical departure from the American tradition. The radical departure was Biden's pledge during the 2020 presidential campaign to turn the Saudis into "pariahs” and to isolate them as punishment for their atrocities. But few people in Washington were alarmed by Biden's campaign vow because nobody believed that Joe Biden — with his very long history of supporting the world's worst despots — ever intended to follow through on his cynical campaign pledge. It took no prescience or cleverness to see it as nothing more than a manipulative attempt to demonize Trump for what official Washington, and Obama and Biden themselves, have always done with great gusto and glee. This is why it comes as absolutely no surprise, repellent as it may be, that Joe Biden aggressively abandoned this core 2020 campaign foreign policy vow regarding Saudi Arabia the first chance he got. Far from turning them into a "pariah” state as he pledged, Biden has seamlessly continued — and even escalated — the U.S. tradition of propping up and strengthening what is quite plausibly the world's single most despotic and murderous regime. Just one month after Biden's inauguration, the Director of National Intelligence made public a long-secret report that announced: “We assess that Saudi Arabia's Crown Prince Muhammad bin Salman approved an operation in Istanbul, Turkey to capture or kill” Jamal Khashoggi. Yet the White House, while imposing some mild sanctions on some Saudi individuals, adamantly refused to impose punishments on Crown Prince bin Salman himself, dispatching anonymous officials to friendly media outlets to explain that they were unwilling to jeopardize the significant benefits that come from the U.S./Saudi partnership. That was exactly the argument Trump made in 2018 in defense of his identical decision which caused so much faux indignation. One would, needless to say, be very hard-pressed to find similarly vehement condemnations of Biden for vandalizing sacred U.S. principles by refusing to sever or even meaningfully reduce the American partnership with the Saudis due to their murder of Khashoggi. But this was merely the start of Biden's embrace of the Saudi regime. Last November, “the U.S. State Department approved its first major arms sale to the Kingdom of Saudi Arabia under U.S. President Joe Biden with the sale of 280 air-to-air missiles valued at up to $650 million.” Just a few weeks later, the U.S. Senate, reported Politico, “gave a bipartisan vote of confidence to the Biden administration’s proposed weapons sale to Saudi Arabia, blunting criticisms from progressives and some Republicans over the kingdom’s involvement in Yemen’s civil war and its human rights record.” A group of dissenters — led by Sens. Rand Paul (R-KY), Bernie Sanders (I-VT), and Mike Lee (R-UT) — argued that the arms sales would fuel the war in Yemen and embolden the Saudi regime, but they were easily swept aside by a status-quo-protecting bipartisan majority led by the two party's leaders, Sen. Chuck Schumer (D-NY) and Mitch McConnell (R-KY). And it was during that same time — long before the Russian invasion of Ukraine — when Biden had all but abandoned any pretense of weakening ties with the Saudis, let alone turning them into the "pariah” state he promised during the campaign against Trump. “Mr. Biden was already prepared to end the isolation of Prince Mohammed as far back as October when he expected to encounter the Saudi leader at a meeting of the Group of 20 leaders and most likely would have shaken hands,” explainedThe New York Times last week (bin Salman was a no-show at the meeting). And now, it appears that Biden is planning a pilgrimage to Riyadh to visit his Saudi partners in person. Last week, The New York Times reported that Biden “has decided to travel to Riyadh this month to rebuild relations with the oil-rich kingdom at a time when he is seeking to lower gas prices at home and isolate Russia abroad.” During the trip, “the president will meet with” bin Salman himself, who Biden's own DNI said oversaw the murder of Khashoggi. The rationale offered by The New York Times for Biden's planned trip was virtually identical to the arguments Trump used in 2018: “the visit represents the triumph of realpolitik over moral outrage, according to foreign policy experts.” Indeed, the explanation offered by Biden's Secretary of State for the president's ongoing embrace of the Saudis is virtually indistinguishable from the rationale offered by Trump that sparked so many outraged denunciations about the fall of American ideals supposedly caused by his willingness to do business with undemocratic regimes: “Saudi Arabia is a critical partner to us in dealing with extremism in the region, in dealing with the challenges posed by Iran, and also I hope in continuing the process of building relationships between Israel and its neighbors both near and further away through the continuation, the expansion of the Abraham Accords,” Secretary of State Antony J. Blinken said on Wednesday at an event marking the 100th anniversary of Foreign Affairs magazine. He said human rights are still important but “we are addressing the totality of our interests in that relationship.” Despite Biden's clear abandonment from the start of his campaign pledge to distance the U.S from the Saudis, this trip is being justified by the need to plead with the Saudis to make more oil available on the market in order to compensate for U.S.-led sanctions on Russia. As The Times put it: “Russia and Saudi Arabia are close to tied as the world’s second-largest oil producers, meaning that as Biden administration officials sought to cut off one, they concluded they could not afford to be at odds with the other.” After the Times report, Biden officials said the trip had been postponed to July, but did not deny that it was happening. What cogent moral argument can be advanced that it is preferable to buy Saudi oil as a means of avoiding the purchase of Russian oil? Whatever one's views are on the extent of autocracy under Putin's rule in Russia, there is no minimally credible argument that it is worse than the systemic tyranny long imposed by the Saudi ruling family. Indeed, it is virtually impossible to contest that, at least prior to the Russian invasion of Ukraine, civil freedoms were more abundant in Russia than in Saudi Arabia. And while one can certainly contend that Russia's three-month war in Ukraine has been more a moral atrocity, there is no basis — none — for arguing that it is worse on any level than the indiscriminate violence and destruction the Saudis have been unleashing for seven years in Yemen (unless one values the lives of European Ukrainians more than non-European Yemenis). And even if one did insist upon the view that absolutely nothing on the planet is worse than the Russian invasion of Ukraine and that everything must therefore be done to maintain the sanctions regime imposed on Russia, how would that dubious moral claim justify overlooking Saudi atrocities and sending Biden, on his knees, to beg bin Salman for more oil? If suffocating and punishing Russia is the highest moral and strategic priority, why would it not be more prudent and more moral for the U.S. to lift Biden's restrictions on its own domestic drilling as a means of replacing Russian oil, especially if that would avoid the need to further strengthen the Saudi regime? But herein lies the unique truth-providing value of the U.S. partnership with Saudi Arabia. Of course U.S. foreign policy is not devoted to spreading freedom and democracy and fighting despotism and tyranny in the world. How can a country that counts the Saudi monarchs, the Egyptian military junta, the Qatari slave owners, and the Emirati dictators as its closest partners and allies possibly claim with a straight face that it opposes tyranny and fights wars in order to protect democracy? The U.S. does not care, at all, whether a foreign country is ruled by democracy or tyranny. It cares about one question and one question only: whether the government of that country serves or hinders U.S. interests. Donald Trump's sin was admitting this obvious fact. This has been the central deceit shaping the virtually closed propaganda system imposed by the West around the U.S./NATO role in the war in Ukraine. If Western leaders had simply acknowledged from the start the obvious truth about their role — that they regard Russia as a geopolitical adversary and seek to exploit the war in Ukraine to weaken or even break that country — at least an honest debate would have been possible. Instead, they and their corporate media allies did what they always do whenever a new war is newly marketed: they draped it in fabricated moral fairy tales about freedom-fighting and opposition to tyranny. Thus, the popular Western moralistic narrative imposed a series of claims about U.S. motives that should not have even passed the laugh test, yet became virtually obligatory articles of faith. The U.S. is not involved in this war in Ukraine because it sees an opportunity to advance its own interests by sacrificing Ukraine in order to weaken Russia (a truth they began admitting in private: their goal is not to end the war but prolong it). Nor is the U.S. motivated by an opportunity to enrich the weapons manufacture industry which lost its primary weapons market after the U.S. withdrawals from Iraq and Afghanistan and which wields enormous power in Washington. Nor does the U.S. government, with its posture of Endless War, seek to justify the ever-increasing budget and power of the U.S. Security State and the sprawling Pentagon bureaucracy. Perish these thoughts. The massive benefits conferred on those powerful sectors by every new war are always just happy coincidences. Only a deranged conspiracy theorist would believe that profit and power for these factions — whose unrestrained growth was the target of Dwight Eisenhower's grave warnings when leaving office in 1961: long before their power exploded even more due to Vietnam, the ongoing Cold War and especially 9/11 — is ever a factor in shaping U.S. war policy. Good American patriots view the military-industrial complex as just a chronic lottery winner: they just keep hitting the jackpots purely through immense strokes of luck. To sustain popular support for the expenditure of hundreds of billions of dollars in new foreign wars, the population must be fed a morally uplifting framework, a sense of righteous purpose that leads them — at least at the start — to believe these new wars are moral necessities. Thus, rather than self-interest in Ukraine, the U.S. is acting benevolently, with the noblest of motives, with nothing but a desire to help others. The United States, you see, is a country that cares deeply that the peoples of the world remain free, that they enjoy the right of democratic rule and self-determination, and that they should never suffer under the repressive thumb of despotism — and we are so magnanimously devoted to these values that we are even willing to expend our our vast resources to ensure the prosperity of others. Those kinds of grandiose morality tales are always deployed to secure American support for new wars (hence, the war in Vietnam was about defending our South Vietnamese democratic allies from aggression and invasion by North Vietnamese Communists; the war in Afghanistan would liberate oppressed Afghan women from the Taliban; the first war in Iraq, beyond “liberating” Kuwait, was to stop a tyrant who tore babies out of incubators, while the second war in Iraq, beyond WMDs, was about freeing Iraqis from Saddam's tyranny; the wars in Libya and Syria would rid their long-suffering populations from the brutal thumb of Gadaffi and Assad, etc. etc.). It is the great enduring mystery of American and British discourse that the U.S. and UK Governments can still have employees of media corporations genuinely believe that their governments fight wars not to advance their own interests but to defend democracy and fight tyranny — even as these very same media figures watch those very same governments prop up the most repressive tyrannies on the planet and lavish them with weapons, intelligence technologies, and diplomatic protection. Somehow, without the U.S. press batting an eye, Joe Biden can deliver a speech righteously touting his commitment to protect democracy in Ukraine and stop Russian autocracy, and then board a plane the very next minute to go visit Mohammed bin Salman and General Sisi, heralding them as vital American partners, and announce new aid military and intelligence packages to each. Somehow, this severest cognitive dissonance — watching a government insisting with one hand that it fights wars in order to protect democracy and vanquish tyranny and then, with the other, send aid to the world's most repressive tyrants — eludes these savvy journalistic gurus. Perhaps this cheap, repetitive, and transparent propaganda works with the journalistic in-group because the officials inside the U.S. Government who disseminate these fraudulent tales are the friends, colleagues, neighbors and vital sources for the country's wealthiest and most prominent journalists, who therefore see the world the way they see it and want to assume the best about the intentions of their socioeconomic and professional comrades. Perhaps it is due to the great career benefits that are inevitably conferred on journalists who uncritically cheer and help sell the lies behind U.S. war propaganda (the path that led Jeffrey Goldberg from writing full-on Iraq War agitprop for The New Yorker in 2002 to becoming editor-in-chief of The Atlantic today). Perhaps it is because bolstering U.S. war propaganda fosters widespread elite applause, while doubting it fosters attacks on one's patriotism, loyalty, competence and sanity. Perhaps American journalists feel a sense of jingoistic pride and psychological pleasure by believing that their government, unlike most in the world, involves itself in an endless stream of new wars due to magnanimity rather than more craven motives. When it comes to the uniquely gullible and herd-like U.S. and British press corps and their unyielding faith in the noble motives of U.S. war planners, all of those dynamics are likely at play. Notably, this self-evidently manipulative propaganda — U.S. foreign policy is devoted to spreading freedom and fighting despotism — works only in the U.S., the UK and various parts of Western Europe. The rest of the world — especially those regions whose democracies have been on the receiving end of the CIA's violence and destabilization efforts — react to such claims not with gullible credulity but scornful laughter. This is why, as The New York Times reported this week, the Biden administration has been encountering increasing levels of resistance around the world for his Ukraine war policies, because most countries understand that what the Western press refuses to acknowledge: namely, that the U.S's motives in Ukraine — whatever they might be — have nothing to do with safeguarding democracy and fighting despotism. The same dynamic was vividly apparent with Biden's failed attempt to summon Latin American countries to Los Angeles for his so-called “Summit of the Americas.” After the Biden administration announced the exclusion of Cuba, Venezuela and Nicaragua on the ground that those countries are insufficiently democratic, numerous other Latin American nations, led by Mexican President Andrés Manuel López Obrador, announced they were likely to refuse to participate. Mexico ultimately boycotted the event, whereas Brazil attended only after Biden acceded to the demands of its president, Jair Bolsonaro, to hold a one-on-one meeting with him and refrain from criticizing Brazil over environmental policies in the Amazon. Again, nobody outside of the U.S. and British media takes seriously the claim that the U.S. — loyal patron to the Saudis, Emiratis and Egyptians and countless CIA coups in their region — is so offended by authoritarianism in the three excluded Latin American countries that they cannot abide participating in a conference with them. Such a claim is particularly unsustainable in light of reports that Biden officials were all but begging Venezuelan leader Nicolas Maduro to sell oil on the market to compensate for sanctions on Russia in exchange for the lifting of U.S. sanctions on Venezuela (indeed, why is it more moral to buy oil from the Saudis than the Venezuelans)? The reason for the U.S.'s shunning of those countries has nothing to do with America's antipathy to autocracy and everything to do with the political importance of rapidly growing immigrant communities in Florida and other key swing states who fled those Latin American countries due to contempt for those governments. What possible cogent moral argument holds that it is permissible to maintain relations with the Saudis and Egyptians due to geo-strategic benefits around oil and international competition but not countries in the U.S.'s own hemisphere such as Venezuela, Cuba and Nicaragua? If American interests compel the U.S. to “overlook” or even sanction grave human rights abuses in their close Gulf-State-dictatorship-partners, why do the benefits for American citizens from relations with these Latin American countries not compel the same? The undeniable reality is that Kissingerian realism — the question of what is in the self-interest of the United States, or at least what is in the interests of a small sliver of American elites — is and long has been the core, animating, overarching ideology of U.S. foreign policy, as is true of the foreign policy of all great powers. The bit about crusading for human rights and democracy and battling tyranny and despotism is just the propagandistic packaging for domestic media consumption. That is why both presidents Obama and Trump, and every president before them, were willing to embrace many of the world's most repressive regimes: because they perceived that doing so would produce tangible benefits for “American interests,” however that might be defined. It is that same mindset that caused both of those presidents, for instance, to view Ukraine as a vital interest of Russia, but not the United States, and therefore not a country worth risking war with Moscow in order to defend. The core deceit about U.S. foreign policy — that it is designed to spread democracy and vanquish tyranny — serves no purpose other than to manipulate the American public, through the government tool known as the U.S. corporate media, to support whatever new wars, obscene spending packages, or authoritarian powers are demanded in its name. And therein lies the real value of the long-standing U.S./Saudi partnership, the reason that Biden's immediate abandonment of his campaign pledge to scorn the Saudis, is so illuminating. For any rational person, watching Joe Biden continue and even escalate the decades-long love affair between Washington and the murderous despots in Riyadh should dispel these myths once and for all and illuminate the reality, the actual motivational scheme, that drives the role that the United States plays in the world, both generally and in Ukraine. To support the independent journalism we are doing here, please subscribe, obtain a gift subscription for others and/or share the article Tyler Durden Sun, 06/12/2022 - 14:30.....»»

Category: blogSource: zerohedgeJun 12th, 2022