Everything's Fine, There's Absolutely Nothing To See Here
In the darkest corners of our human instincts lies a psychological phenomenon that is the result of millions of years of evolutionary biology.
It’s called “tonic immobility”. And it refers to a form of paralysis that occurs when we’re terrified and facing extreme mental or emotional trauma.
Tonic immobility is common in nature. Animals in the wild will often freeze in place when confronted by a predator; the idea is that making no movement, and doing absolutely nothing, increases their chances of survival because the threat will simply go away.
But as anyone who has ever been on safari or seen a nature documentary knows, the danger seldom goes away on its own.
This instinct to ‘do nothing’ in the presence of danger runs very deep in our instincts; and it’s related to a cognitive quirk within our brains that psychologists call ‘normalcy bias’.
We’ve discussed this before. Normalcy bias is what causes human beings to believe, even in the face of obvious perils, that everything is going to be just fine.
Humans are creatures of habit. We easily fall into routines—waking up, going to work, stopping by the coffee shop on the way, spending time with the family in the evening, etc.
And those routines define ‘normal’ for each and every one of us.
When the routine is disrupted, we often have a difficult time coping—even with little things. If the bakery down the street is out of the croissant flavor that we order every morning on the way to work, we’re irritated by it and don’t want to break routine by trying something new.
And major disruptions to our ‘normal’ are met by severe psychological backlash. Our brains simply refuse to acknowledge it.
This is normalcy bias. It’s one of the reasons why denial is the first stage of grief. We cannot accept the loss of a loved one who has been part of our routine– our brains won’t allow it.
Or occasionally we might find out someone has passed, and our first reaction is, “But I just saw them last week!” Again, our brains have an extremely difficult time grasping the concept that our deeply entrenched ‘normal’ is about to change.
And that’s why, when faced with something obvious that threatens our ‘normal’, it’s common for us to instinctively do nothing. Our brains are hard wired to believe that the danger will resolve itself and everything will go back to ‘normal’.
Many of us felt this way in 2020.
When the pandemic struck, it was terrifying. No one really understood anything about it; the media practically made it out to be a flesh-eating superbug that would vaporize everyone immediately.
And in the face of this threat, it was easy for politicians to convince people to literally do absolutely nothing: stay home, and shelter in place.
The idea was that if we waited long enough—if we froze in fear long enough—then the danger would pass.
And people maintained a belief throughout the year that life would eventually return to normal, no matter how crazy the world became.
When we were locked down in our homes, we believed that life would return to normal.
When mostly peaceful protestors were rioting and raging in the streets, torching private businesses that had absolutely nothing to do with their cause, we believed that life would return to normal.
When angry Marxists political candidates raged that they want to confiscate private property and nationalize entire industries, we believed that life would return to normal.
Today there are literally tanks lining in the streets of Washington DC and attack helicopters roaming the skies. A new US President is set to be inaugurated tomorrow with more than 20,000 troops guarding him.
They have already announced sweeping legislative and policy changes, ranging from substantially higher taxes to Green New nonsense to debilitating business regulations that will likely frustrate an already weakened economy.
There is absolutely zero fiscal or monetary restraint in government; there’s hardly a single policy initiative that doesn’t carry at least a trillion dollar price tag.
No one cares about the national debt—which is set to reach $30 trillion within the next few months, or the fact that the central bank balance sheet will likely pass $10 trillion this year.
Their solution to everything is to squash productivity and print money.
Yet still, countless people believe that life will return to normal. For them, part of their ‘normal’ is that America is safe, stable, and powerful… and always will be.
Their brains simply cannot accept a reality in which the country they love so dearly has changed. And it’s not going back.
This is normalcy bias, and it compels countless people to do absolutely nothing in the face of obvious threats.
When you see a government racking up trillions of dollars a year in wasteful new debt, and a central bank printing trillions of dollars of new money, a rational person would take steps to preserve his/her savings.
When the Treasury Secretary states in black and white that the Social Security trust funds will run out of money in a few years, a rational person would take steps to safeguard his/her retirement.
When the nation has become so fractured in conflict that it takes tanks and 20,000+ troops to hold a ceremony in the capital, a rational person would create a Plan B and have some backup options.
But normalcy bias makes us believe that everything is going to back to normal. So we freeze in place and do nothing.
There are plenty of solutions to mitigate these threats. But the most important thing to do right now is overcome normalcy bias.
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On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years. That's why we published a new, 50-page long Ultimate Guide on Gold & Silver that you can download here.
Independent Panel Blames China, WHO For Acting Too Slowly To Contain COVID-19
An independent panel says China and the World Health Organization (WHO) failed to act quickly to contain COVID-19 at the beginning of the outbreak, according to a Monday report.
The Switzerland-based Independent Panel for Pandemic Preparedness concluded that Beijing should have acted with greater urgency in applying public health measures as the new pneumonia-like illness swept through Wuhan, in Hubei Province.
"What is clear to the panel is that public health measures could have been applied more forcefully by local and national health authorities in China in January (2020)," reads the report (via CNN !?).
Of course, regular readers know it goes far beyond 'not acting quickly enough.'
Beijing silenced whistleblowers, refused to share data, lied about the number of deaths, destroyed virus samples, and altered the database at the Wuhan Institute of Virology to scrub references to animal-human research just two days after said samples were ordered destroyed.
In September, former US ambassador to China, Terry Branstad, accused Xi and China of mishandling the coronavirus outbreak, telling CNN, "What could have been contained in Wuhan ended up becoming a worldwide pandemic."
And not only did the WHO 'fail to act quickly,' as the Swiss panel concluded, they helped China cover up the outbreak - congratulating Xi on his "speedy" response, while repeating CCP propaganda suggesting that there was no human-to-human transmission (despite whistleblowers revealing otherwise).
Back to the Swiss report... China has attempted to defend themselves, with Foreign Ministry Spokeswoman Hua Chunying saying "About this I want to say that we should certainly try to do better. I think any country, including China, the US, the UK, Japan, and any other country, should try to do better, because I think there is always no best, only better, when it comes to public health issues," adding "But I think there is another point that needs attention here," in that Western media is unfairly criticizing Beijing's response (which Bill Gates agrees with).
The independent panel is co-chaired by former New Zealand Prime Minister Helen Clark and former Liberian President Ellen Johnson Sirleaf, who raised alarms over the WHO's delay in sounding the alarm on COVID.
"It is not clear why the committee did not meet until the third week of January, nor is it clear why it was unable to agree on the declaration of a public health emergency of international concern when it was first convened," reads the report.
The report also highlighted that WHO did not declare the outbreak a pandemic until March 11, 2020 after some health experts and media outlets had already begun adopting the term. By that time, there were already 118,000 cases and more than 4,000 deaths worldwide.
"Although the term pandemic is neither used nor defined in the International Health Regulations (2005), its use does serve to focus attention on the gravity of a health event," the report said.
It concluded that WHO "has been underpowered to do the job expected of it." WHO has a "gravely limited" power to validate reports of disease outbreaks for pandemic potential, or to deploy support to local areas, it said. -CNN
It's ironic how the MSM, including CNN, breathlessly repeated CCP and WHO propaganda during the early stages of the pandemic. All it took for them to come around was Trump leaving office.
Clinton & Pelosi Suggest Trump Was Following Putin's Orders To Allow Capitol Siege
In a conversation that sounds like two demented QAnon members, Hillary Clinton and Nancy Pelosi suggested that President Trump instigated the Capitol siege at the behest of Vladimir Putin.
Two-time failed Presidential candidate Hillary wheeled out Pelosi on her “podcast”, and the two soon began to spout their familiar conspiracy theories.
“We learned a lot about our system of government over the last four years with a president who disdains democracy and, as you have said numerous times, has other agendas,” Clinton blathered.
“What they all are, I don’t think we yet know. I hope historically we will find out who he’s beholden to, who pulls his strings,” she continued, adding “I would love to see his phone records to see whether he was talking to Putin the day that the insurgents invaded our Capitol.”
She then said that Trump’s “enablers,” “accomplices,” and “cult members” were behind the rioting.
Is Twitter going to include Russiagate in its new crackdown on conspiracy theories? @Jack?— Paul DellaPelle😀 (@paolodellapelle) January 19, 2021
Clinton asked Pelosi “Do you think we need a 9/11-type commission to investigate and report everything that they can pull together and explain what happened?”
Pelosi responded “I do,” and claimed she told Trump that “With you, Mr. President, all roads lead to Putin.”
“And these people, unbeknownst to them, maybe, are Putin puppets. They were doing Putin’s business when they did that at the incitement of an insurrection by the president of the United States,” Pelosi proclaimed, adding
“So yes, we should have a 9/11 commission, and there is strong support in the Congress to do that.”
So another three year waste of time and money chasing some Putin conspiracy?
Glenn Greewald immediately reacted to this farce:
Remember when Mueller spent 18 months and millions of dollars armed with a team of prosecutors and subpoena power, then closed his investigation after arresting *zero* Americans for conspiring with Russia?
Let's do it again! Anything to distract from how rotted neoliberalism is.
LOL. In that above clip, Hillary Clinton explicitly suggests that Trump was plotting with Putin on the day of the Capitol Riots, as if Putin directed it.
These people are the *last* ones with any moral standing to rant about conspiracy theories & disinformation. 🇷🇺🇷🇺🇷🇺🇷🇺🇷🇺🇷🇺
After the break: we'll discuss with our all-FBI panel whether more censorship power is needed to prevent conspiracy theories and disinformation from spreading.
And then, our all-CIA panel asks: did Putin use a pee-pee tape to control the US, and did he order the Capitol riot??
The unhinged rantings were immediately dubbed ‘BlueAnon’:
Hillary, can you show me on the doll were Trump hurt you?— Dr. Lazy Boondoggle (@T_RoyReborn) January 19, 2021
Odd that Twitter doesn’t suspend both accounts for tweeting dangerous disinformation with the intent to sow discord...— Hynek Dvorak (@DvorakHynek) January 19, 2021
Foreigners Bought A Record Amount Of US Stocks In The Year Ending November, China Restarted Bond-Buying
After foreigners bought a record amount of stocks in the last 12 months into October, the latest Treasury International Capital flow data shows November was a massive month for private inflows overall.
After a record stretch of selling which ended in May 2020, foreign central banks bought US Treasury for 3 consecutive months in Aug, Sept and Oct, the longest stretch of buying since June 2014., but November saw the selling stretch resume, with the biggest selling since April 2020...
After 5 straight months of selling, China bought $9bn of US Treasuries in November...
Japan was a seller for the 4th straight month...
Foreigners bought everything in November... for the first time since Sept 2017
Foreigners bought $9.640BN in TSYs in November, a reversal from their selling of $20.1BN in October.
They doubled down on purchases of Agencies, buying $53.39BN in November after buying $48.9BN in October.
Foreigners bought $867MM in corporate bonds, after selling $21.5BN in October.
Finally, they purchased $61.9BN in equities in November, the 7th consecutive month of purchases (and second biggest month of foreign stock purchases ever)...
But what really stood out, foreigners bought a record $316 billion in US equities in the LTM period ending November 2020:
Finally, we note that while Treasury holdings overall are rising modestly, but have a long way to go to match the de-dollarization trend seen in gold holdings over the past year...
Netflix Soars After Huge Subscriber Beat, Company Projects It Will Soon Be Free Cash Flow Positive
Recent earnings reports from streaming giant Netflix have been a mixed bag: the company missing badly a year and a half ago when US subs declined while forecasting the first annual drop this decade, then smashing expectations a little over a year ago, then beating expectations four quarters ago but disappointing in its guidance, then smashing expectations with a blowout first quarter half a year ago in which it added a record 15.8 million subs thanks to covid, but once again offering a surprisingly muted outlook for a post-covid world, then tumbling two quarters ago when the company reported earnings for its first full "post Corona" quarter and warned that "growth is slowing", before plunging last quarter when the company reported a huge miss in both EPS and new subs, which at 2.2 million was tied for the worst quarter in the past five years, while also reporting a worse than expected outlook for the current quarter, investors were on edge today to find out not whether the company would beat or miss expectations, but rather if Netflix, remains a pandemic-proof company and if the slowdown Reed Hastings warned about is for real and has pulled forward even more subscribers due to covid?
To be sure, despite medicore at best earning, the company has been riding a wave of optimism, its stock soaring in early 2020, putting it in the top 20 for S&P 500 companies, similar to the gains seen by other shutdown beneficiaries Amazon.com and Ebay. Still, after surging to a record high in early July, the stock has traded rangbeound, unable to break out to a new high. And while there’s no doubt that viewership has surged during the Covid-19 lockdowns in the U.S. and much of the world, there are complications: the virus has brought TV and film production to a halt, a situation that may only get more dire for Netflix as the months wear on. But the biggest question remains how many future subs has covid brought to the present?
Indicatively, consensus expects 6.1 million new subs this quarter, higher than the company's own guidance of 6 million, and a big rebound from the mere 2.2 million new subs added in Q3. Revenue is expected to come in at $6.63BN, up from $6.44BN in Q3, and resulting in EPS of $1.39, down from the $1.74 last quarter. This is as streaming video remains on a hot streak since the pandemic struck. Something else to watch: Netflix bears will get added ammunition if 1Q guidance misses consensus for 7.45 million new users.
At the same time, the world’s largest paid streaming service is also facing more intense and cutthroat (or rather cut-price) competition than ever. Comcast’s Peacock platform has been rolling out for a few months, along with the short-form video service Quibi. And AT&T’s big bet on streaming, HBO Max is also up and running now while Disney+ has been a massive hit.
Bloomberg notes that in the all-important Netflix subscriber guessing game, the web traffic research site SimilarWeb suggests the service averaged about 1.5 million new subscribers globally per month in Q4. That’s below the 6 million target the company has given and down from Q4 2019. On the plus side, SimilarWeb notes, subscribers have been rising each month in the quarter and are up sharply from the disappointing Q3.
Meanwhile, as Bloomberg notes, with ViacomCBS announcing today that its new Paramount+ streaming service will launch March 4, it’s worth a closer look at Netflix’s movie strategy. The streaming business was built initially on the appearance of other people’s films, including all those blockbusters Disney used to license them. Paramount+ adds yet another big studio to the list of those with its own streaming service.
So was Q4 the quarter that would finally unleash another repricing higher for Netflix stock, or has the triple top telegraphed pain ahead? Well, the bulls may have finally lucked out, despite a bit of a heart attack initially, because after Bloomberg first reported a miss in EPS sending the stock sharply lower first, it then reported a huge beat in Q4 subs... even if it still predicted a far lower than expected subscriber print for Q1 2021. Here are the details:
This is the data that hit first and sent the stock lower, but it was quickly followed by the catalyst behind the sharp reversal higher in the stock, namely the 2.5MM beat in Q4 paying subs:
Netflix’s average paid subs rose 23% Y/Y in Q4, beating its own projection of adding 6 million subscribers by 2.5 million: “We’re becoming an increasingly global service” with 83% of paid net subscriber additions in 2020 coming from outside the U.S. and Canada", NFLX said.
The number of new subs was good enough to allow investors to quickly ignore the disappointing Q1 outlook of just 6.0 million subs (more below), well under the 7.45MM expected:
And some more details on the outlook:
Some more Q4 stats:
Here is the full breakdown:
By adding 8.5 million subs, Netflix has crossed the 200 million paid memberships mark. For the year, Netflix added a record 37 million paid subscribers, and generated a record $25 billion in annual revenue (up 24% year over year) and increased operating profit 76% to $4.6 billion.
And the full forecast:
But while the company's subscriber outlook was disappointing it was more than offset by a surprising addition to the letter, namely that "combined with our $8.2 billion cash balance and our $750m undrawn credit facility, we believe we no longer have a need to raise external financing for our day-to-day operations."
This is a huge development for a company which until a year ago hadn't had a cash flow positive quarter since 2014 (although it once again begs the question how much of this is based on optimistic assumptions about continued WFH growth).
This is what the company said about its forecast:
For Q1’21, we expect paid net adds of 6.0m vs. last Q1’s 15.8m, which included the impact from the initial COVID-19 lockdowns. Since the start of 2018, our paid memberships have risen from 111m to 204m and our average revenue per membership has grown from $9.88 to $11.02, despite significant F/X headwinds. This approach has allowed us to organically increase revenue by $4-$5 billion annually over the past several years.
We’ve made good progress growing our profitability with FY20 operating margin of 18% rising five percentage points over prior year. For FY21, we’re now targeting a 20% operating margin, up two percentage points from 2020 and higher than our previous 19% forecast, due to a more favorable revenue outlook. As we said last quarter, we intend to continue to grow our operating margin each year at an average rate of three percentage points per year over any few-year period, but we anticipate some lumpiness. Some years we’ll be a little over (like in 2020), some years a little under (like in 2021), but we are trying to keep on an average three percentage points per year long-term trajectory.
The cash flow positive forecast came at a good time: just as the company announced that net cash generated by operating activities in Q4 was -$138 million vs. -$1.5 billion in the prior year period, while free cash flow (FCF) for the quarter dropped to -$284 million vs. -$1.7 billion in Q4‘19, but sharply below the $1.145 billion positive FCF in Q3, bringing full year 2020 free cash flow to +$1.9 billion vs. -$3.3 billion in 2019.
But, more critically, NFLX believes it is "very close to being sustainably FCF positive" and For the full year 2021, NFLX anticipates free cash flow will be around break even (vs. the prior expectation for -$1 billion to break even). That, as Bloomberg writes, "ought to put an end to bears’ concerns about endless cash burn, especially after $3.3 billion in 2019 free-cash-flow losses."
There was more: the company said that as it generates excess cash, it intends to maintain $10B-15B in gross debt and will explore returning cash to shareholders through ongoing stock buybacks, as we did in the past (2007-2011). It was unclear if it would also buy some bitcoin...
Content wise, there were few surprises, at least for those who watch NFLX:
In scripted English language television, season four of the critically acclaimed The Crown was the biggest season so far and drove new watchers of prior seasons. In its first 28 days, more member households chose to watch season four of The Crown than each of the prior seasons, helping to grow the number of member households that have chosen to watch this series to over 100m since its initial launch. In late December, we released our first original series from Shonda Rhimes, Bridgerton. This title has proven immensely popular and we’ll have some exciting news about Bridgerton later this week.
Our largest original film of the quarter was The Midnight Sky, starring and directed by George Clooney; we estimate 72m member households will choose to watch this title in its first four weeks. In its first 28 days, 43m member households chose to watch our animated feature film Over the Moon (directed by legendary creator Glen Keane) with high levels of rewatching. We Can Be Heroes (directed by Robert Rodriguez) was another successful family film with a projected 53m member households choosing this title in its first four weeks.
Of course, it's not all smooth sailing as Netflix will soon start to face extremely tough comps of its blockbuster 2020, coupled with cutthroat and price-cutting competition. This is what NFLX said about the competition, and how it dismissed this ever greater threat:
It’s a great time to be a consumer of entertainment. There are a wealth of options ranging from linear TV to video gaming to user generated content on YouTube and TikTok. We continue to work hard to grow our small share of screen time against these major competitors.
Discovery recently launched its streaming service. Disney+ is expanding in new countries and with more content. ViacomCBS will be unveiling its plans for Paramount+ in 2021. Combined with the launch of AppleTV+, WarnerMedia’s HBO Max, and NBCUniversal’s Peacock streaming services, this signifies that these companies all recognize the future is streaming entertainment, a vision we have been working towards since inception.
Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment. This past year is a testament to this approach. Disney+ had a massive first year (87 million paid subscribers!) and we recorded the biggest year of paid membership growth in our history
NFLX company took a victory lap for Queen's Gambit:
Not only did 62m member households choose to watch The Queen’s Gambit in its first 28 days (making this show our biggest limited series in Netflix history), but it ignited sales of chess sets and inspired the next generation of chess prodigies
Netflix also said that its series accounted for nine out of the 10 most searched shows globally in 2020, while its films represented two of the top 10.
Netflix also tried to assuage investor concerns that the pandemic will slow its productions. From the investor letter:
“Our productions are back up and running in most regions - we have learned that flexibility and adaptability are paramount in this fast-changing environment. With over 500 titles currently in post production or preparing to launch on our service and plans to release at least one new original film every week in 2021 with extraordinary talent, we’re confident we’ll continue to have a great content offering for our members.”
The result: between the strong subscriber beat and the company's forecast that it will soon be cash flow positive going forward, NFLX stock has exploded higher, and at last check was about 10% higher trading just above $550.
Everyone On Wall Street Thinks Everyone Else On Wall Street Is Long Bitcoin... But Almost None Are
Once upon a time the Bank of America Fund Manager Survey served a useful indicator of what finance professionals did and thought. Then, over the years, it became a survey which revealed what the prevailing consensus narrative was - if not what respondents actually did - as survey participants merely answered question in line with what they thought was the right answer. Unfortunately, since then it has devolved further to the point where it is mostly noise with very little signal.
Take the latest Fund Manager Survey (FMS) released today by BofA's Michael Hartnett, which took place between Jan 8 and 14, and polled 194 participants with $561bn AUM. While we will have a more indepth take on the findings of the latest FMS, one thing stuck out: the question what is "the most crowded trade" where there was a material change.
After 8 months when the dominant answer to this question was "Long Tech", for the first time in three years the prevailing response was "Long Bitcoin"...
... with 36% of responses while Long Tech dropped to second spot with 31% (short USD was 3rd with 23%).
Why was this response odd? Well, a few reasons: while Wall Street is not limited in its exposure to virtually any other asset class, when it comes to bitcoin virtually no firms are permitted to own bitcoin outright for regulatory reasons, and while few specialized firms are long bitcoin futures - which remain highly illiquid - the GBTC, or Grayscale Bitcoin Trust (not an ETF but rather an open-ended grantor trust) is widely viewed and used as the only vehicle to express a bullish (or bearish) position in bitcoin since the SEC has yet to greenlight a bitcoin ETF.
Well, here's the issue: with bitcoin trading at roughly $37,500, having a market cap just shy of $700 billion, the market cap of GBTC is a tiny $26 billion, or less than 4% of the value of the underlying. In other words,
Putting GBTC in context with Bitcoin's market cap:
What about futures? Well, according to the latest (record) open interest there is a whopping.... $2.3BN in bitcoin futs open interest.
In other words, bitcoin may be the "most crowded trade" in the imaginations of Wall Street professionals - perhaps due to its tremendous ascent, largely driven by whale and retail participation - but it certainly is not the most crowded street on Wall Street, where simply as a result of the limited array of assets available to Wall Street to go long (or short) bitcoin, the true level of exposure is a tiny fraction compared to other far more crowded positions.
Perhaps this is just Wall Street projecting, jealous of 16-year-old Robinhooders (who have recently purchased lambos) who truly are long cryptos, even as most professionals refuse to chase the cryptocurrency ever higher while piling into such bubble names as Tesla.
Meanwhile, just because tech has gone nowhere in the past month does not mean it is any less crowded. In fact, one can argue that tech still is the most crowded trade on Wall Street - it certainly is if only looks at 13F filings and current hedge fund and bank holdings - and as more traders get exasperated by the lack of a breakout in tech, what we will likely see is even more upside in bitcoin as more do in fact crowd into bitcoin.
As a final point, inasmuch as there may be some signal value to the BofA survey, the last time traders - again erroneously - viewed bitcoin as the most crowded trade, was back in December 2017. The cryptocurrency crashed the next month. The only difference this time is that whereas back then the surge in crypto was entirely on the back of retail and Asian hot money, this time we do have some - a decidedly small number - institutions starting to pile into crypto, which is why we are confident that this time around, the BofA survey will not mark the top, just as it didn't when it called out long tech as the most crowded trade back in May 2020 - tech proceeded to soar for another 8 months after...
Watch: In Farewell Address, Trump Wishes Biden Success In "Keeping America Prosperous And Safe"
After 4 years in office (during which no new foreign entanglements were initiated) President Trump is releasing his farewell remarks on Tuesday, as he prepares to hand power over to Joe Biden.
Trump has opted not to participate in the inauguration ceremony, and instead of the usual pageantry, Joe Biden is reportedly planning to deliver an address roughly 20-30 minutes in length, focusing on the theme of unity.
As for President Trump, his team has leaked a short excerpt from his planned remarks to the press. He's expected to point out that he's the first president in "decades" who didn't start any new wars, while also proclaiming that the "America First" movement he started is only just beginning.
But as Bloomberg's report pointed out in the headline, Trump is also expected to say he is praying for Biden's success, what BBG described as "a rare gesture of goodwill" toward his successor.
"This week, we inaugurate a new administration and pray for its success in keeping America safe and prosperous," Trump will say, according to excerpts released by the White House.
He's also expected to denounce the outbreak of violence at the Capitol earlier this month, which has been used to justify a massive pre-inauguration quasi-lockdown in Washington DC.
“All Americans were horrified by the assault on our Capitol,” he will say, according to the excerpts. “Political violence is an attack on everything we cherish as Americans. It can never be tolerated.”
The prepared remarks were leaked first on twitter by reporters for Bloomberg and the Washington Post, among other MSM news outlets.
Biden's inauguration speech will last 20 to 30 minutes. Theme is “unity,” his aides say.— Jennifer Jacobs (@JenniferJJacobs) January 19, 2021
Trump in his farewell speech will say: “I am especially proud to be the first president in decades who has started no new wars.— Jennifer Jacobs (@JenniferJJacobs) January 19, 2021
“All Americans were horrified by the assault on our Capitol. Political violence is an attack on everything we cherish.”
These scripted words are what some advisers had been urging an irritable Trump to say all along: a new president is coming in Jan. 20 but the Trump movement isn’t over.— Jennifer Jacobs (@JenniferJJacobs) January 19, 2021
Excerpt from Trump's farewell speech, as released by the White House:— Seung Min Kim (@seungminkim) January 19, 2021
"Now, as I prepare to hand power over to a new administration at Noon on Wednesday, I want you to know that the movement we started is only just beginning."
A more comprehensive list of the main points Trump will hit in his pre-recorded video (which was reportedly recorded on Monday) can be found below.
First Lady Melania Trump released a farewell video of her own earlier.
A Farewell Message from First Lady Melania Trump pic.twitter.com/WfG1zg2mt4— Melania Trump (@FLOTUS) January 18, 2021
Watch the pre-recorded video (which CNN reported was recorded with a small team last night):
Reports are claiming VP Pence has joined the growing list of turncoat Republicans who won't be attending Trump's farewell shindig at Joint Base Andrews.
Yellen's "Go Big" Narrative Sparks Big-Tech, Bond, Bullion, & Bitcoin Gains
As President Trump "goes gentle into the night" (or not), we note that since his election in Nov 2016, The Dow is up 74%, the dollar is down 6%, gold has gained over 40% in USD terms and bonds are up almost 16%...
However, all those gains pale in comparison to Cryptos' explosion as Bitcoin has gained over 5100% since Trump was elected...
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But today was all about Janet, damn it... as Treasury Secretary nominee Yellen told Congressional lawmakers during her nomination hearings to "go big" on COVID relief, hinted at no major tax hikes in short-term, and raised idea of infrastructure spending too...
What could go wrong? We have all that protection, those institutional back stops, right?
Tech stocks outperformed, the Dow lagged (but all majors were green from Friday's close)...NOTE that stocks took off after Europe closed and as Yellen's speech got beyond her prepared remarks...
Bonds were also bid today after selling off overnight...
The Dollar pushed lower erasing some brief gains yesterday...
And cryptos gained, led by a breakout by Ethereum to a new record high...
“Retail investors are also starting to ramp up crypto investment” helping altcoins including Ether to start to outperform, said Seamus Donoghue, vice-president of sales and business development at METACO.
And as the dollar dropped, commodities were mostly higher with Silver best since Friday...
Finally, some good news... with miraculous timing as Biden takes office, cases and hospitalizations are tumbling...
And, just remember, it's not a bubble...
Source: Google Trends
General Motors "Blue Sky" Scenario Could Send Stock To $160: B of A
This morning we noted that GM had risen to all time highs on the back of an autonomous driving investment from Microsoft and comments from incoming Treasury Secretary Janet Yellen about the importance of EVs for the country under a Biden administration.
Now, Bank of America - like the rest of the market - appears to be waking up to the idea that a "new autonomous General Motors" (as they refer to it) still could have plenty of runway ahead of it.
B of A says that the tie up with Microsoft "provides important cloud/computing value" to GM, especially for ride-hailing and fleet services:
Perhaps more important than the equity investment and increased valuation for Cruise (versus last mark of $19bn in 2019), the announcement with Microsoft this morning marks another important strategic partnership for Cruise (and GM), not dissimilar to the one that was established with Honda in 2018. As a reminder, Honda’s value-add to Cruise/GM was shared investment and core competencies (small car programs and form factors) to develop a purpose-built autonomous vehicle to be deployed in a mobility services model, as well as theoretical access to the Japan market for deployment.
As noted above, Microsoft’s value-add to the partnership will be its Azure cloud computing platform, which will help manage the extensive amount of data required for robust autonomous capabilities of the vehicles in fleet, not to mention mapping/point location, vehicle communication with Cruise’s back office (as well as infrastructure, vehicles, etc.), and the customer-facing app for ride-hailing services, among other potential collaborations.
The note continues: "Moreover, Microsoft’s cloud computing platform to enable Cruise to commercialize its autonomous vehicles and mobility services business puts the partnership at least in the league of the likes of Waymo/Google and Zoom/Amazon."
It also says that Cruise - GM's self-driving business that is now also co-owned by Microsoft, Honda, Softbank and other institutional investors - could be worth "a lot more than $20/share":
In our updated theoretical sum-of-the-parts analysis for GM and its AMOD efforts, we used Lyft and Uber’s current valuations, at the low-end and high-end respectively, and divided by half for conservatism, which indicated a value for Cruise of $8bn to $53bn+. The $30bn mark, or a little over $20/share (again up from $19bn in 2019) for this (still) early stage venture could increase materially as the technology is commercialized and deployed through 2021+.
"With this in mind, we reiterate our SOTP framework, which suggests significant upside potential for GM (page 2) from our current PO of $72," the note says.
The note continues, reminding the reader there could be "significant upside" from the bank's already optimistic price target of $72. The bank laid out its analysis in a sum of the parts framework that sees GM's core value between $59 and $85 per share and its "potential future business" values ranging from $24 to $185.
Combined, the bank sets three scenarios for GM's implied combined equity value per share, ranging from $83 to $270. It notes its $160 "average" scenario at the top of its analysis.
Recall, we reported this morning that Microsoft is part of a group of companies that will invest more than $2 billion in Cruise, which is majority owned by GM. The stakes in Cruise raise its valuation to $30 billion, up from $19 billion in Spring 2019.
GM is also adding to its Cruise investment as part of the funding round and is going to maintain its majority stake. Among other companies investing is Honda, who is already a stakeholder, and "other institutional investors". Cruise had previously pulled in $7 billion during 2018 and 2019 from investors that included Softbank.
The terms of the deal state that Cruise will use Microsoft's Azure cloud service to help it roll out autonomous vehicle services. Cruise has been testing vehicles in San Francisco and plans on rolling out a robot-taxi service eventually. Meanwhile, Tesla's promise of "a million robo-taxis" on the road seems to be a distance memory.
GM also noted that Microsoft is going to be its preferred cloud provided and will help streamline the company's supply chains. Cruise has signaled that it is getting "closer to commercializing its technology" at the same time investor appetite in EVs and self-driving seems to have reached mass adoption.
This marks the first major investment round in Cruise in more than 18 months.
Some investors were already speculating (in jest) last week that GM could re-price according to its new self-driving and EV aspirations. Now, it looks as though the market may agree.
Fun fact: If the market priced the new "flying EV" $GM 2.0 at the same 29x EV to sales it prices $TSLA at (total, unadulterated insanity) it would be $1233 per share. Imagine if like, 10% of the EV hype crowd drifts over to GM...— Quoth the Raven (@QTRResearch) January 14, 2021
Now That Universal Basic Income Checks Have Started, The American People Will Go Mad If They Don't Continue
We crossed a line that should have never been crossed when we sent “stimulus payments” directly to the American people during the very early stages of the COVID pandemic. Even many Republicans that supported the measure acknowledged that what they were doing was pure socialism, but they defended the payments by insisting that we were in the middle of a major national emergency. At the time, I warned that once the government started issuing such checks, the American people would always keep demanding more. When it was announced that the latest round of “stimulus payments” would only be $600 per person, angry activists vandalized Nancy Pelosi’s house. Of course they got Mitch McConnell’s house too. In both cases, the vandals made it exceedingly clear that they wanted more government money.
Sadly, it wasn’t just a handful of activists that went ballistic. Literally millions of enraged Americans posted angry messages on social media that expressed how “insulting” the $600 figure was.
But prior to this pandemic, the U.S. government had never sent out “universal basic income” checks in the entire history of our country.
So you would think that most people should be grateful for an extra $600, but instead there was a tremendous amount of rage.
President Trump wanted the payments raised to $2000 and many Democrats did as well. But Republicans still had control of the Senate, and Mitch McConnell initially blocked that effort.
But now Democrats will shortly have control of the White House, the Senate and the House of Representatives, and one of the first things they plan to do is to deliver $2,000 checks to the American people…
Even while $600 stimulus checks are being deposited in tens of millions of bank accounts, congressional Democrats are laying the groundwork for even greater stimulus payments, which some call “survival checks.” As Senate democratic leader Chuck Schumer (D-NY) recently said, “One of the first things that I want to do when our new senators are seated is deliver the $2,000 checks to the American families.” With Democrats preparing to take power in Washington, a critical question will be whether such survival checks will be one-time payments or recur each month “for the duration of the pandemic,” as Senator Ed Markey (D-MA) and others have suggested.
That may pacify the socialist mobs for a month or two, but eventually they will be back for even more payments.
As the voices get angrier and angrier, do you think that anyone in Washington will be willing to stand up and say no?
The incoming Vice-President, Kamala Harris, previously proposed giving out monthly $2,000 checks for the duration of this pandemic…
Recurring monthly $2,000 checks would mirror the payments proposed in the “Monthly Economic Crisis Support Act” that Vice President-elect Kamala Harris (D-CA) introduced in the Senate in May 2020.
If you are married with three kids, you would have gotten $10,000 every month under her plan.
Considering where we are as a society today, I think that most Americans would have been very eager to sign up for that.
Of course the price tag for such a plan would be nightmarish. It would have been approximately $600 billion every month, and that would mean that it would add more than 7 trillion dollars to our national debt over the course of an entire year.
But since we are liquidating the Republic anyway, who really cares?
Harris insisted that her plan would end once the crisis was over.
Other politicians, however, are ready to start giving citizens “universal basic income” checks on a permanent basis starting right now. For example, Andrew Yang is making this the signature promise of his campaign as he runs for mayor of New York City…
Former 2020 Democratic presidential candidate Andrew Yang has officially started his run to succeed Bill de Blasio as Mayor of New York City with a call for a universal basic income for half-a-million of the city’s poorest residents.
Yang insists that by giving everyone free money every month he can “eradicate poverty” in NYC…
“We can eradicate extreme poverty in New York City,” Yang said. “If you put just a little money in their hands it can actually be what keeps them in their home and, again, avoids them hitting city services that are incredibly expensive.”
That sounds good, but who is he going to tax in order to pay for it?
After all, hundreds of thousands of wealthy people already left the city during 2020.
The truth is that it is a pipe dream, but that pipe dream is going to win him a whole lot of votes.
Benjamin Franklin once made the following statement…
“When the people find that they can vote themselves money that will herald the end of the republic.”
Sadly, we have now reached that point.
And this comes at a time when tens of millions of Americans are in desperate need because the real economy continues to implode all around us.
For example, we just learned that Christopher & Banks has gone belly up…
Apparel retailer Christopher & Banks, which caters to women over 40, is the latest clothing chain to file for bankruptcy protection amid the coronavirus pandemic.
The Minneapolis-based company announced Thursday it filed for Chapter 11 in the United States Bankruptcy Court for the District of New Jersey. Christopher & Banks said in a news release it “expects to close a significant portion, if not all, of its brick-and-mortar stores.”
Thousands of businesses have been dying every month. As I discussed the other day, the U.S. has lost more than 110,000 restaurants alone.
And to make sure that most of the businesses that have died can never possibly make a comeback, Joe Biden wants to institute “a national minimum wage of $15 an hour”.
Promising people more money is a great way to win elections, but at the end of the day someone always has to pay.
As the U.S. economy continues to come apart at the seams, finding sources of tax revenue will become increasingly difficult.
Perhaps the big tech companies can step up and offer to dramatically enlarge their contributions to the U.S. Treasury.
After all, they were quite instrumental in giving control of the federal government to the Democrats, and so you would think they should be quite willing to help pay for their promises.
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US COVID Deaths Top 400K 1 Year After Pandemic Began As Cases Decline: Live Updates
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Update (1450ET): US COVID deaths have officially passed the 400K mark, the largest official death toll in the world, almost exactly one year after the first cases were confirmed in the US, marking the official start of the pandemic (even though the WHO dawdled on calling it that for a week or two).
On Tuesday afternoon in New York, Johns Hopkins counted 400,002 deaths in the US, a death toll that's higher than the number of American deaths in battle of any single war, according to the Department of Veterans Affairs, and is higher than World War II, the most deadly war for Americans, by about 108,000 deaths.
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Update (1350ET): New York State just reported its latest numbers, and it looks like a trend that started late last week has persisted. Instead of the post-Christmas explosion of cases promised by Dr. Fauci, cases are falling across all regions of the US.
Here are the latest numbers out of NY.
Today's update on the numbers:— Andrew Cuomo (@NYGovCuomo) January 19, 2021
Total COVID hospitalizations are at 9,236.
Of the 177,269 tests reported yesterday, 12,512 were positive (7.06% of total).
Sadly, there were 167 fatalities. pic.twitter.com/Ets0DlDHTx
Also, Moderna shares took a hit earlier Tuesday after the company revealed it didn't know how many jabs had been given from a batch of vaccines causing a higher than normal number of adverse reactions.
As we noted earlier, Dr. Fauci is again making the media rounds to proclaim that hitting 100MM Americans vaccinated in his first 100 days is "entirely feasible", and that it's also possible to bring about herd immunity in the US by the fall, before the next flu season, even though these scientists don't know exactly where the herd immunity threshold is.
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As the US approaches 400K COVID-related deaths (at least, according to the official numbers) the focus Tuesday morning has shifted back to Europe, where Chancellor Angela Merkel has reached a deal with local leaders to extend Germany's lockdown until Feb. 14.
According to the latest numbers from Johns Hopkins, another 3.8K US patients in the US died of causes related to COVID-19, keeping the country on track to reach 400K deaths before Joe Biden’s Wednesday inauguration. Meanwhile, even after Pfizer and Moderna missed their vaccination target for year-end 2020 by a wide margin, Dr. Anthony Fauci team Biden’s promise of delivering 100MM doses of the vaccine in 100 days is “absolutely a doable thing."
A breakdown of new cases by state shows particularly harsh numbers in California, and parts of the Southeastern US.
As the incoming Biden team continues to wrestle with the US vaccine rollout (as refusals climb to levels unexpected by the experts, at least among health-care workers), Israel continues to lead the world in the race to vaccinate its entire population, with eligibility expanded to those 40 and older, as the tiny Mediterranean county has now vaccinated 27% of its population.
Meanwhile, the FT is once again hyping up the UK's vaccination rollout, carefully planned by PM Boris Johnson and the NHS. According to the FT, the UK, which has "pulled ahead" of its western peers, has already vaccinated roughly 6% of its population.
In stark contrast to this message, UK Foreign Secretary Dominic Raab said Tuesday that the UK is considering "all possible measures" as deaths top 1.2K for the fifth day in a row, something that experts have attributed to the mutant strain, which purportedly makes the virus more infectious.
Meanwhile, yet another COVID strain "variant" may be emerging in Amazonia, in the Brazilian city of Manaus, which has seen a surge in younger patients dying.
As far as vaccinations are concerned, the WHO recently selected vaccine "inequality" as the theme for its new annual report, which expanded on remarks from Dr. Tedros, the chief of the WHO, who called the vaccine rollout worldwide a "massive moral failure."
This, from an organization that has once again meekly obliged as Beijing once again denied access to investigators looking to figure out how the global viral outbreak began, and what exactly Beijing did wrong. With Beijing pushing vaccines from half a dozen Chinese companies, the question of access for various countries will likely come down to whether they receive the "rich" world Pfizer and Moderna jabs, or the vaccines from China and Russia.
Underscoring all of this, Brazil has officially approved both the AstraZeneca COVID vaccine and the SinoVac jab as cases and deaths climb, and the total number of shots delivered worldwide nears 40MM, according to Bloomberg.
Here's some more COVID news from the US and Europe.
California reported 432 deaths, fewer than 669 the previous day and below the 14-day rolling average of 490, according to the health department’s website. If the state were a country, its 33,392 total fatalities would rank it 16th, between South Africa and Poland. California added 42,229 new cases yesterday, surpassing the 2.94 million mark. The state’s 14-day positivity rate was 12.5%, little changed from the 14-day average (Source: Bloomberg).
France reported 16,642 new cases on Sunday, the lowest daily increase in six days and less than the previous seven-day rolling average of infections of 18,148 (Source: Bloomberg).
Virginia destroys its record for new infections Sunday, rising to a new daily high of 9.9K, state health data show (Source: Bloomberg).
New York state reported 13.8Knew cases Sunday, the second daily drop after infections climbed to a record of just below 20K on Friday. Hospitalizations, a growing concern, fell slightly to 8.8K, as did the positive test rate, to 5.61% statewide, Governor Andrew Cuomo said in a statement. Another 172 people in the state died (Source: Bloomberg).
Sweden’s Prime Minister Stefan Lofven says he can’t rule out further restrictions under a temporary new law (Source: Bloomberg).
Where Wall Street Thinks The Biggest Bubble Is
We are officially in bubble territory.
Earlier today, coinciding with the release of the latest Bank of America Fund Manager Survey, Deutsche Bank also published its latest monthly survey (Jan 13-15) polling 627 market professionals, and which found that just a paltry 12% of respondents saw no bubbles in financial markets.
So with almost 9 out of 10 survey participants now agreeing there is a bubble, where is it?
Wccording to DB's survey, 50% of investors gave Bitcoin the maximum 10 out of 10 bubble rating with an average score of 8.7. Not surprisingly, this confirms the finding from BofA's own survey according to which Bitcoin was the "most crowded trade", even though as we explained, it most certainly isn't.
Perhaps this is just Wall Street projecting, jealous of 16-year-old Robinhooders (who have recently purchased lambos) who truly are long cryptos, even as most professionals refuse to chase the cryptocurrency ever higher while piling into such bubble names as Tesla.
Not surprisingly, and also identical to the BofA survey, US tech equities saw a 7.9 score on this scale. 83% scored it at 7 or above. The third highest was European government bonds that was ‘only’ at 6.2.
This was followed by US and European credit, US govt bonds which by the way, is the biggest bubble in the history of the world thanks to the Fed buying $80BN every month with money printed out of thin air, and is the reason for all other assets bubbles, and so on.
Some other findings from the full survey:
The full survey results are below:
NY Gov. Cuomo Proposes Raising Top Income Tax Rate To Highest In The Nation
New York City already suffers from the biggest big city exodus in the US, with recent data from the USPS showing that 300,000 New Yorkers have bailed from the Big Apple in the March-November 2020 period. And if NY governor Andrew Cuomo gets his way, the exodus is about to get far worse.
According to Newsday reporter Yancey Roy, Gov. Cuomo is proposing to raise the top tax rate - on those with annual income over $5 million - from 8.82% to 10.82%, unless the Federal Government comes through with $15 billion in aid to NYC.
NEW: Cuomo's budget would increase tax rate on annual income over $5 million from 8.82% to 10.82% -- unless the feds come through with $15 billion in aid to NY. If feds come thru, no hike. #nybudget— Yancey Roy (@YanceyRoy) January 19, 2021
If the Cuomo tax passes, taxpayers in the highest income bracket would pay a combined city and state rate of 14.7%, the highest in the nation. However, this is merely a (reverse hostage) negotiation by the governor, who said that the proposal will be reversed if a federal government approves relief payments as proposed by the Biden administration. And if the state gets $15 billion in aid from the Federal government, the tax increase would be withdrawn.
In short, @NYGovCuomo says he'll back a tax hike on the rich IF, IF, IF D.C. doesn't come through with an additional $9B in aid to NY. Many Dems in state Legis want to raise the rates now, not wait on Washington. A potential lightning rod for #nybudget https://t.co/fj3mlkA1ux— Yancey Roy (@YanceyRoy) January 19, 2021
Said otherwise, either all US taxpayers will chip in to bail out on of the most fiscally irresponsible states in the union... or the ultra wealthy will. Something tells us that this particular proposal won't pass (you see, the rich have powerful friends in Washington), because if it does, Escape from New York will no longer be in the "fiction" section.
Incitement Or Free Speech? Comey Calls For The Republican Party To Be "Burned Down"
There is an interesting interview this week with former FBI Director James Comey. He states that he now believes that the infamous alleged “pee tape” may be real and makes other surprising statements while pitching his new book.
One statement, however, stood out:
“The Republican party needs to be burned down … It’s just not a healthy political organization.”
Since the Republican National Committee was targeted with a pipe bomb in the recent riots, some could argue that this is incitement to arson or violence. I would not. I would call it free speech and hyperbole. The question is where the line is drawn given the impeachment of Donald Trump based on his speech and the allegations that others who used such hyperbolic language are actually guilty of incitement.
As I have previously stated, I condemned Trump’s speech in a series of tweets while it was being given and I called for a bipartisan vote of censure over his responsibility in the riots. However, I opposed the use of a snap impeachment by the House and raised concerns over the framing of the article of impeachment as an “incitement to insurrection.” Despite the chorus of legal experts insisting that the speech would constitute a strong case for criminal incitement (and the DC Attorney General said he may charge Trump), I believe such a prosecution would eventually collapse on free speech grounds if based solely on this speech and Trump’s other public statements.
Comey is not alone in the use of such rhetoric in today’s super-heated political environment. We previously discussed how conservatives have pointed to Rep. Maxine Waters (D-Calif.) calling for people to confront Republican leaders in restaurants; Rep. Ayanna Pressley (D-Mass.) insisted during 2020’s violent protests that “there needs to be unrest in the streets,” while then-Sen. Kamala Harris (D-Calif.) said “protesters should not let up” even as many protests were turning violent. They can all legitimately argue that their rhetoric was not meant to be a call for violence, but this is a standard fraught with subjectivity.
The question is whether Comey would be charged under this same logic if the RNC building was attacked again and actually burned down. That would be obviously ridiculous. However, where is the line drawn? Free speech demands bright lines and those are being erased in our cancel culture from universities to the media to Congress.
The interview also had this remarkable statement on the allegation in the Christopher Steele dossier that the Russian government had a video of Trump watching sex workers urinate on each other in a Moscow hotel room in 2013:
“It came to us in late September. We had information since the summer with which it was consistent and I didn’t know what to make of it, but, because it was from a source who had a track record with the FBI, our team dove into it to see if they could replicate it. I still don’t know. I actually think the Senate intelligence committee report, coupled with [former Trump lawyer] Michael Cohen’s account in his book, probably makes the ‘pee tape’ stuff more likely than it was when I was fired.”
That is an extraordinary assertion based on a widely discredited dossier and the equally discredited Michael Cohen. Comey does not cite what in the Senate intelligence report gives credence to the allegation.
Comey does make a point that I agree with. He does not understand how the rioters gained access to the Capitol and he wants an investigation. I voiced the same suspicion the day of the riot. All of these questions should be answered in a full and transparent way.
The call for a commission is far more constructive than Comey’s version of the “burn baby burn” mantra.
Why Hardly Anyone Trusts The Virus 'Experts'
Early in the pandemic, “trust the science!” could actually be used in a debate without attracting derisive laughter. But as the flip-flops, mistakes and, yes, lies have accumulated, a consensus seems to be forming that the health care authorities are no more trustworthy than the people running Congress or the Fed.
For proof, let’s start with vitamin D, which sure seems to lessen the severity of coronavirus infections. As the chart below illustrates (couldn’t find the source, but google “covid vitamin D” and you’ll find lots of studies that track with this data), people with higher levels of vitamin D in their bloodstream tend to experience covid-19 as a non-event while people low levels found the infection life-threatening.
There are obvious questions about causality here, so calling vitamin D a “cure” is going way too far. But if it has even a marginal effect – and the data suggest considerably more — a rational government would, you’d think, be handing out vitamin D like Halloween candy. In fact, since we’re mandating/prohibiting all kinds of other behaviors, we might expect vitamin D consumption to be required along with masks and social distancing.
Even covid-czar Anthony Fauci recently said:
“If you are deficient in vitamin D, that does have an impact on your susceptibility to infection. So I would not mind recommending — and I do it myself — taking vitamin D supplements.”
So why aren’t family-sized bottles of vitamin D arriving in the mail from the CDC? A cynic might wonder if the fact that Big Pharma doesn’t make much money from cheap, widely available supplements plays a role in the government’s apparent lack of interest.
Now about those lockdowns. Tom Woods has been producing charts that appear to show virtually no difference in virus outcomes between US states with aggressive lockdown policies and those without. California, for instance, has shuttered most of its small businesses and imposed widespread curfews, while Florida hasn’t. Here’s the result:
As for the rest of the world – where they’re supposedly doing better than the US – the pattern of zero correlation between lockdowns and virus spread seems to be holding. France imposed a full national lockdown in March – after which the virus spiked. Then they added mask mandates (indoor and outdoor), with fines attached. And daily new cases soared.
Then of course there’s the lying. Dr. Fauci first claimed that masks don’t help – when he believed they did help — because he feared mask shortages for health care workers. He also admits to changing the official line on herd immunity according to what he thinks we’re ready to hear.
And, in what sounds more like incompetence than dishonesty, he’s apparently been answering the question “when will life go back to normal?” with whatever pops into his head at the time. In early 2020, it was the coming Autumn. In July, it was “a year or so.” More recently it’s “well into 2021.”
But the biggest and by far the most outrageous reason for this growing mistrust has to be the World Health Organization which, well, read for yourself:
The World Health Organization’s special envoy on COVID-19 urged world leaders this week to stop “using lockdowns as your primary control method.”
“We in the World Health Organization do not advocate lockdowns as the primary means of control of this virus,” Dr. David Nabarro said to The Spectator’s Andrew Neil. “The only time we believe a lockdown is justified is to buy you time to reorganize, regroup, rebalance your resources, protect your health workers who are exhausted, but by and large, we’d rather not do it.”
Nabarro went on to point out several of the negative consequences lockdowns have caused across the world, including devastating tourism industries and increased hunger and poverty.
“Just look at what’s happened to the tourism industry in the Caribbean, for example, or in the Pacific because people aren’t taking their holidays,” he said. “Look what’s happened to smallholder farmers all over the world. … Look what’s happening to poverty levels. It seems that we may well have a doubling of world poverty by next year. We may well have at least a doubling of child malnutrition.”
In the United States, lockdowns have been tied to increased thoughts of suicide from children, a surge in drug overdoses, an uptick in domestic violence, and a study conducted in May concluded that stress and anxiety from lockdowns could destroy seven times the years of life that lockdowns potentially save.
The health care establishment could have saved a lot of time — and embarrassment — by just asking regular people about this stuff. But then they would have made a lot less money.
Signs Of Exuberance Warn Of Correction
During the past couple of weeks, I have discussed the rising levels of exuberance in the markets. Importantly, that exuberance combined with surging margin debt levels warns of an impending correction.
I recently discussed why this is not a “new bull market,” which changes the dynamic of the understanding of “risk” in markets.
Following actual “bear markets,” investor sentiment is crushed, valuations revert toward their long-term means, and price trends are negative. Notably, few investors are willing to “buy” assets in the market. However, “corrections” do not accomplish any of those outcomes.
While the mainstream definition of a “bear market” is a 20% decline, such has little relevance to what constitutes a “bear market.” As noted in “March Was Only A Correction,” there is a significant difference.
“The distinction is essential.
‘Corrections’ generally occur over short time frames, do not break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs.
‘Bear Markets’ tend to be long-term affairs where prices grind sideways or lower over several months as valuations are reverted.
Using monthly closing data, the “correction” in March was unusually swift but did not break the long-term bullish trend. Such suggests the bull market that began in 2009 is still intact as long as the monthly trend line holds.
Several other factors confirm March was just a correction.
As noted, following an actual “bear market,” investors are very slow to return to the market. Following the “Dot.com” crash, it took several years before investors returned their allocation levels to “fully allocated” levels. The same occurred following the “Financial Crisis.”
However, following the March decline, investors quickly allocated back into equities, which coincides with corrections rather than bear markets.
“We didn’t think traders could get any more speculative than they were at the end of August. We were wrong. For the first time, small trader call buying (adjusted for equivalent shares) exceeded 9% of total NYSE volume last week.”
As we saw at the peak in 1999, investors are again piling into companies reporting “negative” earnings. Following bear markets, speculative behavior such as this takes years to return.
Most importantly, “bubbles” are not formed immediately following a bear market. Instead, bubbles are a function of “bull markets” where investors rationalize why “this time is different.” As Jeremy Grantham noted recently:
“The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior. I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.“
Another indication we are not in a “new bull market,” but rather an extension of the bull market that began in 2000, is occurring in margin debt. As I explained previously:
“Margin debt is not a technical indicator for trading markets. What margin debt represents is the amount of speculation that is occurring in the market. In other words, margin debt is the ‘gasoline,’ which drives markets higher as the leverage provides for the additional purchasing power of assets. However, ‘leverage’ also works in reverse as it supplies the accelerant for more significant declines as lenders ‘force’ the sale of assets to cover credit lines without regard to the borrower’s position.”
The last sentence is the most important. The issue with margin debt, in particular, is that the unwinding of leverage is NOT at the investor’s discretion. It is at the discretion of the broker-dealers that extended that leverage in the first place. (In other words, if you don’t sell to cover, the broker-dealer will do it for you.) When lenders fear they may not recoup their credit-lines, they force the borrower to either put in more cash or sell assets to cover the debt. The problem is that “margin calls” generally happen all at once, as falling asset prices impact all lenders simultaneously.
Margin debt is NOT an issue – until it is.
Another indication that March was only a correction and not a bear market is that free-cash balances remain negative. During bear markets, banks force borrowers to cover margin loans as prices drop. Such causes further declines in asset prices, causing more margin calls, causing further price declines. The process continues until liquidation of margined investors is complete, and free-cash balances return to positive territory. That did not occur following the March correction.
In fact, despite a short-term correction in margin debt, the “speculative frenzy” following the correction pushed margin debt back to record highs.
As noted, when markets are rising, and investors are taking on additional leverage to increase buying power, margin debt supports the advance. However, the magnitude of the recent surge in margin debt also confirms the current levels of investor exuberance.
The chart shows the relationship between cash balances and the market. I have inverted free cash balances, so the relationship between increases in margin debt and the market is better represented.
Note that during the 1987 correction, the 2015-2016 “Brexit/Taper Tantrum,” the 2018 “Rate Hike Mistake,” the “COVID Dip,” the market never broke its uptrend, AND cash balances never turned positive.
Both a break of the rising bullish trend and positive free cash balances were the 2000 and 2008 bear markets’ hallmarks. Such is another reason why March was just a “correction.”
Margin data goes back to 1959 to get a long-look at margin debt and its relationship to the market. The chart below is a “stochastic indicator” of margin debt overlaid against the S&P 500.
The stochastic indicator is a momentum indicator developed by George C. Lane in the 1950s. The chart shows the position of the most recent margin debt level relative to its previous high-low range. The indicator measures the momentum of margin debt by comparing the closing level with the range over the past 21-months.
The stochastic indicator represents the speed and momentum of margin debt level changes. Such means the stochastic indicator changes direction before the market. As such, it can be considered a leading indicator.
When margin debt is increasing rapidly, such has usually been coincident with short to intermediate-term peaks in markets. Given that investors tend to “buy the most at the top,” rapidly increasing levels of margin debt tend to confirm exuberance.
The two charts below confirm the acceleration of speculative risk increases in the market. The chart below is the rate-of-change of margin debt from the preceding 12-month low.
The chart confirms the same by measuring the raw rate-of-change in margin debt over the preceding 8-months.
By all measures, margin debt acceleration is a sign of caution for investors in the short-term. Such is particularly the case, as noted yesterday, there are “alarm bells” in the most speculative areas of the market.
Margin debt, much like valuations, are “terrible market timing” indicators and should not be used as such. Rising levels of margin debt, and high valuations, are a reflection of investor psychology and overconfidence.
I agree and disagree that margin debt levels are simply a function of market activity and have no bearing on the market’s outcome. As we saw in March, the double-whammy of collapsing oil prices and economic shutdown in response to the coronavirus triggered a sharp sell-off fueled by margin liquidation.
Currently, the majority of investors have forgotten about March. Or worse, assume it can’t happen again for a variety of short-sighted reasons. However, investors are more exuberant now than at the peak of the market in 2000 or 2008.
Sure, this time could indeed be different. That has remained the “sirens song” of investors since March. However, as Sentiment Trader summed up the last time we wrote on this topic, such is usually not the case.
“Whenever some of this data fails to lead to the expected outcome for a few weeks or more, we hear the usual chorus of opinions about why it doesn’t work anymore. This has been consistent for 20 years, like…
Decimalization will destroy all breadth figures (2000)
The terror attacks will permanently alter investors’ time preferences (2001)
The pricking of the internet bubble will forever change option skews (2002)
Easy money will render sentiment indicators useless (2007)
The financial crisis means relying on any historical precedents are invalid (2008)
The Fed’s interventions mean any indicators are no longer useful (2010 – present)
All of these sound good, and for a time it seemed like they were accurate. Then markets would revert and the arguments would get swept into the dustbins of history.”
It’s not too late to take action to preserve capital now, so you have the money to invest with later.
Boeing 737 Max To Be Cleared For European Flight This Summer After EU Approval
The European Union Aviation Safety Agency (EASA) could return the Boeing 737 Max to European skies in the coming months upon approval, which could occur as early as next week.
EASA suspended the Max in March 2019 following two fatal crashes, killing 346 people who died in Indonesia and Ethiopia.
Patrick Ky, the executive director of EASA, was quoted Tuesday by The Guardian as saying it would issue an updated airworthiness directive next week.
Ky said a separate airworthiness certification for the Max-200 variant would follow in the "coming weeks," allowing those jets to fly before summer.
Since the two fatal crashes and worldwide grounding of the Max, Boeing updated software and rewired flight components on each aircraft. Airlines have also trained their pilots in the new changes.
"We believe we know what happened in the Max accidents," Ky said. "We are confident that the safety criteria have been met."
Last month, airlines in the US and Brazil resumed commercial flights of Max jets.
Reopening the European market for the Max would be a big move for Boeing to restore its credibility following the two crashes.
According to Bloomberg, Air Lease Corp. Chairman Steven Udvar-Hazy said some carriers have reconsidered reinstating previously canceled Max orders.
Udvar-Hazy said Europe, Russia, and Canada could approve Max airworthiness on Jan. 20. He said China is still a big question because of politics.
Earlier this month, Boeing had agreed to cough up $2.5 billion to settle charges that it deliberately defrauded and deceived the FAA during Max's certification process.
Moderna "Does Not Know How Many Doses Went Into Arms" In California Adverse Vax-Reaction Cluster
Update (1300ET): Moderna has issued a statement addressing the disturbing number of severe reactions to a batch of its COVID vaccine:
Moderna acknowledges receiving a report from the California Department of Public Health (CDPH) that several individuals at one vaccination center in San Diego were treated for possible allergic reactions after vaccination from one lot of Moderna’s COVID-19 Vaccine. The Company is fully cooperating with CDPH in investigating these reported adverse events. Consistent with the statement from CDPH, at this point
Moderna is unaware of comparable clusters of adverse events from other vaccination centers which may have administered vaccines from the same lot, or from other Moderna lots. Moderna confirmed that a total of 1,272,200 doses were produced in batch number 041L20A, with nearly a million doses (964,900) already distributed to approximately 1,700 vaccination sites in 37 states. According to CDPH, that includes more than 330,000 doses from this lot distributed to 287 providers across the state of California. A total of 307,300 doses remain in storage and not yet distributed.
While Moderna said it does not know how many doses may have ended up in arms of people, it did report that the lot was shipped between January 4th and January 8th, and thus it expects that a significant portion of the distributed doses have been already used. This investigation is still ongoing and Moderna is working closely with FDA and CDC to understand the clinical cases and whether the broad pause in use of the lot is warranted.
Moderna's share price is down around 4% after this news...
We wonder how the Biden administration will respond to this.
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As the suspected death toll attributed to COVID-19 vaccines rises around the world, with dozens already reported in the US and Norway, California health officials have asked health-care providers in the state to immediately stop administering a batch of Moderna COVID-19 jabs after an "unusually high number" of adverse reactions were linked to it, according to RT.
On order of State epidemiologist Dr. Erica S. Pan and the California Department of Public Health, the vaccines should be shelved until a proper investigation can be conducted. The lot in question is Moderna Lot 041L20A.
Message to #CovidVaccine providers:— Shawna Khalafi (@ShawnaKhalafiTV) January 18, 2021
"This week, a higher-than-usual number of adverse events were reported with a specific lot of #Moderna vaccine administered at one community vaccination clinic. Fewer than 10 individuals required medical attention over the span of 24 hours." pic.twitter.com/RsaIzd1Gap
More than 330,000 doses from this lot have been distributed to 287 providers across the state.
The shipments arrived in California between Jan. 5 and 12.
All of the reactions appear to be tied to a single community clinic that was administering the batch. The clinic reportedly closed for several hours after a string of adverse reactions occurred.
California has confirmed nearly 3MM COVID cases as of Monday morning,
California COVID-19, By The Numbers:— CA Public Health (@CAPublicHealth) January 18, 2021
🔹 Confirmed cases to date: 2,942,475
🔹 Note: Numbers may not represent true day-over-day change as reporting of test results can be delayed
More information at https://t.co/TLLUGx7imH. pic.twitter.com/bYSD41PQRL
Officials on Wednesday announced a major expansion of vaccination eligibility guidelines, allowing all residents 65 and older to more quickly qualify for COVID-19 vaccinations. As far as numbers go, more than 330K doses from the same Moderna vaccine batch have been distributed to 287 providers across the state, but this is the first time that health authorities have received reports detailing adverse reactions associated with the lot.
While acknowledging that "less data exists on adverse reactions related to the Moderna vaccine," the state epidemiologist insisted that it’s still rare for vaccines to trigger serious side effects. Moderna, the CDC, and the FDA are reviewing the batch and all relevant medical data.
The COVID-19 jab has been linked to other cases of serious medical emergencies, not just in the US, but in Europe and elsewhere around the world.
In December, a physician in Boston said he suffered one of the worst allergic reactions he’s ever experienced after receiving Moderna’s vaccine, describing the episode as potentially life-threatening, while a doctor in Miami actually died due to a reaction from the vaccine.
Similar cases linked to the Pfizer-BioNTech vaccine have been referred to the CDC and FDA for review. According to other reports, Hong Kong’s government-appointed vaccine advisory panel is seeking more data from the Norwegian and German governments on the reported deaths of elderly people after they received.
30Y Breakevens Spike Above 16 Year Downtrend After Yellen Says "Will Explore 50-Year"
It isn't the first time an ultra-long duration bond has been discussed by the Treasury, and it also certainly won't be the last time, but moments ago long end of the curve slumped, and the 5s30s steepened to session wides, after Janet Yellen said during her Senate confirmation hearing she’ll look into the possibility of 50-year bonds.
Specifically, Yellen said: “There is an advantage to funding the debt, especially when interest rates are very low, by issuing long-term debt and I would be very pleased to look at this issue and examine what the market would be like for bonds of this maturity.”
Treasury 30-year yields cheapened following the comment...
... briefly widening 5s30s curve to session high above 140bp.
But the impact was most acute on long-duration brekevens, with the 30Y BE hitting session highs shortly after Yellen's comments...
... in the process pushing the 30Y BE to breakout above a 16 year downtrend.
As Brean Capital's Russ Certo said, "Janet Yellen’s willingness to even consider issuing ultra-long U.S. Treasuries was enough to drive traders to sell 30-year bonds on Tuesday" and while Yellen sounded “non-committal,” her comments hit the back- end of the curve.
On the other hand, as noted above, this won't be the first time the Treasury has "looked closely" at 50Ys (or even 100Ys): several years ago Mnuchin did the same, and in the end decided that it's not worth the risk of unanchoring the long end, and instead he decided to relaunch the 20Y. We doubt this time will be different.
Is Asset-Inflation Really "Unstoppable & Forever"?
The consensus is that asset inflation is unstoppable and forever. History begs to differ.
Not unsurprisingly, people want a binary option: do we get deflation or inflation? Unfortunately, reality is messy.
Broadly speaking, globalization is deflationary as capital seeks the lowest cost labor, parts and materials, the least stringent environmental standards and the most corrupt governance to maximize profits by any means available (in this case, exploitation and corruption).
Wages lose purchasing power as every labor force competes with the cheapest available pool of global labor, and domestic companies must lower prices or face obliteration by the global corporations.
Broadly speaking, financialization is inflationary as the costs of services increase as financialization enables monopolies and cartels to dominate entire sectors. Once they control the sector, they increase prices while lowering quality to maximize profits by any means available (in this case, monopoly, cartels and political corruption). As the profits gush in, corporate monopolies and cartels can "invest in corruption" by using a sliver of their profits to buy political favors and protection.
Financialization lowers the cost of credit to corporations and financiers, giving the largest entities an unmatchable competitive advantage: they can borrow immense sums at near-zero cost and use this money (or newly issued stock) to buy competitors, insuring their monopoly won't be challenged by either regulations (since politicos and bureaucrats have been bought off) or competitors (all bought out with "free money".)
While many hold that inflation is always a monetary phenomenon, real-world scarcities are also inflationary. If you were waiting in a long line at a gas station in 1973, hoping to get a tank of gas at only double the price of a month earlier, you'll know that scarcity is absolutely marvelous at sending price soaring regardless of what's happening with the money supply.
So inflation can be driven by either or both monetary and scarcity dynamics.
Enter the pandemic. Needless to say, restrictions in travel and gatherings are deflationary in travel-leisure-dining sectors as airlines lower prices to compete for a shrinking pool of passengers and surviving restaurants suppress prices to attract scarce customers.
As millions of workers lose their jobs and depend on unemployment, the insecurity of future income weighs on overall consumption.
Lowering the cost of credit does little for these sectors while rocket-boosting speculation and financialization. The monetary "solution" to deflation is always the same: lower interest rates to zero and flood the financial sector with unlimited liquidity. The resulting stock market bubble and corporate orgy of borrowing and stock issuance are predictable results of unfettered, near-infinite financialization.
But lowering the cost of credit and incentivizing monopolies and cartels to expand their control doesn't actually help the economy. Enabling rapacious monopolies and cartels is systemically inflationary, while lowering the cost and availability of credit also increases the attractiveness of automation as a means of lowering labor costs, a dynamic that is deflationary as lower wages equals lower consumption.
The reality is relatively few gig economy workers earn a middle-class income working 40 hours a week. The large-scale reduction of wage and benefit security--i.e. the transition to a precariat work force--is highly deflationary in terms of wages and consumption, as precariats cannot count on future earnings being reliable or sufficient.
The political "solution" is Universal Basic Income (UBI) as a means of supporting consumption. But supporting the consumption of essentials doesn't magically incentivize innovation or the expansion of capacity and real-world production.
Meanwhile, the Federal Reserve will continue giving unlimited "free money" to corporations and financiers to increase the concentration of financial and political power in the hands of the few at the expense of the many. This fuels the dominance of corporations and financiers and increases the risks of monetary over-reach, which introduces the potential for a non-linear sudden and unpredictable explosion of monetary-driven inflation.
All of this sets the stage for both monetary and scarcity inflation. Monopolies and cartels are free to exploit their stranglehold on the nation by jacking up prices and reducing quality (while the bought-and-paid-for political class theatrically wrings their hands while skimming millions in campaign contributions). This is rabidly inflationary.
Since there are few incentives to expand real-world capacity and production, this sets the stage for scarcities in essentials and non-essentials alike. With Peak Globalization in the rearview mirror, the deflationary forces of globalization are ebbing.
The fly in the ointment is speculative bubbles always pop. All the inflation in the system has flowed into excessive speculation, which has inflated unprecedented bubbles across most asset classes. When these all pop, the results are deflationary as the wealth effect reverses and over-leveraged corporations default and/or go bankrupt.
I marked up this chart of the S&P 500 about a year ago, and since then the market crashed and then soared to new highs (SPX 3,826). The basic message here is extremes get more extreme until the rocket runs out of fuel--something the consensus now claims is "impossible." The consensus is that asset inflation is unstoppable and forever. History begs to differ.
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McConnell Sparks GOP-Split Talk, Claims "Mob Was Fed Lies...Provoked By Trump"
As impeachment moves to the Senate, and on Trump's penultimate day as president, (still) Majority Leader Mitch McConnell may have just showed his truest colors yet as he addressed the floor claiming that "The mob was fed lies. They were provoked by the president and other powerful people."
Sen. Majority Leader McConnell: Insurrectionists were "provoked by the president and other powerful people." pic.twitter.com/6kqSlAJHky— The Recount (@therecount) January 19, 2021
McConnell went on:
“We stood together and said an angry mob would not get veto power over the rule of law in our nation. Not even for one night. We certified the people’s clear choice for their 46th president.
Tomorrow, President-elect Biden and Vice-President-elect Harris will be sworn in. We will have a safe and successful inauguration right here on the west front of the Capitol — the space that President Bush 41 called ‘democracy’s front porch.’ And then we’ll move forward."
This, according to Kentucky Senator Rand Paul, is a major problem for the GOP who told Fox News’ Ingraham Angle on Friday that he believes that if Senate Minority Leader Mitch McConnell and other Senate Republicans join the Democrats to impeach President Donald Trump, a third of Republican voters will permanently abandon the party as a result.
PlanetFreeWill.news' Tom Papper notes that, speaking first about the Democrats’ aims for impeachment, Paul expressed incredulity.
“I don’t understand how they can be moving forward with this,” he said, before adding
“The thing they’re doing now is an overreaction, and if they think they’re going to have a positive feeling from the public, when they’re going to go through a partisan impeachment again, I think that’s absolutely insane and wrong headed.”
Ingraham then asked Paul if he was surprised that McConnell is reportedly planning to instruct Republicans to vote to convict President Trump after he leaves the presidency, in a move that could strip him of his security and prevent him from running for office in 2024.
“I don’t often get asked my advice from leadership on how they should react, but my unsolicited suggestion would be this: They will destroy the Republican Party if leadership is complicit in impeachment, or if leadership votes for impeachment, they will destroy the party.”
“Impeachment is purely a partisan thing, it’s for the moral, ‘Oh I’m so much better than you, and you’re a bad person, because I’m so moral.’” Paul added, “These are the kind of people that are going to do this.”
“The impeachment is a wrongheaded, partisan notion. If Republicans go along with it, it will destroy the party. A third of Republicans will leave the party.”
“This isn’t about, anymore, the electoral college,” Paul concluded.
“It’s about the future of the party, and if you’re going to ostracize and excommunicate President Trump from the party, then guess what, millions of his fans will leave as well.”
Additionally, congressional leaders, including House GOP leader Kevin McCarthy and Senate Majority Leader Mitch McConnell, will skip President Trump's departure ceremony in Maryland tomorrow morning in favor of attending mass with incoming President Joe Biden ahead of his inauguration, congressional sources familiar with their plans tell Axios.
Natgas Plunges 5% On New Weather Models Forecasting Milder Temps
As soon as Goldman Sachs gets bullish on natural gas, new weather models are forecasting warmer weather trends for the next two weeks. As a result, NYMEX Henry Hub natgas February futures have plunged 5% Tuesday morning.
The plunge in natgas futures come on milder forecasts for the US, which means heating demand will wane over the next two weeks than previously expected.
"That decline came even though liquefied natural gas (LNG) exports remained near record levels and last week's storage draw was slightly bigger than expected," said Investing.com's Ajay Kedia.
Kedia said, "US natural gas production and demand will drop in 2021 as the economic fallout from coronavirus lockdowns continues."
Meteorologists at BAMWX expanded more on the new weather models that forecast warmer weather trends for the US through the end of the month.
They tweeted, "A look at what natgas was expecting FRI for week 2 vs the latest data rolled into the 5-12 day period. EPS lost 17 HDDs in that period GEFS lost 11.3 HDDs in that period BAM had to lower HDDs 3 points in that period (our FRI week 2 shown)."
From the Southwest to Mid-Atlantic, temps will be slightly above average through the end of the month.
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Johnstone: Viral #TrumpsNewArmy Video Is Liberals At Their Craziest And Scariest
A new viral video calling on liberals to form “an army of citizen detectives” to gather information on Trump supporters and report their activities to the authorities has racked up thousands of shares and millions of views in just a few hours.
The hashtag #TrumpsNewArmy is trending on Twitter as of this writing due to the release of a horrifying video with that title from successful author and virulent Russiagater Don Winslow. As of this writing it has some 20 thousand shares and 2.6 million views, and the comments and quote-retweets are predominantly supportive.
NEW VIDEO #TrumpsNewArmy VOLUME UP— Don Winslow (@donwinslow) January 19, 2021
On January 20th Donald Trump will no longer be The Commander in Chief.
He will lose control of the U.S. Armed Forces and take control of a NEW ARMY. pic.twitter.com/59MHHaIegP
“On or before January 20th, Donald Trump will no longer be the Commander-in-Chief: he will lose control of the Army, Navy, Airforce, Marines, Special Forces and America’s nuclear arsenal,” Winslow’s voice begins ominously. “On January 20th Donald Trump will become Commander-in-Chief of a different army: this army.”
Viewers are then shown footage from Trump rallies while being told that they are looking at “radical extreme conservatives, also known as domestic terrorists”.
“They are hidden among us, disguised behind regular jobs,” Winslow warns.
“They are your children’s teachers. They work at supermarkets, malls, doctor’s offices, and many are police officers and soldiers.”
Winslow talks about white supremacists and the Capitol riot, warning that Trump will continue escalating violence and fomenting a civil war in America.
“We have to fight back,” Winslow declares.
“In this new war, the battlefield has changes. Computers can be more valuable than guns. And this is what we need now more than ever: an army of citizen detectives. I’m proposing we form a citizen army. Our weapons will be computers and cellphones. We, who are monitoring extremists on the internet and reporting our findings to authorities. Remember, before the Navy Seals killed Osama Bin Laden, he had to be found. He was found by a CIA analyst working on a computer thousands of miles away. It’s up to you.”
The viral video is being loudly amplified by popular #Resistance accounts like Majid M Padellan (better known as Brooklyn Dad Defiant) with frighteningly paranoid and HUAC-like rhetoric.
“#TrumpsNewArmy is VILE,” one of Padellan’s Twitter shares of the video reads. “And we KNOW who they are. They are our teachers. They are our neighbors. They are our police officers. They are EVERYWHERE. EXPOSE THEIR TREASON.”
“Donald trump is on his way out,” reads another.
“Good riddance. But his ‘army’ is still here, hiding amongst us. They are traitors. They are evil. And they MUST be rooted OUT.”
“I pledge allegiance to the flag of the United States of America,” reads yet another. “But SOME people… they pledged their allegiance ONLY to trump. These are dangerous traitors.”
“After 9/11, we were told: If you see something, say something,” reads still another.
“We have TERRORISTS in our midst. Some of us KNOW these people. It is our patriotic DUTY to expose them.”
So if you were hoping that maybe liberals would chill out and get a little less crazy with Trump out of the White House, I am sorry to be the bearer of bad news.
This is as insane and scary as I have ever seen these people get, and I was in the thick of peak Russiagate hysteria. An aggressively manufactured push to get an army of citizens spying on each other calls to mind the Stasi informants of East Germany, the patriotism-fueled digital “digging” of the QAnon psyop, and the NatSec LARPing of Louise Mensch Twitter, all rolled into one great big ball of crazy.
Veteran CIA officer and former deputy DNI Sue Gordon calls for a "9/11 Commission kind of activity" to apply "lessons that we learned in the fight against foreign terrorism" to battle domestic extremism https://t.co/Dor0GMZmfm pic.twitter.com/MGmdNoMZ1f— Max Blumenthal (@MaxBlumenthal) January 19, 2021
This comes out as we are being bombarded with mass media punditry from literal CIA veterans like Sue Gordon and Elissa Slotkin forcefully hammering home the message that domestic terror is the new frontier for combating violent extremism, meaning of course that new Patriot Act-like solutions will be needed. Winslow himself spent six years traveling and doing research for a novel about a former CIA operative, and if some government agency didn’t recruit him during that period they clearly should have.
This will get frightening if it keeps up. Just as a relatively low-profile lefty blogger I routinely get liberals online falsely claiming I’m a Russian agent and saying they’ll report me to the FBI, and that’s without an aggressive campaign urging them to join a powerful digital army. The fact that Winslow stays very vague about what he means by “Trump’s new army” and constantly conflates rank-and-file Trump supporters with white supremacist terrorists means people are effectively being pointed at all Trump supporters, especially when normal Trump rallies are what he points to in the video. If this takes off it can very quickly lead to a volunteer army of power-worshipping snitches against literally anyone who is critical of US foreign policy or the Democratic Party, whether they actually support Trump or not.
In fact just following the trending hashtag I’m noticing Twitter users saying this means targeting all Trump supporters, so clearly that is the message that’s being absorbed.
That #TrumpsNewArmy video is making people crazy and scary. I've been in the thick of liberal insanity right through peak Russiagate, and I don't think I've ever seen anything like this. pic.twitter.com/X1kSnCg4ao— Caitlin Johnstone ⏳ (@caitoz) January 19, 2021
“Trumpers are pushing back so hard against this video because so many of them live in the dark, cloaked behind normal jobs and seemingly normal lives,” Winslow tweeted in promotion of his project.
Well maybe that’s because they are half the voting public, Don?
Winslow mixes in these generic comments about “Trumpers” with comments about “white supremacists”, about whom he tweets “1. We expose them. 2. We identify them. 3. We notify law enforcement. 4. We notify their employers.”
This is just liberals being pushed toward targeting anyone who isn’t ideologically aligned with them for destruction. I really, really hope it doesn’t take off, because it is profoundly ugly. Please don’t let the manipulators trick you into ripping each other to pieces, America. They’re only pointing you at each other so you don’t look at them.
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Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for at my website or on Substack, which will get you an email notification for everything I publish. My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics on Twitter, throwing some money into my tip jar on Patreon or Paypal, purchasing some of my sweet merchandise, buying my new book Poems For Rebels (you can also download a PDF for five bucks) or my old book Woke: A Field Guide for Utopia Preppers. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge.
Nomura Spots A BOJ Catalyst That Could Trigger Even More Treasury Turmoil
Earlier today we discussed last week's "very large" options expiration, which as SpotGamma calculated sparked a ~50% reduction in single stock gamma, which on one hand has left markets vulnerable to short-term volatility but on the other - as Nomura's Charlie McElligott poetically put it - sparked a "gamma unchlenching" as evidenced by Friday morning’s near -1.5% peak-to-trough decline in ESA, a -2% high-to-low move in RTYA and a -1.5% hi-lo move in NQA post Friday’s Op-Ex index settlement, as those previously insulating Dealer hedging flows were reduced as options expired.
So with opex out of the way, dealers are once again roughly Gamma neutral; echoing what we said earlier, McElligott notest that this "means it would not take much of a pullback to pivot towards Short Gamma “accelerant flows” to the downside, especially as now we hit peak “buyback blackout” into EPS, as well as the historically “negative” forward returns that come with “higher” earnings revisions."
While that is the risk scenario, in the meantime we are enjoying all the benefits of renewed euphoria after last week's selloff with equity implied vols "again getting hammered into Wednesday’s VIXpiry" with McElligott observing that "UX1 is already down 1vol this morning, while broad cross-asset markets look like resumption of recent thematic trend—USD lower vs Risk FX & Crypto, UST yield curves bear-steepening, Commods generally higher, RTYA (Cyclical Value) > NQA (Sec Growth / Duration-Sensitivity / LT Momentum)."
There is one potential caveat here: as Goldman discussed last week, as a result of the decline in VIX, managed volatility and vol control funds are rapidly approaching full equity allocation after the Q1 2020 VIX shock. As a reminder, among systematic macro investors, managed vol funds are large (they account for roughly $200bln ofAUM) and important, since vol itself is the key input to their asset allocation decisions. As such, any renewed spike in VIX could lead to much more aggressive deleveraging and further market downside.
So while we wait to see which way dealers flip now that gamma is no longer a market driver, McElligott points out "some remarkable CFTC data" which confirms the “buy-in” to the fiscal reflation + renormalization theme, with the latest Committment of Traders data showing "the single-largest TY spec sale on record following the GA Senate Blue Wave Lite outcome—but more granularly and highlighting the concentration of the selling, with almost 2/3 of the selling coming via "Top 4” holders of the contract, stating that “…we feel confident that bulk of the selling pressure was driven by either one or a few large money managers who continues to press a growing short interest" off the back of the long-term narrative of inflationary risks + a potentially massive jump in net supply with the new Administration’s aggressive policy agenda."
This also confirms what we noted two weeks ago, when we warned that CTAs would start shorting TY when the 10Y yield rose above 1.10%, to wit: "CTAs could turn short on TYs out of a surplus of momentum. In such an event, however, 10yr UST yields would need to remain above 1.10% at least."
And while none of that is news to regular readers, Charlie points out something that was "potentially lost in the fog of the MLK holiday weekend, with significant implications for Global Rates, Yield Curves and Equities Thematic Factor tie-ins", was the flurry of BoJ-tied "policy trial balloons" which "effectively hint at a common BoJ desire for higher intermediate and long-end Yields (but done so in a fashion which won’t stoke market fears of “tightening,” lololol good luck with that)", the Nomura strategist chuckles. Among these are:
While all these are admirable, the fact is also that none of them are even remotely possible to execute for the central bank whose balance sheet is now a record 133% of Japan's GDP...
... which means that it is very likely that in the very near future we will have another central bank inspired global coordinated rates tantrum, which will then force central banks to double down with much more QE (as a reminder, the Fed needs a new crisis to double its QE for 2021 which at the current pace will barely monetize half of the upcoming net Treasury issuance).