zerohedge

Government's Global Response To COVID Has Absolutely Decimated The Middle Class

Very few, if any, financial outlets have been more outspoken over the last decade about the harm that governments can do micromanaging (and in this case, shutting down) economies than we have been. 

Which is why we weren't surprised to see a brand new report noting that due to the pandemic (and the ensuing global 'stimulus' response) more people than ever are falling out of the middle class. Published by Bloomberg, the report defines 'middle income' earners as those making from $10 to $20 per day, smoothed out across geographical borders. Those making $20 to $50 per day are considered "upper middle income". 

These two brackets make up 2.5 billion people, or about 33% of the world's population. And of that group are numerous stories from numerous countries of what Bloomberg calls "hard won successes that evaporated overnight".

The outlook for the future doesn't look promising, either. The IMF predicts that the global economy in 2024 will be 3% smaller than it would have been if Covid hadn't happened. For example, India's GDP will be 5.2% smaller than it would have otherwise been. (And we're sure no one will do anything to hold China accountable for this massive global dent to GDP, either).

In India, the report highlighted Ravi Kant Sharma, who had spent "more than a decade" saving up to buy a car. He started 2020 with enough for a down payment and plans to celebrate his wedding anniversary. By the end of the year, he had lost his job, ate into his savings and had to put his car on hold. 

“I have exhausted all my savings. We are finding it difficult to pay installments of existing loans,” he said. “My life has been set back by at least three years, even as my dreams have moved beyond my reach."

Francinete Alves of Brazil is also making sacrifices, eating kidney, tongue, liver and other organ meat sporadically as egg consumption in the meat-heavy country rises. Alves is still employed, making about $881 per month, but soaring food prices have caused her to make changes in her diet. She now looks for discounts at butcher shops before she goes grocery shopping. 

“In the past, 20 reais was enough for you to leave here with a lot of things. I keep thinking about people who have a family to support and receive only a minimum wage,” Alves says. “I honestly don’t know how they live”

In South Africa, 26 year old Mosima Kganyane had finally just leased her own apartment. After Covid hit, her employer faced bankruptcy and laid her off, contributing to the country's 32.5% unemployment rate. She paid a $271 fee to break her lease and move back in with her family. She now works a temp job and has spent $1,000 to put an addition on her parents house so she could rent a room. 

She told Bloomberg: “Covid-19 taught me not to relax and that I need to fight, to fight for survival because I don’t know what tomorrow holds.”

In Bangkok, food vendors like Yada Pornpetrumpa are dealing with a smaller, laid back crowd of tourists to sell to late after losing 75% of thier business. She now lives on government assistance and her income has plunged 90% per day. 

“Before all of this, when I started setting up my shop, there would already be a line for fruit juice,” she says. “I had a 50% profit on everything I sold.”

Sadly, she concluded with an affirmation that despite having few assets, she remains happy:  “Having a car or a house is just what society tells us we should value, but it doesn’t define the middle class. I have no assets now. But I have peace of mind.”
 

Tyler Durden Sat, 04/10/2021 - 12:25

Newsom Neutered Again - Supreme Court Blocks California's Restrictions On In-home Religious Gatherings

Authored by Zachary Stieber via The Epoch Times,

The Supreme Court late Friday ruled against California, blocking the restrictions ban on in-home Bible studies and other religious gatherings.

The court’s narrow 5–4 ruling was in favor of a group of Santa Clara residents who asserted the restrictions violated the First and Fourteenth Amendments of the U.S. Constitution.

“Applicants are likely to succeed on the merits of their free exercise claim; they are irreparably harmed by the loss of free exercise rights ‘for even minimal periods of time’; the State has not shown that ‘public health would be imperiled’ by employing less restrictive measures,” an unsigned opinion of the court’s majority said in its opinion.

The ruling is the fifth time the nation’s highest court has overruled the Ninth Circuit Court of Appeals on California COVID-19 fueled restrictions, including a February ruling that saw the court grant a worshipper’s application asking for restrictions on in-person religious services be rolled back.

“It is unsurprising that such litigants are entitled to relief. California’s Blueprint System contains myriad exceptions and accommodations for comparable activities, thus requiring the application of strict scrutiny,” the majority wrote on Friday.

The blueprint system is the statewide criteria for loosening or tightening restrictions based on the level of CCP virus spread.

Justices Samuel Alito, Clarence Thomas, Brett Kavanaugh, Neil Gorsuch, and Amy Coney Barrett made up the majority.

Chief Justice John Roberts, another Republican-nominated justice, joined the court’s liberal wing in dissenting, though he did not sign on to the dissenting opinion authored by Justice Elena Kagan.

Kagan said she would have rejected the application for relief because she felt the state complied with the First Amendment in its limiting religious gatherings in homes to three households since the state had the same restrictions on secular gatherings in homes.

“It has adopted a blanket restriction on at-home gatherings of all kinds, religious and secular alike. California need not, as the per curiam insists, treat at-home religious gatherings the same as hardware stores and hair salons—and thus unlike at-home secular gatherings, the obvious comparator here,” she wrote.

The original order in the case denying the application for relief came from U.S. District Judge Lucy Koh, who said that in light of “the unique risks of gatherings in spreading COVID-19; the deaths and serious illnesses that result from COVID-19; and the overwhelming strain on the healthcare system,” enjoining the state and county restrictions on in-home religious gatherings “would not be in the public interest.”

The Ninth Circuit’s panel upheld Koh’s ruling, writing last month that “appellants had not satisfied the requirements for the extraordinary remedy of an injunction pending appeal.”

“Specifically, the panel held that appellants had not demonstrated a likelihood of success on the merits for their free exercise, due process, or equal protection claims, nor had they demonstrated that injunctive relief was necessary for their free speech claims,” the panel wrote.

Lawyers for the plaintiffs and defense did not immediately respond to requests for comment. California had argued in a brief on Thursday that its policy regarding in-home gatherings applied to all gatherings, no matter their purpose, while also offering the Supreme Court did not need to intervene because the state will relax restrictions later this month.

Tyler Durden Sat, 04/10/2021 - 12:00

Debt-Fueled Spending Won't Create Growth

Authored by Lance Roberts via RealInvestmentAdvice.com,

More debt equals less growth. In October, I discussed the “2nd Derivative Effect” and the ongoing cost of the stimulus. With the passage of the $1.9 trillion “American Rescue Plan,” will the math of debt to growth change?

Now, even Deutsche Bank credit strategist, Stuart Sparks, got the memo.

“History teaches us that although investments in productive capacity can in principle raise potential growth and r* in such a way that the debt incurred to finance fiscal stimulus is paid down over time (r-g<0), it turns out that there is little evidence that it has ever been achieved in the past.

The chart below illustrates that a rising federal debt as a percentage of GDP has historically been associated with declines in estimates of r* – the need to save to service debt depresses potential growth. The broad point is that aggressive spending is necessary, but not sufficient. Spending must be designed to raise productive capacity, potential growth, and r*. Absent true investment, public spending can lower r*, passively tightening for a fixed monetary stance.”

Such is a logical conclusion, but one widely dismissed by economists and politicians. However, some fundamental analysis will underscore Mr. Sparks’ comments.

A Review

To keep some consistency in the analysis, let’s review the actions to date.

As the economy shut down in March of last year due to the pandemic, the Federal Reserve flooded the system with liquidity. At the same time, Congress passed a massive fiscal stimulus bill that extended Unemployment Benefits by $600 per week and sent $1200 checks directly to households.

In December, Congress passed another $900 stimulus bill extending unemployment benefits at a reduced amount of $300 per week, plus sending $600 checks to households once again.

Now, the latest iteration of Government largesse comes in a solely Democrat supported $1.9 trillion “spend-fest.” Out of the total, only about $900 billion goes to consumers in the form of $400 extended unemployment benefits and $1400 checks directly to households. The remaining $1.1 trillion will have little economic value as bailing out municipalities and funding pet projects doesn’t boost consumption.

Using current economic data, we can calculate estimates for the estimated impact of the economy’s stimulus through 2021. As shown in the chart below, in Q3, the inflation-adjusted GDP surged 29.91% from the Q2 reading of -35.94%. As stimulus ran out, Q4 GDP only increased by 3.95%. If we assume that Q1 will increase by the Atlanta Fed GDPNow estimate, GDP will show an 6.2% advance. That advance is the result of the $900 billion stimulus bill in December.

Add-In Federal Spending

If we assume the next round of direct checks to households hit by April, GDP will rise by 6.67% in the second quarter. In other words, the “2nd derivative effect” of a larger economy reduces the rate of change from the stimulus and its ability to create growth.

The chart below adds the percentage change in Federal expenditures to the chart for comparison. The 41% jump in expenditures in Q1 is from the combined $900 billion and 1/3rd of the latest stimulus bill. The remainder of the newest bill is then spread into Q2 and ending in Q3 of 2021. At such time Federal spending is assumed to return to is $4.5 trillion quarterly run rate.

We will revise these estimates as data becomes available. However, based on previous stimulus bills’ impact, we have a relatively high degree of confidence in our forecasts.

Estimated Impact

Economists estimate the latest stimulus bill could add nearly $1 trillion to nominal growth (before inflation) during 2021. While such a surge in growth would be welcome, it represents just $0.50 of growth for each dollar of new debt.

Such a high growth estimate also assumes that individuals will quickly spend their checks in the economy. The hope is that as vaccines become available, individuals will unleash their “pent-up” demand from the last year.

While that could indeed be the case, there are also other facts to consider.

For example, following the initial stimulus bill’s passage, following the shutdown of the economy, many workers assumed their job loss was temporary. However, a year later, unemployment remains high, and many temporary layoffs have become permanent. Such may well change individuals’ spending behavior, leading them to pay off debt, back rent, late mortgage payments, or save just in case employment remains elusive.

Furthermore, much of the “pent up” demand was already pulled forward by the previous two stimulus plans. We have already witnessed robust increases in manufacturing and services data suggesting consumers have been at work spending money over the last few quarters. The recent surge in retail sales confirms the same.

As discussed previously, while the next American Rescue Plan will be roughly the same size as the original CARES Act, its impact on the economy will be less.

The Second Derivative

Such is the “second derivative” effect we explained previously.

“In calculus, the second derivative, or the second-order derivative, of a function (f) is the derivative of the derivative of (f.)” – Wikipedia

In English, the “second derivative” measures how the change rate of a quantity is itself changing.

I know, still confusing.

Let’s run an example:

As Government spending grows sequentially larger, each additional round of expenditures will have less and less impact on the total. Going back to 2016, not including the CARES Act, the Government increased spending by roughly $50 billion each quarter on average. If we run a hypothetical model of Government expenditures at $50 billion per quarter, you can see the issue of the “second derivative.”

In this case, even though Federal expenditures are increasing at $50 Billion per quarter, the rate of change declines as the total spending increase.

More Leads To Less

The following chart shows how the “second derivative” is already undermining both fiscal and monetary stimulus. Using actual data going back to Q1-2019, Federal Expenditures remained relatively stable through Q1-2020, along with real economic growth. However, in Q2-2020, with our estimates through 2021, Federal Expenditures will double. However, economic growth rates will slow quickly after the stimulus expires.

The chart below shows the inherent problem. While the additional fiscal stimulus may boost short-term economic growth, its impact becomes less over time.

However, this is ultimately the problem with all debt-supported fiscal and monetary programs.

A Slower Growth Trend

As stated, even with the additional stimulus package, the outcome will be muted. If we assume our current estimates for GDP growth over the next 4-quarters, which align with mainstream consensus, growth will quickly fade back to long-term trends.

As noted above, it requires increasing levels of debt to generate lower rates of economic growth. The chart below shows the previous and estimated CARES Acts and their impact on GDP growth.

To understand this better, we can view it from how many dollars it requires to generate $1 of economic growth. Following the economic shutdown, when economic activity went to zero, each dollar of input had a more considerable impact as the economy restarted. However, going into 2021, economic activity has already recovered and started to stabilize at a slightly lower level than seen previously.

Given that stabilization of activity, it will require more dollars to generate economic growth in the future. As shown, it will need nearly $5.50 of debt-supported expenditures to create $1 of economic growth.

Here is the exciting part. That is NOT a new thing. As I discussed previously, “The One-Way Trip Of American Debt,”  the economy requires $5.01 of debt to create $1 of growth. While not a great return on investment, it will worsen as debt continues to retard economic growth.

You Can’t Use Debt To Create Growth.

As Mr. Sparks states, more debt doesn’t lead to more robust economic growth rates or prosperity. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the change in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

Another way to view the impact of debt on the economy is to look at what “debt-free” economic growth would be. In other words, without debt, there has been no organic economic growth.

The economic deficit has never been more significant. For the 30 years from 1952 to 1982, the economic surplus fostered a rising economic growth rate, which averaged roughly 8% during that period. Such is why the Federal Reserve has found itself in a “liquidity trap.”

Interest rates MUST remain low, and debt MUST grow faster than the economy, just to keep the economy from stalling out.

The deterioration of economic growth is seen more clearly in the chart below.

From 1947 to 2008, the U.S. economy had real, inflation-adjusted economic growth than had a linear growth trend of 3.2%.

However, following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Unfortunately, instead of reducing outstanding debt problems, the Federal Reserve provided policies that fostered even greater unproductive debt and leverage levels.

Following the 2020 recession, the economic growth trend will again decline below the previous growth trend. Even with our more optimistic assumptions about economic recovery, the trend of economic growth will weaken. Such is simply a function of the massive amounts of debt added to the overall system, which will retard future economic growth.

Pulling Forward Consumption Isn’t Sustainable.

Our conclusions from the initial analysis remain the same:

“The ‘trap’ that lawmakers, along with the Fed, have now fallen into is that ‘stimulus’ only pulls forward ‘future consumption.’ As we saw after the initial CARES act, as soon as financial supports evaporated, so did economic growth.

The hope over the last decade was the economy would eventually “catch fire” grow organically. Such would allow Central Banks to reverse monetary supports. However, such has never occurred. Each time Central Banks reduce monetary supports, the economy stalls or worse.

It is likely that “something has gone wrong” for the Federal Reserve. The limit of its ability to pull-forward future consumption through monetary interventions has been reached. Despite ongoing hopes of ‘higher growth rates’ in the future, such will likely not be the case until the debt overhang gets cleared.”

While the U.S. economy will indeed exit the recession in 2021, it may be a statistical result rather than an economic recovery leading to broader prosperity.

The most significant risk of the latest stimulus package is a surge in inflationary pressures, which undermines the stimulus’s benefit. That concern will manifest itself as a stagflationary environment where wages remain suppressed while costs of living rise.

Due to the debt, demographics, and monetary and fiscal policy failures, the long-term economic growth rate will run well below long-term trends. Such will only continue to widen the wealth gap, increase welfare dependency, and socialism continuing to usurp the “golden goose” of capitalism.

Tyler Durden Sat, 04/10/2021 - 11:10

Alibaba Slapped With $2.8 Billion Anti-Trust Fine As Analysts Ponder Whether Worst Is Over

Chinese anti-trust regulators have just slapped Alibaba with a record RMB18.2 billion ($2.8 billion) fine after concluding that the Chinese e-commerce giant had abused its market dominance for the sake of profit at the expense of Chinese society.

The FT reported that China's State Administration of Market Regulation announced the penalty on Saturday. It was set at 4% of Alibaba's 2019 revenues, amounting to a slap on the wrist. Alibaba was meant to "carry out a comprehensive rectification" drive on its platform, a reference to what antitrust regulators deemed the company's primary sin: forcing merchants to sell exclusively on its Tmall and Taobao online shopping platforms. The review is intended to force Alibaba to strengthen its legal controls and compliance with the new antitrust framework. Alibaba has 15 days to submit a report detailing changes to this "illegal behavior. In a statement, Alibaba said it "sincerely accepted" the penalty.

A Chinese antitrust lawyer, who asked to remain anonymous, said the fine "was meant to teach Alibaba 'don’t think you can do whatever you want,' but [would] not materially harm the business." He noted the penalty was not as large as it could have been and was limited to Alibaba’s ecommerce operations, rather than its other industry-spanning operations.

In a roundup of commentary from domestic lawyers, academics and analysts, Reuters quoted Wu Ge, director at the Beijing Zhongwen law firm, who cautioned that the fine was a message not only to Alibaba, but to Chinese consumers.

“The fine indicates that internet platforms should also obey the laws and create real value for consumers - not just chase profits or make profitability their top priority.

The Communist party’s People’s Daily, the party's most influential mouthpiece inside China, said the fine represented a "normative correction for the company’s development, a clean-up and purification of the industry environment, and a strong defence of fair competition."

"It is an important action to safeguard fair market competition and quality development of internet platform economies," the company said. "It reflects the regulators’ thoughtful and normative expectations."

Analysts said the fine alone would not significantly affect Alibaba’s operations. The company has $48 billion of cash on its balance sheet as of the end of 2020 and earned $24 billion in net profit last year alone, another reason the fine is merely a slap on the wrist.

But Li Chengdong, chief executive of Dolphin Think Tank, was the fact that Alibaba had been found guilty of serious abuses, meaning it would be more likely to yield in future regulatory disputes over tax and counterfeit goods. "Whereas Alibaba used to have a strong, assertive stance with regulators, now it will be on the back foot," Li said.

The fine likely won't be the last handed down by anti-trust regulators to one of China's dominant tech behemoths: Tencent, whose stock is still reeling from the Archegos blowup, has also been targeted for an anti-trust 'review'.

The crackdown, which burst into public view last October after the CCP scuttled the IPO/spinoff of BABA's Ant Group, a financial group focused on providing payments and loan services to the Chinese population via smartphone apps. Ant is now facing restrictive new regulations that analysts say will hamstring its growth.

Investors will be watching to see how the fine impacts BABA's shares, which have been struggling in recent months as the anti-trust crackdown and broader pressures facing Chinese stocks weighed on demand.

While some analysts dared to suggest that the "worst is over" for Alibaba, others pointed out that China's shifting regulatory framework would likely help empower Alibaba competitors like Pinduoduo, an upstart online retailer that overtook Alibaba's annual shopper count last year, with 788 million people buying on its platform, vs. 779 million for Alibaba.

Whatever regulators have in store for Alibaba, it appears Beijing isn't yet finished punishing the company's founder and longtime leader, Jack Ma, as authorities have just halted enrollment at a business school Ma founded a few years back that has become one of the most prestigious academic institutions in the country.

Tyler Durden Sat, 04/10/2021 - 10:45

What Could Go Wrong? 5 Ideas...

From Nicholas Colas of DataTrek Research

Today we offer up a list of 5 negative scenarios for US/global equities. In no particular order: 1) markedly higher interest rates, 2) below-expectation US consumer spending, 3) heightened geopolitical risks once militaries/non-state actors are vaccinated, 4) US Big Tech regulation and 5) a raft of better investment opportunities that take capital away from global equities. We’re still bullish because we believe fiscal/monetary policy more than compensates for expected value of these downside scenarios.

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Today’s Markets topic is "What could go wrong in US/global equity markets over the next 12-24 months?" As much as we’re still positive on risk assets, it always pays to consider the downside case.

Five scenarios to consider: #1: The easiest negative argument for stocks is also the simplest: materially higher interest rates begin to hurt equity valuations.

Back in the 1980s, the Shiller PE for the S&P 500 was 15-20x when 10-year Treasury yields were 8-9 percent. That PE is now 30-35x in large part because yields are 1.5 – 2.0 percent. Even though the S&P today is dominated by stronger companies (Big Tech has big moats) now than in the 1980s, higher discount rates will absolutely hurt equity valuations. Maybe not a lot, but everything in capital markets happens at the margin.

Future Federal Reserve policy is also a potential pitfall. Yes, Chair Powell has promised to keep rates low, but that can’t go on forever and markets know that. That’s why we focus on 5-year Treasury yields as an early warning sign. Keeping Fed Funds at zero for the next 2 years means very little if there’s a series of 50 basis point rate hikes in the offing during 2023 – 2024.

Summary: higher rates will come because of higher inflation and, while there’s good arguments on both sides of the “low vs. high” debate, in the end “higher inflation/rates” is a very real possibility. It has been decades since that was the case, and how badly equity markets respond to this new framework is very hard to predict.

#2: US consumers’ spending patterns prove less predictable than consensus expectations.

There’s a “roaring 20s” analogy making the rounds which posits that the 2020s will resemble the post-WW I 1920s, but that’s a fundamental misreading of history. Wartime, for all its horrors, is typically a period of full employment. The 2020 pandemic era was certainly not that. Further, in the 1920s the US repaid several large war bond offerings which spurred both consumer spending and stock market speculation. While that may sound familiar, there was virtually no consumer debt at the start of the roaring 1920s, unlike today.

The more correct analogy might be to what the Great Depression did to US consumer psychology: increasing the propensity to save and shunning unnecessary debt and expenses. Much of the market’s enthusiasm over future earnings increases relies on the US consumer returning to pre-pandemic form as soon as they are able. Being long the US consumer over the last 40 years has been a great bet, to be sure. But simply assuming that everything will quickly return to the status quo ante is potentially a serious blind spot for markets.

Summary: the weight of the global post-pandemic recovery rests entirely on the US consumer. Europe is in no place to shoulder any of that load, and China is not running its 2010 playbook. Markets think they have this call down pat, hence the recent rally to new highs. At a +21x forward multiple on the S&P 500, they’d better be right.

#3: The end of the “Pandemic Peace Dividend”.

As long as the virus was circulating around the world and there was no proven vaccine, no country could sensibly consider large scale military action. First, putting thousands of people in close contact would spread the disease. Second, every medical professional was needed to treat virus patients and that included military doctors and nurses. Now that vaccinations are underway, countries and non-state actors can inoculate military personnel and execute Clausewitz’s “diplomacy by other means”.

Summary: geopolitical risk is always out there, but last year it was forced as far to the sidelines as it has been in decades or perhaps even centuries. How, if, or when it comes to the fore is always hard to predict, but 2021 – 2022’s odds of a geopolitical shock are materially worse than 2020’s.

#4: Tech regulation/index concentrations.

Large Cap Tech + AMZN, FB, GOOG and TSLA is 38 percent of the S&P 500 and 35 percent of total US equity market cap. The industry faces a very unfriendly US/global regulatory environment at the moment, even if stock prices say otherwise.

China presents a cautionary tale on this count. The MSCI China Index is down 16 percent from its February highs. Leading that decline are Tencent and Alibaba, which are each down 17 percent and have a collective 29 percent weighting in the index. Note that they are not really underperforming. Rather, the Chinese government’s sudden increase in tech sector regulatory scrutiny is hitting overall investor confidence.

Summary: markets are relying on Big Tech’s phenomenal profitability to fully offset the business risk created by stronger regulation, but that has not worked in China so it’s valid to ask if it will insulate US tech stocks once Washington gets in gear on this issue.

#5: Winning ideas may not be the “right” ideas in terms of index-based investing.

For example, which would you rather own for the next 2 years:

• The virtual currency that begins with “B”, or a major global stock market index like the S&P 500, MSCI EAFE or Emerging Markets?

• A newly IPO-ed Coinbase, or JP Morgan? Even though Coinbase is very profitable, it won’t be in the S&P 500 for a year due to seasoning requirements. JPM is 1.4 pct of the index right now.

• PayPal, or the S&P large cap Financials sector? PYPL is just 0.9 pct of the S&P; Financials are 11.2 pct.

• A basket of late-stage VC-funded disruptive tech companies, or the NASDAQ 100 (QQQs)?

Summary: there’s no shortage of capital in the world, but there’s also never been a greater variety of places to put it.

Virtual currencies alone are a $2 trillion parking lot, and the recent NFT craze shows this ecosystem can still pull in fresh capital. We’ll likely have a record year for US IPOs, but none of them will hit the S&P 500 until 2022 at the earliest. In other words, a lot of financial assets can do well without the S&P seeing any benefit since correlations typically remain low during the middle part of an economic recovery. In fact, capital may leave US stock indices looking for greener pastures elsewhere.

Pulling all this together: the goal today was to present 5 reasonable bear cases and let you decide how likely they might be. From our perspective, they’re all valid to some degree and others (like US tax policy) may not be as discounted in stock prices as we think. Ultimately, we’re still positive on US stocks because we believe fiscal and monetary policy plus corporate earnings leverage offsets these potential outcomes sufficiently to make the risk-reward calculus favorable. Put another way, the expected return from policy actions is greater than the expected return of the risk factors we’ve outlined today.

Tyler Durden Sat, 04/10/2021 - 10:20

 US Homes "Snatched Up Right Away" As Market Drained Of Supply 

There has been a clear shift in market mood and sentiment ever since the COVID pandemic: whereas the Fed smashed mortgage rates to record lows, and the federal government delayed the foreclosure wave via forbearances. On top of this, socio-economic chaos in major metro areas resulted in an urban exodus like never before. 

This has led to a shortage in supply and a fierce bidding war that almost half of US homes are selling within a week of hitting the market, according to a new Redfin report.

Daryl Fairweather, Redfin's chief economist, said, "new listings are getting snatched up right away." 

"First it was, the faster you move, the more of an edge you have. Now if you don't put in an offer five days after it's listed, you're not going to be considered at all," said Fairweather

In the report, he said the housing market "is more competitive than we've ever seen it." More or less, today's housing market is a speculative frenzy powered by super cheap borrowing rates (thanks Powell) and ultra-low supply. 

Fairweather indicates the red hot demand can't continue forever and warns: "we're nearing a peak in terms of how fast demand and prices can grow." 

Besides record-low mortgage rates and tight supply, the implosion of liberal cities, spiraling into an epidemic of violence following last year's defund the police movement, resulted in one of the most significant urban exoduses of city dwellers. This has fueled housing markets in suburbs and rural communities, pushing prices up even further. 

With builders unable to build fast enough, more and more prospective homebuyers fight over a smaller pie of listed homes. Redfin data shows the average US home is selling above the listing price as a fierce bidding war has ensued in the spring housing market cycle. In areas like Northern California, homes sell for 107% of the asking prices.

Source: Bloomberg 

Buyers have become desperate and offer to wave inspections, pay seller costs, and throw in extra perks to lock in a deal. 

The speculative frenzy has ignited US home prices in 20 major cities, up a shocking 11.10% year-over-year. 

This is the fastest YoY rise since March 2014.

Away from the 20 major cities, prices are rising even faster, up 11.22% - the fastest YoY price appreciation since Feb 2006...

Jim Black, a broker who works in Worcester, Massachusetts, told Bloomberg many houses "are selling in a couple of days with multiple offers, sometimes 10% over list price."

"It's as crazy as it has ever been," Black said. 

There have been reports of buyers in Atlanta writing personal letters and offering gifts of as much as $2,000 just for accepting their offer, said Andrew Kolodey, a Redfin agent.

Allison Health, a realtor with Baltimore-based Northrop Realty, said the housing market is absolutely on fire, and low inventories in the Baltimore Metropolitan Area have unleashed bidding wars that have resulted in soaring home prices. She said the only way to secure a deal is to put in a contract well above the listing price, offer to pay closing costs and wave inspections. 

Readers may recall, one home in Toronto saw 112 showings and received more than 17 offers.  

While Redfin's chief economist Fairweather warns the housing market is possibly overheating, there are early indications homebuyer demand could soon be waning. We've seen this story before, and it never ends well. 

Tyler Durden Sat, 04/10/2021 - 09:50

Frederick Forsyth Says Government Has Launched "Campaign Of Mass Fear" Against British Public

Authored by Paul Joseph Watson via Summit News,

Iconic author Frederick Forsyth has accused the UK government of waging a “campaign of mass fear” against the British public by using psychological methods to ensure compliance with lockdown that resemble those used against East Berliners in the 1960’s.

Forsyth was responding to an article published in the Telegraph which exposed the “covert tactics” being used by the British government to frighten the public into complying with COVID regulations.

The article quoted a retired NHS consultant clinical psychologist who warned that there was “growing concern within my field about using fear and shame as a driver of behaviour change.”

Gary Sidley and 46 of his colleagues wrote to the British Psychological Society to express “concerns about the activities of Government-employed psychologists … in their mission to gain the public’s mass compliance with the ongoing coronavirus restrictions.”

The letter states that the UK government is deploying “covert psychological strategies – that operate below the level of people’s awareness – to ‘nudge’ citizens to conform to a contentious and unprecedented public health policy.”

Commenting on the article, Frederick Forsyth, author of classic thrillers such as The Day of the Jackal and The Odessa File, wrote to the Telegraph to express his alarm about how the British public had been terrorized by lockdown propaganda.

“Congratulations to the Telegraph and Gordon Rayner for revealing that the campaign of mass fear that reduced a once brave nation to trembling terror was deliberately organised to secure obedience to the policy of lockdown,” wrote Forsyth.

“I have only once before seen anything like it. This was when I was posted to East Germany in 1962. Such a brainwashing tactic was employed to frighten East Berliners into believing that the Berlin Wall was a defensive measure to protect them from tiny West Berlin, and that the Stasi was their guardian. The wall was of course an instrument of enslavement.”

“I never thought that the government of a country whose uniform I once wore with such pride would sink so low. Those responsible should be identified without delay and ousted from all office over us.”

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Tyler Durden Sat, 04/10/2021 - 09:20

"Lost Golden City" Rises From The Egyptian Sand

Archaeologists unearthed a 3,000-year-old city in Egypt known by some as the "lost golden city." The ancient city's actual name is called "The Rise of Aten," which is located in the desert outskirts of Luxor, a city on the east bank of the Nile River in southern Egypt.

"The Egyptian mission under Dr. Zahi Hawass found the city that was lost under the sands," the excavation team told CBS News. "The city is 3,000 years old, dates to the reign of Amenhotep III, and continued to be used by Tutankhamun and Ay."

Hawass said the discovery is one of the "largest" ancient cities ever found in Egypt that dates back to the golden age when pharaohs ruled the land. 

The excavation crew began operations in September 2020, between the temples of Ramses III and Amenhotep III near Luxor, and within weeks, they uncovered parts of the city. 

"Within weeks, to the team's great surprise, formations of mud bricks began to appear in all directions," he said. 

Amenhotep III, one of Egypt's most powerful pharaohs, ruled between 1391 to 1353 BC.

"The discovery of this lost city is the second most important archaeological discovery since the tomb of Tutankhamun," Betsy Brian, professor of Egyptology at Johns Hopkins University in Baltimore, US, said.

Brian said the ancient city "gives us a glimpse into the ancient Egyptians' life" when Egypt was at its most prosperous. 

Following seven months of excavations, the team has uncovered multiple neighborhoods, and within, it has found a complete bakery with ovens and storage containers. The team also found administrative and residential districts. 

"What they unearthed was the site of a large city in good condition of preservation, with almost complete walls, and with rooms filled with tools of daily life," Hawass said. 

CBS noted the team also found pottery vessels, jewelry, scarab beetle amulets, and bricks with the seal of Amenhotep III. 

The excavation team's next objective is to "uncover untouched tombs filled with treasure," said Hawass. 

Only further excavations will uncover what lead to the demise of the ancient city more than 3,000 years ago. 

Video: Inside "Lost" Egyptian City

You never know what the sands of Egypt will hide - apparently a lost city that may rewrite history books. 

Tyler Durden Sat, 04/10/2021 - 08:45

Greenwashing The Ugly Truth: Box-Ticking ESG Investment Stupidity Exposed

Authored by Bill Blain via MorningPorridge.com,

“Give a man a fish and he will eat for a day, teach him to fish and he will destroy the planet...”

Seaspiracy is a shocking, flawed, yet critical film. It should set the market thinking about what sustainability really means, addressing how we skirt the real issues on climate change and environmental degredation. It should provide a much-needed kick up the a**e to box-ticking ESG investment stupidity.

It’s the weekend, so I am allowed to have a rant...

If you haven’t yet watched Seaspiracy, the Netflix shock documentary about the global fishing industry – then I suggest you do. It is an impact film. It might just be the most important documentary you watch this year. If you think the global environment matters, and you aren’t watching what’s happening to the oceans, then you are looking in the wrong direction.

Ostensibly Seaspiracy is a shock-doc about how the fishing industry is destroying the planet. For the purposes of the Morning Porridge, it’s about the exposure of greenfoolery on a massive scale – waking us up to difference between what we think we know, and what we don’t. We unquestioningly accept fishing is good and wholesome, enabling bogus ideas and concepts that claim to support the environment, but which are little more than environmental, and often financial rip-offs.

Seaspiracy should set you thinking about the scale of damage being done to the global environment and economy that we are doing nothing about in the Oceans. It is going to shake many long-held opinions about focus, direction and sanctions within the ethical investment industry. Basically, forget saving the planet if we don’t save the oceans first.

Last night I sat down to watch Seaspiracy. I’d already read about it. It was not easy viewing.

There have been a lash of accusations that interviewees have been taken out of context, their quotes misused and manipulated to make them appear foolish. Many of the facts it glibly presents have been questioned. It’s been made in the style of Michael Moore on crack-cocaine, spiced up with exaggerated naivety and fantastically done shocking cinematography. Call me a cynic, but it feels like the young director Ali Tabrizi, a Brit, carefully choregraphed his run-ins with authorities for best dramatic effect. For every positive comment about the film, there is dissent.

None of that matters. It is still a film you must watch.

What matters is the film raises some very real, troubling and difficult questions for an investment community besotted with buzzword concepts like sustainability, environmental protection and social responsibility. If you are stressing about planting a tree every time you fill up the Range Rover – as I do – then you are probably worrying about all the wrong things. The environmental damage inflicted on the oceans is a magnitude higher than everything happening on land – and we are doing nothing about it.

If we want to clear CO2 from the atmosphere – then protecting the oceans will be the way to do it.

I’ve written before about the need for ocean clean-up and protecting it from plastic pollution. As a sailor, I’ve seen plastic floating in the English Channel and Irish Seas. I’ve joined beach-clean ups. I’ve refused plastic straws and use metal drinks bottles. And I’ve been pretty much sating my conscience and doing zero good.

The reality is the bulk of plastic pollution at sea is from the fishing industry. 46% of the plastic floating in the oceans is discarded fishing nets. (I should know that; I got one wrapped around my keel a few years ago, it took lumps out the trailing edge.) Plastic straws are 0.03%, but it’s good for the middle classes to feel they are doing something. Mrs Middle-Class Putney will stop her kids drinking SunnyD with its little plastic straw, tell her friends to join her in saving the planet, while feeding her little darlings fish fingers caught by the Atlantic Dawn – check out the trawler from hell.

We really do need to think about the oceans and the effect we are having on them. 70% of the planet’s surface is Ocean. Its role in CO2 absorption is increasingly understood to dwarf rain forests. It’s an incredibly complex biosphere. It relies on whale poo to fertilise plankton, which sequester carbon before sinking to the bottom, aided by the movement of marine like up and down the water column creating powerful downdrafts. It’s a delicate organic machine we barely understand. Yet we rip it up on a daily basis – as the documentary makes absolutely clear.

Some of the filming is shocking – like the butchery of whales in Japan and The Faroes. However unpalatable watching whales being slaughtered is, Mr Tabrizi gives a thoughtful Faroe whaler time to make ethical points questioning the moral equivalency of the killing of a single porpoise versus the death of a 1000 chickens. It’s a very moot point – man is an omnivore, we kill animals as part of our diet. There are sustainability implications around the killing of a wild animal for versus the costs of raising and then slaughtering thousands of battery chickens.

But what’s going on in the oceans beggars belief. 2.7 trillion fish being hoovered up from the seas every year, much of it being “by-catch” which is thrown away dead. Bottom crawling trawlers ripping up 3.9 bln acres of sea-bed and everything living on and off it every year. The unsustainability of “sustainable” fish farming and the waste it produces. The destruction of coastal mangroves to factory farm shrimps and prawns. The social costs of fishing slavery. It’s all there in the film.

Then there is the money being made from sticking “dolphin friendly” or “sustainably caught” on tins of fish. None of it means anything. Spokesmen for the organisations that validate such claims were interviewed and said some foolish things – which are used in the film. They were unfairly ambushed – but that’s not the point. There is no guarantee that tin of tuna didn’t cost dozens of dolphins and hundreds of sharks their lives.

Claims that current industrial scale fishing is “sustainable” were conclusively debunked by the programme. Sustainability is a buzzword glibly used around the globe to greenwash environmental destruction. It’s been very easy for the markets to persuade itself its doing good because it uses terms like sustainable. That is not enough.

I’ve gotten myself into trouble a number of times over ESG investment, Corporate Social Responsibility and Sustainability.

I was asked to take part in an ESG panel last year, but the invite evaporated after I sent the organisers some Morning Porridges criticising the basis of ESG investment, suggesting it has become a series of formulaic, bureaucratic box-ticking excuses for ill-considered investment decisions.

I’m happy to say it again. Whole swathes of the “ethical investment overlay” are anything but. They dominate investment committee thinking. Much of it is overkill, stifling debate and discouraging questions. To me, it’s dead simple: invest in companies where the management understands and commits to doing good.

I got into particular trouble with one fund last week after I suggested BAT might deserve a second look. Yes, tobacco is bad, and smoking kills. But, smoking is a personal choice, BAT pays its farmer suppliers in developing nations fairly, supports them to farm sustainably, and is investing heavily in less unhealthy smoking options. The fund manager unsubscribed – offended I would suggest it.

If you are sitting on a bank’s ESG desk, or a CSR investment committee, or claim to care about climate, the environment, social or animal welfare…. then you really need to keep learning about it in the broad sense. I think Seaspiracy is a flawed film, it looks and feels staged, and it’s clear some of it is out of context – but it’s still a critically important documentary that should set you thinking…

This morning’s rant is not about the small fishermen we see on TV plying their trade from quaint Cornish harbours, but the industrial pillage of the sea by massive factory trawlers. Yet, the local guys will no doubt suffer as the middle classes turn on them.

This morning I “trawled” the internet for reviews of the programme. It was fascinating – I came across well written articles from popular mass-market magazines like Hello and Marie-Claire that chock full of quotes from readers who’ve watched Seaspiracy saying things like: “have given up eating fish with immediate effect”, “fishing is responsible for climate change”, “we’ve been kept in the dark”, or “the world is ignorant to the truth”. My daughter – who demanded I watch it – isn’t going to eat fish ever again.

It’s a film that is already having an impact.

Personally – I live near to a brilliant fishmonger, and I know they collect direct from small local boats. But I might not be buying frozen prawns again, and I’ve gone right off  the sashimi-quality tuna that’s sustained us through lockdowns.

Tyler Durden Sat, 04/10/2021 - 08:10

Northern Ireland Violence Worst In Decades; Fears Of "The Troubles" Return 

Sporadic rioting across several cities and towns in Northern Ireland has resulted in at least 70 injured police officers. The violence is some of the worst in decades as governments in Belfast, London, and Dublin have denounced the social unrest, according to BBC. 

Unrest broke out a week ago amid rising post-Brexit tensions. A more immediate catalyst was a decision a few weeks back by public prosecutors not to charge anyone with alleged breaches of COVID regulations at an IRA funeral that sparked unionist outrage.

The unrest began on Mar. 29 in a small city in Northern Ireland called Londonderry. Since then, protests and rioting have spread to Belfast, Carrickfergus, Ballymena, and Newtownabbey.

Source: BBC 

The rioting has mainly been loyalist youths hurling petrol bombs, bricks, and fireworks at police officers and their vehicles. But on Wednesday, the chaos intensified into sectarian fighting over a peace wall in west Belfast that separates Protestant loyalist communities from predominantly Catholic nationalist communities who want unification with Ireland. 

Source: BBC 

Irish nationalist and pro-British loyalists clashed at the peace wall, igniting fears about the revival of the "The Troubles," a dark period when both sides fought a low-level war against each other late 1960s to the late 1990s. The conflict claimed the lives of nearly 3,600 people as nationalists and unionists fought. At times, the conflict spilled over into the Republic of Ireland, England, and mainland Europe.

"We are gravely concerned by the scenes we have all witnessed on our streets," the compulsory coalition, led by rival pro-Irish Catholic nationalists and pro-British Protestant unionists, wrote in a statement.

"While our political positions are very different on many issues, we are all united in our support for law and order and we collectively state our support for policing," the statement continued.

Northern Ireland's assistant chief constable, Jonathan Roberts, said several hundred people on both sides of the wall were responsible the violence, and he accused outlawed paramilitary groups of inciting it.

"We saw young people participating in serious disorder and committing serious criminal offenses, and they were supported and encouraged, and the actions were orchestrated by adults at certain times," he said.

"Last night was at a scale we haven't seen in Belfast or further afield in Northern Ireland for a number of years," Roberts said.

In a tweet, the Police Federation for Northern Ireland called for calm, saying, "These are scenes we hoped had been confined to history."

Violence on both sides of the interface at Lanark Way now. Calm is needed on BOTH sides of the gates before we are looking at a tragedy. These are scenes we hoped had been confined to history. @NIPolicingBoard @NIOgov @PoliceServiceNI pic.twitter.com/SjtWq10UFo

— Police Federation for Northern Ireland (@PoliceFedforNI) April 7, 2021

Tensions in Northern Ireland have been growing since the United Kingdom voted to leave the European Union, creating a potential trade border between the British-ruled north and the Republican of Ireland in the south. The lack of a trade border has been the main reason why a peace deal has remained in place since 1998. 

Under the Northern Ireland Protocol of the Brexit withdrawal agreement, a trade border was placed around the Irish Sea with goods entering Northern Ireland from mainland Britain subject to European Union checks. This move infuriated unionists, who have accused London of abandoning them.

The British and Irish prime ministers held talks this week, while the Biden administration was concerned about the ongoing violence. 

British Prime Minister Boris Johnson said, "The way to resolve difference is through dialogue, not violence or criminality."

Meanwhile, Ireland's foreign minister, Simon Coveney, has called on local leaders to ease tensions.

As Philip McGowan writes, these protests have not suddenly appeared out of nowhere, but neither are they all about Brexit and the Northern Ireland Protocol. They are the culmination of a complex mix of change and a deep-rooted resistance to it, and an ingrained political and social inertia particular to this place. It’s true that some things in Northern Ireland have changed enormously for the better on a day-to-day basis since the signing of the Good Friday Agreement in 1998, but look behind that surface improvement and quickly you will see evidence that other things have not changed that much at all. Meanwhile, our politics has atrophied as it has polarised in the intervening decades.

The point remains, however, that there are huge social issues here that are not being addressed by politicians: 120,000 children are living in poverty in Northern Ireland and more than 40,000 people are on the social housing waiting list – a rise of 10% in the past year. Between 1998 and 2014, more people died by suicide in Northern Ireland than were killed during the Troubles (and of those there were 3,600), and that devastating statistic keeps growing. An endemic lack of social and economic opportunity has been added to the load carried by a new generation, who are the children of the children of the Troubles.

Could things spiral backwards? Yes, if there is a continued absence of political leadership willing to take the forward steps needed to stabilise a volatile situation. Northern Ireland has never needed better political leadership than it does right now. It also needs the UK and Irish governments to accept and adhere to their responsibilities as set out in the Agreement, because the Agreement is the roadmap to resolve Northern Ireland’s status as we move away from violence and toward peace. For the Agreement to have been overwhelmingly supported across all of this island (71% in Northern Ireland, 94% in the Republic of Ireland) was a remarkable feat. Stagnation politics since then has nurtured complacency about exactly what was achieved in 1998. Peace is an extraordinarily brittle entity. Democracy is a daily commitment to hearing and addressing the issues in front of us as they arise. It needs constant vigilance and it needs tolerance. It doesn’t always produce the desired result, so it also requires compromise. But in terms of the problems that face us, we already have the solution in our hands: we worked it out after decades of pain and loss, but we still need to implement all the Agreement’s commitments.

Northern Ireland needs leaders who accept the complexities at play in this new reality: our grave social deprivation and economic disadvantages; our shared peripheral status for decades; and the political inertia that defines our situation. All of this means economic and social problems are not being addressed, which, in turn, plays into the hands of criminal and gang elements happy to keep communities at the mercy of irresponsible and divisive forces who, I’m afraid, haven’t gone away.

Tyler Durden Sat, 04/10/2021 - 07:35

Escobar: Ukraine Redux - War, Russophobia, & Pipelineistan

Authored by Pepe Escobar via The Asia Times,

The deep state/NATO combo's using Kiev to start a war to bury Nord Stream 2 and German-Russian relations...

A Ukrainian serviceman walks in a fortified position at the front line with Russia-backed separatists not far away, in Avdiivka, Donetsk region, on April 5, 2021. Photo: AFP

Ukraine and Russia may be on the brink of war – with dire consequences for the whole of Eurasia. Let’s cut to the chase, and plunge head-on into the fog of war.

On March 24, Ukrainian President Zelensky, for all practical purposes, signed a declaration of war against Russia, via decree No. 117/2021.

Ukrainian President Volodymyr Zelensky speaks during a joint press conference with European Council President in Kiev on March 3, 2021. Photo: AFP / Sergey Dolzhenko

The decree establishes that retaking Crimea from Russia is now Kiev’s official policy. That’s exactly what prompted an array of Ukrainian battle tanks to be shipped east on flatbed rail cars, following the saturation of the Ukrainian army by the US with military equipment including unmanned aerial vehicles, electronic warfare systems, anti-tank systems and man-portable air defense systems (MANPADS).

More crucially, the Zelensky decree is the proof any subsequent war will have been prompted by Kiev, debunking the proverbial claims of “Russian aggression.” Crimea, since the referendum of March 2014, is part of the Russian Federation.

It was this (italics mine) de facto declaration of war, which Moscow took very seriously, that prompted the deployment of extra Russian forces to Crimea and closer to the Russian border with Donbass. Significantly, these include the crack 76th Guards Air Assault Brigade, known as the Pskov paratroopers and, according to an intel report quoted to me, capable of taking Ukraine in only six hours.

It certainly does not help that in early April US Secretary of Defense Lloyd Austin, fresh from his former position as a board member of missile manufacturer Raytheon, called Zelensky to promise “unwavering US support for Ukraine’s sovereignty.” That ties in with Moscow’s interpretation that Zelensky would never have signed his decree without a green light from Washington.

On March 8, 2021, US Defense Secretary Lloyd Austin speaks during observance of International Women’s Day in the East Room of the White House in Washington, DC. Photo: AFP / Mandel Ngan

Controlling the narrative

Sevastopol, already when I visited in December 2018, is one of the most heavily defended places on the planet, impervious even to a NATO attack. In his decree, Zelensky specifically identifies Sevastopol as a prime target.

Once again, we’re back to 2014 post-Maidan unfinished business.

To contain Russia, the US deep state/NATO combo needs to control the Black Sea – which, for all practical purposes, is now a Russian lake. And to control the Black Sea, they need to “neutralize” Crimea.

If any extra proof was necessary, it was provided by Zelensky himself on Tuesday this week in a phone call with NATO secretary-general and docile puppet Jens Stoltenberg.

NATO Secretary-General Jens Stoltenberg gives a press conference at the end of a NATO Foreign Ministers’ meeting at the Alliance’s headquarters in Brussels on March 24, 2021. Photo: AFP / Olivier Hoslet

Zelensky uttered the key phrase: “NATO is the only way to end the war in Donbass” – which means, in practice, NATO expanding its “presence” in the Black Sea. “Such a permanent presence should be a powerful deterrent to Russia, which continues the large-scale militarization of the region and hinders merchant shipping.”

All of these crucial developments are and will continue to be invisible to global public opinion when it comes to the predominant, hegemon-controlled narrative.

The deep state/NATO combo is imprinting 24/7 that whatever happens next is due to “Russian aggression.” Even if the Ukrainian Armed Forces (UAF) launch a blitzkrieg against the Lugansk and Donetsk People’s Republics. (To do so against Sevastopol in Crimea would be certified mass suicide).

In the United States, Ron Paul has been one of the very few voices to state the obvious: 

“According to the media branch of the US military-industrial-congressional-media complex, Russian troop movements are not a response to clear threats from a neighbor, but instead are just more ‘Russian aggression.’”

What’s implied is that Washington/Brussels don’t have a clear tactical, much less strategic game plan: only total narrative control.

And that is fueled by rabid Russophobia – masterfully deconstructed by the indispensable Andrei Martyanov, one of the world’s top military analysts.

A possibly hopeful sign is that on March 31, the chief of the General Staff of the Russian Armed Forces, General Valery Gerasimov, and the chairman of the Joint Chiefs of Staff, General Mark Milley, talked on the phone about the proverbial “issues of mutual interest.”

Days later, a Franco-German statement came out, calling on “all parties” to de-escalate. Merkel and Macron seem to have gotten the message in their videoconference with Putin – who must have subtly alluded to the effect generated by Kalibrs, Kinzhals and assorted hypersonic weapons if the going gets tough and the Europeans sanction a Kiev blitzkrieg.

French President Emmanuel Macron speaks as German Chancellor Angela Merkel looks on after a German-French Security Council video conference at the Elysee Palace in Paris, on February 5, 2021. Photo: AFP / Thibault Camus

The problem is Merkel and Macron don’t control NATO. Yet Merkel and Macron at least are fully aware that if the US/NATO combo attacks Russian forces or Russian passport holders who live in Donbass, the devastating response will target the command centers that coordinated the attacks.

What does the hegemon want?

As part of his current Energizer bunny act, Zelensky made an extra eyebrow-raising move. This past Monday, he visited Qatar with a lofty delegation and clinched a raft of deals, not circumscribed to LNG but also including direct Kiev-Doha flights; Doha leasing or buying a Black Sea port; and strong “defense/military ties” – which could be a lovely euphemism for a possible transfer of jihadis from Libya and Syria to fight Russian infidels in Donbass.

Right on cue, Zelensly meets Turkey’s Erdogan next Monday. Erdogan’s intel services run the jihadi proxies in Idlib, and dodgy Qatari funds are still part of the picture. Arguably, the Turks are already transferring those “moderate rebels” to Ukraine. Russian intel is meticulously monitoring all this activity.

A series of informed discussions – see, for instance, here and here – is converging on what may be the top three targets for the hegemon amid all this mess, short of war: to provoke an irreparable fissure between Russia and the EU, under NATO auspices; to crash the Nord Steam 2 pipeline; and to boost profits in the weapons business for the military-industral complex.

So the key question then is whether Moscow would be able to apply a Sun Tzu move short of being lured into a hot war in the Donbass.

On the ground, the outlook is grim. Denis Pushilin, one of the top leaders of the Lugansk and Donetsk people’s republics, has stated that the chances of avoiding war are “extremely small.” Serbian sniper Dejan Beric – whom I met in Donetsk in 2015 and who is a certified expert on the ground – expects a Kiev attack in early May.

The extremely controversial Igor Strelkov, who may be termed an exponent of “orthodox socialism,” a sharp critic of the Kremlin’s policies who is one of the very few warlords who survived after 2014, has unequivocally stated that the only chance for peace is for the Russian army to control Ukrainian territory at least up to the Dnieper river. He stresses that a war in April is “very likely”; for Russia war “now” is better than war later; and there’s a 99% possibility that Washington will not fight for Ukraine.

On this last item at least Strelkov has a point; Washington and NATO want a war fought to the last Ukrainian.

Rostislav Ischenko, the top Russian analyst of Ukraine whom I had the pleasure of meeting in Moscow in late 2018, persuasively argues that, “the overall diplomatic, military, political, financial and economic situation powerfully requires the Kiev authorities to intensify combat operations in Donbass.

“By the way,” Ischenko added, “the Americans do not give a damn whether Ukraine will hold out for any time or whether it will be blown to pieces in an instant. They believe they stand to gain from either outcome.”

Gotta defend Europe

Let’s assume the worst in Donbass. Kiev launches its blitzkrieg. Russian intel documents everything. Moscow instantly announces it is using the full authority conferred by the UNSC to enforce the Minsk 2 ceasefire.

In what would be a matter of 8 hours or a maximum 48 hours, Russian forces smash the whole blitzkrieg apparatus to smithereens and send the Ukrainians back to their sandbox, which is approximately 75km north of the established contact zone.

In the Black Sea, incidentally, there’s no contact zone. This means Russia may send out all its advanced subs plus the surface fleet anywhere around the “Russian lake”: They are already deployed anyway.

Russian President Vladimir Putin looks on as Novator Design Bureau director-general Farid Abdrakhmanov and Deputy Defense Minister Alexei Krivoruchko shake hands during a signing ceremony for government contracts in Alabino, Moscow region, Russia. on June 27, 2019. Photo: AFP / Alexei Druzhinin / Sputnik

Once again Martyanov lays down the law when he predicts, referring to a group of Russian missiles developed by the Novator Design Bureau: “Crushing Ukies’ command and control system is a matter of few hours, be that near border or in the operational and strategic Uki depth. Basically speaking, the whole of the Ukrainian ‘navy’ is worth less than the salvo of 3M54 or 3M14 which will be required to sink it. I think couple of Tarantuls will be enough to finish it off in or near Odessa and then give Kiev, especially its government district, a taste of modern stand-off weapons.”

The absolutely key issue, which cannot be emphasized enough, is that Russia will not (italics mine) “invade” Ukraine. It doesn’t need to, and it doesn’t want to. What Moscow will do for sure is to support the Novorossiya people’s republics with equipment, intel, electronic warfare, control of airspace and special forces. Even a no-fly zone will not be necessary; the “message” will be clear that were a NATO fighter jet to show up near the frontline, it would be summarily shot down.

And that brings us to the open “secret” whispered only in informal dinners in Brussels, and chancelleries across Eurasia: NATO puppets do not have the balls to get into an open conflict with Russia.

One thing is to have yapping dogs like Poland, Romania, the Baltic gang and Ukraine amplified by corporate media on their “Russian aggression” script. Factually, NATO had its collective behind unceremoniously kicked in Afghanistan. It shivered when it had to fight the Serbs in the late 1990s. And in the 2010s, it did not dare fight the Damascus and Axis of Resistance forces.

When all fails, myth prevails. Enter the US Army occupying parts of Europe to “defend” it against – who else? – those pesky Russians.

That’s the rationale behind the annual US Army DEFENDER-Europe 21, now on till the end of June, mobilizing 28,000 soldiers from the US and 25 NATO allies and “partners.”

This month, men and heavy equipment pre-positioned in three US Army depots in Italy, Germany and the Netherlands will be transferred to multiple “training areas” in 12 countries. Oh, the joys of travel, no lockdown in an open air exercise since everyone has been fully vaccinated against Covid-19.

Pipelineistan uber alles

Nord Stream 2 is not a big deal for Moscow; it’s a Pipelineistan inconvenience at best. After all the Russian economy did not make a single ruble out of the not yet existent pipeline during the 2010s – and still it did fine. If NS2 is canceled, there are plans on the table to redirect the bulk of Russian gas shipments towards Eurasia, especially China.

Connecting German infrastructure for Nord Stream 2 is in place. In this handout photo released February 4, 2020, by the press service of Eugal, a view shows the Eugal pipeline, in Germany. The Eugal pipeline, which will receive gas from Nord Stream 2 in the future, has reached full pumping capacity, and the second line of the pipeline has been introduced. Photo: AFP / Press-service of Eugal / Sputnik

In parallel, Berlin knows very well that canceling NS2 will be an extremely serious breach of contract – involving hundreds of billions of euros; it was Germany that requested the pipeline to be built in the first place.

Germany’s energiewende (“energy transition” policy) has been a disaster. German industrialists know very well that natural gas is the only alternative to nuclear energy. They are not exactly fond of Berlin becoming a mere hostage, condemned to buy ridiculously expensive shale gas from the hegemon – even assuming the egemon will be able to deliver, as its fracking industry is in shambles. Merkel explaining to German public opinion why they must revert to using coal or buy shale from the US will be a sight to see.

As it stands, NATO provocations against NS2 proceed unabated – via warships and helicopters. NS2 needed a permit to work in Danish waters, and it was granted only a month ago. Even as Russian ships are not as fast in laying pipes as the previous ships from Swiss-based Allseas, which backed down, intimidated by US sanctions, the Russian Fortuna is making steady progress, as noted by analyst Petri Krohn: one kilometer a day on its best days, at least 800 meters a day. With 35 km left, that should not take more than 50 days.

Conversations with German analysts reveal a fascinating shadowplay on the energy front between Berlin and Moscow – not to mention Beijing. Compare it with Washington: EU diplomats complain there’s absolutely no one to negotiate with regarding NS2. And even assuming there would be some sort of deal, Berlin is inclined to admit Putin’s judgment is correct: the Americans are “not agreement-capable.” One just needs to look at the record.

Behind the fog of war, though, a clear scenario emerges: the deep state/NATO combo using Kiev to start a war as a Hail Mary pass to ultimately bury NS2, and thus German-Russian relations.

At the same time, the situation is evolving towards a possible new alignment in the heart of the “West”: US/UK pitted against Germany/France. Some Anglosphere exceptionals are certainly more Russophobic than others.

The toxic encounter between Russophobia and Pipelineistan will not be over even if NS2 is completed. There will be more sanctions. There will be an attempt to exclude Russia from SWIFT. The proxy war in Syria will intensify. The hegemon will go no holds barred to keep creating all sorts of geopolitical harassment against Russia.

What a nice wag-the-dog op to distract domestic public opinion from massive money printing masking a looming economic collapse. As the empire crumbles, the narrative is set in stone: it’s all the fault of “Russian aggression.”

Tyler Durden Sat, 04/10/2021 - 07:00

Daily Mail Exposes Hunter Biden Bombshells After 'Tell-All' Book Holds Back

With Hunter Biden on a serious image rehabilitation tour - a 'tell all' book combined with television interviews from friendly outlets designed to invoke pity over the First Son's crack and hooker habits, the Daily Mail is now telling the rest of the story regarding the contents of his abandoned laptop after Hunter admitted it 'certainly' could be his in a Sunday interview with CBS.

If you've seen the laptop photos which leaked last October, you can probably stop here. The Mail did spare us from blurred pictures of Hunter's wang, along with several sex tapes released by exiled Chinese billionaire Guo Wengui.

After obtaining a copy of the hard drive, DailyMail.com commissioned top cyber forensics experts Maryman & Associates to analyze its data and determine whether the laptop's contents were real.

The firm's founder, Brad Maryman, is a 29-year FBI veteran Supervisory Special Agent who served as an Information Security Officer and founded its first computer forensics lab. -Daily Mail

The Mail obtained over 100,000 text messages, 154,000 emails and over 2,000 photos which were verified by top forensics experts, which reveal that Joe 'became a punching bag for Hunter's drug-fueled rants,' and 'paid his grandchildren's bills when Hunter had drained his bank accounts with prostitutes and crack cocaine.'

Hunter appeared to be obsessed with making and starring in porn films with prostitutes, videos and photos on his laptop show.

The hard drive contains hundreds of pictures of naked women and naked selfies of Hunter, as well as dozens of videos.

Hunter photographed and filmed himself, often with two prostitutes at a time, in explicit videos that he then posted on adult website Pornhub under the username 'RHEast'.

Hunter filmed himself with the women from his laptop webcam, sometimes shooting at different angles using an iPad and cell phone. -Daily Mail

The Mail also promises to release more Hunter laptop drops:

Hunter's laptop is a pandora's box of shocking revelations, explicit photos and intimate communications.In the following days, DailyMail.com will publish more shocking stories from Hunter's laptop, including:

• How Hunter blew hundreds of thousands on prostitutes, drugs and luxury cars, leaving him scrambling to avoid jail for $320k in unpaid taxes
• How five members of the Biden family have been to rehab for drug or alcohol abuse – and a stunning admission by Joe to his son
• The OTHER Biden family member planning to buy and cook crack, after falling into the disastrous addiction with Hunter
• Hunter's unconventional and unlikely relationship with his well-known psychiatrist 
• The whispered bedroom conversation with a prostitute caught on Hunter's webcam, in which he confesses he had a previous laptop stolen – by Russians for blackmail

The president's son left his 2017 MacBook Pro laptop at a Wilmington, Delaware computer repair shop in April 2019 and never returned for it.

In one text exchange between Joe and Hunter, Joe wrote "Good morning my beautiful son. I miss you and love you. Dad." To which a petulant Hunter raged at his father for "having made clear to the world that the only reason for not [running for president is your] family problems im glad to be the f***ing bullseye you painted on my back."

In another exchange, Hunter complained that Joe's advice not to defend himself publicly during his expensive divorce with ex-wife Kathleen Biden, or his affair with his brother's widow Hallie, had backfired.

"Your team just made me the uncontrollable troubled tax cheat philanderer sex and drug addict that you tried so hard to fix but couldn't yt. They just totally wrote my life away," Hunter wrote, adding "If you dont run [for president] ill never have a chance at redemption."

Joe replied with a promise to run, though hinted that maybe Hunter should probably stop getting so dramatic over texts due to them being a target.

"I'll run but I need you,' he wrote. 'H[allie] is wrong. Only focus is recovery. Nothing else... When you can and feel like it call. Positive my text etc a target. Love."

Joe Biden would announce his run for president two months later - during which Hunter's laptop contents would leak, defeating the purpose of rehabilitating the crack addict's image.

Joe would again warn Hunter not to spill his life story over text, writing "Be careful what you text. Likely I'm being hacked."

Read the rest of the report here.

And then there's this other thing Hunter failed to mention in his book or his interviews...

“Hunter Biden purchased a handgun illegally, he lied on a federal background check..”

“The question is will David Chipman arrest the President’s son? If he doesn’t... how exactly are you obligated to follow these rules?”

Great questions, Tucker. pic.twitter.com/mNbYAwzOHN

— Benny (@bennyjohnson) April 9, 2021 Tyler Durden Sat, 04/10/2021 - 05:55

24 World Leaders Call For More Globalism In Wake Of Pandemic

Authored by Steve Watson via Summit News,

Twenty four world leaders have signed a letter calling for more globalism to combat future pandemics, citing the the coronavirus outbreak as an opportunity to consign nationalism to the dustbin of history.

UK prime minister Boris Johnson, German chancellor Angela Merkel, and French president Emmanuel Macron are the leading figures behind the pledge, with 21 other heads of state signing the letter.

It states that “nobody is safe until everyone is safe,” and that a “global community” must be further implemented in order to combat ‘inevitable’ future pandemics.

“At a time when Covid-19 has exploited our weaknesses and divisions, we must seize this opportunity and come together as a global community for peaceful cooperation that extends beyond this crisis,” the letter states.

“Building our capacities and systems to do this will take time and require a sustained political, financial and societal commitment over many years,” it adds.

The letter compares the situation to the aftermath of the Second World War, and urges an end to “isolationism and nationalism”.

The pledge calls for a strengthening of the World Health Organisation’s infrastructure, despite the global health body’s documented failures in regards to the pandemic, and continued charges that it has facilitated the communist Chinese government’s lies and deceptions.

WHO director general Dr Tedros Adhanom Ghebreyesus also signed the letter, having repeatedly slammed nations including Britain and the US for putting their own populations first when it comes to recovery.

The letter specifically calls for a global treaty on pandemics to be signed to establish international ‘rules and norms’ for vaccine production and distribution, as well as coordination on ‘alert systems, data-sharing and research’.

Presumably any global treaty would also address restrictions to be put in place under future pandemics, although that is not made clear in the letter.

Below is the full Letter signed by 24 world leaders (emphasis ours):

The Covid-19 pandemic is the biggest challenge to the global community since the 1940s. At that time, following the devastation of two world wars, political leaders came together to forge the multilateral system. The aims were clear: to bring countries together, to dispel the temptations of isolationism and nationalism, and to address the challenges that could only be achieved together in the spirit of solidarity and cooperation: namely, peace, prosperity, health and security.

Today, we hold the same hope that as we fight to overcome the Covid-19 pandemic together, we can build a more robust international health architecture that will protect future generations. There will be other pandemics and other major health emergencies. No single government or multilateral agency can address this threat alone. The question is not if, but when. Together, we must be better prepared to predict, prevent, detect, assess and effectively respond to pandemics in a highly coordinated fashion. The Covid-19 pandemic has been a stark and painful reminder that nobody is safe until everyone is safe.

We are, therefore, committed to ensuring universal and equitable access to safe, efficacious and affordable vaccines, medicines and diagnostics for this and future pandemics. Immunisation is a global public good and we will need to be able to develop, manufacture and deploy vaccines as quickly as possible. This is why the Access to Covid-19 Tools Accelerator (ACT-A) was set up in order to promote equal access to tests, treatments and vaccines and support health systems across the globe. ACT-A has delivered on many aspects but equitable access is yet to be achieved. There is more we can do to promote global access.

To that end, we believe that nations should work together towards a new international treaty for pandemic preparedness and response. Such a renewed collective commitment would be a milestone in stepping up pandemic preparedness at the highest political level. It would be rooted in the constitution of the World Health Organisation, drawing in other relevant organisations key to this endeavour, in support of the principle of health for all. Existing global health instruments, especially the International Health Regulations, would underpin such a treaty, ensuring a firm and tested foundation on which we can build and improve.

The main goal of this treaty would be to foster an all-of-government and all-of-society approach, strengthening national, regional and global capacities and resilience to future pandemics. This includes greatly enhancing international cooperation to improve, for example, alert systems, data-sharing, research, and local, regional and global production and distribution of medical and public health countermeasures, such as vaccines, medicines, diagnostics and personal protective equipment.

It would also include recognition of a ‘One Health’ approach that connects the health of humans, animals and our planet. And such a treaty should lead to more mutual accountability and shared responsibility, transparency and cooperation within the international system and with its rules and norms.

To achieve this, we will work with heads of state and governments globally and all stakeholders, including civil society and the private sector. We are convinced that it is our responsibility, as leaders of nations and international institutions, to ensure that the world learns the lessons of the Covid-19 pandemic.

At a time when Covid-19 has exploited our weaknesses and divisions, we must seize this opportunity and come together as a global community for peaceful cooperation that extends beyond this crisis. Building our capacities and systems to do this will take time and require a sustained political, financial and societal commitment over many years.

Our solidarity in ensuring that the world is better prepared will be our legacy that protects our children and grandchildren and minimises the impact of future pandemics on our economies and our societies. Pandemic preparedness needs global leadership for a global health system fit for this millennium. To make this commitment a reality, we must be guided by solidarity, fairness, transparency, inclusiveness and equity.’

Boris Johnson, Prime Minister of the United Kingdom; Emmanuel Macron, president of France; Angela Merkel, chancellor of Germany; Dr Tedros Adhanom Ghebreyesus, director-general of the World Health Organisation and 21 other world leaders.

Health ministers of nations are set to meet in May at the World Health Assembly, and could discuss a global treaty there.

Tyler Durden Tue, 03/30/2021 - 10:54

9th Woman Accuses Cuomo Of Sexual Harassment, Unwanted Kiss

Another woman has accused NY Gov. Andrew Cuomo of sexual improprieties, including a forcible kiss on the lips, marking the second woman who has accused Cuomo of such a transgression. And what's more, the accuser, named Sherry Vill, has proof.

The 55-year-old accuser said Cuomo grabbed her face and kissed her on the cheek in front of her home in 2017. She described the kiss as an "inappropriate sexual gesture."

"I know the difference between an innocent gesture and a sexual one," Vill said during a virtual press conference. "I never felt as uncomfortable as I did the day Governor Cuomo came to my house. His actions were very overly sexual, highly inappropriate and disrespectful to me and my family."

She said Cuomo told her she was beautiful and acted in a "highly flirtatious and inappropriate manner."

Vill, who was married at the time of the alleged incident, said Cuomo visited her home in Greece, NY, to survey flood damage, according to her attorney, noted feminist #MeToo champion Gloria Allred.

Allred said during a press conference that she would be contacting the state AG's office to volunteer her client's cooperation with the investigation into allegations of sexual harassment by Cuomo.

Afterward, Cuomo tried to brush off the inappropriate contact as something that was normal. "He said that’s what Italians do, kiss both cheeks," Vill said.

Vill's daughter apparently took a photo of the incident and shared it on social media at the time. That marks the second photo of Cuomo delivering an ungainly kiss to an unsuspecting woman.

The governor has insisted that he never forcibly touched a woman who didn't want to be touched.

Meanwhile, the Washington Post reported new details yesterday of Cuomo's abuse of office by using state resources to fast-track COVID testing for friends and family members. Sometimes, the governor would go as far as to ask state workers to personally travel to the homes of family members and test them.

One such example of this was when Chris Cuomo, the governor's CNN anchor brother, was sick with the virus last spring. Cuomo reportedly received several hours-long visits from a state public health official and doctor, according to WaPo.

And a top state physician whose pandemic portfolio involved coordinating testing in nursing homes was dispatched multiple times to the Hamptons home of CNN host Chris Cuomo, the governor’s brother, in testing visits that sometimes stretched hours, according to two people with knowledge of the consultations.

No fewer than seven anonymous sources told WaPo that insiders including fashion designer Kenneth Cole (the governor's brother in law) were allowed to cut the line for scarce tests. They told WaPo that they were heavily pressured to meet Cuomo's demands, and even developed a special designation for priority individuals demanded by the governor.

But people familiar with the efforts said they were also told to treat individuals differently because of their connections to the governor. The individuals — who spoke at length to The Washington Post on the condition of anonymity out of fear of retribution by Cuomo’s office — described the behind-the-scenes operations and their feelings of discomfort with a system that they believed at times prioritized political connections over medical need.

During the early frenetic weeks in March 2020, officials working at testing sites rapidly assembled a system that gave special treatment to people described by staff as “priorities,” “specials,” “inner circle” or “criticals,” according to five people, including three nurses, who described how resources were redirected to serve those close to the governor and other cases that were fast-tracked.

At one of the first pandemic operations hubs in the state, the testing priority status of more than 100 individuals were logged in an electronic data sheet that was kept separate from a database for the general public, according to a person with direct knowledge of the practice.

The NY Department of Public Health denied accusations of preferential treatment. Yesterday, Cuomo announced that he would lower the minimum vaccination age to 30 as he continues to push his plans to reopen the Empire State, despite warnings from Dr. Anthony Fauci and other federal officials that states need to take it easy.

Tyler Durden Tue, 03/30/2021 - 10:38

Archegos? Argh, Chaos More Like

By Michael Every of Rabobank

I noted yesterday that the expected market turbulence caused by the Archegos sell-off was not representative of the underlying structural issues that will guide markets going forwards. I stick by that claim, but even so what a messy day it was. Some individual stocks got hit hard, and US bond yields were up, presumably due to the need to sell anything to get liquidity, while the USD see-sawed. Archegos? ‘Argh, chaos’ more like.

This overshadowed the good news that the Suez Canal is now open again. However, there is a link between the two: both stories reveal how stupid the key infrastructure of the global economy and financial system still is. ‘Too big to sail and too big to fail’, as some dub the two halves of this dyad: and Joe Public can again see our system encourages entities to get so large and complex that when a simple incident happens, everything gets stuck. Something surely needs to change, unless we are going to assume there can’t be any more ‘Argh, chaos’ “because markets”, or any more stuck giant ships in the Suez Canal “because boats”.

So, change? Fed Governor Waller spoke to the Peterson Institute for International Economics yesterday, where he rejected any suggestions the Fed was close to embracing the MMT: he wanted to “definitively put that narrative to rest. It is simply wrong”. Borrowing costs are not being kept low to help finance the government, apparently. (It’s all inflation; and unemployment; and social justice; and the climate?) Clearly there won’t be any need for an Operation Twist and Shout or for Yield Curve Control then…but can we get that in writing?

At the same time, the press reports the Biden administration is planning a further Covid relief bill separate from a key infrastructure bill to be launched Wednesday; and the latter is now rumored to be for as much as USD4 trillion, or close to 20% of GDP, funded by USD3 trillion of tax hikes on businesses and the rich, the largest hike in a generation, as opposed to the original idea of USD3 trillion in spending funded by USD1 trillion of taxes.

If the larger stimulus package is the one put forward, it means there is no sign of MMT in the White House either, because the net spend of USD1 trillion (over a decade) is hardly in the money-printing category. Instead, there is a redistributive fiscal package that presumes USD3 trillion the rich have can be spent more productively on bridges, roads, and ports, etc., than on $100m condos filled with gold-dusted caviar or stock buybacks. Cue a shift of political debate from ‘MMT’ vs. ‘no MMT’ to ‘The government doesn’t know what it’s doing!’ vs. ‘The rich do know what they are doing – turning the US into an oligarchic kleptocracy’. And may the best lobbyists win.

As a linked aside, yesterday I saw 1963 US plans for an alternative to the Suez Canal, because at the time Egypt was a Soviet client state. This was to use *530* nukes to blow a 160-mile long, 1,500 foot deep channel through Israel from its Mediterranean coast to the Red Sea, which would “probably contribute greatly to the economic development of the surrounding area”(!) That underlines the idiocy of central planning and of Cold War thinking. Which is doubly worrying given any new Cold War is again very likely going to see key global infrastructure in the hands of states not aligned with US geostrategic interests, and the US is already talking about its own Belt and Road rival (as China seems to slowly back away from the economic drain of its own). Beware Americans bearing nukes.

Yet the economic national-security Hamiltonian model, the ideas of Henry George, and the fact Eisenhower built the US inter-state highway network partially to prevent Soviet invasion from either coast, still all hold as much water as the glow-in-the-dark 160-mile long monstrosity through Israel would have.

Meanwhile, as the US and nukes and the Middle East make headlines for different reasons today, but still leaving much of Israel feeling antsy, BOJ Governor Kuroda just stated he will continue to buy ETFs within a JPY12 trillion cap “with a close eye on markets” even after Covid is over; he won’t sell the BOJ’s stock of ETFs; and the inflation target stays at 2% (ROFL!). He also thinks that it is “natural for the government to deploy fiscal stimulus flexibly, though Japan must also maintain market trust over its medium- and long-term fiscal health.” (Will the people in the market who associate Japan with long-term fiscal health please stand up?) The BOJ will also “support various entities’ efforts towards reform as Japan faces challenges in the post-Covid world”: does he mean the local Olympic Games Committee? In short, more of the same is on offer from the BOJ – which has worked so magnificently for it so far.

That’s another lesson for the US. Structural reform needs to be structural, not just cementing over river beds – or blowing up the Negev desert.

On which note, the FTSE Bond Index just announced that it is about to include Chinese government bonds (CGBs) in its world index, allowing global investors to buy both sides of the Cold War bet and all related public expenditures. But there is a sting in the tail: the FTSE CGB weighting will be just 5.25%, not the 6.5% expected, starting October 29, and this will be tapered in over 36 months, not 12 months as originally believed.

A few months ago, when China was seeing too much capital flow in for its liking, that slower pace might have been welcome. Indeed, and ironically, much of the capital that went in to Chinese markets from foreign funds is believed to have been encouraged to flow straight back out again via different channels to prevent excess appreciation pressure on the currency (and note that China’s FX reserves have hardly soared). Yet CNY and CNH are starting to move markedly lower again; and genuine capital outflows are being experienced as US yields rise, even despite bumper Covid-related trade surpluses (which will fade with the virus does). Moreover, with the geopolitical backdrop this Cold, how could this most political of all FX crosses not eventually respond in kind?

One wonders what the Fed (and ECB and BOJ) would make of any sustained move lower in CNY, given what it will mean for inflation; and the White House, given what it means for jobs.

Tyler Durden Tue, 03/30/2021 - 10:15

US Consumer Confidence Explodes Higher In March

After a mixed picture in February (expectations down, current conditions up), analysts expected a big jump in Conference Board Consumer Confidence in March... and they got it.

March Consumer Confidence exploded from 90.4 (revised lower) in Feb to 109.7 in March - the highest since March 2020.

The underlying components also smashed expectations:

• Present situation confidence rose to 110.0 vs. 89.6 last month.

• Consumer confidence expectations rose to 109.6 vs. 90.9 last month - highest since July 2019

Source: Bloomberg

Still, putting these levels in context, they are still dramatically below the pre-COVID levels of confidence...

Source: Bloomberg

Maybe with just a few more trillion dollars of helicopter cash, that Main Street confidence will catch up?

Tyler Durden Tue, 03/30/2021 - 10:04

Regulators Grill Banks About Archegos Blowup As Market Ponders Broader Risks

Traders across Wall Street and on the buy side are anxiously waiting to see if any more big block trades in names like VIAC, GXU, TME and the other constituents of Archegos founder Bill Hwang's busted portfolio will wander across the tape. As journalists, regulators and academics question how Hwang was ever allowed to take on so much leverage (a question that has yet to be thoroughly answered), Bloomberg reports that regulators have already started asking prime brokers tough questions about how this was allowed to happen.

Bloomberg reported that the prime brokers spent Monday briefing US regulators as Washington starts to dig in into a historic fund blowup that could have broader implications for market stability. According to the report, the SEC hastily summoned banks for meetings on what triggered the forced sale, while Finra, the industry self-regulator, asked brokerages about the impact to their operations and credit risks, people familiar said.

"We have been monitoring the situation and communicating with market participants since last week," an SEC spokesperson said in emailed statement. A Finra spokesman declined to comment.

But that's not all the Achegos news we're seeing Tuesday morning. Mitsubishi Financial Group has just become the latest major bank to warn about losses tied to the Archegos blowup, reporting that $300MM might be at risk. Of course, that's a paltry sum compared to the potential $2 billion claim reported by Nomura, Bloomberg.

MUFG’s securities arm said in a statement on Tuesday that it is evaluating the extent of the loss at its European subsidiary, which may change depending on market prices and the unwinding of transactions.

Mitsubishi UFJ Securities Holdings Co. said any loss won’t have a material impact on the firm’s business capability or financial soundness. A representative for the firm declined to comment beyond what it said in the statement.

Mitsubishi wasn't among the prime brokers who met last week to try and manage the unwind of Archegos's positions in a way that wouldn't saddle them all with huge losses - though Goldman and MS's decisions to break ranks with a series of block trades helped trigger the fire sale. And it's possible that more banks could come forward with losses.

Bill Hwang

As more details about the blow-up have emerged over the past 24 hours, academics like Boston University finance lecturer Mark Williams have been quoted in the press criticizing apparent shortcomings in banks' risk-management. "In this environment, where information flows quickly and you have to move quickly, this demonstrates a significant weakness on the part of Nomura’s risk management," Williams said. "Did they not understand the risks they entered into, or did they ignore them because they wanted to grow?"

Put another way: Did Archegos mislead its prime brokers about its total leverage and exposure? Or did the intense competition among PB desks incentivize them to simply ignore these risks (perhaps figuring that, if Hwang's positions went tits up, competitors would be incentivize to cooperate and work out out a solution)?

What's more, Larry Peruzzi, director of international trading at Mischler Financial says the Archegos Capital block-trade incident could lead to calls for new regulations such as limiting the size of blocks or prohibiting off-board discounted prints on the open and close, or during the first or last 30 minutes of trading. It “will be tough, though, as exchanges and investors like liquidity,” Peruzzi said in a statement reportedly emailed to Bloomberg. “These types of swings seem to be another factor in pushing more trading into passive strategies”.

At any rate, Fed Chairman Jerome Powell has repeatedly touted the resilience of post-GFC banking regs. "We actually monitor financial conditions very, very broadly and carefully. And we didn’t do that before the global financial crisis 12 years ago. Now we do," Powell said during the post-FOMC Q&A on March 17. Unfortunately for him, the biggest hedge fund blowup since LCTM has revived talk about the risks of "leverage gone wrong," as Bloomberg pointed out in a piece published last night,

Sameer Samana, Wells Fargo Investment Institute’s senior global market strategist, added that "[w]hat it does make me think of is how much leverage in aggregate has now built up in the system” in brokerage accounts, options and credit, Samana said. “If a broader stock market pullback were to take shape, especially in the more widely owned areas of technology and technology-related stocks, a much bigger unwind would have to take place."

But as Bloomberg's Brian Chappatta pointed out (and as we have mentioned several times), Archegos' use of CFDs, an opaque derivative reserved for institutional clients, allowed his firm to crank up its exposure to ViacomCBS and the other companies without needing to file ownership disclosures. The shares themselves remained securely with the banks. This arrangement, Chappatta continued, could represent "a blind spot" for regulators, and raising the prospect that the market could see more hedge fund or "family office" blowups in the near future, should equities face further broad-based selling pressure.

"The world has already been battling a once-in-a-century pandemic," Chappatta wrote. "The last thing it needs is big banks heaping on risk in search of profits, leaving someone else to hold the bag." That's well put.

While AOC and her fellow progressive Democrats haven't publicly called for a hearing, at least not yet, we imagine the big banks will swiftly turn on their client, placing the blame for what happened squarely with Achegos. Though JPM managed to escape the drama, one twitter wit captured this point with a meme.

When that Archegos Capital hearing starts on Capitol Hill... pic.twitter.com/r8gkn8B0rG

— Thornton McEnery (@ThorntonMcEnery) March 29, 2021 Tyler Durden Tue, 03/30/2021 - 09:50

Canada's Supreme Court Upholds Trudeau Climate Tax That Biden Wants To Mimic

Canadian Prime Minister Justin Trudeau, who has long been criticized by progressives (who hold the political scion in contempt as a poser and "faux-feminist") for his quiet support for Canadian Big Oil, can clearly see where the political winds in increasingly liberal Canada are blowing. And as the youthful prime minister (who is rumored to have inherited his famous good looks from Cuban revolutionary Fidel Castro) tries to foster a reputation as one of the western world's foremost climate warriors, Canadian courts have handed him a major victory.

As the world waits for a ruling on a major climate change case from the US Supreme Court, and President Biden prepares to unveil his sweeping infrastructure/climate program, the Supreme Court of Canada ruled on Thursday that Prime Minister Justin Trudeau’s national carbon price, the cornerstone of his climate policy, is entirely constitutional.

The API, an influential organization representing energy firms, announced Tuesday that it supports a carbon-pricing scheme, the first time the US energy industry has nominally supported a carbon tax. However, the organization specified that the tax should be used to encourage green energy use, not pad government coffers.

Trudeau declared that a carbon tax would be a key policy goal back in 2016, but it wasn't until 2019, after he was reelected, that the Canadian federal government set a minimum price on carbon emissions in provinces which don’t have an equivalent provincial price. The controversial program applies a price to fuel purchases by individuals and businesses with lower emissions, and on part of the actual emissions produced by companies that are responsible for large emissions, such as pipelines, manufacturing plants and coal-fired power plants.

The law was quickly challenged by the oil-rich province of Alberta as well as conservative governments in Saskatchewan and Ontario. In his ruling, the federal judge who decided the case said companies should pay a price for pollution, the AP reports.

Chief Justice Richard Wagner said in the written ruling that climate change is a real and existential threat to Canada and the entire world, and evidence shows a price on pollution is a critical element to addressing it.

"The undisputed existence of a threat to the future of humanity cannot be ignored," he wrote.

Wagner also said the Canadian provinces can’t set minimum national prices on their own and if even one province fails to reduce their emissions it could have an inordinate impact on the rest of the country. It is a split decision with six judges entirely in favor, one partial dissent and two entirely in disagreement with the majority.

Almost immediately after the ruling was handed down, Federal Environment Minister Jonathan Wilkinson issued a statement lauding the decision as "a win for the millions of Canadians who believe we must build a prosperous economy that fights climate change."

Bloomberg pointed out that the ruling is key to Canada’s goal of reaching net-zero emissions by 2050. It’s also a victory for Trudeau, who came to power in 2015 pledging to tackle climate change, but has faced strong opposition from the fossil-fuel sector and oil-rich western provinces like Alberta. Canada produces more greenhouse gas per capita than almost all the world’s top emitters.

Now, considering the timing of this decision, will we hear Joe Biden point to Canada as an example for the US to follow during his briefing Thursday afternoon?

Tyler Durden Thu, 03/25/2021 - 12:57

India Halts COVID Vaccine Exports As Novovax Delays Deal With EU

Update (1200ET): Despite AstraZeneca releasing its revised trial data earlier, Denmark has decided to extend its pause on the AstraZeneca jab.

On March 11, Denmark joined Norway, Austria, Italy and Iceland to suspend the use of the vaccine after reports of blood blots.

Originally the rollout of the coronavirus jab was paused for 14 days as a precautionary measure but Danish officials said on March 25 that this has been extended by three weeks as they conducted their own investigations.

Most European countries resumed the shots after the EU's medicines watchdog deemed it safe and effective.

In more bad news for the EU, Reuters reports that Novovax is delaying a deal to supply jabs to the Continent once its vaccine regulator decides to approve the jabs.

Following the release of the updates trial data earlier today, the FT reported that AstraZeneca is working on creating a vaccine nasal spray. According to the FT, Oxford, AstraZeneca's partner in developing the vaccine, has started advertising for participants for a trial of the nasal spray vaccine. The phase 1 trial will involve about 30 healthy adults aged up to 40 and will study the safety of the formulation, according to a recruitment sheet seen by the paper. It could begin as early as next week. Participants will receive at least one intranasal dose of the vaccine; and half will randomly receive a booster dose. The study will take about four months to finish.

Finally, in other vaccination news, Pfizer's revealed just minutes ago that it would soon start trialing the COVID vaccine on children younger than 12. This comes after a trial on children aged 12 to 15 went well. The trial’s first participants, a pair of 9-year-old twin girls, were immunized at Duke University in North Carolina on Wednesday. Results from the trial are expected in the second half of the year, and the company hopes to vaccinate younger children early next year, according to the New York Times.

But by far the biggest news comes out of India, which on Thursday imposed a de facto ban on vaccine exports. That's a huge problem for dozens of developing nations, as well as the WHO's Covax program. The Serum Institute of India, the largest manufacturer of vaccines in the world and Covax's biggest supplier, has reportedly been told to halt exports and that the measures could last as long as two to three months, according to two people familiar with the situation. Gavi, the UN-backed international vaccine alliance, immediately warned that the controls would have a direct impact on the Covax scheme

The European Commission is holding talks Thursday about whether to impose similar restrictions, although Brussels seemed yesterday to be on the cusp of a deal with the UK to ensure "reciprocity" in vaccine supplies, per the FT.

The Serum Institute is contracted to manufacture 550MM AstraZeneca jabs and 550MM Novavax jabs solely for Covax in 2021 and 2022. That accounts for 80% of the facility’s currently signed contracts according to data from earlier this month.

* * *

Update (1000ET): More holdouts have decided to allow AstraZeneca jabs to be used on patients once again Thursday morning, with Sweden ending its safety probe. Vaccinations will move forward, including for people aged 65+.

• SWEDEN TO RESUME ASTRAZENECA COVID-19 VACCINATIONS - HEALTH AGENCY
• RECOMMEND ASTRAZENECA COVID-19 VACCINE FOR PEOPLE AGED 65 AND ABOVE
• RECOMMENDS EXTENDING PAUSE ON VACCINATIONS FOR YOUNGER PEOPLE

* * *

Earlier this week, AstraZeneca managed to destroy the last remaining shreds of its credibility by prematurely releasing an analysis of its COVID vaccine Phase 3 trial data, drawing an uncomfortably public rebuke from an American oversight board tasked with regulating the trials. In response, the company acknowledged that the data it had just released was based on an interim analysis, and promised to re-release its final results later in the week.

The company made good on its promise early Thursday morning, when it re-published the trial data with one notable tweak: the jab, which was initially touted as 79% effective, is now 76% effective. Although the company's claim that the jab is "100% effective" against serious disease was unaltered (scientists counted eight severe cases during the trial, all among trial participants who received the placebo). The data included 190 confirmed cases of COVID among the trial participants - 49 new cases that weren't included in the data released Monday. On top of this, the company said there are 14 "possible or probable cases to be adjudicated so the total number of cases and the point estimate may fluctuate slightly."

The 76% number results from including newer infections among the 30K+ trial participants (trials were conducted in the US, as well as Chile and Peru). AZ also said the vaccine was 85% effective in preventing sickness among adults aged 65+, which is 5 percentage points higher than the 80% number it reported Monday.

While the revision is the latest reminder that the efficacy numbers touted by vaccine-makers are effectively meaningless, Reuters reported that the restatement of the AZ trial results will "go a long way to putting the vaccine back on track for gaining U.S. emergency use authorization."

"The vaccine efficacy against severe disease, including death, puts the AZ vaccine in the same ballpark as the other vaccines," said William Schaffner, an infectious disease expert from the Vanderbilt University School of Medicine, adding that he expects the shot to gain US approval.

AstraZeneca said the latest data has been presented to the independent trial oversight committee, the Data Safety Monitoring Board, and it plans to submit the analysis for peer-reviewed publication in the coming weeks.

"The primary analysis is consistent with our previously released interim analysis, and confirms that our COVID-19 vaccine is highly effective in adults," Mene Pangalos, executive vice president of BioPharmaceuticals R&D at AstraZeneca, said in a quote included with the press release.

One top AZ executive said during an appearance on CNBC earlier this week that the company intends to apply for approval in the US during the first half of April. Europe, meanwhile, the nation of Denmark extended its suspension of the AstraZeneca jabs as local public health officials take a closer look at rare blood clots that appeared in a small handful of patients. The clots led to notable illnesses and a death among a trio of Norwegian health-care workers, and cases have also been reported in Austria, Italy, the Netherlands and elsewhere. Canada's health department on Wednesday became the latest western government to reiterate that it believes the vaccine is "safe" - though it also updated its label to warn about the risk of potentially deadly blood clots in patients with low blood-platelet counts.

Tyler Durden Thu, 03/25/2021 - 12:44

Previewing Today's Closely Watched 7Y Auction

Today the Treasury will auction $62BN in 7-year notes at 1pm. It will be a closely watched auction because one month ago the same 7Y February auction was "catastrophic" and sparked a rout in bonds which then quickly morphed into a marketwide dump hitting tech, momentum and growth stocks the hardest.

As a reminder, last month's 7Y tailed 4.4bps, the largest tail on record with dismal end-user demand declining to 60.2%, 20.2%-pts below the previous auction and the lowest level since September 2014, while the bid-to-cover ratio declined to 2.04, the lowest since the Treasury reintroduced the 7-year in early 2009

At the investor class level, the investment manager share declined 14.3%-pts to 49.1%, the lowest level since May 2020, and the foreign share of demand declined to 8.1%, the lowest level on record.

To be sure, it wasn't just fear of inflation that was the culprit last month: technicals played a prominent role in last month's weak results, as intermediate yields rose as much as 25bp on the day of the auction, and Treasury market depth declined significantly to levels not seen since the early spring of 2020

In fact, the deterioration in depth was particularly severe around the auction as volumes surged and the most rapid sequence of the sell-off took place.

Market depth declined significantly around the last 7-year auction, but has since mostly recovered

Some more thoughts from JPM:

Looking ahead, though intermediate and long-end yields have declined 5-15bp from their recent highs last week, once we get through the 7-year auction, we think portfolio rebalancing could also drive yields lower. Equities have once again significantly outperformed fixed income: the S&P 500 has risen 3.5% QTD while the GABI-US (our aggregate fixed income index) has declined 3.4%. This sort of performance differential has typically led to rebalancing around quarter-end, and our colleagues estimate this could total $200bn rebalancing out of equities. Empirically, we have observed these sort of rebalancing flows have been supportive of lower Treasury yields: Exhibit 1 shows the cumulative change in 10-year yields around quarter-ends in which equities have outperformed the GABI-US by more than 5%-pts. Ten-year yields tend to decline by an average of 4bp in the weeks leading up to quarter-end and then reverse higher as the calendar turns to the new quarter, and this has occurred in 7 of 10 instances. Thus, cyclicals indicate risks are skewed toward a decline in yields in the coming days.

Market depth has recovered in the intermediate sectors, retracing back in line with average levels over the past year, but remains lower than prior to the 7-year auction, and depth remains relatively depressed in intermediates compared to the long end. Additionally, even though seven-year yields are 7bp higher since the last auction, yields have declined 10bp this week alone. The 7-year sector appears modestly cheap versus the wings after adjusting for the level of rates and the shape of the curve. The WI 7-year roll opened at +1.75bp, in line with our fair value estimate, and is still trading, underperforming the erosion of carry. Lastly, though end-user demand at intermediate auctions have generally remained above historical averages—last month’s auction notwithstanding, dealers have had to absorb significantly more duration supply, which has likely driven more variable auction results recently. That said, the quarter-end rebalancing flows mentioned above could be supportive on the margin.

Overall, despite relatively cheap valuations, given the recent decline in yields, and technicals that have not yet fully recovered, JPM thinks today's auction will require above-average end-user demand to be digested smoothly, which following the two most recent auctions this week where we saw a solid 2Y and 5Y auction, this shouldn't prove to be too difficult.

Tyler Durden Thu, 03/25/2021 - 12:40