Jan 10

Today’s News 10th January 2022

  • Kazakhstan Denies US-Funded 'Military Biological Lab' Seized By Rioters After Russia Claims Potential Pathogen Leak
    Kazakhstan Denies US-Funded ‘Military Biological Lab’ Seized By Rioters After Russia Claims Potential Pathogen Leak

    Kazakh officials have denied that a US-funded ‘military biological laboratory’ was seized by rioters in the recent unrest, which has seen at least 160 dead since the violence broke out just one week ago.

    It is unclear whether the deaths, reported by the health ministry to state news channel Khabar-24, are primarily civilians or law enforcement according to the Daily Mail – however officials said on Sunday that at least 16 police or national guard members had been killed. Pictures of Kazakh secret service operatives killed during the unrest have also been released.

    According to Russian media, the biolab near Almaty – built in 2017 and used to study outbreaks of particularly dangerous infections – was ‘compromised,’ resulting in a potential leak of dangerous pathogens. Kazakh officials have denied the claim.

    The secret bio-laboratory funded by the US defence department – which has links to Russian and Chinese scientists – was also compromised in the disturbances, according to social media claims that it was seized.

    ‘This is not true. The facility is being guarded,‘ said the health ministry which is responsible for the Central Reference Laboratory, in Almaty.

    Official Russian news agency TASS had highlighted alleged social media reports that it was taken over by ‘unidentified people’ and ‘specialists in chemical protection suits were working near the lab so a leak of dangerous pathogens could have occurred‘.

    The laboratory’s existence has been controversial and in 2020 the country formally denied that it was being used to make biological weapons.

    At the time, the Kazakh government stated: ‘No biological weapons development is underway in Kazakhstan – and no research is conducted against any other states.’ -Daily Mail

    Of course, since the source of the claim is Russian state media, one should take it with the same grain of salt as any state-sponsored outlet (or their legacy media mouthpieces).

    As the Mail notes, “The airport, mayor’s office and secret services buildings fell briefly into the hands of rioters during a wave of protests backed by shadowy armed cells.”

    In 2018 there were reports that a new strain of meningitis which had leaked from the lab – which was similarly denied. According to officials, no US personnel remain involved in the lab’s work, which included studying Covid.

    The most recent controversy over the lab comes amid ‘growing intrigue’ over how the recent protests came to be organized, and which have been tamped down since a large Russian force was sent to the country. According to reports, ‘well-coordinated’ armed groups were operating alongside protesters over a hike in gas prices.

    Nearly 6,000 people have been detained following the riots, with a “sizeable number of foreign nationals among them,” the Mail reports. It’s unclear where these alleged foreign provocateurs originated from.

    Russia and allies Belarus have continued to pour troops and equipment into Kazakhstan.     

    Kazakh authorities said earlier on Sunday that 16 police or national guard members had been killed in the protests that started on January 2.

    A total of 103 deaths were in Almaty, the country’s largest city, where demonstrators seized government buildings and set some on fire, according to the ministry. The country’s ombudswoman for children’s rights said that three of those killed were minors, including a four-year-old girl.

    The ministry earlier reported more than 2,200 people sought treatment for injuries from the protests, and the Interior Ministry said about 1,300 security officers were injured. -Daily Mail

    As we noted on Sunday, Among the boldest and eye-brow raising political moves by embattled Kazakh President Kassym-Jomart Tokayev within the past days that grabbed international headlines was his ordering the arrest of Kazakhstan’s powerful former intelligence chief, Karim Massimov, on the charge of high treason.

    Massimov had served as the prior longtime strongman ruler Nursultan Nazarbayev’s prime minister and has long been considered his “right hand man”. Shortly after, a photo has resurfaced, currently subject of widespread speculation which shows Joe Biden and Hunter Biden posing with the now detained Kazakh security chief Karim Massimov, along with well-connected oligarch Kenes Rakishev.

    Hunter and Joe Biden pictured with Kenes Rakishev (left) and Karim Massimov (right)

    Where does this rabbit hole lead?

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    Tyler Durden
    Mon, 01/10/2022 – 00:00

  • "Influencer" Who Made $200K Selling Farts Retires After Heart Attack "Scare" Caused By Eating Too Many Eggs
    “Influencer” Who Made $200K Selling Farts Retires After Heart Attack “Scare” Caused By Eating Too Many Eggs

    While rugged Chinese and Russian citizens prepare for the vigors of geopolitical turmoil on a global stage as each country looks to potentially expand their geographical presences, U.S. citizens are giving themselves heart attack scares from farting into jars and selling them. 

    Just ask 31 year old Stephanie Matto, who has been making more than $50,000 per week selling her farts. 

    After a series of news reports on her “business”, an already-burgeoning venture that Matto was running gained in popularity, to the point where the former “90 Day Fiancé” star (we’ve never heard of it, either) was forcing herself to eat eggs and beans in order to keep up with demand for her flatulence.

    Matto cashed in $200,000 in sales, according to the NY Post, before being forced to retire after being rushed to a hospital with chest pains that she thought were symptoms of a heart attack.  

    Instead, “Matto was told that her pain was the result of her steady diet of gas-inducing beans and eggs,” the Post reported. Matto was pushing out up to 50 jars worth of farts per week, the report says. 

    Matto commented: “I thought I was having a stroke and that these were my final moments. I was overdoing it.”  

    “I remember within one day I had about three protein shakes and a huge bowl of black-bean soup,” she disclosed, talking about her ‘secret recipe’ for keeping business “booming”. 

    “I could tell that something was not right that evening when I was lying in bed and I could feel a pressure in my stomach moving upward. It was quite hard to breathe, and every time I tried to breathe in, I’d feel a pinching sensation around my heart,” she continued. “And that, of course, made my anxiety escalate. I actually called my friend and asked if they could come over to drive me to the hospital because I thought I was experiencing a heart attack.”

    “It was made clear that what I was experiencing wasn’t a stroke or heart attack but very intense gas pains.”

    With the scare behind her, we’re predicting Matto’s retirement will only be short-lived. Who can turn down those types of margins? $200,000 in sales and your cost of goods sold is a couple cans of Goya Garbanzo Beans and a couple dozen eggs.

    She’ll be back. 

    Tyler Durden
    Sun, 01/09/2022 – 23:30

  • These Are The Three Things Investors Will Focus On During Q4 Earnings Season And Into 2022
    These Are The Three Things Investors Will Focus On During Q4 Earnings Season And Into 2022

    There are no two ways about it: the first full year of the year was a lousy one for stocks, with the S&P falling by 1.9% and the Nasdaq tumbling 3.5%, its biggest drop since the year 2000 – the year the dot com bubble popped.

    The culprit for the plunge, of course, was the Fed, with the mid-week pivot coinciding with the release of the hawkish December FOMC minutes that hinted at not just a faster liftoff, but an even faster balance sheet drawdown. As a result, banks expect the Fed to hike either three or four times, with some expecting the Fed to announce QT in early H2, and Friday’s dismal jobs report which showed just 199K gains (vs. consensus of 450K) did not deter hawkish expectations as the unemployment rate – just a few years ago viewed as a completely meaningless statistic – fell to 3.9%, down 0.3% from 4.2% in November.

    Looking at the price action, Goldman’s David Kostin – who is of course, head of research and not an actual trader – points to the rapid move higher in yields catalyzed by the Fed statement, and which surged as high as 1.80% last week before settling around 1.76% after ending 2021 at 1.52%, a 24 bps rise over just 5 days. This is material because as Kostin notes in his latest Weekly Kickstart note, the speed of rate moves matters (perhaps more than the actual move) for equity returns. To wit, “equities typically struggle when the 5-day or 1-month change in nominal or real rates is greater than 2 standard deviations. The magnitude of the recent yield backup qualifies as a 2+ standard deviation event in both cases.”

    Kostin then notes that the sharp spike in rates was an obvious risk to the premium valuation accorded to the longest duration equities (high growth but low margins), something discussed here extensively. And sure enough, these stocks have been violently re-priced during the past few days, but also past few months

    It may not feel like it, but the EV/sales multiple for these stocks has compressed from a peak of 15x in February, to 12x at the start of November, to 7x today. But if the Russell 3000 constituents traded in a well-ordered progression, the relative valuation of these stocks would be wider than the current spread.

    With all that in mind, and with one eye trained on macro developments, investors now await the start of 4Q 2021 earnings season that begins next week, when BLK, C, FRC, JPM, and WFC all release their 4Q 2021 results on Friday, January 14.

    As Kostin calculates, between January 10 and February 11, companies representing 79% of S&P 500 market cap will report year-end results, and a list of next week’s reporters is shown below.

    Looking ahead, consensus expects 4Q 2021 S&P 500 EPS will grow by 20% year/year. The growth rate will represent a sharp deceleration from previous quarters that benefited from comparison with the worst quarters of Covid-plagued 2020. In 2021, the sequence of year/year EPS growth was 48% (1Q), 88% (2Q), and 39% (3Q). If the consensus expectation for 4Q is realized, it would represent a step in the direction of normalization towards trend growth. Among the sectors, energy is expected to swing from negative to positive EPS. Materials (+57%), Industrials (+47%), and Health Care (+16%) are forecast to report the highest EPS growth while Financials (0%) and Consumer Staples (+3%) are expected to barely grow earnings vs. 4Q 2020

    On the revenue side, consensus expects sales will grow by 15% year/year vs. 17% for the prior quarter. Energy (+64%), Materials (+24%), and Communication Services (+16%) will generate the largest revenue gains. Consumer Staples will lag (+9%).

    Net margins are forecast to expand year/year by nearly 100 bps to 11.5% despite soaring inflation, suggesting that all of the input price increases and then some, have been passed on to consumers. On a rolling four-quarter basis margins will equal 12.1%. Note that in 3Q, actual results were 70 bps above analyst forecasts at the start of earnings season. Energy and Materials are anticipated to have the largest margin expansions.

    In any case, as companies close their books on 2021, investors and managements are already focused on 2022. Goldman forecasts the S&P 500 will generate 8% EPS growth to $226, slightly below the median top-down forecast but above the consensus bottom-up forecast of $223. At the index level, Kostin and Co. expect sales growth of 9%, and also project a net profit margin of 12.6% which implies 41 bps of expansion and explains the bank’s above-consensus EPS forecasts. As Kostin explains, his above-consensus forecast “is driven by a combination of operating leverage, pricing power, and cost management.” He also notes that Goldman’s expectations differ most from consensus for the Industrials and Utilities sectors, where it projects slower year/year EPS growth, and for the Communication Services, Materials, and Info Tech sectors, where the bank expects more EPS growth than bottom-up estimates.

    Putting it all together, investors will focus on three items during 4Q reporting season and into 2022.

    1.Threats to growth, especially those posed by Covid variants. The Omicronvariant has introduced new risks to economic activity given its heightenedtransmissibility and drag on reopening. Our economists recently slashed their USgrowth forecasts to 3.5% (from 4.2%), in part due to the effects of Omicron. Each 1pp change in GDP growth translates into roughly $7 of S&P 500 EPS.

    2. Expanding margins will be an uphill battle for companies in 2022, due in part to persistent labor market tightness. In earnings calls as recent as 3Q, managements bemoaned historic worker shortages, particularly for low-wage jobs in the services sector. Goldman economists expect the rapid pace of wage inflation to subside to around 4%, but this could take several quarters to achieve. Today’s jobs report showed average hourly earnings rose 4.7% year/year. Firms with high labor costs or exposure to wage inflation will face the most difficulty in preserving margins. Since the beginning of 4Q, companies with high and stable gross marginshad outperformed those with weak and variable margins by 12 pp(+4% vs. -9%), but the trade has slightly reversed in recent weeks. The next chart shows a list of stocks with high and stable gross margins.

    One headwind to margin expansion that may soon improve is the resolution of supply chain bottlenecks that plagued firms in 2021 (assuming it doesn’t get even worse should China’s suffer an Omicron-linked lockdown of its key ports). Managements employed a mixture of price increases and cost controls to offset surging raw materials and shipping prices. Looking ahead, Goldman notes that market measures of supply chain tightness appear to be slowly easing, and shipping costs have begun to decline in recent weeks. We disagree.

    3. Finally, the revival and ultimate passage of President Biden’s Build Back Better bill would have mixed implications for US equities. Senator Joe Manchin’s late-December rejection of the draft legislation ruled out its passage last year. In the event that the legislation is adopted this year, Goldman estimates this tax reform would reduce S&P 500 EPS by 2-3% relative to current tax policy but only go into effect in 2023 at the earliest. By then, however, Dems will no longer have a supermajority in Congress so everything will be in flux.

    Tyler Durden
    Sun, 01/09/2022 – 23:00

  • Tent City Pops Up In Front Of DC's Union Station Amid "Severe Homeless Crisis"
    Tent City Pops Up In Front Of DC’s Union Station Amid “Severe Homeless Crisis”

    Down the street from the US Capitol Building, right in front of Union Station, more than a dozen tents have been erected, highlighting the homeless problem in the nation’s capital. 

    The area outside the train station is a 16-minute walk from the Capitol Building. Lawmakers who take the train to work have to pass by this area and gaze upon the homeless who have been knocked out of the workforce and unable to afford shelter, food, and energy because of inflationary conditions produced by unorthodox monetary and fiscal policies. 

    RT News’s Rachel Blevins first reported on the homeless encampment outside the train station on Christmas Eve. She tweeted, “while the Mayor of DC puts an additional burden on businesses by requiring vaccine checks that divide the public into two classes of people… This is the scene outside Union Station. Dozens of tents are serving as a reminder of how bad the homeless crisis has gotten in this city.”

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    After two brutal snowstorms and wicked cold weather, another social media user captured the tent city in front of the train station. 

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    What’s odd about this tent city, or rather a “Bidenville,” is that it’s not tucked away in an alley and empty parking lot but right in front of Union Station for the world to see. 

    So far, DC officials have yet to shut down the homeless encampment. There’s no word if the city has provided food and essential items for the homeless to survive the brutally cold winter. 

    The tent city reminds us of the sprawling homeless encampments throughout Los Angeles, San Francisco, Portland, and other West Coast cities. These metropolises have one thing in common: they’re run by liberal and progressive lawmakers. So far, handing out welfare and other services is failing as more and more people cannot rebound from rock bottom of living in tents back to everyday life. Maybe a different approach is needed.

    Suppose CNN wanted to do real reporting. They should send one of their journalists to Union Station; it’s only a 5-minute walk from their DC studio.

    Tyler Durden
    Sun, 01/09/2022 – 22:30

  • California Folds; Says Asymptomatic COVID-Positive Health Workers Can Get Back To Work Amid Shortages
    California Folds; Says Asymptomatic COVID-Positive Health Workers Can Get Back To Work Amid Shortages

    Authored by Jack Phillips via The Epoch Times,

    The California Department of Public Health issued guidance that allows health care networks to enable COVID-19-positive employees to keep working if they don’t show any symptoms.

    “The department is providing temporary flexibility to help hospitals and emergency services providers respond to an unprecedented surge and staffing shortages. Hospitals have to exhaust all other options before resorting to this temporary tool. Facilities and providers using this tool, should have asymptomatic COVID-19 positive workers interact only with COVID-19 positive patients to the extent possible,” the Department of Public Health said in a statement to news outlets over the weekend.

    The Epoch Times has contacted the agency for comment.

    Health care workers in the state now don’t have to isolate or show a negative COVID-19 test, the guidance said, before coming back to work if they are asymptomatic. The guidance, which remains in effect until Feb. 1, stipulates that staff wear N95 respirator masks while on the job.

    After the guidance was handed down, several unions that represent nurses and other hospital staff expressed alarm.

    “Healthcare workers and patients need the protection of clear rules guided by strong science. Allowing employers to bring back workers who may still be infectious is one of the worst ideas I have heard during this pandemic, and that’s really saying something,” Bob Schoonover, the head of union SEIU California, told CBS Sacramento.

    Schoonover added that while his union supports “supplemental paid sick leave,” the latest guidance imperils a “critical piece of the protection that workers and the public need.”

    The president of the California Nurses Association, Sandy Reding, told local media that the California health department’s guidance will put patients at risk.

    “We are very concerned,” she told KNTV news.

    “If you have health care workers who are COVID positive care for vulnerable populations, we can spread the COVID virus inside the hospital as well.”

    Union officials did not mention the rampant staffing issues that have plagued hospitals across the United States and California in recent days.

    Mandates that were put into effect last year by California Gov. Gavin Newsom, a Democrat, required health care workers to get COVID-19 vaccines or face termination—despite studies showing that natural immunity conferred by a previous COVID-19 infection shows lasting immunity to the virus. Critics of vaccine mandates have questioned why governments and businesses would impose vaccinate or fire policies for “essential workers”—such as nurses and doctors—in the midst of staff shortages during a viral pandemic.

    Health giant Kaiser Permanente suspended more than 2,000 employees who were not vaccinated in October. Other California systems such as Santa Clara Valley Medical Center and Sutter Health also terminated or suspended their employees who weren’t vaccinated in the fall of 2021.

    Meanwhile, Dr. George Rutherford, professor of Epidemiology at the University of California San Francisco, told KNTV that the guidance revision isn’t anything new.

    “This is about having infected people taking care of infected people. We did this with Ebola in South Africa. We’ve done it before. It’s not the first play option in our playbook. I think staffing issues are such that it led the state to put this guidance out,” he told the outlet.

    It comes days after the Newsom administration mandated that booster shots be given to certain health care staffers by Feb. 1. On Friday, New York Gov. Kathy Hochul, a Democrat, issued said she would issue a directive for all health care workers in the state if signed off by a public health advocacy board.

    Tyler Durden
    Sun, 01/09/2022 – 22:00

  • Pelosi Dangles New Round Of Virus Aid; Wants Tied To February Debt Ceiling Vote
    Pelosi Dangles New Round Of Virus Aid; Wants Tied To February Debt Ceiling Vote

    House Speaker Nancy Pelosi has floated the possibility to tack a new round of federal COVID-19 relief to a package of legislation which would fund the government past a February stopgap deadline, according to Bloomberg.

    “It is clear from the opportunity that is there and the challenge that is there,” Pelosi told CBS‘s “Face the Nation,” adding that President Biden’s administration “has not made a formal request for more funding.”

    “I believe that left to their own devices, the appropriators can get the job done,” said Pelosi. “Something like additional funding can be in there, can be fenced off for emergency, as would be Covid.”

    More via Bloomberg:

    Last week, two senators suggested that additional relief for U.S. restaurants and other service industries hurt by the surge of infections could be added to the spending bills. Senators Ben Cardin, a Maryland Democrat and head of the Small Business Committee, and Roger Wicker, a Mississippi Republican, said they are working to build support for the plan among their colleagues. Pelosi didn’t specify what any extra funding might be used for.

    Pelosi told CBS that the virus’s “resilience” means it’s spreading faster than in previous phases of the pandemic, underscoring the need for everyone “to get vaccinated, to be masked, to have spatial distancing and the rest. And to be tested, tested, tested.”

    Senator Roy Blunt, a Missouri Republican, blasted the administration on the Senate floor last week, saying the problem wasn’t funding but the administration’s lack of a strategy for getting a handle on the virus. Biden officials focused on vaccinations at the expense of additional testing capacity, he said.

    “For a full year, the administration has focused almost exclusively on one thing, and testing and treatments have not had the attention they should have had or now that they must have,” said Blunt, adding: “That failure’s come at a steep cost. Today, Americans can’t find over-the-counter tests, and the nation lacks a comprehensive, reliable testing infrastructure.”

    Pelosi also poured cold water on the notion that the spending bill will include an extension of the child tax credit, which expired in December.

    “The Child Tax Credit, we have to have that fight, that discussion, in the Build Back Better legislation,” she said. “In order to pass the Build Back Better, it’s under reconciliation, we only need 51 votes. The bill that is the appropriations bill requires 60 votes in the Senate. So we have to do what’s possible there.”

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    Tyler Durden
    Sun, 01/09/2022 – 21:30

  • You Know Global Elites Are Triggered When The Propaganda Institutions Collaborate To Refute "Mass Formation Psychosis"
    You Know Global Elites Are Triggered When The Propaganda Institutions Collaborate To Refute “Mass Formation Psychosis”

    Authored by ‘sundance’ via TheConservativeTreehouse.com,

    Well, butter my buns and call me a biscuit… if this ain’t the biggest revealing tell in years.

    Apparently Big Tech and big propaganda media, Reuters and the Associated Press, have joined together to refute the concept of “Mass Formation Psychosis”, and pushed their collective narrative into the narrative engineering system:

    The Associated Press – SEE HERE and Reuters – SEE HERE, quickly rush to the “fact check” typeset to stop people from recognizing what is most likely the cause of their own psychosis.   In a world where things are no longer shocking, this is, well, a little shocking, in a weird and seemingly Orwellian kind of way.

    Yes Alice, the same “experts” and media who are credibly accused of creating/enabling the mass formation psychosis would like to assure us that no such reality exists.  This is almost too funny.

    (AP) – […] “The concept has no academic credibility,” Stephen Reicher, a social psychology professor at the University of St Andrews in the U.K., wrote in an email to The Associated Press.  The term also does not appear in the American Psychological Association’s Dictionary of Psychology.

    “Psychosis” is a term that refers to conditions that involve some disconnect from reality. According to a National Institutes of Health estimate, about 3% of people experience some form of psychosis at some time in their lives.

    […]  The description of “mass formation psychosis” offered by Malone resembles discredited concepts, such as “mob mentality” and “group mind,” according to John Drury, a social psychologist at the University of Sussex in the U.K. who studies collective behavior. The ideas suggest that “when people form part of a psychological crowd they lose their identities and their self-control; they become suggestible, and primitive instinctive impulses predominate,” he said in an email.

    That notion has been discredited by decades of research on crowd behavior, Drury said. “No respectable psychologist agrees with these ideas now,” he said.

    Multiple experts told the AP that while there is evidence that groups can shape or influence one’s behaviors — and that people can and do believe falsehoods that are put forward by the leader of a group — those concepts do not involve the masses experiencing “psychosis” or “hypnosis.” (read more)

    Reuters offers this simultaneous rebuttal:

    (Reuters) – “Mass formation psychosis” is not an academic term recognized in the field of psychology, nor is there evidence of any such phenomenon occurring during the COVID-19 pandemic, multiple experts in crowd psychology have told Reuters.

    […] There is no evidence to suggest a “mass formation psychosis” has occurred during the pandemic, experts told Reuters. The term itself is not recognised among academics, and modern research into crowd psychology has shown that crowds do not behave in mindless or non-individualistic ways. (more)

    Once a collective group creates an alternate reality of itself, in this case a totalitarian reality based on government needing to create an irrational illusion of fear that becomes part of the accepted national identity, how can anyone call attention to the outcomes without finding themselves in front of the board of inquisition who organizes the collective?

    Put another way… if the pod under your bed malfunctioned, but the pods under all the other beds in the city worked, what happens when you awaken and realize you are not one of them, but you must engage in the world of them while looking for others -like yourself- whose pods hopefully malfunctioned?   That is the current challenge for anyone trying to communicate on contrary evidence and yet avoid the ire from the collective board of COVID compliance who have successfully brainwashed the audience.

    [ZH: Oh wait, there’s this too…]

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    As a rather prescient Lewis Carroll shared so brilliantly in his novel of Alice, Through The Looking Glass:

    “If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?”

    So here we are.

    Cheers !

    Tyler Durden
    Sun, 01/09/2022 – 21:00

  • Mexico Auto Production Plunges To Lowest Annual Level Since 2014 Amid Chip Shortage
    Mexico Auto Production Plunges To Lowest Annual Level Since 2014 Amid Chip Shortage

    Mexican automotive production plunged to the lowest levels annually since 2014 as ongoing semiconductor shortages put the brakes on the industry, according to Bloomberg. 

    National statistics agency (INEGI) data shows auto production in December slumped 16.51% to 212,272 vehicles from a year earlier, while exports dropped by 17.31% to 227,465. 

    Volkswagen Group’s Audi was the worst-hit automaker which saw a staggering 74% drop in production. General Motors Co. and Daimler AG’s Mercedes Benz both saw output halved. 

    An unrelenting global semiconductor shortage continues to terrorize automakers in Mexico and all over North America, forcing many to implement rolling shutdowns, curtailing production.

    Detroit-based General Motors Co’s spokesperson said last month, “the stoppages are due to the shortage of semiconductors, and yes, production decreased due to the shortage.” 

    Entering the new year, there’s more bad news: delivery times for chips jumped in December, signaling the semiconductor shortage is worsening.

    If we go by the numbers, President Biden’s progress on alleviating supply chains continues to falter even though the president hails a supply chain win. Guess it’s all about the optics ahead of midterms later this year. 

    Tyler Durden
    Sun, 01/09/2022 – 20:30

  • US Threatens Curbs On Tech & Electronics Access For Russia, Day Before Talks
    US Threatens Curbs On Tech & Electronics Access For Russia, Day Before Talks

    Just a day ahead of the much anticipated Russia-US-NATO Monday talks to be held in Geneva, Washington is already signaling it doesn’t expect any breakthroughs. This as the Biden administration continues piling on threats and leverage for its corner, over the weekend ramping up rhetoric on the ‘option’ of imposing strict export controls on Russia. 

    Such controls would involve curbs on sensitive technology and electronics, according to Reuters, in the scenario of Putin ordering an offensive into Ukraine. This would include, according to an official who spoke to Reuters, “measures to deprive Russia of microelectronics made with or based on U.S. software or technology.”

    Via TASS

    Prior anti-Russia sanctions have up to this point only focused on individuals and government-linked entities, for example officials believed responsible for the persecution of Alexei Navalny, or firms working on the Nord Stream 2 pipeline. 

    The talks will kick off in Geneva, but are expected to then move on to venues in Brussels and Vienna; however, there’s current speculation on whether they’ll even be extended beyond a day or two, as Reuters notes, “state-owned RIA news agency quoted Deputy Foreign Minister Sergei Ryabkov as saying it was entirely possible that diplomacy could end abruptly after a single meeting.”

    “I can’t rule out anything, this is an entirely possible scenario and the Americans… should have no illusions about this,” Ryabkov told the outlet. The Kremlin’s firm and consistent position has been that it must gain legal guarantees from the West of “no further NATO expansion eastward”. But a fresh report on Sunday strongly suggest both sides are willing to walk away:

    “Naturally, we will not make any concessions under pressure” or amid constant threats from participants in the talks, said Ryabkov, who will lead the Russian delegation in Geneva. Moscow was not optimistic going into the talks, Interfax news agency quoted Ryabkov as saying.

    The U.S. prognosis was similarly gloomy. “I don’t think we’re going to see any breakthroughs in the coming week,” U.S. Secretary of State Antony Blinken said in a CNN interview.

    So it’s looking like both sides are ready for talks to fail, at a moment the situation on the ground has grown more complicated, especially with the fresh “distraction” of a severe security crisis on Russia’s long border: Kazakhstan. 

    Tyler Durden
    Sun, 01/09/2022 – 20:00

  • Almost Half Of New York COVID-19 Hospitalizations Not Due To COVID-19
    Almost Half Of New York COVID-19 Hospitalizations Not Due To COVID-19

    Authored by Zachary Stieber via The Epoch Times,

    Nearly half of the patients currently in New York hospitals with COVID-19 are not in the hospital because of COVID-19, the state said Friday.

    Forty-three percent of the 11,548 hospitalized patients did not have COVID-19 listed as one of the reasons for admission, Gov. Kathy Hochul’s office said.

    Hochul, a Democrat who is seeking a full term in office, told a press conference that she wanted to drill down on the hospitalization numbers to see how many patients are actually being treated for COVID-19 versus merely having the disease, which often causes no or mild symptoms.

    Some of the patients test positive for COVID-19 “but they’re in there for other reasons,” Hochul said.

    “Think of all the other reasons people end up at a hospital; it’s an overdose, it’s a car accident, a heart attack.”

    Hochul had announced on Monday that the state would be separating out hospitalizations for COVID-19 versus those with the disease, which is caused by the CCP (Chinese Communist Party) virus.

    She said it was important to know the percentage of patients in each category as the number of hospitalizations rise.

    “I just want to always be honest with New Yorkers about how bad this is. Yes, the sheer numbers of people infected are high, but I want to see whether or not the hospitalizations correlate with that. And I’m anticipating to see that at least a certain percentage overall are not related to being treated for COVID. But we’re still going to watch hospital capacity,” she said.

    Most people admitted for non-COVID reasons who have COVID-19 are in New York City, with approximately half the hospitalizations there meeting that criteria, the data show. In some other areas, the percentage is much lower.

    New York Gov. Kathy Hochul speaks during a news conference in the Manhattan borough of New York City on Dec. 14, 2021. (Carlo Allegri/Reuters)

    “About 50 percent are admitted with COVID and 50 percent admitted for COVID,” Dr. Steve Corwin, CEO of New York Presbyterian Hospital, which is in the city, told reporters. “Of the patients in the hospital, 50 percent are unvaccinated or partially vaccinated and 50 percent have two doses of the vaccine,” he added.

    Partially vaccinated means a person has received one dose of the Moderna or Pfizer COVID-19 vaccines or has received two doses but two weeks have not elapsed since their second dose.

    Dr. Scott Gottlieb, a former Food and Drug Administration commissioner who sits on Pfizer’s board, said the percentage was higher than he would have expected.

    “Unclear why we’d see so much incidental infection. I’m hearing similar stats in [New Jersey] and [Connecticut] hospitals. Creates some concern [that COVID-19] could be spreading by contact with healthcare system itself,” he wrote on social media.

    While many jurisdictions and hospitals do not make clear how many COVID-19 patients are being treated for other reasons, researchers found last year that approximately half of the hospitalizations showed just mild or no COVID-19 symptoms. Another study found four-in-10 children hospitalized with COVID-19 were asymptomatic, and the Centers for Disease Control and Prevention’s director, Dr. Rochelle Walensky, told reporters Friday that the recent increase in pediatric COVID-19 hospitalizations was due in part to non-COVID reasons.

    “This is really a consistent problem we keep ignoring it as if it’s not an issue. It is an issue,” Dr. Scott Atlas, part of the White House COVID-19 response team during the Trump administration, told The Epoch Times previously.

    Hochul told people who are only experiencing mild symptoms to stay home amid concerns of overburdening New York’s healthcare systems. She said that nearly 5,000 New Yorkers in the past 24 hours alone went to emergency rooms for COVID-19 testing.

    “We have capacity. We have 2,000 locations where people can get tested. So, please do not go to an emergency room and tie up the resources, those individuals, so you can get a test. And don’t come in if you have very mild symptoms, either,” she said. “I know you’re anxious, I really understand this, but if you’re an adult that has very minor symptoms, you can handle a runny nose. You can handle your throat being a little bit sore, a little bit of cough. Just treat it as if you would have the flu. Follow the protocols, but please don’t overburden our emergency rooms.”

    Tyler Durden
    Sun, 01/09/2022 – 19:30

  • 'Bring A Trailer' Nears A Billion In Sales As Online Car Trader Dominates Top Auction Houses
    ‘Bring A Trailer’ Nears A Billion In Sales As Online Car Trader Dominates Top Auction Houses

    The days of live classic car auctions at Barrett-Jackson, Mecum Auctions, and RM Sotheby’s aren’t over but are losing popularity in a post-COVID world where online auctions have become all the rage. 

    Bloomberg reports digital auction platform “Bring a Trailer,” also known as BaT, has become a hit with the classic car enthusiast community. Collectors are selling their cars on BaT instead of traditional live auctions. 

    In 2021, BaT sold $828.7 million worth of cars, more than a 100% jump over the $398 million sold in 2020 and a quarter billion more than any live-auction-house competitor (Mecum Auctions reported $578 million in total sales, RM Sotheby’s reported around $407 million, and Barrett-Jackson a little more than $191 million last year). 

    For the first time last year, online auctions surpassed live auctions, selling 20,000 cars compared with 16,000, according to data from classic car insurer Hagerty. 

    Hagerty’s Kevin Fisher said online car sales were up 107% YoY, jumping from $492.5 million sold in 2020 to $1.02 billion in 2021. 

    “Online and live auctions were on fire last year,” Fisher said. 

    BaT reports that highly collectible cars, usually reserved for live auctions, are being sold on its website. “Moving online removes the middle men in an inherently opaque industry cloaked by backdoor deals, insider favors and clubby agreements between power brokers,” Bloomberg said. 

    Since the pandemic began, attendance plummeted at live auctions as sales of blue-chip cars shifted to online auctions. Top auction houses have reduced the number of live auctions.

    The days of live classic car auctions in big fancy white tents with Champagne and beautiful women aren’t over, but for the time being, online auctions appear to be red hot. 

    Tyler Durden
    Sun, 01/09/2022 – 19:05

  • 19 Killed Including 9 Children In Deadliest NYC Fire In Decades; Blaze Started By Space Heater
    19 Killed Including 9 Children In Deadliest NYC Fire In Decades; Blaze Started By Space Heater

    Update (1840ET): Authorities have confirmed that the deadly Bronx apartment complex fire that killed at least 19 people (including 9 children) was started by a malfunctioning space heater, NYC Mayor Eric Adams disclosed during a press conference Sunday evening.

    32 people have been hospitalized, and 60 were injured in total. One reason this fire’s death toll was high was because of the smoke, not the flames, which were mostly confined to one apartment.

    Here are more details, courtesy of Reuters:

    The fire itself started in an apartment that spanned the second and third floors of the building, and only made it to the hall, officials said.

    But smoke still spread to every floor of the building, likely because the door to the apartment was left open, and victims suffered from significant smoke inhalation, the city’s fire department commissioner Daniel Nigro told reporters at a news briefing.

    “Members found victims on every floor in stairwells and were taking them out in cardiac and respiratory arrest,” he said.

    Fire marshals had determined through physical evidence and accounts from residents the fire started in a portable electric heater in the apartment’s bedroom, Nigro said. He added that the heat had been on in the apartment building and that the portable heater had been supplementing that heating.

    Mayor Eric Adams is just one week into his new job of running the city, and is already confronting a major tragedy. The fire is the deadliest in NYC in decades…

    * * *

    On an otherwise quiet Sunday afternoon, a fire at a massive apartment complex in the Bronx has suddenly become the most deadly fire in the city in decades, casting a pall over the first weeks of Mayor Eric Adams’ tenure.

    So far, 19 people have been killed in the fire, including 9 children. Another 13 are hospitalized in critical condition.

    Approximately 200 firefighters responded to the building on East 181st Street where the fire broke out around 1100ET Sunday. Initial reports said the fire was on the third floor of the 19-story building, with flames blowing out the windows, according to the AP.

    Firefighters “found victims on every floor and were taking them out in cardiac and respiratory arrest,” the fire commissioner said.  “That is unprecedented in our city.”

    Sunday’s fire originated in a duplex apartment spanning the second and third floors,

    Mayor Adams called the fire “horrific.”

    The fire comes after a similarly devastating rowhouse fire in Philadelphia that left 12 dead, including eight children.

    Footage of the fire is already making the rounds on social media.

    https://platform.twitter.com/widgets.js

    Building resident Cristal Diaz, 27, told the New York Post she started putting wet towels at the bottom of her door after smelling smoke. “Everything was crazy,” she said. “We didn’t know what to do. We looked out the windows and saw all the dead bodies they were taking with the blankets.”

    The 120-unit where the fire broke out is one of multiple buildings in the Twin Parks Northwest complex. It was built in 1973 as part of a project to build subsidized affordable housing across the Bronx. Right now, there’s no reason to believe the fire was “suspicious” in origin. But the cause is being investigated.

    Tyler Durden
    Sun, 01/09/2022 – 18:52

  • Beijing Steps Up Efforts To Contain Housing Risks
    Beijing Steps Up Efforts To Contain Housing Risks

    By Ye Xie, Bloomberg Live commentator and an analyst

    1. China lent more support to the housing market. Policy makers called on banks to boost real-estate lending in the first quarter and eased a key debt restriction for developers. It’s part of the broader policy shift to prioritize economic stability this year. While the credit market remains fragile, property stocks rallied to the highest since July (for more on how one can trade the growing policy divergence between the US and China see here).

    2. China’s easing stands in contrast with the U.S., where the Fed embarked on one of the most-hawkish turns in recent memory. U.S. Treasuries had the worst start to a year in decades as Fed minutes suggested the central bank may unwind its balance sheet soon after raising rates.

    Friday’s payroll report showed the unemployment rate dipped below 4%, cementing expectations for the first rate hike in March. This week’s inflation report may add to the vulnerability of the bond market. The policy divergence between the U.S. and China drove their yield differential to the narrowest since 2019.

    3. Beijing’s strict Covid strategy adds downside risk to the economy. As one of the world’s last “Covid Zero” holdouts, China has enacted strict measures to curb the spread of the virus, including locking down some 13 million residents in Xi’an. Travel has already taken a knock, with air passenger trips during the Jan. 1-3 long weekend down 27% from a year ago, state broadcaster CCTV reported.

     

    Tyler Durden
    Sun, 01/09/2022 – 18:40

  • AOC Tests Positive For COVID
    AOC Tests Positive For COVID

    Rep. Alexandria Ocasio-Cortez (D-NY) has tested positive for Covid-19, less than one week after she was spotted partying maskless at a crowded bar in Miami.

    “Representative Ocasio-Cortez has received a positive test result for COVID-19. She is experiencing symptoms and recovering at home. The Congresswoman received her booster shot this Fall, and encourages everyone to get their booster and follow all CDC guidance,” reads a statement from her office.

    The far-left member of ‘the squad’ was seen last week at several Miami hotspots, as New York was hit with a record-high number of Covid-19 cases due to the far less mild Omicron variant. New York has also instituted a strict mask and vaccine policy.

    https://platform.twitter.com/widgets.js

    How will AOC spin this? Blame Florida?

    Nailed it:

    https://platform.twitter.com/widgets.js

    Tyler Durden
    Sun, 01/09/2022 – 18:20

  • "In 10 Years Half Of All Financial Transactions Will Touch Ethereum" – Iconic Crypto Fund Responds To JPMorgan's Ethereum Hit Piece
    “In 10 Years Half Of All Financial Transactions Will Touch Ethereum” – Iconic Crypto Fund Responds To JPMorgan’s Ethereum Hit Piece

    Perhaps having grown tired of bashing bitcoin which had become one of his main pastimes for the past two years, JPMorgan quant (and rising in-house expert cryptoskeptic) Nick Panigirtzoglou shifted his attention to ethereum last week, and at the risk of infuriating his (very wealthy) web 3.0 clients, used his latest Flows and Liquidity report to slam the second biggest cryptocurrency by warning that it has “been losing market share in the DeFi space at a rapid pace over the past year.”

    And while he admits that the pace has (clearly) slowed in the second half of the year (as the chart below so vividly demonstrates), he then boldly predicts that “the share of ethereum in DeFi will likely drop further before Sharding is implemented in 2023” although it is very much unclear how he reaches this conclusion, and then proceeds to note that “the relative valuation of ethereum vs. its competitors has been echoing its declining DeFi share”, because correlation in this case is clearly causation.

    There is more in the full note (available to pro subs in the usual place) but you get the gist; and here is the one chart that he used to guide his whole narrative and goalseeked conclusion which may have been among the factors that hammered the price of ETH in the past week, sending it 40% below its all time high.

    Not everyone was impressed by this painfully superficial “analysis” however, and on Sunday, Joey Krug, co-CIO at digital-asset investment firm Pantera Capital, tore apart JPM’s hitpiece, telling Bloomberg that an explosion in the growth of crypto networks vying to take market share from Ethereum is unlikely to threaten the dominance of the world’s most used blockchain, and what will happen instead is that ETH dominance will only grow in the coming years.

    “If you roll the clock forward 10 to 20 years, a very sizable percent, maybe even north of 50%, of the world’s financial transactions in some way, shape or form will touch Ethereum,” Krug said in an interview, an outcome which all web 3.0 fanatics would find delightful.

    To be sure, Krug is also talking his book, which is of course to be expected – he admitted that Ether is among Pantera Capital’s top three positions across funds. That said, unlike so many fly-by-night “asset managers” who have taken to crypto in recent months and years hoping to piggyback on the success of the cryptocurrency, Pantera is one of the earliest digital-asset investment firms and ranks in the top five of crypto-focused funds with $5.8 billion in assets.

    Krug was responding not just to JPM but to all critics of Ethereum (who tend to also be big bitcoin fans… big frustrated bitcoin cans since that particular crypto is flat over the past year) say it has expensive fees and slow transaction speeds as traffic crowds the network. Add-ons, known as layer-2 networks, have emerged as fixes but can be complex to use, or have other disadvantages. Of course, all of that will change with Ethereum 2.0 and Sharding, both of which are coming soon.

    There is another reason why bitcoin supporters do not like ETH much: it had a breakthrough year, hitting a record high while soaring almost 400%, smashing the performance of bitcoin. That came on top of a gain of almost 500% the prior year, and has rekindled speculation that it could one day surpass Bitcoin, which currently has about double the market value of Ether, an advantage that is rapidly shrinking.

    While various ETH-killers had an even better year in 2021 with Solana and PolkaDot surging 7,000% and 150% respectively, that has to do with their far lower price a year ago. Meanwhile, Krug, an early DeFi developer, believes competitors will eventually rely on Ethereum as a base, assuming that the blockchain successfully switches to proof-of-stake, a transition which is expected to take place in Q2 of this year, and which should catalyze a major spike in the price.

    “There’s too many trade-offs other chains are making that Ethereum is not making on the decentralization side that are pretty important,” Krug said, noting security concerns. “I don’t know if they’re best suited to be the new global financial settlement layer.”

    Pantera is headed by Dan Morehead, a veteran Bitcoin investor, who was an executive at Julian Robertson’s Tiger Management earlier in his career.

    Some have a more laid back view of the increasingly cutthroat competition in the crypto space: Grayscale Investments’ David Grider, head of research, says “all boats can be lifted” in the sector. Several competitors performed strongly in the second half of 2021, Grider said. Grayscale Investments LLC offers clients a Solana investment fund. It is also exploring products related to other rivals.

    “I don’t think it’s this winner-take-all type of market,” Grider says. “Ethereum has this lead-of-a-network effect. It has this large community, but other ones have emerged that fill different market voids.”

    Of course, a far bigger concerns for both Ethereum and Bitcoin fans is when will the selling associated with the Fed’s infamous hawkish turn relent. As we noted yesterday, a furious bout of selling on Saturday which sent bitcoin just above $40,000 and Ethereum to precisely $3,000.01, both down more than 40% from their November all time highs, made Bitcoin be the most oversold since the March 2020 crash, surpassing even the furious liquidations observed during the May 2021 crash.

    It remains to be seen what will catalyze the relentless BTFD bid that lifted the crypto space from every single previous crash in its brief history, although our money is on the realization that the more the Fed tightens and hikes rates in the coming months, the more it will have to ease, cut rates, do more QE, NIRP, etc in the months that follow once it send stocks into a catastrophic tailspin.

    Tyler Durden
    Sun, 01/09/2022 – 18:00

  • "I Do Not Want To Have A Vaccination": NHS Doctor Tells UK Health Secretary On Camera
    “I Do Not Want To Have A Vaccination”: NHS Doctor Tells UK Health Secretary On Camera

    Authored by Lily Zhou via The Epoch Times (emphasis ours),

    An NHS doctor told Health Secretary Sajid Javid on Friday that he’s not happy with the government’s Covid-19 vaccination mandate for health workers that is due to take effect in April.

    Health Secretary Sajid Javid (R) talks to consultant Steve James during a visit to Kings College Hospital in London on Jan. 7, 2022. (Stefan Rousseau/PA)

    The vaccination mandate has already come into effect for care home staff, volunteers, and visitors from Nov. 11. Parliament approved the mandate for frontline NHS workers on Dec. 14.

    Steve James, a consultant anesthetist at the King’s College Hospital, told Javid that he doesn’t believe the science for mandating the vaccines is “strong enough” and the government should at least consider the nuance that some doctors have had antibodies through previous exposure to the CCP (Chinese Communist Party) virus—the virus that causes COVID-19.

    “I’m not happy about that,” James told the health secretary after he asked an intensive care unit (ICU) their thoughts about the new rule to require CCP virus vaccination for NHS staff.

    The unvaccinated doctor said he had had COVID-19 and had been working in COVID-19 ICU since the beginning of the pandemic.

    “I’ve not had a vaccination. I do not want to have a vaccination,” James said, adding that one of his colleagues was in the same situation.

    “The vaccines are reducing transmission only for eight weeks for [the] Delta [variant of the CCP virus]. With Omicron, it’s probably less. For that, I will be dismissed if I don’t have a vaccine? The science isn’t strong enough,” he told Javid.

    The health secretary said he respects James’s view, adding, “but there’re also many different views.”

    “Obviously, we have to weigh all that up—for both health and social care—and there will always be a debate about it,” Javid said.

    James suggested Javid should reconsider the mandate, considering “Omicron and the changing picture,” or at least the “nuance” that doctors who had previous infections can be exempt because the “protection I’ve got from transmission is probably equivalent to someone who’s vaccinated.”

    When Javid said his immunity “at some point … will wane as well,” James suggested that to maintain a high level of protection against transmission, every staff member would have to get a booster dose “every single month.”

    Javid said the ministers “take the very best advice that we can from people that are vaccine experts.”

    A new study published on Wednesday in the New England Journal of Medicine concluded that CCP virus vaccination was associated with a smaller reduction in transmission of the delta variant than of the alpha variant, and the effects of vaccination decreased over time.

    Analysing real-world data from England between Jan. 2 and Aug. 2, 2021, the government-funded study suggested that Pfizer/BioNTech COVID-19 vaccine reduced the transmission of Delta by 50 percent two weeks after the second dose, but the reduction shrunk to 24 percent 10 weeks later. The Oxford/AstraZeneca COVID-19 vaccine only offered a 24 percent reduction in transmission after two weeks and 2 percent after 12 weeks.

    The government previously stated that the reasons for making CCP virus vaccination a condition of deployment in the health and wider social care sector are to “protect them and to reduce transmission within health and social care premises, contribute to the protection of individuals who may have a suboptimal response to their own immunisations, [and to] avoid disruption to services that provide their care.”

    However, with Omicron’s increased ability to evade immunity, the UK is experiencing a record-high number of cases despite the country’s high vaccination rate, with troops deployed to assist hospitals amid staff shortages.

    On Friday, Joint Committee on Vaccination and Immunisation said the main aim of the UK’s vaccination programme remains the prevention of severe disease and that “protection against mild or asymptomatic infection with existing vaccine products would require regular (perhaps as frequent as 3 monthly) booster vaccinations which is not considered a sustainable long-term strategy.”

    The Epoch Times reached out to the Department of Health and Social Care for comment.

    Tyler Durden
    Sun, 01/09/2022 – 17:45

  • The Ultimate Supply And Demand Equation
    The Ultimate Supply And Demand Equation

    By Macro Ops Musings

    Let’s talk about asset shortages.

    If you’re active on fintwit then you’ve probably heard people mention the possibility of a coming asset shortage squeeze — I myself, have been mulling the idea over.

    But the concept is a fuzzy one. There’s little research on the topic. Very few people are aware of the idea and its impact. And even those that do talk about it, have serious misconceptions of how it actually works.

    Even more importantly, it’s a useful model to apply in our framework for analyzing market cycles — it’s at the heart of what drives bull markets (hint… it’s not earnings). It also ties into our debt cycle model and is likely to become an important driver of market returns over the coming year. So knowing what it is and how it works will put us ahead of the market… which is where we want to be.

    Everything in markets comes down to supply and demand. Our job as speculators is to figure out the two and see if there’s a mismatch that will lead to a price change (a trend). So let’s start by defining market demand.

    Investors can allocate their savings to three main assets: stocks, bonds, and cash. They make these allocation decisions based on desired returns and tolerance for risk to come up with a portfolio mix — the classic being m60% in stocks and 40% in bonds/cash. Recent price appreciation (not valuation or yield) is the overwhelming driver behind this allocation decision. Momentum is the bottom line, which means investors are always chasing the trend — nobody likes sitting out of a rising market.

    Savings — the amount of money available to invest — fluctuates according to the levels of cash + credit (money) in the system. Since credit is easier to create than cash (any two willing parties can create credit out of thin air with an IOU), credit largely drives the amount of investable money in the system. Rising lending equals more savings to invest. The amount cycles up and down in accordance with our debt cycle framework.

    The supply side of financial assets is comprised not just of the total amount of shares or bonds in existence, which is what many people mistakenly think. Rather, it’s the market value — the total dollar amount in existence at current market prices — that makes up supply.

    This means that the equity market has a flexible supply. If the demand for stocks increases then those flows will drive up prices along with the overall market value thus creating more supply to meet that demand. It’s a system that automatically self-corrects over time.

    The bond market, on the other hand, has a theoretical supply limit.

    There’s a ceiling on the market value of bonds because credit shouldn’t trade much above the price which corresponds to a 0% yield to maturity. It used to be thought that this was an iron-clad rule. But after years of NIRP, we now know that bonds can and do trade above this limit, in which their yield is negative. But even here, they can only trade so far above this level that there’s a range that serves as a limit on bond market value and hence supply.

    So to summarize, the basics of our supply and demand model is: On the demand side we have:

    • a. The amount of savings available to invest is largely driven by the credit cycle
    • b. The allocation mix of investor portfolios is largely driven by performance chasing

    On the supply side we have:

    • a. Supply is made up of the total market value of the asset and this market value is equal to the number of shares + the price at which they trade
    • b. Stocks have a flexible supply in that greater demand leads to higher market value and more supply
    • c. Bonds have a theoretical limit in that they can’t trade much below 0% interest rates
    • This is a very different kind of thinking about what moves the market. It’s the model that Stanley Druckenmiller was referring to when he said:

    Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.

    Liquidity is credit-driven investment demand. This isn’t to say that earnings don’t matter. They do, especially on an individual company level. But on the aggregate, earnings are largely a result, not the cause of, the liquidity-driven short-term debt cycle.

    We can look back through time and see how this model correlates to market returns.

    Historically, US corporate share issuance has rarely exceeded 2% and over the last three and a half decades corporates have been actively reducing their share count through buybacks and M&A at an average annual rate of 2%. The chart below shows net corporate share issuance.

    While the number of shares has been falling, the amount of money (cash+credit), has been steadily increasing. Over the last 50 years, the US’s money stock has been rising at an average annual rate of 8% a year. The chart below shows total new credit (blue line) and M2 cash stock (red line).

    So over the last five decades, we’ve had the supply of equity shares shrinking by an average of 1-2% a year, through buybacks and M&A. And we’ve had the total money stock increasing at an average rate of 8% a year. Disregarding total market value and investor allocation preferences for a second, this gives us a supply/demand mismatch of roughly 9.5% a year. Well, guess what the average annual return has been on the stock market over the same period? That’s right…9.5%.

    The stock market’s average annual returns equal the supply/demand mismatch of share reduction and money creation over the same period. This isn’t a coincidence. It’s just math. You see, if investors keep their portfolio mix (their allocation preference between stocks, bonds, and cash) relatively constant, then the market value of stocks has to rise at the same level of the supply and demand imbalance between share reduction and money creation.

    If not, investors’ allocation to equities will dwindle relative to bonds and cash and the market value of stocks will fall on a relative basis to the amount of investable savings. We can see what this would look like on the chart below via Philosophical Economics.  The chart shows how much the investor allocation to stocks would decrease if the market went through a “lost decade” period; where the share count/money demand imbalance grew at its historical rate, but stock prices stayed constant. The purple line shows the allocation to equities over each hypothetical “lost decade” period and the orange line shows what the actual allocation to stocks was.

    So we can see, the market has to rise over time because we operate in an inflationary market system, where the quantity of money is nearly always growing and the corporate sector’s aversion to dilution keeps share growth at a minimum to net negative. The only way for the market to clear — for supply and demand to balance — is for the market’s total value to rise, increasing the supply to meet the demand. If you were trading back in the early 80s and you understood this market supply and demand model, you would have foreseen the massive secular bull market that was mathematically inevitable.

    In the early 80’s we saw a perfect storm that led to a huge imbalance between the supply of equities (shares issued plus total relative market value) and demand (total money creation plus investor allocation).

    We can see that following the 1981 recession both money creation ballooned to all-time highs and corporates saw record net negative share issuance.

    At the same time, investors’ allocation to stocks hit an all-time low of 12%! The chart below shows a household’s allocation to equities as a percentage of total financial assets.

    At that rate of money creation and net share decline, investors’ allocation to stocks would have had to fall to near zero just to keep the market from rising.

    The secular bull market HAD to happen so that the market’s total value could rise, bringing supply up to meet demand and allowing the market to clear.

    Tyler Durden
    Sun, 01/09/2022 – 17:30

  • Morgan Stanley: Central Banks Are Increasingly Comfortable Pushing A More Hawkish Line… Until Something Pushes Back
    Morgan Stanley: Central Banks Are Increasingly Comfortable Pushing A More Hawkish Line… Until Something Pushes Back

    By Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley

    We hope everyone had a Happy New Year and a restful holiday. It feels like we’ll need it. Right out of the gate, 2022 is greeting us with a surge in Covid cases, 199K on payrolls, geopolitical risk, and hawkish Fed communication. Buckle up!

    Amid these issues, the question for our readers is whether the carefully crafted Outlooks and Investment Committee conclusions from late last year still hold. We think the main themes of our 2022 Outlook still apply – solid growth and tighter policy within an accelerated cycle. But clearly, there are now more moving parts.

    One of them is the growth outlook. Our 2022 expectation was that global growth remains above-trend, led by DM and aided by a healthy consumer, robust business investment, and healing supply chains. Can that still hold with the new Omicron variant?

    For the moment, we think it can. Our economists note that global GDP has become less sensitive to each new Covid wave as vaccination rates have risen, treatment has improved, and the appetite for restrictions has declined. Modelling by our US biotechnology team suggests that cases in Europe and the US could crest within 3-6 weeks, meaning that the better part of 2022 lies beyond this peak. With some form of ‘winter wave’ already baked into our original forecasts, we don’t think, for now, that the story has changed.

    However, there are some wrinkles. Because China is pursuing a different (zero Covid) policy from the US, Europe and Japan, its near-term growth may be more impacted than that of other regions. And the emergence of this variant likely reinforces another prior expectation: that US and eurozone growth exceed EM growth in 2022.

    A second wrinkle is the Federal Reserve’s hawkish shift. Last January, the market assumed the first Fed rate hike was still 40 months away (~April 2024). Last August, the market assumed liftoff would come around April 2023. Today, pricing implies that the first hike is ~2.3 months away (March 2022). Importantly, the Fed is doing little to suggest that these assumptions are wrong.

    And this week it continued to push the story. A hawkish set of minutes noted active discussion around whether to raise rates sooner, raise them faster, and start shrinking the balance sheet (QT) much closer to the first rate hike than the market had anticipated. This last point is especially critical, given the importance investors have assigned to Fed purchases for overall market strength and resilience.

    Our economists expect more details at the next Fed meeting later this month. But the direction of travel appears clear: 2022 will be a year of policy tightening.

    And of course, it’s not just the Fed. At the time of writing, markets imply about 100bp of rate hikes over the next 12 months in the UK, 139bp in Canada, 245bp in Mexico, 150bp in Poland and 145bp in New Zealand. Japan stands out as the only major economy without a rate hike priced in for the next year.

    Indeed, it would seem for the moment that central banks are increasingly comfortable pushing a more hawkish line until something pushes back. And so far, nothing has. Equity markets haven’t fallen, credit spreads are steady, and yield curves have steepened over the last month (the opposite of what you’d expect in a policy mistake). Why stop now?

    For markets, therefore, our strategy still leans into the idea of a more hawkish tone to start the year. Our FX team remains bullish on the US dollar, while our US interest rate strategists remain negative on duration, especially in real rates. We think that this combination should be negative for gold but supportive for financial stocks, both in the US and around the world.

    Elsewhere in equities, the expected rate hikes from the Fed and EM central banks, relative to the ECB and the BoJ, lead to different assumptions about how valuations in these markets evolve. We think that valuations for European and Japanese stocks, which are now similar to January 2017, are reasonable, and don’t need to de-rate further. US and EM equities, in contrast, face more valuation uncertainty ahead of the full force of the tightening cycle. In credit, tight spreads and shifting policy drive forecasts for modest spread widening, although low default rates should still support exposure at the bottom of securitized capital structures.

    2022 is set to be an action-packed year, and one that looks likely to test many assumptions about how far, and how fast, monetary policy could shift in this cycle. We wish investors the best, even as they continue to see hawks.

    Enjoy your Sunday.

    Tyler Durden
    Sun, 01/09/2022 – 16:30

  • DOJ Refuses To Withdraw Memo Activating FBI Counterterrorism Division Against School Parents
    DOJ Refuses To Withdraw Memo Activating FBI Counterterrorism Division Against School Parents

    In a quiet response to the Senate Judiciary Committee three days before Christmas, the Biden DOJ says it won’t withdraw a controversial memo used to activate the FBI Counterterrorism Division to investigate parents voicing their opposition to a variety of topics – primarily mask and vaccine mandates, and teaching critical race theory.

    This week, Sen. Chuck Grassley (R-IA) revealed the pre-Christmas response – stating:

    “[I]n December we asked why the FBI’s Counterterrorism Division was getting involved in parents expressing their concerns at school board meetings. Now, just to be crystal clear, there’s no excuse for real threats or acts of violence at school board meetings, but if there are such threats, these should be handled at the local level and the Attorney General should withdraw his memo that started this whole thing.

    “Well, a couple days before Christmas, the Justice Department responded to us with just a one-page letter.

    “In that letter, DOJ had nothing to say about why the FBI’s Counterterrorism Division was involved in local school-board matters. DOJ just said, ‘We’re not going to withdraw the memo.’ So, the Feds may be keeping track of school board meetings—even if it creates a horrible chilling effect. And, of course the FBI looking over your shoulder would have a chilling effect. Next week the Judiciary Committee will hold a hearing on domestic terrorism. I hope we’re going to be focusing on the serious threats facing our country—and I hope no one thinks the focus is on our nation’s parents.”

    The Garland memo

    On October 4, AG Merrick Garland issued a memorandum announcing a concentrated effort to target any threats of violence, intimidation, and harassment by parents toward school personnel.

    The announcement came came days after the national association of school boards asked the Biden administration to take “extraordinary measures” to prevent alleged threats against school staff that the association said was coming from parents who oppose mask mandates and the teaching of critical race theory.

    In late October, however, it was revealed that Garland based the memo on unsupported claims made by the National School Boards Association, which apologized for inflammatory language. Garland maintains that the letter had no bearing on the DOJ’s stance.

    A ‘protected disclosure’:

    In mid-November, House Judiciary Committee Republicans sent a letter to Garland after an FBI whistleblower came forward with “a protected disclosure” – claiming that “the FBI’s Counterterrorism Division had been compiling and categorizing threat assessments related to parents, including a document directing FBI personnel to use a specific “threat tag” to track potential investigations.”

    “This disclosure provides specific evidence that federal law enforcement operationalized counterterrorism tools at the behest of a left-wing special interest group against concerned parents,” the letter continues.

    According to a public statement by Grassley regarding the one-page letter: 

    “The Department of Justice owes the American people a better answer than just a one-page letter that says nothing about why the FBI’s Counterterrorism Division is involved in local school-board matters. Now more than ever, parents should be their kids’ strongest and best advocates. They have the God-given right to do so. And the Justice Department ought to be doing everything it can to protect that right, not scare them out of exercising that right. Attorney General Garland should withdraw his memo. And he should take Congress’s oversight, and concern for the rights of parents, more seriously.”

    (h/t Sharyl Attkisson)

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    Tyler Durden
    Sun, 01/09/2022 – 16:00

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