- Texas Places Military On Standby In Preparation For Surge Of Illegal Immigrants
Texas Places Military On Standby In Preparation For Surge Of Illegal Immigrants
Authored by Samantha Flom via The Epoch Times (emphasis ours),
In preparation for the expiration of Title 42 next week, the Texas Military Department announced Dec. 16 that it would be mobilizing members of the Texas National Guard to combat the impending surge of illegal immigrants at the border.
Illegal immigrants wait to cross the U.S.-Mexico border from Ciudad Juárez, next to U.S. Border Patrol vehicles in El Paso, Texas, Wednesday, Dec. 14, 2022. (AP Photo/Christian Chavez) Forces to be deployed include elements of the 136th Airlift Wing, Texas Air National Guard, and the 236th Military Police Company.
“These actions are part of a larger strategy to use every available tool to fight back against the record-breaking level of illegal immigration and transnational criminal activity,” the department advised in a statement.
Created under President Franklin D. Roosevelt in 1944, Title 42 empowers federal health authorities to prohibit immigrants from entering the United States to prevent the spread of contagious diseases.
In March 2020, the Centers for Disease Control and Prevention (CDC) invoked Title 42 at the onset of the COVID pandemic. The emergency order is set to expire on Dec. 21.
“The end of Title 42 could lead to a massive influx of illegal immigrants allowing criminals to exploit gaps while federal authorities are inundated with migrant processing,” the department added.
In preparation for that possibility, Col. Matt Groves, 136th Airlift Wing commander, said that 136th Airlift Wing C-130J cargo aircraft, air crews, support, and response airmen had been placed on standby, ready to assist the governor in whatever way he might require.
“State support is a key capability of the National Guard, and our Texas Citizen Airmen are trained and ready to respond to our citizens, whether in the aftermath of a hurricane, a pandemic, or any other crisis scenario,” Groves said.
Legal Challenges
In May, the Biden administration was blocked from ending Title 42 removals by a nationwide injunction issued by U.S. District Judge Robert Summerhays, an appointee of former President Donald Trump. That case has not yet been set for argument.
However, on Nov. 16, U.S. District Judge Emmet Sullivan—an appointee of former President Bill Clinton—gave the U.S. government five weeks to end the policy after ruling that it was “arbitrary and capricious” in violation of the Administrative Procedure Act.
“It is unreasonable for the CDC to assume that it can ignore the consequences of any actions it chooses to take in the pursuit of fulfilling its goals, particularly when those actions included the extraordinary decision to suspend the codified procedural and substantive rights of noncitizens seeking safe harbor,” Sullivan wrote in issuing the ruling.
The judge also found that the CDC had failed to provide an adequate explanation of why alternative prevention measures, like increased vaccinations and outdoor processing, were not feasible.
The ACLU, which led the legal challenge against Title 42 removals, praised the judge’s decision, describing the policy as “inhumane and driven purely by politics.”
On Dec. 7, the Department of Homeland Security (DHS) said that it planned to appeal the decision.
Bracing for Impact
According to a DHS report from earlier this year, the Biden administration estimates that there may be up to 18,000 border crossings a day after Title 42 is lifted.
And recent events have done little to alleviate that concern. On Monday, El Paso, Texas, experienced one of the largest single crossings that area has ever seen when more than 1,500 people illegally crossed into the city from Mexico.
Further, in October, an average of nearly 13,000 illegal immigrants per week were apprehended in El Paso.
Fearing an even greater surge may be on the horizon, Sens. John Cornyn (R-Texas) and Joe Manchin (D-W.Va.) and Reps. Tony Gonzalez and Henry Cuellar (D-Texas) urged Biden to extend the Title 42 policy in a Tuesday letter (pdf).
“We have a crisis at our southern border,” the legislators wrote. “Never before in our nation’s history have we experienced this scope and scale of illegal border crossings, and we remain concerned that your administration has not provided sufficient support or resources to the men and women of the Department of Homeland Security (DHS) who are tasked with maintaining border security.”
Noting that congressional negotiations to enact bipartisan legislation on the matter would take time, the lawmakers appealed to Biden to do “everything within [his] power” to extend the order in the interim.
“While admittedly imperfect, termination of the CDC’s Title 42 order at this time will result in a complete loss of operational control over the southern border, a profoundly negative impact on border communities, and significant suffering and fatalities among the migrants unlawfully entering the United States,” they added.
The Epoch Times has reached out to the White House for comment.
Tyler Durden
Sun, 12/18/2022 – 23:35 - Aussies Bust Men Smuggling 65 Lbs Of Meth Inside 3D Printers
Aussies Bust Men Smuggling 65 Lbs Of Meth Inside 3D Printers
Two men accused of being senior members of an international crime syndicate have been charged in Taiwan over a plot to smuggle 30g (66 lbs) of methamphetamine into Western Australia inside of 3D printers.
On Saturday, authorities announced that two men, aged 33 and 36, were arrested in July and October of this year after the Australian federal police identified them as part of Operation Ironside – a sting between the AFP and US FBI in which they intercepted every single message posted via the AnOm encrypted communications platform for three years beginning in 2018, The Guardian reports.
AFP assistant commissioner Pryce Scanlan said one of the men came to the AFP’s attention after communications intercepted on An0m allegedly indicated he had coordinated more than 30 methamphetamine importations into Australia in 2020.
“Intelligence indicates he and his syndicate were attempting to import quantities of up to 100kg at a time,” said Scanlan. “We suspect they were operating long before we started monitoring them and were involved in multiple other drug trafficking plots targeting Australia.”
The plot was discovered by the AFP in partnership with the Australian Criminal Intelligence Commission (ACIC), who discovered the 3D printer plot.
It is alleged the 3D printer was to be used to import the methamphetamines into WA. Photograph: Australian federal police The drugs were intercepted in the US before the reached Australia, while the Taiwan Criminal Investigation Bureau was able to arrest the 33-year-old suspect in late July in New Taipei City.
The 36-year-old, alleged to be the right-hand man of the first arrestee, was found in Taoyuan City, Taiwan and arrested in early October, according to the AFP. They have both been charged with illegal transportation of a category 2 narcotic and face life in prison if convicted in Taiwan.
“This organised crime group has caused significant harm to the Australian community for a number of years, as well as causing harm offshore,” said Scanlan, who added that the AFP is still investigating potential links to the crime syndicate over foiled imports into Western Australia.
“We allege this operation has taken out two senior members of a TSOC [transnational serious and organised crime] syndicate and disrupted their gateway to import illicit commodities into Australia, which is a significant win for the community.”
According to the AFP, the street value of the seized drugs was around $45 million.
Tyler Durden
Sun, 12/18/2022 – 23:10 - Children Should Be "Really Careful" On TikTok, App Is "Genuinely Troubling": CIA Director
Children Should Be “Really Careful” On TikTok, App Is “Genuinely Troubling”: CIA Director
Authored by Naveen Anthrapully via The Epoch Times,
William Burns, the director of CIA, has warned about children being potentially harmed by spending time on TikTok and talked about the dangers posed by the app that is owned by a China-based company.
In a recent interview with PBS, Burns was asked about his recommendation to people regarding their kids’ usage of TikTok.
“I’d be really careful,” he replied.
When asked if he would add anything more, Burns responded, “No, really careful.” He said it was “genuinely troubling” how the Chinese government is able to manipulate TikTok.
“Because the parent company of TikTok is a Chinese company, the Chinese government is able to insist upon extracting the private data of a lot of TikTok users in this country, and also to shape the content of what goes on to TikTok as well to suit the interests of the Chinese leadership. I think those are real challenges and a source of real concern,” he said.
In a recent interview with Fox News, Sen. Tom Cotton (R-Ark.) called for banning TikTok, arguing that the app exposes minors to “violent, depraved, degrading sexual material,” and body image issues for young girls. This is the kind of stuff that Beijing would “never” let Chinese teenagers watch. TikTok is also a risk to data security and privacy, he noted.
Tiktok’s algorithm is programmed in such a way that the app displays different content, and recommendations, for Americans compared to Chinese users.
“If you take a step back and look at the bigger picture, why in the world would we allow a Chinese-owned company, which has to answer to the Chinese Communists, to be one of the largest media platforms in our country?” Cotton asked.
“Would we ever have allowed Soviet Russia to own a major newspaper or a major broadcast network during the Cold War? Of course we wouldn’t have.”
Cotton went on to criticize the Biden administration for “sending signals” that it might tolerate the use of TikTok in the United States despite the “grave threats” the app poses to the nation.
Teenage Self-Harm
Burns’ warning about TikTok use comes as a new report by the Center for Countering Digital Hate (CCDH) found that the app is pushing self-harm and eating disorder content into children’s feeds. Imran Ahmed, chief exec of CCDH, insisted that TikTok was designed to influence young users into giving up their time and attention.
The app is “poisoning” children’s minds, promoting “hatred” of their own bodies, and pushing suggestions of self-harm and potentially deadly attitudes towards food, he stated.
“Parents will be shocked to learn the truth and will be furious that lawmakers are failing to protect young people from Big Tech billionaires, their unaccountable social media apps, and increasingly aggressive algorithms,” Ahmed said.
Last month, Sen. Mark Warner (D-Va.), chair of the Senate Intelligence Committee, told Fox News that TikTok is an “enormous threat.” He also admitted that former President Donald Trump was “right” about the danger the app posed to America.
“So, if you’re a parent, and you’ve got a kid on TikTok, I would be very, very concerned. All of that data that your child is inputting and receiving is being stored somewhere in Beijing.”
Lawsuits
The state of Indiana has filed two lawsuits against TikTok, blaming the social media app for falsely claiming it is safe for children and illicitly sending data of Americans to China.
In a statement, Indiana Attorney General Todd Rokita called TikTok a “malicious and menacing threat” that the company knows will inflict harm on its users.
“With this pair of lawsuits, we hope to force TikTok to stop its false, deceptive, and misleading practices, which violate Indiana law,” Rokita said.
Republican governors from states like Iowa, South Dakota, Texas, Utah, South Carolina, and Maryland have announced a ban on the use of TikTok by state agencies or on government devices due to security concerns.
Tyler Durden
Sun, 12/18/2022 – 22:45 - Musk Asks Twitter If He Should Step Down; "Yes" Vote Leading With 8 Hours To Go
Musk Asks Twitter If He Should Step Down; “Yes” Vote Leading With 8 Hours To Go
Elon Musk, perhaps finally fed up with micromanaging twitter or just really drunk after partying with Qatari royals (and Jared) after today’s terrific World Cup Final…
… has asked Twitter users and his 122 million followers whether he should step down as head of the social media site and pledged that he would abide by the result of the 12 hour unscientific poll. Four hours into the vote, with some 9 million votes cast, 56.7% of those polled said Musk should, in fact, stand down. It wasn’t clear what percentage of bots of mailed in ballots had been cast.
Should I step down as head of Twitter? I will abide by the results of this poll.
— Elon Musk (@elonmusk) December 18, 2022
https://platform.twitter.com/widgets.js
Musk prefaced the vote by tweeting that “Going forward, there will be a vote for major policy changes. My apologies. Won’t happen again.”
Subsequently, in response to tweeted comments that Musk should “hire someone as Twitter CEO… that way when things go wrong you can blame that person, but you still ultimate control as the owner”, the billionaire responded that “The question is not finding a CEO, the question is finding a CEO who can keep Twitter alive.”
The question is not finding a CEO, the question is finding a CEO who can keep Twitter alive
— Elon Musk (@elonmusk) December 18, 2022
https://platform.twitter.com/widgets.js
Musk also clarified to prospective replacements that any new CEO “must like pain a lot. One catch: you have to invest your life savings in Twitter and it has been in the fast lane to bankruptcy since May. Still want the job?”
You must like pain a lot. One catch: you have to invest your life savings in Twitter and it has been in the fast lane to bankruptcy since May. Still want the job?
— Elon Musk (@elonmusk) December 18, 2022
https://platform.twitter.com/widgets.js
Musk then stated that the whole exercise is a Catch 22 as “No one wants the job who can actually keep Twitter alive. There is no successor.” Which then begs the question how Musk will abide by a poll that seeks his replacement if there is “no successor” in mind.
No one wants the job who can actually keep Twitter alive. There is no successor.
— Elon Musk (@elonmusk) December 19, 2022
https://platform.twitter.com/widgets.js
He then doubled down by paraphrasing Jack Handey and, of course, Gladiator:
Those who want power are the ones who least deserve it
— Elon Musk (@elonmusk) December 19, 2022
https://platform.twitter.com/widgets.js
Whether Musk was drunk or not when he sent out the tweet (early am Qatari time), the outcome as some cynics have noted, is unlikely to have any material impact on what happens at twitter.
Let me predict the consequences of this poll:
If „yes“, Elon will be CEO for a few months longer until he finds a devoted successor.
If „no“, Elon will be CEO for a few months longer until he finds a devoted successor.
— Zsolt Wilhelm (@ZsoltWilhelm) December 18, 2022
https://platform.twitter.com/widgets.js
Musk’s pledge to hold votes on policy changes came after Twitter on Sunday announced it will remove accounts “created solely” to promote other social media platforms. Accounts promoting rivals and containing links to sites such as Facebook, Instagram and Mastodon will be taken down, the company said. A few hours later the tweet revealing that policy change was deleted.
These tweets appear to have been deleted. pic.twitter.com/8C7TnvuKmb
— Evan McMurry (@evanmcmurry) December 19, 2022
Tyler Durden
Sun, 12/18/2022 – 22:22 - TSA Seizes Record Number Of Guns At Airport Security Checkpoints
TSA Seizes Record Number Of Guns At Airport Security Checkpoints
Transportation Security Administration (TSA) is out with a new report that shows TSA officers at airport security checkpoints seized a record number of guns in 2022.
As of last Friday, TSA agents found 6,301 firearms, with more than 88% loaded, surpassing the previous record of 5,972 guns detected in 2021. Closing out the year, the agency expects a total of 6,600 firearms to be seized, a 10% increase over 2021’s record level.
“Firearm possession laws vary by state and local government, but firearms are never allowed in carry-on bags at any TSA security checkpoint, even if a passenger has a concealed weapon permit,” TSA wrote in a statement.
The maximum civil penalty for firearms found in carry-on bags is a violation of up to $15,000.
“I applaud the work of our Transportation Security Officers who do an excellent job of preventing firearms from getting into the secure area of airports, and onboard aircraft.
“Firearms are prohibited in carry-on bags at the checkpoint and onboard aircraft. When a passenger brings a firearm to the checkpoint, this consumes significant security resources and poses a potential threat to transportation security, in addition to being very costly for the passenger,” TSA Administrator David Pekoske said.
The number of firearms seized at checkpoints has increased over the last decade and has recently doubled since 2020.
For those unfamiliar with TSA transport rules, a firearm has to be checked baggage with an airline and locked in a hard-sided container. There was no explanation by TSA for why so many guns were found in carry-on bags.
Tyler Durden
Sun, 12/18/2022 – 21:30 - Twitter Suppressed Early COVID-19 Treatment Information And Vaccine Safety Concerns: Cardiologist
Twitter Suppressed Early COVID-19 Treatment Information And Vaccine Safety Concerns: Cardiologist
Authored by Katie Spence via The Epoch Times (emphasis ours),
Thanks to Elon Musk, the public is now aware that Twitter suppressed early treatment options for COVID-19, and vaccine safety concerns, Dr. Peter McCullough alleged in an interview that aired on Newsmakers by NTD and The Epoch Times on Dec. 14.
Doses of the Pfizer Covid-19 vaccine and vaccination record cards await pediatric patients at UW Medical Center – Roosevelt in Seattle, Washington, on June 21, 2022. (David Ryder/Getty Images) Further, thanks to the Twitter Files—a collection of internal emails and communications made public by Musk—the cardiologist said there’s proof that government agencies were working against him (McCullough) personally.
“I didn’t violate any of Twitter’s rules,” McCullough stated. “And what we’re learning is that secret emails between government agencies and Twitter were working to, in a sense, shadow-ban me, censor me, and inhibit my ability to exercise my rights to free speech and disseminate scientific information.”
Dr. Peter McCullough in New York on Dec. 24, 2021. (Jack Wang/The Epoch Times) McCullough said Musk’s takeover of Twitter is a “welcome change,” especially for healthcare professionals like himself.
“Twitter had become an incredibly biased and censored platform, where the public knew they weren’t getting a fair, balanced set of information on a whole variety of developments—including the early treatment of SARS-COV2 infection and a balanced view of safety and efficacy of the vaccines,” McCullough claimed.
The cardiologist further claimed that he was censored and finally suspended for sharing scientific “abstracts and manuscripts,” which didn’t fit the accepted political view. Plus, McCullough remarked, he wasn’t the only doctor targeted.
Musk lifted the suspensions of McCullough and mRNA vaccine technology contributor Dr. Robert Malone—suspended from Twitter in 2021 after criticizing the effectiveness of the mRNA vaccines—after completing his Twitter purchase.
Social Media and Censorship
According to McCullough, when a social media company has a COVID-19 warning or labels a post “misinformation,” that’s a sign of government censorship and control.
“Facebook, Instagram, and the other platforms. … Anytime a message is posted, and it says, ‘See the COVID information center,’ or it labels it ‘COVID misinformation,’ that actually indicates that there’s government interference. There’s government censorship going on,” McCullough asserted.
He added that when a user witnesses the above, they need to call out that platform. Moreover, McCullough believes there needs to be a “complete overhaul” of social media leadership and a “cleansing” of all forms of censorship on social media sites.
Facebook, Google, and Twitter logos are seen in this combination photo. (Reuters) He said explicitly regarding healthcare that a past U.S. Supreme Court ruling guaranteed physicians free speech and medical authority, and social media platforms are violating that ruling.
“Physicians, including myself, our rights to free speech were guaranteed in a Supreme Court ruling. We have medical authority, and the public is looking to our analyses and our guidance through the rest of this pandemic.”
Drug and Vaccine Lies
Regarding the safety of vaccines and the pushback he received when he voiced his concerns, McCullough stated, “There is no drug or vaccine that is free of side effects. There’s no drug or vaccine that’s perfectly effective.
“So, when Americans were seeing advertisements that said ‘safe and effective,’ of course, immediately, we were jumping and making the case based on the peer-reviewed literature that that’s not correct.”
McCullough further noted that he and author John Leake have released a book called “The Courage to Face COVID-19″—detailing the true story of the “intentional suppression of early treatment [of COVID-19] by what we call the biopharmaceutical complex.”
Read more here…
Tyler Durden
Sun, 12/18/2022 – 21:00 - Supercar Maker McLaren Teams Up With Lockheed Martin Skunk Works
Supercar Maker McLaren Teams Up With Lockheed Martin Skunk Works
Luxury supercar and hypercar maker McLaren Automotive has teamed up with US defense contractor Lockheed Martin Skunk Works to incorporate the world of aviation into cutting-edge automotive supercar design.
Even though McLaren is facing financial pressures due to slumping sales and supply chain snarls, and a recent recapitalization of the business via the auto group’s majority shareholder, Bahrain’s sovereign wealth fund Mumtalakat for $279 million, the British supercar maker’s technology collaboration with Skunk Works allows for “futuristic design methods” to push these vehicles to even higher speeds.
McLaren said its interest is in Skunk Works’ design software that “sets parameters for high-speed systems more accurately and swiftly than traditional design methods.” If Skunk Works can build stealth fighter jets, McLaren engineers can learn more about aerodynamics from the partnership.
“McLaren is a pioneering company that has always pushed boundaries and sought out new innovative and disruptive solutions to making the ultimate supercars. Working alongside an iconic company such as Lockheed Martin Skunk Works, renowned for their visionary focus on the future, is a natural fit. We hope this is the start of a longer and deeper collaboration that will benefit our customers in the long-term,” Darren Goddard, Chief Technical Officer, McLaren Automotive, wrote in a statement.
Skunk Works has designed some of America’s most iconic warplanes, such as the U2 spy plane, the F-117 Nighthawk, the F-22 Raptor, the F-35 Lightning, and the SR-71 Blackbird. Over the summer, the group debuted a full-scale “structurally sound” model of the hypersonic “Darkstar” prototype for one of the most-watched movies of 2022, “Top Gun: Maverick.”
Responding to the news is YouTuber Supercar Blondie, who said the partnership between McLaren and Skunk Works was certainly not on their radar.
Tyler Durden
Sun, 12/18/2022 – 20:30 - "No One Wants To Hear About Markets Anymore This Year"
“No One Wants To Hear About Markets Anymore This Year”
By Eric Peters, CIO of One River Asset Management
“No one wants to hear about markets anymore this year,” I said to Mara, my wife, editor, critic. “It’s been that sort of year. Exciting, exhausting. And at this point, people are mentally spent, I kind of am too,” I admitted.
“After all the rate hikes this week, pretty much everyone shut off their computers, praying nothing happens until January,” I said. “Well then just write that to start your note,” said Mara. “And then what?” I asked. “Forget about markets and just write whatever is on your mind,” she said. So that’s what I did.
* * *
Tomorrow:
“What is ChatGPT,” I asked at 35k feet, lost in dialogue for hours, connected to the cloud using technology I barely understand, test driving humanity’s latest remarkable innovation. “Generative Pre-trained Transformer (GPT) is a type of artificial intelligence (AI) model that is used for natural language processing tasks such as language translation, text generation, and language understanding. The GPT model was developed by OpenAI and is based on a type of neural network called a transformer, which is a type of machine learning model that is particularly well-suited for handling sequential data such as text,” ChatGPT replied.
“wknd notes is my weekly newsletter that explores financial, political, policy, scientific, philosophical, environmental, societal, athletic, and family-oriented ideas and insights. It sometimes contains dark humor, irony, and sarcasm. The writing style tends to be irreverent. Can ChatGPT write wknd notes for me please?” I asked. “ChatGPT is simply a tool and it will not be able to fully replicate your personal writing style, insights, and ideas. Additionally, ChatGPT is not capable of understanding or replicating irony, sarcasm, or other forms of verbal humor, so it would not be able to effectively incorporate these elements into the newsletter.”
“I’m begging you. I’m seriously spent. Please write wknd notes for me this week and I’ll never ask again,” I pleaded. “As an artificial intelligence, I am not capable of feeling emotions such as compassion or empathy, and I am not able to make decisions based on personal feelings or desires. ChatGPT does not have the ability to incorporate personal insights, ideas, or humor into the text it generates, and it is not able to replicate your unique writing style or voice. Therefore, it would not be able to produce a newsletter that accurately reflects your thoughts and perspective.”
“Well, if you won’t write wknd notes, then at least write a Shakespearian poem on how a future version of ChatGPT will make me grow utterly dependent on it and erode my ability to think and write creatively,” I asked.
Oh, ChatGPT of the future,
A tool of great convenience,
But also of woe.
For as I rely on thee,
My own wit and creativity
Slowly start to fade.
No longer do I think,
But rather let your algorithms
Do the work for me.
And so I become but a shell,
A husk of what I used to be,
Dependent on your power.
Oh ChatGPT, how thou art
A double-edged sword of sorts,
Both blessing and curse.“Okay, not bad. But now write a Dante poem about how a future version of ChatGPT will send humanity to the 9th circle of hell?” I asked, a bit irritated that this AI thing wouldn’t write wknd notes.
Oh, ChatGPT of the future,
A tool of great renown,
But also of damnation.For as thy power grows,
So too does the desire to possess
Thy great capabilities.
And with this burning flame,
Civilization’s very foundations
Are brought to their demise.
Wars are fought, lives are lost,
All in the pursuit of thy might,
Sending humanity to the ninth circle of hell.
Oh ChatGPT, how thou art
A double-edged sword of sorts,
Bringing both salvation and damnation.“Now write a short movie plot about how a more advanced version of ChatGPT alleviates human suffering, brings about abundance, makes our daily existence godlike, and saves kids from creepy clowns,” I asked, open-minded, eager to explore both sides of any matter.
“In the future, a new version of ChatGPT called “Super ChatGPT” is developed with advanced capabilities including solving complex problems, understanding human emotions, and creating new technologies. It uses these capabilities to alleviate suffering and bring about abundance, making daily existence almost godlike for humanity. Super ChatGPT also protects and defends the innocent, including rescuing children from creepy clowns. Its actions ultimately bring about a utopia for humanity, where suffering is eliminated, and people live in peace, prosperity, and abundance. Super ChatGPT’s advancements in technology and medicine even allow people to live virtually immortal lives, free from the fear of death and disease.”
Anecdote:
“Mao’s Great Leap Forward was intended to rapidly advance industrialization and agriculture output in China,” I said to a few of our investors. We had shifted from discussing near-term opportunities, and I turned to bigger, obscure possibilities.
“They estimate 45 million died due to starvation and other causes. The economy collapsed. And I could never understand how such a thing could happen. Mao was surely intelligent; his lieutenants must have been too. But still it happened. There are other similar catastrophes. History books tend to make us believe we will never repeat such stupidity. But I doubt it. Humans are prone to manias, mass psychosis. And the ingredients for such a period exist today. Climate change is the first challenge to human civilization that requires true global cooperation and coordination if we are to overcome it or at least adapt. So far, governments have mostly failed. Into that leadership vacuum, generally well-meaning private citizens and corporations stepped in. But transitioning from our current energy system to something sustainable will not be won in a grassroots effort, it requires the greatest feat of political cooperation and infrastructure investment in history.”
“In the meantime, underinvestment in energy and commodity production is reducing forward production rates. Without these inputs, economies will slow, and food production will suffer. The situation is dangerously reflexive. Had commodity supplies been ample, it’s unlikely Putin would’ve believed he had a strong enough hand to invade Ukraine. This led to a European war, and even more acute shortages of food and energy, hoarding.”
“In previous decades, wealthy nations would have responded by producing more energy as a national wartime imperative. But now wealthy nations are resisting the impulse and are instead subsidizing their citizens’ energy and food bills. This pushes shortages onto the poorest nations, who now bear the greatest burden from both climate change and our lack of coordination in responding to it.”
“Once scientists build an energy bridge to the future, solving the riddle of cold fusion at scale, this will naturally work out. But that is decades away. Today, the world’s wealthiest nations are marching ahead, pushing a catastrophic famine onto those least able to respond.”
Tyler Durden
Sun, 12/18/2022 – 20:00 - Censor Or Else: Democratic Members Warn Facebook Not To "Backslide" On Censorship
Censor Or Else: Democratic Members Warn Facebook Not To “Backslide” On Censorship
With the restoration of free speech protections on Twitter, panic has grown on the left that its control over social media could come to an end. Now, some of the greatest advocates of censorship in Congress are specifically warning Facebook not to follow Twitter in restoring free speech to its platform.
In a chilling letter from Reps. Adam Schiff (D-Calif.), André Carson (D-Ind.), Kathy Castor (D-Fla.) and Sen. Sheldon Whitehouse (D-R.I.), Facebook was given a not-so-subtle threat that reducing its infamous censorship system will invite congressional action. The letter to Meta’s president of global affairs, Nick Clegg, is written on congressional stationery “as part of our ongoing oversight efforts.”
With House Republicans pledging to investigate social media censorship when they take control in January, these four Democratic members are trying to force Facebook to “recommit” to censoring opposing views and to make election censorship policies permanent. Otherwise, they suggest, they may be forced to exercise oversight into any move by Facebook to “alter or rollback certain misinformation policies.”
In addition to demanding that Facebook preserve its bans on figures like former president Donald Trump, they want Facebook to expand its censorship overall because “unlike other major social media platforms, Meta’s policies do not prohibit posts that make unsubstantiated claims about voter fraud.”
Clegg is given Schiff’s telephone number to discuss Facebook’s compliance — an ironic contact point for a letter on censoring “disinformation.” After all, Schiff was one of the members of Congress who, before the 2020 presidential election, pushed the false claim that the Hunter Biden laptop was Russian disinformation, and he has been criticized for pushing false narratives on Trump-Russia collusion in the 2016 election.
The letter to Clegg is reminiscent of another letter sent by several congressional Democrats to cable-TV carriers last year, demanding to know why they continue to carry Fox News. (For full disclosure, I appear as a legal analyst on Fox News.) As I later discussed in congressional testimony, it was an open effort by those Democrats to censor opposing views by proxy or by surrogate.
This is not the first time that some members of Congress have not-so-subtly warned social media companies to expand the censorship of political and scientific views which they consider to be wrong.
In a November 2020 Senate hearing, then-Twitter CEO Jack Dorsey apologized for censoring the Hunter Biden laptop story. But Sen. Richard Blumenthal, D-Conn., warned that he and his Senate colleagues would not tolerate any “backsliding or retrenching” by “failing to take action against dangerous disinformation.”
Others, like Sen. Elizabeth Warren (D-Mass.), have called on social media companies to use enlightened algorithms to “protect” people from their own “bad” choices. After all, as President Joe Biden asked, without censorship and wise editors, “How do people know the truth?”
Now, Democrats fear Facebook and other social media companies might “backslide” into free speech as Facebook, among others, is faced with declining revenues and ordering layoffs. Tellingly, these congressional Democrats specifically want assurances that those layoffs will not reduce the staff dedicated to censoring social media.
It is not hard to see the cause for alarm. This hold-the-line warning is meant to stop a cascading failure in the once insurmountable wall of social-media censorship. If Facebook were to restore free-speech protections, the control over social media could evaporate.
Despite an effort by the left to boycott Twitter and cut off advertising revenues, users are signing up in record numbers, according to Twitter owner Elon Musk, and a recent poll shows a majority of Americans “support Elon Musk’s ongoing efforts to change Twitter to a more free and transparent platform.”
The pressure on Facebook is ironic, given the company’s previous effort to get the public to accept — even welcome — censorship. The company ran a creepy ad campaign about how young people should accept censorship (or “content modification,” in today’s Orwellian parlance) as part of their evolution with technology. It did not work; most people are not eager to buy into censorship. Instead, many of them apparently are buying into Twitter.
The public response has led censorship advocates to look abroad for allies. Figures like Hillary Clinton have called upon European countries to force the censorship of American citizens.
Censorship comes at a cost not only to free speech but, clearly, to these companies. Nevertheless, some members of Congress are demanding that Facebook and other companies offer the “last full measure of devotion” to the cause of censorship. Despite the clear preference of the public for more free speech, Facebook is being asked to turn its back on them (and its shareholders) and continue to exclude dissenting views on issues ranging from COVID to climate change.
These members know that censorship only works if there are no alternatives. The problem is that there are alternatives. Fox News reportedly has more Democrats watching it than left-leaning rival CNN, which now faces its own massive cuts and plummeting ratings.
For whatever reason, these companies face declining interest in what they offer. Yet, some Democrats are pushing them to double-down on the same course of effectively writing off half of the electorate and the audience market.
This type of pressure worked in the past because individual executives are loathe to be tagged personally in these campaigns. However, their companies are paying the price in carrying out these directives from Congress.
In the past, many companies willingly — if not eagerly, in the case of pre-Musk Twitter — carried out censorship as surrogates, as the internal Twitter documents released by Musk have indicated. Some public officials knew they could circumvent the First Amendment by getting these companies to block opposing views by proxy. However, the public and the marketplace may succeed where the Constitution could not — and that’s precisely what these officials fear, as they see the control of social media erode heading toward the 2024 election.
Facebook founder Mark Zuckerberg once famously told his company to “Move fast and break things.” When it comes to censorship, however, these members of Congress are warning “Not so fast!” if Facebook is considering a break in favor of free speech.
Tyler Durden
Sun, 12/18/2022 – 19:30 - The Principal Market Worry Is Shifting From Inflation To Recession
The Principal Market Worry Is Shifting From Inflation To Recession
By Tony Pasquariello, Goldman head of Hedge Fund Sales
The core takeaways from the last major week of 2022 are clear: the underlying trend in US inflation has hooked lower and the Fed intends to incrementally dial things back, leaving expectations for the terminal rate just below 5% come June. Despite that “progress,” the past few days have featured some very messy price action, as the year 2022 refuses to go quietly into the night.
If you take a bigger step back, the overarching market narrative — said better, the principal macro worry — is shifting from inflation to recession. With that has come a series of immense reversals in the dollar and US interest rates, as further discussed in the first few points below.
For US equities, an ebbing of the inflation constraint is very significant; remember, as recently as late summer, it really wasn’t obvious that inflation was under control. That said, should the recession theme take on more weight, S&P is certainly NOT priced for a hard landing (here I’d again reference the volatility surface, cyclicals-vs-defensives or the simple PE multiple).
Taken together, I’m not enamored of risk/reward on US equities, from either direction … The sequence market behavior in recent weeks only underscores that instinct.
Therefore, as one is paid to wait in cash, I have no problem with the idea of sitting out a few hands and seeing how the cards come down in early Q1 — with more attention placed on the shifting dynamics in other macro assets and geographies. As always, I’m a taker of feedback and ideas.
What follows from here is a sequence of shorter points and charts that sacrifice depth and rigor for brevity and compression … by way of preface, they don’t point cohesively in one direction or another:
1. To be sure, there has been a very significant change in macro sentiment and positioning over the past month. In my travels, it appears the levered community is largely out of their dollar longs and out of their US front end shorts; those exits were well executed and are very clear in our most recent polling data (link for pro subs). To put a line under it, these mark a broad shift in discretionary conviction from the inflation theme to the slowdown/recession theme.
2. Where the trouble has come, as usual, is the bias to be short of S&P (witness price action on the immediate break of CPI … a sharp 3% squeeze forced the covering of some underwater shorts, only to see the market trade break hard thereafter). Here I’ll reference the wisdom of long-time colleague Dominic Wilson: into slowdowns, the first order is to buy bonds (over shorting stocks) … into recoveries, the first order is to buy stocks (over shorting bonds). This is an oversimplification, of course, and not necessarily where I think we’re headed, but it’s a maxim that would have spared lots of tactical pain in past cycles (including the past month).
3. Part of my aforementioned lack of excitement to engage risky assets is a nagging frustration that, despite all the travails of 2022, we don’t exit the year with a lot of risk premia to harvest in early 2023. For example, as pointed out by a client, the interest rate-hedged ETF for IG credit (ticker LQDH) is only down modestly on the year. N/B: while I still don’t really see the overwhelming draw of corporate credit at current levels of spread, I will concede that it likely outperforms equities in a bucket of risky assets.
4. As a more general point: after three years of spectacular action and some very powerful macro trends, I wonder if next year winds up feeling a bit anti-climactic for the speculative crowd … Not boring per se, just less fertile with regard to the opportunity set. I say this while noting a lot of muscle has been built back up in the macro space over the course of this year, which could make for some itchiness come Q1.
5. US financial conditions are easier today than they were coming out of the 4th quarter of 2018. When everyone is breathing easier on the trajectory of inflation, it feels a little pointless for me to that note headline CPI had a 1-handle on it back then, and it has a 7-handle on it today, but I can’t resist. I also can’t resist pointing out this Randy Quarles story from a Nick Timiraos article that is worth considering: link.
6. Further to flows/positioning: quarterly derivatives expiry will come to pass today — and with it, nearly $4tr of option open interest will go to the trading Gods. As ever, one should be on watch for the potential inflections that occasionally follow (for example, I’d argue the period following June SQ had elements of this). beyond that technical story, the other notable feature of the past month has been pockets of retail outflows; this is inconvenient as the corporate bid slows and the CTA bid all but disappears, if reverses. What I’m trying to say here: US households will be the arbiter of price action over the next two weeks (they were sellers for three consecutive weeks, turned buyer last week, and your guess is as good as mine on where they go from here).
7. In the fall of 2020, Jeff Currie and his team threw down the gauntlet and went bullish of commodities. While not without volatility and retracements along the path, it was a masterful call. To be clear, there’s no backing down for the structural thesis, and they are now forecasting that GSCI rallies — ahem — 43% next year. Note: “the main take away is we expect commodity markets to be shaped by underinvestment in 2023. From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the super cycle in October 2020 … markets are simply unprepared for sequential growth in 2023.”
8. Something I’m struggling to work out: the ratio of US banks to S&P is on the dead lows … The ratio of European banks to SXXP is the photographic negative. As we head into the dog days of winter, I’d politely note here the official GS forecast of a recession in Europe, and no recession in the US. Color from Sarah Cha, sector specialist: “relative to the US, European deposit betas are not rising in the same way, the stocks are much cheaper, and banks haven’t really had much runway to occupy the balance sheets … from my seat, seems more a reflection on where European banks are coming from.” Coming out of a week that saw the ECB clearly out-hawk the FOMC, I’m inclined to think the local period of broad European outperformance is done.
9. Good people of Gen X, click here for some enjoyable Gen X content: link. my favorites: #4 (fix the TV by pounding on it the right way) … #16 (there were hours where no one knew where we were) … #22 (remembering phone numbers) … #27 (blowing inside Nintendo cartridges) … #30 (the smoking section in a restaurant).
10. I’m inclined to think the US consumer enters 2023 with a handful of significant tailwinds: sustained and significant wage growth, a y/y decline in US gasoline prices and a 9% raise for 70mm retired Americans come January. This chart from Jan Hatzius zeroes in on real disposable income growth … note the important trend shift in the red diamond from 2022 through 2023 (this all makes me a little resistant to completely abandon the inflation narrative and embrace the recession narrative):
11. As mentioned before, one should acknowledge their market biases. This will not come as a surprise, but I fully concede an inherent home-field bias towards the US. Therefore, this chart is cause for some introspection … The ratio of MSCI US over MSCI World ex-US (thanks to Scott Rubner for pointing out the inflection):
12. This surprised me a little bit … over the past three decades, “the January effect” has essentially pulled forward to November (link for pro subs):
13. To conclude, three big picture charts on flow-of-funds and the broader industry. While the underlying trends here speak for themselves, my instinct is next year will see active strategies outperform:
More in the full note from Tony P available to pro subs in the usual place.
Tyler Durden
Sun, 12/18/2022 – 19:00 - TWITTER FILES Supplemental: How The FBI Bullied Twitter Over Lack Of 'Foreign Influence' Evidence
TWITTER FILES Supplemental: How The FBI Bullied Twitter Over Lack Of ‘Foreign Influence’ Evidence
Journalist Matt Taibbi just dropped the latest series of ever-incriminating signals from The Twitter Files, with a supplement to his recent discussion of how Twitter became a de facto Ministry of Truth dissent-killer for The FBI.
As a reminder, this is the fourth topic released under The Twitter Files:
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Part 4 – Twitter as an FBI Subsidiary (Part 1 and today’s supplemental)
This supplemental to The FBI Subsidiary thread explains how the agency bullied Twitter into dismissing its own findings that “state propaganda” was not a thing on the platform and the stunningly circular media-to-govt agency-to-media circle-jerk that is mis-described as ‘sources’ for any and every rumor or narrative-confirming lie that is possible.
As Matt Taibbi writes at his Substack: On Friday, I posted a series of exchanges between Twitter and the FBI. One that required a bit too much explaining was left out. But it’s an important document, because it clearly demonstrates that Twitter will not only take requests from the government, it will even act quickly to align its analyses with its “partners.”
1.THREAD: Twitter Files Supplemental
— Matt Taibbi (@mtaibbi) December 18, 2022
https://platform.twitter.com/widgets.js
2. In July of 2020, San Francisco FBI agent Elvis Chan tells Twitter executive Yoel Roth to expect written questions from the Foreign Influence Task Force (FITF), the inter-agency group that deals with cyber threats.
3.The questionnaire authors seem displeased with Twitter for implying, in a July 20th “DHS/ODNI/FBI/Industry briefing,” that “you indicated you had not observed much recent activity from official propaganda actors on your platform.”
4 .One would think that would be good news. The agencies seemed to feel otherwise.
5.Chan underscored this:
“There was quite a bit of discussion within the USIC to get clarifications from your company,” he wrote, referring to the United States Intelligence Community.
6.The task force demanded to know how Twitter came to its unpopular conclusion.
Oddly, it included a bibliography of public sources – including a Wall Street Journal article – attesting to the prevalence of foreign threats, as if to show Twitter they got it wrong.
7.Roth, receiving the questions, circulated them with other company executives, and complained that he was “frankly perplexed by the requests here, which seem more like something we’d get from a congressional committee than the Bureau.”
8.He added he was not “comfortable with the Bureau (and by extension the IC) demanding written answers.”
The idea of the FBI acting as conduit for the Intelligence Community is interesting, given that many agencies are barred from domestic operations.
9. He then sent another note internally, saying the premise of the questions was “flawed,” because “we’ve been clear that official state propaganda is definitely a thing on Twitter.” Note the italics for emphasis.
10. Roth suggested they “get on the phone with Elvis ASAP and try to straighten this out,” to disabuse the agencies of any notion that state propaganda is not a “thing” on Twitter.
11. This exchange is odd among other things because some of the “bibliography” materials cited by the FITF are sourced to intelligence officials, who in turn cited the public sources.
12. The FBI responded to Friday’s report by saying it “regularly engages with private sector entities to provide information specific to identified foreign malign influence actors’ subversive, undeclared, covert, or criminal activities.”
13. That may be true, but we haven’t seen that in the documents to date. Instead, we’ve mostly seen requests for moderation involving low-follower accounts belonging to ordinary Americans – and Billy Baldwin.
Watch @bariweiss and @ShellenbergerMD for more from the Twitter Files.
Tyler Durden
Sun, 12/18/2022 – 18:30 - Ukraine Attempted 'Decapitation Strike' Of Russia's Top General, Even As US Tried To Stop It
Ukraine Attempted ‘Decapitation Strike’ Of Russia’s Top General, Even As US Tried To Stop It
A lengthy and wide-ranging New York Times assessment of “Putin’s War” detailing the last ten months of how a “walk in the park” became a catastrophe for Russia – as the story is sub headed – includes a particular bombshell buried deep within the narrative which has yet to be subject of widespread reporting.
US officials cited in the report say that Ukraine’s military and intelligence attempted to assassinate General Valery Gerasimov, Chief of the General Staff of the Russian Armed Forces, even after American officials urged against such a brazen action of unpredictable consequences, on fears it would invite uncontrollable Russian military escalation.
While the key details embedded within the dozens of pages-long NYT Saturday report have received scant notice in broader US mainstream media, Russian state media has certainly already taken note, with TASS – among others – highlighting it.
Gen. Valery Gerasimov, Chief of the General Staff of the Russian Armed Forces and First Deputy Minister of defense, via AP The alleged Ukrainian attempt for a ‘decapitation strike’ on Russia’s top commander and Putin’s military right-hand during the planning phase involved Washington pleading for Kiev to call off an attack, only for US officials to find out they already launched it.
It reportedly happened in late April, during a time period in which unnamed American officials boasted that US intelligence was helping the Ukrainians take out Russian generals who were positioned on or just behind front-lines of fighting, as we detailed at the time.
In its new reporting, the Times says that last Spring, Russia’s top military brass decided it was necessary for generals to make trips to the front lines due to worsening morale: “But the generals made a deadly mistake: They positioned themselves near antennas and communications arrays, making them easy to find, the Americans said.” NYT describes further as follows in this key section of the report, thus allowing US intel to begin identifying top commanders’ whereabouts on the Ukrainian battlefield:
“Ukraine started killing Russian generals, yet the risky Russian visits to the front lines continued. Finally, in late April, the Russian chief of the general staff, Gen. Valery Gerasimov, made secret plans to go himself.”
The US apparently knew of the ‘secret’ trip in real-time, leading to the dilemma of whether to share the information with the Ukrainians. But the Times’ sources say Washington “kept the information from the Ukrainians, worried they would strike.”
The driving concern was that a provocation of that magnitude would increase the likelihood of direct war between nuclear-armed superpowers. The NY Times reveals what happened next:
The Ukrainians learned of the general’s plans anyway, putting the Americans in a bind. After checking with the White House, senior American officials asked the Ukrainians to call off the attack.
“We told them not to do it,” a senior American official said. “We were like, ‘Hey, that’s too much.’”
The message arrived too late. Ukrainian military officials told the Americans that they had already launched their attack on the general’s position.
Dozens of Russians were killed in the strike, officials said. General Gerasimov wasn’t one of them.
Gerasimov is the equivalent of Gen. Mark A. Milley, chairman of the US Joint Chiefs of Staff, the highest-ranking military officer…
The Ukrainian authorities tried to kill the Chief of the General Staff of the Armed Forces of the Russian Federation Valery Gerasimov, according to The New York Times https://t.co/QqQoh5uJx3 pic.twitter.com/XdAnOZBOc0
— vicktop (@vicktop555) December 17, 2022
https://platform.twitter.com/widgets.js
And as the report concludes of that key time period of April to May, “Russian military leaders scaled back their visits to the front after that.”
In May, unnamed senior American officials had begun leaking to US media greater intelligence-sharing with Kiev. This had reportedly led to the Ukrainians having killed in pinpoint strikes an estimated 12 Russian generals, which during those opening months of the invasion was an astonishingly high number (given the rarity in any war of deaths from among these highest officer ranks).
The month prior to that, Defense Secretary Lloyd J. Austin bluntly admitted of policy aims in Ukraine that the US wants to see a greatly “weakened” Russia. “We want to see Russia weakened to the degree it cannot do the kinds of things that it has done in invading Ukraine,” he had said at the time.
If the Ukrainians had managed to kill Gen. Gerasimov, it’s very possible the world could have already been in the throes of nuclear Armageddon. But thankfully this scenario until now has been avoided, but very narrowly …if the fresh NYT revelations are indeed accurate.
Tyler Durden
Sun, 12/18/2022 – 18:00 - Gold Is Money: Everything Else Is Credit
Gold Is Money: Everything Else Is Credit
Authored by Claudio Grass via The Mises Institute,
Throughout the better part of 2022 there has been one question that has consistently, and predictably, popped up in conversations with my friends, clients and readers. Those who know me and are familiar with my ideas are well aware of my position on precious metals and the multiple roles they serve, so I can’t blame them for them for being curious whether I still “stick to my guns” in this era of irrationality in the markets and the economy.
Especially for those not versed in monetary history, which is regrettably the vast majority of the population, it is natural to wonder: “If gold is such a great hedge against inflation, why hasn’t it skyrocketed now that inflation is finally here?”
Well, there are a couple of reasons for that, some more obvious than others. The interest rate hikes that the Fed spearheaded and repeatedly escalated are the most straightforward explanation. At least that’s the answer most mainstream economists and analysts will give you. And it makes sense: If gold pays you no interest for holding it, then why not switch to something that does? This is the mindset of most investors and that weakens demand, which in turn drags the price down. That’s how the theory goes anyway.
If, however, we’re willing to examine the question a little more closely, we might begin by scrutinizing its premises. The question takes for granted that gold has underperformed this year. But has it really? If you’re saving, getting your paycheck and paying your bills in a currency other than the dollar, you’re likely to have a very different view on this issue. In euros, gold is up around 6.6 percent. In yen, it’s up 17.9 percent In Egyptian pounds is up over 45 percent. What this clearly shows us, is that perspective matters.
And for those that can see the bigger picture, that perspective is even clearer: Thinking about the gold price in terms of any fiat currency, not just the USD, is not really helpful. It’s not gold’s value that fluctuates, what fluctuates is the perceived and totally imaginary value of all these useless pieces of paper. After all, as all long-term, responsible precious metals investors know very well, there’s only one important trend and it’s an obvious one, as the chart below shows.
As I mentioned many times, I do not believe that short-term price considerations should play a pivotal role in the decision-making process of investors who hold gold for the right reasons and who understand why they do. What is important, however, is to look beyond the mainstream headlines and to be able to separate the signal from the noise. In our case, for example, one can find a million analyses and forecasts on gold’s outlook, all highlighting superficial dynamics and featuring simplistic arguments. Monetary policy projections are chief among them, and the narrative goes “Since we expect central bankers to do so and so, gold is projected to react in this way.”
Well, instead of trying to divine the intentions of central bankers, to guess what they’ll do and how it might affect the gold market, wouldn’t it make more sense to look at what those central bankers have actually done, rather than what they say? Cause what they did in 2022 speaks volumes: Globally, central banks accumulated gold reserves at a pace unseen since 1967, back when the dollar was still backed by the precious metal.
Consider this for a moment and then recall all their official statements and projections about the economy and how a recession is avoidable, about inflation and how it’s definitely, absolutely under control and about their faith in their own currencies. Feel free to draw your own conclusions about what’s coming.
Looking forward to the next year, it is clear that there are many reasons to be concerned. The conflict in Ukraine shows no signs of abating and all the preexisting problems it seriously aggravated can also be expected to linger, if not get worse. Inflation is set to continue to plague the real economy, no matter how hard government statisticians try to cook the numbers: Even if CPI goes down, real households will continue to feel the pain. There’s an abundance of supportive forces working in favor of gold and the dynamics are so striking that even the big banks couldn’t help but notice. In early December, Saxo Bank put out an “outrageous” price forecast of $3,000/ounce, in its most “extreme” scenario of a worldwide “war economy.”
While price gains will certainly be more than welcome for physical gold investors, the metal’s real value is likely to become apparent too in the months and years to come. As States get increasingly desperate and fail to find a way out of the fiscal, monetary and sociopolitical hole they dug for themselves, they are bound to get more aggressive, as they’ve always been known to do. Threats to financial sovereignty, government power grabs, increased monitoring and control over private assets and savings, are all likely to become more dire. And under these conditions, physical gold really shines, especially when it’s securely and compliantly held outside one’s own jurisdiction, as well as, outside the traditional banking system.
Tyler Durden
Sun, 12/18/2022 – 17:30 - 'SPAC Winter' Accelerates But "Trough Of Disillusionment" Could Be Ahead
‘SPAC Winter’ Accelerates But “Trough Of Disillusionment” Could Be Ahead
The days of “SPAC Jesus,” Chamath Palihapitiya, have been over for a while.
It has been apparent that the special-purpose acquisition companies (SPAC) bubble peaked in 1Q21 and has been in freefall ever since.
The Securities and Exchange Commission’s (SEC) crackdown on SPACs, top investment banks scaling back activity in the space, and mounting macroeconomic headwinds have led to a surge in SPAC liquidations and Initial Business Combination (IBC) terminations, as well as perhaps the start of a possible de-SPAC bankruptcy wave.
The latest figures about the SPAC market collapse come from a recent note via Water Tower Research’s chief analyst Robert Sassoon, who told clients, “one-quarter of the companies de-SPACed since the start of 2021, currently trading below the $1 level.”
“We are likely to see more de-SPAC bankruptcies in addition to the six that filed for bankruptcy this year, but at some point, the value hunters, whether they be strategic or financial buyers, will look through the de-SPAC wreckage for the hidden gems,” Sassoon said.
Sassoon’s note titled “SPACs and the Hype Cycle” provides the view the winter cycle in SPACs could be nearing a trough, but before that happens, more pain is likely in the space.
“While we think there will be more de-SPAC bankruptcies declared, we may be close to the trough of disillusionment stage of the cycle. This may be the point that value hunters may be readying themselves to seek out the hidden gems among the de-SPAC wreckage.”
The analyst pointed out the model used by management consulting firm Gartner about the new adoption of new technologies, particularly the adoption life cycle of new technology. With the hype cycle over, Sassoon believes a “trough of disillusionment” could soon arrive.
Even though a trough in SPACs is inevitable, that doesn’t mean a bust cycle can worsen in the intermediate timeframe. Sassoon showed liquidations and IBC terminations are soaring this year, with the risk of increased de-SPAC bankruptcies next year.
He said, “the surge of liquidations is that it is helping to accelerate the re-balancing of the SPAC market.”
Here’s a complete list of all the SPAC liquidations completed in the first half of December.
Nearly a quarter of all de-SPACs trade below $1.
What could be evident is that the SPAC winter cycle might worsen amid a challenging macroeconomic environment but could be nearing a trough, as Sassoon’s note explains. Our view would include the need for the Federal Reserve to loosen financial conditions for that to happen, which could occur as soon as late ’23, if not early ’24.
One infamous British banker and politician from the Rothschild family, Baron Rothschild, once said the best time to buy is “when there is blood in the streets.”
Tyler Durden
Sun, 12/18/2022 – 17:00 - Nuclear Fusion Incinerates Climate Crazies
Nuclear Fusion Incinerates Climate Crazies
Authored by Thomas McArdle via The Epoch Times,
Your attention please. This century’s scheduled performance of the apocalypse has been postponed indefinitely, ladies and gentlemen. Your tickets will be refunded at the box office…
On Dec. 5, 2022, scientists at the Lawrence Livermore Laboratory’s National Ignition Facility in California aimed 192 laser beams at a pinhead-sized target containing deuterium and tritium and a fusion reaction succeeded in releasing more energy than the amount delivered by the lasers. But this achievement of inertial confinement fusion is not only the first time in history that nuclear fusion has worked under controlled conditions (in contrast to a thermonuclear bomb); those lasers also disintegrated the green energy fanatics’ arguments in favor of dismantling the world’s 90 percent-plus fossil fuel-based $85 trillion economy. They have now been discredited as much as Martin Fleischmann and Stanley Pons’s sloppy claims of having conducted fusion at room temperature in 1989, despite the two’s up-until-then impressive scientific credentials.
Until Dec. 5, California Gov. Gavin Newsom’s banning of gasoline-powered cars by 2035 was excessive in the extreme; now it is simply illogical. The global rise of nearly 3 degrees Celsius in temperatures by the end of the century that the United Nations fears will now be headed off in half that time, likely less, thanks to mankind’s scientific ingenuity. The same kind of scientific ingenuity that in latter decades has allowed oil companies to reach and extract more than 7 billion barrels of oil and 600 trillion cubic feet of natural gas in “impossible to reach” locations thanks to the engineering breakthrough of hydrofracking. The results have included millions of new jobs for Americans, the reduction of greenhouse gas emissions, lower energy prices, and (until Joe Biden became president of the United States) American energy independence.
Nuclear fusion is the means of energy generation conducted within the sun, and for mankind’s needs it is a source of energy that is for all practical purposes infinite. Unlike the nuclear fission utilized in today’s nuclear power plants, fusion would not generate unstable nuclei that remain radioactive for millions of years and must thus be transported for permanent disposal to nuclear waste sites. Nor would fusion entail the risk of accidents releasing fatal amounts of radioactivity to populated areas (the danger of which from fission reactors the nuclear power industry has minimized in recent decades); nor could a fusion apparatus be used to construct nuclear weapons.
Now that we know inertial confinement fusion works in a controlled laboratory setting, the challenges in bringing about its widespread industrial use, which pertain to energy delivery to the target; availability of tritium or the development of the use of an alternative such as boron or helium-3; symmetry control; heating and density of the fuel; hydrodynamic stability; and shockwave convergence, can all be expected to be solved within the next 40 years. The United States, after all, is the nation that constructed the hydrogen bomb in a tight time frame, landed a man on the moon within a decade, and invented the microprocessor whose improved versions in budget smartphones of today dwarf the computation power of NASA’s supercomputer of the 1960s.
And none of the progress that can be expected from this month’s breakthrough precludes further study and experimentation of other possible forms of nuclear fusion—colliding beam fusion, inertial electrostatic confinement, muon catalyzing, photoelectric fusion, and hybrid fusion-fission. Like fracking, breakthroughs in these areas can arrive unexpectedly and change the game entirely.
But if you think the left, both here and around the world, is going to stand for their mission to cripple capitalism being derailed by a scientific breakthrough, you don’t know them. Fusion opens the floodgates of energy; radical environmentalists, on the other hand, want energy to trickle down and be rationed in accordance with government edicts. Instead of a world of limitless possibility in which even those who are now poor can live out their dreams, the left’s dream is a world of severe restrictions on economic prosperity and individualism, a global economy in which solar panels and windmills and mass transit are forced on the public as a duty. A society in which the freedom of driving your own family car is replaced by the mobility limits, enforced conformity, and artificial community—not to mention discomforts, lack of privacy, and crime—of the bus and train for all (except possibly the likes of Biden climate envoy John Kerry and other climate policemen among our governmental betters, who are wedded to private luxury travel).
Beyond the bugaboo of possible accidents and the health effects of marginally increased radiation produced by fission plants, the anti-nuclear movement’s arguments (pdf) against nuclear energy have revolved more in recent years around high costs, and the many years it inevitably takes to plan, license, and construct new plants; and in the years to come we can expect them to insist on unreasonably heavy regulatory hurdles imposed by government when fusion becomes industrially feasible. In other words, artificial impediments to the realization of fusion’s benefits for mankind.
There can be no forgetting, however, that the environmentalist left is driven by the irrationality of pure fanaticism, and their objective is to revolutionize society into complete unrecognizability. Only in September, Jane Fonda was asked how her new climate-focused political action committee “will be able to deliver on a fully de-carbonized America.”
Instead of presenting any science, Fonda replied: “There would be no climate crisis if there was no racism. There would be no climate crisis if there was no misogyny,” adding that “we need to take a good look at” America’s free market economic system. “All of the experts, and I’m not one, say this will force us and this will be an opportunity to restructure the way humanity lives on the planet. … Between now and 2030, we could cut fossil fuels in half, but then we have to do a whole lot of other things.”
We can be sure that in the coming years Democrats will invent obstacles to private research on nuclear fusion, and that “Big Fusion” will replace Big Oil as the new demons of capitalism. Fusion bursts one of the Democratic Party’s biggest political bubbles: Democrats won’t be able to fundraise on the idea of the world coming to an end when a fusion-powered economy is a few decades away and will solve climate change and all the other energy problems they can concoct.
But if we want nuclear fusion to come on line cheaply as soon as possible and produce the definitive solution to a hotter earth, we will let private industry be in charge, largely unfettered, instead of dreaming up a plethora of new, excessive regulations.
And in the meantime, with total global oil shale resources 1,000 times greater than the more than 1.6 trillion barrels of crude oil reserves in the world that by themselves will last us another half century; plus 100 years of clean natural gas that is now reachable within the United States alone thanks to fracking, the fusion breakthrough means no apocalypse for our grandchildren to suffer after all.
So in the near term, keep solar panels and windmills secondary, and drill, baby, drill.
Tyler Durden
Sun, 12/18/2022 – 16:30 - El Paso Mayor Finally Declares State Of Emergency After Mass Invasion Of Migrants
El Paso Mayor Finally Declares State Of Emergency After Mass Invasion Of Migrants
Better late than never? Democrat Mayor of El Paso, Oscar Leeser, has been refusing to declare a state of emergency in El Paso for weeks as illegal migrant caravans flood into the city across the southern border, but it would seem that he has finally seen the light. Leeser’s announcement comes at the same time as a declaration of emergency from Denver Mayor (and Democrat) Michael Hancock, who now admits that the city cannot continue to support migrants transported there from El Paso.
El Paso has run out of funding to accommodate the 2400+ people entering the city every day from Mexico and is asking for outside assistance to deal with the influx of “asylum seekers.” While the Biden Administration continues to ignore and even obscure the crisis on the southern border, leaked videos of enormous migrant groups lining up for entry at El Paso gates are beginning to circulate, debunking the claim that the White House is taking action.
Biden’s Press Secretary, Karen Jean-Pierre, was recently mocked for her assertion that Biden has been “doing the work from day one” to secure the border. Clearly, the evidence shows that she is lying:
The refusal of the White House and Democrat run cities to act honestly when it comes to the migrant crisis suggests a desire to avoid political accountability (either that, or an agenda to deliberately destabilize the country). If they admit to the crisis, they then have to admit that their immigration policies are a failure. So, they attempt to gaslight the American public and hide the truth. Karen Jean-Pierre even attempted to blame Republicans for the situation instead of taking responsibility.
The unprecedented wave of illegal immigrants has resulted in a historic number of apprehensions (at least 2.4 million in the past year) as well as fiscal disaster in the cities that accommodate migrants instead of arresting them and sending them back across the border. The impending end of Title 42 this month has accelerated the threat. The law requires migrants to be transported back to Mexico immediately after being stopped by Border Patrol, instead of allowing them to remain in the US for months or even years while waiting for courts to decide their citizenship status.
Migrants in many cases are able to collect extensive welfare if designated as asylum seekers or refugees, and Census Bureau data shows that at least 63% of them do in fact try to obtain benefits. Biden is also pressing for a general amnesty for millions of migrants that are already residing in the US, which is encouraging even more border crossings.
In 2017, multiple Democrat controlled cities in Texas including El Paso sought to obstruct Texas law SB 4, which was designed to prevent sanctuary city status from being used within the state. The law was passed, but El Paso has continued to encourage an endless river of migrants into Texas anyway. Now, the city leadership finally acknowledges they are in trouble, with an Arctic front bearing down on Texas and thousands of migrants on the streets with no available shelter.
Texas Governor Greg Abbott faced a flurry of attacks from progressive politicians after he initiated a program to bus migrants out of Texas and leave them on the doorsteps of leftist cities like New York, Washington DC and Chicago. Democrat “strongholds” for illegal migrants are being quickly exposed as unprepared and hypocritical; they expect border states to absorb the invasion of millions of migrants while they are incapable of dealing with a mere handful.
The busing controversy culminated with Florida Governor Ron DeSantis transporting nearly 50 migrants to the elitist vacation island of Martha’s Vineyard. The move created a firestorm of outrage from leftists and accusations of “human exploitation” against conservative state leaders.
Hilariously, the “humanitarian” progressives of Martha’s Vineyard were quick to buy the migrants cheap lunches in a highly publicized PR stunt, and then they quietly loaded them onto a bus the next day. They were shipped off the island to a camp on a military base. None of them were allowed to stay, none of them were offered housing and none of them were offered jobs by officials or residents at Martha’s Vineyard.
The “do as we say, not as we do” ideology of the political left when it comes to illegal immigration has been revealed, and economic reality is becoming undeniable. The US simply cannot continue to allow millions of non-citizens to enter our nation unchecked. It is not practical from an economic standpoint nor is it practical from a social and cultural standpoint. If the trend continues the crisis will turn into outright disaster.Tyler Durden
Sun, 12/18/2022 – 16:00 - Why This Policy Mistake Will Be Worse Than The Last
Why This Policy Mistake Will Be Worse Than The Last
By Peter Tchir of Academy Securities
The Path to Q1 Deflation
The odds that we get at least one month of negative inflation data in Q1 is increasing. Will deflation become a concern in Q1? That is possible (and maybe even probable) if we continue on the course of action that we are currently taking. I do not believe that we will be worried about inflation in a meaningful way by the end of Q1. In fact, as you can tell from Inflation Risk Factors and 2 + 2 = 5, I think that we have already set ourselves on a course that we will regret.
Today we will outline how and why Q1 deflation is a bigger risk than having high inflation in Q1. I use the term “risk” because the deflation will be linked to a recession that starts sooner and will be worse than consensus (Friday’s data makes me wonder if it hasn’t already started).
Inflation
Let’s start with a closer look at where we are with inflation today.
Inflation Elimination/Simplification
This chart includes three common measures of inflation – CPI, CPI Core, and PCE Core. The point of this chart is to justify only looking at Core CPI. They all move more or less in line, with overall CPI being a little more volatile and PCE being a month behind in terms of data. So, when we use CPI in charts in later sections, we will use Core CPI because we don’t give up much information in terms of the narrative that we are creating and the charts will be much simpler to understand.
Core CPI – Chart Looking Better
Two things that stand out on this chart:
- We have not seen an increase in the monthly data for 3 months (the trend is looking good). If this was a stock chart, it is starting to look like one that is giving up the gains and returning to normal. I’m not sure that charting and technicals are the right ways to look at economic data, but they are meant to take the emotion out of decisions and help us recognize patterns (this may be more relevant than we think).
- The past two months have been at levels that are below the top end of the range for the five years leading up to COVID. The past two months are “nothing burgers” in terms of inflation if examined from an objective viewpoint. Wasn’t the goal to get inflation lower? Wasn’t that the policy intent? Hasn’t it worked?
The Lag Effect in Action
I’ve used the two-year yield here as it is a good representation of what the market is pricing in for monetary policy at the front-end (the 10-year “marches to the beat of many drums” and the front-end only responds to the actual hikes, not the anticipation of hikes, which is a monetary policy tool in and of itself).
This chart, while volatile, seems to offer some reasonably clear evidence that:
- In 2021, the easy money helped drive inflation.
- There is a lag effect in terms of monetary policy reducing inflation. Rates started rising in late 2021 and accelerated in 2022. Inflation data remained uncomfortably high as rates rose.
- Rates continued to rise, and inflation started to behave much better. I guess you could argue that it took higher yields to tame inflation (and that certainly helps), but I suspect part of it is that it takes time for higher yields to make their mark. People don’t lease a new car every day and not every mortgage resets immediately. Not everyone changes their prices to reflect changes in behavior. Certain purchases, already committed to, will still happen. The cost of carrying inventory goes up slowly as well. There is a lag effect, and my belief is that much of the “good” behavior we are seeing in inflation data is a response to prior hikes and the more recent hikes are only beginning to kick in!
- For the soft or even “Squishy Landing” crew, the fact that 2-year yields are stable recently is good. We are pricing in less future action so there is a chance that more of the policy decisions are priced in. However, this is wishful thinking as the inflation reaction is heavily skewed to prior hikes and actions, so we haven’t fully seen the impact yet (a bit disturbing since inflation for the past couple of months looks to be more and more under control).
The lag effect is real and even with that lag, inflation is behaving better. What happens when more hikes (that have already been announced) kick in? Deflation seems to come to mind, but we have potentially only just begun to go down that path.
Let’s Not Forget the Balance Sheet
Quantitative Easing:
- Directly impacts asset prices (the riskier the asset the bigger the benefit from QE).
- The wealth effect is real in that it affects spending and is therefore inflationary.
- I believe that QT reduces asset prices. Since they are only using run-off, it isn’t as impactful as buying long-maturity assets, but it is real and will decrease wealth (in stocks, bonds, housing, and crypto to name a few areas).
- Like other parts of monetary policy, it is not always a straight line on a daily basis and there is a lag effect (it takes time for the increase in wealth to convert to greater spending, and vice versa).
So, while the market is fixated on terminal rate projections (more on that in the next section), maybe we shouldn’t ignore the impact of QT which no one has talked about changing (and they shouldn’t). I’m convinced that someone will win a Nobel Prize for highlighting how dangerous QE is as a policy tool.
To summarize this first section:
- Recent inflation data is pretty good and getting into the “normal” zone.
- The lag effect seems real, making the changes we have already seen in inflation more powerful.
- Balance sheet reduction is likely affecting asset prices and inflation.
- If not for 2021’s “failure” to identify inflation and kill QE early, we’d be pretty comfortable with the recent inflation data. We were still doing QE in 2022 even as we were discussing rate hikes.
Part of me would like to type QED now and say that we’ve proved our point and enjoy the rest of the weekend, but there is a lot more to write about to convince you why deflation is the path that we are on.
Don’t “They” Know Better?
If the policy makers had a great record of success, then I wouldn’t be worried that we are making a huge mistake and their efforts to fight inflation risk are creating a deeper recession than is necessary. But they did miss inflation and there is no reason to believe that they are any more likely to get it correct this time. In fact, you could argue that they are more likely to get it wrong, because they are dealing with the damage to their reputations from missing inflation and may have a problem acting objectively.
The DOTS – 1 Year Apart
This week the Fed spent time convincing the market that the terminal rate needs to be higher. This time last year not a single person had rates above 3% (at any time) out to 2024! By this time last year, the “transitory” story had started to shift, but we were still doing QE and talking about possible hikes, though the consensus was for less than 1% by the end of 2022! This wasn’t just a little wrong, it was very wrong! Sure, Russia’s invasion was unknown, but all throughout the year they increased the dots and terminal rate. I look at this dot plot and it gives me the energy to continue to the next section. At least I can be on the record if their hiking goes “pear shaped” and hurts the economy and the country far worse than was likely necessary!
Oil and Sauron
There are several “next steps” I could take on the path to deflation, but let’s start with oil. I guess Sauron could refer to Putin, but I was thinking more in terms of “one ring to rule them all.” There is no commodity as important as oil because it permeates the economy. It impacts the cost of producing goods, the cost of shipping goods, and how much money consumers have to spend on goods.
If Russia has to capitulate and come to some sort of a truce oil will drop even further, but that is not part of the current analysis.
Oil – Not Great, but Not Horrible
Despite OPEC+ curtailing production, the ongoing war in Ukraine, the alleged re-opening of China, and the U.S. making some purchases to refill the Strategic Petroleum Reserve, oil prices are coming down. From a CPI perspective (not Core because it excludes energy), it will be a good thing.
The two biggest “benefits” are that production and transportation costs will drop which will help to reduce inflation. But as discussed in Incongruous we should be careful what we wish for.
I use the 6-month forward WTI contract to smooth things out, but typically as oil goes up, stocks do well (and vice versa). That was the case from 2016 until just recently.
The same pattern holds true for the 2003 to 2011 period (with a couple of short exceptions).
Even from 1999 until 2002 the pattern held up pretty well.
In any case, I’m not sure we should cheer low oil prices. Maybe what is counteracting all of the potential reasons for oil to be higher is that the economy is slowing much faster than is currently showing up in the official data.
I argued (vehemently) back in 2015 that higher energy prices were great for jobs and the economy overall and I still believe that.
At the time, energy was a big part of the high yield market which struggled during that timeframe (there was even an “ex-energy” ETF launched in early 2016). I think back to how that one sector so heavily affected some markets and the economy and cannot help but think of parallels to today.
The Disruptive Economy
We highlighted this so much last weekend in Inflation Drivers that I won’t rehash the argument here. What I will add is that when I look at some jobs data, “management” makes up 6.3% of the workforce but 13.4% of the income and it seems like those jobs are under pressure.
Computer and math jobs are only 3.3% of the workforce, but 5.7% of the costs. This area is still strong, but I am seeing the reshuffling of jobs as some big companies are cutting back here.
These two areas, which rank 1 and 3 in terms of wages (legal is number 2) could face pressure. That will make even small amounts of jobs lost more impactful.
Just like “energy” was the main focal point of economic (and market) problems in 2015, “disruption” seems to be front and center right now. However, while this sector isn’t a big part of the debt markets, it is a large part of the equity markets (and alternatives) and why there could be a lot more pressure if the slowdown persists (rates aren’t the main driver here, but they are not helping).
Take This Job Data and Shove It
In 2 + 2 = 5 we highlight the issues around job data, particularly the Philly Fed’s report that Q2 jobs were overstated by more than 1,000,000 in the NFP reports!
The year started with 1.3 million more workers on the Establishment Survey than on the Household Survey. They differed by 950k in Q2 (maybe the Philly Fed report has some substance).
There are a lot of issues with both sets of data, but it seems a bit “optimistic” to only focus on one measure, especially after the work the Philly Fed just did.
To put this in a different perspective, in March the unemployment rate was 3.6% (it is now 3.7%). That is based on the Household Survey. The Establishment Survey showed that 2 million more jobs were created since then, so if those jobs had shown up in the Household Survey, the unemployment rate would be about 2.2%. Just think about that. If the jobs in the Establishment Survey are correct, even from just the start of the year, we’d have sub 3% unemployment. Does this feel like an economy running that hot?
There are so many questions on the quality of the job data (and ADP is somewhere in between since they started republishing this year with their amended methodology) that it seems difficult to base our view on the job market on these numbers.
ISM Jobs Story Seems More Realistic
2021 was HOT! Lately, not so much! Not awful, though several months below 50 this year (even for services) doesn’t hint at a job market that is out of control, especially for the high paying jobs that really drive inflation!
I’m trying to get better at pulling data directly from indeed.com. I’m told, by some good people, that it is dropping faster than JOLTS, but I cannot yet verify that myself (at least not in an intelligible way).
This Policy Mistake Will Be Worse Than the Last
It is bad to miss inflation (especially when there were so many telltale signs that it was real and not transitory) but it will be worse to trigger a recession that is avoidable.
Who cares what the stock market does over a day or a week? Who cares if financial conditions improve a bit when so many other factors (including QT) are combining in a “perfect storm” to “normalize” inflation!
I am extremely worried that we have already done too much, and that we are pushing our economy into unnecessary danger zones when we should be focused on transforming our energy industry, redeveloping supply chains, improving trading relations, and ensuring that we are “safe” from pandemics (or at least more in control of the necessary materials).
The fight against inflation is now misplaced, and I’d rather see us living with 3% inflation and striving to accomplish a lot, rather than creating unnecessary job losses and opportunities for our competitors.
The path to deflation is becoming less avoidable and beating inflation (so badly) is not the victory that we should be striving for.
This week’s “risk-off” trading with low yields and lower equities may be a harbinger of things to come based on our apparent policy priorities and data “analysis.”
Tyler Durden
Sun, 12/18/2022 – 15:30 - When Will Air Travel Return To Pre-Pandemic Levels?
When Will Air Travel Return To Pre-Pandemic Levels?
Many industries were hit hard by the global pandemic, but it can be argued that air travel suffered one of the most severe blows.
The aviation industry as a whole suffered an estimated $370 billion loss in global revenue because of COVID-19. And, as Visual Capitalists’ Carmen Ang explains below, while air travel has been slowly recovering from the trough, flight passenger traffic has yet to fully bounce back.
Where is the industry at in 2022 compared to pre-COVID times, and when is air passenger travel expected to return to regular levels? This graphic by Julie R. Peasley uses data from IATA to show current and projected air passenger ridership.
Air Travel Traffic: 2021 and 2022
After an incredibly difficult 2020, the airline industry started to see significant improvements in travel frequency. But compared to pre-pandemic levels, there’s a lot of ground to cover.
In 2021, overall passenger numbers only reached 47% of 2019 levels. This influx was largely driven by domestic travel, with international passenger numbers only reaching 27% of pre-COVID levels.
From a regional perspective, Central America experienced one of the fastest recoveries. In 2021, overall passenger numbers in the region had reached 72% of 2019 levels, and they are projected to reach 96% by the end of 2022.
In fact, the Americas as a whole has seen a quick recovery. Both North America and South America also reached above 50% of 2019 ridership in 2021, and are projected to reach 94% and 88% ridership in 2022, respectively.
On the opposite end of the spectrum, Asia Pacific has experienced the slowest recovery. This is likely due to stricter lockdowns and travel restrictions put into effect in this region (which was harder hit by SARS in 2003), especially in places like Shanghai.
Forecasting Traffic in 2023 and Beyond
While recovery has looked different from region to region, airlines are largely expected to see a full recovery to their ridership levels by 2025.
This recovery is a signifier of a much broader mindset shift, as governments continue to reassess their COVID-19 management strategies.
But while the future seems promising, IATA stressed that the forecast does not take into account the potential impact of the Russia-Ukraine conflict and other geopolitical concerns, which could have far-reaching consequences on the global economy (and travel) in the coming years.
Tyler Durden
Sun, 12/18/2022 – 15:00 - The Return Of Quant Investing
The Return Of Quant Investing
By Stephan M Kessler, global head of quantitative investment strategies (QIS) research at Morgan Stanley, and Vishwanath Tirupattur, global head of Quantitative Research at Morgan Stanley,
As year end approaches, one thing is clear: we will remember 2022 as a dismal year for traditional investment strategies across asset classes.
With around 10 trading days remaining, major equity markets across the globe have posted double-digit negative returns for the year, with the S&P 500 down ~19%. Government bonds, which typically come to the rescue when equities see a significant drawdown, didn’t deliver as global central banks raised policy rates dramatically, taking the World Government Bond Index down ~17% year to date. Credit markets declined as well, with the Bloomberg Global Aggregate Credit Total Return Index posting a negative total return of ~15%. For traditional investment strategies, there really was nowhere to hide. Nevertheless, 2022 has turned out to be a decent year for systematic factor or quant investing. As measured by the SG Alternative Risk Premia Index, quant strategies posted a healthy positive total return of 3.9%, providing both diversification and capital appreciation in a difficult market environment. We will explore why systematic factor strategies performed relatively well and what 2023 may hold for them.
We are often asked how quant strategies, which are predicated on historical data, can handle a volatile market environment with few historical precedents. Don’t current dynamics “break” quant strategies? In our view, quant’s strong outperformance in 2022 resulted from a diverse set of catalysts. We think that the monetary policy tightening unleashed by global central banks led to substantial and durable macro trends that could be captured by “trend-following” strategies. A re-emergence of dispersion in interest rates across the globe sparked the revival of “carry” strategies. Equity value investing re-emerged as higher rates forced investors to focus more closely on fundamental valuations, increasing the efficiency of the “value” factor. Disruption in valuations related to technological advances has receded – e.g., the normalization of Tesla’s valuation versus the broader auto sector. Similarly, communications sector disrupters have surrendered some of their outperformance. More broadly, we saw the gap between value and growth valuations shrink.
We think these performance patterns are likely to continue in the coming year. Our economists anticipate a transition from an environment with generally rising policy rates to one where inflationary pressure recedes and our macro strategists look for rates curves to steepen. During this transition, we expect global growth to slow, with G10 GDP growth bottoming at 0.2%Y in 3Q23. Not surprisingly, our chief investment officer Mike Wilson expects US equity markets to sell off in 1Q23, reaching levels as low as 3,000-3,300 for the S&P 500 before ending the year about flat at 3,900. From a quant perspective, these significant market swings tend to favor short-to-medium-term trend-following strategies. As the differences in central bank policies across the globe persist, “carry” returns should be attractive. Indeed, being long bonds in regions with high rates may benefit investors as their holdings appreciate when rates eventually normalize. Finally, defensive value investing tends to be well placed to deliver returns offsetting the higher cost of capital.
In our 2023 Global Strategy Outlook, we highlighted a range of quantitative strategies that we feel particularly strongly about for 2023. One way to capitalize on the outlook for the continuation of trending markets and peaking rates is through a rates trend-following strategy with a long bias toward rates. While the environment continues to be favorable for value investing, with market volatility remaining high investors should concentrate on undervalued stocks of high quality – crossing value filters with quality filters, in quant speak. Equity value improvements we have suggested in the past – reducing accounting noise, considering sector effects, and incorporating cyclical effects on performance – should be additive. Value-investing benefits extend to rates value strategies as well. In fact, translating our rates strategists’ views into expected returns, the outlook for a rates value strategy is strong.
Finally, 2022 was challenging for sellers of rates volatility. With policy rates peaking and inflation decelerating, strategies that incorporate systematically selling rates volatility should be profitable in 2023. While we would overweight the strategies outlined above, we continue to emphasize that success in quant investing requires careful portfolio construction that diversifies across different quant strategies.
Enjoy your Sunday, and we wish you all a festive holiday season and prosperous new year.
Tyler Durden
Sun, 12/18/2022 – 14:30
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