Oct 21

Today’s News 21st October 2024

  • Escobar: The Geoeconomic Drivers Of SCO-BRICS Synergy
    Escobar: The Geoeconomic Drivers Of SCO-BRICS Synergy

    Authored by Pepe Escobar,

    One week before the absolutely crucial BRICS summit in Kazan, the Shanghai Cooperation Organization (SCO) held a summit in Islamabad.

    This convergence is important in more ways than one.

    The summit in Pakistan involved the Council of the Heads of Government of SCO member-states. Out of it came a joint communique stressing the need to implement decisions taken at the SCO annual summit last July in Astana: that’s where the heads of state actually gathered, including new SCO full member Iran.

    China, following the rotating SCO chairmanship of close ally Pakistan – now under a dodgy administration fully endorsed by the military goons who keep ultra-popular former Prime Minister Imran Khan in jail – has officially taken over the SCO presidency for 2024 to 2025. And the name of game, predictably, is business.

    The motto of the Chinese presidency is – what else – “action”. So Beijing took no time to start promoting further, faster synergy between the Belt and Road Initiative (BRI) and the Eurasia Economic Union (EAEU), whose predominant power is Russia.

    Cue to the Russia-China strategic partnership fast advancing trans-Eurasia economic corridors. And that brings us to a couple of key connectivity subplots featured prominently at the Islamabad summit.

    Riding the steppe

    Let’s start with the fascinating Steppe Road – which is a Mongolian idea crystalizing as an upgraded economic corridor. Mongolia is an observer at the SCO, not a full member: reasons for it are quite complex. Still, Russian Prime Minister Mikhail Mishustin raved about the Steppe Road with his SCO interlocutors.

    The Mongolians came up with the idea of a Taliin Zam (“Steppe Road” in Mongolian) back in 2014, containing no less than “Five Great Passages”: a maze of transport and energy infrastructure to be built with investments totaling at least $50 billion.

    These include a 997 km-long transnational expressway linking Russia-China; 1,100 km of electrified railway infrastructure; the expansion of the – already running – Trans-Mongolian Railway from Sukhbaatar in the north to Zamyn-Uud in the south; and Pipelineistan of course, as in new oil and gas pipelines linking Altanbulag in the north to Zamyn-Uud.

    Mongolian Prime Minister Oyun-Erdene Luvsannamsrai was as enthusiastic as Mishustin, announcing that Mongolia has already finalized 33 Steppe Road projects.

    These projects happen to neatly align with Russia’s own Trans-Eurasian Corridor – a connectivity maze which includes the Trans-Siberian Railway, the Trans-Manchurian Railway, the Trans-Mongolian Railway and the Baikal Amur Mainline (BAM).

    Back in July at the SCO summit, Putin and Mongolian President Ukhnaagiin Khurelsukh spent quite some time discussing the finer strategic points of Eurasian logistics.

    Then Putin visited Mongolia in early September for the 85th anniversary of the joint Soviet-Mongolian victory over the Japanese at the Khalkhin Gol River. Putin was received as a rock star.

    All that makes perfect strategic sense. The Russia-Mongolia border is 3,485 km-long. The USSR and the Mongolian People’s Republic established diplomatic relations over a century ago, in 1921. They have been working together on key projects such as the Trans-Mongolian gas pipeline – yet another Russia-China connection; modernization of the Ulaanbaatar Railway joint venture; Russia supplying fuel to the new Chinggis Khaan International Airport; and Rosatom building a nuclear power plant.

    Mongolia harbors the proverbial wealth of natural resources, from rare earth minerals (reserves may reach an astonishing 31 million tons) to uranium (prospective reserves of 1.3 million tons). Even as it applies what is called the Third Neighbor approach, Mongolia needs to maintain a careful balancing act, as it is on the radar non-stop of the US and the EU, with the collective West pressing  for less Eurasia cooperation with Russia-China.

    Naturally Russia holds a major strategic advantage over the West, as Moscow not only treats Mongolia as an equal partner but can provide its neighbor’s needs when it comes to energy security.

    What makes it all even more enticing is that Beijing envisions the Steppe Road as “highly consistent” with BRI, complete with the proverbial enthusiasm hailing the synergy and “win-win cooperation” between both projects.

    This is not a military alliance

    Complementing the Steppe Road drive, Chinese Premier Li Qiang went to Pakistan not only for the SCO summit but with a connectivity priority: advancing the next stage of the $65 billion China Pakistan Economic Corridor (CPEC), arguably BRI’s flagship project.

    Li and his Pakistani counterpart Sharif finally inaugurated the strategically crucial, Chinese-financed Gwadar International Airport in southwest Balochistan – against all odds plus intermittent raids by CIA-funded separatist Baloch guerrillas.

    CPEC is an extremely ambitious multi-level infrastructure development project encompassing several nodes starting from the China-Pakistan border in the Khunjerab pass, down through the – upgraded – Karakoram highway and descending south across Balochistan all the way to the Arabian Sea.

    In the future CPEC may even include a gas pipeline from Gwadar going up north all the way to Xinjiang – further easing China’s reliance on energy transported across the Strait of Malacca, which could be blocked by the Hegemon in no time.

    The pre-BRICS SCO summit in Pakistan once again reiterated the synergy of several aspects concerning both multilateral bodies. SCO member states – from the Central Asians to India and Pakistan – overwhelmingly understand Russian reasoning when it comes to the inevitability of the Special Military Operation (SMO).

    The Chinese position, officially, is a marvel of equilibrium and suave ambiguity; even as Beijing stresses the support for the principle of national sovereignty, it has not condemned Russia; and at the same time it has never directly blamed NATO for the de facto war.

    Geoeconomic connectivity is very much the priority for top SCO powers and strategic partners Russia-China. Since the early 2000s the SCO has evolved from counter-terrorism to  geoeconomic cooperation. Once again in Islamabad it was clear that the SCO will not turn into a military alliance in an anti-NATO mold.

    What matters most now for all members, apart from geoeconomic cooperation, is to combat the West’s war of terror – bound to go on overdrive with the imminent, humiliating failure of Project Ukraine.

    A mechanism that could further solidify the SCO and pave the way for a merger with BRICS further on down the – rocky – road is the Chinese concept of Global Security Initiative, which happens to dovetail with the Russian concept presented to – and rejected by – the US in December 2021, only two months before the inevitability of the SMO.

    China proposes to “uphold the principle of indivisible security” as well as “build a balanced, effective and sustainable security architecture” and firmly oppose “the building of national security on the basis of insecurity of other countries”. That’s something that every member of the SCO – not to mention BRICS – subscribes to.

    In a nutshell, indivisibility of security as envisaged by Russia-China amounts to the de facto application of the UN Charter. The result would be peace on a global level – and by implication the death knell to NATO.

    While indivisibility of security still can’t be adopted Eurasia-wide – as the Hegemon deploys a war of terror in several fronts to undermine the emergence of a multi-nodal world – win-win cross-border connectivity keeps on rolling, from the Steppe Road to New Silk Road corridors.

    Tyler Durden
    Mon, 10/21/2024 – 02:00

  • The Strategic Consequences Of Kamala Harris' Incompetence
    The Strategic Consequences Of Kamala Harris’ Incompetence

    Authored by James E. Fanell and Bradley A. Thayer via Americvan Greatness,

    Vice President Kamala Harris’s disastrous performance in her interview with Fox News’s Bret Baier was notable for two reasons.

    • First, to the degree that there was any discussion of foreign national security threats to America, Harris only mentioned Iran. She failed to mention the disastrous war in Ukraine, where more than a million are dead, and the threat of nuclear war exists. Harris failed to reconcile her administration’s billions in dollars of military and civilian aid to Ukraine and policy actions against Russia for the most significant military threat in Europe since the end of World War Two. Worse though was her failure to make any reference to the existential threat from the Chinese Communist Party (CCP) and the People’s Republic of China (PRC).

    • Second, her performance in response to salient questions—ones that had the chance to inform American voters—was an amalgamation of incoherence, anger, and deception that revealed a candidate who is uniquely unsuited to be president of the United States. The fact that she is the Democratic candidate and might become president is alarming to America’s friends, as it is welcomed by America’s enemies.

    In the interview, she had the opportunity to discuss her analysis of threats to America. While Iran is certainly a regional danger and a threat to the U.S. and its allies in the Gulf, Saudi Arabia, and Israel, it pales in comparison to the existential threat of the CCP. Indeed, Iran and Russia would be far less of a concern if the CCP were not given a free hand to back these aggressor nations. That the PRC is a grave and fundamental threat is revealed by its hyper-aggressive policies against the American people, U.S. allies like Japan and the Philippines, and partners like India and Taiwan.

    An example of the CCP’s threatening military posture was put on display when Exercise Joint Sword 2024B launched on October 14, in which People’s Liberation Army (PLA) forces encircled Taiwan to coerce its new leader, President Lai Ching-te, into a posture of subservience to the PRC. Thus far, those coercive attempts have failed. But Joint Sword 2024B revealed three aspects of the growing PRC threat. First, it showed the increasing capabilities of the PRC. Second, it demonstrated the ever-increasing penetrations of Taiwanese air and seaspace in an effort to normalize those violations and mask the actual invasion when it comes. Third, the first participation of the Chinese Coast Guard in the encirclement of Taiwan occurred.

    • First, with respect to the increased capabilities of the PLA Navy, it should be noted that their first aircraft carrier, Chinese Navy Ship (CNS) Liaoning/CV-16, conducted 90 fixed-wing take-offs and recoveries and 50 more from their embarked helicopters during their operations in the exercise. That is 140 sorties from a PLA Navy aircraft carrier in just one day. By any measure, the PLA Navy’s carrier aviation capabilities are now approaching U.S. Navy aircraft carrier air wing levels in terms of the number of sorties. It is the case that PLAN aircraft have a more limited range and weapons capacity than their U.S. Navy counterparts, due to the Liaoning’s ski-ramp launch, but the fact remains that within just two years, the Liaoning has gone from launching an average of just 30 sorties a day in 2022 to a 140 today. That is a real strategic trendline that presidential candidate Harris demonstrated no awareness or strategy to counter.

    • Second, regarding PLA incursions into Taiwan’s air and seaspace, exercise Joint Sword 2024B provides another inflection point in the PRC’s dramatic transformation of the military status quo in the cross-strait environment. During the exercise, Taiwan’s Ministry of National Defense reported that it detected a total of 153 PLA aircraft, 14 PLAN ships, and 12 Coast Guard ships operating around Taiwan and that 111 of those aircraft crossed the centerline of the Taiwan Strait and entered Taiwan’s air defense identification zones from the west, southwest, and east. To put that into perspective, from 1954 to 2020, PLA aircraft only crossed the centerline four times. This pattern of PLA air force incursions across the centerline began in earnest in 2022 when the PRC’s Ministry of Foreign Affairs announced that the PRC no longer recognized the centerline—a clear violation of the previous agreements between Beijing, Taipei, and Washington to not forcibly alter the status quo. Yet since then, and now with exercise Joint Sword 2024B, the Biden-Harris administration has made no mention of this hyper-aggressive behavior by Beijing or taken any actions to rectify it.

    • Third, the Joint Sword 2024B exercise was unique in that it demonstrated the use of non-PLA ships from the Chinese Coast Guard (CCG) in this PLA-led exercise. Taiwan’s Ministry of Defense reported up to 17 CCGs were detected operating in the waters off Taiwan, or as the PRC’s Global Times noted, the “CCG conducted multi-unit, multi-formation, and multi-subject drills around the island of Taiwan, focusing on strengthening the control network around the island.” The implications of these unprecedented actions by the CCG are to demonstrate that the CCP’s strategy to bring Taiwan under its control, either by blockade or an outright invasion, will use the entirety of the PRC’s assets—a whole of government effort. These facts at sea demonstrate that the PRC’s 2019 declaration of a “People’s War” against the United States is not just propaganda but is advancing in tangible ways.

    Americans need to understand the scope and scale of the CCP’s grand strategy as evidenced by the PLA Navy and the CCG’s demonstrated actions during exercise Joint Sword 2024B. The evidence is undeniable: the CCP intends for the PRC to become the dominant naval force, not just in Asia but across the globe.

    This reality comes against the backdrop of a Biden-Harris administration that keeps downsizing the size and capabilities of the U.S. Navy.

    So, when Bret Baier asks candidate Harris what America’s number one foreign adversary is and there is no mention of the PRC, Americans know this candidate is not competent to assume the office of the Presidency. Americans need to pay attention because U.S. national security is on a knife’s edge—to the U.S., the CCP is a hyper-aggressive regime that is determined to realize its grand strategic objective of dominance. Yet Harris displays no strategic gravitas. She evinces no evidence of the seriousness of the situation or of an understanding that deterrence of the CCP’s hyper-aggression is on her shoulders—let alone having a plan to address this threat.

    Deterrence of the CCP is everything. If it fails, this country will be at war with the PRC. Harris appears oblivious to the demands and requirements of deterrence. Accordingly, before the PRC blockades or invades Taiwan or launches an attack against the Philippines in the South China Sea, Americans must have a president sitting behind the Resolute Desk in the Oval Office who has the knowledge, experience, and courage to prepare our nation for the demands of deterrence of the CCP’s aggression. It must have a president who signals in stark and no uncertain terms to the CCP that their aggression is certain to fail—and so they had better not try it in the first place. A president who not only can talk tough but has the wherewithal to rebuild the U.S. deterrent. The catechism of deterrence is straightforward: weakness invites aggression; strength deters it. Americans must elect a president who understands this catechism and so defends our nation from all threats—most especially from the existential threat of the PRC.

    Tyler Durden
    Sun, 10/20/2024 – 23:55

  • Left McTriggered After Trump Does Fun Publicity Stunt
    Left McTriggered After Trump Does Fun Publicity Stunt

    On Sunday, Donald Trump poked fun at Kamala Harris’ dubious claim that she ‘worked at McDonald’s and made fries,’ by going to a McDonald’s and making fries, plus working the drive-thru.

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    Ding, fries are done!

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    Memes have been made.

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    McTriggered!

    While most on the right thought it was a fun pre-election publicity stunt, it really triggered the left – which didn’t know what to do.

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    The sourpusses even posted a gotcha! Suggesting that because the McDonald’s closed for Trump’s event, the whole thing was staged. Well, duh. The guy was only almost assassinated twice (or thrice) and this is for fun.

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    Tim Walz had jazz hands of fury – and despite all the lies, insisting that Kamala Harris actually worked there. We’re sure he’s not lying this time too.

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    Even Matt Drudge opined (2016 Matt, blink twice if you need help).

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    Hilariously, The Atlantic‘s David Frum revealed he doesn’t know the difference between grilling and frying (and earned a nice ratio).

    This is how you know the publicity stunt worked…

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    Tyler Durden
    Sun, 10/20/2024 – 23:20

  • Wall Street Going "All-In On Trump"
    Wall Street Going “All-In On Trump”

    Matt Drudge’s slide into mainstream media obscurity has been one of the more remarkable events of the post-Trump era, yet – like an insane uncle locked up in the attic – few would bring it up in polite conversation (especially since so little is known about what caused Drudge’s striking U-turn in his one-time embrace of Trump). However, his tweet (or post) from last week that according to Wall Street, Kamala had a 72 chance to win (since deleted)…

    … prompted us to respond.

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    We were the first, but hardly last, and shortly after our response to Drudge, both Goldman and JPMorgan chimed in, with reports that validated our criticism of Drudge’s naive – and dead wrong – claim.

    Later that day, JPMorgan’s closely followed Positioning Intelligence team published a must read report (available to pro subs), in which John Schlegel summarized the recent hedge fund positioning rather simply: “all-in on Trump themes.“

    This is how the JPM trader summarizes the findings of his report:

    As odds of a Trump presidency and Red Wave have increased over the past few weeks, we’ve seen themes that are perceived to be Republican Winners (JPREPWIN) outperform Democratic Winners (JPDEMWIN) by ~7% over the past month. Crypto stocks and small caps have performed better, while Renewables have underperformed. In addition, the wider US equity market continues to make new ATHs and positioning appears to be elevated. Based on the thematic shifts, historical returns around elections, and elevated positioning, there’s room for a bit of disappointment and reversal in coming weeks if odds start to shift the other way.

    In other words, the “smart market” is increasingly going all-in on a Trump victory.

    Below we excerpt the main highlights from the report (much more in the full report available to professional subs):

    • 1. All in on Trump Themes? Hedge Fund flows have shown a strong preference for Republican themes with Rep Winners (JPREPWIN) bought over the past few weeks, putting positioning near ~2yr highs, while Dem Winners (JPDEMWIN) were sold throughout the year and positioning at multi-year low. The relative Rep vs. Dem flows have shifted from -2z a few weeks ago to +2z over the past 10 days. Renewables (JP11RNEW, a clear proxy for a Dem win) have been sold a lot in the past couple weeks and positioning is turning more bearish again.

    • Crypto stocks have seen volatile flows, though buying lately has not been as strong as it was in mid-July.

    • 2. Flows Turning Positive & Positioning Relatively High Ahead of Election (vs. Prior Cycles). HF and ETF flows have been turning more positive lately and 4 week HF net flows have shifted materially from -2z in early Sep to +1z most recently.

    • ETF flows tend to stay positive post elections and even in years when they’re very strong, but S&P returns are often very muted in Oct during election years since 1950 (avg +10bps with range of +2.6% to -2.7% (ex. 2008)).

    • Overall positioning level for US equities remains somewhat elevated (+1.0z, >90th %-tile) and in prior election years since 2012, both positioning and SPX returns have tended to trend lower in the weeks heading into the election.

    • 3. Small Caps and Momentum…What’s the Setup? Small Caps / Russell 2000 is perceived to rally if we get a Red Wave, but Russell 2000 futures positioning seems pretty elevated already (vs. more neutral prior to the July bump).

    • Looking at a 3yr z-score of net positioning, it’s at +2z already, in line with prior highs. ETF flows into small cap ETFs vs. the broader universe are neutral, though not as bearish as they were heading into the July rally, while HF net exp to Size factor is biased more towards Large on a multi-year basis, but not particularly so on a 12m basis.

    • Momentum tends to underperform in the 10d leading up to the election (and continues to decline on average in 3m post-election), but its performance has been quite correlated to the wider market.

    • HFs don’t appear to be running material net exposure to Momentum, but flows have shown a bias towards selling laggards lately

    * * *

    Turning to Goldman Sachs, we find a similar bias. As we noted last week, a Republican Sweep Scenario, has emerged as one of the bank’s preferred trades ahead of the elections. This is how Goldman put it:

    Long our Republican Policy Pair (GSP24REP), consisting of long Republican Policy Outperformers (GS24REPL, ex-commods version is GS24RLXC) vs short Republican Policy Underperformers (GS24REPS)

    • Buy GS24REPL 20Dec24 107% / 117% OTC call spread for 1.30%. 7.69x net leverage. 15% delta. 23 iv. Max loss premium paid.
    • Buy GS24RLXC 20Dec24 108% / 118% OTC call spread for 1.30%. 7.69x net leverage. 16% delta. 25 iv. Max loss premium paid.

    As shown below, the Goldman Republican victory pair trade discussed above just hit an all time high.

    Decomposed into its constituents indexes, we find that the Republican Victory basket just hit an all time high, while the Democrat Victory basket is back to Biden levels.

    In a new report from Goldman FICC vice president Vincent Mistretta (available here to pro subscribers), the trader confirms what we have said, namely that “positioning in markets leans toward Trump-win expressions. That has been the case since even before the recent run up in betting market odds for Trump.”  To help its clients, the bank has come up with a dashboard enumerating these aforementioned preconceived notions, and some trades that should perform well in scenarios that feel under-positioned, underappreciated or are anti-consensus.

    GS Trading Views:

    • Anshul Sehgal (Co-Head of Global Interest Rate Products Trading & Head of US Interest Rate Products) – Don’t have strong views or a robust framework for the election. It’s a binary event, and unclear what the policies/implications will be either way. Rates have been and will continue to be volatile. The market is pricing a 20bp breakeven move over the election, which seems a bit high, but not so high that you want to be short that convexity over the event. If you have a Republican sweep scenario, the night of the market probably doesn’t move a lot – it’s rates higher, risk assets higher initially, largely because what you would likely expect is that the Trump tax cuts get extended and there may well be more fiscal coming. We think the right area of the curve to be short is 2y2y. On Harris victory with divided Congress, we expect the curve to initially bull steepen, and for risk assets to trade weaker – which we would view as an opportunity to set up belly shorts.
    • Mark Salib/Fernando Alvarado Aguilar (FX Trading):  Many clients are long USDCNH via risk reversals to position for a possible Trump presidency, as there isn’t a strong case for USDCNH to depreciate significantly from here. We also like AUDJPY or USDJPY topside on a Trump win. On a potential Harris win we think USDMXN downside is one of the best trades, with favorable entry levels after the recent squeeze higher amid buying from all client types this week, including hedge funds to position for a possible Trump win (especially given Trump’s comments throughout the campaign on implementing tariffs) as well as CTA and real money buying. In a Harris scenario we think EURUSD may rally around 1.5%, but think the moves would be larger in USDMXN and would prefer to express the trade there.
    • Shawn Tuteja/Joseph Clyne (Equities Derivatives Trading/Index Trading) – Among a host of macro factors, we think that the run up in stocks, the collapse in implied vols, and the outperformance of RUT over NDX are partially due to the recent uptick in Trump odds, and a reversion of that move could reverse all three trends. Generally, we like owning year-end upside in SPX on a 12 vol handle which we think can carry flat/positive through the election while having spot up vol up beta on any sustained rally. On the sector side, we’ve seen the “Trump trades” from 2016 start to work, as this last leg higher in SPX has been driven by regional banks (KRE), large-cap banks (XLF), and energy. We’ve seen this buying come at the expense of AI in the past week or so. Interestingly, we’ve gotten a lot of questions from clients in the past 24 hours on best ways to “fade a Republican sweep,” thinking the odds and market pricing have run too far on this.
    • Nick Bartal (Oil Products Trading) – There is currently little positioning in oil directly related to the election. The conflict in the Middle East has shaken a short/low positioned oil market into having length. However, the consensus still remains that the oil balance will be heavy in 2025, which led to the short positioning coming into the Israel/Iran conflict rally in early October. While little direct positioning surrounding the election exists, a Trump victory would likely be day 1 bullish for oil, as he may strengthen sanctions on Iran.

    Much more in the Goldman note available to pro subscribers.

    * * *

    Taking a quick look at UBS, the bank has its own thematic pair trade, and writes that the recent surge in the “Republican Sweep” basket supported the S&P 500 rallying to an all-time high. Indeed, as shown below, the UBS Republican Win basket has trounced the Democrat Win having closed higher for 14 consecutive days! Also, UBS notes that the dramatic ascent in dollar has largely been driven by Chinese Yuan weakness thanks to the surge the Republican Sweep theme.

    Elsewhere, in a note from UBS trader Michael Romano, he writes that “the UBS Republican vs. Democrat election pair trade is up 15% month to date to fresh highs in virtually a straight line, suggesting the market has largely priced former President Donald Trump’s victory.” Romano adds that “the election repricing, driven primarily by banks and solar, coincided with a growth re-pricing following a strong payrolls and strong earnings, making it less clear whether the recent moves are election or growth driven.”

    His conclusion: “While the end result is the same, i.e. banks higher, cyclicals/consumer/growth oriented stocks higher, the more the repricing was driven by an actual growth re-pricing, the more upside there still is on a Trump win. As most of the moves followed bank earnings, with strong follow-through on consumer, my money is on a lot more upside to come on a Trump win.“

    * * *

    By now the big picture should be clear: whether due to his surge in online betting markets, or simply because Kamala’s honeymoon is dead and buried, there has been a rush of sentiment – by people who put money where their mouths – into the Trump Victory/Republican sweep camps, which also largely explains why stocks continue to make new all time highs day after day. However, if one takes a step back and asks a more neutral question without assuming the outcome, such as How will markets react to different US election outcomes?

    To help with the answer, we go to a recent note from Deutsche Bank’s George Saravelos (available to pro subscribers), who took recently published Deutsche Bank Research economics estimates of the likely impact of different election outcomes and translated them in to a market reaction across asset classes with a specific focus on FX. The table is intended to capture the immediate market reaction to year-end rather than the long-term impact. Below are DB’s four main conclusions:

    • There is large variance of opinion on the likely market and growth outcomes within the DB team. This largely stems from uncertainty on three fronts: the fiscal outcomes in the event of divided government, the extent to which tariff policy is applied, the medium-term effects of supply side policies relating to regulation, immigration and energy. Even with full certainty on tariff policy for example, the countervailing growth-inflation impact of a negative supply shock creates great ambivalence.
    • The largest variation in fiscal policy and growth outcomes is likely under a Trump administration: a red sweep would likely lead to the largest deficits while divided government could lead to the smallest deficits via the revenue impact of tariffs. By extension, a Trump victory has the most potential to generate the largest market moves in both directions in bond markets.
    • The largest variation in relative growth differentials between the US and the rest of the world is likely under a Trump versus Harris administration, irrespective of the Congressional outcome, due to tariff policy. By extension, the FX market outcome is more clear cut than the bond market in the event of a Trump victory.
    • We see the most bullish dollar outcome as a red sweep and the most bearish dollar outcome on a blue sweep, but the magnitude of the moves is likely larger in the former. There is also likely to be a large degree of variation in market response across different currency pairs: we see the dollar rising across all currency pairs in a red sweep. We see the dollar strong but FX carry trades as most likely to suffer in a Trump victory without Congress. Asia FX is likely to rally the most in the event of a Harris victory without Congress, while the broadest dollar losses would likely be in a Blue Sweep, albeit more limited than the dollar gains in a Red Sweep. We see short EUR/CAD and long MXN/ZAR as the two most asymmetric trades in FX heading in to the election.

    Much more int he full notes from JPMorgan, Goldman, UBS and Deutsche Bank

    Tyler Durden
    Sun, 10/20/2024 – 22:45

  • West Point Selectively Censors Information In Violation Of Federal Law
    West Point Selectively Censors Information In Violation Of Federal Law

    Authored by Tony Lentini via RealClearDefense,

    Military.com recently carried a story on a West Point cadet facing charges for sexual harassment and sexual assault. The article named names, not just of this one cadet, but also of another cadet charged with sexual misconduct, an officer faculty member facing conduct-related charges and the garrison commander who was acquitted of impaired driving charges.

    Yet, after then-Superintendent Robert S. Caslen promised an investigation into why West Point permitted insubordinate communist cadet Spenser Rapone to graduate in 2016, the Army refused to release its findings on the spurious grounds of protecting Rapone’s privacy. This, despite the cadet’s public flouting of his Marxist political sympathies. Moreover, the promised but undelivered investigation was to be not of Rapone himself but of Caslen’s leadership or lack thereof in allowing an avowed communist to graduate. (Caslen subsequently resigned from his post-West-Point civilian job as president of the University of South Carolina for allegedly plagiarizing parts of a speech.)

    In another case, the fate of several cadets who overdosed on cocaine laced with fentanyl on Spring Break two years ago has never been publicly released, again on privacy grounds.  I have an outstanding Freedom of Information Act (FOIA) request to determine their final disposition that has been pending for over a year now, despite federal law requiring a response within 20 working days.  West Point’s public affairs officer cited privacy laws as the reason for the Academy’s stonewalling, even though I specifically did not ask for their names, only their punishment.  But their names should be released, as well as their fate, since drug abuse is a serious offense under the Uniform Code of Military Justice and the cadets’ actions publicly discredited the United States Military Academy.

    Something rotten is going on at West Point and within our military.  Why are some names released while others are not?  Why are sexual misconduct allegations and related court filings publicly disseminated while cadet drug abuse and West Point administrative failures are covered up?

    My own FOIA request is now languishing in the “Initial Denial Authority” office of the Secretary of the Army at Ft. Belvoir, Virginia.  Repeated calls and emails to expedite the release of information as to the cocaine-fentanyl cadets’ final disposition have gone unanswered.  A classmate’s five-month-old FOIA request to obtain West Point documents related to the Superintendent’s stated intention to make the Cadet Honor Code “more aspirational” was summarily dismissed by that same office for clearly bogus reasons:  1) That the Academy’s FOIA office had supplied the requested materials (they had not, providing only non-germane items); and 2) That a document search had uncovered no such documents.  By “completely bogus,” I mean that they lied.

    West Point is a federally funded institution.  The Academy, and the military in general, are subject to federal laws, just as the rest of us are.  In fact, even more so, because the U.S. military traditionally and by law is subject to civilian control.  So, why are they permitted to pick and choose which laws to obey and which to willfully ignore?  Why are they permitted to ignore legitimate taxpayer requests for information?  Why the disparity between releasing names in sexual assault cases but not in drug cases and administrative failures?

    What is West Point covering up and why?  When and how will these lawbreaking officials be held to account?  And when is this once proud and honorable institution finally going to come clean?

    Tony Lentini is a 1971 West Point graduate and a founding board member of the MacArthur Society of West Point Graduates.  He served five years in the Army, attaining the rank of captain, and then spent his civilian career in the energy industry, ultimately serving as vice president of public and international affairs for two independent oil and gas exploration and production companies.

    Tyler Durden
    Sun, 10/20/2024 – 22:10

  • Daniel Penny Subway Chokehold Trial Begins On Monday
    Daniel Penny Subway Chokehold Trial Begins On Monday

    Jordan Neely’s death in a crowded Manhattan subway car made worldwide headlines in May 2023, after bystander footage showed former Marine Daniel Penny restraining the erratic homeless man in a fatal chokehold. The case is finally set to go to trial, with jury selection beginning Monday.

    Penny, who has argued that he acted to protect fellow passengers from a menacing Neely, faces charges of second-degree manslaughter and criminally negligent homicide. Neely, a homeless Michael Jackson impersonator with a history of mental illness, died after Penny placed him in a chokehold for several minutes. According to prosecutors – who don’t have to prove intent to kill, Penny acted recklessly in causing Neely’s death.

    Manhattan District Attorney Alvin Bragg’s office has argued that Penny knew during the encounter that he might kill Neely, even if that was not his intention.

    They’ve cited testimony from a Marine trainer, who told the grand jury that Marines are taught that chokeholds — which are meant to be a “non-lethal” restraint — can sometimes be fatal.

    Prosecutors will also bring up evidence that Penny kept Neely in his chokehold for six minutes, continuing to restrain him even after the homeless man was no longer making purposeful movements.

    “The notion that death is not a foreseeable consequence of squeezing someone’s neck for six minutes is beyond the pale,” the DA’s office wrote in a November 2023 court filing. –NY Post

    Penny, a former infantry squad leader, has maintained that he did not intend to kill Neely, however Bragg’s office only has to convince a jury that Penny “recklessly” caused the death or disregarded a “substantial and unjustifiable risk of death” when he kept Neely in a chokehold for several minutes.

    Julie Rendelman, a former prosecutor, suggested that the prosecution will likely play video footage of the incident in slow motion to underscore Penny’s extended use of force. “I think they really need to break down the scene, literally, second-by-second,” she explained.

    According to Rendelman, prosecutors will make a huge mistake if they try to argue that Neely was “no danger to anyone” before Penny stepped in.

    “You may lose some of those jurors who have been on the train many times, threatened by different individuals on many occasions,” she told the Post. “They really have to approach it in a way that recognizes that, but also recognizes that he went too far.”

    The Defense’s Strategy

    Penny’s defense lawyers, Thomas Kenniff and Steven Raiser, are expected to argue that their client’s actions were justified, pointing to what they describe as Neely’s erratic and threatening behavior. Witnesses recalled Neely shouting that “someone is going to die today” and declaring that he was “ready to go to Rikers.”

    The defense is likely to question the medical examiner’s ruling that Penny’s chokehold directly caused Neely’s death. In an October 2023 motion, the attorneys argued that the examiner never provided specific evidence that Neely died from asphyxiation. Penny’s team may also attempt to introduce evidence of Neely’s drug use, pointing to toxicology reports that indicated Neely had the synthetic drug K2 in his system. While Penny’s lawyers acknowledge that the reports do not specify the quantity, they suggest that the drug could have been a contributing factor.

    Who Will Testify?

    According to the report, there will be several witnesses who were on the train, police officers who responded to the scene, and detectives who interviewed Penny. The city medical examiner’s office will likely present its findings, and the prosecution may call psychological experts to shed light on Penny’s mindset during the encounter.

    A looming question is whether Penny himself will take the stand. Legal observers are divided on the wisdom of this move, but Rendelman said, “I think he probably needs to testify,” adding “This is one of the cases where it is likely that the jury is going to want to hear from Penny, because part of that justification is going to be about what he perceived at the time that the events were happening.”

    The Stakes and Challenges

    If convicted of second-degree manslaughter, Penny could face up to 15 years in prison. A conviction on the lesser charge of criminally negligent homicide carries a maximum sentence of four years. The final decision on sentencing would rest with Manhattan Supreme Court Justice Maxwell Wiley.

    Jury selection is expected to be a critical phase, as prospective jurors’ own experiences on the subway could shape their views. “Jury selection is always a big part of any case, but for this one in particular, multiply that by 10,” said Brooklyn prosecutor Jason Goldman.

    And according to Rendelman, “at the end of the day, one of their arguments is going to be even if you assume that initially – Daniel Penny’s argument that self defense is true, there was a point in time where there was no longer self-defense protection.”

    Tyler Durden
    Sun, 10/20/2024 – 21:35

  • Ten Lessons On US Foreign Policy
    Ten Lessons On US Foreign Policy

    Authored by Rhesa Browning via The Mises Institute,

    Enough Already by Scott Horton is a must-read for anyone who wants to know the truth about US foreign policy in the Middle East for the last 35 years. Horton starts his exposé with the 9/11 tragedy, and then details all the terror wars up until today. Among all the facts and figures, Horton teaches ten important lessons.

    Each chapter focuses on a specific country, but these lessons are woven throughout each.

    Lesson 1—The US is Not Loyal to Its Allies

    “If you want to know who America’s next enemy is, look at who we are funding right now.”—Dave Smith

    I used to think this statement was an oversimplification, but it is deadly accurate. Our government routinely makes allies only to turn around and attack them years later. One clear example is what would become al Qaeda. In the 1980s, the US armed Afghan resistance fighters to oppose Russia in Afghanistan. After 9/11, al Qaeda became the archenemy of the US. Then, about ten years later, they started arming them again to fight in Iraq and in Syria.

    In Afghanistan, the US supported the Taliban during the Clinton administration. Then multiple presidents fought a 20-year war against them only to give full control of Afghanistan back to the Taliban in 2021.

    The US followed the same pattern with Iraq. The US armed them against Iran during the 1980s. They supported Hussein all the way to Iraq War I in 1990. Then they bombed and sanctioned the country until they captured him in 2003 and had him executed.

    Lesson 2—The US Prolongs Wars

    Without US involvement in the Middle East, both sides in a conflict would be similar in strength and have less resources to continue. In the Yemen War, the US sends arms to Saudi Arabia, who then sends them to their allies in Yemen to fight the Houthis, even though the Houthis “won” years ago. Take the US out of the equation and the Saudi’s allies wouldn’t be able to continue the war.

    The same thing happened in Somalia when the US armed Ethiopian forces to invade. Continued US support incentivized the Ethiopian groups to continue fighting after it started. Outside the Middle East, this lesson played out the exact same way in the Ukraine-Russia war. Plus, the US stopped peace negotiations between Zelensky and Putin through their proxy Boris Johnson.

    Lesson 3—The US Justifies Starting Wars with Nonsense

    The best example is Iraq War II. One of the main intellectual justifications for attacking Iraq in 2003 was a white paper titled “A Clean Break,” written by David Wurmser. In it he dreams that if the US military would overthrow Iraq’s Baathist Party, they could set up a government and form close allies in the region. He then imagined that Syria and Lebanon would prefer to follow a US puppet regime in Iraq over Iran, and that the new Shia Iraqi government would unite more closely with the US than Iran. However, they were never going to prefer a secular Western government over fellow Muslims. Contrary to Wurmser’s mythology, Iraq immediately allied with Iran and the rest of the Shia world instead of the US.

    We also all know about the false accusations the Bush Administration made to garner support for Iraq War II. They fabricated stories about Iraq having chemical and biological weapons, and about Hussein collaborating with al Qaeda.

    Lesson 4—The US Causes the Problems They Claim to Prevent

    The clearest example of this is Libya in 2011. The US government justified their intervention saying that, without it, Muammar Gadhafi would massacre his own civilians in response to al Qaeda-aligned rebels opposing his rule. However, US involvement in the conflict caused civilian massacres instead of preventing them. The US-backed rebels terrorized civilians wherever they gained control and instituted a new slave system.

    Lesson 5—The US-Led Terror Wars Don’t Defend America

    After 9/11, the Taliban offered to help the US capture Osama Bin Laden. Instead of working with the Taliban to avenge the lives of dead Americans, they attacked Afghanistan to conquer the country and install a Western-style government. It demonstrated the purpose was to build an empire, not to defend America.

    The US waged many of the subsequent wars to benefit Israel and Saudi Arabia. The US fought Iraq War III and the Syrian War to reduce Iran’s influence in the region for this purpose. Another reason the US started Iraq War II was to open land for a new pipeline from Iraq to Israel. 

    In the Yemen War, the Houthis were enemies of Saudi Arabia, not the US. The US still dutifully sent in weapons.

    Lesson 6—The US Lies about Every Aspect of These Wars

    They lie about why we should stay, they lie about status updates, they lie about the groups they support. In one of Scott Horton’s radio commercials, he states, “they lied us into war, all of them.” It applies to every aspect of these wars.

    In 2012, the US government showed they were willing to lie in the most insane ways. They blamed the attack on the US consulate in Benghazi on an anti-Islamic video made by an Egyptian-American from Los Angeles. They even threw him in jail for almost a year based on spurious “probation violations” charges. In reality, the terrorists attacked to exact revenge for secret raids against them coordinated by Obama’s counter-terrorism adviser John Brennan. Further, US officials were in Benghazi to transfer weapons from Libya to Syria, between radical Islamists. That led to another lie calling ISIS “moderate” rebels.

    Lesson 7 – The US-Led Terror Wars Produce More Terrorists

    The US military interventions in the Middle East have created more terrorists. In September 2001, al Qaeda consisted of 400 people hiding in eastern Afghanistan. Scott Horton doesn’t give an exact number of their numbers today (though some have estimated at least over 20,000), but he listed al Qaeda-affiliated organizations operating all over the Middle East. Just about every country mentioned in Enough Already now has al Qaeda or Bin Ladenite-style forces in it. Ironically, al Qaeda’s presence in Afghanistan is at another low point now that the Taliban is back in control.

    Lesson 8—The US Primarily Kills Civilians 

    The book throughout presents death and casualty numbers for these wars. Based on those numbers, they roughly kill about 100 times more civilians than combatants. During the 1990s, US bombings and sanctions killed around 500,000 Iraqi civilians. Drone strikes in Pakistan often targeted civilians based on faulty intelligence. Even when they hit terrorists, civilians die because the strikes hit public spaces or community gatherings. Tens of thousands of Yemeni civilians have died because of the war and the blockade resulting in mass starvation there. US-backed al Qaeda forces killed thousands of civilians during the Libyan Civil War of 2011. The same exact thing happened in Syria as ISIS was notorious for massacring civilians in the areas they conquered.

    Lesson 9—The US has Lost Every War It Started in the Middle East

    They haven’t “won” one war in the Middle East. The war in Afghanistan ended with the US giving the country back to the Taliban. In Yemen, the Houthis won and continue to control the main population centers. In Mali, Somalia, and Libya, al Qaeda-affiliated groups are in power. The closest thing to a US victory is Libya since they armed al Qaeda to take out Gadhafi. In Syria, Bashar Al Assad is still in power. Even though the US was successful in deposing Saddam Hussein, the current government is strongly allied with Iran over the US. With such a list of failures the only sensible path is to pursue peaceful interactions.

    Lesson 10—The US Terror Wars Hurt Americans

    The wars hurt normal American citizens in several different ways. Most directly, 7000 American soldiers have been killed with more wounded. Thousands more are suicidal and living lives of desperation because of PTSD.

    The factor affecting most Americans is that the US government pays for military interventions through inflation, debt, and taxation. Simply put, they are stealing from us. As a result, it has become harder for Americans to purchase a home or build a family. This lack of economic opportunity also affects crime rates and homelessness.

    Last, the tools used in those foreign wars are now used on American citizens. The most serious threats to our liberty come from the PATRIOT Act, police militarization, and the NDAA, which allows the government to jail citizens with no due process. I would say that we’ve had enough already. It’s time to end the war on terrorism and every other war we are supporting in the world.

    Tyler Durden
    Sun, 10/20/2024 – 21:00

  • Trump Considers No Taxes For Police Officers, Firefighters And Military
    Trump Considers No Taxes For Police Officers, Firefighters And Military

    The race to shock and awe with the greatest number of tax cuts ahead of the November 5 election is nearing its climax.

    Donald Trump said he’d consider exempting police officers, firefighters, active duty military and veterans from paying taxes, the Republican nominee’s latest campaign trail idea to deliver tax breaks to key groups of supporters.

    “It’s something I would think about,” Trump said in response to a question about excluding first responders and military members from tax bills on an online show Maintaining with Tyrus that aired Friday.

    “You’re like my tax person there, but yeah. I mean something has to be done,” he said. “It’s almost an incentive to where you can get people interested.”

    The idea to exempt members of the military and first responders from taxation is the latest in a long list of tax proposals Trump has talked about while campaigning against Kamala Harris. He’s pledged to i) eliminate taxes on tipped wages, ii) taxes on overtime pay and iii) taxes on Social Security benefits.

    To be sure, Trump didn’t give any more details about the service member tax exclusion, and any such ideas would require congressional approval in order to become law, which is why absent a Republican sweep most of Trump’s promises will end up as being just hot air.

    The no-taxes-on-military-and-first-responders idea could be among the largest new tax cuts he’s discussed to date, exempting more than 20 million people from federal tax payments. According to Bloomberg, there are about 18 million living veterans in the US, roughly 1.3 million active duty troops, approximately 1 million police offers in the US and more than 300,000 professional firefighters, according to several estimates. The US does offer some broad tax exemption to military members, but that is largely limited to people who are serving in active combat zones.

    Over the last several months, Trump has rolled out a steady drumbeat of politically beneficial tax cut plans focused on key election constituencies, as a way to appeal to voters in an extremely tight election — particularly, low-and-middle-income Americans frustrated by high prices. The Republican nominee has thrown out such a wide range of tax proposals that even his own advisers are unsure about which ones he intends to enact if elected.

    Now that it is clear that neither candidate gives a rat’s ass about the war-time US budget deficit which just hit a mindblowing 6% of GDP despite US GDP allegedly growing at a 3%+ rate…

    … Trump it taking his tax break promises to the limit while also campaigning on extending the tax cut first passed when he was president. Major portions of that law, including lower tax brackets for households and deductions for small businesses, are set to expire at the end of 2025. Trump has also pledged to further lower the corporate rate to 15% from 21% and expand the state and local tax deduction, a write-off popular in New York and California where Republicans face close House elections to keep their majority in the chamber.

    Economists have warned that his policy portfolio may balloon the federal debt, adding as much as $15 trillion to the debt over the next decade, according to an estimate from the Committee for a Responsible Federal Budget. Trump contends that economic growth and energy production would offset the loss in tax revenue.

    Of course, the only other presidential candidate that could balloon the federal debt more than Trump is Kamala Harris, whose admin has seen US debt grow by $8 trillion, with US debt growth set to double or triple if her promises of reparations to blacks are realized.

    In the Friday interview, Trump also suggested military members should become teachers when asked about measures to secure schools.

    “So what about teachers that are in the military and they’re teachers, they leave the military, they become history teachers,” Trump said. “They’re in the room and they get to know the students and they know how to use a gun. You can’t have people that don’t have any idea about what to do with guns.”

    Some states, including Iowa and Tennessee, have passed laws allowing teachers to carry concealed weapons on school campuses, a controversial measure that has faced broad criticism from teachers unions and some parents, who say that will make schools less safe.

    Tyler Durden
    Sun, 10/20/2024 – 20:25

  • Bovard: The Democrats' Three-Decade War On Honest Voting
    Bovard: The Democrats’ Three-Decade War On Honest Voting

    Authored by James Bovard,

    When did preventing election fraud become a violation of the Voting Rights Act?

    According to President Joe Biden’s Justice Department, it is now a federal crime to prevent illegal ballots in presidential elections. 

    Barely 30 days before the 2024 election, the Justice Department sued the state of Virginia to prohibit its removal of the names of noncitizens from voting rolls. Gov. Glenn Youngkin was enforcing a 2006 Virginia law, but the Biden administration portrayed that action as an attack on “the cornerstone of our democracy.” Youngkin denounced the federal lawsuit as “a desperate attempt to attack the legitimacy of the elections” in Virginia.

    The Virginia lawsuit is simply the latest in Democrats’ long war against honest voting, which began with the Clinton administration’s Motor Voter Act. That 1993 law mandated voter registration in every welfare and food-stamp office in the nation. Brent Thompson, executive director of the Fair Government Foundation, observed in 1996, “The Motor Voter law did away with a panoply of anti-fraud mechanisms long relied on by the states to police and deter fraudulent voting.”

    In 2015, the Democratic presidential candidate Hillary Clinton condemned voter identification requirements as part of a “sweeping effort to disempower and disenfranchise people of color, poor people and young people.” A Washington Post headline aptly summarized her message: “Hillary Clinton Declares War on Voter ID.” Verifying identification was unnecessary because, as long as enough ballots showed up with a check by Hillary’s name, she would be irrevocably entitled to all the power she could seize in the following four years. 

    Lax voting procedures in some states were insufficient to enable Hillary to capture the White House. But the panic induced by Covid-19 enabled politicians to radically loosen the rules for the next presidential election. Many states made it easier—if not automatic—to vote by mail, even though a 2012 New York Times analysis concluded that “fraud in voting by mail is… vastly more prevalent than the in-person voting fraud that has attracted far more attention.” Some states abandoned any effort to verify mail ballots, dropping requirements for matching signatures, return addresses, or having a witness verify the person and the vote. Civil Rights Commissioner J. Christian Adams noted that “Democrats succeeded in tossing out state laws related to absentee ballot verification, deadlines and a whole range of laws all in the name of Covid.”

    Neither the Elections Clause of the U.S. Constitution (rules for federal elections “shall be prescribed in each State by the Legislature thereof”) nor state law stopped the rigging of the 2020 vote. Michigan sent “unsolicited absentee-voter ballot applications by mail to all 7.7 million registered Michigan voters…without signature verification as expressly required” by state law. The Wisconsin Elections Commission approved setting up to 500 unmanned ballot drop boxes in major Democratic cities in violation of Wisconsin law. That commission  and local election officials encouraged all Wisconsin “voters to unlawfully declare themselves ‘indefinitely confined’—which under Wisconsin law allows the voter to avoid security measures like signature verification and photo ID requirements,” as the Texas Attorney General noted in a brief to the U.S. Supreme Court. The Wisconsin Supreme Court ruled that election officials acted illegally, but that did nothing to nullify the hundreds of thousands of votes that came in via illicit loopholes. Biden carried Wisconsin by 20,000 votes.

    To stifle controversy over electoral rule changes, Biden’s media allies created a fairy tale. A week after Election Day, the New York Times ran a banner headline across the top of the front page: “Election Officials Nationwide Find No Fraud.” How did the Times know? Their reporters basically called election officials in each state and asked, “Did y’all have any fraud?” A total lack of fraud in an election with more than 100 million voters would have required divine intervention to achieve. Biden’s 2020 victory became the election equivalent of the Immaculate Conception. A Washington Post headline scoffed that anyone who doubted Biden’s victory was an “Election Denier”—placing them in the same odious category as Holocaust deniers. An ABC News analysis portrayed distrust of the election results as a form of mental illness.

    Most of the American media pretended that voter fraud was so rare that the mere suggestion of its occurrence was a heresy against democracy. But a few weeks after Biden was sworn in as president, a federal investigation revealed that the U.S. government bankrolled some of the most brazenly corrupt elections in modern times. The Special Inspector General for Afghanistan Reconstruction (SIGAR), issued a report titled, “Elections: Lessons from the U.S. Experience in Afghanistan,” that should have received far more attention in Washington and beyond. SIGAR revealed that the net result of 15 years of U.S. pro-democracy assistance was that Afghanistan’s 2019 presidential election was “the most corrupt the country had ever held.” U.S. tax dollars poured into the coffers of Afghanistan’s Electoral Complaints Commission to safeguard voting, but that agency was a prime source of the most shameless vote stealing. U.S. aid enabled the Afghan government to purchase sophisticated electronic voting systems. But SIGAR’s report warned that “because governments often control electoral commissions and the procurement of election technology, they are well placed to use it to commit fraud.” SIGAR ruefully noted, “The true purpose of adopting election technologies may not be to actually reduce fraud, but to create the illusion of doing so.” A U.S. Army colonel who deployed several times to Afghanistan told SIGAR that as early as 2006, the Afghan government had “self-organized into a kleptocracy.” Officials who were stealing everything else never hesitated to steal votes. The collapse of democratic legitimacy paved the way for the collapse of the U.S. puppet regime in Kabul in August 2021.

    The Biden administration sought to exploit Covid-era precedents to turn America into a Drop Box Democracy where minimal efforts by voters automatically sanctify maximum power for politicians. In 2021, the House of Representatives passed H.R. 1, the For the People Act, to force all states to adopt the most unreliable electoral procedures used during the pandemic. The bill, which failed in the Senate, would have compelled all future federal elections to permit paid ballot-harvesting and universal mail-in voting, prohibit checking voter identification, and require states to count ballots that arrive ten days after an election. Many of the same Democrats who championed Covid vaccine passports, which disproportionately barred blacks from restaurants and gyms, also insist that requiring voters to show identification is Jim Crow at its worst.

    Histrionics and shenanigans continue to be the Democrats’ preferred substitute for election integrity:

    • Kamala Harris objected to voter identification requirements because she bizarrely claimed it was “almost impossible” for rural voters to photocopy their identification papers.
    • The city of Detroit responded to a Republican National Party Freedom of Information Act (FOIA) request for ballot drop box surveillance footage by claiming that the footage had been deleted—after the FOIA request was received. Detroit was notorious for shrouding its vote counting on Election Night 2020, blocking poll watchers from witnessing Biden’s miraculous comeback.
    • In Georgia, Judge Thomas Cox on Wednesday struck down the Georgia State Election Board’s new rules to require video surveillance of ballot drop boxes and to regulate ballot-harvesting.
    • Lawsuits are proceeding regarding lax standards for absentee mail-in ballots in North Carolina, Michigan, Pennsylvania, Texas, and elsewhere.

    Preventing bogus ballots should not be treated like a moral or theological issue. When did verifying votes become a crime against democracy? Why is the Justice Department crusading to turn voting into an entitlement program for non-citizens? Do Democrats seek to make the actual voting as fraud-ridden as politicians’ campaign promises?  Elections need rigorous safeguards against fraud because, as Thomas Paine warned long ago, “the trade of governing has always been monopolized by… the most rascally individuals of mankind.” Four presidential elections since 2000 have been heavily tainted by allegations of foul play. American democracy has zero legitimacy to spare at this point.

    Tyler Durden
    Sun, 10/20/2024 – 19:50

  • Leaked US Intel Confirms Israeli Nuclear Weapons
    Leaked US Intel Confirms Israeli Nuclear Weapons

    Via Common Dreams

    “We have not observed indications that Israel intends to use a nuclear weapon.” That sentence is the concluding line from an allegedly leaked (or hacked) U.S. intelligence document posted online this week and later reported on by Axios, CNN, and other outlets.

    As Axios reported on Saturday, “U.S. officials are extremely concerned about a potentially major security breach after two alleged U.S. intelligence documents about Israel’s preparations for an attack on Iran were published by a Telegram account affiliated with Iran.”

    Overhead satellite view of Shimon Peres Negev Nuclear Research Center, via War is Boring

    The Associated Press and independent investigative journalist Ken Klippenstein both cited government sources who said the documents appeared to be authentic. While U.S. officials have yet to comment publicly on the material, reporting confirmed an investigation into their authenticity and how they came to be in the public domain was underway.

    Since a barrage of missile strikes aimed at military targets in Israel by Iran on Oct 1, a retaliatory strike in response to Israel’s assassination of Hezbollah leader Hassan Nasrallah and other attacks, the world has been waiting for Israel’s promised military response.

    Assuming the documents are authentic, what they show is that U.S. intelligence—as is well known and despite being close allies—keeps a close and clandestine eye on Israeli military operations.

    CNN cited an unnamed U.S. official who called the documents being made public “deeply concerning,” though the outlet did not publish the documents in full. The documents, according to CNN,

    are marked top secret and have markings indicating they are meant to be seen only by the US and its “Five Eyes” allies — Australia, Canada, New Zealand and the United Kingdom.

    They describe preparations Israel appears to be making for a strike against Iran. One of the documents, which says it was compiled by the National Geospatial-Intelligence Agency, says the plans involve Israel moving munitions around.

    Another document says it is sourced to the National Security Agency and outlines Israeli air force exercises involving air-to-surface missiles, also believed to be in preparation for a strike on Iran. CNN is not quoting directly from or showing the documents.

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    It has long been known that Israel has a nuclear weapons program and maintains a nuclear arsenal, but it remains both Israeli and U.S. government policy never to acknowledge or confirm the existence of either. In one of the documents, the U.S. specifically references Israel’s ability to deploy a nuclear weapon, though it categorizes the threat of doing so in this case as low.

    Independent journalist Ken Klippenstein, recently banned from X for posting an internal opposition research dossier that the Trump campaign had compiled on JD Vance, posted images of both documents to his substack page, as he excoriated major outlets for refusing to do.

    “As with the J.D. Vance Dossier, which the entire media knew about but refused to publish, it appears the media has once again lost its nerve – and its sense of what’s news,” Klippenstein wrote.

    According to Klippenstein’s assessment:

    The intelligence report includes a rundown of the various aspects of Israeli military activities that the U.S. is monitoring to inform its judgments and conclusions: weapons handling, air defense, ground forces, Navy, Air, Special Forces, and even Israel’s Nuclear Forces. But even then, only the weapons handling and special forces categories are identified as having a “medium” predictive ability in regards to determining Israel’s action; the rest are designated “low” predictive ability.

    The second intelligence report is titled “Israel: Air Force Continues Preparations for Strike on Iran and Conducts a Second Large-Force Employment Exercise.” The document details Israeli activities during an evident “mission rehearsal” (in U.S. lingo) that could be indicative of how Israel will strike Iran. Citing imagery analysis and other sources, the NGA report notes that the Israeli Air Force is already conducting covert drone operations over Iran (evidently doing its own spying), and how, as part of Israeli Air Force activity, has been handling air-launched ballistic missiles and other weapons.

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    Defending release of the full documents, he explained that both provide “insight of enormous public interest as we stand at the precipice of a broader conflict” and contained “information that directly bears upon U.S. obligations and actions. It is for that reason that I’ve decided to publish the basic documents.”

    Tyler Durden
    Sun, 10/20/2024 – 19:15

  • The Danger To The Dollar Isn't The Euro Or Yuan
    The Danger To The Dollar Isn’t The Euro Or Yuan

    Authored by Mike Shedlock via MishTalk.com,

    Russia GDP is now estimated at +3.8 percent, topping the US, despite sanctions. What’s going on?

    Russia’s War Economy

    Eurointelligence discusses Russia’s War Economy

    It is worth looking at the autumn forecast for Russia by the Vienna Institute for International Economic Studies, one of the best sources of economic information for central and eastern Europe. They upgraded their growth forecast for this year by 0.6pp to 3.8%. Russia is outgrowing all western economies, including the US. Growth is forecast to slow down to 2.5% next year because of the impact of a 19% interest rate. It is clear that Russia’s economic expansion is a classic case of a wartime Keynesian effect.

    It is also interesting to contrast Russia’s economic development with that of Ukraine’s main supporters in Europe, which have entered into synchronised austerity, first in Germany, and now in France and the UK.

    Russia’s fiscal stability is perhaps the biggest surprise. Defence spending is on trajectory towards 6% of GDP. And yet, the 2024 budget deficit is projected at 1.5%, falling to 1% in 2025.

    Vasily Astrov, the Russia expert at WIIW, concludes that Putin will have money for the foreseeable future to continue financing the war against Ukraine. A rise in income and corporate tax has meant that Russia’s state finance will become less dependent on energy.

    Financial sanctions are ultimately not as successful as their advocates once believed because money is not a natural global monopoly. International banks are certainly susceptible to US dollar sanctions. But not all banks in the world operate in dollar markets. The use of secondary sanctions has become a first-order instrument in the US’s diplomatic toolkit in this century. But it falls into the category of instruments which lose their value the more you use them. Even amongst US economists, we see a lot of complacency about this. It was friction combined with network effects that favoured the emergency of a single dominating currency – the pound sterling, the dollar later. The danger to the dollar is not the euro, or renminbi. It is that micro-channels are becoming viable as technology reduces the frictions.

    Lessons of the Day

    • The more you depend on sanctions, the less they work.

    • That’s the real risk to the dollar.

    Here’s a Repeat Lesson on Why Sanctions Fail

    On September 26, I commented To Those Hard of Learning, Here’s a Repeat Lesson on Why Sanctions Fail

    In that post I refuted a claim that sanction failures are due to a lack of political will.

    Also see my September 19, 2023: Lesson of the Day: Sanctions Don’t Work Because They Create New Markets

    A person who touted a buyer’s cartel sanction success, now complains the buyers cartel leaks like a sieve.

    Finally, please see How China Gets Around US Sanctions on Semiconductors

    US sanctions backfire again. China is stronger as a result.

    Russia’s GDP shows just how badly misguided and overused sanctions have worked.

    Tyler Durden
    Sun, 10/20/2024 – 18:40

  • One Of Israel's Most Senior Commanders Dies In Gaza; Hamas Readies Sinwar Successor 
    One Of Israel’s Most Senior Commanders Dies In Gaza; Hamas Readies Sinwar Successor 

    A high-ranking Israeli military officer was killed while fighting in Gaza on Sunday, the Israel Defense Forces (IDF) announced the same day.

    Colonel Ehsan Daqsa, 41, was commander of Israel’s 401st Armoured Brigade, and died when his tank was targeted by explosive devices during operations inside Jabalia refugee camp. Reports suggest an improvised explosive device (IED) detonated when a group of officers stood outside of their tanks.

    Colonel Ehsan Daqsa, IDF

    Another Israeli soldier was seriously wounded in the same incident, which involved a second tank being blown up.

    It remains somewhat rare that a colonel (and brigade commander) would be involved in leading operations directly in the battle zone in Gaza. Col. Daqsa has been identified as one of the most senior officers to have been killed in over a year of Gaza operations.

    The Times of Israel reports of the details of his death: “An IDF probe into the death of Daqsa found that he was outside his tank with other officers when they were hit by an explosive device in Jabaliya, as part of an ongoing offensive there against Hamas.”

    This strongly suggests that despite the death of Yahya Sinwar, Hamas’ top leader in Gaza, Hamas militants are still fighting fiercely and are not relenting.

    Western leaders used the opportunity of Sinwar’s death last week to call for urgent ceasefire and the return of the Israeli hostages remaining in Gaza, but at this point it seems a distant prospect.

    Fighting could actually intensify in the wake of Sinwar’s death, given he has been held up among Palestinians in Gaza as a martyr and a hero, who went down fighting till the end.

    Meanwhile it looks like Hamas and its external backers are already readying to name a successor: 

    Hamas is likely to name Qatar-based Khalil al-Hayya as a successor to slain leader Yahya Sinwar, aligning it closer to Iran and giving its main backer more sway in the next stage of the group’s war with Israel.

    Al-Hayya is a protégé of Ismail Haniyeh, Sinwar’s predecessor who was believed to have been assassinated by Israel in Tehran in July. He has been leading indirect negotiations with Israel over both a cease-fire in Gaza and the release of hostages kidnapped by Hamas during the Oct. 7 attacks last year, which triggered the ongoing conflict.

    Currently there’s very heavy fighting in and around Jabaliya, which is a few kilometers north of Gaza City.

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    Israeli airstrikes have pummeled the area, providing cover for tank and ground forces, but several reports over the past days have pointed to huge civilian casualties, with dozens killed.

    Some 400,000 people are reportedly in Jabalia camp, and there are reports that the military siege has cut off most supplies of food, water, and medicine.

    Tyler Durden
    Sun, 10/20/2024 – 18:05

  • The Key To Happiness In America?
    The Key To Happiness In America?

    In the United States, having a job or career that you enjoy is considered a key cornerstone for leading a fulfilling life.

    As Statista’s Anna Fleck reports, according to a survey by Pew Research Center, 71 percent of respondents said that having a job or career that they like is either extremely or very important to feeling satisfied with their lot.

    Infographic: The Key to Happiness? | Statista

    You will find more infographics at Statista

    The next most popular perceived element for a fulfilling life was having close friends, with 61 percent of respondents picking the option.

    Having children, a lot of money or getting married were less highly rated.

    In the case of having children, 42 percent of respondents said it was not important, while 44 percent said marriage was not important.

    Women were slightly more likely than men to say that their job or career is important to achieving a feeling of fulfillment, at 74 percent compared to their counterparts’ 69 percent.

    Men were slightly more likely to say having children (29 percent versus women’s 22 percent) or marriage (28 percent for men versus 18 percent for women) were key to such perceived metrics of success.

    Tyler Durden
    Sun, 10/20/2024 – 16:55

  • CNN Panelist Says White People Should Be "Held Accountable" If They Don't Vote For Kamala
    CNN Panelist Says White People Should Be “Held Accountable” If They Don’t Vote For Kamala

    Authored by Steve Watson via Modernity.news,

    A CNN commentator declared Saturday that white people who don’t vote to “save democracy” won’t be able to “escape the accountability that they must face.”

    The remarks were made by Angela Rye during a discussion on the network in which she attempted to move blame for Harris’ dismal polling numbers away from black men.

    Rye stated “The responsibility of saving democracy should be on the largest demographic in this country that is white men and white women.“

    “Saving Democracy” by expressing a desire to get rid of it again.

    Also a bit racist no?

    Black people not expressing enthusiasm for Harris is white people’s fault.

    Maybe Obama needs to drop by to give them a stern lecture.

    How, exactly should white people be held accountable?

    It’s not rocket science as to why Americans, regardless of skin colour, don’t want to vote for Kamala.

    Every time one of these people opens their mouth, it only helps one side.

    *  *  *

    Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

    Tyler Durden
    Sun, 10/20/2024 – 16:20

  • Russia's Largest Explosives Plant Attacked In Night Of Over 100 Drones
    Russia’s Largest Explosives Plant Attacked In Night Of Over 100 Drones

    On Sunday Russia’s defense ministry (MoD) announced that over 100 Ukrainian drones were downed over several regions of Russia overnight, as Kiev’s cross-border drone operations have persisted and even been ramped up. Some apparently made it through, however.

    The military and its anti-air defense systems had thwarted “an attempt by the Kiev regime to carry out a terrorist attack using an aircraft-type UAV against targets on the territory of the Russian Federation,” the ministry said.

    Most of the inbound drones were intercepted over the Kursk region, scene of Ukraine’s cross-border ground assault which has been unfolding since August.

    In particular the MoD tallied that it intercepted or destroyed 110 UAVs, and nearly half of these were downed over Kursk not far from the border.

    Dozens of other drones were intercepted over Lipetsk Region, and Nizhny Novgoro and Oryol Regions. One was also downed near Moscow.

    The intended targets of the Saturday night attacks included more energy infrastructure and military sites and likely airports.

    But there are reports that some of the drones made it through Russian defenses, including on Russia’s “largest explosives factory”. Located in Nizhny Novgorod, the sprawling state-owned complex appears to have been hit:

    A source in Ukraine’s SBU security service told Newsweek that drones belonging to the agency, as well as Kyiv’s special operations forces and its GUR military intelligence arm, “struck the Sverdlov plant” in the city of Dzerzhinsk overnight, just west of the regional capital in Russia’s Nizhny Novgorod region.

    Nizhny Novgorod Regional Governor Gleb Nikitin said on Sunday that air defenses and electronic warfare systems had repelled a drone attack around the “industrial zone” in Dzerzhinsk. He did not specify the target of the attack.

    Several Russian Telegram channels, often used as sources of information in lieu of official statements, reported that Ukraine had targeted the Sverdlov explosives, chemicals and ammunition factory in Dzerzhinsk.

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    Russia’s military has downplayed these reports, saying only that “four employees of the fire department located on the territory of the industrial enterprise received minor shrapnel wounds.”

    But videos purporting to have captured the alleged drone strikes show a large fireball lighting up the night sky over Dzerzhinsk.

    Tyler Durden
    Sun, 10/20/2024 – 15:45

  • "Imagine What Government Agencies Could Look Like In 4 Years"
    “Imagine What Government Agencies Could Look Like In 4 Years”

    By Eric Peters, CIO of One River Asset Management

    “Imagine what government agencies could look like in 4yrs,” wrote an X employee as a caption for two images, presented side-by-side. On the left was a SpaceX Raptor engine from 2020, the mechanics of it a jumbled mess, wildly intricate, but still impressive, functional. On the right was the 2024 version of that same Raptor engine, its mechanics simple, sleek, as elegant as one could rightly imagine. More powerful, efficient.

    And Elon, fresh off the maiden return of a Starship Super Heavy booster, reposted the dual image, captioned with a single word: “Yup”.

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    “This is a custom-built tower with arms that are designed to catch the largest flying and heaviest flying object ever made and pluck it out of the air,” said Elon, pre-launch, his magnificent Starship on the launchpad, the largest and most powerful flying object ever made with more than 2x the thrust of the Saturn V moon rocket.

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    “It’ll weigh about 250 tons. We’ll make that lighter over time,” pledged the immigrant from South Africa, now suing the state of California for limiting his ability to increase SpaceX’s launch pace for purely political reasons.

    Even Democrat Governor Newsom came out in support of Elon on this one, chastising his own bureaucratic appointees, as the political winds show signs of shifting.

    “You got a couple hundred tons plummeting at more than half the speed of sound. So this thing is still coming in really fast,” said Musk, his Super Heavy Booster as tall as a 19-story building. “When the engines land… it’s gonna drop the velocity to basically zero and come in between the arms,” he said, describing the landing into his Mechanzilla.

    “The arms will be wide, and as it’s coming in, the arms will, will close, go flush against the side of the vehicle, and the vehicle will be descending through the arms,” said Elon, as Christine Lagarde cut rates 25 one hundredths of one percent, for the third time this year in an attempt to revive Europe’s moribund economy, admitting that she has not yet broken the neck of inflation, but believes she’s in the process of doing so. And as China pledged to print 4trln yuan ($562bln) in additional support for housing projects to try and support its slowly suffocating economy.

    “Excitement guaranteed, success is possible,” said Elon, willing to embrace the uncertain outcome, the risk of televised failure. “It is important in this often difficult and troubled world for there to be things that also inspire and make you feel great to be part of humanity.”

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    Progress

    “A fully and rapidly reusable rocket is barely possible. SpaceX is going to try to do it. We could fail, but we’re going to try to do it,” declared Musk in 2013. “The pivotal breakthrough that’s necessary, that some company has to come up with to make life multiplanetary, is a fully and rapidly reusable orbit-class rocket. This is a very difficult thing to do because we live on a planet where that is just barely possible. If gravity were a little lower, it would be easy. If it was a little higher, it would be impossible. It’s just a very tough engineering problem.”

    “I wasn’t sure it could be solved for a while. But then, relatively recently, probably in the last twelve months or so, I’ve come to the conclusion that it can be solved,” continued Elon racing forward, pursuing his American Dream. “And I think, SpaceX is going to try to do it. Now, we could fail. I’m not saying we’re certain of success here, but we’re going to try to do it. And we have a design that, on paper, doing the calculations, doing the simulations, it does work. And now, we need to make sure that those simulations and reality agree, because generally when they don’t, reality wins.”

    “The strong gravity of Earth makes the physics of a fully reusable rocket with positive payload margin extremely difficult to solve, which is why it has never been done before,” said Elon in 2014. “Removing the mass of landing legs from the booster and ship by making the tower do the work of final velocity attenuation greatly improves payload margin. This architecture also simultaneously substantially increases launch cadence, because the same arms that lift the booster and ship onto the launch stand also catch them, allowing immediate placement of the booster back on the launch stand and the ship back on top of the booster.”

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    “If you can move mass from the rocket to the ground site, it’s better to move mass to the ground site,” said Musk in 2021. “That’s why we took legs off the booster and just have the tower catch it. It sounds mad. I know it sounds insane. When I suggested that, people thought I lost my mind. Maybe I have,” he said, explaining the need to build Mechanzilla’s vast arms to catch his returning booster rockets, improving efficiency, lowering launch costs, one incremental improvement at a time. “It might take a few kicks at the can, but we’ll get it right.

    “Achieving materially positive payload margin to a useful orbit with a fully and rapidly reusable rocket has eluded prior attempts,” said Musk on Monday. “Many have tried to embark upon this path only to give up when it became clear that their design would have negative or negligible payload margin. This is an extremely difficult problem to solve, given the strong gravity of Earth, whereas it is easy on Mars and trivial on the Moon. In the early years of SpaceX, I was not sure that success was even in the set of possible outcomes! Starship is designed to achieve a >1000X improvement over existing rocket systems and, especially after yesterday’s booster catch and precise ocean landing of the ship, I am now convinced that it can work.”

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    “The next generation Starlink satellites, which are so big that only Starship can launch them, will allow for a 10X increase in bandwidth and, with the reduced altitude, faster latency,” said Elon on Friday, as SpaceX requested the FCC make “several small but meaningful updates” to its 2nd-generation Starlink network.

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    “Together, this modification and its companion amendment will enable the Gen2 system to deliver gigabit-speed, truly low-latency broadband and ubiquitous mobile connectivity to all Americans and the billions of people globally who still lack access to adequate broadband.”

    Tyler Durden
    Sun, 10/20/2024 – 15:10

  • Democrats Cheer As Lizzo Says: "Whole Country Be Like Detroit" If Kamala Wins
    Democrats Cheer As Lizzo Says: “Whole Country Be Like Detroit” If Kamala Wins

    Rapper ‘Lizzo’ boarded a private jet on Saturday ahead of a Kamala Harris campaign rally in Detroit, telling the less fortunate than her voters: “This is how a bad b*tch saves democracy. You ho’s couldn’t even spell democracy.”

    Even before Lizzo arrived in America’s most dangerous city, run by far-left Democrats for generations, she insulted everyone… 

    Who the hell talks like that? Also, why a private jet if the imminent global warming disaster is so dire? 

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    It gets even better because, at the rally, Lizzo told the crowd: “I’m so proud to be from Detroit. They say if Kamala Harris wins, the whole country will be like Detroit.” 

    Umm. Who is “they”? Obama? 

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    And, oh boy, X users ripped Lizo for claiming that if Harris was elected president, “the whole country will be like Detroit …” 

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    Detroit is dead. Meanwhile, innovation is happening at SpaceX’s Starbase in Texas. 

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    Most Americans are fed up with Democratic elites who have unleashed chaos and violent crime nationwide while attempting to undermine the Constitution every step of the way.

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    Kamala and her crew are out of touch as nation-wrecking inflation, sparked by her and Joe Biden, financially crushes households.

    Tyler Durden
    Sun, 10/20/2024 – 14:35

  • When Things Kinda Make Sense
    When Things Kinda Make Sense

    By Peter Tchir of Academy Securities

    When Things Kinda Make Sense

    I’m a contrarian by nature. I much prefer finding things that markets may be pricing incorrectly, to going along with the consensus. Usually there is no shortage of topics to pick from as a contrarian. Anything from China, to the quality of data, to the economy, to geopolitical risk, to valuations, but right now, I’m struggling to find an issue to get worked up about. Maybe this is the exception that proves the rule?

    In any case, let’s run through a variety of issues that, for better or worse, I think kind of make sense from a market pricing standpoint.

    Interest Rates

    For the first time in recent memory, I think rates are, more or less, priced correctly. As discussed last week in Little New to Say, it was getting more difficult to remain bearish on Treasury yields, though the bull case was even less convincing. The 10-year did eventually rally back to 4% on Wednesday, but then gave up most of those gains, and is stuck right around 4.1% again.

    We’ve argued in that report and in War, Inflation, and the Neutral Rate, that we might have seen a temporary bottom for inflation. The disruptions caused by hurricanes Helene and Milton could prove inflationary. The rebuilding efforts, which will begin in earnest as insurance checks hit, will also be inflationary. Again, I’m not alarmed that we will get a surge in inflation, but the easy part of the lower inflation story is almost over (the “simple” model of two distinct “Covid bumps” – one for goods and one for services – has been an effective tool in estimating the direction of inflation). You can find the “Covid bump” chart in Building the Case For Rate Cuts from early July.

    The Neutral Rate has become a part of virtually every bit of FedSpeak that we get. Almost all speakers agree that it is higher than they previously thought. So far, they seem to be channeling 3% to 3.5%, but I expect that to solidify to 3.5% to 3.75% sooner than later. We spent over a year over 5% and the economy has barely slowed!

    Having said all that, markets have largely moved to be in line with our take. They are still a bit more aggressive on the rate cut front than we are, and we think they are too complacent on the deficit and the longer end of the yield curve, but market rates are in our ballpark now.

    On the Fed cut front:

    • The market is pricing in 2.5 cuts in the next 3 meetings.

    • That isn’t far from our expectations. As discussed on Bloomberg TV last week, we are still pricing in 25 bps in November as a certainty. Bloomberg TV captioned our recent interview as Embarrassing for the Fed Not to Cut in November. The caption is a bit aggressive (it was 5:30 in the morning after all, and we covered a lot more ground), but I do think that for the sake of continuity and to support the decision to go 50 in September, they will cut 25 unless we get some extremely strong data. Then, I would expect a pause in one or both of the next 2 meetings. Our base case is only 2 cuts in the next 3 meetings, which means the market is “only” 0.5 cuts higher than us (the markets were 2 full cuts more than us a couple of weeks ago).

    • Our current outlook for next 3 meetings:

      • 50% chance of 25, 0, 25

      • 30% chance of 25, 25, 0

      • 20% chance of 25, 0, 0

    • The market doesn’t get below 3.3% on Fed funds until January 2026. That is a far cry from when it was below 3% by the summer of 2025 a few weeks ago. I think that it continue to inch up towards 3.6%, but my timing for that is early 2026. We are basically down to arguing over just about 1 cut, instead of 3, which is where we were. Again, all kinda makes sense.

    • That still leaves me slightly bearish 10s, primarily because I think 2s vs 10s should be 25 bps (though they closed at 13, which fits that “kinda right” vibe of today’s report). Also, I just see many more scenarios where we get another “buyer strike” as the realization that no one in D.C. is incentivized to control the growth of the deficit, rather than scenarios that see a surge in demand. For a range on 10s, I think 4% to 4.2%, but with more risk of a breakout to 4.5% than a breakdown to 3.75%. The 30-year is even more susceptible to a major move to higher yields from Friday’s 4.4% close (5% seems unlikely, but is a risk).

    Jobs and the Economy

    Following my view that seasonal adjustments have been wrong (adding too many jobs in the winter and subtracting too many jobs during the summer), we should be getting “clean” data. In fact, errors and issues surrounding jobs data have retreated from front and center for us, to more of a back burner issue. But, while issues addressed in The Fog of War have not been entirely resolved, they just aren’t our highest priority right now.

    While the hurricanes will cause some distortions, I expect the jobs data to be “okay.” Consistent with a bumpy/choppy landing – not signifying growth, but also not hinting that we might already be in a recession.

    Consumer data seems “mixed.” There are signs that spending remains robust, like this week’s retail sales data. There are also some signs that consumers, especially lower income ones, are getting stretched. Credit card debt, even adjusted for inflation (and wage growth), is getting to be a potential hurdle to further spending. We are seeing delinquencies (most noticeably in autos) tick higher. Regardless of which data you look at on this front, the trend has not been friendly. On the other hand, some metrics are still below 2018/2019 averages, so it shouldn’t signal panic, just something to watch.

    At the same time, some portion of that record amount of money in money market funds is held by individuals. Presumably, some of that interest gets spent, helping the economy. I think the surprise in this cycle will be that lower yields stall spending as most debts are locked in at lower yields and the lack of interest income will hurt households more than the cuts help (ok, I managed to squeeze in one “out there” view in today’s report).

    The Atlanta GDPNow estimate is at 3.43%! That is up from a recent low of 2.54% on October 1st. This number is a bit volatile, but even 3% would indicate a decent, even good economic backdrop, which I cannot disagree with.

    Our “bumpy” scenario is that some sectors will be doing well, while others struggle. Ditto for various regions of the country. Nothing that the economy can’t handle, but also not some overly rosy resurgence story.

    Earnings and Market Responses

    Taiwan Semiconductor announced earnings that helped that stock jump 10% on Thursday. The chip stocks did well, but not as well as TSM, and the Nasdaq 100 edged only marginally higher. To me, the response seemed kinda right. The epicenter of the move was on the stock that delivered the positive outlook, and the strength rippled out from there, but in what seemed appropriately proportional amounts. It didn’t cause the entire market to go into a furor of buying. Similarly, NFLX did extremely well on Friday (up 11%), but it seemed to be treated, correctly in my opinion, as a validation of their business, rather than some sign that all tech should rally! Yes, markets did rally on Friday, in part because of NFLX, but I think it had more to do with another effort by China to further talk up their markets and their commitment to stimulus. ARKK, which I still use as a barometer for “disruption,” was actually down on Thursday, again signaling “differentiation” rather than excessive speculation in the market.

    Breadth seems to be increasing as the Russell 2000 outperformed the other major indices and the equal weighted S&P 500 beat out the regular S&P 500 on the week (barely, but still, a positive sign for breadth).

    The fact that major companies, with large market caps, can move 10% on earnings, still seems a bit bizarre to me, but I like how the rest of the market performed around these earnings. It is as though we’ve built up a base and are being thoughtful, rather than just slapping the “BUY” button.

    I’m sticking to my assessment that the CCP needs the economy to turn around and will continue to add measures to prop it up (see China Stimulus Simplified). So far, they seem to be following our playbook as though they read the T-Report. One thing I do think the market is getting wrong, is assuming the Chinese stimulus will help the big global companies, when I believe it will be as targeted as possible to support domestic brands, as part of the transition from Made in China to Made by China.

    I’m still concerned about valuations in some areas and think there is a big risk if we see any signs that spending on AI is slowing or even being questioned. It is just as easy (or maybe easier) to have 10% down days. In general, I do think the market behaved rationally relative to the news flow recently.

    Finally, from a purely “Market Structure” standpoint, we continue to have the risk that a lack of liquidity can cause larger-than-rational moves in either direction, where the chance of very large single day moves to the downside heavily outweigh the odds of a big day to the upside.

    Credit Markets

    Remember when we asked How Tight Can Credit Spreads Go? Well, the market continues, maybe begrudgingly, to move in our direction. We listed multiple reasons to remain so bullish credit. We have reiterated some in recent reports, but I urge you to go back to this report from July to see the entire list, since the reasons are all still in play.

    The Election

    If saying credit spreads, already tight, are likely to go tighter, isn’t treading into dangerous waters, then bringing up the election certainly is.

    Gridlock. That seems to be the one thing markets and most polls agree on. Most things I see point to a House of Representatives won by the Democrats and a Senate won by the Republicans. So long as that seems to be the base case, then it doesn’t matter as much who wins the presidency, as their ability to create real change will be limited. It also fits with a view (which I hold) that people who vote against someone (rather than voting for someone) are more likely to split their ticket. They want to vote against someone, but don’t want to give, whoever they vote for, too much power.

    We are starting to spend time thinking more seriously about potential outcomes and policies and expect to publish early this week on the subject, but for now, we think the markets are moving in regard to election headlines.

    Geopolitics

    Academy’s Geopolitical Intelligence Group published a SITREP on Israel Kills Sinwar. There are ongoing developments this weekend and we continue to expect Israel to retaliate against Iran directly. While the death of Sinwar may open the door to some truce with Hamas, that is far from certain. In any case, Israel is likely to continue to prosecute their war with Iran’s other proxies and Iran itself.

    The markets seem entirely focused on whether or not Israel (or Iran) will do anything to disrupt the flow of oil. So long as that seems to be off the table (which was the indication that we were given this past week), markets will not pay too much attention to the situation. Yes, participants in markets are paying close attention to all of the suffering and death, but that does not translate into markets moving, unless we get significantly more escalation and expansion (even then, the reaction in markets is likely to be muted unless energy supplies are affected). It seems harsh to write this (and it probably is), but there is a significant difference between human tragedies and what can move markets.

    Owning energy (rather than Treasuries) is the best way to hedge any escalation. Though at 4.1%, it is less unreasonable to own some Treasuries as a hedge to geopolitical risk (though I don’t think it will be as successful as owning energy).

    Bottom Line

    Rates, call it slightly bearish, but just barely (low conviction and small sizes).

    Credit, still dull and still a great place to be.

    Equities, Chinese stocks, value, small caps, and equal weight indices all look attractive. Still too worried to fully commit to the stocks with the highest valuations/multiples/best moments, but I did like how the market behaved (though I’d add to the laggards rather than to the year-to-date winners). Finally, things seem to be falling into place for commercial real estate bets. I would have liked to see a lot more “clearing transactions” where we developed a true clearing price as I’m told there still is a difference between what buyers are willing to pay and what sellers think they deserve. But everything from the end of rate hikes to more “Work From Office” headlines, makes me want to add exposure here.

    Tyler Durden
    Sun, 10/20/2024 – 14:00

  • Boeing Explores Asset Sales In Potential Shrinking Of Corporate Footprint 
    Boeing Explores Asset Sales In Potential Shrinking Of Corporate Footprint 

    The Wall Street Journal reported Sunday morning that Boeing is mulling over asset sales to raise cash levels for its struggling business. On Saturday, Boeing and union heads reached a tentative labor contract agreement that could soon end the money-draining months-long labor strike, while early last week, the planemaker filed a $25 billion shelf registration to provide a “variety of capital options as needed to support the company’s balance sheet over a three-year period.”

    The new report cites a person familiar with a recent discussion between Boeing’s board and executives at its headquarters in Arlington, Virginia. The meeting centered around potential asset sales, as executives and board members combed through internal reports on the state of each of the planemaker’s units. 

    Just weeks ago, Boeing CEO Kelly Ortberg told employees, “We need to be clear-eyed about the work we face,” adding, “We also need to focus our resources on performing and innovating in the areas that are core to who we are.”

    Ortberg replaced Dave Calhoun as the president and CEO of Boeing on August 8. He is expected to comment publicly for the first time as CEO on Wednesday, following the International Association of Machinists and Aerospace Workers’ vote on the new labor contract. The company estimated the strike to cost $1 billion. It warned of a $6 billion quarterly loss for the period ending September 30. 

    On Tuesday, just days after Boeing announced plans to cut 10% of its workforce due to intensifying financial pressure, such as dwindling cash reserves and mounting risk of a credit downgrade, as well as prolonged strike, the beleaguered planemaker filed a $25 billion shelf registration. 

    “This universal shelf registration provides flexibility for the company to seek a variety of capital options as needed to support the company’s balance sheet over a three-year period,” Boeing wrote in the filing. 

    Separately, Boeing entered into a $10 billion “supplemental credit agreement” with a consortium of lenders. It noted that the credit facility provides “additional short-term access to liquidity as we navigate through a challenging environment,” adding that it has not drawn down on this facility or its existing credit revolver. 

    Boeing has already considered selling its rocket-launching joint venture, United Launch Alliance, with Lockheed Martin to Sierra Space for $2-$3 billion. Also, Boeing’s space division is in crisis following the malfunctioning of the Starliner spacecraft.

    Separately, Boeing’s competitor, Airbus, laid off 2,500 jobs in its space division, as Elon Musk’s SpaceX dominates rocket launches and leads the space race in this solar system. 

    Boeing’s obsession (Wall Street’s obsession) with DEI, climate, and gender justice ultimately dealt the fatal blow. It’s time to refocus on the fundamentals, like building planes that actually stay in the sky. Is that a hard ask, Boeing?

    Tyler Durden
    Sun, 10/20/2024 – 13:25

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