Today’s News 23rd May 2022

• Russian Electricity Imports Halted To Another EU Nation
  Russian Electricity Imports Halted To Another EU Nation

  Lithuania has become the second European country within a month to have electricity supplies from Russia halted. 

  Inter RAO, the only importer of electricity from Russia to Lithuania, confirmed the suspension of deliveries would begin on Sunday, according to Russian state-media Tass News Agency. Earlier this month, Inter RAO’s Nordic branch stopped sending power to Finland after formally applying to join NATO.   

  “According to the decision of the electricity exchange operator Nord Pool, trading in electricity generated in Russia, which was carried out by Inter RAO (through its subsidiary Inter RAO Lietuva), is terminated” starting from May 22, Lithuania’s Energy Ministry said in a statement. 

  It wasn’t immediately clear why power trading between both countries was halted, though it comes as the Baltic nation (and NATO member) was the first European Union member to slash natural gas imports from Russia last month. 

  Lithuanian Energy Minister Dainius Kreivys said Friday that cutting imports of Russian energy supplies, including oil, electricity, and natural gas, has allowed it to become “energy independent.”

  

  While Lithuania says halting Russian energy imports is a move toward energy freedom, Inter RAO explained that the country could not pay for electricity. 

  “Inter RAO has received notices from [exchange operator] Nord Pool about the suspension of trading by subsidiaries due to the risk of being unable to pay for Russian electricity,” the company told TASS.

  Russian President Vladimir Putin recently declared that “unfriendly countries” countries must pay for energy products in rubles. He said if any country refuses to settle in Russian currency, “existing contracts will be suspended.” 

  Form Sunday, Lithuania will ramp up domestic electricity generation and increase imports from other EU countries. The latest figures show Lithuania, in 2021, imported 17% of all its domestic electricity demand from Russia. 

  What’s apparent is that Russian energy supplies are being reduced towards NATO countries or countries attempting to join NATO, along with ones who refuse to pay rubles. 

  Tyler Durden
  Mon, 05/23/2022 – 02:45

• Meet The Globalists: Here Is The Full Roster Of Davos 2022 Attendees
  Meet The Globalists: Here Is The Full Roster Of Davos 2022 Attendees

  The infamous World Economic Forum (WEF) will host its annual meeting in Davos this week, and Jordan Schachtel,via ‘The Dossier’ Substack, is going to make sure you know who is attending the invite-only gathering.

  For those of you who are new to this nefarious organization:

  The World Economic Forum (WEF), through its annual Davos conference, acts as the go-to policy and ideas shop for the ruling class. The NGO is led by a comic book villain-like character in Klaus Schwab, its megalomaniac president who articulates a truly insane, extremist political agenda for our future.

  

  Heard one of your politicians declaring support for the “Build Back Better” agenda?

  How about the “Great Reset?”

  All of those bumper sticker political narratives were popularized by the World Economic Forum.

  Have you read about the ESG (Environmental, Social, and Governance) movement?

  That’s also a WEF favorite.

  Davos 2022 includes the usual components of WEF’s “you’ll own nothing and you’ll be happy” totalitarian eco statist agenda. Topics discussed and panels at the 2022 meeting will include:

  • Experience the future of cooperation: The Global Collaboration Village

  • Staying on Course for Nature Action

  • Future-proofing Health Systems

  • Accelerating the Reskilling Revolution (for the “green transition”)

  • The ‘Net’ in Net Zero

  • The Future of Globalization

  • Unlocking Carbon Markets

  • And of course, a Special Address by Volodymyr Zelenskyy, President of Ukraine

  The American contingent will include 25 politicians and Biden Administration officials. US Secretary of Commerce Gina Raimondo will join Climate Czar John Kerry as the White House representatives there. They will be joined by 12 democrat and 10 republican politicians, including 7 senators and two state governors

  Without further delay, I’ve provided the entire list of attendees who are showing up to Davos next week. I’ll list the Americans below and the rest are linked below that in an attached document.

  • Gina Raimondo Secretary of Commerce of USA USA

  • John F. Kerry Special Presidential Envoy for Climate of the United States of America

  • Bill Keating Congressman from Massachusetts (D)

  • Daniel Meuser Congressman from Pennsylvania (R)

  • Madeleine Dean Congresswoman from Pennsylvania (D

  • Ted Lieu Congressman from California (D)

  • Ann Wagner Congresswoman from Missouri (R)

  • Christopher A. Coons Senator from Delaware (D)

  • Darrell Issa Congressman from California (R)

  • Dean Phillips Congressman from Minnesota (D)

  • Debra Fischer Senator from Nebraska (R)

  • Eric Holcomb Governor of Indiana (R)

  • Gregory W. Meeks Congressman from New York (D)

  • John W. Hickenlooper Senator from Colorado (D)

  • Larry Hogan Governor of Maryland (R)

  • Michael McCaul Congressman from Texas (R)

  • Pat Toomey Senator from Pennsylvania (R)

  • Patrick J. Leahy Senator from Vermont (D)

  • Robert Menendez Senator from New Jersey (D)

  • Roger F. Wicker Senator from Mississippi (R)

  • Seth Moulton Congressman from Massachusetts (D)

  • Sheldon Whitehouse Senator from Rhode Island (D)

  • Ted Deutch Congressman from Florida (D)

  • Francis Suarez Mayor of Miami (R)

  • Al Gore Vice-President of the United States (1993-2001) (D)

  Full list of confirmed attendees of 2022 World Economic Forum Annual Meeting

  Here’s the PDF File in case the link goes down.

  

  There is one member of the ‘elites’ that is not going to be there (and never has).

  As Mohamed El-Erian writes in an op-ed at Bloomberg, Davos meetings are full of potential but rarely full of solutions.

  I have never taken up the opportunity to attend the Davos meeting and I will pass again this year.

  That, however, does not mean that I do not follow its evolution and outcomes. I am certainly interested in what could emerge from a meeting that brings together so many leaders of governments, civil society and business.

  In an ideal world, this year’s meeting would prove catalytic in two important ways. 

  • First, it would trigger greater awareness of ongoing watershed developments in the global economy and draw attention to how differently these are viewed around the world.

  • And second, it would point to ways in which an increasingly “zero-sum” view of international coordination can be reshaped to contribute to collective resilience and inclusive prosperity.

  The list of ongoing watershed developments in the global economy is long, extending well beyond the horrific war in Ukraine and the associated human tragedies. Here is an example of what is on such a list:

  • Due to the convergence of food, energy, debt and growth crises, a growing number of poorer countries face a rising threat of famine — and this is but one part of the “little fires everywhere” phenomenon undermining lives and livelihoods around the world.

  • Inflation at 40-year highs in wealthier countries is undermining standards of living and growth engines, hitting the poor particularly hard, fueling political anger, eroding institutional credibility, and undermining the effectiveness of economic and financial policy.

  • The inability to deal with critical secular challenges, including climate change, is seeing short-term distractions compound what already are meaningful long-term challenges.

  • Private- and public-sector efforts to strike a better balance between highly interconnected supply chains and national/corporate resilience are complicated by a global economy that lacks sufficient momentum for this to be done in an orderly fashion.

  • The western weaponization of international finance, while effective in bringing the eleventh largest economy in the world to its knees, has been pursued without a global framework of standards, guidelines and safeguards.

  I suspect that, while the vast majority of Davos participants will agree on this list (and, indeed, add a few more items), there will be quite a bit of disagreement on the causes and longer-term consequences. Such disagreement is problematic in two ways.

  • First, it undermines the shared responsibility needed to address challenges with important international dimensions;

  • and second, it erodes even more trust in the existing international order. Unless the disagreements can be resolved, the damaging effects will deepen and spread.

   On paper, the upcoming Davos meeting would be perfectly suited for resolving these conflicts. History, however, does not provide much encouragement or optimism.

  Time and time again, Davos has fallen victim to a lack of focus and actionable unifying vision. Individual and collective interests have remained unreconciled. Distractions abound. As a result, the output has been, at best, backward-leaning.

  Given the multiple crossroads facing the global economy, this would be a particularly good time for Davos to fulfill its considerable potential — to look ahead, not back. To identify solutions instead of just problems. Otherwise, the forum will evolve even more into a network and social club that is, and is widely perceived to be, even more decoupled from the realities of many and the challenges of most.

  Tyler Durden
  Mon, 05/23/2022 – 02:00

• Gave: The End Of The Unipolar Era
  Gave: The End Of The Unipolar Era

  Authored by Louis-Vincent Gave via Gavekal Research,

  Investors today must deal with the effects of not one, but two wars, as my Gavekal-IS colleague Didier Darcet pointed out in April (see Tick,Tock Tick,Tock).

  • The first is the one we can see playing out each day on our television screens, with all the tanks, deaths and human suffering.

  • The second is a financial war, with the unprecedented weaponization of the Western banking system and Western currencies aimed at bringing Russia to its financial knees (see CYA As A Guiding Principle (2022)).

  

  To the surprise of most people in the West, resistance against both of these war efforts has proved far stronger than expected. Almost 11 weeks into the war on the ground in Ukraine, Russian troops still seem to be taking heavy losses for relatively small territorial gains. And a little over six weeks after US president Joe Biden boasted that the ruble had been “reduced to rubble” by Western sanctions, the Russian currency is close to a two-year high against the US dollar and near a post-Covid high against the euro. At this point, both the euro and the yen appear to be bigger casualties of the Ukraine war than the ruble.

  

  The US boast that the ruble had been “reduced to rubble” is looking premature 

  In this paper, I shall review the implications of this stronger-than-expected resistance – both on the battlefield and in the financial markets – and attempt to draw some salient conclusions for investors.

  The evolution of warfare

  In October 1893, some 6,000 highly-disciplined warriors of King Lobengula’s Ndebele army launched a night-time attack on a camp occupied by 700 British South Africa Company police near the Shangani river in what is now Zimbabwe. It was a massacre. The BSAC “police” killed more than 1,500 Ndebele for the loss of just four of their own men. A week later, they did it again, killing some 3,000 Ndebele warriors for just one policeman dead. These one-sided victories were not won by courage or superior discipline, but because the British were armed with five machine guns and the Ndebele had none. As Hillaire Belloc wrote in The Modern Traveller: “Whatever happens, we have got / The Maxim gun, and they have not”.

  The technological superiority of the machine gun allowed Britain, and France, Germany and Belgium, to subjugate almost all of Africa, even though outnumbered by the Zulu, Dervish, Herero, Masai and even Boer forces they opposed. All were rendered helpless by the machine gun’s firepower.

  I revisit this ancient history to illustrate how military technology is a lynchpin of the geopolitical balance.

  Dominance of military technology is also a key factor underpinning the strength and resilience of a reserve currency. Today, one of the main reasons why Taiwan, South Korea, Japan, Saudi Arabia, the United Arab Emirates and others keep so much of their reserves in US dollars is that the US is widely regarded as being a generation (if not more) ahead of the competition in the design and production of smart bombs, anti-missile systems, fighter jets and naval frigates. In short, the superiority of US weaponry has been one of the principal factors underpinning the US dollar’s status as the world’s reserve currency. However, recent events raise important questions about whether the US can retain this superiority.

  • In September 2019, drones allegedly deployed by Yemeni Houthi forces took out the Saudi Aramco oil processing facilities at Abqaiq.

  • Between late September and early November 2020, Armenia and Azerbaijan fought a war over the Nagorno-Karabakh region. The conflict ended in near-total victory for the Azeris. This result stunned the military world. Observers had assumed that Armenia, with a bigger army, larger air force, more up-to-date anti-aircraft and anti-missile systems, and a history of Russian support, would easily triumph. But all Armenia’s expensively-acquired military “advantages” were quickly taken out in the early days of the fighting by Azerbaijan using Turkish-made drones costing no more than US$1mn each.

  • On successive occasions between March 2021 and March 2022, Houthi drones attacked Saudi Arabian oil facilities, notably the giant terminal at Ras Tanura on the Persian Gulf.

  • In December 2021, Turkish-made drones allowed the Ethiopian government to tip the balance in a civil war that until then had been going badly for government forces.

  • In January 2022, Houthi drones hit oil facilities in the UAE. 

  Now, imagine being Saudi Arabia or the UAE. Over the years you have spent tens, if not hundreds, of billions of US dollars purchasing anti-missile and anti-aircraft systems from the US. Now, you see relatively cheap drones penetrating these defense systems like a hot knife through butter. This has to be frustrating. What is the point of spending up to US$340mn on an F-35c (and US$2mn on pilot training), or US$200mn on an anti-aircraft system, if these can be taken out by drones at a fraction of the cost?

  This evolution in warfare may help to explain the impressive resilience of the Ukrainian army in the face of Russia’s onslaught. When the Russian troops marched into Ukraine, consensus opinion was that the Ukrainian forces would crumble before the Russian military juggernaut. It is always hard to know what is happening on the ground amid the fog of war. But judging by the number of tanks destroyed, warships sunk and the apparent failure of the Russian air force to establish control over Ukraine’s skies, it seems the invasion of Ukraine is proving far more costly in terms of blood and treasure than Russian president Vladimir Putin had imagined.

  Could this be because Putin failed to factor the impact of drones into his military outlook? It may be premature to jump to that conclusion. But judging from afar, it appears inexpensive Turkish drones have helped level the battlefield in the Ukrainian-Russian David versus Goliath confrontation— the biggest and bloodiest on European soil since World War II.

  This helps to explain why the US military assistance package for Ukraine Biden announced this month included 700 Switchblade drones. These are surprisingly cheap—the Switchblade 300 reportedly carries a price tag as low as US$6,000—yet highly effective. In essence, they are single-use kamikaze drones. Apparently, they fly faster than the Turkish Bayraktar TB2 drones that the Ukrainians, like the Azeris before them, have used to such devastating effect. This suggests the Switchblades should be able to evade the air defenses that Russia has attempted to maintain over its troops.

  The US military deployed Switchblades sparingly in Afghanistan, so it is hard to know whether these will perform as billed in combat conditions. But before this shipment to Ukraine, only the UK was permitted to purchase Switchblades. This implies that the Pentagon considers the Switchblade a valuable and potent weapon.

  David Petraeus, the former Central Intelligence Agency director who, as a four star general, commanded the US campaigns in both Iraq and Afghanistan, singled out the weapon in a recent interview with historian Niall Ferguson:

  “I’ll mention one item in particular: the Switchblade drone. It’s a loitering munition that takes a one-way trip. The light version can loiter for 15 to 20 minutes. Heavy version, 30 to 40 minutes with a range of at least 40 km. The operator selects a target, it locks on and it follows. Then it strikes when the operator gives that order. This is extraordinarily effective because you can’t hear it on the ground. The first time the enemy knows it’s there is when it blows up. If we can get enough of those into Ukraine, they could be a true game-changer.”

  However, I digress.

  Returning to the discussion about why drones might matter for financial markets:

  1) If ever-cheaper and more readily available drones are going to revolutionize war, much as the Maxim gun did 140 years ago, then it is questionable whether it still makes sense to invest in tanks, airplanes, anti-aircraft and anti-missile systems. If it does not, what does this mean for the value of the large, listed death-merchants?

  

  Cheap drones are bad news for the stocks of defense giants

  Historically, buying the merchants of death after a big rally in oil made sense, if only because so much of the world’s high-end weapon consumption occurs in the Middle East. But in the world of tomorrow, will Middle Eastern oil kingdoms still line up to buy multibillion US dollar systems from Raytheon, Boeing, Lockheed and the like, if those systems are vulnerable to attacks from relatively cheap drones?

  2) Talking of Middle Eastern regimes, the deal prevailing in the Middle East for the past five decades has been that oil would be priced in US dollars, and that the oil-exporting regimes in Saudi Arabia, the UAE or Kuwait would use these US dollars to buy US-made weapons (and US treasuries). With this bargain, the US implicitly guaranteed the survival of the Gulf Arab regimes. Fast forward to 2022, and following the invasion of Ukraine, countries such as Saudi Arabia and the UAE have failed to condemn Russia. What’s more, Saudi Arabia let it be known that it might start to accept payment for its oil in renminbi. Perhaps this makes sense if Saudi Arabia feels it no longer needs US$340mn F-35s, but instead more US$1mn Turkish-made drones?

  3) If, as the Azeri-Armenian and the Ukrainian-Russian wars suggest, drones have radically leveled the battlefield in war, this profound development has a multitude of implications. Does it undermine the long-held superiority of vastly expensive armament systems, tilting the balance in favor of much cheaper and much more widely-available weapons? If so, does this mean another pillar supporting the US dollar’s reserve currency status is crumbling in front of our eyes?

  In a world where military might is no longer the monopoly of a single superpower, or the duopoly of two, does the world become, de facto, multipolar? In such a world, would there still be a compelling reason for trade between Indonesia and Malaysia to be settled in US dollars, rather than in their own currencies? Wouldn’t trade between China and South Korea now be settled in renminbi and won?

  Drone tactics are a radically different form of warfare, and they are evolving fast. So, it would be premature to offer any definitive conclusions about the extent to which drones will dominate warfare in the future. However, their recent use in Ukraine (and Yemen, Azerbaijan and Ethiopia) means that investors have to be open to the idea that drones will change the battlefield of the future. Because if they are going to change the battlefield of the future, then they will also change the economic and financial realities of today.

  In this sense, drones might well be the modern-day equivalent of aircraft carriers. In World War II, aircraft carriers made big-gun battleships and other traditional naval warships obsolete, or at least highly vulnerable. Two early Pacific battles proved the point. The Battle of the Coral Sea in May 1942, generally considered by historians to have been a draw, was the first naval engagement ever fought in which the opposing fleets never made visual contact with each other. Carrier-based aircraft drove the action. A month later, the far more consequential Battle of Midway established the new reality beyond all doubt. The Imperial Japanese Navy was ambushed northwest of Hawaii and lost the bulk of its carrier force in a single action. It would be on the defensive for the rest of the war.

  With hindsight, Midway marked the start of US dominance over the world’s oceans. In short order, this translated into US dominance over global trade. But with the nature of warfare again changing, is this dominance of the oceans and of other battlefields guaranteed to last?

  Investors need to consider the uncomfortable possibility that it might not.

  The dramatic shift in the global financial landscape

  We are all the offspring of our own experiences. One important formative event in my own modest career was the Asian financial crisis of 1997-98. Witnessing how quickly things could unravel left a deep mark. I highlight this because I am not alone in having lived through the shock of 1997-98. Pretty much every emerging market policymaker aged 50-75 (which is most of them) went through a similar trauma. Seeing your country’s entire middle class wiped out in the space of a few weeks—which is what happened in Thailand, Indonesia, Russia, Argentina and others in the period from 1997 to 2000—is bound to leave a few scars.

  Among emerging market policymakers these scars took the form of a deepseated conviction of “never again” (see Our Brave New World). To ensure their countries’ middle classes were never again wiped out, they adopted a straightforward set of policy prescriptions that in the early 2000s Gavekal dubbed the The Circle Of Manipulation. It went something like this:

  1) To avoid a future crisis, your central bank needs to maintain a healthy safety cushion of hard currency bonds, mostly US treasuries and bunds.

   

  2) The more you become integrated with the global economy, the larger this cushion should be.

  3) To build up this safety cushion, you need to run consistent and large current account surpluses.

  4) To run consistent large current account surpluses, you need to maintain an undervalued currency.

  Among the results of these policy prescriptions were charts looking like this:

  

  

  By all previous standards, this was an odd state of affairs: an economic arrangement under which poorer countries with high savings rates and vast infrastructure investment needs ended up subsidizing consumption in rich countries with low savings rates and ever-accelerating twin deficits.

  

  To cut a long story short, for the last 25 years, we have lived in a world in which undervalued currencies in emerging markets allowed Western consumers to buy attractively priced goods and services imported from developing countries. Meanwhile, the individuals, companies and governments in the emerging markets which earned capital from these sales largely recycled their earned capital into Western assets—because Western assets were perceived to be “safe.”

  But this perception of safety may now be changing in front of our eyes.

  Consider the following changes:

  1) Developed economy government bonds have proved anything but safe. As stresses of increasing severity have affected the world economy over the last 12 months, investors in local currency Indonesian and Brazilian government bonds and in gold have generated positive returns of between 3% and 4% in US dollar terms. Chinese government bonds are up by just over 1.5%. Meanwhile, Indian and South African government bonds have lost -4%. These performances contrast with US treasuries, which have lost -9%, and the train wrecks suffered by investors in eurozone bonds and Japanese government bonds, which are down anywhere between -17% and -23%. Of these, which can be considered the safest?

  

  2) The confiscation of Russia’s reserves. I will not repeat here arguments I have made at length elsewhere (see What Freezing Russia’s Reserves Means). But in a nutshell, the decision to freeze Russia’s central bank reserves has been the most important financial development since US president Richard Nixon closed the gold window in 1971. From now on, any country that is not an outright US ally—China, Malaysia, South Africa and others—and even some historical friends—Saudi Arabia? The UAE? India?—will think twice before reflexively accumulating US treasuries from fear they may get canceled.

  Over the course of a weekend, with no discussion in the US Congress, and no discussion with the Federal Reserve, the US administration unilaterally turned the US treasury market on its head. From that moment on, the whole nature of a US treasury security would depend entirely on who owned it.

  3) Running roughshod over property rights. It is hard to pin down what the West’s single most important comparative advantage might be. Having the world’s strongest military? Being the seat of almost all the world’s greatest universities? Issuance of the world’s reserve currencies? The list goes on. But surely somewhere near the top of the list should be the sanctity of property rights, guaranteed by rock-solid “rule of law.” The main reason Chinese tycoons for years purchased Vancouver real estate, the Emirati central bank bought US treasuries and Saudi princes parked their wealth in Zurich was the knowledge that, whatever happened, and wherever you came from, you were guaranteed property rights, and a fair trial to ascertain those rights, in any courtroom in New York, London, Zurich or Paris.

  Better still, since the implementation over the last 850 years in the West of habeas corpus and various bills of rights, you have been able to have confidence that you would be judged as an individual. One of the fundamental tenets of Western democracies’ legal systems is that there is no such thing as a collective crime—or collective punishment. You can only be held responsible and punished for what you have done as an individual.

  Unless – all of a sudden – you are a Russian oligarch. This is a dramatic development, if only because every Chinese tycoon, Saudi prince, or emerging market billionaire will now wonder whether he will be next to get canceled. If the wealth of Russian oligarchs can be confiscated so abruptly, then why not the assets of Saudi princes?

  Stretching this a little further, maybe it shouldn’t just be Saudi princes or Chinese billionaires who should be worried. If wealth can be seized without any trial, but simply because of guilt by association, maybe in the not-too distant future Western governments could confiscate the wealth of anyone who mined coal or pumped oil out of the ground. Don’t they have blood on their hands for causing tomorrow’s climate crisis? And while we are about it, perhaps we should also confiscate the wealth of social media barons for failing to prevent a mental health crisis among our youth?

  4) Russia’s counter-attacks. Older readers may remember how in the days that preceded the Lehman bust, US Treasury secretary Hank Paulson walked around proclaiming that he had “a big bazooka,” and that if the market pushed too hard, he would fire this bazooka and blow shortsellers out of the water. Unfortunately, with Lehman it became obvious to all and sundry that Paulson’s bazooka was firing blanks.

  Today’s situation is similar. In the wake of the Russian invasion of Ukraine, the US decided to go for full weaponization of the US dollar, proclaiming the ruble had been turned to rubble. Last week, the ruble hit two-year highs against both the US dollar and euro. Biden’s financial bazooka seems to have been no more potent than Paulson’s. Why? Because Russia decided to fight back, requiring buyers from “unfriendly” countries to pay for their purchases of Russian commodities in rubles. And in effect, the only way unfriendly customers can acquire rubles is by offering gold to the Russian central bank (see The Clash Of Empires Intensifies).

  This has created a sudden and profound shift in the global trading and financial architecture. For decades, global trade was simple. If Russia produced commodities that China needed, then China first had to earn US dollars by selling goods and services to the US consumer. Only in this way could it acquire the US dollars it needed to purchase commodities from Russia. But what happens now that China or India can purchase their commodities from Russia or Iran for renminbi or Indian rupees? Obviously, their need to earn and save US dollars is no longer so acute.

  Conclusion

  Warfare is changing and the financial system has been weaponized like never before. However, the weaponization of the financial system has so far failed to deliver the intended results. At this point, investors can adopt one of two stances. The first might be described as “nothing to see here; move along.” The second is to accept that the world is changing rapidly, and that these changes will have deep and lasting impacts on financial markets. Different war, different world, different consequences

  

  For now, there are some clear takeaways.

  1) The Ukraine war may be telling us that modern history’s unipolar age is now well and truly over. As big as the Russian army is, and as powerful as the US Treasury might be, the current crisis has demonstrated that neither is powerful enough to impose its will on its perceived enemies. This includes even relatively weak enemies; Ukraine’s army was hardly thought of as formidable, while Russia was supposed to be a financial pygmy.

  2) This is a very important message. In an age of drones and parallel financial arrangements, there is no longer such a thing as absolute power—nor even the perception of absolute power. The pot has been called, each player has had to show his cards, and all are sitting with busted flushes! The fact that military and financial dominance may be harder to assert in the future opens the door to a much more multipolar world.

  3) For 25 years, emerging market workers have subsidized consumption in developed markets, as emerging market policymakers kept their currencies undervalued and recycled their current account surpluses into “hard” currencies. If this arrangement now comes to an end, then the developed market consumer will struggle while the emerging market consumer will thrive.

  4) Much consumption in emerging markets tends to occur at the “low end” of the product chain. This plays into a theme I have been harping on about for the last year: that investors should focus on companies that deliver products that consumers “need to have” rather than products that are “nice to have.”

  5) Over the last two years, US treasuries and German bunds have failed in their job of providing the antifragile element in portfolios. There are few reasons to think that this failure is about to reverse any time soon. Today, investors need to look elsewhere for antifragile attributes. Precious metals, emerging market government bonds, high-yield energy assets and foodstuffs are all leading candidates.

  6) High-end residential real estate in Western economies will lose the emerging market money-recycling bid and will struggle.

  7) New safe destinations for emerging markets’ excess capital will emerge. Obvious candidates include Dubai, Singapore, Mauritius, and perhaps even Hong Kong (should China eventually decide to follow the rest of the world and to live with Covid). It is hard to be too bullish on these destinations. They are so small that even a marginal, influx of financial and human capital will have a disproportionate impact.

  The world’s unipolar era is over. Few portfolios reflect this reality – and definitely not the indexed portfolios that are today massively overweight an overvalued US and a desperately ill-omened Europe.

  Tyler Durden
  Sun, 05/22/2022 – 23:50

• Record Rate Cut Shows Beijing Pursues Shock-and-Awe
  Record Rate Cut Shows Beijing Pursues Shock-and-Awe

  By Ye Xie, Bloomberg markets live commentator and analyst

  The record reduction in China’s key interest rate on Friday was a rare positive policy surprise from Beijing since the Omicron variant of Covid began to wreak havoc on the economy in the past two months.

  

  It’s a clear policy U-turn that aims to offset some of the self-imposed constraints, such as housing restrictions, to boost business and household confidence. If so, more policy easing for the housing market and more fiscal spending are likely to come.

  China’s banks lowered the five-year loan prime rate (LPR), which is tied to the mortgage rate, by a record 15 bps on Friday, triple the amount that economists had forecast. It was the second policy move in a week that was aimed at propping up the ailing property market, after the People’s Bank of China cut the floor of the mortgage rate a week earlier.

  Until now, Beijing’s plan to save the economy had been conservative, focusing on liquidity injections and tax reductions. That had fallen short of what’s required to offset the destruction caused by Covid restrictions and the property slump. Take the housing sector: New home sales for the top 100 developers tumbled 59% in April from a year earlier. Goldman Sachs on Friday raised the default forecast for high-yield property developers’ bonds to 32% from 19%.

  The efforts to lower mortgage rates show a clear sense of urgency to turn around the housing market. As Zhaopeng Xing, senior China strategist at ANZ Bank, said: “The cut signals that the leadership has ended discussion over the property sector and decided to rescue it as soon as possible.”

  

  There are a few reasons to believe that the impact of the LPR cut alone will be limited. As Nomura’s Lu Ting pointed out, mortgage rates had already started to decline, even before recent policy moves. That did little to arrest the sales decline, in part because Covid restrictions limited mobility, jobs, income and confidence of residents. In addition, when consumer leverage is already high, the willingness and ability to borrow remains in question. In fact, property stocks fell Friday, even as the benchmark CSI 300 rallied.

  What’s clear, then, is more policy follow-ups are likely needed to boost income, save jobs and lift confidence. Here’s is a laundry list from Citigroup on what Beijing could do to revive the housing and the broader economy:

  • Ease restrictions on presale deposits, maybe even tinker with the “three red lines” on funding curbs to improve cash flow for developers
  • Advance part of the 2023 special local-government bond quota to support investment
  • Consumer subsidies or vouchers funded by the central government
  • Special Treasuries to cover Covid expenses, as was done in 2020 (1 trillion yuan)
  • General budget revision to expand stimulus as in 2016 (for tax reform), 2008 (Sichuan earthquake) and 1998 (Asian financial crisis)

  Bloomberg Economics now forecasts China’s growth will trail the U.S. for the first time since 1976, when Chairman Mao died.  President Xi reportedly aims to avoid such a scenario in a year when he is expected to retain power for a third term.

  The rate cut on Friday may be the beginning of a shock-and-awe attack to get ahead of sagging expectations.

  Tyler Durden
  Sun, 05/22/2022 – 23:25

• Gen. Milley Warns West Point Graduates On Likelihood Of War With Russia And China
  Gen. Milley Warns West Point Graduates On Likelihood Of War With Russia And China

  Authored by Frank Fang via The Epoch Times (emphasis ours),

  The top U.S. general told the ​​U.S. Military Academy West Point’s class of 2022 that the nature of war is changing and the current rules-based international order is being threatened by Russia and China.

  “Right now, at this very moment, a fundamental change is happening in the very character of war,” Chairman of the Joint Chiefs of Staff Gen. Mark Milley said on May 21.

  “We are facing, right now, two global powers: China and Russia, each with significant military capabilities, and both fully intend to change the current rules-based order.”

  

  He made the remarks during a speech to the graduating cadets at a commencement ceremony in West Point, New York.

  “The world you’re being commissioned into has the potential for significant international conflict between great powers,” Milley said.

  “And that potential is increasing, not decreasing.”

  He reminded the cadets that Russia’s invasion of Ukraine was a lesson that “aggression left unanswered only emboldens the aggressor.”

  As for China, Milley pointed out that the communist regime has a “revisionist foreign policy,” and now boasts an “increasing capable military.”

  Details of China’s growing military capabilities were disclosed by the Office of the Director of National Intelligence in its annual threat assessment report (pdf) released in March. One area of concern is China’s ongoing construction of hundreds of new intercontinental ballistic missile silos.

  Another concern centers around China’s push to develop space capabilities in order to “erode the U.S. military’s information advantage.” The report states that the communist regime is “fielding new destructive and nondestructive ground- and space-based antisatellite weapons.”

  Adm. John Aquilino, commander of U.S. Indo–Pacific Command, in his prepared statement (pdf) for a congressional hearing on May 17, warned about the threat posed by China’s expansion and modernization of its air force, navy, and rocket force.

  For instance, China is expected to increase its battle force ships to 420 by 2025, even though the communist regime currently already boasts the largest navy in the world, according to Aquilino. China’s new generation of mobile missiles, some of which rely on hypersonic glide vehicles, is designed to evade U.S missile defenses, he added.

  

  Technology

  Milley said the character of war has also changed in the kinds of weapons being used.

  “The maturity of various technologies that either exist today or are in the advanced stages of development, when combined, are likely to change the character of war just by themselves,” Milley said.

  “You’ll be fighting with robotic tanks, ships, and airplanes,” he added. “We’ve witnessed a revolution in lethality and precision munitions. What was once the exclusive province of the U.S. military is now available to most nation states with the money and will to acquire them.”

  According to Milley, the mother of all technologies is artificial intelligence (AI), which is resulting in “the most profound change ever in human history.”

  In recent years, the Chinese Communist Party (CCP) has repeatedly identified AI as one of the top priorities for its national development. It was one of the key industries outlined in China’s industrial road map known as “Made in China 2025.” Two years later, Beijing rolled out the “New Generation Artificial Intelligence Development,” that sets out strategic goals by 2020, 2025, and 2030.

  According to a Congressional Research Service report (pdf) published in April, Beijing is developing AI tools for cyber operations and advancing AI in various types of air, land, sea, and undersea autonomous military vehicles.

  “China is actively pursuing swarm technologies, which could be used to overwhelm adversary missile defense interceptors,” the report added. Swarm intelligence is having machines communicate and work together to achieve a certain objective.

  

  Future

  Milley reminded the cadets that the United States is losing ground militarily.

  “Whatever overmatch we, the United States, enjoyed militarily for the last 70 years is closing quickly,” he said. “And the United States will be, in fact, we already are challenged in every domain of warfare in space and cyber, maritime, air, and, of course, land.”

  The cadets should be prepared for a future that is different from the past, Milley emphasized.

  “So in short, the next 20 or 25 years, is not going to be like the last 20 or 25,” he said.

  “Globally, there’s an increase in nationalism and authoritarian governments, regional arms races and unresolved territorial claims, ethnic and sectarian disputes, and an attempt by some countries to return to an 18th-century concept of balance of power politics with spheres of influence,” Milley added, without naming any country.

  The CCP is expanding its sphere of influence, particularly over developing countries, through its infrastructure and investment scheme known as the Belt and Road Initiative. At the same time, the communist regime is aiming to take over Taiwan—a de facto independent entity that Beijing considers a part of its territory—in order to expand its sphere of influence in East Asia and the western Pacific.

  Tyler Durden
  Sun, 05/22/2022 – 23:00

• Everything You Want To Know About Monkeypox, But Were Afraid To Ask
  Everything You Want To Know About Monkeypox, But Were Afraid To Ask

  With the COVID-19 pandemic still fresh in the minds of the people around the world, it comes as no surprise that recent outbreaks of another virus are grabbing headlines.

  Monkeypox outbreaks have now been reported in multiple countries, and it has scientists paying close attention. For everyone else, numerous questions come to the surface:

  • How serious is this virus?

  • How contagious is it?

  • Could Monkeypox develop into a new pandemic?

  Below, Visual Capitalist’s Nick Routely and Mark Belan answer these questions and more.

  

  What is Monkeypox?

  Monkeypox is a virus in the Orthopoxvirus genus which also includes variola virus (which causes smallpox) and cowpox virus. The primary symptoms include fever, swollen lymph nodes, and a distinctive bumpy rash.

  There are two major strains of the virus that pose very different risks:

  • Congo Basin strain: 1 in 10 people infected with this strain have died

  • West African strain: Approximately 1 in 100 people infected with this strain died

  At the moment, health authorities in the UK have indicated they’re seeing the milder strain in patients there.

  Where did Monkeypox Originate From?

  The virus was originally discovered in the Democratic Republic of Congo in monkeys kept for research purposes (hence the name). Eventually, the virus made the jump to humans more than a decade after its discovery in 1958.

  It is widely assumed that vaccination against another similar virus, smallpox, helped keep monkeypox outbreaks from occurring in human populations. Ironically, the successful eradication of smallpox, and eventual winding down of that vaccine program, has opened the door to a new viral threat. There is now a growing population of people who no longer have immunity against the virus.

  Now that travel restrictions are lifting in many parts of the world, viruses are now able to hop between nations again. As of the publishing of this article, a handful of cases have now been reported in the U.S., Canada, the UK, and a number of European countries.

  On the upside, contact tracing has helped authorities piece together the transmission of the virus. While cases are rare in Europe and North America, it is considered endemic in parts of West Africa. For example, the World Health Organization reports that Nigeria has experienced over 550 reported monkeypox cases from 2017 to today. The current UK outbreak originated from an individual who returned from a trip to Nigeria.

  Could Monkeypox become a new pandemic?

  Monkeypox, which primary spreads through animal-to-human interaction, is not known to spread easily between humans. Most individuals infected with monkeypox pass the virus to between zero and one person, so outbreaks typically fizzle out. For this reason, the fact that outbreaks are occurring in several countries simultaneously is concerning for health authorities and organizations that monitor viral transmission. Experts are entertaining the possibility that the virus’ rate of transmission has increased.

  Images of people covered in monkeypox legions are shocking, and people are understandably concerned by this virus, but the good news is that members of the general public have little to fear at this stage.

  I think the risk to the general public at this point, from the information we have, is very, very low.

  –TOM INGLESBY, DIRECTOR, JOHNS HOPKINS CENTER FOR HEALTH SECURITY

  Finally, as Infectious Disease expert Muge Cevik notes in a detailed Twitter thread, as the monkeypox virus (MPX) outbreak continues, a lot of data emerging in real-time & being rapidly disseminated (as well as misinformation).

  Confirmed and suspected cases of #MonkeyPox now reached 200 among 14 countries with 20 confirmed cases in the UK.

  

  Source: BNO

  The main concern is that there are non-travel associated cases in Europe, meaning there is likely unnoticed community transmission.

  This is the biggest outbreak outside of Africa, and there will be more cases to come. The concern is not necessarily a global pandemic like what we’ve seen w/ coronaviruses or influenza. But a growing & large MPX epidemic is a concern especially if PH measures are delayed.

  So, the most important thing is to inform our communities & healthcare workers about the clinical presentation, incubation period, so that people can be diagnosed at an earlier possibility, isolated and contacts are protected. This is the range of skin lesions.

  

  In conclusion, monkeypox is not really a rare disease & is a public health concern.

  According to prelim evidence there is no indication that current outbreak is due to a new MPX variant & epidemiological data suggest that it’s been introduced to male-to-male sexual networks, likely sometime in late-April.

  We have observed MXP outbreaks in many countries mainly in Africa, this is the first time that we are observing wide transmission in Europe. MPX remains an under-recognized and underreported emerging disease. Good clinical management can limit disease severity or death.

  We are in an unknown territory as individuals who have prior smallpox vaccination do have some degree of protection against monkeypox, but we don’t really know the degree of protection it provides to individuals who had vaccination 50, 60 years prior.

  Tyler Durden
  Sun, 05/22/2022 – 22:35

• Gun-Parts Dealer Sues ATF Over 'Secret And Unannounced Policy Changes'
  Gun-Parts Dealer Sues ATF Over ‘Secret And Unannounced Policy Changes’

  Authored by Ken Silva via The Epoch Times (emphasis ours),

  Pennsylvania firearms product dealer JSD Supply filed for a temporary restraining order against the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) on May 19, asking a federal judge to block “secret and unannounced policy changes” that restrict the sale of gun parts.

  

  A “ghost gun” is displayed before the start of an event about gun-related violence in the Rose Garden of the White House in Washington on April 11, 2022. (Drew Angerer/Getty Images)

  The dispute stems from the ATF ordering JSD Supply to stop dealing “80 percent receivers”—a colloquial term used within the firearms industry for incomplete and unfinished firearm frames or receivers.

  “Those engaged in the business of selling these complete kits, as your company does, are in fact engaged in the business of dealing firearms,” the ATF’s May 9 order said, referencing the company’s “JSD 80% Lower Receivers, Jigs, and Gun Parts Kits.”

  While the ATF has a history of approving the sale of 80 percent receivers—as documented in JSD Supply’s motion for a restraining order—the two parties apparently disagree about what exactly the company is selling. In response to an email inquiry for this article, ATF Special Agent Robert Cucinotta declined to comment but referenced The Epoch Times to the Biden administration’s April 11 order to crack down on “ghost guns.”

  “This final rule bans the business of manufacturing the most accessible ghost guns, such as unserialized ‘buy build shoot’ kits that individuals can buy online or at a store without a background check and can readily assemble into a working firearm in as little as 30 minutes with equipment they have at home,” the order said. “This rule clarifies that these kits qualify as ‘firearms’ under the Gun Control Act.”

  However, JSD Supply contends that the ATF’s May 9 cease-and-desist order has nothing to do with the White House ghost gun rule, which doesn’t go into effect until August. To the company’s point, ATF said in its cease-and-desist order that JSD Supply’s 80 percent receivers “have always been firearms pursuant to the [Gun Control Act] … notwithstanding the recently announced regulations.”

  Instead, JSD Supply contends that the ATF’s cease-and-desist order resulted from “secret and unannounced policy changes” from years ago.

  According to JSD Supply, in 2018, the ATF began to “implement a series of secret and unannounced policy changes regarding the sale of ‘80% frames and receivers,’ the tools used to manufacture them, and the firearm parts used in the assembly process.” Internal ATF records obtained by JSD Supply via the Freedom of Information Act (FOIA) show the bureau refusing to categorize a gun kit as “not a firearm” in 2018—evidence that the policy shift occurred behind closed doors around that time, JSD Supply’s attorney, Stephen Stamboulieh, told The Epoch Times.

  According to Stamboulieh and his client, gun product dealers weren’t made aware of the secret change until the ATF raided a manufacturer in late 2020.

  “Suddenly, without warning, in December of 2020, ATF paid a visit to the nation’s largest manufacturer of 80% frames and receivers, Polymer80, Inc.,” JSD Supply’s motion said.

  “Each time since then, ATF has moved the goalposts by changing its policy. The industry—including plaintiff—has attempted in good faith to adapt to and comply with ATF’s demands, despite the lack of any legal authority for ATF’s position.”

  To support its theory about moving the goalposts, JSD Supply noted that the ATF did not seize from Polymer80 some of the same 80 percent receivers that are subject to the bureau’s cease-and-desist order. JSD Supply also argued that it was being singled out by the ATF when numerous other retailers offer the same products.

  “Indeed, there are dozens, if not hundreds (or possibly thousands) of other companies across the country and internet which offer for sale ‘all the component parts’ necessary for a customer to manufacture a complete firearm,” JSD Supply said quoting from the ATF’s order.

  “This raises the obvious question as to why ATF made the decision to target Plaintiff with a cease-and-desist order, effectively shutting down its business, for doing nothing more than following standard industry practice.”

  JSD Supply said the ATF has not clarified how the company can comply with its policy on 80 percent receivers, which is why a restraining order is necessary.

  “If ATF had wanted to change (again) its secret, unsupported policy on 80% frames and receivers, the agency had the option of issuing an open letter to all manufacturers and retailers of 80% receivers and firearm parts, giving notice to all of the change,” the company said.

  “Defendants’ vague C&D order, without any statutory authority, has forced plaintiff to immediately suspend all retail sales of its entire product line, causing immediate and substantial financial losses, violating the Fifth Amendment, and infringing on the Second Amendment rights of Plaintiff and its customers. Accordingly, Plaintiff is seeking emergency relief, in the form of a temporary restraining order.”

  A hearing date has yet to be set for the matter.

  Tyler Durden
  Sun, 05/22/2022 – 22:10

• Bullwhip Effect Ends With A Bang: Why Prices Are About To Fall Off A Cliff
  Bullwhip Effect Ends With A Bang: Why Prices Are About To Fall Off A Cliff

  It was exactly a year ago, when Deutsche Bank strategist Luke Templeman said that amid the panicked scramble by US wholesalers to stock up on scarce inventory as a result of snarled supply chains, it was only a matter of time before the US economy was roiled by a “bullwhip” (or whiplash) effect.

  Some details for those unfamiliar with this concept: the bullwhip effect occurs when a drop in customer demand causes retailers to under stock. In turn, wholesalers respond to a lack of retail orders by understocking themselves. That then causes manufacturers to slow production. Eventually the reverse occurs. As customer demand comes back, retailers quickly order more goods, often too much, and wholesalers and factories are caught short. Shortages occur, prices increase. Eventually production ramps up at levels that are far beyond equilibrium levels and this cascades down the chain. These violent swings in availability of goods then continue back and forth until an equilibrium is eventually established.

  Last May, the beginning of the bullwhip effect was seen in the way retailers and wholesalers managed their inventory levels since the outbreak of covid. Specifically, retailers kept a supply of inventory at a relatively constant level, above that of wholesalers. As covid hit, supply chains from Asia were cut which caused a fright amongst retailers in the West who immediately began to put in orders for more inventory. A whole lot more of it. Subsequent lockdowns saw demand plummet and inventories along with it. In both cases, the actions of wholesalers followed those of retailers by a month or so.

  In the context of a starting bullwhip effect, Templeman’s conclusion was accurate: “As inventory levels have fallen to multi-decade lows at retailers, there are likely many businesses that will not have enough inventory to satisfy customers as economies recover and pent-up demand is unleashed. This is particularly the case as retailers are far more reliant on just-in-time supply chains than they were in decades past.”

  Among other things, this is also why last May is when a historic bout of inflation was unleashed (one which not a single career economist or Fed official predicted correctly) as collapsing inventories and lack of restocking by jammed up supply chains meant that prices for goods would keep rising and rising and rising. And they did.

  Of course, for much of the past year, the big story was the congestion at west coast ports due to both external (China covid breakouts, port closures, changing legislation) and internal factors (lack of port workers, downstream supply jams including trucking and trains, etc) but that has now changed and as the latest Supply Chain Congestion Monitor report from JPMorgan (available to pro subscribers in the usual place) shows, the number of ships at anchor and on approach to L.A. and Long Beach has collapsed since the January high mark, and is back to levels first seen at the start of the covid pandemic.

  

  Why does this matter? Well, for a simple but critical reason: if one year ago we saw the hyperinflationary start of the bullwhip effect, we have entered the terminal phase of the “bullwhip effect”, where plunging inventory-to-sales ratios reverse violently higher, where supply chains unclog suddenly and rapidly amid a sudden chill in the economy, and where prices for so-called “core” goods collapse almost overnight, even as non-core prices (food and energy) explode even higher.

  This is how Freight Waves discussed this effect on Friday when commenting on the recent dire earnings (and outlook) from the largest US retailers such as Walmart and Target, which saw their prices crater as management warned that inflation is now crippling demand and snuffing profit margins:

  “furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target, among others, reported higher inventory-to-sales ratios, according to government data analyzed by Michigan State.”

  How much higher? A quick look at the latest data reveals the following stunning chart of the Inventory to Sales ratio at the Walmarts of the world at the highest level since just before the deflationary flashbang that was the Global Financial Crisis:

  

  Think: widespread inventory liquidations.

  As Freight Waves continues, “the change has happened fast, according to Jason Miller, logistics professor at MSU’s Eli Broad College of Business. As of November, inventory-to-sales ratios were at pre-COVID levels, Miller said. They have since exploded upward. Miller said he expects a “cooldown” in retailer order volumes, even if inflation-adjusted sales stay constant, as retailers look to reduce their existing stock.”

  And here is the punchline: Miller “also expects retailers to launch major discounting programs to expedite the inventory burn.”

  In short: we are about to see the mother of all liquidations as retailers scramble to unload inventory in a time off rampant demand destruction. The immediate result is the freight recession that was first (correctly) forecast by FreightWaves CEO Craig Fuller at the end of March and which is now coming true as the crashing stock price of countless trucker and other freight stocks has demonstrated. Some more on this:

  high inventory levels are an expected occurrence and should be welcomed. In a Tuesday note, Amit Mehrotra, transport analyst at Deutsche Bank, said rising buffer stock is part of retailers’ desire to have goods available when consumers scan the shelves. Mehrotra added, however, that the data points translate into a likely slowdown in freight flows in the coming months and quarters.

  He said that a recession is already priced into most transportation equities, noting that the shares of most trucking companies are higher over the past 30 days while the broader market is about 7% lower.

  The latest data also confirms what FreightWaves’ Fuller said in a subsequent post when he wondered if “Deflation Was Next” as “the Bullwhip was about do the Fed’s job on inflation.”

  To be sure, not every product will see its price cut: commodities, whose bullwhip effect take much longer to manifest itself, usually lasting several years in either direction, are only just starting to see their price cycle higher. However, other products – like those carried by the Walmarts and Targets of the world – are about to see a deflationary plunge the likes of which we have not seen since the global financial crisis as retailers commence a voluntary destocking wave the likes of which have not been seen in over a decade.

  Tyler Durden
  Sun, 05/22/2022 – 21:45

• Turkey's Chief Statistician Quits For "Health Reasons" After Inflation Hits 70%
  Turkey’s Chief Statistician Quits For “Health Reasons” After Inflation Hits 70%

  Three months after Turkey’s president Erdogan fired his statistics chief as inflation hit a mere 36%, now that inflation has almost doubled since then, the latest official in charge of compiling Turkish inflation statistics has decided to do the smart thing and step down on his own, becoming the latest prominent departure at an institution that’s facing harsh criticism over the reliability of its economic data.

  On Friday, the Turkish Statistical Institute said Cem Bas resigned as head of the department of price statistics for “health reasons.” Furkan Metin, who previously oversaw the digital transformation and projects department at the agency known as TurkStat, has replaced Bas, who’ll remain on staff in a lower-profile role.

  The personnel change, first reported by Bloomberg, adds to a period of ongoing turmoil at TurkStat, whose president was replaced in January less than a year after his appointment.

  Turkish inflation data has been in the spotlight at a time when consumer prices are exploding at the fastest pace since the turn of the century, a key concern for President Recep Tayyip Erdogan’s government just over a year before elections.

  Furthermore, according to Bloomberg, concerns have swirled among researchers over what they call a divergence between the agency’s price statistics and the surge in the cost of living felt by wage earners. While TurkStat reported an annual inflation of 70% in April, ENAGroup, an independent group of scholars who’ve put together an alternative consumer price index, put the figure at as high as 157%.

  

  While both numbers are ridiculous, what is even more ridiculous is that until recently the central bank was cutting rates to avoid angering the president whose “Erdoganomics” theory of upside down economics recommends cutting rates when inflation rises, effectively setting the country on a path to suicide, something the Turkish lira has clearly grasped, as it has resumed plunging after cratering in 2021 and only a massive intervention by the central bank preventing an all-out economic collapse.

  The government is meanwhile seeking to pass legislation that would bar independent researchers from publishing their own data without seeking approval from TurkStat and potentially face a jail term if they violate the law. That should answer any questions whether the government or the shadow stat inflation data is the correct one.

  Tyler Durden
  Sun, 05/22/2022 – 20:55

• Bloated Inventories Hit Walmart, Target And Other Retailers' Profits, Trucking Demand
  Bloated Inventories Hit Walmart, Target And Other Retailers’ Profits, Trucking Demand

  By Mark Solomon of FreightWaves

  There’s little in retailing that Walmart and Target aren’t prepared to handle. So it was jarring that over a 24-hour period the two scions of the trade posted weak first-quarter profits that appeared to blindside management at both.

  

  Part of the bottom-line blowup was due to fuel, which soared to record highs following Russia’s Feb. 24 invasion of Ukraine. Part of it was due to margin pressures caused by an unfavorable sales mix as consumers shifted their buying from higher-margin goods like electronics to less profitable items like groceries. An extension of that was an overshoot of inventory-stocking activity, which came back to bite the retailers after waning concerns over the COVID-19 pandemic pushed more consumer buying toward services and “experiences” and away from goods.

  There’s little that retailers can do about fuel prices. It can be argued they should have expected the pandemic-driven buying spree from March 2020 until the end of 2021 to peter out and that they should have planned their inventory strategies accordingly. Yet demand forecasting has always been a tough nut to crack, and the market is where it is. Inventory build may also have been the result of supply chain delays at the start of the year that resulted in some late deliveries of impaired freight.

  Inventory levels as of March, when compared to activity in March 2019 after inventories stabilized following a major pull-forward in 2018 ahead of the Trump administration’s China tariffs, produce a mixed bag of results. Unsurprisingly given the current dearth of motor vehicles, the ratio of vehicle and parts inventories to sales has fallen considerably, according to federal government data analyzed by Michigan State University. Apparel inventories to sales also declined over those periods, as did e-commerce. 

  However, furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target, among others, reported higher inventory-to-sales ratios, according to government data analyzed by Michigan State. 

  

  For the latter sectors, the change has happened fast, according to Jason Miller, logistics professor at MSU’s Eli Broad College of Business. As of November, inventory-to-sales ratios were at pre-COVID levels, Miller said. They have since exploded upward.

  Miller said he expects a “cooldown” in retailer order volumes, even if inflation-adjusted sales stay constant, as retailers look to reduce their existing stock. He also expects retailers to launch major discounting programs to expedite the inventory burn. Fewer orders within certain categories bodes ill for carriers whose networks are strongly tied to inbound lanes to retailers’ distribution centers, Miller said.

  In a Friday note, Bascome Majors, analyst for Susquehanna Investment Group, said that the spread between year-over-year sales and inventories — a rough barometer of the impact of higher sales on restocking activity — turned positive in spring 2020 and accelerated in favorable territory for four consecutive quarters. Gradually, however, the spread has turned negative, according to Majors. In this year’s first quarter, inventory growth exceeded sales growth by 200 basis points. The recent surge in inflation, Majors wrote, has severely distorted inventory and sales trends.

  Freight recession priced in?

  For some, high inventory levels are an expected occurrence and should be welcomed. In a Tuesday note, Amit Mehrotra, transport analyst at Deutsche Bank, said rising buffer stock is part of retailers’ desire to have goods available when consumers scan the shelves. Mehrotra added, however, that the data points translate into a likely slowdown in freight flows in the coming months and quarters. 

  He said that a recession is already priced into most transportation equities, noting that the shares of most trucking companies are higher over the past 30 days while the broader market is about 7% lower.

  In an unusual world, Walmart, Target and other retailers are likely to turn to the one area where they’ve traditionally found leverage: their shipping bill. During the quarter, Target faced freight and transportation costs that were hundreds of millions of dollars above already-elevated expectations, COO John Mulligan said on the company’s Wednesday analyst call. It was essentially the same story at Walmart.

  Retailers’ efforts to rein in transportation costs will translate into an unprecedented third and even fourth round of truckload contract negotiations, with users getting more aggressive in their bids to extract greater cost savings, according to industry experts. 

  The discussions could get contentious. In a LinkedIn post on Friday, Jason Ickert, president of trucking firm Sonwil Logistics, said a large shipper that Ickert wouldn’t identify suggested on a conference call this week with truckload carriers that they were “artificially propping up their rates” above accepted market levels. The shipper “stated clearly” that the carriers were expected to adjust their rates during what would be an “unprecedented and unplanned” third round of request for proposals, Ickert wrote.

  A potential shift to intermodal

  Pressures to drive down transport expenses will also trigger increased interest in intermodal, whose all-in costs are cheaper relative to contract truckload than at any time since 2018. Intermodal rates have risen at a slower pace than truckload contract rates, a turnabout from the 2019 freight recession when higher intermodal rates allowed over-the-road transport to gain market share.

  

  The shift to intermodal, if it happens, would benefit the railroads and intermodal marketers like J.B. Hunt Transport Services, Hub Group and Schneider. However, experts caution that intermodal capacity remains constrained, as does warehouse space needed to store the stuff. 

  “Walmart, Target and other retailers will soak up every drop of intermodal capacity that Hunt, Hub, Schneider and the rails deliver in 2022 and probably in 2023,” said Majors of Susquehanna Investment Group. The elevated level of activity, he said, should occur even if retailers are working through a multiquarter process of de-stocking.

  Tyler Durden
  Sun, 05/22/2022 – 20:30

• 2022 Has Been The Worst Year Ever For Hedge Funds, Who Are Now Massively Shorting To Chase Stocks Lower
  2022 Has Been The Worst Year Ever For Hedge Funds, Who Are Now Massively Shorting To Chase Stocks Lower

  Some were stunned to see stocks surge in the last hour of trading on Friday in the illiquid vacuum that saw the S&P earlier tumble into a bear market, sliding more than 21% from its January all time high (a level that equates with 3,855 in the e-mini) briefly before bouncing back above 3900, and rejecting the third attempt to enter a bear market in the past week.

  

  We were not, and the reason why is that as has been the case every time a short base builds up, there was a sharp short squeeze. And how did we know that enough of a short pile up had been built up to be toppled by even the smallest spike higher? Why the latest Goldman Prime Brokerage data (full report available to zh pro subscribers). Here are the highlights:

  • US equities on the GS Prime book were net sold for the first time in 4 days driven by short sales and to a lesser extent long sales (2.5 to 1).
  • Wednesday’s net selling on the Prime book, driven by short sales, was relatively modest (1-Year Z score -1.4) compared to the sharp market losses (SPX -4%, largest drop in nearly 2 years), suggesting that hedge funds collectively were not the main driver of the price declines; and also suggesting that they had been already substantially short heading into the -4% abyss.
  • At the same time, quantitative measures tracked by Goldman Research indicates retail investors have become sellers in the past few months, reversing ~26% of the cumulative positions net bought in SPX stocks since Jan ’19 (link ).

  

  Looking at the composition of trades, Goldman Prime finds that both single stocks and macro products (Index and ETF combined) were net sold and made up 67% and 33% of the $ net selling, driven by short sales.

  Furthermore, single stocks saw the largest $ net selling in the past month (1-Year Z score -1.4). 9 of 11 sectors were net sold led in $ terms by Info Tech, Comm Svcs, Industrials, Health Care, and Materials.

  Which is not to say that hedge funds refuse to take profits: indeed, Consumer Discretionary and Consumer Staples – the worst performing sectors on Wednesday  – were both modestly net bought on the Prime book, driven by long buys and short covers, respectively.

  On the other hand, long-suffering Info Tech stocks were net sold for a second straight day – following 5 straight days of net buying from 5/10 to 5/16 – and saw the largest $ net selling in the past month (1-Yearr Z score -1.2), driven by short sales and to a lesser extent long sales (3.2 to 1)

  But the easiest way to visualize the growing bearish sentiment is by looking at the red line in the top left chart (US equities trading flows) , which is now at the lowest level (most shorts) in 2022:

  

  Ok, so we now that hedge funds have been piling up shorts (not to mention puts), which also explains the lack of a violent VIX surge or a capitulation lower in stocks. What may be just as notable is that despite the rise in short positions, both gross and net hedge funds exposures have collapsed. Indeed, the latest Goldman PB data reflects some of the largest reduction of leverage on record (more in the full latest Goldman prime broker weekly note available to pro subscribers). 

  

  According to Goldman’s Tony Pasquariello, the huge underperformance of implied volatility traces back to this point (which, he calls an “immense oddity” – over the past 15 years, there have been 36 daily selloffs of 4% or more, and the VIX was never as low as it was on Wednesday).

  Finally, here are the five top highlights from the latest quarterly Hegde Fund Tracker report from Goldman (also available to professional zero hedge subs in the usual place):

  PERFORMANCE: Both alpha and beta have posed large headwinds to hedge fund returns so far in 2022. The worst start to a year for the S&P 500 since 1932 has created a challenging beta environment. In terms of alpha, Goldman’s Hedge Fund VIP basket of the most popular long positions (GSTHHVIP) has lagged the S&P 500 by 28 pp since early 2021, its worst stretch on record.

  

  Funds have fared better with shorts; the most concentrated short positions are down 31% YTD, lagging both the S&P 500 and VIPs. Nonetheless, the median S&P 500 stock still carries short interest equivalent to just 1.5% of market cap, a 25-year low.

  

  LEVERAGE AND FLOWS: As noted above, the decline in hedge fund net leverage that began in 2021 has accelerated in recent months. Exposure data calculated by Goldman Sachs Prime Services show net leverage in the 30th percentile vs. the past 5 years compared with record highs in spring 2021.

  

  Despite recent selling pressures, equity allocations across a number of investor groups – most notably households – still appear elevated, suggesting the potential for more selling pressure if the macro outlook does not become more friendly for equities.

  HEDGE FUND VIPS: Despite the sell-off in technology stocks, FAAMG remains atop Goldman’s list of the most popular hedge fund long positions. MSFT maintains its position as #1. The VIP list contains the 50 stocks that appear most often among the top 10 holdings of fundamental hedge funds. Four new Energy stocks entered the basket (CHK, VAL, OXY, and LNG) and the sector now has a 10% weight.

  

  The basket has outperformed the S&P 500 in 58% of quarters since 2001 with an average quarterly excess return of 40 bp. 16 new constituents: ANTM, APO, ATVI, CHK, CHNG, CRWD, EQT, FIVN, GPN, HUM, MRVL, OXY, PLAN, T, VAL, Z.

  

  GROWTH STOCKS: Hedge funds continued to reduce exposures to Growth sector and stocks. Rising real interest rates and  declining leverage have weighed in particular on the valuations of long-duration stocks with extremely high multiples.

  

  SECTORS: Hedge funds added to Industrials and Materials while cutting exposures to former favorite Growth sectors. Fund tilts to Information Technology and Consumer Discretionary are now at the lowest levels in at least a decade. “Big Tech” drove much of the reduction in positions across Tech and Discretionary, with funds incrementally rotating away from AAPL, AMZN, and TSLA.

  

  Putting it all together, Goldman’s Ben Snider summarizes that “a plummeting equity market and the even worse performance of the most popular long positions have led to the worst start of a year  on record for hedge fund returns. HFR data show the average equity hedge has returned -9% YTD and GS Prime Services estimates an asset-weighted decline of -17%. As a result of these struggles, in recent months hedge funds have accelerated the reduction in leverage and rotation away from Growth stocks they began several quarters ago” while at the same time piling up shorts. 

  However, as Goldman notes, this adjustment has not been quick enough and despite four Energy stocks entering Goldman’s Hedge Fund VIP list of the most popular long positions (CHK, VAL, OXY, and LNG), Tech still represents over a third of the basket’s 50 constituents. The five FAAMG companies remain at the top of the list. The basket has declined by -27% YTD vs. -18% for the S&P 500 after underperforming the S&P 500 by 17 pp in 2021. During this period, hedge fund VIPs have effectively given back all the excess return they had generated since 2014.

  

  Concluding, Goldman writes that the sharp recent reduction in hedge fund length and rotation in long portfolios reflects a broader asset reallocation taking place across the market. In recent years, low interest rates have supported the investment philosophy that There Is No Alternative to equities (“TINA”). Long-duration Growth stocks have benefited most as both institutional and household investors lifted their equity exposures.

  Today, in contrast, positive real interest rates, growing recession fears, and declining equity prices have signaled to investors that There Are Reasonable Alternatives to stocks (“TARA”). Investors have been reallocating accordingly. This ongoing adjustment is reflected in household and institutional flows away from equities broadly and from Growth stocks in particular.

  

  For hedge funds, this has exacerbated the vicious cycle of falling share prices, declining leverage, and poor liquidity that has created such a challenging market environment this year.

  All reports mentioned above are available to zero hedge professional subs.

  Tyler Durden
  Sun, 05/22/2022 – 20:05

• How Did Mueller's $40 Million Trump-Russia Investigation 'Miss' Hillary's Hoax?
  How Did Mueller’s $40 Million Trump-Russia Investigation ‘Miss’ Hillary’s Hoax?

  Authored by Sundance via The Last Refuge (emphasis ours),

  One of the public revelations created by the trial of Clinton lawyer Michael Sussmann is that Hillary Clinton’s campaign, Hillary Clinton’s lawyers, and Hillary Clinton’s contracted opposition research firm, Fusion GPS, manufactured the Trump-Russia collusion hoax.  How did Robert Muller not find this?

  

  The Clinton hoax is the key takeaway within the testimony of Clinton campaign manager Robby Mook, during the Sussman trial.  Of course, every intellectually honest person who watched events unfold already knew that.  However, the DC politicians, institutions of the DOJ and FBI, and the entire corporate media world have been pretending not to know the truth for almost six years.  Now they are in a pretending pickle.

  Mr. Mook was legally forced to put the truth into the official record, ironically because the Clinton lawyers needed him to in order to save themselves.  A stunned Jonathan Turley writes about the revelation HERE.  Meanwhile the journalists who received Pulitzer Prizes, for pushing the manufactured Clinton lies that Mook now admits, must avoid any mention of the testimony in order to maintain their ‘pretending not to know things‘ position.

  Special Prosecutor John Durham found the truth behind the creation of the Trump-Russia hoax, and through the trial of Sussmann is now diligently passing out the bitter pill ‘I toldyaso’s’ to the small group of rebellious researchers who found this exact trail of evidence years ago.

  The Clinton campaign lying is politics.  The Clinton campaign selling lies to the media is slimy, but nonetheless politics.  The media pushing those lies only showcases how corrupt they are in supporting their political allies.  However, the Clinton campaign selling those lies to the FBI is a bit more problematic; thus, the trial of Sussmann.

  Having said all that; while also accepting this grand game of pretense; there’s an 800lb gorilla in the room that no one seems bothered by.

  How did Robert Mueller and Andrew Weissmann spend 2 years investigating Trump-Russia; with a team of 19 lawyers, $40 million in resources, 40 FBI agents, 2,800 subpoenas, 500 search warrants and 500 witnesses; and not find out that Hillary Clinton created the hoax they were investigating?

  

  The question is, of course, infuriatingly rhetorical.  The 2017, 2018 and 2019 special counsel probe, led by the nameplate of Robert Mueller, was a DC cover-up operation for FBI and DOJ misconduct.  The best defense is a good offense, so they attacked President Trump by maintaining the hoax.

  Media people often forget, or perhaps -again- need to pretend not to know; however, the exact same group of FBI and DOJ staff level investigative officials that originated the Trump investigation in 2016, transferred into the Robert Mueller investigation in May 2017.   It was the same people, doing the same investigation, under a different title.

  The Mueller team originally consisted of the same FBI officials who received the Alfa-Bank hoax material from Michael Sussmann.

  Andrew Weissmann and a group of 19 lawyers joined the effort and pulled in more resources. Yet if we are to believe the current narrative, you would have to believe those same investigators never talked to any Clinton campaign people, or Fusion GPS, or Rodney Joffe, or Marc Elias, or Michael Sussmann?… but wait, I mean, they did.. talk to Sussmann… because….. that’s what this trial is about….

  *  *  *
  [ZH: and as the Wall Street Journal notes:]

  “Most of the press will ignore this news, but the Russia-Trump narrative that Mrs. Clinton sanctioned did enormous harm to the country,” the WSJ Editorial board wrote. “It disgraced the FBI, humiliated the press, and sent the country on a three-year investigation to nowhere. Vladimir Putin never came close to doing as much disinformation damage.”

  

  Tyler Durden
  Sun, 05/22/2022 – 19:40

• Rockstar Energy Creator Buys Fortress-Style Mansion In Utah For $39.6 Million
  Rockstar Energy Creator Buys Fortress-Style Mansion In Utah For $39.6 Million

  The creator of Rockstar Energy Drink, billionaire Russell Weiner, purchased the most expensive house in Utah history that looks like a fortress.

  According to WSJ, sitting on 5 acres nestled in a mountainous region in Park City, Utah, the 17,500 square feet mansion with six bedrooms cost a whopping $39.6 million. 

  

  In December, the home was listed for $42 million and went under contract in April. Weiner’s purchase appears to be politically motivated. He said Utah is “a pro-family and pro-business state” and expects it to “keep attracting people, especially as people run from high tax states.”

  

  Weiner added: “Real-estate values will only continue to rise in Utah because of demand.” 

  He launched Rockstar energy drinks in 2001 and has gained a .3% market share of the US non-alcoholic beverage market. Weiner’s politically motivated move comes as no surprise, considering he’s the son of former conservative radio talk show host Michael Savage. 

  

  The mansion’s amenities include an indoor/outdoor pool, bowling alley, indoor sports court, golf simulator, and movie theater. 

  

  Beating former chief executive of Nikola Motors Trevor Milton’s $32.5 million ranch, Weiner now has bragging rights to the most expensive house in the state. 

  What makes Weiner’s fortress-style mansion unique is the watchtower. Preparing for the apocalypse much? 

  Tyler Durden
  Sun, 05/22/2022 – 19:15

• Hedge Fund CIO: If We Can't Bounce After Being Down 7 Weeks In A Row, Something Is Seriously Wrong
  Hedge Fund CIO: If We Can’t Bounce After Being Down 7 Weeks In A Row, Something Is Seriously Wrong

  By Eric Peters, CIO of One River Asset Management

  “Biggie’s bearish and annoying, ignored,” bellowed Biggie Too, 3rd person. “That’s how the crowd treats Biggie when these cycles get started, when stocks are still at their highs and Biggie turns bearish,” said the chief global strategist for one of Wall Street’s too-big-to-fail affairs, one of only a few such cats to call this market right. “Biggie’s bearish and they congratulate, kiss Biggie’s ring — that’s step Number Two,” barked Biggie, slipping into a slow groove, hands in the air holding two fingers up. “Step Number Three — Biggie stays bearish, and the crowd hates Biggie,” said Too, sharing Biggie’s Three-Step Market Manual.

  “If we can’t bounce after being down seven weeks in a row, something’s seriously wrong with this market. But you gotta get to Number Three before the big bottom is in. And Biggie’s still stuck somewhere in step Number Two – getting lotta praise, no haters, no hate mail. Not yet.”

  Overall:

  “Achieving price stability, restoring price stability, is an unconditional need,” said Jerome Powell. “Something we have to do because really the economy doesn’t work for workers or for businesses or for anybody without price stability. It’s the bedrock of the economy really,” added the Fed Chairman.

  “If that involves moving past broadly understood levels of ‘neutral’ we won’t hesitate to do that,” he said, calm, threatening. “We will go until we feel we are at a place where we can say ‘yes, financial conditions are at an appropriate place, we see inflation coming down.’”

  It’s been decades since a Fed Chairman told investors to sell rallies until inflation cools or something breaks. US equities closed the week lower again, a historic run, but devoid of panic. It’s a market re-price, not a fracture, a break, at least not yet.

  “It’s in everyone’s interest for both the US and EU to make investments in a coordinated way that deepens the entire ecosystem of the semiconductor supply chain,” said US Commerce Secretary Raimondo, unveiling initiatives in high-tech, AI, industrial standards, and global food security. “It will be good for both industry and national security,” she added, as the US and Europe retreat to a fractured world of trading blocs, security alliances.

  Echoes of Europe’s disastrous dependency on Russian energy exports are found in the West’s reliance on Taiwanese semiconductors and Chinese technology, rare earths.

  “We intend to exclude Huawei and ZTE from our 5G networks,” said Canada’s Industry Minister Francois-Philippe Champagne, joining the rest of the Five Eyes intelligence sharing network. “Providers who already have this equipment installed will be required to cease its use and remove it under the plans we’re announcing today.”

  Beijing banned senior officials from owning overseas assets or stakes in foreign entities, whether directly or through spouses, children. Xi naturally wants to insulate his politicians from Western influence/sanctions in a conflict.

  The most consequential redrawing of global relations since WWII has begun. So far it has produced a re-price, not a market fracture. At least not yet.

  Tyler Durden
  Sun, 05/22/2022 – 18:50

• "The Fed Has No Idea How Bad It Is Out There" So Here's Some Context…
  “The Fed Has No Idea How Bad It Is Out There” So Here’s Some Context…

  To quote Jim Cramer circa August 2007, “the Fed has no idea how bad it is out there” and 15 years later his rant is just as applicable, in a market that has rarely been uglier. So to help the Fed – and all those other traders who still refuse to panic even though they probably should (according to Goldman, over the past 15 years, there have been 36 daily selloffs of 4% or more, and the VIX was never as low as it was on Wednesday), here’s some context courtesy of DB’s Jim Reid to show just how bad it is.

  Quoting DB’s chief equity strategist, Binky Chadha, Reid notes that the current -18.7% correction is actually the 6th largest non-recession (so far) correction in post WWII history, only behind > July-98 (around LTCM and Russia default), > Sept-18 (QT and Fed hikes finally bite), > May-46 (post WWII), > Dec-61 (so called Kennedy slide) and finally > Aug-87 (including the Oct-87 crash).

  Of course, if one includes recessions, there are fifteen larger post WWII sell-offs with the median recession sell-off at -23.9%.

  From here, the Deutsche Banker – who alone among his Wall Street peers has forecast a US recession in 2023 – expects the US to move towards the average recession decline in the near term which would put the S&P 500 at 3650 (current 3900), a similar near-term view to that of Morgan Stanley’s Michael Wilson.

  

  At this point, markets become remarkably binary.

  In the event we do slide into recession, the Deutsche Bank strategists see the sell-off going well above average, i.e., into the upper half of the historical range given elevated initial overvaluation. This means -35% to -40% or S&P 500 at 3000.

  However, in the event we do not and growth and the labor market hold up in 2022 – which they won’t –  they expect the market to rally back to 4700-4800 by year-end as equity positioning rebounds from very low levels.

  And just to add another twist, while Binky’s baseline view is that the economy doesn’t slide into recession this year and the S&P 500 ends the year at 4750. However, that’s before the economy does slide into a recession next year.

  So clearly, Jim writes, “if the recession then comes in 2023 markets can again price in a recession and see dramatic falls”, meaning non-stop market rollercoasters for the next two years.

  Indeed, as Reid concludes, “one thing is clear. This is not a market for the faint hearted!”

  There is more in the full piece from Binky Chadha for valuations, sell-offs in historical context, signs of late (but not yet end) cycle, sector analysis and positioning, available to professional subs in the usual place.

  Tyler Durden
  Sun, 05/22/2022 – 18:25

• Rubio Accuses Google Of Election Bias, Censoring Campaign Emails
  Rubio Accuses Google Of Election Bias, Censoring Campaign Emails

  Authored by Rita Li via The Epoch Times,

  Sen. Marco Rubio (R-Fla.) blamed Google for allegedly filtering his emails to supporters in the run-up to the midterms this fall, describing on May 21 his current situation as being in “purgatory.”

  

  The senator said that up to 90 percent of his campaign emails to supporters with a registered Gmail address never reach their inboxes but go to the spam folder. He said it comes after his Democratic opponent Rep. Val Demings (D-Fla.) announced a year ago she would run against him in the 2022 midterm elections.

  “Marco Rubio for Senate is in @Google purgatory. Since a Pelosi puppet announced she was running against me, they have sent 66% of my emails to REGISTERED SUPPORTERS with @gmail to spam,” Rubio wrote on Twitter on Saturday.

  “And during the final weeks of finance quarters, it climbs to over 90%,” the post reads.

  Marco Rubio for Senate is in @Google purgatory

  Since a Pelosi puppet announced she was running against me they have sent 66% of my emails to REGISTERED SUPPORTERS with @gmail to spam

  And during the final weeks of finance quarters it climbs to over 90%

  — Marco Rubio (@marcorubio) May 21, 2022

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

  The Epoch Times has reached out to Google for comment.

  Rubio currently serves as a two-term senator for the state of Florida, and is facing Demings in Florida’s 2022 general election on Nov. 8. As the Sunshine State prepares for its primary on Aug. 23, the Republican senator has been holding an average lead over Demings among registered voters.

  Republicans filed a joint complaint on April 27 with the Federal Election Commission to investigate Gmail’s algorithm—which “makes it much harder for Republicans to reach their supporters” than Democrats and stifles the fundraising efforts of Republicans—as claimed by researchers at North Carolina State University (NCSU).

  The GOP groups said Google’s algorithm could potentially cost them over $1 billion.

  “Gmail marked 59.3% more emails from the right candidates as spam compared to the left candidates, whereas Outlook and Yahoo marked 20.4% and 14.2% more emails from left candidates as spam compared to the right candidates, respectively,” the NCSU study shows (pdf).

  Although researchers said no evidence suggests that the classifications are “deliberate attempts” to influence voters, “their SFAs [spam filtering algorithms] have learnt to mark more emails from one political affiliation as spam compared to the other.”

  Last week, Politico first reported that Republican senators held a private meeting with Kent Walker, president of global affairs and chief legal officer at Google, over email bias claims against the company.

  “Mail classifications in Gmail automatically adjust to match Gmail users’ preferences and actions,” a Google spokesperson said in a previous email, responding to the NCSU study.

  Tyler Durden
  Sun, 05/22/2022 – 18:00

• "We Have No Idea How This Will Be Used" – AI Gun Detection Gaining Popularity In US
  “We Have No Idea How This Will Be Used” – AI Gun Detection Gaining Popularity In US

  AI Scanners may become the norm in the United States as Governments, and private companies look to beef up their surveillance options in the wake of rising gun violence.

  

  According to a report from the Washington Post, systems like Evolv Technology are becoming increasingly popular. Evolv’s machines are similar to metal detectors but instead use AI and light-emission to detect firearms concealed on a person. 

  Evolv claims that this system can detect weapons without the need for the traditional “airport” style system. Those looking to enter through a security checkpoint must empty their pockets and then pass through a metal detector.

  The system is gaining traction throughout the US. Mayor of New York City, Eric Adams, suggested using Evolv Technology’s AI weapons detection system on the NYC Subway in the weeks after the Brooklyn subway shooting that saw 23 people injured.

  Speaking to WaPo about the Evolv system, Jamais Cascio, founder of Open the Future, had this to say:

  “My concern is what happens when it moves beyond looking for weapons at a concert — when someone decides to add all kinds of inputs on the person being scanned, or if we enter a protest and a government agency can now use the system to track and log us. We know what a metal detector can and can’t tell us. We have no idea how this can be used.”

  The idea behind AI detecting and logging firearms is not a new one. Omnilert, another company specializing in AI threat detection, has been integrating its technologies into existing security camera systems since 2020.

  Tech Giants like Google and Facebook also have their versions of AI weapons detection with their Optical Character Recognition system. This system logs and indexes firearm serial numbers, making them easily accessible by google image search. 

  With 2020 & 2021 seeing record numbers of gun-buying and concealed carry permit applications, it seems that governments and corporate entities are seeking to beef up their surveillance and security in response.

  Could the upcoming verdict of the Supreme Court’s newest 2nd Amendment case affect the proliferation of AI firearms detection as well?

  Tyler Durden
  Sun, 05/22/2022 – 17:35

• Did The Biden Administration Just Give A Boost To The Hunter Biden Defense?
  Did The Biden Administration Just Give A Boost To The Hunter Biden Defense?

  Authored by Jonathan Turley,

  Below is my column in the New York Post on the implications of the recent civil lawsuit against Steve Wynn for allegedly working as an agent for China. The lawsuit under the Foreign Agents Registration Act. The timing of the shift to civil penalties is significant given the ongoing investigation of Hunter Biden for possible FARA violations. The decision of the Biden Administration to move away from criminal charges under FARA could prove highly advantageous for Hunter Biden.

  

  Here is the column:

  The Justice Department this week sued former casino mogul Steve Wynn for allegedly working as an agent for China. The lawsuit under the Foreign Agents Registration Act is bad news for Wynn, but it may be a win for another potential target: Hunter Biden.

  By bringing this action as a civil lawsuit, the Justice Department may have undercut the ongoing investigation by David Weiss, the US attorney for Delaware, into Hunter Biden’s foreign dealings. This civil suit doesn’t necessarily bar Weiss, but Biden’s team can now argue that criminally charging him with a FARA violation would be inconsistent with contemporary investigations.

  I recently testified in Congress on FARA prosecutions and noted that the Justice Department had largely dropped civil actions under the act in favor of criminal charges. Special counsel Robert Mueller targeted various Trump officials with FARA, using the law to investigate, search or charge attorneys from Paul Manafort to Rudy Giuliani to Victoria Toensing.

  I testified earlier that “after ramping up prosecutions in the last decade, the Justice Department has created precedent for the criminalization of what were previously treated as administrative violations. From Paul Manafort to the current investigation of Hunter Biden, there remain questions as to whether Justice Department will operate under a single, coherent and predictable standard.”

  Some in the administration may be hoping that this charge will compel a consistent approach that would effectively decriminalize any violations under investigation in Delaware.

  The feds sued Wynn over his effort to intervene in the case of  Chinese businessman Guo Wengui, a billionaire real-estate magnate and critic of the Chinese government. Beijing wanted the businessman back in China and hoped to persuade the US government to deny him a visa.

  Wynn spoke to President Donald Trump about the case, a call that carried added weight due to Wynn’s position as the Republican National Committee’s finance chairman.

  Wynn has interests in Macau, and his intervention was allegedly appreciated by high-ranking Chinese officials. The Justice Department asked Wynn to register as an agent, but he declined.

  What is most striking about this case is how serious it is, particularly compared with past criminal cases like the prosecution of Paul Manafort. Here, Sun Lijun, then the Chinese vice minister for public security, was allegedly organizing the lobbying effort in 2017 and contacted figures like Elliott Broidy, a former RNC finance chairman, and Nickie Lum Davis, a top Trump fundraiser. Both Broidy and Davis later pleaded guilty in prosecutions.

  The question is why Broidy was criminally prosecuted in 2020 under FARA, including for work on the Guo matter, yet the Biden administration suddenly decided that the Wynn part of the deals should be treated as a civil matter. This is coming at the very time a grand jury is reportedly considering charges against Hunter Biden that could include FARA violations.

  Wynn not only allegedly acted at the request of Chinese officials but was able to make direct contact with Trump to lobby him on the issue. He had no apparent interest in Guo, who would face a dire future if deported to China. But he had major financial interests in China, and the investigation yielded other criminal charges.

  A huge high-profile case like Wynn’s is not simply left to local prosecutors. Main Justice is often involved in such investigations and charging decisions. Other agencies can also be involved.

  The decision to depart from the earlier cases and proceed civilly could not come at a better time for Hunter Biden. If the Justice Department applied the same approach used in the Paul Manafort case, Biden would be looking at the serious prospect of a felony charge.

  Biden discussed the possible need to register in light of his extensive work on behalf of foreign interests in what many view as blatant influence peddling. This work happened during the same period as the Wynn work. In 2017, Biden texted his business associate Tony Bobulinski: “No matter what it will need to be a U.S. company at some level in order for us to make bids on federal and state-funded projects. Also we don’t want to have to register as foreign agents under the FCPA [Foreign Corrupt Practices Act] which is much more expansive than people who should know choose not to know. James [Biden] has very particular opinions about this so I would ask him about the foreign entity.”

  There was ample reason to worry given the wide array of foreign clients and their interest in using Hunter’s access and influence.

  The president’s son was working with CEFC, a Chinese Communist Party-linked company led by Ye Jianming. The Justice Department criminally charged one of Ye’s associates, Patrick Ho, in 2017 under the FCPA. The first call he reportedly made after his arrest was to James Biden, who said that he was trying to reach his nephew, Hunter.

  Hunter worked on a joint venture between an entity called Sinohawk and CEFC. He had extensive dealings with Chinese figures as well as officials in Russia, Kazakhstan, Ukraine and other countries. Emails referred to meetings with his father, then vice president. In 2014, he wrote to former business partner Devon Archer about an upcoming trip to Ukraine by “my guy” — his dad. He noted that it should “be characterized as part of our advice and thinking — but what he will say and do is out of our hands.” (Archer would later be criminally convicted of fraud in a separate matter).

  Hunter Biden arranged meetings between his father and Ukrainian and foreign clients. He also continued to express his concerns over registration laws, noting that executives at the Ukrainian energy company Burisma “need to know in no uncertain terms that we will not and cannot intervene directly with domestic policymakers, and that we need to abide by FARA and any other U.S. laws in the strictest sense across the board.”

  He never, however, registered. Like Wynn, he maintained that his work for foreign interests stayed short of the FARA line despite the broad interpretation the Justice Department gave in past criminal cases. Compared with those other cases, Hunter Biden seems well over the line. In United States v. Chaudhry, a US resident pleaded guilty under FARA for efforts to influence various US think tanks’ views on US-Pakistani relations.

  Now the Justice Department has departed from years of criminal charges in favor of civil charges. Many of us have questioned the need for criminalization of these charges and the broad sweep of FARA. But the timing of the Biden administration’s sudden change could not have come at a more opportune time for the president’s son.

  Tyler Durden
  Sun, 05/22/2022 – 17:10

• U.S. Automakers Forced To Hike Prices Due To Rising Raw Material Costs
  U.S. Automakers Forced To Hike Prices Due To Rising Raw Material Costs

  It looks like price hikes as a result of rising costs in the auto industry are starting to become widespread.

  Companies like Tesla, Cadillac and Rivian are now amongst the automakers who are raising prices due to “changing market conditions and rising commodity costs”, according to CNBC.

  While many EV makers have benefitted from battery costs declining over the last few years, it is now being projected that a sharp increase in demand for battery minerals, coupled with global supply chain shortages, could wind up pushing up costs more than 20%.

  Tesla has had to raise prices “several times over the last year”, including two hikes in March, as a result of “significant recent inflation pressure” related to raw materials and transportation costs.

  Rivian worked to offset rising costs on its R1T pickup and R1S SUV by introducing two lower cost versions of both models. Prices were raised by 18% and 21% on the two models, respectively.

  

  Rivian even tried to retroactively apply the price hikes to orders placed before it made the announcement, but received massive pushback from its customers and was forced to apologize.

  CEO RJ Scaringe issued a mea culpa that stated: “In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt. Since originally setting our pricing structure, and most especially in recent months, a lot has changed. Everything from semiconductors to sheet metal to seats has become more expensive.”

  EV company Lucid is also hiking prices on its luxury sedans by about 10% to 12% for U.S. customers.

  “The world has changed dramatically from the time we first announced Lucid Air back in September 2020,” the company’s CEO said.

  GM is also instituting price hikes on some models. Cadillac’s Lyriq crossover EV saw a $3,000 price hike to $62,990.

  Cadillac President Rory Harvey said: “I don’t think it was one thing in isolation. I think it was a number of factors taken into account.”

  Ford, which is keeping its price on its new F-150 Lightning at $39,974, said it now expects $4 billion in raw material headwinds when it had previously just expected $1.5 billion to $2 billion.

  “We’re going to still keep it for everybody, but we’ll have to react on commodities, I’m sure,” Ford’s VP of Global EV Programs said. 

  Recall, last month, we published an article on how China was seeking to control the global EV supply chain. That came weeks after we wrote about how Chinese EV manufacturers were grappling with rising raw material costs.

  

  We noted that many EV manufacturers were doing the only thing they could to help alleviate the pressure – and that meant rising prices. This may be why the idea of extending the subsidy has caught back on in recent weeks.

  We noted in April that the pricing problems China faced were more unique to the country, because it was also trying to engineer a “soft landing” from EV subsidies, which Beijing had planned to roll back.

  “What makes China unique is its commitment to simultaneously rolling back EV subsidies, setting up a delicate balance between growth and profit in the world’s biggest market for clean cars,” Bloomberg wrote back in April. 

  Companies like Tesla, BYD, Xpeng and Li Auto all hiked prices in March, we noted. Among the manufacturers raising prices was also Contemporary Amperex Technology, the world’s biggest EV battery maker. They said they were making “dynamic adjustments to the prices of some of our battery products”.

  Remember, we wrote days prior that Japanese automakers were also grappling with the skyrocketing cost of raw materials and a shortage of semiconductors. 

  Tyler Durden
  Sun, 05/22/2022 – 16:45

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