May 24

Today’s News 24th May 2021

  • Eurovision Winners Inspire Others To Ditch English (And Snort Cocaine?)
    Eurovision Winners Inspire Others To Ditch English (And Snort Cocaine?)

    In the 2021 Eurovision Song Contest, around a third of all entries from the 39 participating countries contain a language other than English. Countries have been free to choose the language in which they sing since 1999 and after that date, many have opted for lingua franca English to get their message across to the international audience of the annual song competition, whose final is held in Rotterdam on Saturday. But, Statista’s Katharina Buchholz reports that, as a detailed analysis by blog Johnthego.com shows, winning titles in languages other than English have in the past inspired more countries to present a song in their native tongue.

    Infographic: Eurovision Winners Inspire Others to Ditch English | Statista

    You will find more infographics at Statista

    In 2007, winning title Molitva (“Prayer”) performed by Serbian Marija Šerifović was one of 36 percent of titles which featured languages other than English. In the following year, more than half of artists suddenly wanted to give a language other than English a go. But it was more likely Šerifović’s emotional performance and the song’s powerful choral chorus that earned her the title, since the following years’ focus did not earn another local-language song a title. Interest waned and reached a low of less than 20 percent of songs offering language variety between 2015 and 2017.

    2016’s winner, 1944 by singer Jamala, contained some Ukrainian verses, but things only changed again after the surprise win of contestant Salvador Sobral with his quirky Portuguese ballad Amar Pelos Dois (“To Love for the Both of Us”) in 2017. Language variety shot up again to 33 percent the next year, but again, non-English winning songs have not materialized since then.

    Chances are good in this year’s final, however, as half of the 20 qualified performers feature languages other than English, meaning that an above-average numbers of local language songs have moved on from semi-finals.

    Not included in the count is the trend of spicing English songs up with foreign language titles, like Cyprus’ El Diablo, Malta’s Je me Casse or San Marino’s Adrenalina. Serbia employs a similar tactic for its entry Loco Loco, which contains mostly Serbian, but mixes in Spanish and English.

    The record for most languages featured in a single Eurovision song stands at four. Israel’s 2020 entry by singer Eden Alene featured Hebrew, English, Arabic and Amharic, a language from her parents’ home country of Ethiopia. The second Eurovision song containing four languages is also tied to Israel. Germany’s 1999 entry for the competition held in Jerusalem was sung in German, English, Turkish and Hebrew.

    And this weekend, the lead singer of the Italian winners of the Eurovision Song Contest had to defend himself from suspicions of drug use, after he was seen leaning towards a table in a way that viewers found suspicious.

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    When asked about the episode during a media conference, a bare-chested David rejected the accusation. “I don’t use drugs, please guys, do not say that,” David said. “No cocaine, please.”

    Tyler Durden
    Mon, 05/24/2021 – 02:45

  • Lithuania Withdraws From China's "17+1" Cooperation Platform
    Lithuania Withdraws From China’s “17+1” Cooperation Platform

    Authored by Frank Fang via The Epoch Times,

    The Lithuanian government has pulled out of Beijing’s “17+1” platform, a Chinese initiative that the Baltic nation signed up to in 2012.

    The Chinese regime officially launched the platform—which was initially named the “16+1” platform—in April 2012 to intensify cooperation with 11 European Union member states and five Balkan countries. The platform was renamed “17+1” after Greece signed up for the initiative in April 2019.

    The initiative calls for participating countries to cooperate with China in many fields, including finance, health, trade, and technology. Modeled after the platform, Beijing rolled out another project in 2013, which is called the “Belt and Road Initiative” (BRI, also known as “One Belt, One Road), in an effort to build up trade routes linking China and other parts of the world.

    On May 22, Lithuanian Foreign Minister Gabrielius Landsbergis said in a statement that the Baltic nation does not see itself as a “17+1” member any more and will not participate in the initiative’s activities, according to the Baltic News Service.

    Landsbergis added that the Chinese platform was “divisive” from the EU’s point of view. He called on EU members to pursue “a much more effective 27+1 approach and communication with China.”

    “Europe’s strength and impact is in its unity,” Landsbergis added. Currently, there are 27 member countries in the EU after the UK left the political and trading bloc in January 2020.

    Lithuania’s decision to pull out of the Chinese platform was not unexpected. In March, Landsbergis told German newspaper Frankfurter Allgemeine Zeitung that the “17+1” platform had fallen short of their expectations, in particular about investments that served mutual interests.

    Taking part in the platform also came with negative consequences. Landsbergis explained to the German paper, “This format was accompanied by divisive tendencies in the EU and greater political pressure from China.”

    Lithuania’s Homeland Union and Lithuanian Christian Democrats party leader Ingrida Simonyte delivers her speech at the parliament in Vilnius, Lithuania, on Nov. 24, 2020. (Petras Malukas/AFP via Getty Images)

    Xinjiang and Taiwan

    Lithuania’s move is the latest indication of a souring tie between the two countries.

    On May 20, the Lithuanian parliament passed a non-binding resolution, condemning Beijing’s treatment of the Uyghur minority in China’s far-western region of Xinjiang as “genocide.” The resolution was passed by 86 to one vote and seven abstentions.

    In Xinjiang, which is home to about 11 million Uyghurs, at least 1 million Uyghurs, Kazakhs, and Kyrgyz have been detained in internment camps for political indoctrination.

    Parliaments in Canada, the Netherlands, and the UK have passed similar resolutions. In January, then-U.S. Secretary of State Mike Pompeo declared that the Chinese Communist Party (CCP) has committed “genocide” and “crimes against humanity” against Uyghurs and other minorities in Xinjiang.

    The Lithuanian resolution also called on the CCP to “immediately end the illegal practice of organ harvesting from prisoners of conscience, release all prisoners of conscience in China, including members of the Falun Gong.”

    In response to the resolution, the Chinese Embassy in Lithuania slammed the Lithuanian parliament for a “shoddy political show based on lies and disinformation” in a statement released on May 20.

    Beijing also reacted angrily when Lithuania voiced support for Taiwan, a de-facto independent country that Beijing claims is a part of its territory. In November 2020, the Lithuanian government stated that it was committed to supporting “those fighting for freedom” around the world including Taiwan.

    The public support for Taiwan drew the ire of Hu Xijin, the editor-in-chief of China’s hawkish mouthpiece Global Times. In his opinion article published days later, Hu demanded the Lithuanian government “to behave” with regards to Taiwan issues.

    “If the government in Vilnius [Lithuania’s capital] continues to behave crazily, it is bound to suffer consequences,” Hu threatened.

    Taiwan and Lithuania are not formal diplomatic allies but officials from the Baltic nation have voiced support for the self-ruled island to take part in the World Health Organization (WHO). Taiwan is not a member of the WHO due to Beijing’s opposition.

    In March, Lithuania stated it wanted to advance ties with Taiwan by setting up a representative office on the island.

    Taiwan President Tsai Ing-wen speaks during National Day celebrations in front of the Presidential Office Building in Taipei on Oct. 10, 2020. (Sam Yeh/AFP via Getty Images)

    Espionage

    Lithuania has also previously warned about China’s increasing intelligence activities inside the Baltic nation.

    “From Lithuanian citizens, Chinese intelligence may seek to obtain sensitive or classified national or NATO and EU information,” stated Lithuania’s 2019 National Threat Assessment report, according to the Estonian newspaper The Baltic Times.

    “Chinese intelligence-funded trips to China are used to recruit Lithuanian citizens.”

    The report was put together by Lithuania’s State Security Department and the Second Investigation Department under the country’s Defense Ministry. It named two Chinese agencies—the Ministry of State Security, China’s chief intelligence agency, and the Military Intelligence Directorate of China’s People’s Liberation Army—for their increasing operations in Lithuania.

    “Chinese intelligence looks for suitable targets—decision-makers, other individuals sympathizing with China and able to exert political leverage. They seek to influence such individuals by giving gifts, paying for trips to China, covering expenses of training and courses organized there,” the report stated.

    Some of the particular interests to Chinese intelligence officials included Lithuania’s domestic and foreign policies, as well as the country’s economy and defense sector. 

    Tyler Durden
    Mon, 05/24/2021 – 02:00

  • Trump's 1776 Commission To Reassemble, Tackle Critical Race Theory In History Education
    Trump’s 1776 Commission To Reassemble, Tackle Critical Race Theory In History Education

    Authored by GQ Pan via The Epoch Times,

    Members of the 1776 Commission, which President Joe Biden disbanded on his first day in White House, are reportedly set to meet again with a renewed focus on combating the teaching of U.S. history based on the Marxist critical race theory.

    The advisory commission was established by the Trump administration in November 2020 to celebrate and promote the principles enshrined in the nation’s founding documents. It is commonly seen as a response to The New York Times’ controversial 1619 Project, which argues that the United States was founded as, and remains today, a racist nation.

    Nearly four months after its dissolution, the commission regained attention when a leading member spoke against a Biden administration’s proposal to prioritize funding education programs that promote the 1619 Project and critical race theory, an ideology rooted in Marxist class struggle but with an emphasis on race, with the goal of dismantling all institutions of American society, which it deems as tools of racial oppression.

    “The Proposed Rule should be withdrawn, just as individual states, which actually have the authority over the nation’s K-12 educational system, should oppose race-based pedagogy as part of their curricula and even if attempted to be imposed by the federal government,” Matthew Spalding, the executive director of the 1776 Commission, wrote in a letter to the Education Department.

    “On behalf of my fellow Commissioners, I submit and draw your attention to Appendix III of The 1776 Report,” Spalding added.

    The appendix explains why race-focused narratives like the 1619 Project and critical race theory are “fundamentally incompatible” with the principles of the Declaration of Independence, which connects liberty-loving Americans everywhere regardless of their race.

    “Proponents of identity politics rearrange Americans by group identities, rank them by how much oppression they have experienced at the hands of the majority culture, and then sow division among them,” the document reads.

    “While not as barbaric or dehumanizing, this new creed creates new hierarchies as unjust as the old hierarchies of the antebellum South, making a mockery of equality with an ever-changing scale of special privileges on the basis of racial and sexual identities.”

    In an interview with Washington Examiner, Spalding said that members of the 1776 Commission will convene next week in Washington on the campus of Hillsdale College. One of their topics will be critical race theory, which sees racism in all aspects of American life.

    “When we start going about dividing people by groups, by social identities, and especially by identities that deal with race, and we’re starting to make those kinds of divisions, all Americans should get very nervous,” said Spalding.

    “It’s a departure away from the historic grounding of civil rights in America, which is that we all are equal.”

    The commission’s first and last report, commonly referred to as the 1776 Report, was taken down after Biden’s inauguration. It can still be found on the publicly archived Trump White House and Hillsdale College websites.

    Tyler Durden
    Sun, 05/23/2021 – 23:30

  • Goldman Steamrolls Iran Oil Output Fears, Sees Crude Hitting $80 In Months
    Goldman Steamrolls Iran Oil Output Fears, Sees Crude Hitting $80 In Months

    Toward the end of Q1, Goldman Sachs along with virtually every other major bank, predicted that oil had nowhere else to go but up, with bank after bank hiking their oil forecast. It also top-ticked the market, as Goldman’s Damien Courvalin writes in a note published on Sunday discussing “the path to higher oil prices”, in which he admits that despite the bank’s “balls to the wall” bullish stance on crude, “the oil rally has given way to sideways volatility since March, due to concerns over vaccination pace, EM Covid waves and the return of Iranian barrels, with the latter pushing Brent prices down from $70 to $65/bbl last week.” Or, as the bank calculates, “last week’s large sell-off was equivalent to bringing forward by 3 months a 1 mb/d increase in global production, leaving the market likely pricing the return of Iranian barrels by late summer.”

    After such a retracement, the Goldman commodities strategist predicts that while the market is now “pricing a return of Iranian barrels by late summer” it is again “underestimating the upcoming demand rebound, too pessimistic a view on both accounts.” Which, of course, is someone that is bullish on oil would say.

    Anyway, here is Courvalin’s math explaining why the market is too pessimistic in his view:

    • On Iran, while comments suggest significant progress has indeed been made, the timelinen is still uncertain as according to press reports, negotiations appear focused on an agreement on the conditions for reinstating the JCPOA, implying a lag (or potential impasse) in lifting US secondary oil sanctions, or conditions that could limit the size of such a restart.

    • On demand, Goldman says that the recovery in DM mobility and travel is on track to exceed its expectations, helping offset the recent hit to South Asia and Latin America demand: “Mobility is rapidly increasing in the US and Europe, as vaccinations accelerate and lockdowns are lifted, with freight and industrial activity also surging. This DM recovery is in fact larger than we had assumed, helping offset the recent hit to demand and the likely slower recovery in South Asia and Latin America.”

    • On supply, Goldman is lowering its non-OPEC+ production forecasts to account for still depressed activity levels and a slower expected rebound from shale. Given the current global deficit of 1.8 mb/d in 2Q21, Goldman believes that this demand impulse will not only absorb remaining excess inventories and a potential July ramp-up in Iran supply…


      … but still require a cumulative additional 2.8 mb/d increase in OPEC+ production by Dec-21 (requiring an early exit from their April 2020 agreement).

    Putting these three together, Goldman assures its clients that the “case for higher oil prices therefore remains intact given the large vaccine-driven increase in demand in the face of inelastic supply.”

    Assuming this is accurate, Courvalin’s next argument is that the path to higher prices is the key uncertainty and to address this, he runs scenarios on Goldman’s updated supply-demand balance, adjusting the OPEC+ and shale responses to various timings of Iran’s potential export recovery: “Even aggressively assuming a restart in July, we estimate that Brent prices would still reach $80/bbl in 4Q21, with our new base case for an October restart still supporting our $80/bbl forecast for this summer.”

    Goldman’s conclusion is some humble… ” despite the global market deficit coming in line with our forecasts in recent months, we under-estimated the weight of such demand and Iran uncertainties, keeping prices trading below our $75/bbl 2Q21 fair value” before trying to convince the market that it will be right, damn it: “With growing evidence of the demand rebound, and imminent clarification on the likelihood of an Iranian return, we now see a clearer path for the next leg higher in oil prices, with the sell-off offering opportunities to position for the rally to $80/bbl.”

    To be sure, this is not the first time Goldman has had outrageous predictions about oil prices, with the current forecast nowhere near Goldman’s $200/bbl prediction from the summer of 2008. On the other hand, with prices across all goods and services already surging, there will be nobody more relieved if Goldman is wrong on this one, than Joe Biden…

    Tyler Durden
    Sun, 05/23/2021 – 23:00

  • The Murph Challenge: A Memorial Day Tribute To The Fallen
    The Murph Challenge: A Memorial Day Tribute To The Fallen

    Authored by Andrew Thomas via The Epoch Times,

    Every Memorial Day, fitness enthusiasts and newcomers around the country and across the globe prepare to honor fallen Navy SEAL Michael P. Murphy and many others who have made the ultimate sacrifice by completing “The Murph Challenge.”

    LT. Michael P. Murphy was killed during Operation Red Wings in Afghanistan on June 28, 2005. (Courtesy of Dan Murphy)

    The grueling workout consists of a one-mile run, 100 pull-ups, 200 push-ups, 300 squats, and another one-mile run.

    Murphy originally dubbed the workout “Body Armor” as he executed the routine with a 20-pound protective vest. He developed the workout as a functional routine that was practical for his work as a SEAL. While his average time was between 32 and 34 minutes, his best time was reportedly just over 28 minutes. The workout would prove invaluable in the treacherous mountains of Afghanistan.

    Operation Red Wings

    On June 28, 2005, Murphy and three other SEALs, Matthew Axelson, Danny Dietz, and Marcus Luttrell, were on a reconnaissance mission, code name Operation Red Wings, in eastern Afghanistan.

    But when they were discovered by unarmed locals, their mission became compromised. The SEAL team let them go, knowing that they would most likely inform the Taliban of their presence.

    LT. Michael P. Murphy created the Body Armor workout. Now, it’s called The Murph in his honor and memory. (Courtesy of Dan Murphy)

    As the three SEALs attempted to return to base, scores of Taliban fighters reached their position, and a firefight ensued. The unforgiving terrain made it impossible to get a connection to call for a quick reaction force to come to their aid.

    Murphy, having already been gravely wounded, left his covered position and went out into the open to get a signal. As he exposed himself to enemy fire, he was able to call for assistance before being shot again. He returned to cover, and continued to fight until he was killed. Only Luttrell would survive the battle.

    The Murph Challenge

    Years later, Michael Murphy’s father, Dan Murphy, approached former SEAL Michael Sauers regarding the LT. Michael P. Murphy Memorial Scholarship Foundation that was established in the aftermath of Operation Red Wings. Sauers, the founder of FORGED, an apparel company, served on active duty for 13 years and seven years as an instructor and had crossed paths with Murphy several times throughout his service.

    Dan Murphy knew about Sauers’s work with the veteran community, and they discussed a fitness fundraiser for the foundation—the Murph Challenge. They worked on how to promote the challenge and prepare participants for it. Since 2014, FORGED has garnered more than $1.25 million from the challenge for the foundation, which has sponsored 33 scholarships this year alone. In total, since 2007, the foundation has sponsored more than 400 scholarships. Every year, the challenge is able to raise enough to sponsor one or two more.

    “Michael’s favorite saying was ‘Education will set you free,’” Dan Murphy explained. “Education removes superstition, prejudice, rumor mongering. He said education brings us together as a people—all Americans.”

    Dan Murphy established the LT. Michael P. Murphy Memorial Scholarship Foundation in the aftermath of Operation Red Wings. (Courtesy of Dan Murphy)

    Since 2014, FORGED and the CrossFit community have expanded the tradition across the country and the world. Actor Taylor Kitsch, who played Murphy in “Lone Survivor” has promoted the workout and made it a staple in fitness culture. Other influential athletes and celebrities, including Dwayne “The Rock” Johnson, have further popularized the event. Every Memorial Day weekend, Dan Murphy travels throughout his Long Island community and beyond to promote the challenge, but also to tell participants about his son’s story.

    “What I always try to instill in my comments to everybody is that when they’re doing this, the idea is to think about all those fallen heroes, including Mike, who sacrificed for our freedom,” Dan Murphy said.

    Michael Sauers (L) and actor Chris Pratt (R) promote The Murph Challenge. (Courtesy of Michael Sauers)

    While participants try to complete the challenge as fast as they can, Sauers stressed how the event isn’t about getting the best time. The challenge isn’t a competition, but rather a way to honor Murphy and the many others who have been killed in combat. And while the workout is intense, Sauers encourages everyone to participate even if they have to modify the routine.

    “Murph would have been the guy who finished, wouldn’t even have made a big deal about it, and he would’ve helped all of the other people who were struggling, and he would’ve motivated them and helped them go through the Murph Challenge,” Sauers explained.

    Participants

    Liz Gilroy, 52, of East Hanover, New Jersey, has completed the workout multiple times. She first learned about “The Murph” in 2012 from FORGED, and she had read both Luttrell’s “Lone Survivor” and Gary Williams’s biography on Murphy entitled “SEAL of Honor.” After a little bit of research, the CrossFit enthusiast was drawn to the challenge. Many of her brothers, uncles, and cousins have served in the military, and attempting the workout was her way of showing appreciation for the service.

    “The whole never quit, never give up, and never out of the fight kind of thing really hit home,” Gilroy said.

    After completing the workout for the first time, Gilroy was exhausted. But she’s kept at it, and she tends to do the challenge multiple times per year. Over the past year during the pandemic, she’s done the workout four times. This year, she’ll be adding the weighted vest.

    “I don’t care if it takes me three days. I’ll just do it until I’m done,” Gilroy said.

    Michael Sauers is a former Navy SEAL and co-founder of The Murph Challenge. (Courtesy of Michael Sauers)

    Joe Romano is the owner of Mission Fitness, where Gilroy exercises and performs the challenge. He learned about The Murph when he started doing CrossFit in 2009 and hosts the event every Memorial Day at his gym.

    “It just reminds me how privileged, grateful, and thankful I am to live in this country. There are men and women out there that throughout our history have sacrificed everything for us to be able to do a Murph, to be free,” Romano explained.

    Romano has tremendous respect for the military, and he wanted to be able to pay tribute to Murphy and so many others who have died for our way of life. He’s been hosting the event at his gym since 2014. Like Sauers, Romano tells his members that the event isn’t about getting a stellar time. The challenge on Memorial Day is about teamwork.

    “That’s really the essence of Michael Murphy, what he did for his teammates, and just how that organization operates. They all rely on each other,” Romano said.

    Tyler Durden
    Sun, 05/23/2021 – 22:30

  • On Friday A PBOC Official Called For A Stronger Yuan; One Day Later His Article Was Deleted
    On Friday A PBOC Official Called For A Stronger Yuan; One Day Later His Article Was Deleted

    By Sofia Horta e Costa, Bloomberg reporter and commentator

    China’s rising inflation is putting focus on the role of the yuan, which is trading near a three-year high.

    On Friday, a central bank official in the Shanghai branch said China should allow the yuan to appreciate to offset the impact of rising import prices.

    “As an important consumer of commodities globally, China is inevitably impacted by international market prices through imports,” Lyu Jinzhong, director of the research and statistics department at the central bank’s Shanghai branch, wrote in an article published Friday by China Finance, a magazine run by the PBOC.

    The comments were unusually blunt, and the article has since been deleted.

    On Sunday, People’s Bank of China Vice Governor Liu Guoqiang appeared to counter that view, saying the exchange rate will be kept at “basically stable” levels. Local media also chimed in with a front-page commentary, saying the exchange-rate mechanism is expected to stay stable for some time.

    A stronger yuan would cut the cost of imports, such as commodities, which have been a major component of increasing prices. But the strength of the yuan means additional gains may fuel speculation that authorities are letting go of the currency — thereby spurring traders to bet on further appreciation. Such one-way bets have long been resisted by the PBOC, while a too-strong yuan would also hurt the nation’s global competitiveness by making exports more expensive.

    If Beijing was serious about letting go of the yuan or making it more international, more effort would need to be made to take down capital controls. So far, there’s little sign of that. A botched mid-2015 move to let the market have a greater role in setting the yuan spooked global investors, eventually pushing Beijing to adopt its current framework: welcoming inflows of overseas capital while limiting the outflow of domestic money.

    Tyler Durden
    Sun, 05/23/2021 – 22:15

  • An RV Attachment For Tesla's Cybertruck, Which Isn't Even In Production Yet, Already Has $50 Million In Pre-Orders
    An RV Attachment For Tesla’s Cybertruck, Which Isn’t Even In Production Yet, Already Has $50 Million In Pre-Orders

    An RV attachment for Tesla’s Cybertruck, that pops out of the the truck’s bed and turns it into a living space, already has $50 million in pre-orders. This is despite the fact that the Cybertruck isn’t in production (and may never be).

    And still, the Fed sees no signs of excess. 

    Las Vegas-based analytics company Stream It has created the CyberLandr, which turns a Cybertruck into a portable home for “weekend trips or even emergencies”. 

    The space also “has a water-filtration system, voice automation, and Starlink dish for internet access,” according to Insider. The company is working with Munro and Associates to help it “cater to high demand, while delivering a high quality product.” 

    The company took in pre-orders of $40,000 and $50,000 beginning in early April. Customers placed more than 1,000 pre-orders in the first 15 days. 

    Lance King, Stream It CEO, said: “We conservatively estimate demand for CyberLandr at more than 10,000 units in 2022.”

    This video, provided by Stream It, shows how the CyberLandr is supposed to protrude from the back of the Cybertruck and turn into a living space. Forgive us if we’re a bit – skeptical – that any of this is ever going to come to fruition.

    But lets not let that get in the way of a nice rendering:

    Tyler Durden
    Sun, 05/23/2021 – 22:00

  • "Shocking Act" Of "State Hijacking" Of Civilian Plane: US & EU Demand Belarusian Journalist's Immediate Release
    “Shocking Act” Of “State Hijacking” Of Civilian Plane: US & EU Demand Belarusian Journalist’s Immediate Release

    update(9:30pm): It didn’t take long for a flurry of condemnations from both EU and US officials in the hours after the Ryanair incident over Belarus, with US Secretary of State Antony Blinken calling for opposition journalist Raman Pratasevich’s immediate release. Multiple EU leaders described Sunday’s detention of Pratasevich after his commercial aircraft with 170 international passengers on board (including Americans, apparently) was diverted to Minsk complete with Belarusian MiG fighter escort as tantamount to “hijacking a civilian plane”…

    “Hijacking of a civilian plane is an unprecedented act of state terrorism. It cannot go unpunished,” Polish Prime Minister Mateusz Morawiecki wrote on Twitter. 

    And Greece’s Foreign Ministry agreed (the aircraft had departed from Athens en route to Lithuania), calling the incident “state hijacking”: “Greece strongly condemns the state hijacking that took place today and resulted in the forced landing of Ryanair FR 4978, which operated the Athens-Vilnius route, in Minsk, Belarus,” the statement said.

    Top EU officials were unanimous in their outrage and condemnation…

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    The US statement from Secretary Blinken underscored that there had been Americans on board:

    “This shocking act perpetrated by the Lukashenka regime endangered the lives of more than 120 passengers, including U.S. citizens,” he said late in the day Sunday.

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    “Initial reports suggesting the involvement of the Belarusian security services and the use of Belarusian military aircraft to escort the plane are deeply concerning and require full investigation,” the US statement added.

    But at the same time some are pointing to some not-so-distant history where US and European allies did essentially the same thing…

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    * * *

    A bizarre and alarming incident which officials are calling unprecedented unfolded over the skies of Eastern Europe on Sunday. A Ryanair flight which had departed Athens and was en route to Vilnius – the capital of Lithuania – was forced to land in Belarus to allow state intelligence and security services to detain a journalist who’s long been critical of President Alexander Lukashenko.

    Bloomberg has identified the detained journalist is Raman Pratasevich, described as “the former editor-in-chief of the most popular Telegram news channel in Belarus” who was “arrested in the Minsk airport after the plane landed, according to the Minsk-based human rights center Viasna, which is not officially registered by the country’s authorities.”

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    Neighboring Lithuania had earlier issued Pratasevich asylum after Belarusian authorities had put him on a “terror watch list” related to his journalistic activities, given the 26-year old blogger and activist helped spearhead last year’s anti-Lukashenko demonstrations which at times shut down large parts of central Minsk following the disputed August 2020 election which resulted in prolonging the autocrat’s rule to a sixth term (which will see him into three decades in power).

    The journalist has been dubbed an “extremist” for his role in covering and participating in protests which officials also alleged there was a “foreign hand” behind which had covert NATO support. Pratasevich now faces a severe sentence – if he even goes to trial at all, with some supporters going so far as to suggest a possible death penalty case.

    Astoundingly, Belarus’ military had scrambled MiG fighter jets in order to divert the plane to Minsk. Bloomberg continues, “The plane, which was flying over Belarus en route to Lithuania, was escorted to Minsk by a MiG-29 fighter jet after a bomb threat, Belarusian state news agency Belta reported, citing the Minsk airport’s press service.”

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    The bomb threat, however, is being widely perceived as but a ruse which ensured the plane would be on Belarusian soil in order to facilitate the controversial detention. 

    Germany’s Deutsche Welle details:

    An airport spokesperson told the agency that although authorities did not find any explosive devices on the plane, it was unclear when it would be allowed to take off again.

    The opposition Telegram channel Nexta also reported that the plane was searched and that authorities detained the outlet’s former editor, Roman Protasevich.

    “The plane was checked, no bomb was found and all passengers were sent for another security search,” said Nexta. “Among them was… Nexta journalist Roman Protasevich. He was detained.”

    Image via NEXTA

    The episode is quickly gaining international attention and raising alarm in NATO and the European Union, with Lithuanian President Gitanas Nauseda issuing a statement on Twitter condemning the “unprecedented” and “abhorrent” action of Lukashenko’s government.

    President Nauseda also said in a written statement released to international press agencies that: “I call on NATO and EU allies to immediately react to the threat posed to international civil aviation by the Belarus regime.” He added, “The international community must take immediate steps that this does not repeat.”

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    Also interesting will be the added pressure on both Belarus and Lukashenko-ally Putin over the brazen intervention in a foreign airline’s flight path (Ryanair DAC is based in Ireland and did not immediately comment in the hours after the incident), given especially the two leaders are expected to meet again in Sochi this week, Rossiya-1 television reported.

    Putin has been widely seen in the West as enabling Lukashenko’s dictatorial rule, with Russian officials also seeing recent protests in the former Soviet satellite state as West-backed ‘color revolution’ activity fueled by external powers designed to expand NATO influence by seeking overthrow of Russia-friendly governments.

    Tyler Durden
    Sun, 05/23/2021 – 21:35

  • With China's Digital Yuan, Think Surveillance
    With China’s Digital Yuan, Think Surveillance

    Authored by Milton Ezrati, op-ed via The Epoch Times,

    Ever since China launched its digital yuan in 2019, western commentary has reacted to the initiative with waves of nonsense. Many of these articles suggest that the People’s Bank of China (PBOC) has stolen a march on the West. Many claim that China’s digital effort will secure the yuan global status and enable it to supplant the dollar as the world’s premier currency for international reserves and transactions.

    The venerable Economist magazine forecast that soon everyone everywhere will be using the digital yuan. The most recent wave of such commentary emerged after the Federal Reserve (Fed) and other central banks announced that they, too, are looking into digital versions of their own respective currencies. Media attention has suggested that the Fed and others are playing catch up.

    These claims are overblown to say the least, entirely misplaced, in fact. A digital yuan hardly constitutes a basis for a global currency. Many countries, including the United States, have laws against transacting domestic business in any currency other than their own. Besides, a digital yuan could add only marginally to existing digital arrangements in which credit and debit cards, Apple watches, PayPal, easy wire transfers, and the like have long-provided efficient and convenient ways to manage both international and domestic transactions. All the digital yuan would do is add a new layer to this fully functioning system. That addition hardly constitutes a revolution, any more than if American Express were to issue a new kind of card. Nor will a digital version of the yuan overcome all the many impediments in the way of its ability to become the premier global reserve currency.

    What should have been clear at the onset is that rather than creating a global upset, the digital yuan, in a manner entirely consistent with so much else Beijing does, aims at domestic surveillance.

    Issuing a digital currency—whether a yuan, a dollar, a euro, a yen, whatever—takes a big step toward supplanting paper currency and coin, and thereby the main way people can transact business anonymously.

    There is, of course, Bitcoin and other cybercurrencies, but they are less a factor than paper and coin, at least for most populations. In any case, China has already closed off these avenues for its population by banning Bitcoin and other cybercurrencies.

    Representations of the Ripple, Bitcoin, Ethereum, and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, on Feb. 14, 2018. (Dado Ruvic/Reuters)

    Paper and coin are about the only way people in China can evade strict controls and get assets out of the country or into an alternative currency. By using the digital yuan to eradicate paper and coin, or at the very least severely limiting their role, Beijing will have closed off any ability of its citizens to move assets and transact business unobserved. Once this happens, the authorities will have the ability to track every citizen’s transactions, how much each person spends, on what, where he or she spends it, as well as when.

    Central banks, even in less authoritative systems, could do the same with their digital currencies once they take hold, but they will likely be less ambitious than the PBOC and think mostly in terms of money laundering and tax evasion. Whether the government’s focus is narrow or broad, surveillance of one kind or another is the objective.

    To be sure, the authorities everywhere have the option of using existing digital networks to track most people’s transactions, whether through credit card, bank, or equivalent records. But accessing these still largely private sources is cumbersome and, in some places, faces numerous legal hurdles. Beijing might face additional impediments because today much of this information resides abroad. Accessing the elements of this system would also have a hit or miss quality that would prevent the authorities amassing an all-but-complete picture of people’s transactions.

    But a digital currency would have it all in one easily accessible government computer. The arrangement could even enable the authorities to develop algorithms to cull transactions and flag anything suspicious, something that is all but impossible with current arrangements. Besides, it is already clear that current digital arrangements, for all their convenience and efficiency, have not driven out paper and coin as effectively as digital currencies are likely to do.

    Beijing does indeed have grand global ambitions. It clearly wants to make China the world’s leading economy and see the yuan supplant the dollar’s global position. It wants to dominate world trade, a clear objective of the Belt and Road initiative. And it wants the political, diplomatic, and military advantages that goes along with such economic and financial dominance. The digital yuan might have a role in this grand scheme but only after Beijing has put into place other, needed, and much more significant elements.

    For now, the digital currency is neither part of such grand designs nor the “revolution” described by less-than-thoughtful western reports. It is instead a straightforward if innovative way to secure still more complete domestic control and thereby ensure that nothing the Chinese people do, even inadvertently, can threaten the authorities in Beijing.

    Tyler Durden
    Sun, 05/23/2021 – 21:30

  • CA Lawmaker Mocked After After Finding "Semi-Automatic" Glock Packaging — For BB Gun
    CA Lawmaker Mocked After After Finding “Semi-Automatic” Glock Packaging — For BB Gun

    A California lawmaker demonstrated why liberals are totally unqualified to opine on the 2nd Amendment, much craft legislation restricting citizens’ rights.

    In a now-deleted tweet, California Assemblyman David Chiu dramatically posted: “Finding the discarded packaging of a semi-automatic on a leisurely weekend walk was disturbing, particularly during this month’s surge of gun violence in San Francisco.”

    Except… if David had maybe looked at the packaging, he would have noticed it’s for a .177 caliber C02 powered BB gun.

    The replies, as expected, were hilarious before Chiu deleted the tweet.

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    And for the uninitiated: 

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    Tyler Durden
    Sun, 05/23/2021 – 21:00

  • How A $1 Billion Cryptocurrency Fund Is Trading The Crash
    How A $1 Billion Cryptocurrency Fund Is Trading The Crash

    Back in December, vol-specialist hedge fund One River Asset Management surprised its peers when long before Elon Musk arrived on  the scene, it became one of the first major asset managers to disclose it had purchased $600 million in bitcoin and ethereum and said it would own more than $1 billion in cryptos in early 2021. It wasn’t along in this pioneering effort: Brevan Howard Asset Management co-founder Alan Howard had taken an ownership stake in One River Digital and was helping provide the company with backend trading services. Another prominent backer was British hedge fund Ruffer, which last December also revealed that 2.5% of its total AUM were in bitcoin.

    And since the last big bitcoin plunge took place last March, that makes the current crypto crash the first major stress-test for One River, not to mention a majority of the 14% of Americans who owned crypto at the end of 2020.

    So how is the hedge fund trading the current crash? Below, are some digital market comments from Marcel Kasumovich, the fund’s head of research, as of May 19, so much of the selling indicated here has taken place in the 72 hours subsequent to this note:

    This is a broader crypto trading washout. It is worth benchmarking the Bitcoin downturn to previous ones. We are approaching the percentage drawdown of the Feb-Mar 2020 period. A price decline to $23,700 or so would replicate the initial 2017-2018 downturn. The patterns thereafter of those two downturns were vastly different obviously. After the initial bottom in 2018, Bitcoin fell another 55% and it took nearly four years to recover the 2017 high-water. It took only months to recover the 2020 downturn.

    The role of Grayscale lockups remains poorly understood. This was arbitrage demand for Bitcoin that now needs to be absorbed. In the next ten days, 33mm shares become unlocked and will need to be sold as the unwind of the original trade. Through the end of August, 151mm shares will be unlocked (22% of total supply). At a Bitcoin price of $33k, that is $3.2bln of supply to be absorbed. There can be high profile stresses in the ecosystem of players engaged in this trade. The Grayscale discount is fairly stable around 20% discount through the latest downturn, suggesting some institutional demand willing to absorb supply at prevailing prices.

    We learn a lot from the ecosystem data. Take stablecoin prices. USD.T and USD.C are incredibly steady through this downturn. Dai shows a bit more volatility, trading to as low as 0.995 (to put into real world numbers, on $1mn of collateral we’re talking about a $5k haircut from Dai at the low in prices, which was quite brief). It is not nothing, particularly in violent markets. But overall, this element of the ecosystem is performing very well. Trading volumes in USD.T are running $64bln in the past 24 hours, roughly 3-times the start of the year.

    The liquidity shock in leveraged trading markets is easily evident. Deribit is a good example. The bid-offer pricing on $10mn Bitcoin in the perpetual swap market (leveraged forwards) was wider than 30% earlier today and is currently around 10%. Other exchanges were trading at a fraction of this price tiering. You see the same in implied yields across exchanges. The 1-month annualized yield on the Deribit exchange plunged to -75% annualized at its worst point today. Ether is similar, though not as extreme as Bitcoin relative to last March.

    There has been a rapid inflow of Bitcoin back to exchanges. This is an indicator of holders preparing to sell. In turn, cash holdings through markets like USD.T also show a rise. Large wallets or “whales” are not responsible for flows in the past month. Flipside Crypto does a terrific job of documenting these flows day by day. Smaller wallets and exchanges overwhelm the flow, accounting for 550k of Bitcoin token flows compared to 17k for whales. Ether flows are an entirely different architecture, even though the outcomes are correlated. The moves are between decentralized exchanges and smart contracts, such as ETH embedded in Dai.

    Where do we go from here? The speed of moves and ecosystem make it clear this is a speculative risk move, with a liquidity component. Is the macro backdrop intact? Yes. Are there near-term challenges to overcome? Absolutely. Grayscale locks and FATF (Financial Action Task Force) guidance on decentralized finance are big ones. Not a crypto winter, more of a cold front from Washington. A recovery slower than March 2020, but much faster than 2018 would be my benchmark.

    Tyler Durden
    Sun, 05/23/2021 – 20:30

  • David Rosenberg: "A Whole Bunch Of People Are Really, Really Wrong" About Inflation
    David Rosenberg: “A Whole Bunch Of People Are Really, Really Wrong” About Inflation

    With so much focus on the macro environment as stocks struggle to return to their all-time highs, MacroVoices invited seasoned Wall Street economist David Rosenberg, the chief economist and chief strategist of Rosenberg Research, on the show this week to discus the market’s topic du jour: inflation, and whether or not it will be “transitory,” like the Federal Reserve says.

    What followed was a thorough critique from Rosenberg, who just a couple of months ago was warning that rising Treasury yields would soon push the market to a “breaking point,” of what he sees as flaws in the market’s pricing of lasting inflationary pressures.

    Instead, Rosenberg essentially agrees with Fed Chairman Jerome Powell that the recent acceleration in inflation seen in April will be temporary.

    What’s going on isn’t a fundamental “regime shift”, but rather a “pendulum” swinging back to the opposite extreme following the sudden deflationary demand shock caused by the pandemic. We had three consecutive months of negative CPI prints last year, Rosenberg pointed out. To offset all that, April saw the biggest MoM jump in consumer prices since 1981.

    Rosenberg argues that the factors that contributed to this surge in prices are already starting to fade. Commodity prices are falling back to earth, supply chain shortages are slowly being addressed, and leading indicators already show a dramatic increase in exports out of Korea and Taiwan, critical sources of semiconductors. Meanwhile, container ships that are “filled to the brim” are lingering outside the ports of LA and Long Beach, the two busiest ports in the country, as COVID concerns continue to delay the unloading of these ships. With all these signs that supply chain snarls are quickly being worked out, “to suggest that the supply will not come back to me is ridiculous,” Rosenberg said.

    On the demand side of the equation, federal stimulus has created a sugar high that Rosenberg expects will wear off by the fall. Around that time, Rosenberg believes, all the workers being kept out of the labor pool by generous government benefits will be forced to look for work again, and the “fiscal withdrawal” will emerge to suppress aggregate demand just as supply levels are normalizing. “The fiscal policy and the short term nature of the stimulus has just accentuated the volatility in the data. So I actually believe that come the fall, we will start to see the reopenings having a positive impact on aggregate supply at a time when we’re gonna see fiscal withdrawal having a downward impact on demand. And so a lot of the inflation we’re seeing today is going to reverse course I expect either by late summer or early fall.”

    Moving on, Rosenberg criticized economists calling for an inflationary “regime change” under the Democrats, claiming that similar arguments were made when both Trump and Obama took office. And while professional economists like to talk about the M2 money supply, Rosenberg argued there’s little correlation between Money Supply and inflation: “for the past 20 years, the money supply numbers have had no correlation with anything except maybe asset prices. And you’re quite right. We’ve had dramatic asset inflation. Well, look, there’s different ways even regulatory, that we can deal with that. That’s a big problem.

    He then pointed to another theory of inflation that’s increasingly gaining credibility among economists: the notion that inflation isn’t correlated with money supply, but money velocity, which has been contracting for decades. 

    “But you cannot predict inflation with just the money supply because you have to take a look at money velocity and money velocity has been contracting for decades because we’re choking on too much debt. And it has impaired the credit multiplier. So I don’t see that that’s changed.”

    And as for all those claiming that McDonald’s and Wal-Mart hiking wages will lead to inflation on that end, Rosenberg joked that they clearly have forgotten a similar wave of wage-hike announcements a few years back after President Trump passed his tax cuts.

    “Money supply against money velocity is not leading right now to an inflationary conclusion, oh, people are now saying, well look at wages. Look at all these companies announcing wage increases. And then of course, to lure these people that work in the consumer cycle industries, whether it’s restaurants, or in the hotel business, or theme parks. You know, once again, a little history goes a long way. I remember back after Trump cut taxes on the corporate side and allowed companies to repatriate tax free their earnings from abroad back home and all these companies. I listed 20 them in my morning note the other day. 4% of the corporate sector announced wage and bonus increases back in early 2018, some bellwether companies too. So where was the big inflation coming out of that?”

    Moving on from all the inflation talk, Rosenberg said he’s more interested in productivity, which actually increased in 2020 as millions of workers retreated to their home offices. It’s a phenomenon that deserves more attention.

    “So here we have a situation which nobody talks about what’s really important, which is that we just got last week, a first quarter productivity number that’s showing that productivity is running over a 4% annual rate. Now, whether that’s a secular or structural change, I’m not sure. But you know, everybody talks about regime change in an inflationary way. But nobody talks about the fact that in the weakest year for the US economy since 1946, it was the best year for productivity in a decade. Companies actually realized for all the lamenting of shortages and job shortages and job shortages and job shortages. The reality is that the corporate sector actually had its best productivity performance in a decade in the same year that we had the worst year for employment since the 1930s.”

    Still, “it’s really hard to tell if that’s noise, or a more fundamental shift,” Rosenberg added.

    But the takeaway for all this is that, as Rosenberg sees it, the big focus on an inflationary “regime shift” has caused the market narrative to shift in a way that Rosenberg believes is somewhat overzealous.

    We’ve got some inflation right now, because the economy is having trouble getting started up and responding quickly to demand, it’ll all come back out and we’ll be back to what we’ve been used to for the last several years. That’s the way you see this playing out. If that’s right, it means a whole bunch of people are really, really wrong. And that means market opportunity, because a whole bunch of things have moved quite a long ways in a inflation is coming and not just inflation, but secular inflation is coming. If people are wrong about thinking that, and we don’t really have secular inflation coming. What’s the best trade to kind of play the crowds got it wrong? Well let me just say that I’m not gonna actually say that the markets have anything particularly wrong. What I’m saying is that the narrative that you’re reading and hearing about day in day out, that narrative is wrong. You know, look, The Wall Street Journal runs with an editorial that uses as its inflationary thesis, the one year, the one year inflation expectation component out of the University of Michigan index, which just came out on Friday for May.

    A quick glance at the TIPS market shows that most inflation expectations being priced in are still “very near term”, and that spreads between twos and fives, fives and tens, and twos and 30s shows there’s been “no big outbreak of longer term inflation expectations.”

    What they don’t tell you is that if you back out the two to five year inflation expectation, because the one year is just if you plot the one year inflation expectation against gasoline prices, that’s your story. But the two to five year, the two to five year hasn’t moved, it’s still in the range. For that particular metric, it’s 2.7%. It’s still in the range. The two to five years, if you go into taking a look at the TIPS market, or the breakeven inflation levels out of the bond market, you’ll see that most of the inflation expectation is still a very near term. Like really out to the next two years. If you take a look at the breakeven spreads between twos and fives and fives and 10s and twos and 30s. You’ll see that there’s been no big outbreak of longer term inflation expectations. That’s actually very encouraging. They’re just telling you that right now we have a tremendous dislocation. And yes, it’s going to probably gonna last a few more months. It’s not just your base effects. There is some real price increases coming into the fore. But what would you expect? I mean look, we just had a 10% increase in airfares and the CPI index, they’re still down 20% from where they were pre-COVID. You know, the sports tickets and the like that were up 10% in April. You know they’re down significantly for where they were pre-COVID. And so there’s still tremendous amount of distortions.

    In a chart-filled slide deck shared alongside the interview, Rosenberg argues that neither inflation or an early Fed taper are the main risks to the stock market and other risk assets. In reality, Rosenberg expects a post-stimulus growth shock in Q4 could lead to widespread re-pricing.

    Source: Rosenberg Research, MacroVoices

    For what it’s worth, a quick glance at the “stale” Fed minutes released this week show Fed insiders still see inflationary risks as “balanced.”

    More confirmation that inflation is just “transitory”

    The staff continued to view the risks around the inflation projection as balanced.

    … even as some concede that supply chain collapse can lead to higher prices for longer:

    A number of participants remarked that supply chain bottlenecks and input shortages may not be resolved quickly and, if so, these factors could put upward pressure on prices beyond this year. They noted that in some industries, supply chain disruptions appeared to be more persistent than originally anticipated and reportedly had led to higher input costs.

    But investors like Jeff Gundlach aren’t so sure, arguing that the Fed’s “transitory” rhetoric is the result of mere guesswork.

    Readers can listen to the full interview below:

    And find the transcript here:

    MV272 David Rosenberg Interview on Scribd

    For a look at Rosenberg’s chart book, check out MacroVoices.com.

     

    Tyler Durden
    Sun, 05/23/2021 – 20:00

  • Rand Paul First Senator To Announce He Won't Get COVID-19 Vaccine
    Rand Paul First Senator To Announce He Won’t Get COVID-19 Vaccine

    Authored by Jack Phillips via The Epoch Times,

    Sen. Rand Paul (R-Ky.) announced this weekend that he will not get vaccinated against COVID-19, explaining that he already contracted the virus last year and has “natural immunity.”

    Paul, who is an ophthalmologist, said that he has not seen evidence proving the vaccine is more effective than having survived the CCP (Chinese Communist Party) virus, otherwise known as the novel coronavirus, so he won’t get the shot.

    “Until they show me evidence that people who have already had the infection are dying in large numbers, or being hospitalized or getting very sick, I just made my own personal decision that I’m not getting vaccinated because I’ve already had the disease and I have natural immunity,” Paul, who appears to be the first senator to announce he won’t get vaccinated, told WABC 770 AM on Sunday, according to news reports.

    Paul has made similar remarks in the past when interviewed about vaccines. Sen. Ron Johnson (R-Wis.), who also recovered from COVID-19, suggested he wouldn’t get vaccine earlier this year.

    Paul tested positive for COVID-19 in March 2020, becoming the first senator to contract the virus. At the time, Paul said he did not develop any notable symptoms and wasn’t hospitalized.

    The senator also noted that the pressure from various institutions to get vaccinated flies in the face of individual liberty.

    “In a free country you would think people would honor the idea that each individual would get to make the medical decision, that it wouldn’t be a big brother coming to tell me what I have to do,” Paul said in the interview, suggesting that the pressure campaign around vaccines could be an attempt to manufacture consent for other power grabs.

    “Are they also going to tell me I can’t have a cheeseburger for lunch? Are they going to tell me that I have to eat carrots only and cut my calories?” the Kentucky senator said.

    “All that would probably be good for me, but I don’t think big brother ought to tell me to do it.”

    The Centers for Disease Control and Prevention (CDC) has recommended that people who have recovered from the CCP virus get vaccinated, arguing that health officials don’t know how long natural immunity lasts.

    “Even if you have already recovered from COVID-19, it is possible—although rare—that you could be infected with the virus that causes COVID-19 again,” the CDC says on its website.

    Paul’s comments come as some states and municipalities have attempted to place pressure on businesses trying to reopen by ascertaining whether their employees have been vaccinated.

    Last week, Oregon became the first state to require that individuals in workplaces, businesses, and houses of worship show proof of vaccination before entering facilities without wearing masks. And in Santa Clara County, California, health officials issued an order that stipulated businesses are now required to determine the vaccination status of employees.

    Tyler Durden
    Sun, 05/23/2021 – 19:30

  • Goldman Lists The Three "Gray Rhinos" Haunting The Market
    Goldman Lists The Three “Gray Rhinos” Haunting The Market

    Confirming that “selling in May” is there for a reason, virtually every bank has turned cautious if not outright downbeat on the market following a blockbuster earnings season when despite record earnings beats, the S&P is down compared to where it was a month ago. So now that Wall Street is back to its favorite activity of “explaining” events after the fact, here is Goldman strategist Chris Hussey listing the three key “grey rhino” events the market is grappling with.

    As Hussey writes in the “end of week” market intel note, “gray rhino” risks have proliferated around markets this week, helping to sustain the tepid return range that the S&P 500 has been stuck in all of May (now down 0.2% mtd). Incidentally, for those unaware, Gray rhinos – not to be confused with black swans – refer to black swan type of events (bad things) but ones that we know about but still don’t do anything about (similar, perhaps to the 800 lb gorilla in the room). Some have referred, for example, to the COVID-19 pandemic as a Gray Rhino event (especially now that the lab escape hypothesis is once again all the rage).

    In any case, according to Goldman, among the gray rhino events markets are grappling with this week include:

    • The run-up in commodity prices, including cryptocurrencies. Copper is downn3%+ for the week, iron ore down 1%, and front month oil futures are down~3%.  Additionally, some cryptocurrencies are down as much as 50% for the week.
    • Inflation. Last week’s CPI and PPI releases continue to garner attention. And at Goldman’s Global Staples Forum this week, participating CPG companies called out inflation headwinds that are likely to only grow stronger
    • S&P 500 valuations.  The S&P 500 continues to trade near a P/E of 22X — very high by historical standards and a valuation level that is unlikely to expand from here even as earnings climb higher writes chief strategist David Kostin.

    When one thinks about what can be done to cut these gray rhino’s off at the pass, Goldman notes that there are some developments. China has already started to introduce regulations aimed at curbing excessive speculation and asset prices as Hui Shan addresses in “China’s digital economy.”  And the Fed, of course, is positioned to step in with tighter monetary policy to curb a sustained increase in inflation expectations should it develop — although Goldman’s David Mericle does not believe that the current “temporary” spike in inflation is likely to cause the Fed to act. Here is Goldman’s chart of the week for an illustration of when the bank sees inflation peaking.

    As for the market’s ‘high’ valuation, Goldman’s strategist suggests that perhaps this week’s trading action is a sign that investors are willing to address this gray rhino by being a bit more selective even on the back of extremely strong earnings growth.

    Interestingly, investors do not appear to be as shaken by the market concentration we have been experiencing for quite some time. The FAAMG complex is performing in-line with the broader S&P 5000 index on average this week — in other words, the market remains as concentrated as it was to start the week, something we noted on Friday when we highlighted how 4 of the 5 FAAMG stocks are also among the 5 most widely owned hedge fund stocks.

    The one non-FAAMG stock in the HF top-5? BABA.The one FAAMG stock that is not in the HF top-5? AAPL.

    Tyler Durden
    Sun, 05/23/2021 – 19:11

  • How Hard Will Biden Press For A Probe Of Wuhan Knowing That A Lab Leak Will Require Political Response
    How Hard Will Biden Press For A Probe Of Wuhan Knowing That A Lab Leak Will Require Political Response

    By Eric Peters, CIO of One River Asset Management

    The world’s worst disaster in a century killed 7.1mm-12.7mm across the planet. The total continued rising. No one knew exactly when it would end, only that the poorest nations would bear the brunt. They always do. European and Asian countries lost more citizens than they had since WWII. The US lost more than in any war. Children fell behind. Economic costs spiraled, leaving each nation’s finances forever changed. Monetary and fiscal policy merged in the West. Inflation reappeared. Despots tightened their grip. America’s president was voted out.  

    In the emergency of the moment, the world’s leaders mostly kept their nations focused on dealing with the disaster. But as the crisis in the developed world subsided, focus turned to the origin of it all. The world’s leading biologists felt that the preliminary analysis lacked scientific rigor and appeared incomplete. To prevent a repeat of such tragedy, they insisted on doing what they are trained to do. And in this search for the truth, they had to seriously explore the possibility that the disaster was not of natural origin, but an accident.

    Having suffered the consequences, people throughout the world rightly sought the truth. But the hunt for truth in epidemiology is a rather different matter than the search for truth in geopolitics. The former is infinitely cleaner and easier than the latter. And to compound that difficulty, the geopolitical consequences of this disaster having been a laboratory accident are so vast that it is difficult to quite imagine. Would nations hold China to account? If so, how? War reparations? How would international debts be treated? Equity? These barely scratch the surface.

    Every person on the planet should hope the truth is the virus struck humanity naturally, unluckily (I sure do). Beijing certainly wants this to remain the explanation. They rebuked Australia for questioning it. So how hard will Western leaders press for a thorough investigation knowing that if it were to conclude a lab leak, it would require a political response that could turn the world upside down? And yet, if they do not press hard, how will Western governments retain their already diminished credibility when it comes to national security?

    Tyler Durden
    Sun, 05/23/2021 – 18:30

  • "The Amazon Of Information": Goldman Initiates On Crypto, Sees Ethereum Overtaking Bitcoin
    “The Amazon Of Information”: Goldman Initiates On Crypto, Sees Ethereum Overtaking Bitcoin

    When Goldman officially announced two weeks ago that it was re-launching a previously rumored cryptocurrency trading team on May 6…

    … some joked that this was the top-tick for the crypto space: after all, the last time Goldman launched a bitcoin trading desk, the sector imploded and just a few months later Goldman killed its expansion plans, sending cryptos tumbling even more, and starting the infamous crypto winter which lasted over two years.

    In retrospect, such cynicism wasn’t too far off, because bitcoin did plunge more than 40% since the day Goldman decided to relaunch its trading effort.

    However, poor recent price action notwithstanding, we doubt that Goldman would let it go 2 out of 2 on catastrophic crypto crashes as soon as it officially gets involved.

    Confirming this is an aggregate report published by Goldman late on Friday which is as close to an initiation by Goldman on the asset class as one can hope (last month Goldman already revealed its favorite “crypto-exposed” stocks), and which includes not only a handful of both “pro” crypto interviews (with Mike Novogratz leading the cheerleaders) as well as “anti” (Nouriel Roubini not surprisingly is the lead hater), but more importantly Goldman reveals its own thoughts on:

    • Bitcoin as a macro assets
    • Crypto as its own asset class
    • What is a digital store of value, and
    • The role of crypto in balanced portfolios

    While the full report can be found in the usual place (for pro subscribers)…

    … we wanted to highlight the one thing we found notable in the 40 page report, is the bank’s preference for ethereum (an entirely new technological platform) over bitcoin (a store of value and an alternative payment system) which is not really surprising: as Mike Novogratz points out, “the three biggest moves in the crypto ecosystem—payments, DeFi, and NFTs—are mostly being built on Ethereum, so it’s going to get priced like a network. The more people that use it, the more stuff that gets built on it, and the higher the price will ultimately go.” And since for the past five years much of the world has largely associated crypto with bitcoin, it will take some time for conventional wisdom to realize that there is much more to crypto than just bitcoin.

    Which incidentally brings up the question, of just what is crypto, and conveniently none other than the head of commodities at Goldman, Jeff Currie, has dedicated an entire section discussing this, which also reveals how Goldman is approaching the various constituents of the crypto space: Currie argues that cryptos are a new class of asset that derive their value from the information being verified and the size and growth of their networks. Here are the details:

    The term “cryptocurrencies”—which most people take to mean that crypto assets act as a digital medium of exchange, like fiat currency—is fundamentally misleading when it comes to assessing the value of these assets. Indeed, the blockchain that underlies bitcoin was not designed to replace a fiat currency—it is a trusted peer-to-peer payments network. As a cryptographic algorithm generates the proof that the payment was correctly executed, no third party is needed to verify the transaction. The blockchain and its native coin were therefore designed to replace the banking system and others like insurance that require a trusted intermediary today, not the Dollar. In that sense, the blockchain is differentiated from other “digital” transactional mechanisms such as PayPal, which is dependent upon the banking system to prevent fraud like double-spending.

    In order to be trustworthy, the system needed to create an asset that had no liabilities or contingent claims, which can only be a real asset just like a commodity. And to achieve that, blockchain technologies used scarcity in natural resources—oil, gas, coal, uranium and hydro—through ever-increasing computational-power consumption to “mine” a bit version of a natural resource.

    From this perspective, the intrinsic value of the network is the trustworthy information that the blockchain produces through its mining process, and the coins native to the network are required to unlock this trusted information, and make it tradeable and fungible. It’s therefore impossible to say that the network has value and a role in society without saying that the coin does too. And the value of the coin is dependent upon the value and growth of the network.

    That said, because the network is decentralized and anonymous, legal challenges facing future growth for crypto assets loom large. Coins trying to displace the Dollar run headlong into anti-money laundering laws (AML), as exemplified by the recent ransoms demanded in bitcoin from the Colonial Pipeline operator and the Irish Health service. Regulators can impede the use of crypto assets as a substitute for the Dollar or other currencies simply by making them non-convertible. An asset only has value if it can either be used or sold. And Chinese and Indian authorities have already challenged crypto uses in payments.

    As a result, the market share of coins used for other purposes beyond currencies like “smart contracts” and “information tokens” will likely continue to rise. However, even these non-currency uses will need to be recognized by courts of law to be accepted in commercial transactions—a question we leave to the lawyers.

    The network creates the value, unlike other commodities

    Unlike other commodities, coins derive their entire value from the network. A bitcoin has no value outside of its network as it is native to the Bitcoin blockchain. The value of oil is also largely derived from the transportation network that it fuels, but at least oil can be burned to create heat outside of this network. At the other extreme, gold doesn’t require a network at all.

    Derived demand leaves the holder of the commodity exposed to the risk of the network becoming obsolete—a lesson that holders of oil reserves are now learning with decarbonization accelerating the decline of the transportation network, and, in turn damaging oil demand. Likewise, bitcoin owners face accelerated network decay risk from a competing network, backed by a new cryptocurrency.

    As the demand for gold is not dependent on a network, it will ultimately outlive oil and bitcoin—gold entropy lies at the unit, not the network, level. Indeed, most stores of value that are used as defensive assets—like gold, diamonds and collectibles—don’t have derived demand and therefore only face unit-level entropy risk. This is what makes them defensive. The world can fall apart around them and they preserve their value. And while they don’t have derived demand, they do have other uses that establish their value, i.e. gold is used for jewelry and as a store of value.

    Transactions drive value, creating a risk-on asset

    Crypto doesn’t trade like gold and nor should it. Using any standard valuation method, transactions or expected transactions on the network are the key determinant of network value. The more transactions the blockchain can verify, the greater the network value. Transaction volumes and the demand for commodified information are roughly correlated with the business cycle; thus, crypto assets should trade as pro-cyclical risk-on assets as they have for the past decade. Gold and bitcoin are therefore not competing assets as is commonly misunderstood, and can instead co-exist. Because the value of the network and hence the coin is derived from the volume of transactions, hoarding coins as stores of value reduces the coins available for transactions, which reduces the value of the network. Because gold doesn’t have this property, it is the only commodity that institutional investors hold in physical inventory. Nearly all other commodities are held in paper inventory in the form of futures to avoid disrupting the network. This suggests that, like oil, crypto investments will need to be held in the form of futures contracts, not physically, if they are to serve as stores of value.

    Crypto assets aren’t digital oil, either, as they are not non-durable consumables and can therefore be used again. This durability makes them a store of value, provided this demand doesn’t disrupt network flows. The crypto assets that have the greatest utility are also likely to be the dominant stores of value—the high utility reduces the carry costs.

    So what is crypto? A powerful networking effect

    The network provides crypto an extremely powerful networking externality that no other commodity possesses. The operators—miners, exchanges and developers—are all paid in the native coin, making them fully vested in its success. Similarly, users—merchants, investors and speculators—are also fully vested. This gives bitcoin holders an incentive to accommodate purchases of their own products in bitcoin, which in turn, creates more demand for the coins they already own. Similarly, ether holders have an incentive to build apps and other products on the Ethereum network to increase the value of their coins.

    Because the coin holders have a stake in the network, speculation spurs adoption; even during bust periods, coin holders are motivated to work to create the next new boom. After the dot-com bust, the shareholders had no commodity to promote. In crypto assets, even when prices collapse, the coin holders have a commodity to promote. They will always live for another boom, like an oil wildcatter.

    It’s all about information

    As the value of the coin is dependent on the value of the trustworthy information, blockchain technology has gravitated toward those industries where trust is most essential—finance, law and medicine. For the Bitcoin blockchain, this information is the record of every balance sheet in the network, and the transactions between them—originally the role of banks. In the case of a smart contract—a piece of code that executes according to a pre-set rule—on Ethereum, both the terms of that contract (the code) and the state of the contract (executed or not) are the information validated on the Ethereum blockchain. As a result, the counterparty in the contract cannot claim a transfer of funds without the network forming a consensus that the contract was indeed executed. In our view the most valuable crypto assets will be those that help verify the most critical information in the economy.

    Over time, the decentralized nature of the network will diminish concerns about storing personal data on the blockchain. One’s digital profile could contain personal data including asset ownership, medical history and even IP rights. Since this information is immutable—it cannot be changed without consensus—the trusted information can then be tokenized and traded. A blockchain platform like Ethereum could potentially become a large market for vendors of trusted information, like Amazon is for consumer goods today.

    Crypto beyond this boom and bust cycle

    By many measures—Metcalfe’s Law or Network Value to Transactions (NVT) ratio —crypto assets are in bubble territory. But does the demand for “commodified information” create enough economic value at a low enough cost to be scaled up in the long run? If the legal system accommodates these assets, we believe so. While many overvalued networks exist, a few will likely emerge as long-term winners in the next stage of the digital economy, just as the tech titans of today emerged from the dot-com boom and bust. This transformation is happening now—there are already an estimated 21.2 million owners of cryptocurrencies in the US alone. However, technological, environmental and legal challenges still loom large.

    Ethereum 2.0 is expected to ramp up capacity to 3,000 transactions per second (tps), while sharding—which will scale Ethereum 2.0’s Proof of Stake (PoS) system through parallel verification of transactions—has the potential to raise capacity to as much as 100,000 tps. For context, Visa has the capacity to process up to 65,000 tps but typically executes around 2,000 tps. PoS intends to have validators stake the now scarce and valuable coins to incentivize good behavior instead of having miners expend energy to mine new blocks into existence, as under Proof of Work, making crypto assets more ESG friendly. PoS also can significantly boost computational time in terms of transactions per second, which will further incentivize technological adoption. Ironically, this is likely where the value of and demand for bitcoin will come from—being used as the scarce resource to make the PoS system work instead of natural resources.

    While overcoming the economic challenges will likely be manageable, the legal challenges are the largest for many crypto assets. And this past week was challenging for crypto assets with confirmation that the 75 bitcoin ransom over the Colonial Pipeline was actually paid. This is a reminder that cryptocurrencies still facilitate criminal activities that have large social costs.

    For Ethereum, new companies which aim to disrupt finance, law or medicine by integrating information stored on the platform into their algorithms are likely to run into problems with being legally recognized. If crypto assets are to survive and grow to their fullest potential, they need to define some concept of “sufficiently decentralized” that will satisfy regulators; otherwise, the technologies will soon run out of uses.

    In short: bitcoin is good, and “ironically” will be used as the “scarce resource” to make PoS systems work “instead of natural resources”, but while bitcoin may end up being a one-trick pony (if quite valuable) it is the new blockchain platforms – like Ethereum – that will serve as the basis for a marketplace of trusted information, as Goldman puts it “like Amazon is for consumer goods today.”

    Since this is a Goldman report, it was naturally chock-full of charts and images, and below we reproduce the main ones, first, focusing on bitcoin…

    …  then ethereum…

    … a snapshot of all cryptos…

    … and recent price performance.

    And with that background in place, here is why Goldman believes that “ether has high chance of overtaking bitcoin as the dominant digital store of value.” Here is Goldman explaining what is a digital store of value:

    Based on emerging blockchain technology that has the power to disrupt global finance, yet with limited clear use today, bitcoin has been labeled a solution looking for a problem. Many investors now view bitcoin as a digital store of value, comparable to gold, housing, or fine wine. But all true stores of value in history have provided either income or utility, and bitcoin currently provides no income and only very modest utility.

    However, unlike bitcoin, several other crypto assets have clear economic rationales behind their creation. Bitcoin’s first-mover advantage is also fragile; crypto remains a nascent field with shifting technology and consumer preferences, and networks that fail to adjust quickly could lose their leadership. We therefore see a high likelihood that bitcoin will eventually lose its crown as the dominant digital store of value to another cryptocurrency with greater practical use and technological agility. Ether looks like the most likely candidate today to overtake bitcoin, but that outcome is far from certain.

    What is a store of value?

    A store of value is anything that preserves its value over time. While financial stores of value like equities and bonds hold their value because they produce a given cash flow, yield is not a prerequisite for value. Art, wine, gold, and non-yielding currencies are widely used as stores of value too. Yet all of these non-yielding assets have a clear material use besides being stores of value. This usefulness generates a “convenience yield”—the incentive for people to own them—that reflects both the utility a consumer derives from using these assets and the relative scarcity of that utility—a fact captured by Adam Smith’s famous Diamond-Water paradox.

    We place assets on a continuum across time by their store of value properties. We identify stores of future value, like financial assets that offer the owner the right to future yields or the promise of growing value over time, stores of present value, like consumable commodities such as oil and grains for which the utility of driving and eating today imparts a convenience yield, and stores of past value, like gold, art or even housing in which the assets store value generated in the past because of their duration.

    Value always stems from use

    The key to stores of past value like gold and houses is that someone demanded these assets in the past and placed value in them by exchanging something of value, usually currency, for them. Indeed, all important non-yielding stores of value developed real uses before becoming investment assets. For instance, gold was first used as jewelry to signal permanence, commitment or immortality. The economic problem was a need to signal permanence, and gold’s durable and inert elemental properties solved that problem. Given the state of technology at the time, gold was the only solution for this problem, which explains why so many societies adopted it for this use.

    And when societies began to conquer each other and needed a means to standardize international trade, gold was the natural choice to solve this economic problem as most societies already owned gold and it was divisible. Real use is important for stores of value because consumption demand tends to be price-sensitive and therefore provides some offset to fluctuations in investment demand, tempering price volatility. For example, jewelry demand is the swing factor in the gold market, falling when investment demand for gold pushes prices higher, and vice versa.

    Ether beats bitcoin as a store of value

    Given the importance of real uses in determining store of value, ether has high chance of overtaking bitcoin as the dominant digital store of value. The Ethereum ecosystem supports smart contracts and provides developers a way to create new applications on its platform. Most decentralized finance (DeFi) applications are being built on the Ethereum network, and most non-fungible tokens (NFTs) issued today are purchased using ether. The greater number of transactions in ether versus bitcoin reflects this dominance. As cryptocurrency use in DeFi and NFTs becomes more widespread, ether will build its own first-mover advantage in applied crypto technology.

    Ethereum can also be used to store almost any information securely and privately on a decentralized ledger. And this information can be tokenized and traded. This means that the Ethereum platform has the potential to become a large market for trusted information. We are seeing glimpses of that today with the sale of digital art and collectibles online through the use of NFTs. But this is a tiny peek at its actual practical uses. For example, individuals can store and sell their medical data through Ethereum to pharma research companies. A digital profile on Ethereum could contain personal data including asset ownership, medical history and even IP rights. Ethereum also has the benefit of running on a decentralized global server base rather than a centralized one like Amazon or Microsoft, possibly providing a solution to concerns about sharing personal data.

    A major argument in favor of bitcoin as a store of value is its limited supply. But demand, not scarcity, drives the success of stores of value. No other store of value has a fixed supply. Gold supply has grown nearly ~2% pa for centuries, and it has remained an accepted store of value. Plenty of scarce elements like osmium are not stores of value. In fact, a fixed and limited supply risks driving up price volatility by incentivizing hoarding and forcing new buyers to outbid existing holders, potentially creating financial bubbles. More important than having a limited supply to preserve value is having a low risk of dramatic and unpredictable increases in new supply. And ether, for which the total supply is not capped, but annual supply growth is, meets this criterion.

    Fast-moving technologies break first-mover advantage

    The most common argument in favor of bitcoin maintaining its dominance over other cryptocurrencies is its first-mover advantage and large user base. But history has shown that in an industry with fast-changing technology and growing demand, a first-mover advantage is difficult to maintain. If an incumbent fails to adjust to shifting consumer preferences or competitors’ technological advances, they may lose their dominant position. Think of Myspace and Facebook, Netscape and Internet Explorer or Yahoo and Google.

    For crypto networks themselves, active user numbers have been very volatile. During 2017/18, Ethereum was able to gain an active user base that was 80% the size of Bitcoin’s within one year. Ethereum’s governance structure, with a central developer team driving new proposals, may be best suited for today’s dynamic environment in which crypto technology is changing rapidly and systems that fail to upgrade quickly can become obsolete.

    Indeed, Ethereum is undergoing much more rapid upgrades to its protocol than Bitcoin. Namely, Ethereum is currently transitioning from a Proof of Work (PoW) to a Proof of Stake (PoS) verification method. Proof of Stake has the advantage of dramatically increasing the energy efficiency of the system as it rewards miners based on the amount of ether holdings they choose to stake rather than their processing capacity, which will end the electricity-burning race for miner rewards. Bitcoin’s energy consumption is already the size of the Netherlands and could double if bitcoin prices rise to $100,000. This makes bitcoin investment challenging from an ESG perspective.

    While PoS protocols raise security concerns due to the need for trusted supervisors in the verification process, Bitcoin is also not 100% secure. Four large Chinese mining pools control almost 60% of bitcoin supply and could in theory collude to verify a fake transaction. Ethereum too faces many risks and its ascendance to dominance is by no means guaranteed. For instance, if the Ethereum 2.0 upgrade is delayed, developers may choose to move to competing platforms. Equally, Bitcoin’s usability can potentially be improved with the introduction of the Lightning Network, a change of protocol to support smart contracts and a shift to PoS. All cryptocurrencies remain in early days with fast-changing technology and volatile user bases.

    High vol is here to stay until real use drives value

    The key difference between the current rally in crypto and the crypto bull market of 2017/18 is the presence of institutional investors—a sign that financial markets are starting to embrace crypto assets. But bitcoin’s volatility has remained persistently high, with prices falling 30% in one day in just this past week. Such volatility is unlikely to abate until bitcoin has an underlying real, economic use independent of price to smooth out periods of selling pressure. Indeed, more recently, institutional participation has slowed as reflected in lower inflows into crypto ETFs, while the outperformance of altcoins indicate that retail activity has once again taken center stage.

    This shift from institutional adoption to increasing retail speculation is creating a market that is increasingly comparable to that of 2017/18, increasing the risk of a material correction. Only real demand that solves an economic problem will end this volatility and usher in a new mature era for crypto—one based upon economics rather than upon speculation.

    Goldman’s conclusion: ethereum is the platform that solves economic problems here and now, while bitcoin is “a solution looking for a problem.” It’s also why two weeks ago, JPMorgan also laid out a bullish case for eth even as it has continued to slam bitcoin. As a reminder, JPMorgan’s quant Nick Panigirtzoglou laid out six reasons why ethereum is set to continue its ascent even if there is a crackdown on bitcoin by either China or the US:

    1. The European Investment Bank (EIB) used the ethereum blockchain to issue €100mn in two-year zero-coupon digital notes last week, its first ever digital bond. The transaction involved a series of bond tokens on the ethereum blockchain, where investors purchase and pay for the security tokens using traditional fiat. The EIB digital bond is surely very significant as it represents the endorsement of the ethereum blockchain by a major official institution.
    2. The first ethereum ETF (ETHH) was launched on April 20th by Purpose Investments in Canada and three more ethereum ETFs launches followed during the same month.
    3. The structural decline in ethereum supply from the pending introduction of protocol EIP1559 in the summer. EIP 1559‘s objective is to make transaction fees on the ethereum blockchain more predictable by introducing an automatically calculated base fee for all transactions depending on network activity. Once paid with ethereum, this fee would be immediately burned, implying reduced supply of ethereum in the future. Ethereum’s theoretically unlimited supply had been a concern in the past, with ethereum in circulation rising by 5% per year over the past three years. Via burning ethereum through base fees, EIP1559 could potentially reduce the annual change of ethereum in circulation to 1-2% per year.
    4. The greater focus by investors on ESG has shifted attention away from the energy intensive bitcoin blockchain to the ethereum blockchain, which in anticipation of Ethereum 2.0 is expected to become a lot more energy efficient by the end of 2022. Ethereum 2.0 involves a shift from an energy intensive Proof-of-Work validation mechanism to a much less intensive Proof-of-Stake validation mechanism. As a result, less computational power and energy consumption would be needed to maintain the ethereum network.
    5. The sharp growth of NFTs and stablecoins in recent months are increasing the usage of the ethereum which is already dominating the DeFi ecosystem.
    6. The rise in bond yields and the eventual normalization of monetary policy is putting downward pressure on bitcoin as a form of digital gold, the same way higher real yields have been putting downward pressure on traditional gold. With ethereum deriving its value from its applications, ranging from DeFi to gaming to NFTs and stablecoins, it appears less susceptible than bitcoin to higher real yields.

    In short, while one doesn’t have to agree with Goldman or JPMorgan, these represent the institutional take. In other words, bitcoin and ethereum can co-exist and ostensibly become even more popular and eventually hit new all time highs (as a reminder FundStrat sees bitcoin hitting $100,000 and Ethereum rising to $10,500), but if the hammer hits and central banks in collaboration with local regulators decide to crackdown on crypto, what they will in fact be eliminating is the tax-evasion/money-laundering threat that bitcoin represents, while ethereum – and its various de-fi spinoffs – is left untouched. While that might mean ethereum has to find use within the demand confines of the so-called “establishment”, we doubt those who are long it will complain if Goldman is proven right and it becomes the “Amazon of trusted information”, one token trading at $20,000 or much more.

    Tyler Durden
    Sun, 05/23/2021 – 18:25

  • "Air's Coming Out Of The Balloon" – Redfin CEO Says Home Price Gains Set To Cool
    “Air’s Coming Out Of The Balloon” – Redfin CEO Says Home Price Gains Set To Cool

    Glenn Kelman, CEO at Redfin, spoke with Bloomberg Radio’s Denise Pellegrini on Wednesday about the state of the US housing market. He said the latest surge in home prices could subside. 

    Kelman said the housing market is a frenzy, with most houses selling above the asking prices, which has never happened before. 

    After record gains in the first quarter, some home prices are likely to stall. 

    Nationwide, the median existing-home sales price rose 16.2% in the first quarter to $319,200, a record high in data going back to 1989, according to the National Association of Realtors.

    We recently reported that home sales prices in the country’s hottest markets had risen by their widest level since 2006, according to the Case-Shiller Home Price Index, a closely watched measure of home prices in the US which offers a breakdown by region, as well as nationally. According to Case-Shiller, US home prices in 20 major cities are up a shocking 11.10% year-over-year.

    But outside the major metro markets, demand was even more robust, translating into the most significant YoY increase in median sales since 2006.

    So back to Kelman, who told Pellegrini that people placing bids well over the asking price might find their loan denied because the appraisal level will come in so much lower than what the house is worth. 

    Kelman warned: “I think you’re going to see a little bit of air come out of the ballon,” referring to the housing market bubble the Federal Reserve engineered by sending mortgage rates to record lows at the start of the virus pandemic in 2020. 

    He still believes some inland markets will continue to see price increases because of the migration of people from large metro areas settling in small towns where home prices are low in their eyes. 

    Kelman’s warning comes as home-buying sentiment has collapsed to its weakest since 1983…

    Meanwhile, Goldman Sachs believes by 2024 home prices will be rising at a pace far faster than the widely recognized 2006-2007 housing bubble. 

    So the question we are asking in the intermediate timeframe: will Kelman’s warning play out? 

    Tyler Durden
    Sun, 05/23/2021 – 18:00

  • Apples-to-Apples, Consumer Price Inflation Is Nearing 1970-Type Numbers
    Apples-to-Apples, Consumer Price Inflation Is Nearing 1970-Type Numbers

    By Joseph Carson, former chief economist at Alliance Bernstein

    Apples-to-apples, consumer price inflation nowadays is running close to the high inflation readings of the late 1970s. That should be a red flag for policymakers as monetary decisions are focused on actual outcomes, not forecasted. But reported inflation statistics do not show the 1970s inflation-style inflation because they no longer include actual house prices.

    The old consumer price index included house prices in measuring the owner’s housing cost, whereas the present-day price index base owners’ housing cost on an arbitrary, non-market rent measure. The only way to make a price series strictly comparable over time is to use the same measurement process.

    In April, the median price for existing homes increased 20.3% in the past twelve months, a new record and far above the 1970s high-reading of 17.4%. More importantly, the increase in existing house prices is ten times greater than the 2% increase in non-market rents in the consumer price index.

    Owners rent index accounts for nearly one-quarter of the overall consumer price index and a full one-third of the widely followed core index. Inserting actual house prices in place of the non-market rents would add roughly five percentage points to 4.2% headline and 3% core inflation readings. The last time the US consumer price inflation ran that high was during the 1978 to 1982 time frame.

    Just because reported inflation statistics no longer include actual house prices does not mean a rise in house price is not a sign of increased inflation and higher inflation expectations. If an increase in house prices is not inflation, then what is it?

    One would think the current generation of policymakers would include house prices in their policy framework since it is an inflation-related outcome directly linked to monetary policy.

    Inflation cycles don’t end well, and the odds of a bad outcome should be measurably higher when policymakers are unaware that monetary policy is fueling an unsustainable price cycle.

    Tyler Durden
    Sun, 05/23/2021 – 17:30

  • Wuhan Lab Workers Were 'So Sick They Sought Hospitalization' According To US Intelligence
    Wuhan Lab Workers Were ‘So Sick They Sought Hospitalization’ According To US Intelligence

    Three researchers at the Wuhan Institute of Virology were so sick in November of 2019 that they sought hospitalization, according to the Wall Street Journal, citing a previously undisclosed US intelligence report “that could add weight to growing calls for a fuller probe of whether the COVID-19 virus may have escaped from the laboratory.”

    Photo: hector retamal/Agence France-Presse/Getty Images

    The details of the reporting go beyond a State Department fact sheet, issued during the final days of the Trump administration, which said that several researchers at the lab, a center for the study of coronaviruses and other pathogens, became sick in autumn 2019 “with symptoms consistent with both Covid-19 and common seasonal illness.”

    The disclosure of the number of researchers, the timing of their illnesses and their hospital visits come on the eve of a meeting of the World Health Organization’s decision-making body, which is expected to discuss the next phase of an investigation into Covid-19’s origins. -WSJ

    “The information that we had coming from the various sources was of exquisite quality. It was very precise. What it didn’t tell you was exactly why they got sick,” one source told the Journal, while another person said the information, provided by an “international partner,” was potentially significant but still in need of further investigation and corroboration.

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    The Wuhan lab has notably refused to share raw data, safety logs and lab records of its extensive experiments with bat coronaviruses, which a US-funded NGO, EcoHealth Alliance, collaborated with.

    Beijing, meanwhile, has repeatedly denied that COVID-19 escaped from one of its labs – going as far on Sunday as to cite a WHO-led team’s conclusion that a lab leak was unlikely. A WHO team, mind you, which included EcoHealth’s Peter Daszak, the guy paid $666,000 per year by Anthony Fauci’s NIH to collaborate with the WUhan lab.

    “The U.S. continues to hype the lab leak theory,” China’s foreign ministry told the Journal in response to a request for comment. “Is it actually concerned about tracing the source or trying to divert attention?”

    Maybe Beijing – with its sophisticated tracking techniques – can explain the whereabouts of still-missing WIV lab worker Huang Yanling?

    Missing Chinese researcher Huang Yanling. Photo / news.com.au

    Huang Yanling, who worked at the Wuhan Institute of Virology, was one of scores of doctors, scientists, activists and journalists who disappeared during the Chinese Communist Party’s suspected cover-up.

    During the early weeks of the outbreak last February, rumours swirled on Chinese social media that the graduate student was “patient zero”, creating a direct link between the controversial lab and the virus outbreak.

    Chinese officials quickly stepped in to censor the reports from the internet.

    The Wuhan Institute of Virology denied she was patient zero and insisted, without evidence, that she was alive and well elsewhere in the country – while scrubbing her biography and image from its website. -NZ Herald

    The Biden administration, meanwhile, has gone from scoffing at the lab-leak hypothesis to a more neutral ‘wait-and-see’ stance.

    “We continue to have serious questions about the earliest days of the Covid-19 pandemic, including its origins within the People’s Republic of China,” said a spokeswoman for the National Security Council. “We’re not going to make pronouncements that prejudge an ongoing WHO study into the source of SARS-CoV-2,” she added.

    The Journal, playing devil’s advocate, notes that “It isn’t unusual for people in China to go straight to the hospital when they fall sick, either because they get better care there or lack access to a general practitioner,” and that COVID-19 shares a multitude of symptoms with the flu despite being very different illnesses.

    “Still, it could be significant if members of the same team working with coronaviruses went to hospital with similar symptoms shortly before the pandemic was first identified,” the report continues.

    That said, former US State Department official David Asher, who led a task force on the origins of COVID-19, told a Hudson Institute seminar in March that he doubted the lab workers were infected with an ordinary flu.

    “I’m very doubtful that three people in highly protected circumstances in a level three laboratory working on coronaviruses would all get sick with influenza that put them in the hospital or in severe conditions all in the same week, and it didn’t have anything to do with the coronavirus,” he said, adding that the researchers who fell ill may represent “the first known cluster” of COVID-19 cases.

    Long characterized by skeptics as a conspiracy theory, the hypothesis that the pandemic could have begun with a lab accident has attracted more interest from scientists who have complained about the lack of transparency by Chinese authorities or conclusive proof for the alternate hypothesis: that the virus was contracted by humans from a bat or other infected animal outside a lab.

    Many proponents of the lab hypothesis say that a virus that was carried by an infected bat might have been brought to the lab so that researchers could work on potential vaccines—only to escape.

    While the lab hypothesis is being taken more seriously, including by Biden administration officials, the debate is still colored by political tensions, including over how much evidence is needed to sustain the hypothesis. -WSJ

    That’s a nice way of saying the CCP and the anti-Trump establishment politicized the most logical theory and wasted nearly 18 months covering for Beijing.

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    During the last week of the Trump administration, the State Department issued a fact sheet which drew on classified intelligence stating that the “U.S. government has reason to believe that several researchers inside the WIV became sick in autumn 2019, before the first identified case of the outbreak, with symptoms consistent with both Covid-19 and seasonal illnesses.”

    The Jan. 15 fact sheet added that this “raises questions about the credibility” of Wuhan bat researcher Shi Zhengli, and criticized Beijing for its “deceit and disinformation.”

    Thus far the Biden administration hasn’t disputed a single aspect of the fact sheet.

    And now the United States, along with the European Union and several other governments, have called for a more transparent investigation into the origins of COVID-19.

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    Tyler Durden
    Sun, 05/23/2021 – 17:00

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