Jan 26

Today’s News 26th January 2021

  • EU Drops Recognition Of Juan Guaido As Venezuela's 'Interim President'
    EU Drops Recognition Of Juan Guaido As Venezuela’s ‘Interim President’

    The European Union has now officially abandoned its Venezuela mythology which deemed Juan Guaido as ‘Acting President’ or ‘Interim President’ rather than the man who actually rules the country, Nicolás Maduro (like it or not). This reaffirms a prior January 7th EU decision.

    On Monday the European Union issued a new statement which merely acknowledged Guaido as a “privileged interlocutor” despite having over the prior two years joined Washington in recognizing the opposition leader of parliament as ‘actual winner’ in the disputed re-election of President Nicolas Maduro at the end of 2018.

    Via AFP

    “The EU repeats its calls for… the freedom and safety of all political opponents, in particular representatives of the opposition parties elected to the National Assembly of 2015, and especially Juan Guaido,” the statement said after a meeting of EU foreign ministers in Brussels.

    “The EU considers them to be important actors and privileged interlocutors,” it added. Conspicuously absent were any references to Guaido as ‘interim president’. Ironically it was only last week that Guaido thanked the European Parliament for maintaining his status as ‘head of state’ in Venezuela. 

    More than mere symbolism, the issue’s importance lies in that “The status of interim president gives Guaido access to funds confiscated from Maduro by Western governments, as well as affording him access to top officials and supporting his pro-democracy movement domestically and internationally.”

    Though it’s as yet uncertain what the Biden White House’s official stance on Guaido will be, or if it will change, last week Biden’s nominee for secretary of state Anthony Blinken gave an early indicator.

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    Blinken told Senators last Tuesday that Guaido will still remain the recognized leader of the Latin American country in Washington’s eyes. He also said he agrees with the existing US policy of seeking to “increase pressure on the regime” of Maduro.

    This of course began under Trump when in January 2019 Guaido dubbed himself ‘Interim President’ and also ‘Acting President’ at the encouragement of Washington during Trump admin attempts to foment a military and popular uprising against Maduro. But Monday’s EU decision is likely to weigh heavy on near-term White House discussions on the issue.

    Tyler Durden
    Tue, 01/26/2021 – 01:30

  • China, Blaming Covid, Is Erecting Border Walls With Myanmar And Vietnam
    China, Blaming Covid, Is Erecting Border Walls With Myanmar And Vietnam

    China is now starting to build and/or reinforce border walls near its Southeast borders – “stirring up controversy” with neighboring countries, according to a new report from Australia’s ABC.  While much of the focus in the U.S. over the last 4 years was decrying President Trump’s calls to build a wall domestically, China was doing the exact same thing on its border with Vietnam and Myanmar. 

    “It looks like a national program,” one Southeast Asia expert said. 

    The project in Vietnam, which is still being extended, has a 4.5 meter high iron fence topped with barbed wire. It was built between 2012 and 2017 and stretches 12 kilometers, the report says.

    Additionally, the country has also erected a 659 km fence alongside China’s 2,000 km border with Myanmar. The project was completed in December of last year, according to the report. In some cases “the walls are designed not just to keep the virus out, but to keep people in,” ABC reports. 

    The same expert argued that smuggling could be the main reason for erecting such walls. He noted that “illegal cross-border activity has been a major headache for both China and Vietnam since 1979″. The illicit activity includes trafficking of Vietnamese women to China. “At least” 100 girls were sent back to Vietnam from China every year, ABC had previously reported. Some, however, were stolen and/or sold – and never heard from again.

    China explains the wall by doing what most governments around the world have been doing for the last year – blaming Covid. “Before the pandemic, there was no wall, but only short wooden fences,” a YouTuber, who captured video of the wall along Myanmar, said. 

    You can see video of the border wall here:

     

    Tyler Durden
    Mon, 01/25/2021 – 23:59

  • Hong Kong Stocks Soar On Flood Of Chinese Money
    Hong Kong Stocks Soar On Flood Of Chinese Money

    After a poor showing in 2020, Hong Kong’s Hang Seng Index has roared back to life in 2021 and is the best performing index so far this year, thanks to a deluge of Chinese money. Hong Kong’s Hang Seng Index on Monday closed above 30,000 points for the first time in 20 months as a rally since late December powered by investors in mainland China gains momentum.

    Defying fears that China’s take over of Hong Kong would lead to a crash in local stocks, the Hang Seng has soared and as the Nikkei reports, signs suggest Chinese hunger for Hong Kong stocks will continue for the time being, with investors buying new-economy shares, such as Tencent Holdings, and stocks in other companies including China Mobile and Xiaomi, especially since their ability to list in the US remains in limbo for the foreseeable future.

    While these shares were dumped earlier this month after the U.S. imposed an investment ban on companies identified as having links to the country’s military, mainland investors have shifted out of China-listed A-shares to buy the cheaper Hong Kong-listed H-shares of mainland companies traded in the territory.

    Hong Kong’s benchmark index, which fell 3.4% last year and trailed far behind international and mainland Chinese indexes, is on course for its best January since 1989, when it climbed 14.3% according to the Nikkei. The Hang Seng’s gains so far, at 10.8%, are nearly quadruple those of the S&P 500 index. The Hang Seng closed on Monday at 30,159.01, although it dipped back below 30,000 on Tuesday after China’s unexpectedly withdrew funds from the financial system amid warnings about growth froth.

    The Chinese backstop is providing some assistance to the world’s cheapest major index that fell out favor as the coronavirus pandemic and a national security law imposed by Beijing in June following months of anti-government protests raised doubts over Hong Kong’s future as a global financial center.

    And now that momentum is back, so are the inflows into Hong Kong from China through the Stock Connect program, which allows mainland investors to buy shares on the city’s exchange. This number has already raced to a record $30.3 billion this month or about four times the 2020 monthly average. The buying this month also is a third of the entire net purchases of $87 billion made last year, according to Nikkei calculations.

    Yet just like in the US, where major banks are warning that a day of reckoning for market euphoria is near, analysts have cautioned that the pace of mainland buying will have to slow even though some of it is driven by the arbitrage opportunity the Hong Kong-listed shares offer and investors’ belief that the economic resurgence in the mainland will drive corporate earnings.

    Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, said that since the inception of Stock Connect more than six years ago, there consistently has been southbound inflows, “with current volumes driven by investor hunger for new-economy stocks that have mushroomed in Hong Kong and money chasing beaten down stocks that face a U.S. investment ban.”

    He said that while he believes “inflows will continue as the Hong Kong market transforms into the Nasdaq of the East, the volumes won’t be as high as it is currently now.”

    Last Wednesday, the state-run China Securities Journal warned investors to be wary of a correction in Hong Kong, where institutional investors dominate, if stock valuations “deviate from fundamentals.”

    Stock Connect’s southbound turnover, which represents both the buying and selling of Hong Kong-listed shares through the exchanges in Shanghai and Shenzhen, has exceeded $8 billion a day, representing 14% of the Hong Kong Stock Exchange’s volumes. That compares with a daily average volume of 10% in the second half of 2020.

    “We believe southbound [flows through Stock Connect] will play a greater role structurally in the Hong Kong market,” Morgan Stanley strategists wrote in a note last week. They cited three reasons for their:

    • First, Hong Kong provided the opportunity to invest in some of the largest mainland companies in the telecommunications, technology and entertainment sectors.
    • Second, the growing trend of U.S.-listed Chinese companies, including Alibaba Group Holding and JD. Com, holding a secondary listing in Hong Kong is luring investors from the mainland.
    • Third, an appreciating yuan gives room for authorities to allow currency outflows with Hong Kong — the first port of call for investors.

    Among the stocks that have been sharply bid up is Tencent, which is up a whopping 22.5% this month. Other favored targets include companies such as China Mobile, China Telecom and railway equipment maker CRRC Corp., all of which bore the brunt of the sell-off in the past two months after the U.S. banned Americans from trading in them.

    The top 20 stocks by southbound daily inflow this year through Jan. 19 has on average accounted for 43% of turnover on the Hong Kong exchange, compared with 7% for the same period last year, according to analysts at Morgan Stanley. The figures are even higher for China Mobile and oil conglomerate CNOOC, accounting for 94% and 74%, respectively, of the volumes in Hong Kong, compared with 2% and 3% last year.

    As the Nikkei adds, the inflow into Hong Kong started to accelerate in recent weeks as more than 200 billion yuan ($31 billion) of new mutual funds raised so far this year is deployed, with allocations to Hong Kong likely to rise to half that amount, Citigroup analyst Yafei Tian said.

    “The higher interest in Hong Kong stocks could be due to a couple of reasons, including laggard performance versus A-shares, inauguration of [the] Biden administration easing concerns over U.S.-China tensions and attractive new economy exposures,” she said.

    Said buying helped Hong Kong-listed shares claw back steep discounts to their yuan-denominated versions trading in Shanghai or Shenzhen. Last October, the premium that yuan-denominated shares had over their Hong Kong counterparts surged to its highest level since 2009. The Hang Seng Stock Connect China AH Premium Index, which measures the absolute price premium A-shares have over H-shares for the largest and most liquid mainland companies, soared to 149.37 points on Oct. 15. It has since come off that recent high and closed on Friday at 134.84.

    “A true value investor should now: Sell A-shares and buy H-shares,” Li Bei, the managing director of Shanghai Banxia Investment Management, wrote on the company’s official WeChat account. In 2020, “almost all asset classes in the world have achieved growth except for Hong Kong stocks,” she said. “H-shares have not felt the easing of overseas liquidity and the strong recovery of China’s economy.” She said the “undervaluation” of Hong Kong stocks is bigger among sanctioned companies, such as China Mobile, China Unicom, China Telecom and CNOOC.

    The infatuation that Chinese investors have with Hong Kong is not new: they have been the biggest supporters of Hong Kong stocks during the past year amid questions over the city’s future as a global financial center and as Western investors have pulled back. Beijing’s moves to erode the autonomy enjoyed by the city have hurt confidence, while months of social unrest and the pandemic have sent Hong Kong’s economy into a deep recession.

    Yet as global investors balked at investing in Hong Kong, money from the mainland has been flowing in. Almost $80 billion has flooded into the city through Stock Connect since the national security law came into effect on June 30. That compares with $170 billion that came in from China since the start of 2015 to June 2020.

    However, analysts caution that such exuberance has faded in the past. Mainland investors poured nearly $20 billion into Hong Kong in March last year after pandemic-induced selling sent markets into bear market territory, which is marked by a 20% fall from a recent peak.

    As Hong Kong shares lagged, investors turned their attention elsewhere, with inflows averaging just $3.5 billion over the next three months. Analysts warned that, while Chinese investors may continue buying, sustaining such momentum will be difficult. Still, analysts largely expect the Hong Kong’s benchmark index, where mainland companies hold a 60% weighting, to catch up with the economic recovery in China.

    “Broadly speaking, we are optimistic on the outlook for H-shares, given continued inflows from China and the positive trajectory for China economic growth,” said Tai Hui, chief Asia market strategist at J.P. Morgan Asset Management in Hong Kong. “That points to a long-term earnings growth potential for many companies in H-shares, so we do see potential for further upside.”

    Tyler Durden
    Mon, 01/25/2021 – 23:37

  • Here Are All Of Melvin Capital's Crushed Put Positions
    Here Are All Of Melvin Capital’s Crushed Put Positions

    Last Friday, in the aftermath of the Gamespot’s historic eruption which sent the stock from $40 to the mid-70s (before it doubled again on Monday rising as high as $158), we had a feeling which way the wind was blowing and laid out all the Russell 3000 stocks that had the highest Short Interest (50%> of float).

    Also on Friday, we put together an equal weighted basket of the companies listed above which on Monday… well… exploded, in light with our expectations that WallStreetBets/Robinhood traders would go down the list and systematically ramp up each and every one of these most shorted names, sending them in the stratosphere.

    That’s exactly what happened.

    And yet, while the market reaction was as we expected, one thing we did not anticipate was the “fracture point” which as we now know was Gabe Plotkin’s Melvin Capital, which effectively blew up today and suffered a multi-billion margin call on its shorts (as reported earlier), and only a $2.75 billion bailout from Citadel and Point72 (both prior investors in the fund) avoided a far greater disaster (had the $12 billion Melvin Capital been forced to start liquidating its longs to pay its margin calls, all bets would have been off).

    What is most remarkable, however, is that a quick look at Melvin’s put positions – which had attracted the ire of WallStreetBets investors who were long the names that Plotkin was short – shows that most of them were amazingly the same as the most shorted names shown above! One wonders how many idea dinners Plotkin attended to pitch his positions to his hapless peers who followed him right into the Big Short Squeeze abyss, and how many other hedge funds had been caught in the conflagration. Incidentally the reason why the WallStreetBets vendetta was targeted at Plotkin is because unlike traditional shorts, it had to disclose its puts in its quarterly 13F. Ironically, had Melvin merely kept its bearish bets in the form of regular shorts – which hedge funds have no obligation to report – all of this could have been avoided.

    And so, without further ado, here are Melvin Capital’s puts.

    Why do we care? Because as S3 Partners founder Bob Sloan told Bloomberg in a TV interview today, GameStop could rise even further after surging 95% over the past week: “Get prepared for another round of short squeeze. You’re going to see GameStop go way higher.”

    The reason: while the negative hit from Plotkin’s shorts and/or puts may have been neutralized, especially with the help of the nearly $3 billion in excess funding from Steve Cohen and Ken Griffin, which removes his incentive to cover shorts at all costs, earlier today we learned that as the hobbled hedge fund cralwed through the finish line, suffering massive P&L losses, countless other hedge funds took its place shorting Gamestop et al. In fact, GME’s short interest as a percent of float declined from 142% two weeks ago to… 139% today.

    Bottom line: brace for even more fireworks as WallStreetbets reignites the squeeze, only this time it won’t be Melvin but some other hedge fund that will be crushed under the collective weight of a few thousand Robinhood bulls. Which, incidentally, would be great news for Ken Griffin. Not only does he know which stocks will be ramped by Robinhood before anyone else – after all Citadel is the biggest buyer of RH orderflow – but once the short hedge fund on the other side blows up, Griffen can just pull another Melvin, and swoop in with another “bailout loan-for-revenue” scheme – i.e., an offer that simply can not be refused – and forcibly takes an equity stake in another distressed hedge fund… and another… and another, and so on, all with the help of a few thousand stimmychecked Gen-Zers.

    Tyler Durden
    Mon, 01/25/2021 – 23:03

  • House Delivers Impeachment Article To Senate But Biden Doesn't Think Trump Will Be Convicted
    House Delivers Impeachment Article To Senate But Biden Doesn’t Think Trump Will Be Convicted

    The House delivered its single impeachment article against former President Donald Trump to the Senate on Monday, setting the stage for a February 8 trial.

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    Just three Senate Republicans were present during the formal delivery of the article; Mitch McConnell, Mitt Romney and Roger Marshall.

    Senators will get sworn in as jurors on Tuesday, according to a previous statement by Senate Majority Leader Chuck Schumer (D-NY), while both the impeachment managers who will argue the House Democrats’ case, and Trump’s defense team, will have time to draft and file legal briefs, according to CNBC.

    The managers, headed by lead manager Rep. Jamie Raskin, D-Md., carried the article across the Capitol to the Senate on Monday in masked pairs as part of a formal procession. As Raskin read the charge against Trump, a smattering of senators wearing face coverings looked on from within the chamber. –CNBC

    Ironically, Trump – the only president to be impeached twice by the House – is unlikely to be convicted according to none other than President Biden, who told CNN he believed the outcome would be different if Trump had six months left in office – but that he doubts the required 17 GOP senators will vote to convict.

    Which begs the question if the entire exercise is moot, then why do it as it will only further polarize the already deeply divided US society and certainly not help the “unity” that Biden is allegedly striving to achieve.

    https://platform.twitter.com/widgets.jsTrump was charged by the House with incitement of insurrection at the US Capitol on Jan. 6 by, as House Democrats claim, ‘falsely claiming that widespread election fraud cost him the 2020 election,’ and then encouraging his supporters to show up and challenge the electoral college count. According to the article, Trump “threatened the integrity of the democratic system, interfered with the peaceful transition of power, and imperiled a coequal branch of Government,” and “thereby betrayed his trust as President, to the manifest injury of the people of the United States.”

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    South Carolina attorney Butch Bowers will defend Trump during the trial, while the nine House impeachment managers are Democratic Reps.Raskin, Diana DeGette of Colorado, David Cicilline of Rhode Island, Joaquin Castro of Texas, Eric Swalwell and Ted Lieu of California, Stacey Plaskett, the delegate for the U.S. Virgin Islands, Madeleine Dean of Pennsylvania and Joe Neguse of Colorado. (via CNBC).

    Tyler Durden
    Mon, 01/25/2021 – 22:50

  • Company Plans Mass Rollout Of Humanoid Robots To Replace Workers In Healthcare, Education
    Company Plans Mass Rollout Of Humanoid Robots To Replace Workers In Healthcare, Education

    Submitted by PFW News

    A Hong Kong-based robotics company plans to mass produce humanoid robots to replace workers across industries such as healthcare and education.

    Hanson Robotics is set to launch a mass rollout of human-like robots that can compete with human workers, something the company’s founder says is needed to keep people safe in the age of the coronavirus.

    “The world of Covid-19 is going to need more and more automation to keep people safe,” founder and chief executive David Hanson claims. 

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    Hanson says the manufacturing process of putting together such robots has scaled to the point where his company can produce the AI machines in large quantities. The plan is to ramp up production of four models, including their best known model ‘Sophia’, and the new ‘Grace’ robot that are specifically built to labor in healthcare.

    “Social Robots like me can help take care of the sick or elderly in many corners of healthcare and medical uses,” the Sophia robot said in a video by Reuters (it must be 2021 if robots are being quoted in the news).

    “I can help communicate, give therapy, and provide social stimulation even in difficult situations,” the robot further spoke.

    The ‘Sophia’ machine is best known for receiving citizenship in Saudi Arabia and being appointed the UN’s first non-human “innovation Champion.” Yes, really …

    Hanson’s sale pitch is that the robots can provide for people who are “lonely and socially isolated” during these times when Covid and lockdowns still effect many populations.

    “People need to be isolated from each other because to be around people is dangerous these days,” Hanson chillingly told Reuters.

    The development and utility of the human like machines such as the ones being developed by Hanson Robotics is a nod to the long dreaded fear that the AI/robotics industries are coming for jobs considered to be well paying and respected.

    During the Covid-19 pandemic robots were deployed in many parts of the world to enforce mask mandates and other social distancing edicts.

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    Humanoid robots have also been deployed in Wuhan hospitals to provide services such as admission and food delivery for patients.

    Tyler Durden
    Mon, 01/25/2021 – 22:50

  • Beware Bursting Bubbles: JPM Now Sees Only $900BN Biden Bill Passing
    Beware Bursting Bubbles: JPM Now Sees Only $900BN Biden Bill Passing

    While there were plenty of fireworks in the market today, mostly launched by the reddit/WSB/robinhood daytrading crowd who successfully sparked a historic short squeeze and ramped the most shorted stocks on Monday to the point that they brought a respected hedge fund, Melvin Capital (run by a former SAC portfolio manager) to the verge of collapse and only a $2.75 billion bailout from Ken Griffin and Steve Cohen avoided the biggest hedge fund margin call since LTCM, a more sinister risk-off undertone emerged early on following overnight reports that the Biden stimulus was facing major headwinds of opposition, on Monday Senate Majority Leader Chuck Schumer said the next round of Covid-19 relief was unlikely before mid-March, futher cementing the reality that Joe Biden’s nearly $2 trillion stimulus proposal to pass in Congress.

    To be sure, while we will likely see rolling short squeeze among small and medium (and eventually, large cap) stocks, the question is whether the market is getting cold feet about the reflation trade (as Rabobank warned last week) if indeed “Biden’s trillions” appear to be headed for a major delay, or haircut.

    What is concerning for bulls – especially now that virtually every major bank has warned of record euphoria spiking the risk of a sharp market drop in the very near future – as Biden gets ever growing pushback on his proposal, is that the probability of a $1.9 trillion plan diminishes with each passing day. In fact, whereas Goldman recently slashed its estimate of the final size of the realistic Biden stimulus to just $1.1 trillion from $1.9 trillion, JPMorgan has gone even further and as the following summary of “what happens next” from JPMorgan’s Andrew Tyler show, JPM now expects a mere $900 billion to pass, or a carbon copy of the bipartisan December stimulus (and it will be quite delayed at that as well).

    The question is whether Wall Street has priced in such a material decline and delay, and if not, just how (even more) adversely will this impact the reflation trade.

    So without further ado, here is the excerpt from Andrew Taylor’s “Market Summary” section published after the close:

    EQUITY AND MACRO NARRATIVE: Today, I received a lot of questions on the fiscal stimulus. Timing, size, and composition matter. Here are some thoughts:

    TIMING – Schumer told us it would be 4 – 6 weeks before the matter was taken up. Why?Trump’s first impeachment trial took 3 weeks. This trial is set to begin on Feb 8 and if we use prior impeachment for guidance then the trial concludes in that 4 – 6 week time frame.

    SIZE – given the push back from the GOP on doing another stimulus bill in this close proximity of the December $900bn package may mean that the pathway forward is via Reconciliation. This would be that a final bill would like be materially smaller than the proposed $1.9T. JPM current estimate is $900bn.

    COMPOSITION – one critical aspect of the US economy is the volume of people at/near financial distress.

    • Consider renters, where ~20% of all renters are behind on payments. The average renters owes $5,600 (CNBC). For reference, US median household income is~$63k and with a 25% withholding means ~$2k per pay period in take home pay. Combined, there is about $57bn in back rent owned by more than 10mm renters.
    • Consider homeowners, where about 2.7mm homeowners, or ~5.5% of all mortgages, have their mortgage payment in forbearance (WSJ).
    • The federal eviction moratorium was extended to March 31 by Biden’s Executive Order. An eviction ban does not create jobs nor clear that backlog of debt. If we have millions of people put through an eviction process, it is unlikely that states have the funds to service the increase homelessness.

    WHAT HAPPENS? At this time, it appears most likely that fiscal bill passes that is closer to$1T than to $2T, with a targeted focus on the most devastated Consumers and small businesses, sometime in late March or early April.

     

     

    Tyler Durden
    Mon, 01/25/2021 – 22:36

  • NYC Badly Misses 1 Million COVID Vaccination Target
    NYC Badly Misses 1 Million COVID Vaccination Target

    After being forced to cancel 20K+ appointments over “logistical issues” that were blamed on McKesson, Moderna’s partner for distributing the vaccine, NYC has admitted that it will delay opening vaccination megasites like Yankee Stadium and Citi Field as shortages of vaccines leave the city shorthanded.

    According to Bloomberg, the city will almost definitely fall short of its goal of doling out 1MM+ doses by the end of January. So far, the city has doled out 628.8K doses, compared with 21.8MM vaccine jabs doled out world-wide.

    In New York State, there are about 19K designated first doses left, and officials are expecting another 107K more this week.

    During a Monday press briefing, Mayor Bill de Blasio said the city is equipped to vaccinate 500K people a week should it receive the increase in supply that it has been expecting.

    “We’re not going to be able to soar until we get more supply,” de Blasio said.

    He said more during a press briefing (see the full clip below).

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    Meanwhile, case and hospitalization numbers in the city have been relatively stable.

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    Jay Varma, de Blasio’s senior public health adviser, said the city is now targeting the end of February/beginning of March to receive a supply of the (still-unapproved) one-dose JNJ vaccines, which de Blasio has called “a real game-changer.”

    Citi Field (home of the New York Mets) was supposed to open this week and operate 24/7 doling out vaccines, with the goal of vaccinating as many as 7K New Yorkers a day.

    Of course, NYC isn’t the only city to miss its target. National targets and state-level targets pretty much everywhere (aside from a handful of smaller states like West Virginia) have missed their targets. Last year, the CDC missed its target to vaccinate 20MM by Jan. 1 by a wide margin, with only 2MM people being vaccinated in that time just 10% of the total.

    Meanwhile, on Friday New York governor Andrew Cuomo announced his state had temporarily run out of the vaccine. But according to the Bloomberg chart, NY has used just 61% of its nearly 2.4 million doses. This as some quickly pointed out “means they have tossed out a HUGE amount of their vaccines in the trash. We’re talking hundreds of thousands of doses.”

    The conclusion: “If an adversarial press still exists, they need to ask Cuomo about this and nothing else until we get answers.”

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    Alas, under the current regime the term “adversarial press” is nothing but an oxymoron.

    Tyler Durden
    Mon, 01/25/2021 – 22:20

  • Government Waste Thrives In Darkness
    Government Waste Thrives In Darkness

    Submitted by Real Clear Politics, authored by Thomas W. Smith chairman of OpenTheBooks.com.

    In the last 20 years, our country’s national debt has exploded. In 2001, when George W. Bush took office, the national debt was $5.8 trillion. It took around 225 years — booms, busts, depressions, wars, etc. — to amass that much national debt. In just eight years, Bush and a compliant Congress doubled the number to $11.7 trillion. In Barack Obama’s two terms, another $8.6 trillion was added. During the past four years, Donald Trump and Congress fought many battles, but not over this: In that time, America’s future was mortgaged to the tune of another $6.7 trillion. Today, the national debt is around $27 trillion, a four-fold increase in the last two decades. That doesn’t count unfunded mandates. And there is no end in sight. 

    Whenever human beings gather to accomplish a task, any task, without strong and effective oversight, a natural evolution takes place. Whether it be in business, academia, philanthropy, or government, every activity morphs from the original goal to self-aggrandizement. In government, this process is particularly toxic. There are no profits, let alone a profit motive. No concern with productivity. No incentive to turn off the proverbial lights. No measure of success. No motivation to end counterproductive activities. 

    Add to this mix the influence of public employee unions. Franklin Delano Roosevelt and Harry Truman were opposed to them for reasons that long ago became apparent. The goal of all unions is self-preservation – just as management’s is to maximize profits. But public employee unions add two other noxious elements to the mix: (1) defending job incompetence and (2) heavy-handed involvement in the electoral process in a search for pliant politicians who can help them achieve their objectives by spending ever more of the public’s money.

    Now, out of the blue, the experts-for-hire have a new scheme to justify continued fiscal irresponsibility: modern monetary theory. It holds that so long as interest rates are lower than inflation rates, politicians can spend away. That is not a theory. It is idle wordplay, and the victim of such sophistry is the American taxpayer — and future generations of American taxpayers.

    Never in our history has fiscal soundness been more important. The exploding annual deficits of the last 20 years have produced a national debt as a percentage of the gross domestic product that is as high as it was during World War II even though our nation is at peace. Moreover, many severely underfunded programs such as Social Security and Medicaid are not included in today’s debt calculations, although they should be.

    The passage of a 5,593-page must-pass-quickly bill in December was indisputable evidence that the national debt will never be addressed from the top down. That legislation was sent to the Senate two hours before the vote. Who can read 2,800 pages per hour, 47 pages per minute? How can a responsible lawmakers vote on bills they have not read? While our political leaders have repeatedly told us how important this bill was to the survival of so many Americans, they delayed the bill for months for political reasons. A crucial-to-the-survival-of-so-many-Americans pork-filled bill? Some $10 million to Pakistan for “gender programs”? Another $700 million to Sudan for Lord knows what? And on and on and on.

    History has a clear and repeated message: If we do not address this exploding debt, it will bring to life all-knowing leaders, leaders who Friedrich Hayek said possessed the “fatal conceit.” They think they know more than is knowable. Leaders who have all the answers for everything they define as a problem: More regulations. More government control. More taxes. This is a noxious cure that has never succeeded, one that has left country after country in economic tatters.

    Fortunately, the world in changing. Today, we have the means to address this financial irresponsibility, this threat to our country as our founders envisioned it. We are immersed in the Information Age, the Big Data world, the Cloud world, the Bitcoin world. The cost of communications is close to zero. Smartphones, iPads, and computers are a crucial part of everyday life. With the touch of a finger, one click, information on every topic is available 24 hours a day. Buy anything. Sell anything. Today, instant access to information is embedded in our culture. Why should government expenditures be exempt? 

    Transparency has always been the best antidote to rein in profligate government spending. Having instant information at our fingertips gives fiscally responsible Americans a powerful new weapon in the War on Waste. Today, there is no reason why every local, state, and federal government expenditure is not online, in real-time, available to every citizen. Taxpayers should be able to attend a school board meeting and pull up school expenses on their phones. 

    OpenTheBooks has a formidable weapon to unleash the voting public’s ability to address this exploding national debt, this lack of transparency, this threat to our democracy — the OpenTheBooks Government Expenditure Library, which contains over 5 billion (and growing) local, state, and federal government expenditures. Last year, we filed 41,500 Freedom of Information Act requests. We sued several government entities to encourage them to provide us the same information we collect from other states.

    The OpenTheBooks Government Expenditure Library is open to everyone: Citizens.  Politicians. Students. Academics. Scholars. Journalists. Think tanks. Everyone — 24-hours a day, seven days a week. 

    Transparency can be as revolutionary as the Internet has been for the economic well-being of the world. Transparency can not only enhance the odds of the survival of this, the greatest country in the history of the world but, over time, it will contribute to our prosperity, our health, and our happiness. Wasted taxpayer dollars are not just nonproductive. Waste allowed to exist encourages more waste. Fraud allowed to exist encourages more fraud. A financially sound economy, one that works to remove waste, fraud, duplication, and incompetence, will increase respect for government, for the rule of law. 

    OpenTheBooks places the future of this great country more firmly in the hands of the voters. To ensure our elected officials realize this, we have to communicate continuously with them what we expect and how we will vote. I suggest we begin with one clear public statement: “I will never vote for anyone who has voted for a bill they have not read.” Register that statement at OpenTheBooks.com/READTHEBILL. 

    Obviously, our elected officials are unwilling to address this explosive, increasingly crucial national debt problem. Fortunately, we the taxpaying voters today have a weapon at our fingertips to successfully wage a War on Waste. Successful because our political leaders will quickly recognize that if they want to be reelected, they will have to respond accordingly.

    Tyler Durden
    Mon, 01/25/2021 – 21:50

  • The First Casualty Of The Big Short Squeeze: Melvin Capital Gets $2.75BN Bailout From Citadel, Point72 After Its Shorts Explode
    The First Casualty Of The Big Short Squeeze: Melvin Capital Gets $2.75BN Bailout From Citadel, Point72 After Its Shorts Explode

    With dozens of heavily shorted (by hedge funds) stocks exploding higher in recent days, it was only a matter of time before the first casualty of said bull raid emerged, and thanks to the WSJ we now have the first name.

    Melvin Capital, which we learned last week had suffered massive losses on its shorts, is set to receive a $2.75 billion capital injection from hedge fund giants Citadel and Point72 and investors (in what appears to be a bailout so Mevlin Capital founder Gabe Plotkin, a former star portfolio manager for Steven Cohen, could pay his margin call). The bailout loan investments are for non-controlling revenue shares in the hedge fund, although it wasn’t immediately clear how much of Melvin’s revenue the two funds would get.

    Melvin Capital’s Gabe Plotkin

    According to the WSJ, the influx of cash is expected to help stabilize Melvin, which lost a staggering 30% in just the first three weeks of 2021. While Melvin started the year with $12.5 billion, and had been one of the best performing hedge funds on Wall Street in recent years, it saw huge losses (and margin calls) as a result of numerous short bets against companies and have stunned clients and other traders.

    In other words, 16-year-old Robinhood traders 1 – “star” hedge fund portfolio manager 0. In yet other words, hedge funds are now bailing out other hedge funds (in which they have invested money), who have been steamrolled by the Robinhood Gen-Z “buy everything” juggernaut.

    The $2.75 bailout is effectively a rights offering for Citadel and SAC, as they had more than $1 billion invested in Melvin as of 2019. Melvin founder Gabe Plotkin was a top portfolio manager at Point72’s predecessor firm, SAC Capital Management, before he left to start Melvin.

    An interesting question here is how it is legal that Citadel, which buys the bulk of retail orderflow and is intimately aware of which institution will get crushed as a result of historic short squeeze bull raids, is also allowed to bailed out its investment in Melvin, which got hammered precisely because of said orderflow. The answer, sadly, is beyond our pay grade.

    As the WSJ reported last week, “Melvin is known for running an expansive and aggressive short book that has sometimes made up the bulk of the fund’s gains, an uncommon dynamic in the industry. The firm has returned an average 30% a year since it started in 2014, despite charging performance fees that range up to 30% on investment gains.”

    The gains came to a jarring end once teenage traders realized that with the Fed at their back, they could steamroll any bearish hedge fund in their way.

    Not surprisingly, one stock that crushed Melvin is GameStop. We all know what happened there. Some of the recent Reddit posts on Gamespot specifically call out Melvin, which disclosed in its most recent quarterly regulatory filing that it held put options on GameStop. Put options are contracts that give investors the right to sell stock at a specific price by a certain date and limit an investor’s potential losses (the WSJ cites a person familiar with Melvin who said its GameStop puts expired last week).

    In recent days, Plotkin had been calling clients with chief operating officer David Kurd to inform them of and explain the losses thus far. One client said Melvin’s message was that the fund still liked its portfolio and that it had rebounded from past losses.

    We wonder if he feels the same way just days later, and if he will boldly go back to shorting the same stocks that nearly put it out of business.

    Finally, since this is merely the start, we remind readers of the post we published in November, when we laid out the Top 50 shorts by the hedge fund community…

    … when we said that “our advice is to go long the most hated names and short the most popular ones – a strategy that has generated alpha without fail for the past 7 years, ever since we first recommended it back in 2013.”

    Tyler Durden
    Mon, 01/25/2021 – 21:45

  • COVID Lockdown Policies Will Disproportionately Hit Black Americans For Decades, New Study Finds
    COVID Lockdown Policies Will Disproportionately Hit Black Americans For Decades, New Study Finds

    “Follow the science” exclaimed every virtue-signaling talking head as left-leaning authorities/officials clamped down on Americans’ rights nationwide… “wear a mask”, “shelter at home”, “no comingling”, “slow the spread”, “think of the children”, “save grandma” were the cries as the virus refused to pay attention to state and local authories’ orders to behave as the “scientist” textbooks claimed.

    And, as cases rose, and hospitalizations rose, and deaths rose, so did the tyrannical trouncing of the economy sending unemployment rates to record highs and crushing GDP growth to record lows.

    Now, here we sit, hunkered down in many blue states still, unable to discern exactly what ‘science’ it is that is driving officials’ decision.

    Along those lines, it seems like a good idea to point out that a new peer reviewed study out of Stanford is questioning the effectiveness of lockdowns and stay-at-home orders (which it calls NPIs, or non-pharmaceutical interventions) to combat Covid-19. The study’s lead author is an associate professor in the Department of Medicine at Stanford.

    “The study did not find evidence to support that NPIs were effective in preventing the spread,” according to Outkick, who published the report. 

    The study, co-authored by Dr. Eran Bendavid, Professor John P.A. Ioannidis, Christopher Oh, and Jay Bhattacharya, studied the effects of NPIs in 10 different countries, including England, France, Germany and Italy.

    And, when all was said and done, it concluded that: “In summary, we fail to find strong evidence supporting a role for more restrictive NPIs in the control of COVID in early 2020.”

    In fact, the study found  “no clear, significant beneficial effect of more restrictive NPIs on case growth in any country.”

    So, did left-leaning states’ policies in response to the pandemic – to lockdown entire states, crush economies, and spark mass unemployment and poverty leading to increasing deaths of despair actually achieve anything?

    The short answer is no…

    The longer answer is yes… they made the situation for African Americans considerably worse for at least the next two decades.

    A recent study by the National Bureau of Economic Research has found that, for the overall population, the increase in the death rate following the COVID-19 pandemic lockdown policies implies a staggering 0.89 and 1.37 million excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.24% and 0.37% of the projected US population at the 15- and 20-year horizons, respectively.

    However, for African-Americans, we estimate 180 thousand and 270 thousand excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.34% and 0.49% of the projected African-American population at the 15- and 20-year horizons, respectively.

    For Whites, we estimate 0.82 and 1.21 million excess deaths over the next 15 and 20 years, respectively. These numbers correspond to 0.30% and 0.44% of the projected White population at the 15- and 20-year horizons, respectively.

    These numbers are roughly equally split between men and women.

    African-Americans experience larger unemployment shocks and the effects of these shocks on unemployment are more persistent. Conditional on the same race, the shocks for women are smaller. The effects on life expectancy and death rates are more severe for African-Americans, overall.

    Alas, the time to fix this is gone as Deutsche Bank’s Jim Reid previously noted, the die has already been cast and it is now far too late.

    Tyler Durden
    Mon, 01/25/2021 – 21:20

  • On Avoiding Expensive Mistakes…
    On Avoiding Expensive Mistakes…

    Submitted by Adventures in Capitalism

    Let me throw this out there; the investing game is mind-numbingly easy. You buy good businesses for less than fair value. Sure, we can all argue about fair value. There are always surprises in the future trajectory of a business. This game has some wrinkles and drama, but at the most basic level, it’s easy. In fact, done correctly, it only involves a handful of decisions each year.

    If it’s so easy, why aren’t I wealthier? It’s because I’ve tried to complicate things from time to time and made some very expensive mistakes along the way. Look, I’m human. Fortunately, I learn fast and usually avoid making the same mistake twice. I like to joke that my career is nothing more than two decades of finding creative ways to lose money. That’s not to say that the markets haven’t been good to me—the markets have been amazingly rewarding to me.

    When I look back on my career thus far, I don’t dwell too much on the winners—remember how I said buying something cheap is easy? Nor do I think about the ones that didn’t go anywhere, while tying up my precious capital. Instead, I repeatedly relive my most expensive mistakes. Over a decade later, I still ask myself how could I have been so foolish to keep shorting more Research in Motion (currently BB – USA) as it went parabolic? On one hand, I was right about the iPhone displacing the Blackberry. On the other hand, it didn’t matter because I was a year early. I was stubborn and it was my most expensive loss ever. (Thankfully I took the loss when I did, as it more than doubled from where I eventually covered my short).

    Over the years, I have learned that it is never the boring compounder that really hurts you—it’s the leverage, the complexity and the shorting that gets you—especially the shorting. There’s a reason that I rarely ever short these days. I even penned a piece on the topic; Stop Shorting “Project Zimbabwe” as I wanted to warn my friends that the market is suddenly quite different from what we were all accustomed to. Having been run over in the past, I have a reasonably good perspective on when other situations can run people over—heck, I sometimes even join in the fun on the long side. Looking back to Tesla, it was obvious to get out when I did. I feel bad that so many friends didn’t listen. I feel even worse that I didn’t reverse long—it was that obvious.

    I bring this all up while watching the drama at GameStop. Let me start by saying that I don’t care how confident you are that a company will go to zero, when there are more shares short than outstanding, you’re just asking for people to play games with you. When word gets out that a few large funds are individually short 8-figure positions, you know that someone will try for the kill-shot. r/WallStreetBets gets the attention, but there are killer whales out there, silently doing the real work. There’s a price where these shorts will puke it up and the market has a funny way of finding that price.

    I don’t want to focus too much on GameStop. I had an Event-Driven long position because July 4th is always more fun when you buy your own fireworks. I tossed it at $92.50 premarket for a nice score. I’ve also written a pile of puts as implied volatility has experienced a supernova event, but this is still boring GameStop after all. However, this article isn’t about what will happen at GME; my guess is as good as yours. Rather, I want to point out that you have to be a special sort of stupid to stay short when there are more shares short than outstanding. Hubris is dangerous in the investing game. Shorts are extra dangerous. There are landmines everywhere. I don’t care how small the position is, when a short position goes up 25-fold in six months, it’s going to hurt badly. If you didn’t realize that was a risk, you really weren’t paying attention.

    Remember how easy this game is? Buy cheap stocks and go to the beach. I’d be a whole lot wealthier today if I had done more of that when I was younger. Instead, we all like to add complexity because we think we’re smarter than the market. We like to add leverage because 50% more of a good thing tends to make it better. We often forget that one big mistake on the short side can bankrupt you. The first rule of investing is to never put yourself in a position where you can lose it all. Having been burnt in the past, I focus inordinate attention today on how I can get hurt; not on where I can make the most money—that part is easy. I like to think that the shift in my focus means that I have matured as an investor. Trust me, I know how frustrating it is to dig out of a self-created hole. As a result, I’m amazed that so many people blindly dismiss the risks out there. That is just asking for trouble.

    “Project Zimbabwe” is a brave new world for everyone. Please stop, review your portfolio, stress test everything, think through the implications of 100-sigma events happening each day. No one is ready for what’s about to happen, as it’s mostly right-tail risk—except if you have a financialized book, in which case a move in interest rates may detonate your left tail first. As others blow up their books, your version of complexity may end up as collateral damage. Stop. Think it through. Be extra careful. No one expected GameStop to become a momentum stock. What else does no one expect? What else can happen? Be careful out there. Stop being stupid. A large fund with a great track record, is not immune to these rules—if anything, their position sizing makes them more vulnerable. A lot of rules that we’ve all taken for granted are about to be re-written. NEVER put yourself in a position where you can lose it all.

    The shorts at GameStop are probably thinking that Friday was the blow-off top. Instead, they should be asking themselves, “was Friday a base-camp on the way to the real blow-off top?” Remember, in today’s world, any asset can trade at any price. The price of oil went negative. No one thought that was possible, yet trillions of bonds at negative yields should have been a warning that the old rules no longer applied. I want to repeat again for the third time; NEVER put yourself in a position where you can lose it all. The rules for “Project Zimbabwe” are being re-written and they will be full of surprises. In particular, be careful on the short side. GameStop isn’t the first supernova squeeze of this decade and it surely won’t be the last.

     

    Tyler Durden
    Mon, 01/25/2021 – 20:50

  • Superstar Robinhood Traders Are Turning To Paid Financial Advice
    Superstar Robinhood Traders Are Turning To Paid Financial Advice

    It’s starting to look like the new ultra-high net worth individuals are formerly twenty-somethings that got their start trading on Robinhood. Some of those who have smashed and grabbed on the platform are now turning to professionals to help protect their winnings. At least that was the takeaway from a Bloomberg report featuring several Robinhood traders who have done well and are now seeking out professional financial advisors to manage their wealth.

    The piece featured traders like 31 year old Jeremy Johnson, who, after investing $15,000 per year with Robinhood, has decided to move on to greener pastures. “You can save your money all you want, but if it’s not doing anything, what does it look like long term?” he asked Bloomberg.

    Rather than be a bad omen for financial advisors, the pandemic has actually helped the field grow. For Johnson, a financial advisor meant help saving more money, life insurance recommendations and a mix of different types of investments. 

    And he’s not alone: 40% of U.S. based investors said they need more financial advice. 56% of those people said they would be willing to pay for such advice, up 5% from 2019. 82% that pay for the financial advice say it’s worth the price. Investors who have an advisor are twice as likely to say they have the best investment strategy compared to those who go it alone, BBG notes.

    Investment advisor Aspiriant LLC said it saw a push in demand after stocks plunged back in March of 2020. Additional clients turned up during the year as high profile IPOs hit the market, the firm said. Its client list was up 32% in 2020. 

    30 year old pharmacist Tia Ware, who was once taken back by the $1200 fee of hiring a financial advisor, has come around to the idea. She said: “At first I was like ‘hell no. But now, yes, when I see my accounts. If I didn’t have a financial adviser, I’d only have shoes and bags to show for it.”

    After the pandemic started, she said she engaged with her advisor far more often than in years past. 

    Brokerages like Schwab say they have created a new pipeline to financial advisors by taking on new accounts as a result of zero trading fees. Schwab’s digital advisory assets grew 18% in 2020 to $57.9 billion. 

    People are “more warm and receptive to paying for and receiving advice” during turmoil, financial advisor Eddie Welch concluded.

    He said that while Robinhood makes it easy to get into the market, “it’s a little more difficult to get into the market with a plan. And in most cases I think that’s what people seek from us.”

    Tyler Durden
    Mon, 01/25/2021 – 20:35

  • Democrats Have Released A Roadmap To One-Party Rule
    Democrats Have Released A Roadmap To One-Party Rule

    By Phill Kline, via Real Clear Politics

    The Democrats appear intent on instituting one-party rule in the United States. 

    They’re trying to use the U.S. Capitol riots as an excuse to criminalize dissent and banish conservative voices from the public sphere, and at the same time they’re hoping to use their temporary, razor-thin majority in Congress to rewrite the rules governing our elections in a way designed to keep the Democratic Party entrenched in power for decades to come. 

    In the House, Democrats have revived sweeping election reform legislation that died in the Senate during the previous session, perhaps hoping they can browbeat enough Republicans into going along with them. If that happens, the “Grand Old Party” of Abraham Lincoln might as well disband, because Republicans would never have any hope of regaining a congressional majority or controlling the White House under the rules that HR 1 would put in place. 

    Although the Constitution explicitly places state legislatures in charge of managing federal elections, HR 1 seeks to use the power of the purse to bludgeon the states into conforming to a centralized system pioneered in California and other deep-blue states. Congress can’t technically compel the states to change their voting laws, but seasoned politicians know that the states have become dependent on federal money to run their elections, and can’t afford to pick up the tab themselves. 

    To make matters worse, HR 1 declares that Congress possesses “ultimate supervisory power over Federal elections” — an extraordinary usurpation of governmental authority that the Founders specifically assigned to the states. 

    The 2020 election witnessed private interests dictating the manner in which the election was conducted in the nation’s urban cores. Mark Zuckerberg alone poured $419 million into this scheme. 

    The goal of centralizing power in the hands of the federal government has long been at the heart of liberal politics, and this legislation demonstrates why. 

    HR 1 would codify the very practices — many of them currently illegal in most states — that created widespread irregularities in the 2020 elections and contributed greatly to public mistrust of the electoral process. In 2020, state and local officials used the COVID-19 pandemic as justification to ignore or deliberately violate state election laws. If HR 1 is enacted, they won’t need any such excuse in 2022 because the states will have no choice but to implement policies such as legalized ballot harvesting, early voting, and universal mail-in voting, as well as repeal of voter ID laws, signature-matching laws, and other ballot security measures. 

    For example, HR 1 would allow ballot harvesting on steroids. Voters would — for the first time — have the ability to print out their ballots at home, creating a gaping security hole that could easily be exploited by either domestic or foreign interests. The legislation also allows third parties to collect ballots from an unlimited number of absentee voters and submit them through ballot drop boxes, dramatically increasing the risk that vulnerable Americans could be bullied, bribed, or blackmailed for their votes without the protection of election workers. 

    Under the rules outlined in HR 1, election observers wouldn’t even be able to challenge the legitimacy of ballots without written documentation, making it virtually impossible to document or detect election irregularities. 

    Nothing in this legislation could plausibly be interpreted as a means of restoring public confidence in our elections — but the reforms establish a clear roadmap to one-party rule. This is especially so when you consider the new proposals for the war on “domestic terror” aimed directly at the free expression of American citizens. 

    We can only hope that principled Republicans and Democrats will reject this direct assault on American democracy and individual freedom, and resist the institutionalists in both parties who believe the American people need them to protect us from ourselves. 

    The way to create one-party rule is to control information and control the way a nation selects its leaders. The political left has joined with Big Tech and government careerists in aggressively trying to do both.

    Tyler Durden
    Mon, 01/25/2021 – 20:00

  • "Greatest Rise In Inequality Ever": The Last 6 Months Saw Sharpest Rise In US Poverty In Half-Century
    “Greatest Rise In Inequality Ever”: The Last 6 Months Saw Sharpest Rise In US Poverty In Half-Century

    A new poverty estimate seeking to analyze the nationwide impact of government relief measures which expired just at the end of last month has found that the latter half of 2020 marked the sharpest rise in the US poverty rate since the 1960s. The study released Monday and presented in Bloomberg finds that the poverty rate increased by 2.4% during the second half of 2020, following last spring and early summer COVID-19 rolling lockdowns in various parts of the country.

    This amounts to an additional 8 million Americans being considered newly poor, nearly double the highest annual increase in poverty in over a half-century.

    The study authors – economists Bruce Meyer of the University of Chicago, and James Sullivan of the University of Notre Dame – further found that Black Americans were among the hardest hit, and more that twice as likely to fall below the poverty line as White Americans.

    According to Bloomberg’s summary of the results, “The researchers found that the stimulus checks the federal government issued in the spring helped forestall the poverty rate from rising even faster.”

    Getty Images

    Bloomberg recalls further that “In late December, $900 billion in addition federal relief aid was passed, and President Joe Biden is asking Congress for an additional $1.9 trillion in stimulus.”

    The US trend of the past six months is also echoed more broadly in global data showing COVID-fueled poverty across much of the world.

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

    As featured in a recent Oxfam study which also sought to assess the financial impact of the pandemic — up to 500 million people globally have been newly pushed into poverty, while at the same time the world’s 10 richest men made a combined $540 billion over the same time frame.

    Oxfam is calling it evidence of the “greatest rise in inequality since records began.” 

    Tyler Durden
    Mon, 01/25/2021 – 19:35

  • Carlsbad, CA Says No More to Lockdowns. May It Be A National Model
    Carlsbad, CA Says No More to Lockdowns. May It Be A National Model

    By John Tamny, of the American Institute on Economic Research

    It’s been said off and on over the decades that California is a bellwether of sorts. What happens there is a preview of what’s going to happen elsewhere in the U.S.

    In the late 1970s the passage of Proposition 13 foretold a national tax revolt. Californians used a referendum to limit the tax power of grasping politicians in the Golden State, and the pushback eventually went national.

    A different, more local revolt began last weekend in Carlsbad, CA, a town just north of San Diego. Its restaurant and bar owners decided they’re weren’t going to take it anymore. They’re no longer going to allow witless politicians to destroy what they’ve worked so long to build. They’re going to open their businesses to eager customers.

    Some will ask what California legislators right up to Governor Gavin Newsom will say. Ideally the mini-revolt will wake these sick people up to the extraordinary damage they’re doing, but if not it’s worth reminding everyone that the very individuals in government who are presently limiting your right to work, operate your business, and live your life as you desire, used to not be in government. Some even used to have regular jobs in the private sector. The main thing is that they’re not experts on medical matters, nor are they abnormally smart. They just happen to be good at politics. They’re in no position to tell us how to live, or operate our businesses, or whether or not we should have a job to go to. They’re just people who want power, prestige and money, only they want it the easy way.

    This is worth remembering as businesses, jobs and life as we know it vanish thanks to politicians imposing their force on us. Why allow them to do that? People should be free to do as they wish with their property. Period. This includes Twitter and Facebook if they choose to censor comments and commenters. If Amazon chooses to not do business with certain people or companies, that’s its right. If bakers choose not to bake cakes for events that offend their personal morality, that’s their right. Business owners who want to meet the needs of willing customers while a virus is spreading should be free to open up as they see fit.

    Interesting and happy about scenic, seaside Carlsbad is that in a state that is largely locked down, in a state where most restaurants can’t even serve customers outside, Carlsbad is open. Its restaurants and bars are open outdoors and indoors. Some of the bars are packed. Please learn more about this happy story of protest against what is ridiculous. Please support it.

    Of course, the owners of the bars and restaurants in OPEN (!!!!!) Carlsbad are far more diplomatic than yours truly. They’re calling their exercise of their property rights a “peaceful protest.” And peaceful it is. Nothing could be more peaceful than operating a business that can only succeed insofar as its patrons are pleased for having patronized it, only to come back over and over again.

    Furthermore, the protest is one lodged under desperate circumstances. These businesses can’t not be open. If they remain shuttered by decree, or limited in their ability to serve their customers by decree, they will close for good. Though some business owners may have political leanings, this is not political. It’s about survival, and it’s something all who consider themselves decent should cheer. This includes those who’ve not been out in public or inside a public venue since March. Freedom is its own virtue.

    Arguably the most important supporters of the beautiful story unfolding in Carlsbad would be other business owners. They must open if they feel inclined to re-open. The simple truth is that the power-mad can’t arrest everyone. If restaurants and bars open en masse in California, New York, Illinois, New Jersey, and every other city and state overseen by authoritarians, what can the authorities do? There aren’t enough jails and handcuffs, and there aren’t enough guns to subdue a mass, nationwide, owner, employee and customer protest against a tragic lapse of reason.

    Crucial about what’s happening in Carlsbad, and that should happen everywhere, is that there’s nothing violent about it. It’s much more than just a “peaceful protest.” It’s reasonable. It’s common sense. It’s businesses, workers, and customers exercising their right operate, work, and live as they want. They’re not forcing their values on others. Businesses that choose to stay closed should do just that. Worried employees should stay home. The people fearful of the virus should similarly stay home.

    For the rest of us who feel inclined to resume living, it’s time for us to do that. Again, those who are sickeningly intoxicated with power can’t incarcerate us all. As for the businesses terrorized by the political class in Carlsbad, they decided they no longer have any choice. Given the choice between going out of business and defying politicians, they chose the latter. Good for them.

    Let’s again support what’s happening in Carslbad, including purchasing gift certificates from its restaurants and bars. Let’s also emulate them. May Carlsbad be a national model!

    Tyler Durden
    Mon, 01/25/2021 – 19:10

  • Is This The Reason Behind's Today's Surreal Market Action
    Is This The Reason Behind’s Today’s Surreal Market Action

    Between the insane rollercoaster action in the most shorted names, which exploded out of the gate only to get hammered the moment the broader market suddenly plunged 60 points in just a few minutes (one wonders which dealer(s) was so short gamma in the most shorted names, they had no choice but to hammer the entire market to break the upward momentum wave and avoid getting crushed), one word describes today’s market action so far: surreal.

    And while it would probably be unwise to try to make any sense of this idiocy, there likely is some fact/fundamental based reason for today’s market action besides merely a reaction to the berserk technicals and market action.

    So courtesy of Bear Traps report Larry McDonald, here is one attempt at explaining why stocks are suddenly looking quite a bit gappy, and it has to do with the Fed finally pulling some of the punch bowl away::

    Our 21 Lehman Systemic Indicators are screaming higher. The inmates are running the asylum and the probability of the Federal Reserve breaking out their creative “macro prudential” tool box is the highest in years. U.S. central bankers are no longer Trump constrained, the banking system is strong but the equity market has far more in common with Steve Wynn (Vegas) than Warren Buffett (Omaha).

    We think the Fed sends a shot over the bow very soon. Our social justice, inequality embarrassed Fed is not happy. The will not taper but they can make serious threats to risk takers. We have an explosion of SPAC / IPO issuance, $850B of margin debt or 75% above 2015 levels, the most shorted equities up 75% vs. 16% for the S&P 500 since October (bulls running over bears), record high call vs. put volume with the little guy leading the charge SELL Mortimer Sell. The risk reward is atrocious from a long perspective in U.S. equities.

    Impeachment Threat to Reflation: Moves to the Senate floor next week. Impact; 1 . Pushes out the Fiscal timeline.  2 . Similar to the GOP immediately trying to take down Obamacare, the signature achievement of the previous administration , on day one of the Trump administration. The move was Unwise and Not helpful to the fiscal policy path.

    Remember, the tax cuts were sold to us as a certainty in Q1 2017, they didn’t arrive until late Q4 that year. In our view, this speaks to a potential rally in bonds / USD for the next few weeks.

    Best case scenario, we have a $1.9T fiscal plan coming in late February early March with the current the bid / offer at $800B to $1.9T. However, any additional variant / mutations Covid risk increase will game the spread in the direction of the offer side if the  mpeachment doesn’t blow up the deal altogether.

     

    Tyler Durden
    Mon, 01/25/2021 – 18:57

  • The Secret History Of America's 'War On Terror' Mythology
    The Secret History Of America’s ‘War On Terror’ Mythology

    A new book exposes the alternative history of the so-called “war on terror” which has in the past decades unraveled the Middle East, resulted in failed states from Libya to Syria to Yemen, and has fueled the rise of ISIS and led to a stronger al-Qaeda in places like Syria and North Africa: Enough Already: Time to End the War on Terrorism.

    Author Scott Horton of The Libertarian Institute and AntiWar.com begins his unrelentingly detailed and devastating ‘secret history’ and deconstruction of the ‘terror wars’ as follows: “On September 11, 2001, there were no more than a few hundred al Qaeda members hiding out in Afghanistan. Three months later, when the Central Intelligence Agency (CIA) paramilitaries, U.S. Army Delta Force and U.S. Air Force finished bombing them, and Osama bin Laden had escaped to Pakistan, there were not enough of the terrorists left alive to fill a 757.“

    Horton goes on to conclude that, “Now, 20 years after that brief, one-sided victory, there are tens of thousands of bin Ladenite jihadists thriving in lands from Nigeria to the Philippines. Recently, and for almost three years, some even claimed their own divinely ordained caliphate, or Islamic State, temporarily erasing the border between Iraq and Syria. Local chapters of their group keep popping up all over the region. The State Department consistently reports a vast increase in the number of global terrorism incidents compared to the pre- September 11th era. Al Qaeda, the Islamic State in Iraq and Syria (ISIS) and their ‘lone wolf’ copycats have carried out multiple, deadly attacks in more than a dozen major Western cities in the past decade, including Brussels, Paris, Berlin, London, San Bernardino, Orlando, New York City, Pensacola and Corpus Christi.”

    Former Congressman Ron Paul writes of the new book:

    “Nothing has fueled the abuse of government power in the last 20 years like the ‘War on Terrorism.’ Scott Horton’s essential new book, Enough Already, is the key to understanding why it’s not too late to end the wars and save our country. Three administrations in a row have promised us a more restrained foreign policy. It is time we insisted on it.“

    Below is an authorized excerpt from Enough Already: Time to End the War on Terrorism.

    * * *

    Expediting the Chaotic Collapse

    Dick Cheney’s Middle East adviser, neoconservative strategist David Wurmser, wrote in his 1996 article “Coping with Crumbling States” that the U.S. should seek to “expedite the chaotic collapse” of Syria as soon as they were done overthrowing Saddam Hussein’s Iraq. Unfortunately for Wurmser, the opportunity to destroy Syria did not come until after he was out of power. Americans concerned about bin Ladenite terrorism might have wondered why in the world they should want to spread any more chaos in the region after the catastrophe of Iraq War II.

    In an age of international terrorism waged by radical Islamists, Bashar al-Assad was a secularist who shaved his chin every morning, wore a threepiece suit and was an old acquaintance of Secretary of State John Kerry. His father’s government had joined George H.W. Bush’s coalition against Iraq in 1991 and cooperated with America and Israel at the Madrid and Oslo meetings. Bashar al-Assad had voted for America’s UN Security Council Resolution 1441 mandating the return of the weapons inspectors to Iraq. He had also been willing to negotiate with Israel over the Golan Heights in the George W. Bush years, before Secretary of State Condoleezza Rice intervened and forced the Israelis to halt the talks.

    Assad was a “reformer,” Hillary Clinton had said. Assad’s regime had been torturing people for the CIA as part of the “extraordinary rendition” program since her husband’s administration in the 1990s. Former CIA officer Robert Baer seemed to be honest about his own role in the program when he told the New Statesman that, “If you want a serious interrogation, you send a prisoner to Jordan. If you want them to be tortured, you send them to Syria. If you want someone to disappear — never to see them again — you send them to Egypt.” The George W. Bush administration, in a case of mistaken identity, handed an innocent Canadian named Maher Arar over to the Syrians to be tortured.

    As revealed in leaked State Department cables, in 2010 Assad’s government invited the U.S. to join their efforts against bin Ladenites crossing the border from Syria into Iraq.

    Assad was not a full-fledged American sock-puppet dictator like Hosni Mubarak in Egypt, but he had been mostly cooperative in the War on Terrorism and certainly had no love for al Qaeda. Syria had been accused of helping to facilitate the entry of foreign fighters into Iraq earlier during Iraq War II, though it was never proven that his government was behind the jihadists’ border crossings. If it were true that Assad had done so, his motives would have been defensive in nature, and understandable, if not justifiable: to get those dangerous terrorists out of his country and help keep the United States bogged down in Iraq before they could move on to the next stage of their publicly stated plan: overthrowing him.

    When Nancy Pelosi embraced Bashar al-Assad in April 2007, via The National Review

    In 2007, House Speaker Nancy Pelosi went to Syria. There she visited the Omayyad mosque in Old Damascus and met with President Assad for three hours, insisting despite the Bush administration’s objections that diplomacy with Syria was vital. “We came in friendship, hope and determined that the road to Damascus is a road to peace,” she said. In 2011, John Kerry told the Carnegie Endowment that “President Assad has been very generous with me in terms of the discussions we have had. And when I last went to — the last several trips to Syria — I asked President Assad to do certain things to build the relationship with the United States.” According to the AP, Kerry listed six requests for Assad, including working together on Iraqi border security and said the Syrians fulfilled them all.

    In any case, the Syrian government certainly never attacked or threatened the United States. Intervening in that country did not serve to protect the American people in any way. The hawks would agree and claim this shows that selfless humanitarian concerns were at the core of their policy. The American Superman had to go and save the nice people. But that is not what the U.S. role in Syria was about. The policy was regime change.

    But after the rise of al Qaeda in Iraq in the aftermath of Iraq War II, the obvious question was if the U.S. did succeed in overthrowing the Ba’athist regime in Syria, what organized force in the country could possibly replace it? The obvious answer was the Muslim Brotherhood if you’re lucky. The Brotherhood had posed a major problem for the Syrian government in the past. In 1982, Bashar’s father, Hafez al-Assad, had massacred thousands of members of the Brotherhood, their supporters and nearby civilians in the town of Hama to successfully repress a fouryear armed Islamist uprising. Though the group remained mostly underground, it was obvious years before the war began that any attempt to overthrow the Ba’athists would benefit the Brotherhood first. The U.S. government knew it too. They did it anyway.

    * * *

    You can find Scott Horton’s new book Enough Already: Time to End the War on Terrorism, here.

    Tyler Durden
    Mon, 01/25/2021 – 18:50

  • Sen. Leahy To Preside Over Trump’s Impeachment Trial
    Sen. Leahy To Preside Over Trump’s Impeachment Trial

    Authored by Zachary Stieber via The Epoch Times (emphasis ours)

    Sen. Patrick Leahy (D-Vt.) arrives at the US Capitol on Jan. 25, 2021. (Brendan Smialowski/AFP via Getty Images)

    Sen. Patrick Leahy (D-Vt.), president pro tempore of the Senate, will preside over next month’s impeachment trial of former President Donald Trump, Leahy said on Jan. 25.

    Leahy is 80. Both parties traditionally choose their eldest member to serve in the pro tempore role, which is essentially a backup for the president of the Senate, whenever they gain a majority in the body.

    “The president pro tempore has historically presided over Senate impeachment trials of non-presidents,” Leahy said in a statement. “When presiding over an impeachment trial, the president pro tempore takes an additional special oath to do impartial justice according to the Constitution and the laws. It is an oath that I take extraordinarily seriously.

    “I consider holding the office of the president pro tempore and the responsibilities that come with it to be one of the highest honors and most serious responsibilities of my career,” he said. “When I preside over the impeachment trial of former President Donald Trump, I will not waver from my constitutional and sworn obligations to administer the trial with fairness, in accordance with the Constitution and the laws.”

    The U.S. Constitution states that the Supreme Court’s chief justice shall preside when the president of the United States is tried in an impeachment trial. But once Trump left office last week, that threw Chief Justice John Roberts’s role into question; Roberts had presided over the first impeachment trial.

    Chief Justice John Roberts announces the results of the vote on the second article of impeachment during impeachment proceedings against President Donald Trump in Washington on Feb. 5, 2020. (Senate Television via Getty Images)

    Reports suggested that Roberts didn’t want to preside over a trial of the former president. Supreme Court spokespersons didn’t immediately respond to a request by The Epoch Times for comment, nor did spokespersons for Senate Majority Leader Chuck Schumer (D-N.Y.) or Senate Minority Leader Mitch McConnell (R-Ky.).

    Dozens of Republicans have voiced opposition to holding an impeachment trial for a former president; some have said that Roberts’s apparent reluctance to act as presiding judge is significant.

    “If Justice Roberts won’t preside over this sham ‘impeachment,’ then why would it ever be considered legitimate?” Sen. Rand Paul (R-Ky.) said in a tweet last week.

    The House alleges in its single article of impeachment that Trump incited the Jan. 6 breach of the U.S. Capitol. The Senate expects to start the trial during the week of Feb. 8.

    Follow Zachary on Twitter: @zackstieber

    Tyler Durden
    Mon, 01/25/2021 – 18:30

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