Apr 04

Today’s News 4th April 2022

  • Which Nations Are On Russia's "Unfriendly" List?
    Which Nations Are On Russia’s “Unfriendly” List?

    On May 13, 2021, Russian President Vladimir Putin signed into law the List of Unfriendly Nations, which included the United States and the Czech Republic.

    On March 5, 2022, as Russia’s military operation in Ukraine progressed, the list was updated to include 45 more nations and jurisdictions.

    The countries and territories mentioned in the list have imposed or joined the sanctions against Russia.

    Source

    Tyler Durden
    Mon, 04/04/2022 – 02:45

  • European Union Unveils New Strategy To Become A Global Power
    European Union Unveils New Strategy To Become A Global Power

    Authored by Soeren Kern via The Gatestone Institute,

    • The goal is “strategic autonomy” — the ability for the EU to act independently of, and as a counterweight to, the United States and the North Atlantic Treaty Organization — in matters of defense and security.

    • The key component of the Strategic Compass is the development of a so-called EU Rapid Deployment Capacity (RDC), a military force able to intervene in “non-permissive environments” anywhere in the world.

    • The RDC is to become fully operational by 2025 and commanded by an institution called the “EU Military Planning and Conduct Capability.” (The term “capability” is a politically correct substitute for “headquarters,” as in “military headquarters.”)

    • The push for Europe to achieve strategic autonomy from the United States is being spearheaded by Macron, who, as part of his reelection campaign, apparently hopes to replace former German Chancellor Angela Merkel as the de facto leader of Europe.

    • The danger is that many of the pie-in-the-sky policy proposals in the Strategic Compass will divert and drain resources and finances from where they are actually needed: NATO.

    • A logical course of action would be for EU member states to honor past pledges to increase defense spending as part of their contribution to the transatlantic alliance. That, however, would fly in the face of the folie de grandeur — the delusions of grandeur — of European federalists who dream of transforming the EU into a geopolitical “great power.”

    The European Union has published a new strategy aimed at transforming the 27-member bloc into an independent geopolitical actor on the world stage.

    The long-awaited “Strategic Compass” lays out an ambitious ten-year plan for the EU to develop an autonomous European security architecture. The goal is “strategic autonomy” — the ability for the EU to act independently of, and as a counterweight to, the United States and the North Atlantic Treaty Organization — in matters of defense and security.

    The greatest advocate of strategic autonomy, French President Emmanuel Macron, said the objective is to make Europe “powerful in the world, fully sovereign, free in its choices and master of its destiny.”

    In fact, dreams of strategic autonomy have been waylaid by reality. Russia’s invasion of Ukraine has underscored the indispensability of the United States and NATO for European defense and security. In the face of Russian revanchism, most EU member states can be expected to oppose efforts to develop an independent European military capacity that undermines the transatlantic alliance.

    The 64-page policy blueprint — “A Strategic Compass for Security and Defense” — was originally commissioned in June 2020 by the government of former German Chancellor Angela Merkel. An initial draft of the document, presented in November 2021, was significantly revised after EU member states were given the opportunity to submit requests for changes. The document was then hastily rewritten after Russia invaded Ukraine in February 2022.

    The 2022 Strategic Compass — which builds on the 2003 European Security Strategy, the 2016 Global Strategy, the 2020 EU Security Union Strategy and the 2022 Versailles Declaration — aims to “translate” the “common ambition” of European strategic autonomy “into actionable proposals.”

    The document, which has been described as “a master military strategy document” and “the closest thing the EU could have to a military doctrine,” seeks to “build a common strategic culture” to “contribute to the EU’s credibility as a strategic actor.”

    The Strategic Compass, also described as “an expression of Franco-German cooperation,” is loaded with lofty rhetoric: “Europe’s geopolitical awakening,” “permanent strategic posture,” “instruments of power,” “weaponization of interdependence,” “the return to power politics,” “full spectrum of threats,” “strategic convergence,” “common strategic culture,” “learning to speak the language of power,” “quantum leap forward on security and defense,” and “shape the global future,” among many others.

    The key component of the Strategic Compass is the development of a so-called EU Rapid Deployment Capacity (RDC), a military force able to intervene in “non-permissive environments” anywhere in the world. (The term “capacity” is a politically correct substitute for the word “force,” apparently to avoid giving the impression that the EU is seeking to build an army.)

    The document calls for the EU to be able to quickly deploy up to 5,000 troops — including land, air, and maritime components — for “crisis management missions” outside the bloc. The RDC is to become fully operational by 2025 and commanded by an institution called the “EU Military Planning and Conduct Capability.” (The term “capability” is a politically correct substitute for “headquarters,” as in “military headquarters.”)

    On March 21, the day the Strategic Compass was published, Germany’s hapless defense minister, Christine Lambrecht, announced that Germany would provide the entire 5,000-strong force plus heavy equipment for the RDC’s first year. She was forced to backtrack after learning that the German military is so understaffed and underequipped that it is incapable of delivering that amount of personnel and equipment. The German Defense Ministry later clarified that Germany would supply a “core” of between 1,500 and 2,000 troops.

    The RDC concept — widely viewed as the foundation of a future supranational EU Army — replaces the existing EU Battlegroup concept. Created in 2007, EU battlegroups, battalion-sized formations consisting of 1,500 troops each, are paper tigers. They have never been deployed due to disputes over when and where they should be used, and over funding. The Strategic Concept does not explain why the EU thinks the RDC will succeed where the EU Battlegroup concept has failed.

    Another key element of the Strategic Compass involves implementation of Article 44 of the Lisbon Treaty (aka the European Constitution) which allows the EU to circumvent the unanimous consent principle during crises. The Strategic Compass states that the EU will “decide on practical modalities” for implementing Article 44, which has never been used.

    In practical terms, Article 44 would allow the EU to launch EU-flagged missions and operations without the consent of all 27 EU member states. In effect, such “coalitions of the willing” would be a back-door way for EU member states, such as France and Germany, to move ahead with military integration regardless of opposition from other EU members, such as those from Eastern Europe. Implementation of Article 44 will probably move forward during the French EU Presidency in the first half of 2022.

    The Strategic Compass also calls for:

    • Creating an “EU Hybrid Toolbox” to respond to “a broad range of hybrid threats.” A “Hybrid Fusion Cell” aims to provide “foresight and situational awareness” while a “dedicated toolbox” will “address foreign information manipulation and interference.”

    • Further developing the “EU Cyber Defense Policy” to be “better prepared for and respond to cyberattacks.” A new “Cyber Resilience Act” aims to “increase our common approach to cyber infrastructure.”

    • Expanding the “Coordinated Maritime Presences” to the Indo-Pacific.

    • Developing an “EU Space Strategy” for security and defense.

    • Implementing a “Climate Change and Defense Roadmap.”

    • Creating a “Defense Innovation Hub” within the European Defense Agency.

    The document further seeks to: “fill strategic gaps,” “reduce technological and industrial dependencies,” “promote rapid and more flexible decision-making processes,” “strengthen command and control structures,” “increase readiness and cooperation,” “ensure greater financial solidarity,” “spend more and better in defense,” “develop cutting-edge military capabilities,” and “invest in technological innovation for defense.”

    In all, the Strategic Compass includes more than 40 goals in four “work strands” — “Act,” “Secure,” “Invest,” and “Partner” — that are to be implemented by 2030.

    The EU’s foreign policy chief, Josep Borrell, described the Strategic Compass as “a turning point for the European Union as a security provider and an important step for the European security and defense policy.” He added: “This is only the beginning.”

    Impact on NATO

    A key unanswered question is how the Strategic Compass will impact NATO, the only credible guarantor of European security. The EU’s foreign policy chief, Josep Borrell, in a forward to the report, pledged that a stronger EU will “strengthen NATO” and be a “stronger transatlantic partner.” Indeed, the document stresses the complementarity between the EU and NATO.

    The aim of EU strategic autonomy, however, is evidently to push the United States out of Europe so that the EU can assume its role as a “strategic power” and an independent pole in a “contested multipolar world.”

    The push for Europe to achieve strategic autonomy from the United States is being spearheaded by Macron, who, as part of his reelection campaign, apparently hopes to replace former German Chancellor Angela Merkel as the de facto leader of Europe.

    Macron, who claims that NATO is “brain dead,” argues that Europe needs its own military because, according to him, the United States is no longer a reliable ally. He cites as examples: U.S. President Joe Biden’s precipitous withdrawal of American troops from Afghanistan; the growing pressure on Europe to take sides with the United States on China; and France’s exclusion from a new security alliance in the Indo-Pacific region.

    Even before Russia invaded Ukraine, many EU member states disagreed with Macron. Eastern European countries know that neither the EU nor France can match the military capabilities offered by NATO and the United States. Other countries are concerned about a panoply of issues ranging from financial costs to national sovereignty. Still others are opposed to creating a parallel structure to NATO that could undermine the transatlantic alliance.

    Many EU countries insist on respecting former U.S. Secretary of State Madeleine Albright’s famous “three Ds“: no decoupling of European security from the United States and NATO; no duplicating capabilities and structures that already exist within NATO; and no discriminating against NATO members that are not members of the EU.

    The danger is that many of the pie-in-the-sky policy proposals in the Strategic Compass will divert and drain resources and finances from where they are actually needed: NATO.

    Case in point: NATO already has a rapid reaction force. The so-called NATO Response Force can deploy 40,000 troops (eight times more than the EU’s proposed rapid reaction force) that are drawn from the same European militaries that the EU wants to use (21 EU member states are also members of NATO). If the EU’s real concern is about security, why would it be trying to duplicate existing NATO capabilities?

    A logical course of action would be for EU member states to honor past pledges to increase defense spending as part of their contribution to the transatlantic alliance. That, however, would fly in the face of the folie de grandeur — the delusions of grandeur — of European federalists who dream of transforming the EU into a geopolitical “great power.”

    Evaluating the Strategic Concept

    In an analysis — “The EU’s Strategic Compass: Brand New, Already Obsolete” — Nick Witney, a senior policy fellow with the pro-EU European Council on Foreign Relations, wrote:

    “The product of many months of debate in Brussels, this effort to align the strategic thinking of 27 member states, each with its own foreign and defense policies, was meant to be a foundational document for a geopolitical EU. But, as a strategy conceived and largely drafted in the days before Russian President Vladimir Putin changed the world, the Strategic Compass has simply been overtaken by events….

    “The Compass itself is full of the usual process-heavy gradualism, to be implemented over a decade and wrapped in conventional reflections on the dangerous world we live in and the ever-popular bromides about the EU’s need to ‘partner’ with all and sundry….

    “What really dooms the operational side of the Compass’s agenda is, of course, the same thing that has crimped the EU’s military aspirations from the beginning — the reluctance of top brass across Europe to take the enterprise seriously. NATO has always been where ‘serious’ military business is done, where they rub shoulders with (and are told what to do by) the mighty United States. The notion of EU intervention operations seems, by contrast, both amateurish and risky without the US to back them up. Now that NATO is rejuvenated and overhauling its whole defensive posture against Russia, no one will rush to stand up a new EU force.”

    In an interview with Euronews, Isabella Antinozzi, an analyst with the European Council on Foreign Relations, noted:

    “The document devotes barely a line to outlining cooperation with the UK — which is striking considering how much of a key partner the UK is on matters of security and defense. This is, to me, a clear sign that relations between London and Brussels are completely strained.”

    In an essay — “Grand Illusions: Partnerships in the EU’s Strategic Compass” — Antinozzi added:

    “It is important for the EU to recognize that excluding the UK from European defense is likely to be both unrealistic and counterproductive. As such, any mixed feelings and wider political tensions associated with Brexit should now give way to constructive defense dialogue between the sides….

    “Security and defence are versatile policy areas with the potential to help rebuild trust between London and Brussels. And ad hoc cooperation in these realms could provide a foundation for a better political relationship in the future.”

    In an analysis — “Does the Strategic Compass Herald a Stronger EU in Security and Defense?” — Luigi Scazzieri, an analyst with the Center for European Reform, wrote:

    “The Strategic Compass is unlikely to end transatlantic and European debates about the EU’s role in European security…. The EU’s ambitions to be a military player endure and could create friction between EU member-states and the U.S., and within Europe, if they lead to competition for resources and personnel with NATO. There may also be disagreements if the EU expands its investments in defense capabilities, as funds would almost certainly be tied to strengthening the EU defense industry and therefore buying European rather than US equipment.”

    The Brussels-based Center for European Policy Studies published an 11-page report — “The EU’s Strategic Compass: A Guide to Reverse Strategic Shrinkage?” — which concluded:

    “The text has been substantially rewritten in the last month to emphasize the impact of Russia’s war of aggression against Ukraine, revealing a newfound consensus on the danger Russia poses but also a lack of strategic foresight. This raises the question of whether the final document might contain shortcomings that could prove to be fatal. As it stands, the Strategic Compass may now be lopsided, downplaying the threat posed by China to the multilateral rules-based order vouched for by the EU and, despite being the talk of Brussels in 2021, the relevance to Europe of what will surely be the center of gravity in the 21st century: the Indo-Pacific. As such, the document essentially characterizes the EU’s security and defense ambitions as that of regional — not a global — power.”

    Tyler Durden
    Mon, 04/04/2022 – 02:00

  • Pollsters Humiliated As 2 Pro-Putin Parties Win Avalanche Victories In European Elections
    Pollsters Humiliated As 2 Pro-Putin Parties Win Avalanche Victories In European Elections

    In a one-two knockout punch for pro-Russia governments in Europe, on Sunday the government of Serbia’s pro-Russia president Aleksandar Vučić was headed for an avalanche victory in the country’s presidential election with nearly 60% of the vote, a big improvement to this 2017 election result…

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    …. while Hungary’s Pro-Russia prime minister, Viktor Orban, was on track to clinch a fourth consecutive term, leveraging a message against being dragged into the war in neighboring Ukraine, to reassert himself as the European Union’s longest-serving premier.

    With roughly half of the vote counted, Orban’s Fidesz party led United for Hungary, a six-member opposition alliance, 57% to 32% in the party list contest, according to the National Election Office, with 63% of the votes counted. That would be sufficient for Fidesz to keep its two-thirds parliamentary majority.

    Despite opinion polls forecasting a tighter race, Orban’s Fidesz party won comfortably across much of the country. Opposition leader Peter Marki-Zay even failed to win in his own district, where he had served as mayor. The far-right extremist Mi Hazank party won 6.3%, and was set to enter parliament, further diluting the power of the anti-Orban alliance.

    “We have such a victory it can be seen from the moon, but it’s sure that it can be seen from Brussels,” Orban said in his speech on Sunday night, making light of his government’s long-running tensions with EU leaders.

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    “We will remember this victory until the end of our lives because we had to fight against a huge amount of opponents,” Orban said, citing a number of his political enemies including the Hungarian left, “bureaucrats” in Brussels, the international media, “and the Ukrainian president too — we never had so many opponents at the same time.”

    The election campaign was dominated by Moscow’s invasion of Ukraine, which put Orban’s lengthy association with Russian President Vladimir Putin under scrutiny. In his victory speech, Orban called Ukraine’s President Volodymyr Zelensky one of the “opponents” he had to overcome during the campaign.

    Orban’s unexpectedly strong victory defied polls ahead of the vote that had predicted Orban would face the toughest challenge to re-election in his 12 years in power, according to a report from the anti-Orban Bloomberg News. It almost makes one wonder why anyone – besides liberals of course – still uses polling, which obviously can’t forecast the future and also fails at mere propaganda and influencing election turnouts.

    Until recently, a new term would have been a defining moment for the 58-year-old Orban, who over the past decade consolidated power and challenged the EU’s so-called “democratic foundations”, raising questions about Hungary’s allegiance to so-called “western values.”

    As Bloomberg adds, “after forging closer ties with Russian President Vladimir Putin while needling his EU counterparts over everything from controlling courts to LGBTQ rights, Orban risks deeper isolation as Europe confronts Moscow over the invasion of Ukraine.” Perhaps so, but the people have spoken and the people clearly want a person in charge who forges closer ties with Putin while needling EU counterparts. Or maybe it’s time for the deep state Biden to suggest some more regime change, this time in Hungary?

    Amid the war in Hungary’s eastern neighbor, Orban refused to fold to western pressure and offered limited support for Ukraine, refusing to let weapons shipments cross Hungary and rejecting a ban of Russian oil and gas imports.

    His message was that joining a rush by fellow EU and NATO members to aid Ukraine with weapons would drag Hungary into the war. That resonated with voters against an opposition campaign suggesting that Orban is Putin’s pawn and the ballot a choice between East and West.

    In the end, being close to Putin served as a powerful force behind Orban’s avalanche victory.

    That said, Obran has an uphill battle in containing the fallout from the Ukraine war – record pre-election spending which prompted the government to cut the economic growth outlook, will require Orban to almost immediately address budget concerns. Phasing out price caps on basic food items and especially fuel, imposed in the run-up to the vote, will test his enduring popularity. Household energy subsidies, in place since 2013 and a reliable vote-getter, may also have to go.

    The political challenges could be equally daunting. While the cost of financing Hungarian debt has soared as the central bank hiked interest rates to the highest in the EU, Hungary’s access to billions of euros of crucial EU funding has been delayed due to concerns over corruption in Hungary, a standard trick in Brussels which ruthlessly and anti-democratically determines who can and can not rule in Europe by limiting access to funds.

    Meanwhile, Orban’s political narrative – centering on the decline of the West and the rise of authoritarian regimes – remains his strong suit. As a result of the Ukraine war, about half a million refugees have arrived in Hungary, and in one of the starkest U-turns, the anti-immigration Orban welcomed them and even posted pictures of himself hugging Ukrainians.

    He will also need to navigate a new EU mechanism that links funding to adherence to rule of law. It was approved in 2020 after the Hungarian premier outmaneuvered the bloc’s concerns about the rollback of democratic norms for the better part of the decade. Should it be activated this year, it threatens to deprive Hungary of as much as $40 billion. Of course, should it be activated, many peripheral states may simply decide to seek a better fate in the orbit of other nations – such as China or Russia – which would be a catastrophic blow to the future of the EU.

    Tyler Durden
    Mon, 04/04/2022 – 01:00

  • NIH Admits It "Suppressed" Wuhan Lab Genetic Data, But Disputes Watchdog's "Deleted" Label
    NIH Admits It “Suppressed” Wuhan Lab Genetic Data, But Disputes Watchdog’s “Deleted” Label

    Authored by Mark Tapscott via The Epoch Times (emphasis ours),

    A National Institutes for Health (NIH) spokesperson is disputing a non-profit watchdog group’s claim that the agency “deleted” genetic sequencing data on Covid-19 from a Chinese lab, but the same official acknowledged the data was “suppressed.”

    NIH Director Dr. Francis Collins holds up a model of the coronavirus as he testifies before a Senate Appropriations Subcommittee looking into the budget estimates for National Institute of Health (NIH) and the state of medical research, on Capitol Hill in Washington on May 26, 2021. (Sarah Silbiger/Pool via AP)

    “The headline says the sequences were deleted which is inaccurate. They were not deleted. This is a really important point, and I’ve highlighted what did happen from what we provided to you earlier this week,” NIH Media Branch Chief Amanda Fine told The Epoch Times in a March 31 email.

    Fine was referring to a March 29 Epoch Times story headlined “NIH Deleted Info Received From Wuhan Lab on Covid-19 Genetic Sequencing, Watchdog’s FOIA Finds.” The information Fine referenced as having been provided to The Epoch Times by NIH earlier in the week was included in the published story:

    “’In June 2020, in response to a request by the same [Wuhan] researcher, National Center for Biotechnology [NCBI] gave the sequence data the status of ‘withdrawn,’ which removes sequencing data from all public means of access but does not delete them.

    “NCBI subsequently reassigned the status of the sequence data to ‘suppressed,’ which means that sequence data are removed from the search process but can be directly found by accession number. This action to reassign the data was identified as part of NLM’s ongoing review into the matter. We are working to make more information available,” the spokesperson said.

    The biotechnology center, which is part of the institute’s National Library of Medicine (NLM), is the U.S. component of the International Nucleotide Sequence Database Collaboration.

    The Epoch Times story was prompted by a report published on March 29 by Empower Oversight Whistleblowers and Research (EO) that was based on Freedom of Information Act (FOIA) responses the group received from the institute.

    The non-profit reported that “on June 5, 2020, a Wuhan University researcher requested that NIH retract the researcher’s submission of BioProject ID PRJNA637497 because of error. The Wuhan researcher explained ‘I’m sorry for my wrong submitting,’” Empower Oversight said in a statement (pdf) on March 29.

    “BioProject ID PRJNA637497 is also referred to as Submission-ID SUB7554642. Three days later, on June 8th, the NIH declined the researcher’s request, advising that it prefers to edit or replace, as opposed to delete, sequences submitted to the SRA,” EO reported. SRA refers to the Sequence Read Archive (SRA) data resource made available by NCBI, and it “stores raw sequencing data.”

    “But then, on June 16, 2020, NIH officials reversed themselves and deleted the genetic sequencing data, as requested by the Wuhan researcher. That researcher was quoted by EO as explaining to NIH: ‘Recently, I found that it’s hard to visit my submitted SRA data, and it would also be very difficult for me to update the data. I have submitted an updated version of this SRA data to another website, so I want to withdraw the old one at NCBI in order to avoid the data version issue.’

    “After some discussion about what would be deleted, the NIH concluded the discussion by reassuring the Wuhan researcher that it ‘had withdrawn everything.’”

    Asked for a response to Fine’s claim the information was not deleted, EO Founder and President Jason Foster told The Epoch Times that NIH’s actions ensure the CCP (Chinese Communist Party) virus genetic sequencing info is only available to the few individuals possessing its “accession number,” which effectively deletes the data from open access and research.

    “NIH documents released with Empower Oversight’s report demonstrate that the sequencing data was deleted from public view by the NIH at the request of the Wuhan researcher,” Foster said.

    “Our report also details emails between Professor Jesse Bloom and the NIH’s Steve Sherry from October 2021 that clearly indicate NIH retained copies ‘for archival purposes.’ Yet, the emails demonstrate that NIH refused to share that data in an open, transparent scientific process sought by Professor Bloom,” Foster continued.

    “The NIH should make more information available about each and every time it reassigned the status of sequence data and any information potentially relevant to the origins of COVID-19 should be made available for scientific inquiry,” he said.

    Fine did not respond when The Epoch Times asked who “has access to all of the genetic sequencing information provided by the Wuhan researcher and which was requested by that researcher to be removed.”

    The Epoch Times also asked that because “NIH must know who in fact has accessed the data … who did so and when since the Wuhan researcher requested the information’s removal?”

    Tyler Durden
    Sun, 04/03/2022 – 23:30

  • "I Have No Idea What's Going On" – Shanghai Officials Separate COVID-Positive Children From Parents As Outbreak Worsens
    “I Have No Idea What’s Going On” – Shanghai Officials Separate COVID-Positive Children From Parents As Outbreak Worsens

    Local authorities’ initial plans for a nine-day staggered lockdown in Shanghai have already been dashed, as we reported earlier that the entire city is now under some level of lockdown, despite authorities’ promises that the eastern half of the city would see restrictions eased on Friday. And while the CCP scrambles to bring more hospital capacity online to treat the desperately ill (including primarily those who are suffering from non-COVID maladies), locals are complaining that authorities have resorted to separating sick children from their parents in the name of the lockdown.

    Parents who brought their children in for treatment have seen them taken by authorities and moved to official quarantine facilities, often leaving families in the dark about their childrens’ condition. When both parent and child have tested positive, doctors have used threats to browbeat families into compliance. in some cases, children as young as 3 months old have reportedly been separated from their breast-feeding mothers.

    Reuters shared the story of Esther Zhao, a woman who was separated from her 2.5-year-old daughter in Shanghai after the girl came down with a fever.

    Esther Zhao thought she was doing the right thing when she brought her 2-1/2-year-old daughter to a Shanghai hospital with a fever on March 26.

    Three days later, Zhao was begging health authorities not to separate them after she and the little girl both tested positive for Covid, saying her daughter was too young to be taken away to a quarantine centre for children.

    Doctors then threatened Zhao that her daughter would be left at the hospital, while she was sent to the centre, if she did not agree to transfer the girl to the Shanghai Public Health Clinical Center in the city’s Jinshan district.

    Despite pleading with doctors for information, parents are often left in the dark, offered few – if any – updates about their child’s status.

    Since then she has had only one brief message that her daughter was fine, sent through a group chat with doctors, despite repeated pleas for information from Zhao and her husband, who is in a separate quarantine site after also testing positive.

    “There have been no photos at all…I’m so anxious, I have no idea what situation my daughter is in,” she said on Saturday through tears, while still stuck at the hospital she went to last week. The doctor said Shanghai rules is that children must be sent to designated points, adults to quarantine centres and you’re not allowed to accompany the children.

    Making matters worse, images of crying children who had been separated from their parents went viral on Chinese social media, filling Zhao with feelings of dread. The photos and videos posted on China’s Weibo and Douyin (the Chinese version of TikTok) social media platforms depicted wailing babies, crowded three to a cot. In one video, a clearly distressed toddler crawled out of a room with four child-sized beds pushed to one side of the wall. Few adults could be seen. While Reuters wasn’t able to independently verify the videos, a sources familiar with the facility confirmed their authenticity, and also confirmed that the facility is situated in at the Jinshan District of Shanghai.

    While most of these posts had been deleted by the authorities by Saturday, thousands of comments and complaints remained on the sites.

    Some of the videos have survived on American social media.

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    The separation policy is the latest controversy to elicit widespread outrage across Shanghai. It comes after authorities were caught lying about the number of deaths in the city’s nursing homes.

    The big question now: will this be enough to derail the political career of Li Qiang, the Communist Party secretary of Shanghai and an important ally of President Xi? Li is (or rather, was) expected to be elevated to the Politburo Standing Committee, China’s most powerful policy-setting body during the National Party Congress later this year.

    But considering the number of local officials who have been sacked for their failure to contain local outbreaks, it’s not outside the realm of possibility that Li could be next.

    Tyler Durden
    Sun, 04/03/2022 – 23:00

  • Doomsday 'Preppers' Warn Of Hard Times Ahead As Preparedness Goes Mainstream
    Doomsday ‘Preppers’ Warn Of Hard Times Ahead As Preparedness Goes Mainstream

    Authored by Allan Stein via The Epoch Times (emphasis ours),

    Food scarcity. Food vouchers. Food riots and flash mobs.

    All of that’s coming – and soon, says Texas-based food scientist and “Health Ranger” podcaster Mike Adams, who sees dire events unfolding in America in the short term.

    Texas-based food scientist Mike Adams, known online as the “Health Ranger,” sees food shortages and heightened security later in 2022. (Courtesy of Mike Adams)

    His advice: people need to get prepared now.

    “The thing to really watch for is the food inflation,” Adams said.

    “My position is we’re going to see food riots in America before the end of this year. We’re going to see flash mobs in grocery stores—especially for meat products.

    “Grocery stores are going to respond with increased security and checkpoints. At some point, we’re probably going to see an attempt at price controls and rationing. 

    “And not on everything—certain types of things. It’s almost certain that the rationing they will attempt to enforce with a vaccine passport app that becomes a food rationing app,” Adams told The Epoch Times.

    Adams is not alone in his predictions of hard times coming to America—and the world.

    With food production buckling under the weight of runaway inflation, skyrocketing fuel costs, and fertilizer shortages, much of what’s in store is already “built-in.”

    Unfertile Ground

    In North America two years ago, it cost around $200 an acre to fertilize a 1,000-acre commercial farm, Adams said. Right now, with spring planting, farmers can expect to pay $1,200 to $2,000 an acre.

    And consumers will pay for it in higher prices for basic necessities. 

    “Many farmers are deciding not to plant. In addition, the diesel fuel prices and diesel fuel scarcity is going into their equation whether they should plant,” Adams said.

    The upshot, he said, is that fewer farmers are planting, which means less food to go around.

    As a food scientist Adams is a big proponent of clean, organically grown food free of heavy metals, which he makes available through the online sale of “Ranger Buckets.” The demand for his products has seen extremely high since the COVID-19 lockdown began in 2020. 

    Adams said it takes on average six to eight weeks to produce 2,000 buckets, which typically sell out within 30 minutes to three hours.

    “Health Ranger” Mike Adams says surviving hard times depends on how well one prepares for them. (Courtesy of Mike Adams)

    Even before the Russian invasion of Ukraine, the demand for survival food in the United States has been on the increase among a number of national suppliers. 

    “The supply chain in the United States continues to crumble. More Americans are realizing it takes four trips to different home improvement stores for parts to make home repairs, instead of all their needs being in one store,” said Lori Hunt at Practical Preppers in South Carolina. 

    “That is making folks realize this extends to everything: food, books, solar equipment—and considering Ukraine is a source for critical raw materials in the solar industry, this is going to get much worse in the coming months,” she told The Epoch Times. 

    “Many of our customers are moving toward energy independence, and this is making a greater demand and diminishing supply situation. We are urging our customers to be prepared for a 2–4 month wait to amass all parts needed for their systems. Many installers around the United States are telling us they are experiencing the same.”

    Byron Walker, Founder and CEO of Survival Frog in Denver, told the Epoch Times, “We have struggled with supply chain issues and things only appear to be getting worse.”

    Allied Marketing Research (AMR) reported that the global incident and emergency market, valued at $75.5 billion in 2017, is projected to reach $423 billion by 2025.

    “Factors such as rise in need for safety and security solutions, owing to increase in natural calamities and terrorist attacks, implementation of regulatory policies for public safety, and the necessity for emergency preparedness drive the growth of the global incident and emergency management market,” AMR said on its website.

    “In addition, the surge in smart cities is expected to drive the adoption of intelligent evacuation systems and surveillance systems, thereby fueling the incident and emergency management market growth.”

    Price Hikes ‘Here to Stay’

    In recent weeks YouTube survival “preppers” such as City Prepping and Alaska Prepper have been sounding the alarm that hard times are just ahead. 

    Matt the “Magic Prepper,” in North Dakota, said being prepared continues to go mainstream as a “financial and scarcity genre” in view of current global events.

    “With food production issues, supply chain problems, a slow economic recovery from the pandemic, and the cascading effects of an overseas conflict, it seems rather clear that shortages, disruptions, and price hikes are here to stay,” Matt told The Epoch Times. 

    He said the situation in Ukraine has revived interest in preparedness in case of a nuclear, biological, or chemical attack. 

    “With the conflict creating volatile rhetoric from multiple global superpowers, we find ourselves closer to such an event than any point in recent history,” Matt said. “I operate under the assumption that there is and will likely always be more time to prepare.”

    Still, the state of being prepared is “exponentially limited” by the length of time it takes to get prepared, and other factors, he said. 

    “Every dollar spent today is worth less in value toward preparations than a dollar you would have spent three years ago. Therefore, by waiting to begin, you’ll inherently be able to prepare less and less. 

    YouTube’s Matt the “Magic Prepper” in North Dakota says it’s not too late to begin preparing for difficult economic times ahead. (Courtesy of Matt the “Magic Prepper”)

    “This is most obviously apparent when you relate it to items such as ammunition. Stocking up on it now provides you with anywhere from 50 percent [to] 75 percent less ammunition for the same amount spent on it three years ago.

    “Even if we find ourselves in the midst of a full-on economic collapse or hot conflict, training and learning skills will likely still be accessible,” he said.

    Preparedness also requires the ability to network and communication, having supplies in sufficient quantity, a “hardened” location, and knowledge on how to survive an economic collapse. 

    “I have suggested to keep moving forward regardless of the events unfolding currently. If things finally fall apart to the point of relying on our preparedness efforts, we will have prepared as best as we could up to that point.

    “I am making phone calls, appointments, and plans every day to try and enhance my own personal preparedness,” Matt said. 

    Given the economic protectionism of halting food exports from countries like Hungary, Ukraine, Russia, and Belarus, the world supply of grain is going to be severely limited, Adams said.

    This, he said, will result in the “most extreme food shortages we’ve seen in our lifetime.”

    Better Now Than Never

    “It will begin about August and continue until the end of the year. A lot of this depends on [President Joe] Biden’s economic decisions on whether he allows U.S. oil companies to finish pipelines and do more drilling. If he does not we are going to see even more shortages throughout 2023.”

    Out of chaos, however, Adams foresees a reawakening of freedom and self-reliance in the way we grow and produce food.

    “I think this is a red pill moment for the people of the world that they need to be more self-reliant. We need decentralization of food production. I’m a big proponent of decentralization—food grown locally.”

    The bad news is that only about 5 percent of people in the United State are prepared. But “the more people prepare, the less they panic when shortages appear,” Adams said.

    Tyler Durden
    Sun, 04/03/2022 – 22:30

  • The Pain Trade Remains Higher As Hedge Funds Sell Every Rally
    The Pain Trade Remains Higher As Hedge Funds Sell Every Rally

    After suffering tremendous losses in January and February, March was a very confusing month for hedge funds: as JPMorgan’s Prime Brokerage writes in its monthly note, the start of March was characterized by one of the largest de-grossing episodes among Equity L/S funds in N. America, along with quite significant net selling globally (especially in APAC), and resulted in some marquee names such as Tiger Global suffering massive losses.

    So as markets closed out the month and quarter with a very sharp rebound in equities, most funds were again caught by surprise, while few are willing to embrace the recent move higher in risk as a persisting trend.

    Commenting on the recent failure of hedge funds to embrace the rally, JPM writes that there are still many concerns to deal with, but the “net selling we’ve seen from HFs into this rebound (4wk global net flows at -2 to -3z) is quite consistent with other market lows (post  Dec 2018 and Mar 2020) and may suggest, from a contrarian perspective, that equity markets could continue to grind higher.”

    Looking back to the prior episodes, JPM’s John Schlegel writes that while net flows did turn more positive starting about a month after the market lows, “it wasn’t until net flows reached a significantly positive level (i.e. about +2z), the market was back to highs, and average net positioning levels were back above average that the market saw a more meaningful pullback.”

    Well, as of this week, the average positioning level was still around -0.7z and gross/net leverage were still below the 20th %-tiles vs. the past year. Thus, from a positioning/flows perspective, the prime desk believes that the “pain trade” is still higher for now and the rally could persist for a bit longer, given the bias to STR (sell-the-rally), positioning still low, and possibly a lack of incrementally negative news (i.e. we “know” Fed is very hawkish, Russia/Ukraine conflict isn’t new, and expectations are that inflation will remain high).

    We’ll do a deeper dive of these points shortly, but before we do a quick tangent: according to JPM, one of the recent areas of focus during the 2H Mar rebound has been the outperformance of High short interest stocks. About 6 months ago (in October) the desk outlined 5 reasons why shorts could continue to work in the medium term. Looking back, that trade indeed worked and we’ve seen quite large underperformance of High SI stocks in the past 6 months — the JPM High SI basket has underperformed the SPX by ~35% since the start of Oct 2021, including the recent rebound.

    So looking back at the 5 reasons JPM gave 6 months ago, do they still hold today? The short answer is “somewhat.” I.e., the set up doesn’t appear particularly bad for shorts per se, but it also doesn’t look as clear as it did 6 months ago.

    • Reasons why shorts could still work, i.e. underperform: ETFs still a high % of the short book, limited recent shorting of High SI stocks, still relatively few stocks with High SI % float (although this has increased from 6 months ago)
    • Reasons why shorts might not work as well going forward: Most of the recent covering has been in ETFs (i.e. potential to cover single-names if funds were to continue to cover shorts), short leverage still low, but net leverage also low (i.e. limited need to hedge directional risk), “risky” factors have already underperformed significantly and might not continue to do so going forward.

    With that in mind, let’s go back to some of JPM’s core observations starting with…

    1. Selling The Rally… Not as Unusual as One Might Think

    As markets have rallied over the past couple weeks, the biggest driver seems to be a reduction of hedges. When looking at the components of the bank’s Tactical Positioning Monitor (TPM) and comparing current levels to those as of mid- March, volatility related metrics (e.g. call/put ratios), HF ETF shorts/covers, and US Asset Manager Futures positioning have seen the biggest positive change in the 4wk scores (all were about -1z to -2z vs. positive levels most recently).

    From a HF flow perspective, however, there’s been a fairly strong bias to sell-the-rally (STR) as JPM Prime has seen net selling in 8 of the past 9 days, during which stocks have staged a torrid rally. That said, this is not that unusual, as markets saw similar biases in the flows post the low in Dec 2018 and Mar 2020.

    Looking at these periods more closely, if we were to follow the prior pattern then we should see net flows turn to moderate buying if markets grind higher/sideways starting in a couple weeks (e.g. 4wk net flows were positive in Feb 2019 and May 2020, about 2 months after the low). However, HF net flows didn’t reach a significantly positive level (i.e. around 2z) until 4-5 months after the low. Coincidentally, by this time the market was back near ATHs and positioning levels were above average (nearly +0.5-1z), potentially why those peaks in flows/higher positioning proved to be a good time to tactically short the market. In other words, the moment hedge funds finally rush in, that will be the time to short.

    Then again, with positioning levels still quite low vs. the past year (i.e. around -0.7z currently), perhaps it’s too early to expect a sharp pullback. Similarly gross and net leverage for HFs remains relatively low vs. the past year (around 20th %-tile across All Strategies and <10th %-tile for Eq. L/S on a 12M lookback). If these conditions change and we see a stronger impulse to chase the rally, then we’d generally be more concerned.

    Providing a bit more perspective on HF leverage, for the typical fund across strategies, hedge fund net leverage recently fell back to its median levels and gross is below historical median historical levels. This is down quite a bit from where things stood ~6 months ago, indicative of the fairly broad decline in risk levels. That said, exposures are not necessarily at extreme lows on a longer time frame (i.e. past 3-5 years).

    As for what is driving the net and gross flows across strategies and regions, the net selling over the past 1-2 weeks is mostly in N. America and EMEA and strongest among Multi-Strats and Quants. L/S funds have been net buyers of N. Am. recently (although sellers of EMEA). From a gross flows perspective, the recent de-grossing is strongest in EMEA and broad-based across strategies, while the opposite is true in APAC. However, on a 20-day basis, the de-grossing among Eq L/S and Quants in N. Am. is largest.

    2. Will Shorts Continue to Rip Higher?

    One feature of the market bounce since Mar 14 is the outperformance of High Short Interest stocks in N. America, and generally “riskier” stocks / prior laggards. For context, the JPM High SI basket, JPTASHTE, is up 22% since 3/14 (just over 2x the SPX’s gain) and the top 25 most crowded net shorts in N. Am. are up about 20% over the period vs. a gain of only ~11% for the top 25 most crowded net longs. Additionally, the High Vol basket (JP1HVO) is up 31% and the Momentum shorts (JP1SMO & JP16SMO), i.e. laggards over the past 12M or 6M, are up 28-29% over the period.

    In early October last year, JPM wrote a note that outlined why shorts could continue to perform well over the medium term (i.e. 6 months). Looking back at what’s transpired, this has played out fairly well, as evidenced by large underperformance of High SI stocks in the past 6 months—the JPM High SI basket, JPTASHTE, has underperformed the SPX by ~35% since the start of Oct  2021.

    As a refresher, in early Oct last year, there was concern as to whether the shorts would continue to work since they had performed quite well since the middle of Feb of last year. Generally speaking, there were still concerns about whether retail investors and so-called meme stocks might cause significant pain to shorts. While that was (and still is) a potential risk to specific shorts, it seemed that there was still ample room for shorts to continue to perform relatively well, which they did. So looking back at the 5 reasons JPM gave 6 months ago, do they still hold today? The short answer is “somewhat.” I.e., the set up doesn’t appear particularly bad for shorts per se, but it also doesn’t look as clear as it did 6 months ago.

    One last note on the “risky” factors. One of the main reasons why we thought the “risky” factors weren’t set up to outperform was because the broader market had not yet seen a meaningful drawdown. Given the drawdown we saw this quarter, it’s harder to make the case that these types of stocks won’t start to perform a bit better, but the speed of the rebound has varied quite a lot in the past and we’re not coming off a larger drawdown like post 2000-2002, 2008-2009, or Mar 2020 that triggered the most violent snapbacks.

    Tyler Durden
    Sun, 04/03/2022 – 22:00

  • Trump Budget Official Calls Biden Spending Proposal "Atrocious"
    Trump Budget Official Calls Biden Spending Proposal “Atrocious”

    Authored by Nathan Worcester via The Epoch Times (emphasis ours),

    Russ Vought, a critical race theory (CRT) opponent who led the White House Office of Management and Budget under Trump, told The Epoch Times on Thursday that the amount of spending in President Joe Biden’s proposed 2023 budget is “atrocious.”

    Russ Vought, Director of the White House Office of Management and Budget, in his office in Washington on Dec. 15, 2020. (Tal Atzmon/The Epoch Times)

    Vought, who currently heads the anti-CRT organization Center for Renewing America, made the comments at an emergency foreign policy conference, “Up from Chaos: Conserving American Security,” organized by American Moment and The American Conservative.

    Vought also spoke about the disconnect between the views that got Trump elected and decision-making in the Trump White House as part of a conference panel, “Rotten Branches: How Congress, The Military, and Executive Bureaucracy Fail Our Foreign Policy.”

    He said the policy process was “completely disconnected from the views of the President,” prioritizing defenders of the status quo and avoiding what he described as “paradigm-shifting questions,” including on decades of U.S. military spending:

    “Why are we still in Afghanistan? Why are we on a collision course with Russia? Why haven’t you brought our troops home from Europe? Shouldn’t we prioritize a China fight above all else? Are Japan and Taiwan ready to defend themselves? Why is it the Army, the Navy, and the Air Force just so happen to have the same share of the budget?”

    Vought told The Epoch Times that today’s raging inflation cannot be an excuse for indefinite budget expansion.

    “You’ve got to have an ability to stop spending,” he said. “We should increase defense spending. I definitely think we should increase the Navy’s budget. But this notion that the bar has to be 8 percent when inflation is 8 percent is just nonsense.”

    “We all know that there’s an extensive network of foreign policy elites that have a unified view of the world, and America’s role in it, that is essentially imperialist,” Vought said during his panel talk. He later added that policy officials deferred to the network of insiders in part to avoid looking stupid, and that national security agencies capitalized on secrecy and their ability to over-classify information to shut out people who ask inconvenient questions.

    Like others at “Up From Chaos,” Vought invoked George Washington’s Farewell Address, in which the founding father warned his countrymen to steer clear of foreign entanglements or permanent alliances.

    Another lodestar was America’s sixth president, John Quincy Adams, who said that the nation “goes not abroad, in search of monsters to destroy.”

    Vought told the audience that D.C.’s current foreign policy elites see Washington’s and Adams’ counsel as “quaint advice”—the thinking of a bygone era, before the United States became “a big country,” often dictating the terms of the world order established after World War II.

    In Vought’s view, a foreign policy that does not take the aspirations of other nations seriously could make it harder to understand the factors that spark conflicts overseas.

    “I think we have suffered from that with Russia—never thinking through, ‘What are their interests?’ vs. ‘What are our interests?’” he said.

    Vought believes that tackling D.C.’s entrenched opposition to Trump-style foreign policy will require a new expert class, capable of steering pliable officials in a different direction.

    “We need new institutions to credential people, to allow people to think through the pros and cons of different policies,” he told The Epoch Times.

    He thinks such institutions offer an important foundation for practical politics, including on the sort of budgeting he oversaw as OMB director.

    “It’s time we engage them on the battlefield of ideas,” Vought said. “Once you’ve got that, then you can go to battle and win funding fights and turf war battles.”

    He told The Epoch Times he does not worry about any labels that may be applied to him because of his participation in ‘Up From Chaos.’

    Words like “appeaser” or “stooge,” he said, may be losing their sting from overuse.

    “As we’ve seen in the woke area, where they call you a racist, Islamophobe, bigot, that comes at a cost where people stop caring anymore, and you learn to have these conversations, come what may,” he said.

    Tyler Durden
    Sun, 04/03/2022 – 21:30

  • "General Average" Declared On Massive Container Ship Stranded In Chesapeake Bay 
    “General Average” Declared On Massive Container Ship Stranded In Chesapeake Bay 

    Evergreen Marine, the owner of the massive container ship, Ever Forward, stuck in the Chesapeake Bay, declared “General Average” after multiple unsuccessful refloating attempts, according to maritime news website gCaptain

    The latest refloating attempt took place last Wednesday and was unsuccessful even though tides in the Chesapeake Bay, just outside of Baltimore, were about a foot higher than average. 

    “Evergreen Line has been making every effort to refloat the stranded ship on behalf of the common interests of cargo owners and the safety of all involved,” Evergreen Marine said in a statement on Thursday.

    It added: “In light of the increasing costs arising from the continued attempts to refloat the vessel, Evergreen declared General Average today.”

    Declarations of General Average require all parties, including the shipowner and cargo owners, to bear some responsibility in the refloating process. If readers remember, Evergreen also declared General Average about a year ago when another of its vessels, the Ever Given, ran aground in the Suez Canal. 

    Ever Forward ran aground on March 13 after it veered off the course of a shipping channel outside the Port of Baltimore and came to a dead stop in about 25 feet of water. The vessel’s draft is 42.6 feet, outlining that the ship is seriously stuck. 

    It’s unclear what the next steps Evergreen will take after two refloating attempts have failed. There could be moves to remove fuel and cargo, but nothing has been publicly discussed.

    Concerns are mounting the ship, buried in 20 feet of mud, could be experiencing stress on the hull due to the weight of containers and may lead to a fuel leak disaster. 

    Tyler Durden
    Sun, 04/03/2022 – 21:00

  • "The Illegality…Was Obvious": An Analysis Of The Carter Opinion On Jan. 6th
    “The Illegality…Was Obvious”: An Analysis Of The Carter Opinion On Jan. 6th

    Authored by Jonathan Turley,

    “The illegality of the plan was obvious.”

    Those words of Judge David O. Carter in the U.S. District Court for the Central District of California this week have electrified commentators across the networks and the Internet.

    Judge Carter was praised for his “simple clarity” in declaring that “it is more likely than not that President Trump corruptly attempted to obstruct the Joint Session of Congress on January 6, 2021.”  The declarations by the court have led to a frenzy in the media and renewed calls for the prosecution of the former president.

    However, there are elements to the decision that are deeply concerning on issues ranging from free speech to attorney-client privilege.

    The Washington Post was quick to breathlessly declare that the time had finally come . . . again. Given the Posts long record of running professed slam dunk criminal charges against Trump that amounted to nothing, that is hardly a surprise. However, Carter’s opinion was immediately portrayed as ending all speculation. It seems now like little more than an administrative matter before Trump is marched off to the slammer.

    Post columnist Jennifer Rubin declared “Carter has issued a clear invitation — almost a plea — for the Justice Department to pursue charges against both Eastman and Trump . . . [Attorney General Merrick] Garland will have an exceptionally hard time justifying a decision not to prosecute.”

    If you read such columns, it is difficult to see why Trump has not been charged after two years. After all, the media heralded the statements of D.C. Attorney General Racine that he was pursuing possible charges. Yet, neither Racine nor the Biden Administration have charged Trump. Why?

    The reason that hasn’t happened is that Judge Carter’s “invitation” is strikingly short of clear evidence of such criminal conduct.

    Judge Carter was ruling on the disclosure of material claimed as privileged by Eastman, who advised Trump after he spoke at the Jan. 6, 2021, rally near the White House. Eastman believed Vice President Mike Pence could refuse to certify the election and send the electoral votes back to the states. Carter ruled that such legal advice failed under the “crime/fraud exception” because the president knew there was no basis for such a challenge.

    As legal experts celebrate Carter’s decision as a great victory against Trump, it is important to consider the implications for both free speech and attorney-client privilege. That is not because I agree with Eastman’s claims; to the contrary, I criticized Trump’s speech as he gave it and later called for Congress to censure him. I also supported Vice President Pence’s interpretation of federal law and disagreed with Eastman’s interpretation.

    Moreover, as I have repeated stated, Congress has a legitimate interest in getting a full record of what occurred on Jan. 6th.  However, none of that should blind us to the dangerous elements of this decision.

    Judge Carter notes that Eastman still believes that the statute is unconstitutional as written. The court simply brushes that aside and states the “ignorance of the law is no excuse” and “believing the Electoral Count Act was unconstitutional did not give President Trump license to violate it.”

    More importantly, the court simply declares that Trump knew that the election was not stolen and thus “the illegality of the plan was obvious.”

    Putting aside the court’s assumption of what Trump secretly concluded on the election, a sizable number of Americans still do not view Biden as legitimately elected. The court is not simply saying that they are wrong in that view but, because they are wrong, legislative challenges amounted to criminal obstruction of Congress.

    In 2005, it was Democrats who alleged that a presidential election was stolen and challenged the certification in Congress of the votes in Ohio. The claim was equally frivolous but Democratic leadership praised the effort, including Speaker Nancy Pelosi who praised Sen. Barbara Boxer’s challenge and insisted that “this debate is fundamental to our democracy.”

    The Democrats did not, however, demand that Vice President Dick Cheney refuse to certify, an important distinction to be sure. Jan. 6th was a desecration of our constitutional process and one of the most disgraceful days in our history.

    However, the lack of factual foundation for the challenge (cited repeatedly by Judge Carter in the Trump challenge) did not make this a criminal or fraudulent effort.

    Some attorneys believed (and still believe) that it was possible for Pence to refuse to certify. Holding such a legal view is not a crime and sharing that view with the White House is not a conspiracy. Indeed, Eastman and others were publicly stating essentially the same thing. That is what triggered the debate as many of us who challenged their interpretation.

    Yet, Carter is conclusory and dismissive on this critical point in declaring “President Trump and Dr. Eastman justified the plan with allegations of election fraud — but President Trump likely knew the justification was baseless, and therefore that the entire plan was unlawful.” Trump is still insisting that he believes the opposite. The question is why arguing that point with Pence and others amounted to a criminal act. In the end, wiser minds prevailed and the theory was not used by Pence.

    There were crimes that day, of course. Some of those at the rally rioted and were charged largely with trespass and unlawful entry. A handful have been charged with seditious conspiracy. The court does not cite any evidence that Trump directly advocated violence while noting that Trump told the crowd to peacefully go to the Hill.

    Consider the implications of Carter’s opinion. There was rioting when President Trump was elected while various Democratic leaders continued to claim that he was not the legitimately elected president, a view echoed by Hillary Clinton. While they did not riot in Congress, they committed other crimes.

    Under Carter’s theory, the baseless claims that Trump was not legitimately elected have been used by the Trump Administration to seize confidential legal material given to the 2005 leaders. After all, there was not a solid factual basis for these claims and they knew it. They further fueled the mob but making these claims in public.

    What is particularly concerning is that none of this was necessary. The Congress has every right, indeed it has a duty, to investigate if there was a criminal conspiracy.  Yet, it already knows the legal advice given by Eastman and other witnesses have testified as to what he said in critical meetings.

    In the Post column, Rubin reminds readers “this is a federal court, not a pundit or politician.” Yet, at points it was hard to tell the difference. Judge Carter seemed intent on rendering judgment on what he described as a “coup” rather than a riot: “Dr. Eastman and President Trump launched a campaign to overturn a democratic election . . . Their campaign was not confined to the ivory tower — it was a coup in search of a legal theory.”

    That last comment was particularly interesting because it suggests that Eastman, who was dean and on the faculty of Chapman Law School, could have made the same articles as a professor. However, when he took his academic views and applied them as counsel, it somehow became part of a criminal conspiracy and attempted coup.

    That is what is so disturbing about Carter’s opinion. While I agree with many aspects of Judge Carter’s decision, there is no clear limiting principle of when a legal opinion becomes a criminal conspiracy beyond the court’s predisposition of the meaning of these facts.

    Tyler Durden
    Sun, 04/03/2022 – 20:30

  • Cathie Wood Says The Fed Is "Playing With Fire" And That Raising Rates Would "Be A Mistake"
    Cathie Wood Says The Fed Is “Playing With Fire” And That Raising Rates Would “Be A Mistake”

    Apparently, real rates approaching -10% doesn’t necessarily mean it’s time to hike interest rates. That is, of course, according to “visionary” Cathie Wood, who spewed what can only be described as this incredibly hot take on Saturday.

    Better yet, Wood said the Fed raising rates while the yield curve is inverted would be a “mistake”, according to Bloomberg. It certainly would be for Wood’s flagship ARK Innovation Fund (ARKK), that’s for certain. 

    On Friday, after a strong jobs report, the two year bond yield rose above that of the 30 year for the first time since 2007, while other parts of the curve have already been inverting over the last several trading sessions. 

    Cathie Wood offered up a take that was…well…commensurate with her investing style. The portfolio manager, who never met a cash burning “innovative” tech company she didn’t appear to instantly love, Tweeted out on Saturday: “Yesterday, the yield curve – as measured by the difference between the 10 year Treasury and 2 year Treasury yields – inverted, suggesting that the Fed is going to raise interest rates as growth and/or inflation surprise on the low side of expectations…which will be a mistake.”

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

    In a thread that followed, Wood wrote that “Economists have learned over many cycles that the 10-2 year measure of the yield curve leads another one: the difference between the 10 year Treasury yield and the 3 month Treasury rate. I have no idea why many strategists and economists are reverting to the latter one now.”

    “The 10-year to 3 month yield curve is steep because the Fed is telegraphing aggressive interest rate hikes in the face of inflation that has been stoked by supply shocks. Inflation is a highly aggressive tax that is killing purchasing power and consumer sentiment,” she continued.

    Then, she made the astute argument that consumer sentiment is waning, which is correct. Unfortunately, Wood doesn’t seem to realize that the Fed has its hands tied behind its back and has officially run out of options for dealing with the inflation she is referencing. She wrote: “US consumer sentiment, as measured by the University of Michigan, is lower today than it was at the depths of the coronavirus crisis. It has entered 2008-09 territory and is not far from the all time lows in the 80’s when inflation and interest rates hit double digits.”

    “The economy succumbed to recession in each of those periods. Europe and China also are in difficult straits. The Fed seems to be playing with fire,” she concluded. 

    Wood’s flagship ARKK fund is down -28.6% this year so far. Its benchmark NASDAQ ETF, the QQQ, is down -9%. 

     

    Tyler Durden
    Sun, 04/03/2022 – 20:00

  • Bear Traps: "This Is Not About The 2s10s, There Is Far, Far More Going On… We See 20-30% Near-Term Downside"
    Bear Traps: “This Is Not About The 2s10s, There Is Far, Far More Going On… We See 20-30% Near-Term Downside”

    By Larry McDonald, author of the Bear Traps report

    When we think about the hard assets vs. financial assets debate — clearly, we can see a “first-second inning” shift in play — but what takes the trade to the next level? We still have not seen even the slightest indication of real financial asset selling. What will give the hard asset value equity thesis real, sustainable legs? It all comes down to the dollar. As we stressed in our March 10th note —“a Secular C change for the Greenback” – for much of the last 20 years the U.S. political leadership has been weaponizing its currency. One could say they have –“gone to this well” too many times, indeed. Keep in mind, today ´s sanctions roulette has a far different gene pool.

    BEFORE the war in Ukraine — inflation in the U.S. was already running near 8%. Now the United States has chosen to bring out its sanction’s sword yet again — but this time up against a country that has regional control — influence over 10-15% of the global commodity complex.

    We are NOT sure the risk-reward has been meticulously thought through here. The risks of a self-inflicted wound are sky high and complacency around these risks is even higher. At the very end of the day, U.S. sanctions and counter attacks from Putin – push inflation’s roots much deeper below the surface and make higher price pressures far more sustainable than any time in recent memory. This mess gives “unintended consequences” a whole new meaning.

    As we stressed in the summer of 2020 the “Cobra Effect” coming from a fiscal and monetary policy overdose delivers many surprises wrapped in inflationary pressures. But sanction games raise these stakes to a whole new level. “Our currency your problem” becomes “our commodities your problem” (to paraphrase Zoltan Pozsar).

    Globally, the lights on the “USD weaponization” stage have NEVER been brighter. Even one of the U.S.’s most trusted allies – The Kingdom of Saudi Arabia – is looking at ways to lay off dollar risks and possibly trade their dark crude in red China yuan (CNH). We are NOT saying the U.S. dollar will lose its world’s reserve currency status this decade – that is absurd – but make NO MISTAKE a near term diversification away from the greenback is certain – all coming with HIGH impact on rates, inflation and hard assets.

    * * *

    There are times when developments pile up so fast late in the week that the street doesn’t have time to process the significance of the data. The Wall Street research community has always been “slow on the draw” – but we believe strategists and analysts will be confronted with a “come to Jesus” moment in the weeks ahead.

    What is the state of play you ask? We have a U.S. equity market that has been led by Utilities (XLU up 15% since late November vs. 3% for the S&P 500 over the same period) and Consumer Staples XLP for nearly five months now.

    In the U.S., ISM Manufacturing fell in March to 57.1 vs. 59 est. and 58.6 in prior month lowest since September 2020. Above all, new orders light blue above) plunged from 61.7 to 53.8 At the same time, the Dow Jones Transports had one of the sharpest one day declines in years on Friday following a warning from FreightWaves CEO that a freight recession looms. Classic economic bellwethers like Union Pacific UNP dropped 8% day over day at one point; US banks (Citi) and consumer plays (GM and Home Depot) are 30-35% off their highs with the U.S. Treasury curve moving deeper into inversion territory.

    CLEARLY this is NOT all about 2s-10s and the rates curve. There is FAR FAR FAR more going on.  AND the divergence between UMichigan and the Conference Board consumer data is screaming “stagflationary recession” as well. We see 20 30% near term downside for the Nasdaq.

     

    * * *

    The Fed Has to Convince the Market of What?

    In essence, the Federal Reserve has convinced the market of two things: 1) rate raises will be higher than formerly believed; 2) such raises will do little to cure inflation, at least over the near term. Breakevens (the yield of an inflation-protected bond minus the yield of a non-inflation-protected bond of the same maturity) were at 3.42% at the start of the Fed’s March meeting. On Friday, that got to 3.57%.

    So, traders decided that inflation was actually worse after the Fed meeting than before the Fed meeting. It is now at a record high, in fact.

    Furthermore, the bear market rally shows that the stock traders do not believe they are fighting the Fed. Ultimately, stocks believe that for all the clamor around higher rates, net-net monetary policy is and will continue to be loose, just less loose than it was. Loose money means Fed Funds after inflation are negative. Since inflation is running near 8%, no reasonable person thinks Powell will make Fed Funds actually positive after inflation.

    This explains the rise in yields on the 10 year: traders are trying to get more vig given ongoing inflation. It also explains the rise in gold, which in addition to its safe have bid is also an inflation hedge. So yes, the markets were surprised by a more hawkish Fed, but no, the markets don’t believe inflation is going away.

    We still think that aggressive tightening will lead to recession, assuming one hasn’t already gotten underway. We still believe we are either in or about to enter stagflation (depending on one’s definition of the term). So faster hikes but inflation still rages – in our view – the S&P 500 will be 20 30% lower in this world.

    Dollar Ceiling and Cash at the Treasury

    Cash Balances at the Treasury are relatively high at the Treasury vs. prior pre Covid years, and well off the lows of a few months ago. Dollar seems to be near a congestion zone of potential supply.

    If Treasury cash balances decline, the dollar may soften up a bit … With the HIGHEST conviction we believe we are in the middle of a secular change for the U.S. dollar. U.S. sanctions are FAR more of a dollar threat then most realize and they make sustained inflation FAR FAR FAR more certain.

    UMich – Conference Board Consumer Sentiment Spread

    Look at this spread and then look at the dates and events around it historically. The UMich survey is more ‘inflation-sensitive’. There is a higher weighting towards durable goods, whereas job conditions is more important in the Conference Board survey. The  Conference Board survey (correlated with unemployment rate) tends to stay optimistic for much longer than the U Michigan survey, which is more about affordability and people’s perceptions of job security. So, the U of Mich survey is more of a leading indicator and the Conference Board survey is more of a real time coincident indicator. The UMich survey usually leads the Conference Board survey down into recession.

    Tyler Durden
    Sun, 04/03/2022 – 19:30

  • Price Controls Will Likely Make A Comeback – Even Though They Don't Work
    Price Controls Will Likely Make A Comeback – Even Though They Don’t Work

    As anybody who lived through the oil crisis of the 1970s (and the stagflation that resulted) will likely tell you, using price controls to try and alleviate Americans’ pain at the pump (and with their heating bills, and their grocery bills and, well, all their other bills) is, at best, a band-aid on a bullet wound, and at worst, a hair-brained policy response that does nothing to solve the underlying problem (in fact, it only exacerbates the problem).

    While America’s left-leaning millennials weren’t around for the 1970s, some of the people who served in government during the 1970s are still around, and one of them is Philip Verleger, president of PKVerleger and an analyst who specializes in commodity markets. Over the years, Verleger has authored more than 100 articles and books about commodities. He also worked on energy policy during the Ford and Carter Administrations after getting his PhD in 1971.

    It’s this first-hand experience that gives him special insight into why price controls don’t work, and also why it’s only a matter of time before the Biden Administration brain trust moves to bring them back.

    The problem with price controls, as Verleger explained during a recent MacroVoices interview with Erik Townsend, is that they create “distortions” in the market which feed through and influence producers’ willingness to ramp up production, effectively exacerbating the underlying cause of high prices in the first place.

    Here’s more on that in an excerpt from their interview:

    Erik: Now, there are a lot of people that are beginning to talk about price controls. I personally have a pretty strong bias that that’s never the right way to solve a problem. But a lot of people think it is. Are price controls potentially a good idea and regardless of whether they’re a good idea, are they likely coming or not?

    Philip: Oh, God. Oh, God. So when I had color in my hair. It is very gray now. I went to work in the Ford administration at the Council of Economic Advisers. And the focus and the reason I went there was to get us out of price controls. I stayed at the US Treasury in the Carter administration because I got asked by the Secretary of Treasury to help get rid of crude oil price controls and I managed to help lead the effort to get us out of price controls. The Energy Department’s didn’t. And as for getting us out of it, I was rewarded by being asked to draft and think of a windfall profit tax. These are not good ideas. Matter of fact, they’re terribly bad ideas. The distortions they caused if you go back and look at the World War Two experience and and I got into this business because my grandfather’s good friend had been a senior official in the Roosevelt administration had in fact run the price control programs for well had been ahead of the descent of St. Louis Federal Reserve.

    And he, you know, told me all when I was in high school, all the problems with price controls. I cannot I can’t screen but I don’t, you don’t want them. Now, so that is a terrible idea. There are some controls that might help. One of the things and there’s the report I sent you. I sent for Notes at the Margin. I’ve been following very closely how hedging of call options on crude and on crude oil has exacerbated the volatility of oil prices. One of the steps that one could take is to require people who write calls on these say $300 call on oil be fully covered. That is if a firm writes a calls on 100 contracts, it must be long 100 contracts under all our modern derivatives models. If I write a call today on $300 oil for 100 contracts, I only have to have about a third of a contract. 1/3 of a contract I need to cover that to hedge it.

    And if price goes up, I have to buy more. S, and Javier Blas wrote a great piece for Bloomberg in January 18 saying Wall Street was about to take the oil market on a wild ride. And it has because as I do the numbers, the number of calls out there are so large that every time somebody says well, oil prices might maybe should go up about 50 cents or something like that, it gets magnified to $5. So you don’t want price controls. The financial markets are out of control. And as Blas said, people are buying lottery tickets on oil. It’s you know, it’s the odds are better buying call options on oil right now or call options on natural gas in Europe than they are on betting on a sporting event. You know, you just look at the handle in the sporting events and how much it goes back to the better versus what oil is and oils earning much better returns. That needs to change. That could change. But you don’t want to tax and you don’t want just sudden taxes on oil and you don’t want price controls.

    So, why are policy makers and academics still kicking around a revival of price controls? At the risk of sounding excessively cynical, Townsend and Verleger put it succinctly enough: It’s the policy corollary to Murphy’s Law. The best policy ideas are impossible to push through. And the worst ideas…will inevitably be put into practice.

    Erik: I couldn’t possibly agree more Phil that we don’t want price controls. But the very fact that it’s such a bad idea almost tells my cynical mind that it’s more likely to happen if government’s in charge. You’ve been through this once before in the 1970s event for some of us that are a little bit younger than you are. Tell us a little bit more about maybe what people have forgotten about price controls. How that went and why it’s such a bad idea but also for fatalists like me who think it’s probably coming even though it’s a bad idea. What do we need to be thinking about as investors in terms of getting ready for it?

    Philip: We agree 100%. You know, it’s an economic policy. If there’s a really great idea, it’s almost impossible to get it through and if it’s a bad idea, it almost always happens. That seems to be Murphy’s Law or move Murphy’s corollary. The problem with price controls essentially is that… Let me rephrase that the problem with price controls are… this is plural. The Myraid, of details that you have to get into to make them work. When we went into this in 1971 50 years ago. 50 years ago plus six months, they froze them for 90 days. For 90 days okay you can just freeze prices and most things will be fine. But if you go much further, then you start to say well we have a problem here. We’ve lost some capacity here or something else and we start having to make adjustments. And it means you have to start building a bureaucracy. And we built a bureaucracy called the Cost of Living Council in the 70s. And they were looking into everything, and everybody had to file all this information. And then you had to, you know, if you had a problem, then you can apply to get a special exemption. We had special courts, temporary court, emergency Court of Appeals which was not very temporary. You know, it’s a rabbit hole once you go down it. There’s so many details that you have to start looking at, that’s a problem.

    Perhaps another clue lies in the analysis of Credit Suisse’s Zoltan Pozsar, who has in a series of notes published this year theorized about the birth of a new commodities-focused monetary regime which he has christened “Bretton Woods III”. While contemporary central bankers are accustomed to controlling the money supply via balance-sheet expansion and NIRP, they’re mostly powerless to counter soaring commodity prices (short of engineering a brutal recession that succeeds in crushing the ‘demand’ side of the supply vs. demand equation).

    Once President Biden’s latest attempt at countering sky-high oil prices proves to be a failure, the only options left will be 1) gas stimmies, followed inexorably by 2) price controls.

    Readers can listen to the full MacroVoices interview with Verleger below:

    Tyler Durden
    Sun, 04/03/2022 – 19:00

  • Countdown To US Government Default
    Countdown To US Government Default

    Authored by MN Gordon via EconomicPrism.com,

    Central Bank Digital Currencies (CBDC) are coming.  And they’re coming much faster than most people care to think about.  Are you ready?

    At the moment, roughly 90 central banks – including the European Central Banks and the Federal Reserve – are either experimenting with, or are in varying stages of CBDC implementation.  Moreover, these CBDC friendly central banks include all G20 economies.  And together, represent more than 90 percent of global GDP.

    What’s important to understand is the adoption of a CBDC in your country of residence would accompany the abolition of cash.  This would be for your own good, of course.  To eliminate nefarious transactions and black markets.

    If you value financial privacy and the liberty to spend your money as you please, then the rapidly approaching rollout of CBDCs is a major red flag.  Compulsory use of a CBDC, like a digital dollar for example, would give central planners complete oversight and control over your finances.

    You see, under a CBDC regime – free of cash – all of your transactions would be subject to government surveillance.  All remnants of financial freedom, privacy, and anonymity would be destroyed.  But that’s not all…

    CBDCs would allow control freak, power mad central planners to do much more than spy and surveil your financial transactions.  CBDCs would allow them to control how and when you spend your money.

    This may sound crazy to a sane person, who operates with a modicum of modesty and integrity.  But, in truth, this is one of the main intents of CBDCs.  In fact, several years ago Bank for International Settlements General Manager Agustin Carstens outlined the extraordinary powers CBDCs would afford central planners.  Here are the particulars from Carstens himself:

    “There is a huge difference [between CBDC and cash].  For example, with cash we don’t know who’s using a 100 dollar bill today.  We don’t know who’s using a 1,000 peso bill today.  A key difference with the CBDC is the central bank will have absolute control under rules and regulations that will determine the use of that expression of central bank liability, and we will have the technology to enforce that.”

    Do you get it?  The central planners want absolute control over how you spend your money.  This includes the U.S. government too…

    Traceable And Programmable

    On March 9, the Biden administration released an executive order (EO) requiring several federal agencies to study digital currencies and to identify ways to regulate them.  A big part of the EO is focused on blockchain based cryptocurrencies like bitcoin and ethereum.

    However, within the EO, Biden also directs the federal government and Federal Reserve to lay the foundation for a potential new U.S. currency, a CBDC – perhaps, a digital dollar.

    Specifically, the EO directs the U.S. Treasury, and other federal agencies, to study the development of the new CBDC and report back within 180 days of the potential risks and benefits of a digital dollar.  The EO also directs the Treasury Department, Office of the Attorney General and Federal Reserve to produce a ‘legislative proposal’ to create a digital currency within 210 days, about seven months.

    The digital dollar is coming, and it’s coming quick.

    To be clear, the adoption of a digital dollar by the U.S. government, as Biden intends, would be one of the greatest expansions of federal power ever made.  The digital dollar would be much different than a digital version of the existing U.S. dollar.  It would also be much different than cryptocurrencies like bitcoin and ethereum, which are decentralized.

    Digital dollars would be traceable and programmable. The Federal Reserve, or some other government agency, would have the ability to create digital dollars at whim.  Moreover, the digital dollars could be programmed to have various rules and restrictions governing how and when they are spent.

    Earlier this year, in Federal Reserve published report about the development of a CBDC, the Fed provided examples of possible ‘design choices’ for a digital dollar, including that “a central bank might limit the amount of CBDC an end user could hold.”

    Biden’s EO plan for a digital dollar also includes design choices that will give the federal government total control over financial freedom and the economy.  The EO even states the CBDC and other policies governing digital assets must mitigate “climate change and pollution” and promote “financial inclusion and equity.”  This is a major focus.

    From this, we can speculate that financial inclusion and equity means wealth redistribution.  And climate change mitigation means restrictions to fossil-fuel use.  These, and other government dictates, like the direct subtraction of taxes and fees from your account, would be programmed into the digital dollar.

    Why now…

    Blowback

    U.S. and European Union sanctions against Russia, including cutting Russian financial institutions off from SWIFT and preventing the Russian Central Banks from using its foreign currency reserves, may prove to be a strategic blunder.  The blowback potential is real, and is already happening.

    Europe, which depends on Russia for 40 percent of its natural gas, is now reaping the whirlwind.  According to Bloomberg, Putin has signed a decree demanding payment in rubles for Russian gas supplies starting April 1 (today).  Will Europe submit?

    There are rumors European nations are already covertly buying rubles.  The ruble’s increase on the foreign exchange market to pre-invasion levels certainly hints something is in the works.

    Regardless, the U.S. is losing control over the international financial and payment system.  By freezing Russia out SWIFT, Putin is being forced to look for other alternatives.  Specifically, China has been developing its own Cross-Border Interbank Payment System (CIPS) as an alternative to SWIFT.

    Sanctions against Russia may further accelerate the use and adoption of CIPS by nations that are opposed to western influence.  Cryptocurrencies and blockchain technology also offer banks and individuals ways to move payments without using dollars or SWIFT.

    The very success of the weaponization of the legacy financial system by the U.S. and Europe is driving Russia and others into such alternatives.  Hence, fewer international transactions in dollars could undermine the dollar’s reserve currency status.  This would have serious implications for the U.S. economy, as the dollar would likely suffer a significant devaluation.

    In the U.S. consumer price inflation (official) is already at a 40 year high.  Unofficially, it’s higher than it has been in over 100 years.

    Between the financial war being waged, raging consumer price inflation, a $30 trillion national debt, trillion dollar deficits, and unfunded liabilities running into the hundreds of trillions, something’s got to give…

    …namely, the U.S. dollar.

    Countdown to U.S. Government Default

    The popular American myth is that the U.S. government has never defaulted on its debt. 

    Quite frankly, that’s unadulterated hogwash. 

    The U.S. government has (unofficially) defaulted on its debt twice within the last hundred years.

    Executive Order 6102 of 1933, which forced all American citizens to turn in gold coins and bars, was, in fact, a default.  Gold ownership in the United States, with some small limitations, was illegal for the next 40 years.

    Under EO 6102, Americans were compensated $20.67 per troy ounce of gold.  They were paid with paper dollars.  Immediately following the government’s gold confiscation, the price of gold was raised by the Gold Reserve Act of 1934 to $35 per ounce.  Just like that, American citizens were robbed of over 40 percent of their wealth.

    The second default occurred in 1971, when President Nixon “temporarily” suspended the convertibility of the dollar into gold.

    Prior to 1971, as determined by the Bretton Woods international monetary system, which was agreed to in Bretton Woods, New Hampshire, in July 1944, a foreign bank could exchange $35 with the U.S. Treasury for one troy ounce of gold.  After the U.S. reneged on this established exchange rate, when foreign banks handed the U.S. Treasury $35, they received $35 in exchange.

    In both instances, the U.S. government didn’t overtly default on the debt.  Instead, it changed the fundamentals – the terms and conditions – of the dollar.  By all honest accounts, these are defaults.

    Similarly, the issuance of a digital dollar (a Fed issued CBDC), which is traceable and programmable, changes the terms and conditions of the cash dollar.

    Make no mistake.  This is a default…and you won’t like it.

    Moreover, per Biden’s EO, this default could happen as soon as T-minus 210 days from March 9 – or as soon as October 4th.

    If that doesn’t give you a warm and fuzzy, we don’t know what will.

    *  *  *

    The window to protect your wealth and financial privacy is closing.  And it’s closing quick.  I don’t like it one bit.  But I’m not going to stand around powerless as Washington’s control freak sociopaths destroy everything I’ve worked so hard for.  For this reason, I’ve dedicated the past 6-months to researching and identifying simple, practical steps everyday Americans can take to protect their wealth and financial privacy.  The findings of my work are documented in the Financial First Aid Kit.  If you’d like to find out more about this important and unique publication, and how to acquire a copy, stop by here today!]

    Tyler Durden
    Sun, 04/03/2022 – 18:30

  • World's Largest Oil Trader Warns Energy Markets Are Under-Pricing Supply Risks
    World’s Largest Oil Trader Warns Energy Markets Are Under-Pricing Supply Risks

    Thanks to a lucky confluence of circumstances, President Joe Biden has so far been able to delude the American people into believing that his latest feeble attempt to drive energy prices lower (without abandoning the green agenda that has led to structural deficiencies in the American oil and gas industry that will require concentrated investment over time to correct) has actually helped to drive prices lower at the pump.

    Unfortunately for him, a growing chorus of energy-market analysts are warning the public that the SPR release is essentially a band-aid on a bullet wound. Just the other day, Goldman Sachs warned that the unprecedented SPR release of 180 mb over the next six months to fight the “Putin price hike at the pump” has, in reality, done nothing to resolve structural issues, prompting the bank’s energy analysts to raise their near-term forecast for 2H22 Brent to $115/bbl from $110/bbl.

    Fresh off making a record $4 billion profit in 2021 (per Reuters), analysts at Vitol, the world’s largest energy trader, are warning of more imminent upside ahead in oil prices.

    Their reasoning? Lockdowns in Shanghai and Washington’s efforts to lead a ‘Marshall plan for energy’ to try and wean Europe off their dependence on Russian oil doesn’t change the fact that flows of Russian crude and oil products may be down by between 1 and 3 million barrels a day through the third quarter, while OPEC+ has refused to bolster its output.

    “Oil feels cheaper than most would’ve predicted,” Mike Muller, Vitol Group’s head of Asia, said Sunday on a podcast produced by Dubai-based consultant and publisher Gulf Intelligence. “Oil prices could be higher given the risk of disruption of supplies from Russia. But people are still lost figuring out those numbers.”

    Other factors that have weighed on energy prices this past month include (according to Bloomberg)…

    The Lockdown in Shanghai

    Muller suspects the CCP will double down on its repressive strategy for quashing the latest COVID outbreak, even as locals become increasingly outraged and accuse the Party of violating its compact with the Chinese public, as the NYT recently pointed out.

    “I happen to be in the camp that thinks China will continue to suppress this,” Muller said. “The Chinese are certainly making a good fist of arresting it.”

    Beijing will probably announce more economic stimulus measures before the Communist Party Congress later this year, Muller said. Such a move would likely bolster demand for oil in the world’s biggest importer.

    “China will throw the kitchen sink at making sure the economy delivers,” he said. “We are going to see China put a massive effort into infrastructure spending and propping up the economy. You’re going to see a big outlay.”

    The Iran Deal

    Another bullish risk factor for oil prices is the unraveling talks with Iran about reviving the JCPOA. Muller believes the market is overestimating the odds of a deal, noting that vast differences in the two sides’ negotiating positions remains.

    American officials said late last month that a pact wasn’t “imminent,” while Iran has made similar comments. Envoys are yet to say when they’ll return to Vienna for negotiations and many U.S. allies in the Middle East – including Israel and Saudi Arabia – are wary that a revival of the deal would hand Iran an oil windfall and allow it to continue arming proxy groups in the region.

    “Everyone was expecting a return of Iranian supplies,” Muller said. Now “nobody believes that’s going to happen in the second quarter. It looks much less likely than it did a few weeks back.”

    Of course, commodity traders like Vitol have plenty of incentive to brace for higher energy prices. As we pointed out last month, many commodity traders have just endured a brutal series of market ructions that some likened to a “doom loop”.

    In fact, just last month, the CFO of Vitol rival and commodity trading giant Trafigura predicted that that chaotic moves in global energy and commodity markets would likely trigger a wave of “consolidation” as smaller players are driven into insolvency.

    With this in mind, it’s worth asking: how much longer until the “doom loop” is finally triggered and the price of energy (and other commodities) surges to levels beyond the forecasts of even the most bullish investment banks/commodity traders?

    Tyler Durden
    Sun, 04/03/2022 – 18:05

  • Busting The Myth That The Fed Can Control Or Predict The Economy
    Busting The Myth That The Fed Can Control Or Predict The Economy

    Submitted by Jon Wolfenbarger, Founder and CEO of Bull And Bear Profits, an investment website.

    The Federal Reserve states that it “conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.”

    Let’s look at how well the Fed has done that job since its founding in 1913.

    Economy And Long-Term Interest Rates

    Since 1913, the US unemployment rate has ranged from 2.5% in the early 1950s to 25% during the Great Depression. Inflation has ranged from positive 24% to negative 16%. Inflation is currently 7.9%, well above the Fed’s 2% target. While the Fed has some influence over money supply, they have no control over money demand or how money is spent, which has a significant impact on employment and inflation.

    The Fed’s goal to “moderate long-term interest rates” below free market levels is a form of price fixing. Since price fixing never works for long, it is no wonder the Fed has been unsuccessful in this goal. Since 1913, 10-Year Treasury rates have ranged from 0.5% in 2020 to 16% in 1981. Interest rates have been much more volatile than before the Fed, as shown below.

    Source: Chart courtesy of multpl.com

    Money Supply And Short-Term Interest Rates

    Maybe the Fed can’t control the economy, but at least they can control the money supply and short-term interest rates, right? Wrong.

    The Fed controls the Monetary Base, which is currency plus bank deposits at the Fed. But the popular M2 money supply measure is 3.6 times larger than the Monetary Base. The broader money supply is driven by the desire of commercial banks to lend and people to borrow from them. The Fed has no control over that.

    The Fed also controls the Federal Funds Rate, which is the interest rate at which commercial banks borrow and lend to each other overnight. But as shown below, the Fed follows market driven interest rates, such as the 2-Year Treasury rate (red line), when setting the Federal Funds Rate (black line), since they have no way of knowing where rates should be.

    Source: Chart courtesy of FRED

    The Fed’s Real Purpose

    The Fed’s real purpose is to enable banks to make loans by creating money out of thin air and then bail them out when their loans go bad. It has been successful in that goal, as we saw with the bank bailouts during the Great Recession.

    As Murray N. Rothbard explained: “Banks can only expand comfortably in unison when a Central Bank exists, essentially a governmental bank, enjoying a monopoly of government business, and a privileged position imposed by government over the entire banking system.”

    The Fed’s other main purpose is to help the US government borrow. They have been very successful at this, as the government debt to GDP ratio has more than tripled in the past 40 years to over 120%.

    The Fed Succeeds In Lowering Living Standards

    Two of the main negative consequences of Fed money creation is inflation and the boom and bust business cycle, both of which lower living standards significantly. Inflation raises living costs and erodes savings, while the business cycle wastes  scarce resources allocated to bad investments.

    Since the Fed’s founding in 1913, the US dollar has lots 97% of its purchasing power.

    The Fed helped engineer the Great Depression of the 1930s and the Great Recession of 2008-2009. Austrian Business Cycle Theory explains how the business cycle is caused by banks creating money out of thin air, which leads to an unsustainable boom that eventually turns into a bust, since newly created money does not create the scarce resources (land, labor and capital) needed to complete all the projects businesses have undertaken with the newly created money.

    As Ludwig von Mises explained: “The wavelike movement effecting the economic system, the recurrence of periods of boom which are followed by periods of depression is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.”

    Fed Predictions

    Now that we’ve reviewed the Fed’s failures, let’s see how successful Fed leaders have been at predicting the economy.

    Alan Greenspan was Fed Chairman from 1987 to 2006. He presided over the 1987 stock market crash, the S&L crisis, the early 1990s recession, the late 1990s tech bubble, the early 2000s recession and the early/mid 2000s housing bubble. Naturally, the press called him “maestro” for his work at the Fed.

    Near the peak of the tech bubble in January 2000, Greenspan bragged about engineering a long economic expansion that he saw no signs of ending. As he said shortly before the NASDAQ stock index collapsed 80% and the early 2000s recession started: “[T]here remain few evident signs of geriatric strain that typically presage an imminent economic downturn.”

    In response to the recession he did not see coming, Greenspan slashed the Fed Funds rate from 6.5% in 2000 to 1% in 2003, which helped fuel the housing bubble. Then Greenspan encouraged homeowners to take out adjustable-rate mortgages in early 2004, just before he raised the Fed Funds rate to 5.25% over the next two years, which triggered the housing bust.

    In 2007, Greenspan said this about banks lending to subprime borrowers: “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late…I really didn’t get it until very late in 2005 and 2006.”

    At least Greenspan has been honest about the Fed’s inability to forecast the economy: “People don’t realize that we cannot forecast the future. The number of mistakes I have made are just awesome.” Greenspan also admitted that the market is much larger and more powerful than the Fed: “[T]he market value of global long-term securities is approaching $100 trillion [so these markets] now swamp the resources of central banks.”

    Ben Bernanke was Fed Chairman from 2006 to 2014, so he presided over the Great Recession, the worst economic downturn since the 1930s up to that time.

    In 2002, in a speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here”, Bernanke bragged that the Fed’s legal right to create money out of thin air would prevent deflation: “The US government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost…under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.” Naturally, given the Fed’s ability to control the economy, “it” did happen in 2009, with prices falling 2% in the wake of the Great Recession.

    In 2006, Bernanke dismissed the inverted yield curve, which is known by virtually all economists to be one of the best predictors of a recession: “I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come.” In June 2008, seven months into the Great Recession, Bernanke said: “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

    Janet Yellen was Fed Chair from 2014 to 2018, so she had less time to cause major damage. But true to form, she stated she had no idea the housing bust would lead to a major recession: “I didn’t see any of that coming until it happened.”

    Jerome “Jay” Powell has been Fed Chairman since 2018. He helped invert the yield curve in 2019 and has presided over the Covid crash and recession, as well as the highest inflation rates in 40 years.

    In early November 2021, when inflation was over 6%, Powell and the Fed were still calling inflation “transitory” and caused by Covid and not the 40% increase in the money supply.

    By March 2022, with inflation rising 7.9%, Powell finally raised the Fed Funds rate by 0.25%, with plans to raise rates up to 2.75% by the end of 2023. Ominously, given his forecasting track record, Powell thinks he can raise rates that aggressively and achieve the elusive “soft landing” of slowing inflation without driving the economy into a recession, despite the already flattening yield curve.

    Conclusion

    The Federal Reserve cannot control the economy or even the money supply and interest rates. And Fed leaders clearly cannot predict the economy, even though the media and Wall Street hang on their every word. But the Fed can lower living standards by destroying the value of the dollar and causing the boom and business cycle. Economic theory and history has proven that government central planning does not work in creating stability or prosperity. That includes centrally planned monetary policy.

    Tyler Durden
    Sun, 04/03/2022 – 17:40

  • Russian Space Head To Halt ISS Cooperation Citing "Illegal Sanctions" 
    Russian Space Head To Halt ISS Cooperation Citing “Illegal Sanctions” 

    Tensions between Russia and the US on Earth have had broader implications for the two nations’ partnership in low Earth orbit aboard the International Space Station (ISS). 

    Dmitry Rogozin, head of Russian space agency Roscosmos, tweeted Saturday morning that he would suspend cooperation on the ISS and partnerships with NASA, the European Space Agency (ESA), and the Canadian Space Agency (CSA) as he criticized Western sanctions designed to severely damage the Russian economy (already appear to be working as recession imminent). 

    “The purpose of the sanctions is to kill the Russian economy, plunge our people into despair and hunger, and bring our country to its knees. It is clear that they will not be able to do this, but the intentions are clear,” Rogozin said.

    “That’s why I believe that the restoration of normal relations between the partners at the International Space Station (ISS) and other projects is possible only with full and unconditional removal of illegal sanctions,” he continued.

    Rogozin added “specific proposals” on when to end the “cooperation within the framework of the ISS with the space agencies of the United States, Canada, the European Union, and Japan” will be discussed with Moscow “in the near future.” 

    Rogozin sent letters to NASA, the ESA, and the CSA to lift sanctions on Russian space and rocket companies. He posted the responses of all major agencies, which gave generic answers and appeared not to budge on sanctions. 

    NASA’s response 

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

    ESA’s response 

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

    CSA’s response

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

    Rogozin is known for provocative statements and threatened to end Russian cooperation on the ISS last month. He also said one disastrous result of Russia pulling out of the ISS would be an “uncontrolled de-orbit” of the 500-ton space station. That’s because Russia is responsible for ISS’ propulsion systems. 

    Last week, Rogozin suspended all European launches of satellites. Meanwhile, British satellite venture OneWeb has contracted Elon Musk’s SpaceX to launch satellites instead of Russia. 

    Russia has already said it will pull out of the ISS by 2025, though Moscow’s special military operation” in Ukraine and following sanctions by Western countries has expedited their departure. Roscosmos has already begun work on a new space station. 

    Even in space, global superpowers who once worked together for decades are quickly unwinding relations as here on Earth, a new world order is emerging, one that is multi-polar. BlackRock CEO Larry Fink’s annual shareholder recently warned about that. 

    Tyler Durden
    Sun, 04/03/2022 – 17:15

  • 'The House That Davos Built' Quakes As PM Orban Claims "Great Victory" In Hungary Election
    ‘The House That Davos Built’ Quakes As PM Orban Claims “Great Victory” In Hungary Election

    Update (1700ET): AFP reports that Hungarian Prime Minister Viktor Orban claimed a “great victory” in Sunday’s general election, as partial results gave his Fidesz party the lead.

    Addressing a jubilant crowd chanting his name, Orban said:

    “We have won a great victory — a victory so great you can perhaps see it from the moon and certainly from Brussels”.

    This will be Orban’s fourth consecutive term in office.

    “Hungarians decided that they back peace and security,” Orban’s foreign minister, Peter Szijjarto, told TV2 Sunday night. 

    As Bloomberg reports, the unexpectedly clear victory (Orban’s Fidesz party leads United for Hungary, a six-member opposition alliance, 55% to 33% in the party list contest, according to the National Election Office, with 63% of the votes counted) defied polls ahead of the vote that had predicted Orban would face the toughest challenge to re-election in his 12 years in power, even as changes to the electoral process under his rule gave Fidesz an advantage.

    *  *  *

    Update (1600ET): Much to the chagrin of the elites – as detailed below – Prime Minister Viktor Orban’s party took a commanding lead in Hungarian elections, according to an early count that appeared to dim the chances of a six-party opposition alliance to block him from a fourth consecutive term.

    With 36% of the votes counted, mostly from rural districts that are the core of Orban’s support base, his Fidesz party was leading a six-party opposition alliance 58% to 30% on Sunday in the party list vote.

    It was also tipped to win a large majority of the electoral districts that may give it close to a two-thirds parliamentary majority.

    “We expect a clear victory,” Cabinet Minister Gergely Gulyas told reporters.

    A far-right party, Mi Hazank, may also clear the parliamentary threshold.

    *  *  *

    As Tom Luongo detailed earlier via his Gold, Goats, ‘n Guns blog, today Hungarians went to the polls to decide their future.

    What they may not have realized is that they also are deciding on the future of most of the European continent in the process.

    Sitting Prime Minister Viktor Orban is vying for his fourth term in office, having been in power for 12 years and he is under intense opposition from within and without. It’s an open secret that Orban is reviled in Brussels.

    And because of his basic sense of common decency and nationalism that means he must be removed from office in order to ensure the full consolidation of power with the European Commission and European Council.

    That only happens with his removal and a Brussels-centric puppet controlled by George Soros and the Davos Crowd put in his place. There is a real sense of desperation surrounding this bid to remove Orban.

    The formation of a ridiculous Not-Orban coalition of no less than six parties, none of whom would piss in each other’s mouths if their throats were on fire, is pure desperation. It is the apotheosis of the Davos strategy to put in power weak coalitions that can be torn apart at the seams but whose members are also so enamored with being in power they won’t collapse the government as popular opinion turns against them.

    This is how Davos engineered Mario Draghi’s takeover in Italy. Five Star Movement cut a deal with the Democrats to oust Lega despite the polls being completely against the idea of such a government after Matteo Salvini pulled out of his coalition with Five Star back in 2019.

    Germany’s ‘Traffic Light’ coalition members have almost nothing in common but in no way will you see the FDP, for example, pull out of it with their sinking poll numbers, now just 8%, even though they could. Instead, we see Finance Minister and FDP leader Christian Lindner doing exactly what he was put in power to do, gum up the financial works and prep the stage for the transference of Germany’s power within the EU to the EU.

    But all of that unravels if Orban is free for another four years to veto every stupid and belligerent idea that comes out of the European Council. Hungary is already under financing sanctions from the EU over their anti-LGBT laws, threatening to block distributions from the EU budget.

    The EU have already gotten the Poles to knuckle under because the Poles are dependent on Germany for gas flows thanks to their own intransigence in cutting deals with Russia for energy.

    Hungary, on the other hand, has energy independence from Brussels by having contracted directly with Gazprom for natural gas via Turkstream’s train that goes into Serbia and Hungary. This should give you some context as to why the EU is trying to sanction Serbia and cut off the flows of that pipeline where it crosses EU territory in Bulgaria.

    With a fiscally, monetarily (they are not on the euro) and energy independent Hungary there is little argument for them staying in the EU if Brussels is going to treat them as second class members. Orban and his government have been resolute in their refusal to get involved in the Russia/Ukraine conflict even though there has been serious pressure applied by NATO.

    This helped Orban in recent polls along with the war itself. The natural tendency is to not change leadership during a time of crisis. So, I don’t anticipate Orban having much trouble winning the election, if the election is anything close to ‘fair.’

    And that’s the crux of the conflict.

    To ask why the election wouldn’t be ‘fair,’ let’s think through the consequences of an Orban victory.

    Hungarians would have a strong incentive to reverse their support of EU membership. It is the one thing that really hamstrings Orban politically within the EU’s power structures.

    Orban needs to get past this election to begin making the case that Hungary is not better off in the EU rather than outside it. Then he can then fully express his power within the EU to slow down, if not grind to a halt, any further expansion of EU aggression against Russia.

    What Davos has tried to do in response is ratchet up the fear of Russia expanding west and stir up memories of life under the Warsaw Pact, which is the main source of basic support for the EU among many Europeans in the first place.

    Putin has made his intentions very clear. The dividing line for him are the republics of the former USSR, not the Warsaw Pact countries. In fact, as Dexter White has pointed out in multiple podcasts (this one in particular), which I and others like The Saker agree with, Russia doesn’t have the force projection capability or desire to do so even if they wanted to much past the Dnieper River in Ukraine no less Poland or Hungary.

    So, that narrative is pure fear porn for electioneering purposes.

    It reeks of existential fear over what an Orban administration looks like free for four years from further meddling by external forces. And since the EU is already refusing to give Hungary the money they are owed under EU rules, this is an easy argument for Orban to make to the people, post-election.

    Hungary standing tall against further European integration while Russia holds serve on its territorial gains in Ukraine would make a powerful argument to most of the Visegrads that there’s an opportunity for life without either Russia or the EU controlling their futures.

    The opportunity exists here for a new bloc to emerge which frees many of these landlocked countries to gain access to the Baltic, Black and Mediterranean seas if they overcome their fear of Russia and look West to the threats coming from Brussels.

    That would also mark the limit of their war against populism and sets up the possibility of a political earthquake in France later this month when Emmanuel Macron faces off against a surging Marine LePen in the second round of Presidential elections there.

    Look for a lot of post-election shenanigans in Hungary if Orban wins the initial vote. The OSCE will use their typical game of using biased ‘exit polls’ to throw shade on the results citing differences between their polls and the official results to gin up anti-Orban sentiment on the ground in Budapest.

    We should see a replay of 2020’s riots in Minsk over the results in Belarus. Now, I’m not suggesting that Orban is going to stuff the ballot box like Lukashenko likely did (who didn’t need to), but that will be the narrative constructed all across the western press.

    We will be subjected to the worst kind of disinformation campaign against Orban. It will be an order of magnitude worse than anything he’s experienced in the past. I hope for his part that he’s aware of these threats and has contingency plans in place.

    We’ll find out this week.

    Because the future of the EU hangs in the balance here against a backdrop of forces pulling at it on which the whole of Davos’ grand plans to make the world safe for Eurotrash technocrats possible.

    And if that’s not enough of an incentive for everyone to cheat, lie and steal this election I don’t know what is.

    *  *  *

    Join my Patreon if populism isn’t a dirty word to you.

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    Tyler Durden
    Sun, 04/03/2022 – 17:06

  • Lessons From A Trading Great: Stanley Druckenmiller
    Lessons From A Trading Great: Stanley Druckenmiller

    By Macro Ops

    The “greatest money making machine in history”, a man with “Jim Roger’s analytical ability, George Soros’ trading ability, and the stomach of a riverboat gambler” is how fund manager Scott Bessent describes Stanley Druckenmiller. That’s high praise, but if you look at Druckenmiller’s track record, you’ll find it’s well deserved.

    Druck averaged over 30% returns the last three decades — impressive. But what’s even more astonishing is the lack of volatility… the guy almost never loses.

    He never had a single down year and only had five losing quarters out of 120 altogether! That’s absolutely unheard of. And he did all of this in size. At his peak, Druck was running more than $20 billion and he was still managing to knock it out the park.

    When you study Druckenmiller you get the sense that he was built in a laboratory, deep in a jungle somewhere, where he was put together piece by piece to create the perfect trader. Every character trait that makes up a good speculator, Druck possesses in spades… things like:

    • Mental flexibility

    • Independent thinking

    • Extreme competitiveness

    • Tireless inquisitiveness

    • Deep self-awareness

    Maybe he’s a freak of nature or perhaps a secret Jesse Livermore / George Soros lovechild… or maybe he’s just a relentlessly determined trader who’s been on a lifelong path of mastery. Either way, it behooves us to study the thoughts and actions of one of the game’s greatest. And with that, let’s begin.

    On what moves stocks

    In Jack Schwager’s book The New Market Wizards, Druckenmiller said this in response to the question of how he evaluates stocks (emphasis is mine):

    When I first started out, I did very thorough papers covering every aspect of a stock or industry. Before I could make the presentation to the stock selection committee, I first had to submit the paper to the research director. I particularly remember the time I gave him my paper on the banking industry. I felt very proud of my work. However, he read through it and said, “This is useless. What makes the stock go up and down?” That comment acted as a spur. Thereafter, I focused my analysis on seeking to identify the factors that were strongly correlated to a stock’s price movement as opposed to looking at all the fundamentals. Frankly, even today, many analysts still don’t know what makes their particular stocks go up and down.

    The financial world is chock full of noise and nonsense. It’s filled with smart people who don’t know a damn thing about how the world really works. The financial system’s incentive structure is set up so that as long as analysts sound smart and pretend like they know why stock xyz is going up, they get rewarded. This holds true for all the talking heads and “experts” except for those who actually trade real money. They either learn the game or get competed out.

    Being one of those who compete in the arena, Druckenmiller was forced to learn early on what actually drives prices. This is what he found:

    Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.

    Liquidity is the expansion and contraction of money, specifically credit. It’s the biggest variable that drives demand in an economy. It’s something our team at Macro Ops follows closely.

    The federal reserve has the biggest lever on liquidity. This is why a trader needs to keep a constant eye on what the Fed is doing.

    This is not to say that things like sales and earning don’t matter. They are still very important at the singular stock level. Here’s Druckenmiller again (emphasis mine):

    Very often the key factor is related to earnings. This is particularly true of the bank stocks. Chemical stocks, however, behave quite differently. In this industry, the key factor seems to be capacity. The ideal time to buy the chemical stocks is after a lot of capacity has left the industry and there’s a catalyst that you believe will trigger an increase in demand. Conversely, the ideal time to sell these stocks is when there are lots of announcements for new plants, not when the earnings turn down. The reason for this behavioral pattern is that expansion plans mean that earnings will go down in two to three years, and the stock market tends to anticipate such developments.

    The market is a future discounting machine; meaning earnings matter for a stock, but more so in the future than in the past.

    Most market participants take recent earnings and just extrapolate them into the future. They fail to really look at the mechanism that drives the bottom line for a particular company or sector. The key to being a good trader is to identify the factor(s) that will drive earnings going forward, not what drove them in the past.  

    Druckenmiller said in a recent interview that his “job for 30 years was to anticipate changes in the economic trends that were not expected by others, and, therefore not yet reflected in security prices.” Focus on the future, not the past.

    Another thing that sets Druck apart is his willingness to use anything that works; as in any style or tool to find good trades and manage them.

    Another discipline I learned that helped me determine whether a stock would go up or down is technical analysis. Drelles was very technically oriented, and I was probably more receptive to technical analysis than anyone else in the department. Even though Drelles was the boss, a lot of people thought he was a kook because of all the chart books he kept. However, I found that technical analysis could be very effective.

    I never use valuation to time the market. I use liquidity considerations and technical analysis for timing. Valuation only tells me how far the market can go once a catalyst enters the picture to change the market direction.

    Druckenmiller employs a confluence of approaches (fundamental, macro, technical and sentiment) to broaden his view of the battlefield. This is a practice we follow at Macro Ops. It doesn’t make sense to pigeonhole yourself into a single rigid scope of analysis… simply use what works and discard what doesn’t.

    How to make outsized returns

    Druckenmiller throws conventional wisdom out the window. Instead of placing a lot of small diversified bets, he practices what we call the “Big Bet” philosophy, which consists of deploying a few large concentrated bets.

    Here’s Druckenmiller on using the big bet philosophy (emphasis mine):

    The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered. I’m here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere. And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets. They see something, they bet it, and they bet the ranch on it. And that’s kind of the way my philosophy evolved, which was if you see – only maybe one or two times a year do you see something that really, really excites you… The mistake I’d say 98% of money managers and individuals make is they feel like they got to be playing in a bunch of stuff. And if you really see it, put all your eggs in one basket and then watch the basket very carefully.

    A lot of wisdom in that paragraph. To earn superior long-term returns you have to be willing to bet big when your conviction is high. And the corollary is that you need to protect your capital by not wasting it on a “bunch of stuff” you don’t have much conviction on.

    This reminds me of what Seth Klarman wrote in his book Margin of Safety:

    Avoiding loss should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather “don’t lose money” means that over several years an investment portfolio should not be exposed to appreciable loss of capital. While no one wishes to incur losses, you couldn’t prove it from an examination of the behavior of most investors and speculators. The speculative urge that lies within most of us is strong; the prospect of free lunch can be compelling, especially when others have already seemingly partaken. It can be hard to concentrate on losses when others are greedily reaching for gains and your broker is on the phone offering shares in the latest “hot” initial public offering. Yet the avoidance of loss is the surest way to ensure a profitable outcome.

    You need to keep your powder dry so that when the stars align you can go for the jugular and turkey neck that son of a gun.

    The importance of striking when the iron is hot is something Druckenmiller learned while trading for George Soros.

    I’ve learned many things from [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. The few times that Soros has ever criticized me was when I was really right on a market and didn’t maximize the opportunity.

    An intense focus on capital preservation coupled with a big bet approach is the barbell philosophy used by many of the greats.

    Keeping your losses small and pushing your winners hard is the name of the game in profitable speculation.

    The fund washout we’re seeing today is not just because of the glut of mediocrity in the money management space, but also because even decent managers are scared to take the necessary risks to have big return years. They manage too much to the benchmark and are too short-term focused. That’s a recipe for average performance. Here’s Druck on how it should be done:

    Many managers, once they’re up 30 or 40 percent, will book their year [i.e., trade very cautiously for the remainder of the year so as not to jeopardize the very good return that has already been realized]. The way to attain truly superior long-term returns is to grind it out until you’re up 30 or 40 percent, and then if you have the conviction, go for a 100 percent year. If you can put together a few near-100 percent years and avoid down years, then you can achieve really outstanding long-term returns.

    Once you’ve earned the right to be aggressive and can bet with the house’s money (profits), you should plunge hard when that high conviction trade arises and push for outsized returns.

    The trader’s mindset and handling losses

    According to Druck, to be a winning trader you need to be “decisive, open-minded, flexible and competitive”.

    The day before the crash in 1987, Druckenmiller switched from net short to 130% long because he thought the selloff was done. He saw the market bumping up against significant support. But through the course of the day he realized that he made a terrible mistake. The next day he flipped his book and got short the market and actually made money. You see this type of mental flexibility in all the greatest traders. And Druckenmiller is one trader that epitomizes it perhaps better than anybody else.

    The practice of having “strong opinions, weakly held” is difficult but paramount to success.

    In order to attain that level of mental flexibility, you need to learn to detach ego from your immediate trade outcomes. If you allow losses to affect your judgement, you’ll inevitably make bigger mistakes. Druckenmiller learned this lesson early on from Soros.

    Soros is the best loss taker I’ve ever seen. He doesn’t care whether he wins or loses on a trade. If a trade doesn’t work, he’s confident enough about his ability to win on other trades that he can easily walk away from the position. There are a lot of shoes on the shelf; wear only the ones that fit. If you’re extremely confident, taking a loss doesn’t bother you.

    One of the best parts about this game is that as long as you stay alive (protect your capital) you can always make another trade. Druckenmiller said the “wonderful thing about our business is that it’s liquid, and you can wipe the slate clean on any day. As long as I’m in control of the situation — that is, as long as I can cover my positions — there’s no reason to be nervous.”

    I remember watching Charlie Rose interview Druckenmiller a few years ago. Charlie asked him why, after all these years, and with all the money he’s made, does he still put in 60-hour weeks trading? Druck responded (and I’m paraphrasing here) “because I have to… I love the game and I love winning, the money isn’t even important.”

    To get to Druck’s level, you have to trade because that’s just what you do. It’s what you live for.

    Tyler Durden
    Sun, 04/03/2022 – 16:50

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