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[Markets] Apple stock rises 3% as earnings, revenue top estimates Apple stock rises 3% as earnings, revenue top estimates Published:1/28/2020 4:09:51 PM
[Markets] Could The Coronavirus Epidemic Be The Tipping Point In Supply Chain Leaving China? Could The Coronavirus Epidemic Be The Tipping Point In Supply Chain Leaving China?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects.

While the media naturally focuses on the immediate effects of the coronavirus epidemic, the possible second-order effects receive little attention: first order, every action has a consequence. Second order, every consequence has its own consequence.

So the media's focus is the first-order consequences: the number of infected people and fatalities, government responses such as quarantines, and so on. The general expectation is these first-order consequences will dissipate shortly and life will return to its pre-epidemic status with virtually no significant changes.

Second-order effects caution: not so fast. Second-order consequences may play out for months or even years even if the epidemic ends as quickly as the consensus expects.

The under-appreciated dynamic here is the tipping point, the imprecise point at which a decision to make fundamental changes tips from "maybe" to "yes."

These tipping points are often influenced by exhaustion or frustration. Take a small business that's been hit with tax increases, additional fees, more regulatory compliance requirements, etc. When the next fee increase arrives, the onlooker might declare that the sum is relatively modest and the business owner can afford to pay it, but the onlooker is only considering first-order effects: the size of the fee and and the owner's ability to pay it.

To the surprise of the onlooker focusing only on first-order effects, the second-order effect is the owner closes the business and moves away. Invisible to everyone focusing solely on first-order effects, the owner's sense of powerlessness and weakening resolve to continue despite soaring costs and declining profits has slowly been moving up to a tipping point.

Beneath the surface, every new fee, every tax increase and every new regulation has pushed the owner closer to "I've had it, I'm out."

When the owner shuts the business, onlookers can't understand how one little extra fee could trigger such a fundamental change. The observer is only looking at the new fee as a single cause with a single consequence. In the real world, each new fee, tax increase and regulation was another link in a causal chain of consequences generating consequences.

Turning to the possible second-order effects of the epidemic in China, let's start with the decision to keep supply chains in China. The reasons to keep supply chains in China have been dwindling for years: wages and other costs have been rising, the central government has increased demands for technology sharing, the general sense that foreigners and foreign companies are no longer needed or wanted, and the trade war, which is more or less in a truce phase rather than over.

One common belief is that it's "impossible" to move supply chains out of China. This is a classic first-order effect analysis. When the supply chain gets disrupted for one reason or another and alternatives must be found, alternatives are found. What becomes "impossible" isn't moving the supply chain from China but keeping it in China.

The mistake made by those only considering first-order effects is that a modest effect "should" only generate modest consequences. For the observer focused solely on first-order effects, if the coronavirus epidemic blows over as expected, then supply chains "should" be unaffected because the effect is quantitatively modest.

But once we start considering cumulative second-order effects and potential tipping points, then the disruption of supply chains caused by the epidemic, no matter how modest, could be "the last straw" to those who had beneath the surface already shifted from "never leave China" to "maybe leave China." The epidemic could tip the decision process into "must leave China."

Consider two executives, one who looked at the longer term consequences of being dependent on production in China and began establishing alternative suppliers at the start of the trade war 18 months ago, and another exec who looked at the first-order hassles and expenses of moving out of China and stayed put to minimize short-term expenses.

Individual decisions add up to trend changes, and these charts reflect a trend change in globalization and China's share of global exports. Globalization and China's share of global exports have both plateaued and are now entering the stagnation / decline phase of the S-Curve.

Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects and easy assumptions that the consequences of the epidemic will be near-zero.

Here are some informative science-based links on the coronavirus, courtesy of longtime correspondent Cheryl A.:

Another Decade, Another Coronavirus

New coronavirus can cause infections with no symptoms and sicken otherwise healthy people, studies show

Map of Global Case of Wuhan Coronavirus

Coronavirus contagious even in incubation stage, China’s health authority says

Preliminary Risk Assessment of Coronavirus Spreading

Preliminary estimation of the basic reproduction number of novel coronavirus (2019-nCoV) in China, from 2019 to 2020

Containing new coronavirus may not be feasible, experts say, as they warn of possible sustained global spread

How fast can biotech come up with a vaccine for the latest outbreak?

DNA sleuths read the coronavirus genome, tracing its origins and looking for dangerous mutations

*  *  *

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Tyler Durden Tue, 01/28/2020 - 16:55
Published:1/28/2020 4:09:51 PM
[Markets] Dow closes higher to snap 5-day losing streak after worst single session loss since October U.S stocks close higher Tuesday, a day after worries about the impact of China’s coronavirus outbreak on global economic growth sparked the biggest one-day selloff since early October. Published:1/28/2020 4:09:51 PM
[Markets] NewsWatch: AMD stock slides as outlook falls below Wall Street view Advanced Micro Devices Inc. shares declined in the extended session Tuesday after the chip maker’s outlook fell below Wall Street estimates and data-center sales did not come in as well as expected.
Published:1/28/2020 4:09:51 PM
[Markets] AMD stock falls 4% after light first-quarter outlook AMD stock falls 4% after light first-quarter outlook Published:1/28/2020 3:38:13 PM
[Markets] Demand For "Prepper Properties" Soars Amid "Concerns About Social Stability" Demand For "Prepper Properties" Soars Amid "Concerns About Social Stability"

Authored by Michael Snyder via The End of The American Dream blog,

In 2017 and 2018, most Americans were generally feeling pretty good about the future, and interest in “prepping” plummeted nationwide. 

But now things have changed. 

All of a sudden, demand for “prepper properties” is absolutely soaring, and this is driving up the prices of rural homes all over the nation.  In fact, in some of the hottest areas working class families have already been completely priced out of the market.  Meanwhile, luxury home prices in the heart of New York City have fallen to the lowest level in six years.  Many are deeply concerned about the upcoming election, and many others are alarmed by all the other crazy stuff happening all over the world, but whatever the motivation it is undeniable that an increasing number of Americans are seeking to flee the major cities right now.   There seems to be a growing consensus that our society is rapidly steamrolling toward a nightmare, and a lot of people are purchasing “prepper properties” while they still can.

I knew that conditions were shifting, but I was stunned when I saw that even had posted an article about this growing trend…

But today, Americans en masse are again preparing for the worst—and Communists are just about the only thing not on their list. What is? Terrorist attacks, a total economic collapse, perhaps even zombie invasions. Or maybe just a complete societal breakdown after this November’s scorched-Earth presidential election.

And Reuters just posted an article in which they discussed the fact that preppers have “boosted rural land values” in property markets all across the nation…

Whichever camp, realtors say the new dropouts are not “crackpots” and often include affluent professionals whose run for the hills has boosted rural land values and started to change their property market.

“I’ve had hedge-fund managers and billionaires that have made purchases, and they all have concerns about the direction of the economy and social stability,” said John E. Haynes, president of Retreat Realty in North Carolina.

That same Reuters article identified “Idaho, Montana and Wyoming” as three of the states with the hottest property markets.  It has gotten to the point where even some of the biggest celebrities in the country are very eager to grab a slice of rural life.  For example, Kanye West and Kim Kardashian just purchased a second extremely large ranch in Wyoming.

But mostly this trend is being driven by preppers, survivalists and those that want to own an “off-grid property”.  The following comes from a recent NPR article

Welcome to the world of sustainable, survivalist real estate. There’s a growing market for this kind of off-grid property. Mondale figures over the past six to eight years, sales of these survivalist properties have risen by 50 percent.

“It seems like over the past few years, there’s just this need, I don’t want to say panic or frantic, but people feeling the need to be able to have someplace to go,” Mondale says.

Real estate agent Theresa Mondale has been in this game for a very long time, and she has never seen the market as hot as it is right now.

In fact, some of the prepper properties that she has listed sell for more than a million dollars

Despite the remoteness of these homes, they’re not backwoods shacks with sagging metal roofs. Some of her listings sell for more than $1 million if there’s a lot of land and if water rights are included. The one with the helicopter pad is a spiffy, two-story log home with a wraparound porch. It has solar panels and inside, a backup generator, luxury bathrooms and a kitchen with granite countertops and stainless steel appliances.

Over in Idaho, real estate agent Todd Savage has also noticed a huge surge in interest in prepper properties.  He told that his sales are up 50 percent compared to a year ago…

For example, sales at American Redoubt Realty, a real estate firm nestled in the heart of prepper country in northern Idaho, are up 50% over the same time last year, says real estate agent Todd Savage, who specializes in such transactions. His clients typically hail from Texas and California.

As we approach the 2020 election, demand is going to continue to surge, and prices are only going to go higher.

And if great chaos breaks out during the aftermath of the election, that will drive prices into the stratosphere.

We live at a time when our nation is very deeply divided, but at the same time people from all walks of life are extremely concerned about where our society is heading.

In the event that things really start to fall apart, people want their families to be safe, and safety is not going to be found in the major cities.

Of course some developers are taking things to the extreme.  For example, one developer has actually transformed a former nuclear missile silo in Kansas into what he is calling “survival condos”

Larry Hall is the brainchild behind such luxury developments which he refers to as ‘Survival Condos’. The project is a luxury complex housed 15 stories below ground in a former missile silo near Concordia, Kansas.

The missile silos were originally built by the US Army Corps of Engineers in the 1960s during the Cold War for the Atlas F missile, and there were 72 of them around the country.

Being stuck in a highly publicized hole in the ground when society starts to collapse may not be the best tactical situation, but apparently there is a lot of demand for these condos.

In fact, the price for a penthouse unit is a cool 4.5 million dollars

A full-floor apartment, spanning 1,800 square feet, will cost buyers $3million, while a 900-square-foot, half-floor unit is $1.5million. The ultra-wealthy can also make a penthouse selection starting at $4.5million.

Needless to say, only the ultra-wealthy can afford such extravagant accommodations.

But everyone should be preparing in their own way.

The relative stability that we had been enjoying has now given way to a time of great uncertainty.  Economic conditions are deteriorating, global weather patterns are going completely nuts, war could break out in the Middle East at any time, civil unrest is on the rise all over the globe, a mysterious coronavirus is spreading very rapidly in Asia, our planet is becoming increasingly unstable, and the 2020 election looks like it could be a flashpoint for all the anger that has been boiling just under the surface in our nation for many years.

If you want to grab a prepper property, now is the time to do so, because time is running out and things are about to start getting really crazy out there.

Tyler Durden Tue, 01/28/2020 - 16:25
Published:1/28/2020 3:38:12 PM
[Markets] The Margin: ‘You gotta be sh***ing me?’ Air Force veteran falls to the ground when he’s told the mouth-watering value of his watch This U.S. Air Force vet, who was stationed in Thailand in the early 1970s, has probably seen a lot over his lifetime, but he clearly didn’t see this coming.
Published:1/28/2020 3:38:12 PM
[Markets] Stocks Soar To Best Day In 4 Months As "Devil"-Virus Death-Count Spikes Stocks Soar To Best Day In 4 Months As "Devil"-Virus Death-Count Spikes

The death toll in China has soared past 100 while the number of confirmed cases doubled overnight. Health officials around the world have confirmed more than 4,500 cases, more than triple the number from Friday.

And domestically, while 'soft' data improved - headline consumer confidence ticked up and Richmond Fed saw its 2nd biggest rebound in its 27 year history, 'hard' data collapsed as Durable Goods orders were a disaster...

All of which explains (not in any way whatsoever) why the S&P surged to its best day since October 4th (filling the gap from Friday's lows)... We saw a similar "all clear" reaction last week - let's see how this ends...

There was some chatter that headlines about a vaccine being produced in Hong Kong were the catalyst - who knows, anything is possible in this machine-driven malarkey - but one thing is for sure, waiting at least four months for any vaccine will not stop a collapse in global supply chains if this virus continues to spread like it is.

With China cash markets still closed, A50 Futures stabilized (near 6-month lows)...

Source: Bloomberg

European markets soared today led by a 2.5% spike in Italian stocks, erasing all of yesterday's losses...

Source: Bloomberg

All US Majors were notably higher today, but none managed to erase yesterday's losses (Small Caps got closest)... (NOTE - most of the gains today were once again at the opening ramp, then markets traded sideways after EU closed)...stocks closed on the weak side...

Source: Bloomberg

Of course, all this was accompanied by a major short-squeeze...

Source: Bloomberg

Big rebound in cyclicals today, but defensives remain the winners on the week..

Source: Bloomberg

Credit markets rebounded massively today - after a record outflow...

Source: Bloomberg

Bond yields rose in line with stocks today but remain notably decoupled...

Source: Bloomberg

Treasury yields jumped higher today (up 3-4bps across the curve) along with stocks, but remain notably lower on the week still...

Source: Bloomberg

30Y traded to as low as a 2.02% yield today before bouncing higher...

Source: Bloomberg

The Dollar roundtripped from overnight gains to close marginally lower...

Source: Bloomberg

Bitcoin spiked up to almost $9200...

Source: Bloomberg

Copper slipped again today but it was silver (slammed) and oil (gained) that stood out...

Source: Bloomberg

Silver was clubbed like baby seal back to 5-week lows (even as gold only drifted modestly lower)...

WTI lifted back near $54 handle but could noit quite fill the gap from Friday...


Finally, Dr.Copper's historic 10-day decline suggests some major ugly surprises for the Chinese economy are on their way...

Source: Bloomberg

And while it's ridocnculous, we note that today's bounce continues to perfectly fit with the Fed's Y2K liquidity surge analog...

Source: Bloomberg

Tyler Durden Tue, 01/28/2020 - 16:00
Published:1/28/2020 3:07:30 PM
[Markets] U.S. stocks end higher, rebounding from biggest selloff since October U.S. stocks end higher, rebounding from biggest selloff since October Published:1/28/2020 3:07:30 PM
[Markets] "Smart Money"? - Hollywood Celebs And Sports Icons Got Crushed In Mattress-Maker Casper "Smart Money"? - Hollywood Celebs And Sports Icons Got Crushed In Mattress-Maker Casper

"Smart money" investors, such as some Hollywood actors and sports icons, are linked up with top VC firms and investment banks, have been stung by the VC bubble of overinflated unicorns that see a valuation collapse right before IPO. 

Think WeWork, and what happened to the office-sharing space company last fall, it's valuation plunged as it attempted to IPO. The company then ran out of money and was bailed out by its largest shareholder, SoftBank. 

Leonardo DiCaprio and rapper 50 Cent have been the latest "smart money" investors to feel the pain of plunging valuations, after their investments in Casper Sleep Inc., an online mattress retailer, saw valuations fall as it attempts to IPO. 

Reuters notes that the unicorn mattress company will issue 9.6 million shares between the $17 to $19 level, which is at the top part of the range, giving the company $182.4 million in IPO proceeds. Such a level would also give the company a $768 million valuation, or about a -23% drop in book value from its latest funding round. 

In 1Q19, the money-losing company was valued at $1.1 billion, which is a -30% decline in today's valuation versus what was seen early last year. 

We noted since WeWork imploded last fall, investors' risk appetite for money-losing companies has collapsed. This has also marked the top of not just the VC bubble, but also the IPO bubble

"Valuations in the private market are currently under the microscope, especially with unicorns, as they attempt to tap the public markets," said Jeff Zell, a senior research analyst at IPO Boutique.

"The biggest hurdle that Casper Sleep is going to have during the roadshow process is proving to investors a viable path to profitability while competing in a highly competitive industry," Zell said. 

Even "smart money" in Hollywood is feeling the pressure as the bubble of everything deflates. 

Tyler Durden Tue, 01/28/2020 - 15:35
Published:1/28/2020 2:38:38 PM
[Markets] Outside the Box: Avoid these 3 estate-planning mistakes and make probate cheaper and easier for your loved ones At the very least, fill out simple forms to make sure your bank accounts and investments immediately go to your heirs
Published:1/28/2020 2:38:38 PM
[Markets] Millennial investors like this 1 stock even more than Amazon and Tesla Millennial investors like this 1 stock even more than Amazon and Tesla Published:1/28/2020 2:07:47 PM
[Markets] Trump lawyer: Don’t let report on Bolton book dictate next step in impeachment trial As President Donald Trump’s attorneys on Tuesday launch into their third and final day of opening arguments in his Senate impeachment trial, they promised to wrap up before dinner. Published:1/28/2020 2:07:47 PM
[Markets] Powerful 7.7 Earthquake Hits Between Cuba And Jamaica, Tsunami Possible Powerful 7.7 Earthquake Hits Between Cuba And Jamaica, Tsunami Possible

A powerful 7.7-magnitude earthquake has been detected between Jamaica and Cuba on Tuesday afternoon, reported the U.S. Geological Survey (USGS).

A tsunami warning has been issued for Jamaica, Cayman Islands, and Cuba.

Beachgoers in Jamaica have tweeted footage of the earthquake, but there are no reports of a tsunami or damage at the moment.


Tyler Durden Tue, 01/28/2020 - 15:01
Published:1/28/2020 2:07:47 PM
[Markets] The U.S. national debt is projected to rise to $31.4 trillion by 2030, CBO says The U.S. national debt is projected to rise to $31.4 trillion by 2030, CBO says Published:1/28/2020 1:38:10 PM
[Markets] Key Words: ‘I believe John Bolton,’ says Trump’s former Chief of Staff Kelly President Donald Trump’s former White House chief of staff sided with John Bolton in comments late Monday when asked about the ex-national security adviser’s claim that Trump told him he wanted to tie Ukraine aid to an investigation of the Bidens.
Published:1/28/2020 1:38:09 PM
[Markets] The Dow is up more than 200 points, recouping about half its big Monday loss The Dow is up more than 200 points, recouping about half its big Monday loss Published:1/28/2020 1:07:01 PM
[Markets] Revealed: Trump Releases 'Deal Of The Century' Map Of Future "Palestinian State" Watch Live: Trump Unveils 'Deal Of The Century' Mideast Peace Plan With Netanyahu

President Trump and Israeli Prime Minister Benjamin Netanyahu will be delivering joint remarks from the White House, scheduled for noon EST on Tuesday. 



  • "I was not elected to do small things or shy away from big problems"
  • "This vision for peace is fundamentally different from past proposals"
  • 80 pages are the “most detailed proposal every put forward by far”
  • Trump touted his experience as a “Deal-maker” and that what’s being proposed is a win-win “two-state solution”
  • Both Netanyahu and Gantz willing to endorse vision as basis for direct negotiations with Palestinians. A joint US-Israeli committee will work on implementing conceptual map.
  • US will work toward recognizing contiguous territory within the Palestinian state “when conditions for statehood are met”
  • “Jerusalem will remain Israel’s undivided capital”... “But that’s no big deal because I’ve already done that for you…”
  • “We will not allow a return to… relentless bloodshed… we will never allow Israel to compromise its security.”
  • “I want this deal to be a great deal for the Palestinians. After 70 years this could be the last opportunity” for Palestinians to have their own state.
  • Palestinian capital in East Jerusalem proposed in future where the US "will proudly open a US Embassy"...
  • No Israelis or Palestinians will be displaced from their homes. Palestinians' GDP will triple over next decade if peace plan conditions implemented.

Yesterday the president met with both Israeli Prime Minister Benjamin Netanyahu and Blue and White party rival Benny Gantz separately at the White House. Both have briefly paused campaigning ahead of Israel's March 2 elections.

Trump had sought to assure the press that the Palestinians would "ultimately" come around to giving their support, though statements of Palestinian leadership have made this highly doubtful.

"I think it might have a chance," he said Monday. Trump touted that both Netanyahu and Gantz "like very much" what they've heard of the plan thus far. President Trump described the plan has having been "many, many years in the making"

The administrations last big move, albeit deeply controversial, was to relocate the US Embassy in Tel Aviv to Jerusalem in recognition of it as the official Israeli capital in 2018.

Netanyahu's arrival at the White House yesterday, via Washington Post.

"We'll see what happens," Trump said. "We have something that makes a lot of sense for everybody," the president added after describing that most people think of the prospect for Israeli-Palestinian peace as something impossible. 

Despite Trump's measured optimism, Palestinian Authority leaders as well as Hamas have previously repeatedly said the plan would be dead on arrival.

For its part the Palestinian side has not been invited to Washington, and even threatened over the weekend to withdraw from key provisions of the 1993 Oslo Accords. 

Tyler Durden Tue, 01/28/2020 - 12:05
Published:1/28/2020 1:07:01 PM
[Markets] BorgWarner Is Buying Delphi. Why the Market Is Unhappy. Automotive supplier BorgWarner shocked investors Tuesday, announcing a deal to buy Delphi Technologies. The deal looks like a bet on fossil fueled vehicles—and Borg investors don’t appear happy. Published:1/28/2020 1:07:01 PM
[Markets] 3M sees coronavirus boosting demand for face masks, as China projected to return to growth 3M Co. Chief Executive Mike Roman said Tuesday that his view of weakness in the China business is “changing” because of the coronavirus, as the outbreak of the deadly virus has boosted demand for face masks, but stock falls on subpoena related to PFAS discharges.
Published:1/28/2020 1:07:01 PM
[Markets] Coronavirus update: Vaccine stocks fall and 20 U.S. airports add screening Coronavirus update: Vaccine stocks fall and 20 U.S. airports add screening Published:1/28/2020 12:39:54 PM
[Markets] Market Snapshot: Dow rebounds after biggest one-day loss since October U.S stocks recovered some ground Tuesday, a day after worries about the impact of China’s coronavirus outbreak on global economic growth sparked the biggest one-day selloff since early October.
Published:1/28/2020 12:39:54 PM
[Markets] S&P 500 Having Its Best Day Of New Year As Dow Flashes A Positive Signal Stock indexes were near session highs Tuesday as the market continued to bounce back from two days of selling. The S&P; 500 today climbed 1% for its best gain of 2020 so far. Published:1/28/2020 12:39:54 PM
[Markets] "I Believe John Bolton" Says John Kelly In Support Of Fellow Failed Trump-Handler "I Believe John Bolton" Says John Kelly In Support Of Fellow Failed Trump-Handler

Former White House Chief of Staff John Kelly has given a rubber-stamp endorsement to John Bolton's new book-claim that President Trump tied military aid for Ukraine to his demands to investigate the Bidens.

"If John Bolton says that in the book I believe John Bolton," said Kelly, adding "John’s an honest guy. He’s a man of integrity and great character, so we’ll see what happens."

Kelly also endorsed Democratic calls to subpoena witnesses in President Trump's impeachment trial, which would of course mean a Bolton testimony, adding that "the majority of Americans would like to hear the whole story."

Of course, in 2008 then-President George W. Bush blasted Bolton, reportedly telling a group of journalists: "Let me just say from the outset that I don’t consider Bolton credible." (via The Federalist)

Bolton was one of the primary proponents of the claim that Iraq had weapons of mass destruction, requiring a ground invasion and regime change by U.S. troops. “We are confident that Saddam Hussein has hidden weapons of mass destruction and production facilities in Iraq,” Bolton said in 2002.

Even after those claims were debunked and the promised weapons of mass destruction were never found, he remained a steadfast supporter of the Iraq War, claiming it couldn’t be proved that the ensuing chaos was caused by the decision to remove Hussein from power.

According to New York Times reporter Peter Baker, Bush told the assembled writers he did not think his hire of Bolton had been worth it in the end.

I spent political capital for him,” Bush reportedly said, complaining he got little in return. -The Federalist

So - two Presidents say Bolton was a terrible pick, but John Kelly - who did nothing but talk shit about Trump to his aides, loves the guy.

Tyler Durden Tue, 01/28/2020 - 13:36
Published:1/28/2020 12:39:54 PM
[Markets] Trump’s impeachment: Romney signals vote for witnesses may have a chance, other Republicans just want Bolton’s book As the Senate prepares to vote this week on whether to subpoena new witnesses or documents in President Donald Trump’s impeachment trial, Mitt Romney and other senators are adding to expectations that the vote might have a chance. Published:1/28/2020 12:09:23 PM
[Markets] Hong Kong Researchers Have Developed A Coronavirus Vaccine, There Is Just One Catch Hong Kong Researchers Have Developed A Coronavirus Vaccine, There Is Just One Catch

With scientists from around the world scrambling to be the first to market with a vaccine for the Chinese coronavirus pandemic, Hong Kong researchers said today they have already developed a vaccine for the deadly Wuhan diseases, although there is a catch: the vaccine will not be commercially available for months, if not a year, as it would "take months" to test the vaccine on animals and at least another year to conduct clinical trials on humans before it was fit for use.

That's a problem, because at the current exponential rate of propagation, the virus may have infected several billion people by then.

According to SCMP, as scientists in mainland China and the United States were racing to produce a vaccine for the new coronavirus, infectious diseases expert Professor Yuen Kwok-yung, chair of infectious diseases at the University of Hong Kong, revealed that his team was working on the vaccine and had isolated the previously unknown virus from the city’s first imported case.

“We have already produced the vaccine, but it will take a long time to test on animals," Yuen said, without giving a specific time frame on when it would be ready for patients.

Professor Yuen Kwok-yung did not give a time frame on when the vaccine would be ready. Photo: SCMP

Meanwhile, with the virus having already mutated once becoming "more easily spreadable" among humans according to Chinese officials, by the time the virus is finally tested, the prevalent phenotype will likely be vastly different from the one the HK researcher is currently operating on.

How did the HK team come up with such a quick vaccine? HKU researchers based it on a nasal spray influenza vaccine previously invented by Yuen’s team. Researchers modified the flu vaccine with part of the surface antigen of the coronavirus, meaning it could prevent influenza viruses as well as the new coronavirus, which causes pneumonia.

Could Yuen's team be just a tad optimistic about the relevance of their product? Most likely: on Monday Chinese mainland media quoted Chinese infectious diseases expert Li Lanjuan who said saying a vaccine targeting the coronavirus was only now being developed and could be made in around a month at the earliest; testing would then lead to further months of delays.

“If the vaccine appears effective and safe in a number of animal species, it will go into clinical trials on humans. This takes at least one year even if expedited,” Yuen said, adding that the approach taken by the mainland side to develop a vaccine would lead to a major complication, in which people who were vaccinated might develop a more severe disease if exposed to the virus. He said such a reaction for coronavirus had been recorded in reports.

Coronaviruses are a large family of viruses causing illnesses ranging from the common cold to more severe diseases such as Middle East respiratory syndrome (Mers) and severe acute respiratory syndrome (Sars). Meanwhile, Xinhua reported that Shanghai East Hospital of Tongji University had urgently approved a project for the development of a vaccine targeting the novel virus.

The vaccine would be co-developed by the hospital and Stemirna Therapeutics, a Shanghai-based biotechnology company. Company CEO Li Hangwen said no more than 40 days would be needed to manufacture vaccine samples, which would then be sent for tests and brought to clinics "as soon as possible." Here's the problem: assuming the number of infected people continues to roughly double every day...  well, we leave it to readers to calculate how many will be sick in over a month if we start with today's 4,500 infected baseline.

Tyler Durden Tue, 01/28/2020 - 12:55
Published:1/28/2020 12:09:23 PM
[Markets] The Technical Indicator: Charting near-term technical damage, S&P 500 ventures under key support Technically speaking, the S&P 500 has pulled in sharply from recent record highs, pressured amid the most aggressive selling pressure since October, writes Michael Ashbaugh.
Published:1/28/2020 12:09:23 PM
[Markets] The S&P 500 has fallen under a key support level, this technical indicator says The S&P 500 has fallen under a key support level, this technical indicator says Published:1/28/2020 12:09:22 PM
[Markets] Stock Market Rebounds Bullishly After Monday Sell-Off; Apple Rallies Ahead Of Earnings The stock market showed solid gains near midday Tuesday after Monday's drubbing. Growth stocks bounced back in spades, including Apple ahead of earnings. Published:1/28/2020 11:39:48 AM
[Markets] Airline stocks face 'substantial' risk from coronavirus fallout, 1 analyst says Airline stocks face 'substantial' risk from coronavirus fallout, 1 analyst says Published:1/28/2020 11:39:48 AM
[Markets] Central Banks Have Made Markets So Fragile, Liquidity Premiums Are Now Negative Central Banks Have Made Markets So Fragile, Liquidity Premiums Are Now Negative

Back in late December, when the market was melting up every single day with zero regard for economic data or newsflow, we pointed out something ominous: the world's most liquid stock market, the S&P500, was now as (il)liquid as it was during the 2008 financial crisis.

As BofA's Benjamin Bowler wrote, while market liquidity generally correlated with volatility, in recent years, it was progressively deteriorating despite near record low levels on the VIX. According to BofA calculations, average "illiquidity" for S&P e-mini futures since 2018 has been in its 73rd% since 2008. Historically, the period when markets were less liquid was primarily during the '08 crisis when the VIX was north of 40.

It is also noteworthy that illiquidity rose ahead of the sharp fragility events of Aug-2011, Aug-2015, and Feb-2018, while implied vol remained muted until very near the selloffs, suggesting that VIX no longer reflects prevailing market stress, and confirms what Morgan Stanley said in late 2019, namely that Fed actions now directly seek to lower marketwide volatility.

Why does this matter?

Because as BofA summarized one month ago, the fact that liquidity seems to be progressively deteriorating over time suggests that market fragility is getting worse, particularly as long as crowding remains a problem and liquidity providers are incentivized to pull back from liquidity provision in times of stress.

Wait, what fragility?

While we have extensively discussed the growing fragility of the market, manifesting itself in ever more frequent liquidity "air pockets" and "flash crashes", here is a quick reminder, once again courtesy of Bank of America, which writes that despite the direct suppression of volatility by central banks, "markets have remained highly fragile in recent years."

The left chart below shows that BofA's fragility measure for the S&P 500 exceeded global financial crisis (GFC) levels during 2018 despite volatility remaining at or below its longer-run average. In fact, as the chart on the right shows, fragility across 25 markets covering five asset classes has been historically elevated vs. volatility in recent years.

This matters because as Bowler notes, it is fragility - not volatility - that is a better measure of the risk that active managers are exposed to. In this vein, BofA believes that high market fragility in the past few years (which corresponded to relatively large hedge fund drawdowns) "is driven by a combination of investor crowding in an alpha starved market and the increasingly fickle liquidity provision from high frequency traders (HFTs)."

Fast forward to the end of January when we got a very clear example of what happens when fragility and black swan (or perhaps black bat) events collide.

As Bowler writes today, "fragility risk remains real - as seen from the -3.2 stdev drop in the S&P on 27-Jan following a near-record Sharpe of 6.3 over the prior 3m" and is driving a paradigm shift in harvesting the equity volatility risk premium (VRP).

The S&P volatility risk premium - long one of the most persistent across derivatives markets - has been especially hard hit, turning negative on average in 2018 for the first time outside of the GFC and struggling to revive itself in 2019.

BofA attributes this to:

  • (i) a supply-demand shift in S&P options usage (towards more robust supply from yield-starved investors and weaker hedging demand from under-positioned equity investors), as well as
  • (ii) high market fragility (i.e., large dislocations in price relative to the prevailing level of volatility), which has altered the distribution of the SPX VRP in recent years by pulling its average well below its median

Looking to 2020, more bullish US equity positioning (as the Fed increasingly pulled investors back into the recent rally where there wasn't a single +/-1% market swing in 70 days ) could restore healthier demand for S&P hedges in sell-offs, according to Bowler. However, in yet another irony, more liquid markets now tend to perversely experience more acute fragility events, as they attract a broader array of trading activity. In other words, superior liquidity equates to higher crowding risk, which translates to greater realized fragility in markets today. One needs to only recall the "other 1%", namely that the top 5 companies in the S&P500 make up a record 18% of total market cap, more than the dot com era, to get a sense of what's going on.

Alas, with the S&P being the most liquid equity market in the world, "and to the extent that central bank-induced financial repression continues to incentivize yield-starved investors to sell short-dated S&P options/vol for income, headwinds to the SPX VRP likely remain", according to BofA.

What's the remedy?

According to BofA's chief derivatives strategist, beyond adopting more defensive approaches to VRP harvesting, investors should look to diversify away fragility risk. Sizing is also critical to the risk management of short volatility positions, and applying more conservative sizing schemes to assets prone to fragility shocks can help limit the contribution of such assets to broader cross-asset risk premia portfolios.

What does this mean in practical terms? While the S&P does not rank at the very bottom of the screen, it still ranks among the worst (and sits above the regression line in Chart 8). Importantly, what makes the S&P/Nasdaq rank so poorly vs. SX5E is not the benefit side of the equation, but instead the fragility risk (see Chart 9). Indeed, the Stoxx 50 has the second-lowest fragility risk metric among the markets considered (i.e., selling vol on SX5E has been one of the safest opportunities for vol sellers among popular global equity indices over the past 4 years; see Chart 10). Hence, it is ironic that selling vol in markets which some would consider as having better fundamentals (e.g., US large caps or US Tech) has become a worse investment proposition than selling vol on markets with the some of the worst fundamentals (e.g., European equities or US small caps).

In conclusion, and consistent with the notion of a negative liquidity premium, whereby more liquid markets like the S&P are ironically more vulnerable to fragility shocks, BofA finds that selling volatility on markets with worse fundamentals - e.g., European equities (SX5E) - has perversely become a better investment proposition than selling volatility on US large caps. Paradoxically, VRP "harvesting" on the Stoxx 50 has never been safer vs. the S&P or Nasdaq over the past 20 years. This leads BofA to conclude that "S&P vol sellers should efficiently diversify away fragility risk."

Of course, they won't and instead the crowding will continue until one day the market crashes and the Fed is unable to spark the BTFD rebound, resulting in what will likely be the first ever market-wide halt that will last for a long time until clearing prices based on fundamentals and not liquidity are rediscovered far, far lower.

Tyler Durden Tue, 01/28/2020 - 12:25
Published:1/28/2020 11:39:48 AM
[Markets] The Margin: More Americans are booking it to the library than going to the movies Young adults, women and low-income families visited libraries the most — and zoos the least.
Published:1/28/2020 11:39:48 AM
[Markets] Could we get a quick coronavirus vaccine? Here's what that would involve Could we get a quick coronavirus vaccine? Here's what that would involve Published:1/28/2020 11:05:53 AM
[Markets] Avenatti Googled "Insider Trading" And "Nike Puts" Before Attempting To Shake Down Sneaker Giant Avenatti Googled "Insider Trading" And "Nike Puts" Before Attempting To Shake Down Sneaker Giant

No, this is not from the Onion.

Somehow, before driving his firm and himself into near bankruptcy due to his insatiable lifestyle addiction, Michael Avenatti was once a respected California lawyer.

A respected California lawyer who clearly had no qualms googling things like "Insider trading" and "Nike puts" before allegedly attempting to extort the world's biggest manufacturer of athletic shoes. Even if he wasn't arrested for the threats, the SEC would have almost certainly nailed him if he tried to trade on his own press conference.

With Avenatti's trial set to begin next week, prosecutors are arguing that the judge should admit a history of Avenatti's google searches, which they argued offer critical insights into Avenatti's state of mind while he was concocting the so-called extortion plot (Avenatti originally partnered with another celebrity lawyer, Mark Geragos, according to media reports. However, Geragos was never charged in the scheme).

According to Bloomberg, prosecutors informed US District Judge Paul Gardephe about the emails on Monday, and are now trying to convince the judge to let the jury see the evidence. However, the judge has raised some hackles with their argument, pointing out that Avenatti is not being tried for insider-trading related charges.

Despite being re-arrested two weeks ago for violating his bail terms by - what else? - trying to conceal money from the government, Avenatti appeared in court Monday wearing a real suit (instead of an orange jumpsuit) for his pre-trial hearing. Opening statements in the trial could start as soon as Tuesday.

We're certain Avenatti's lawyers will use every trick in the book to try to redirect the jury's focus to Nike's misdeeds, rather than Avenatti's allegedly illegal behavior. They've already leaked information about texts showing Nike lawyers mocking the FBI to the press, suggesting that the company's wrongdoing will be a cornerstone of their defense.

But judge Gardephe said Monday he won't allow the trial to "involve an exploration" of whether Nike sought to corrupt youth basketball. But the lawyers can argue to the jury that Nike's intentions when they approached the FBI about Avenatti were less than pure.

Nike argued in a filing that Avenatti was simply trying to "put the government’s and Nike’s conduct on trial” because he can’t dodge the video and audio evidence of his demands on the company.

"He intends to misdirect the jury - pointing their attention anywhere but on his own conduct - in the hope that at least one of them will be confused by evidence that is legally irrelevant and factually inaccurate," Nike said.

Responding to this, the "creepy porn lawyer's" legal team described the google searches mentioned above as a "red herring."

"The obvious implication is that Mr. Avenatti illegally traded in Nike stock based upon information obtained from Coach Franklin," the defense lawyers said in a Jan. 24 court filing. "That did not happen, the government has no evidence that it did, and Mr. Avenatti is not charged with insider trading."

Sure, he didn't trade on his information. But we'd off an analogy to illustrate what these google searches represent: It'd be like if a man accused of attempted murderer had googled "best strategies for disposing of a body" before the assault.

Tyler Durden Tue, 01/28/2020 - 11:50
Published:1/28/2020 11:05:53 AM
[Markets] The Moneyist: My ex-husband forgot to sign paperwork to split a sizable investment account — then he died. Can his estate come after me for the money? ‘My ex-husband will owe a lot of money on his tax returns and other bills, and I know that his estate does not have the money to pay.’
Published:1/28/2020 11:05:53 AM
[Markets] 3M Beat Earnings Expectations. Here’s Why Its Stock Is Falling. The industrial conglomerate (MMM) had dual disappointments for investors on Tuesday morning. Earnings guidance fell short of Wall Street expectations and the company raised concern over potential environmental liabilities. The company reported $2.15 in per share earnings, net of restructuring charges, while analysts were looking for $2.11. Published:1/28/2020 10:41:48 AM
[Markets] Is It Time To 'Buy The Dip'? Is It Time To 'Buy The Dip'?

Authored by Lance Roberts via,

Over the last few weeks, we have discussed the outsize market advance driven by the Fed’s massive liquidity injections into the market. As we discussed with our RIAPRO subscribers (30-day RISK FREE Trial) we stated:

“If it appears to you that the recent rally is an anomaly, your thoughts do not deceive you. The graph below shows that recent returns divided by annualized volatility (risk) have been running higher than at any time since the financial crisis.

This standard calculation of return per unit of risk is technically called the Sharpe Ratio. The ratio has been sitting around 2.0 for most of January. To put that into context, the current reading is about 4 sigma (standard deviations) from the norm, an event that should statistically occur in one day out of every 43 years. Since January first, there have been 5 daily readings that were greater than 4 sigmas!”

Not surprisingly, due to that extreme reading the correction on Monday was the largest we have seen since the Federal Reserve started intervening into the financial market in mid-October of last year.

This analysis, along with several other posts over the last couple of weeks, detailed our concerns about inherent market risk and why we reduced portfolio exposure a couple of weeks ago. To wit:

“On Friday, we began the orderly process of reducing exposure in our portfolios to take in profits, reduce portfolio risk, and raise cash levels. 

  • In the Equity Portfolios, we reduced our weightings in some of our more extended holdings such as Apple (AAPL,) Microsoft (MSFT), United Healthcare (UNH), Johnson & Johnson (JNJ), and Micron (MU.)

  • In the ETF Sector Rotation Portfolio, we reduced our overweight positions in Technology (XLK), Healthcare (XLV), Mortgage Real Estate (REM), Communications (XLC), Discretionary (XLY) back to portfolio weightings for now. 

  • The Dynamic Portfolio was allocated to a market neutral position by shorting the S&P index itself.

Let me state clearly, we did not ‘sell everything’ and go to cash. We simply reduced our holdings to raise cash, and capture some of the gains we made in 2019. When the market corrects we will use our cash holdings to either add back to our current positions, or add new ones.”

While I received a lot of emails and comments questioning why would we “sell out of the market” and “go to cash,” such was NOT the case. We did raise our cash position from 5% to 12%. Just prior to increasing cash, we had previously added defensive exposure in fixed income, gold, gold miners, and REIT’s. However, we still maintain the majority of our long equity exposures currently.

You Can’t Time Market Corrections

At the time we made these changes, it appeared we were clearly wrong as the market continued to grind higher. As Howard Marks once quipped:

“Being early, even if you are right, is the same as being wrong.” 

However, from a portfolio management, and more particularly, a “risk mitigation” view, our job isn’t necessarily to hit the exact tops or bottoms, just to provide a cushion against losses.

During the last couple of weeks, we have noted the extreme overbought, overly bullish, and over complacent conditions of the market. Here is an updated chart of the S&P 500 from two weeks ago when we discussed taking profits.

With the markets pushing into 3-standard deviations above the 200-day moving average, it was only a function of time before a correction occurred. Therefore, while we were early taking profits, the end result is it reduced portfolio risk against a pending correction. As I wrote then:

“While the markets could certainly see a push higher in the short-term from the Fed’s ongoing liquidity injections, the gains for 2020 could very well be front-loaded for investors. 

Taking profits and reducing risks now may lead to a short-term underperformance in portfolios, but you will likely appreciate the reduced volatility if, and when, the current optimism fades.”

When discussing portfolio management, it is often suggested that you can’t “time the market.”

That statement is correct.

You can not effectively, and repetitively, get “in” and “out” of the market on a timely fashion. I have never suggested that an investor should try and do this. However, I have discussed managing risk by adjusting market exposure at times when “risk” outweighs the potential for further “reward.”

While our actions are almost always misunderstood, and labeled as “bearish,” I am actually neither bullish or bearish. In our practice, we follow a very simple set of rules, which forms the core of our portfolio management philosophy which focuses on capital preservation and long-term “risk-adjusted” returns.

As long-term investors, we don’t worry about short-term rallies, we only need to worry about the direction of overall market trends, and focus on capturing more of the positive and less of the negative. This philosophy stems from Baron Nathan Rothschild’s view:

“You can have the top 20% and the bottom 20%, I will take the 80% in the middle.”

While our assessment of the market two-weeks ago was that risk versus reward was unbalanced, such can remain the case for extended periods of time.

The problem with an economy being propped up by artificially appreciated assets is that this pendulum swings both ways. At some point, prices eventually decline. No one knows what will cause the decline;

  • Higher interest rates like in 2018,

  • A presidential tweet, when he launched the “trade war” with China.

  • The ongoing implosion of the Chinese economy is still a threat.

  • It could just be the realization by the markets that asset prices don’t grow to the sky.

  • Or, it could be triggered by an unexpected, exogenous event, which results in the markets “repricing” risk. 

The “coronavirus” was the exogenous event the markets had not priced into its view.

Is It Time To “Buy The Dip?”

With the “sell off” on Monday, the immediate reaction by investors is to jump in and “buy the dip.” This would seem to be the logical action given the Federal Reserve is still supplying liquidity to the market currently.

Maybe not.

The chart below is part of the analysis we use to “onboard” new client portfolios. The purpose of this measure is to avoid transitioning a new client into our portfolio models near a short-term peak of the market. The vertical red lines suggest we avoid adding equity risk to portfolios and vice versa.

There are a few important points to denote in the chart above.

  1. The top and bottom signals are essentially relative strength and momentum measures. Both are currently still on “buy” signals and the current “sell off” has not reversed those signals as of yet. 

  2. With the market still very deviated above the longer-term 200-dma, and just clearing out of 3-standard deviation territory, there is currently more downside risk, than upside reward. 

  3. Note that corrections, once the “sell signals” are triggered can last from several weeks, to several months. During the correction process there are often multiple opportunities to reduce risk and raise cash accordingly. 

  4. The last two times the market pushed into 3-standard deviation territory, the resulting corrections were fairly sharp and lasted for several months.

However, on a VERY short-term basis the market is indeed oversold, and is testing the breakout of the upward trending trading range from last year. Given the MACD has registered a “sell signal” from a fairly high level, investors must consider the risk of further downside even if the market rallies over the next couple of days.

Don’t be fooled that a short-term reflexive rally is an “all-clear” for the bull market to resume. With the bulk of our momentum, relative strength, and overbought/sold indicators just starting to correct from recent highs, it is likely short-term rallies will be “selling opportunities” over the next couple of weeks as the market either corrects further or consolidates recent gains.

As we have detailed over the last few missives, due to the rather extreme extension of the market, this is likely the beginning of a correction which could encompass a 5-10% decline in totality before it is complete.

The problem for investors is they tend to make to critical mistakes in managing portfolios.

  • Investors are slow to react to new information (they anchor), which initially leads to under-reaction but eventually shifts to over-reaction during late-cycle stages.

  • Investors are ultimately driven by the “herding” effect. A rising market leads to “justifications” to explain over-valued holdings. In other words, buying begets more buying.

  • Lastly, as the markets turn, the “disposition” effect takes hold and winners are sold to protect gains, but losers are held in the hopes of better prices later. 

With the Federal Reserve reducing slowing its torrid pace of liquidity, still weak economic growth, and potential for weaker than expected earnings growth, the risk remains to the downside currently.

From that perspective, we are continuing to maintain our higher levels of cash, and we will use reflexive rallies in the short-term to rebalance portfolio risk as needed according to our investment discipline.

  1. Tighten up stop-loss levels to current support levels for each position.

  2. Hedge portfolios against major market declines.

  3. Take profits in positions that have been big winners

  4. Sell laggards and losers

  5. Raise cash and rebalance portfolios to target weightings.

Notice, nothing in there says, “sell everything and go to cash.”

As Michael Lebowitz previously noted:

“The point being made here is essential; risk management is generous. Based on the past 100 years of market data, there is no evidence that long-term returns are penalized by taking a defensive investment posture at high valuations. Investors today do not need to ‘buy and hold’ stocks and remain heavily invested when expected returns are paltry. The historical record, though imprecise, affords an excellent map for navigating and managing risk.”

By having reduced risk, we can afford to remain patient and wait for the next opportunity. Much like a professional baseball player, by reducing risk we create an environment that is “emotionally” controllable and we can exercise patience until a “fat pitch” comes along.

One thing is for certain, swinging at every pitch, won’t get you into the “hall of fame.” 

Tyler Durden Tue, 01/28/2020 - 11:30
Published:1/28/2020 10:41:48 AM
[Markets] Durable-Goods Orders Rose but ‘Core’ Goods Fell, Signaling Weaker Business Investment Although overall orders rose a better-than-anticipated 2.4% last month from November, orders for nondefense capital goods, excluding aircraft, unexpectedly declined 0.9%. Published:1/28/2020 10:10:21 AM
[Markets] Bernie Sanders Staffer Admits Campaign Attracts "Marxists, Leninists And Anarchists" Bernie Sanders Staffer Admits Campaign Attracts "Marxists, Leninists And Anarchists"

Two more Bernie Sanders staffers have been caught on tape speaking passionately about 'the revolution' they're fighting, they type of people the Sanders campaign attracts, and the need to take direct, violent action against their enemies.

"I’ve Canvassed with Someone Who’s an Anarchist, and with Someone Who’s a Marxist/Leninist. So, We Attract Radical, Truly Radical People in the Campaign…Obviously That’s Not Outward Facing," said South Carolina field organizer, Mason Baird, who told a Project Veritas undercover operative "We would need a federal government and a labor movement that is working together to strip power away from capitalists and preferably directing that violence towards property."

"A lot of those people (on the campaign) who do that kind of work, they're Marxist-Leninists, they're anarchists...They have more of a mind for direct action...engaging in politics outside of the electoral system," says Baird.

Another South Carolina field organizer, Daniel Taylor, said that not everybody is ready for the "crazy stuff," when it comes to direct action.

"We don't want to scare people off, so you kinda have to feel it out before you get into the crazy stuff...more, more extreme organizations and stuff like Antifa, you know you were talking about the Yellow Vests and all that; but, you know we're kinda keeping that, keeping that on the back-burner for right now."

"It's unfortunate that we have to make plans for extreme action, but like I said, they're not going to give it to us, even if Bernie is elected."

Earlier this month, Veritas caught two other Sanders staffers extolling the virtues of throwing capitalists in literal gulags, and fighting in the revolution.

In short, Sanders is getting the Antifa vote, assuming they vote.

As O'Keefe notes at the end of the latest montage, will Bernie disavow these radicals within his campaign, or does he welcome them?

Watch the full video below:

Tyler Durden Tue, 01/28/2020 - 11:05
Published:1/28/2020 10:10:21 AM
[Markets] Dow Reports Earnings Wednesday. Here’s What to Expect. Commodity-chemical giant Dow will report fourth-quarter earnings. The numbers will offer a look into the health of the global economy, and a chance to see if Dow stock, which trades at a relatively big discount, is cheap enough. Published:1/28/2020 9:39:20 AM
[Markets] No Bonus For JPM Bankers As Goldman Self-Monitors For Deadly Virus        No Bonus For JPM Bankers As Goldman Self-Monitors For Deadly Virus       

As the real economy continues to decelerate and the Federal Reserve's 'Not QE' catapulted growth stocks to the moon, well not anymore since coronavirus has spooked global markets, bankers across the industry have seen their annual bonuses stagnate.  

JPMorgan Chase & Co. recently decided to keep annual bonuses flat across its investment bank segment for the 2019 year, reported Bloomberg

JPM bankers should not complain about the lack of pay increases, at least they still have a job, considering an industrywide cut has shocked many in the last year, as macroeconomic headwinds continue to rise. 

The bank noted compensation expense grew 4% to $10.6 billion for the corporate and investment bank units last year as headcount rose 3%.

Bloomberg said pay for top management increased by 1.6% to 2.4% last year, a small boost compared to 2018 figures. 

Even CEO Jamie Dimon's compensation only increased by a mere 1.6% to $31.5 million, a reduction in growth seen over the prior year.

Despite employment compensation growth waning, JPM recorded some of the highest profits ever with $36.4 billion, due to a 56% increase in stock and bond trading in the fourth quarter, after it single-handedly triggered the repo crisis, forcing the Fed to launch 'Not QE.'

Across the industry, we've noted as the stock market hit record highs, thousands of bankers have been laid off. 

Morgan Stanley last month fired 2% of its workforce, or approximately 1,500 workers, due to a slowdown in the economy. 

Earlier this month, Barclays Plc slashed 100 senior staff at its investment bank unit. These cuts were primarily made in Europe and the U.S. 

Goldman Sachs has had its fair share of layoffs and pay reduction in 2019. Now bankers at the firm, who have recently visited China, have been told to quarantine themselves at home for two weeks for fears they might have coronavirus.

It seems coronavirus could be the next excuse by banks to reduce pay or layoff staff members.

Tyler Durden Tue, 01/28/2020 - 10:30
Published:1/28/2020 9:39:20 AM
[Markets] Consumer confidence hits 5-month high at the start of 2020 Consumer confidence hits 5-month high at the start of 2020 Published:1/28/2020 9:39:20 AM
[Markets] Home-price growth gained speed in November as buyers found few homes to purchase Home-price growth gained speed in November as buyers found few homes to purchase Published:1/28/2020 9:05:34 AM
[Markets] Watch: CNN Calls Trump Supporters Stupid Illiterate Rednecks Watch: CNN Calls Trump Supporters Stupid Illiterate Rednecks

Authored by Steve Watson via Summit News,

Don Lemon howls with laughter as panel imitate southern accents

This is CNN. During a discussion regarding the impeachment show trial, Don Lemon and a pair of talking heads devolved into imitating southern accents and declaring that anyone who can read or spell is an elitist, in an effort to mock Trump voters as stupid rednecks.

In an unbridled show of arrogance, Lemon cackled while blowhard Rick Wilson and New York Times op-ed writer Wajahat Ali suggested that anyone who voted for Trump is an illiterate dummy.

Wilson declared that “Donald Trump couldn’t find Ukraine on a map if you had the letter ‘U’ and a picture of an actual, physical crane next to it,” then asserted that Trump is backed only by a “credulous boomer rube demo” of Americans.

“Donald Trump’s the smart one, and there all y’all, y’all elitists are duuuumb.” Wilson shouted in a faux Southern accent.

“You elitists, with your geography and your maps and your spellin’.”  Ali joined in, with his own redneck impression.

“Your math and your readin!’” Wilson added, the hilarity in full flow.

“Yeah, your readin’, your geography, knowing other countries, sipping your latte,” said Ali.

“All those liiines on the map,” said Wilson.

“Only them elitists know where Ukraine is,” Ali added.

When Lemon finally composed himself,  he admitted “I needed that.”

This display is a prime example of why Trump will win a second term.

Sitting in a television studio on the East cost, calling Americans stupid and illiterate doesn’t tend to go over too well.

The ultimate irony is that Y’all elitists really are duuuumb.

Tyler Durden Tue, 01/28/2020 - 09:50
Published:1/28/2020 9:05:34 AM
[Markets] Metals Stocks: Gold eases back from a more than 6-year high as traders assess China virus outbreak Gold futures edge lower Tuesday, as investor worries over the spread of China’s coronavirus abated somewhat, a day after prices rose to a more than six-year high. Analysts, however, said gold and other havens remain likely to see support on adverse developments regarding the outbreak.
Published:1/28/2020 9:05:33 AM
[Markets] Beyond Meat Stock Is Falling. There Isn’t Much Upside Left, Analyst Says. J.P. Morgan analyst Ken Goldman downgraded shares from the equivalent of Buy to Hold, following on the heels of a court ruling that went against Beyond Meat in a dispute with a former contract manufacturer. Published:1/28/2020 8:36:23 AM
[Markets] CDC Issues Level 3 Warning: Avoid All Non-Essential Travel To China CDC Issues Level 3 Warning: Avoid All Non-Essential Travel To China

Following comments from the WHO chief that the coronavirus is only a China problem, not a global problem - which seems false given the apparent first non-Chinese death this morning in Thailand (and is perhaps only designed to maintain elevated risk asset prices around the world) - the Centers for Disease Control and Prevention (CDC) has raised its travel warning to level 3 for China - Avoid all non-essential travel.

  • CDC recommends that travelers avoid all nonessential travel to China. In response to an outbreak of respiratory illness, Chinese officials have closed transport within and out of Wuhan and other cities in Hubei province, including buses, subways, trains, and the international airport.  Additional restrictions and cancellations of events may occur.

  • There is limited access to adequate medical care in affected areas.

A novel (new) coronavirus is causing an outbreak of respiratory illness that began in the city of Wuhan, Hubei Province, China. This outbreak began in early December 2019 and continues to grow. Initially, some patients were linked to the Wuhan South China Seafood City (also called the South China Seafood Wholesale Market and the Hua Nan Seafood Market).  

Chinese health officials have reported thousands of cases in China and severe illness has been reported, including deaths. Cases have also been identified in travelers to other countries, including the United States. Person-to-person spread is occurring in China. The extent of person-to-person spread outside of China is unclear at this time.

Coronaviruses are a large family of viruses. There are several known coronaviruses that infect people and usually only cause mild respiratory disease, such as the common cold. However, at least two previously identified coronaviruses have caused severe disease — severe acute respiratory syndrome (SARS) coronavirus and Middle East respiratory syndrome (MERS) coronavirus. 

Signs and symptoms of this illness include fever, cough, and difficulty breathing. This novel coronavirus has the potential to cause severe disease and death. Available information suggests that older adults and people with underlying health conditions or compromised immune systems may be at increased risk of severe disease.

In response to this outbreak, Chinese officials are screening travelers leaving some cities in China. Several countries and territories throughout the world are reported to have implemented health screening of travelers arriving from China.

On arrival to the United States, travelers from China may be asked questions to determine if they need to undergo health screening. Travelers with signs and symptoms of illness (fever, cough, or difficulty breathing) will have an additional health assessment.

What can travelers do to protect themselves and others?

CDC recommends avoiding nonessential travel to China. If you must travel:

  • Avoid contact with sick people.

  • Discuss travel to China with your healthcare provider. Older adults and travelers with underlying health issues may be at risk for more severe disease.

  • Avoid animals (alive or dead), animal markets, and products that come from animals (such as uncooked meat).

  • Wash hands often with soap and water for at least 20 seconds. Use an alcohol-based hand sanitizer if soap and water are not available.

If you were in China in the last 14 days and feel sick with fever, cough, or difficulty breathing, you should:

  • Seek medical care right away. Before you go to a doctor’s office or emergency room, call ahead and tell them about your recent travel and your symptoms. 

  • Avoid contact with others.

  • Not travel while sick.

  • Cover your mouth and nose with a tissue or your sleeve (not your hands) when coughing or sneezing.

  • Wash hands often with soap and water for at least 20 seconds. Use an alcohol-based hand sanitizer if soap and water are not available.

*  *  *

Does any of that sound like this is "contained"... or just a China problem?

Tyler Durden Tue, 01/28/2020 - 09:23
Published:1/28/2020 8:36:23 AM
[Markets] How the No. 1 bat maker in MLB is looking to disrupt the baseball glove market Marucci Sports has teamed up with expert glove maker Scott Carpenter to make a glove that’s half-leather and half high-tech.
Published:1/28/2020 8:36:23 AM
[Markets] Durable-goods orders get a big boost from the military; business investment weak Durable-goods orders get a big boost from the military; business investment weak Published:1/28/2020 8:08:53 AM
[Markets] The S&P 500 Just Broke Its Streak. Here’s What History Says Happens Next. After 70 relatively calm trading days, the S&P 500 finally closed with a move bigger than 1% on Monday. What could come next might not be that bad. Published:1/28/2020 8:08:53 AM
[Markets] NewsWatch: 5 reasons coronavirus fears are overblown — and 14 stocks to buy now Even the lockdown around Wuhan won’t have much of an impact on China’s economy.
Published:1/28/2020 8:08:53 AM
[Markets] Tanger Outlet shares surge as short sellers get squeezed The pioneering retailer saw its market cap fall below the threshold that would allow it to be held in a popular fund. Now market capitulations have sent it back over that level.
Published:1/28/2020 7:35:39 AM
[Markets] Multi-Billion Levered Options Strategy Fund Finally Faces The Music For Fraud Multi-Billion Levered Options Strategy Fund Finally Faces The Music For Fraud

Three years ago, we first introduced the world to Catalyst Capital, and its Hedged Futures Strategy Fund, which wasn't a managed futures fund after all...

"It was miscategorized," said Morningstar (MORN) analyst Jason Kephart, noting that Morningstar analysts don't cover the fund. The Catalyst fund uses put and call options on Standard & Poor's 500 stock futures, with the aim of reducing volatilty and overall correlation to the blue-chip index.

Morningstar moved the fund into the options writing category Feb. 1, Mr. Kephart said.

For many, it was the first time they had seen the power of 'short gamma' to create a massive market melt-up in practice as at the time, chatter about a multi-billion-dollar levered options strategy fund getting caught offside (and being forced - by its own strategy's hedging requirements - to buy into the rally, acting as the 'catalyst' for the almost unprecedented move) had been rife.

Catalyst Capital CEO Jerry Szilagyi told Bloomberg in Feb 2017:

"It's just people looking to sensationalize things and make headlines," adding that "our exposure was greatly exaggerated, and our impact on the market was greatly exaggerated."

Which rang a bell to more than a few...

Bear Stearns CEO Alan Schwartz goes on CNBC in March 2008 and assures viewers that the firm has ample liquidity. "Part of the problem is that when speculation starts in a market that has a lot of emotion in it," Schwartz says he has numbers to back up his insistence that the bank's position is solid.

As we mocked at the time, the first rule of crisis management... "blame the speculators"

Well, three years later, it appears we were right, and Szilagyi was lying about the exposure as The SEC today announced charges against the New York-based investment adviser for misleading investors about the management of risk.

Catalyst Capital Advisors LLC (CCA) and its President and Chief Executive Officer, Jerry Szilagyi, agreed to pay a combined $10.5 million to settle the charges...

...although CCA told investors that it abided by a strict set of risk parameters for the Catalyst Hedged Futures Strategy Fund, it breached those parameters and failed to take the required corrective action during a majority of the trading days between December 2016 and February 2017.

As alleged, the fund lost hundreds of millions of dollars – approximately 20% of its value – from December 2016 through February 2017 as markets moved against it.  The SEC's complaint against Walczak alleges that he told investors that the fund employed a risk management strategy involving safeguards to prevent losses of more than 8%, when in fact no such safeguards limited losses and Walczak did not otherwise consistently manage the fund to an 8% loss threshold.

"CCA's misrepresentations, and Walczak's alleged departure from his stated approach to managing risk, deprived investors of accurate information about an important aspect of the fund's management."

In parallel action, the Commodity Futures Trading Commission (CFTC) today announced settled charges against CCA and Szilagyi, and a district court action against Walczak."

Finally, we note that Feb 2017's unprecedented decoupling between fundamentals, flows, bond yields, and in fact anything else that was in any way rationally discounting risk mimics the recent few months of farce that has been evident in the so-called markets as gamma built up and the virtuous cycle escalated stock prices to record high valuations.

The funny thing is - just like in Feb 2017 - Catalyst Capital was seeing a massive liquidation as the collapse in its assets under management suddenly accelerated once again...

Source: Bloomberg

The fund's net asset value tumbled...

Source: Bloomberg

And its NAV's decline perfectly synced with the surge in the stock market - as once again - the fund's strategy forced them to buy more and more as prices rose, sustaining the rally...

Source: Bloomberg

And as is clear from the chart above, the decoupling in the last couple of days suggests things are about to get a little hectic for this strategy.

So, was Catalyst's fund once again the driver of irrational buying panics as it liquidated its positions with forced buying into ever-rising index prices? We will see...

Tyler Durden Tue, 01/28/2020 - 08:16
Published:1/28/2020 7:35:38 AM
[Markets] Dow Jones Futures Rebound After China Coronavirus Slams Stock Market Rally; Apple, AMD On Tap Futures edged up after China coronavirus fears slammed the stock market Monday. China-exposed Apple, AMD and Starbucks report earnings Tuesday. Published:1/28/2020 7:04:53 AM
[Markets] Harley-Davidson stock sinks 7% after earnings, revenue fall short Harley-Davidson stock sinks 7% after earnings, revenue fall short Published:1/28/2020 7:04:53 AM
[Markets] 2000 vs. 2020: The Role Of Monetary And Fiscal Policies In Stock Market Cycles 2000 vs. 2020: The Role Of Monetary And Fiscal Policies In Stock Market Cycles

Submitted by Joe Carson, former Chief Economist & Director of Global Economic Research for Alliance Bernstein

The equity market of 2020 has some of the lofty valuation features that showed up at the peak of 2000 cycle. Yet, a key difference is the accommodative stance of monetary and fiscal policies nowadays versus the restrictive stance of 2000. So, the key question for investors is how does the monetary and fiscal policy backdrop influence the investment outlook? Do friendly policies create the potential for even more elevated valuations, to last longer, or is it merely a mirage shifting the focus of investors attentions to the upfront benefits and away from the longer term fundamentals of earnings and portfolio risks?

Equity Markets 2020 vs. 2000

There are a number of macro measures that are often used to assess how expensive or cheap the equity markets are at any point in time. None of these are hard barriers that can’t be exceeded - as all records in finance (like in sports) tend to get broken eventually - but they do offer a perspective on the market valuation relative to past cycles.

For example, the S&P 500 price to sales ratio hit a record high of 2.16 at the beginning of 2000 and has now been exceeded for the first time by the current reading of 2.25X.

Similarly, the market valuation of domestic companies to Nominal GDP - a metric that compares equity prices to overall economic growth - stood at a record 1.85X in 2000 and at the start of 2020 it is estimated that this metric has matched or slightly exceeded the highs of 2000.

Both of these measures suggest that the equity market is expensive. But, critics would argue that favorable monetary and fiscal backdrop makes these measures less excessive than they appear at first glance.

To be fair, there is evidence to support their case. In 2000, for example, monetary and fiscal policies were draining liquidity, the lifeblood of all equity cycles. At the start of 2000, the fed funds rate stood at 5.5%, well above the underlying inflation rate suggesting a restrictive policy, and policy became even more restrictive as policymakers raised official rates three times, by a total of 100 basis points to 6.5% by the end of Q2.

The fiscal stance in 2000 was also restrictive as the federal budget was in surplus, an indication that the federal government was taking more money away from the economy than it was adding.

In 2020, monetary and fiscal policies are stimulative, evident by very low interest rates and a trillion dollar budget deficit. Moreover, these policies directly and indirectly spurred a demand and supply imbalance in finance, favoring equities relative to cash and fixed income assets.

For example, the 2017 tax cut for corporations triggered a windfall in cash flow enabling a number of companies to fund a large share buyback reducing the supply of equities. At the same time, the policy of low official rates along with the promise of low rates for the foreseeable future directly increased the demand for equities by the increasing the value of the future stream of potential earnings and at the same time diminished the current and expected returns on fixed income assets.

So it is fair to say that monetary and fiscal policies nowadays have created a more favorable environment, at least temporarily, for the equity markets. But has these policies fundamentally altered the long-term investment outlook and eliminated valuation and portfolio risks? The answer is no.

First, the operating profits of companies have not improved. The GDP measure of operating profits (before tax) has not increased for the past 5 consecutive years, and that’s one more than the 4 years of flat profit growth before the run-up of the equity markets in 2000.

Second, the equity markets nowadays shows a more concentrated form of excessive valuation. For example, there are four trillion dollar companies, Apple, Google, Microsoft and Amazon, and when combined these companies market valuation account for roughly 13% of all domestic companies (the top five companies account for a record 18% of the S&P's market cap). Moreover, the combined price to sales ratio of these 4 companies is over 5 - more than double than the overall market.

Third, the direct and indirect effects of these policies have greatly increased household portfolio risks by elevating the share of equities. In each of the last two finance/asset driven recessions households holdings of equities dropped below the levels of cash deposits and fixed assets - and if that happened again the wealth loss would be greater than equity declines of the tech and housing bubbles combined.

The final script of the role of monetary and fiscal policies in the current equity market cycle has not been written. The upfront benefits of these policies are clearly visible in equity market valuations, but the concentrated form of excessive valuations and its direct link towards household large exposure of equities does create new risks in the outlook.

In 2000, the draining of liquidity sank the equity markets.

In 2020, it could well be that the inflow of liquidity from policies became too concentrated that the equity market fell under its own excess weight triggering negative ripple effects through all segments of finance and the economy.

Tyler Durden Tue, 01/28/2020 - 08:00
Published:1/28/2020 7:04:53 AM
[Markets] British stocks inch higher after previous day’s hammering U.K. stocks inched higher on Tuesday as traders waited for more news on the deadly coronavirus outbreak before pushing in either direction.
Published:1/28/2020 7:04:53 AM
[Markets] Dow Jones Stocks: United Technologies Earnings Top, 3M Earnings Miss Dow Jones stocks: United Technologies earnings topped views amid Boeing 737 Max headwinds and ahead of its planned Raytheon merger. 3M earnings missed. Published:1/28/2020 6:04:21 AM
[Markets] 5 reasons coronavirus fears are overblown — and 14 stocks to buy now Even the lockdown around Wuhan won’t have much of an impact on China’s economy.
Published:1/28/2020 5:34:04 AM
[Markets] China Curbs Travel To Hong Kong, Sends 6000 Medics To Hubei As Death Toll Soars China Curbs Travel To Hong Kong, Sends 6000 Medics To Hubei As Death Toll Soars

On Tuesday morning, China's top health officials shared some grim statistics essentially confirming that the novel coronavirus believed to have emerged from a shady food market in Wuhan is on track to confirm some of the more dire projections shared by epidemiologists.

As we reported late yesterday, the death toll in China has soared past 100 while the number of confirmed cases doubled overnight. Health officials around the world have confirmed more than 4,500 cases, more than triple the number from Friday. All but a few of the deaths recorded so far have been in Wuhan or the surrounding Hubei province.

Panic has swept across the region as border closures appear to be the overarching theme of Tuesday's sessions. Even North Korea, which relies on China for 90% of its foreign trade, has closed the border with its patron. More than 50 million remain on lockdown in Hubei, and transit restrictions have been imposed by cities and regions around the country. An 'extension' of the Lunar New Year holiday is threatening GDP growth, as economists try to size up the knock-on potential impact on the global economy. The virus has now spread across China and another 17 countries/autonomous territories globally, according to BBG.

But the most important announcement made overnight - at least as far as global markets are concerned - was Hong Kong Chief Executive Carrie Lam's decision to suspend high-speed rail and ferry service, while halving the number of flights between HK and the mainland. This news helped send US stock futures higher in early trade, after health experts yesterday urged Lam to use 'draconian' measures to curb the spread, for fear of a repeat of the SARS epidemic, which killed some 300 people, according to the BBC.

"The flow of people between the two places needs to be drastically reduced" amid the outbreak, Ms Lam told the South China Morning Post.

China, meanwhile, said it would stop individuals from traveling to Hong Kong to try and curb the virus.

Jiao Yahui, deputy head of the NHC’s medical administration bureau, said during a press conference Tuesday that shortages of medical supplies in Wuhan were still a serious problem.

CDC has issued new travel recommendations urging people to avoid all non-essential trips. But officials remained reluctant to declare a global emergency, instead insisting that this is merely an emergency "in China". Of course, after yesterday's brutal pullback, that's to be expected.

The big piece of evidence that the WHO is purportedly looking for is human-to-human transmission outside China. Zhong Nanshan, a leading expert on SARS and other communicable diseases in China, confirmed human-to-human transmission in at least one case in Wuhan and two cases in Guangdong Province. Meanwhile, as we noted yesterday, one case of possible human-to-human transmission is being investigated in Canada, while Vietnam and Japan have now each confirmed one cases. Japan revealed on Tuesday that a bus driver in his 60s, who recently carried passengers from Wuhan, has been found to have the virus.

During a meeting in Beijing, President Xi told World Health Organization Director-General Tedros Adhanom Ghebreyesus that the safety of the people is his government's first priority, and that he recognizes the situation is "very serious."

"This was supposed to be a time for rest, but because of the pneumonia outbreak caused by the novel coronavirus, the Chinese people right now are faced with a very serious battle," Xi said. "This is something we take very seriously because in our view nothing matters more than people’s safety and health. That is why I myself have been personally deploying, planning, and guiding all the efforts related to containment and mitigation of the outbreak."

That's ironic, considering Beijing's sluggish response after the first cases were discovered in December. After all, Wuhan Mayor Zhou Xianwang on Tuesday spoke out against the deluge of criticism he has faced to accuse Beijing of tying his hands. This comes after President Xi and the party tried to scapegoat him and other local party officials for the crisis.

This was supposed to be a time for rest, but because of the pneumonia outbreak caused by the novel coronavirus, the Chinese people right now are faced with a very serious battle,” Chinese President Xi Jinping tells in Beijing.

Speaking at a press briefing in Beijing on Tuesday, Jiao Yahui, deputy head of the NHC’s medical administration bureau, said shortage of medical supplies was a major constraint in China’s efforts to contain the outbreak and treat infected people.

Jiao said China was sending about 6,000 medical personnel to Hubei from around the country – with more than 4,000 already there and 1,800 more due to arrive by Tuesday evening – to work in Wuhan and seven other cities in the province. In Wuhan, more than 10,000 hospital beds have been made available for patients, he said, while another 100,000 are being prepared.

In Beijing, CNBC's Eunice Yoon reported that the local government is strongly encouraging the wearing of facemasks in public. Police guarding Beijing's public transit are wearing full hazmat suits, and anybody hoping to board a train must be wearing a mask, and must submit to a temperature check via infrared thermometer. If an individual is found to have a fever, they're sent to a hospital to be quarantined.

As Beijing tries to telegraph to the world that it has the situation under control, health experts have raised new questions about the government's response. One infectious disease specialist told the NYT that they were skeptical about the Wuhan quarantine's ability contain the virus (unsurprising considering that 5 million left the city before the lockdown began). Beijing and Guangzhou, a port city northwest of Hong Kong, have broken ground on new hospitals, mimicking the speedy construction of not one but two new hospitals in Wuhan to treat patients infected with the virus. Beijing is also reopening a hospital used to fight the SARS outbreak in 2003, while 6,000 medical staff have been sent to Hubei.

“At this stage of the outbreak, the things that make the most difference are finding people, diagnosing people, and getting them isolated,” said Dr. Tom Inglesby, an infectious diseases specialist and director of the Johns Hopkins Center for Health Security. "If you isolate the city, then my question and my concern is that you’re making it harder in a number of ways to do those things you need to do," including ferrying critical supplies and ensuring that infected victims receive adequate treatment.

Tyler Durden Tue, 01/28/2020 - 06:29
Published:1/28/2020 5:34:04 AM
[Markets] Sit Down For This: The Dow's Been Sagging for 5 Days Straight The Dow and the Russell 2000 are now at their 50-day moving averages -- here's what that means for the market. Published:1/28/2020 5:04:29 AM
[Markets] Europe Markets: European stocks trade around seven-week lows as coronavirus fears continue Stoxx Europe 600 falls, as luxury-good companies reliant on Asian sales suffer amid the outbreak
Published:1/28/2020 5:04:29 AM
[Markets] Financial News: Here’s what a top adviser to UBS’s chief executive learned at Davos Let’s hope this year’s base case of ‘cautious optimism’ isn’t too sorely tested, says Huw van Steenis
Published:1/28/2020 4:35:27 AM
[Markets] Can Europe's Largest Economy Survive Without Coal? Can Europe's Largest Economy Survive Without Coal?

Authored by Viktor Katuna via,

One of the greatest moral dilemmas that has been creeping into the everyday activities of specialists working with coal, oil and in some cases even gas (despite its being perceived a natural bridge to a low-carbon future) could be phrased in the following way: how do you stop producing fossil fuels when you still have cheap ample reserves?

In this context coal stands out – its relative inferiority in terms of environmental pollution prompted governments in developed economies to ban its future usage. Yet whenever its production is not curtailed by government-mandated cuts, producers simply continue to extract as much coal as possible. Straight in the middle of the so-called European approach to coal lies Germany, an erstwhile bulwark of the coal industry. Can it eventually survive without coal?

In stark contrast to oil and gas – of which Germany has traditionally been a major net importer and in both cases looking back to a more than 50-year history of depending on primarily Russian hydrocarbon riches – Europe’s leading economy has substantial reserves of coal, lignite in particular. In fact, Germany remains the world’s largest producer of lignite and burns most of it for power generation, accounting for some 22 percent of the nation’s gross electricity output. Ironically, lignite production is more CO2 intensive than hard coal as it is done by extracting coal from open-cast pits, nevertheless, its mid-term future looks a lot better than that of hard coal mining in Germany.

Whilst lignite remains economically competitive, Germany’s hard coal production went downhill after the government ended its subsidy schemes. The last hard coal mine closed its gates in December 2018, ending a 200-year history of the Ruhr Region and potentially starting a new development phase of Westphalia, a geographical phenomenon inextricably intertwined with coal.
Yet even though Germany ceased to extract hard coal itself, it continues to use it. Around 12 percent of power generation is coming from hard coal, imported primarily from Russia, Canada and the United States. Once Germany’s flagship industry, the steel sector consumes almost 40 percent of the nation’s hard coal.

If Germany is to remain an industrial powerhouse, it would need to keep on importing hard coal as it remains an indispensable element of steel-making. This would in turn compel it to rely on imports from Russia (Murmansk and Ust-Luga, to be precise), thereby creating a triple dependence on Russian hydrocarbons. If one is to take monthly statistics in the past 3 years they would find that 53 percent of all imported coal came from Russia, a dependence which has palpably deepened in the past 24 months thanks to the vicinity of large coal-handling ports in the Russian Baltics. Oil, gas and coal – in all three instances Germany imports more than a third of its needs from Russia; in the case of gas it will be significantly higher very soon with NordStream-2 being slated for a mid-2020 commissioning and Groningen going to a government-mandated halt.

(Click to enlarge)

Graph 1. Germany’s Coal Imports in 2017-2019 / German Dependence on Russia (in million tons).

Source: Thomson Reuters.

It would be also interesting to see how the German government will resolve the issue of compensated closures, especially for lignite mines. Hard coal is an easier nut to crack – economically unviable, operationally underutilized (only some 6GW of the existing 20GW hard coal capacity was used in 2019) and widely unpopular due to a lack of serious lobbying effort. For hard coal, the 8GW set as target for 2030 does seem fairly manageable. Yet the government’s efforts to fix the first lignite closures by 2022 are still subject to discussion with mine operators, not to speak of its flaunted intention to launch enforced closures from 2027 which currently seems to be a task too complex to effectuate this quickly.

Interestingly, running somewhat counter to the general narrative as heard from advocates of wider renewables usage, the drop in German coal consumption is not fully supplanted by the mix of gas and renewables. Let’s look at 2019 a bit closer. Both lignite and hard coal usage dropped a whopping 20 percent year-on-year, coming from debilitating (and mandatory) carbon emissions prices and renewables being prioritized in terms of grid access, whilst renewables grew by 3 percent in 2019. In absolute terms the situation is even clearer – coal usage dropped by 20.5 million tons of coal equivalent, whilst renewables only rose by 3 million tons of coal equivalent (natural gas increased by almost 4 mtce).

The ramifications of Germany’s coal exit are truly manifold – on the one hand, Berlin is one of the few coal-producing nations to take its CO2 emission commitments seriously and has managed to decrease its carbon dioxide emissions by some 7 percent y-o-y in 2019 alone. It has spearheaded the European Union drive to decrease the continent’s emissions regardless of the platform. The 2038 phase out of German coal seems like a fairly feasible objective, buttressed by a draft bill which will seemingly soon be signed into law. Replacing lignite will be a tough call as it is cheap and located next to massive urban conglomerations – burning imported gas which also carries in it additional transportation costs might not be always the best option.

On the other hand, the decline of coal is happening concurrently with an unprecedented drop in Germany’s primary energy usage (the 2019 level plummeted to levels unseen since the early 1970s) and the nation’s industrial output might suffer as a result. Moreover, the general view on the coal exit presupposes that Germany’s States will compensate for the end of coal mining by creating new business opportunities and reshaping people’s skills to better suit the needs of the 21st century. However, that is happening only in a fragmented fashion – unemployment rates in major coal-producing hubs like Gelsenkirchen or Dortmund still amount to roughly double of the German average.

Tyler Durden Tue, 01/28/2020 - 05:00
Published:1/28/2020 4:04:19 AM
[Markets] NerdWallet: Who should consider a Roth conversion under the SECURE act? Financial planners say the changes make Roth conversions more attractive for big savers.
Published:1/28/2020 4:04:19 AM
[Markets] Dow Futures Gain Amid Coronavirus Concern as Investors Look to Apple Earnings To Kick-Start Rebound Wall Street will look to a series of bluechip corporate earnings this week, highlighted by Apple later today, to pull stocks out of the biggest single-day decline since October as fears linked to the spread of the deadly coronavirus in Asia continue to cloud markets around the world. Published:1/28/2020 3:33:51 AM
[Markets] Turkey Behind Major 'State-Backed Cyber-Espionage' Targeting Europe & Middle East Turkey Behind Major 'State-Backed Cyber-Espionage' Targeting Europe & Middle East

After prior widespread state cyber-espionage operations were revealed connected to both Iran and Saudi Arabia in the past months, a new bombshell Reuters investigation has exposed a new alleged Turkish government-linked hacking operation which has targeted organizations across Europe and the Middle East for the past two years

Citing multiple senior Western defense and security officials as well as public internet records the new report concludes at least 30 organizations ranging from government ministries to embassies to international companies have been targeted by hackers who appear to be doing the bidding of Turkey. Notably the Greek and Cypriot governments and their state email services have topped the list of targets.

File image via Arab Weekly news.

The Cypriot government confirmed it was targeted as part of the operation but did not give details. Iraq's government, specifically national security offices, were also identified in the report as a prime target. 

Security officials said that infrastructure registered in Turkey was used in the hacks, but did not reveal further details related to confidential intelligence assessments. 

But interestingly, at least one entity inside Turkey itself was allegedly hacked - a Turkish chapter of the Freemasons said to have ties to US-based Turkish opposition cleric Fethullah Gulen.

The DNS-hijacking campaign is said to be similar in methodology detailed in separate prior reporting related to Iran known as DNSpionage. Reuters explains and summarizes the alleged Turkish hackers' methods as follows

The hackers used a technique known as DNS hijacking, according to the Western officials and private cybersecurity experts. This involves tampering with the effective address book of the internet, called the Domain Name System (DNS), which enables computers to match website addresses with the correct server.

By reconfiguring parts of this system, hackers were able to redirect visitors to imposter websites, such as a fake email service, and capture passwords and other text entered there.

Reuters reviewed public DNS records, which showed when website traffic was redirected to servers identified by private cybersecurity firms as being controlled by the hackers. All of the victims identified by Reuters had traffic to their websites hijacked - often traffic visiting login portals for email services, cloud storage servers and online networks — according to the records and cybersecurity experts who have studied the attacks.

The new hacking revelations also come as tensions between Turkey and its longtime enemies Greece and Cyprus are soaring over Turkey oil and gas exploration and drilling in the eastern Mediterranean, which the EU says has illegally cut into both countries' Exclusive Economic Zones (EEZ). 

Investigators took particular note of the victims and targets — all who appeared to be geopolitical enemies of Turkey, and in the case of Turkish-related groups targeted, they happened to be linked to the exiled Fethullah Gulen and/or his supporters. 

Gulen has remained an official enemy of the Turkish state under President Erdogan, who has consistently put pressure on Washington to arrest and transfer the opposition cleric back to Turkey. 

Tyler Durden Tue, 01/28/2020 - 04:15
Published:1/28/2020 3:33:51 AM
[Markets] Asian markets sink on continued worries about China virus Asian shares continued to fall Tuesday, dragged down by worries about an outbreak of a new virus in China that threatens global economic growth. Published:1/28/2020 2:34:53 AM
[Markets] The EU Survives In Emilia-Romagna But Five Star Won't The EU Survives In Emilia-Romagna But Five Star Won't

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

There was real fear in Europe over what could have happened this weekend in Italy. Regional elections in Emilia-Romagna and Calabria could have been terrible for the tenuous ruling coalition between PD and Five Star Movement.

But the center-left held serve against the insurgent campaign of Matteo Salvini and his Lega-led coalition.

Emilia-Romagna is the birthplace of Italian Communism and has been a stronghold for the political left for decades. Even though Salvini failed to win the day this is a clear case of failing falling forward.

It’s a massive improvement for the center-right in Italy and will effect how the region is governed. But the big story here is Five Star.

It is also clear that Five Star is now in complete collapse as an opposition party, garnering only 3.5% in E-M and just 7.3% in Calabria.

Nationally, Five Star is now polling between 15-17%, flirting with political irrelevance if the numbers drop much lower than this. But, where will those voters go?

Five Star was born as an opposition party to entrenched and corrupt Italian political elites. It was decidedly Euroskeptic and it’s not handled the transition from outsider gadfly channeling voter frustration into an effective governing force at all.

Mattia Zulianello has a great article up on the London School of Economics and Political Science blog about how Five Star’s lack of internal cohesion has doomed it to an Icarus-like flight too close to the sun and crashing back down to earth while Salvini’s Lega continues to be a force capable of transforming Italian politics for a generation.

Five Star originally emerged (and remained until 2018) as an anti-system party that rejected cooperation with the other parties in the system and presented itself as a separate pole in opposition to both the centre-right and centre-left. At that time, it declared that it would only cooperate with the other parties on a strict issue-by-issue (and law-by-law) basis. The M5S rejected the legitimacy of the other parties in the strongest terms and fully-fledged cooperation was out of the question.

However, anti-system parties often eventually integrate into the system they previously opposed. This is especially true for populist parties as they are the ‘new normal‘ in European party systems and governments today. The integration and legitimation of populist parties can be a long or short process, according to the various incentives of the political system and electoral results, and is usually accompanied by a series of programmatic and organisational reforms.

The zenith of the integration of populist parties is represented by their eventual entry into national office. In many cases, populist parties are indeed able to survive office, and even to gain votes in subsequent elections. Italy’s Lega is a case in point. After a first disastrous experience in office (1994), the Lega, over time, benefited from a ‘learning process’. It now has a long record of government participation and dominates the Italian agenda. According to all the polls, the party led by Matteo Salvini is by far the strongest in the country today (estimated at 32%).

This is why Lega’s support in E-M has steadily risen over the course of the last three elections there and was nearly capable, in just a three-year time horizon to unseat the establishment there. Only a bitter fight driving massive turnout, nearly 59%, kept E-M from turning “blue.”

Previous elections saw turnout drop as low as 30%. Who turns up to vote when the outcome is predetermined?

Look at the results closely and you’ll see the thing disquieting the Italian plutocrats. Five Star and PD’s support dropped a combined twenty points. Not only is Five Star in freefall but it looks like PD may be as well. The next government in E-M will not take the voters for granted like they have been.

Lega and the Brothers of Italy scooped up the 7 seats in the government lost by PD, who no longer rule with a massive majority.

The results for Calabria were even worse. The Center-Left coalition lost more than thirty-two points over the 2014 election. And while that outcome wasn’t in doubt beforehand it shouldn’t be discounted either. Like Umbria’s election last fall, these results are telling everyone that big change is on Italy’s horizon.

The markets today are breathing a sigh of relief. Salvini has been beaten back for a bit. But for how long? Yes, the ruling coalition survives another day. Yes, it’s a little stronger than it was yesterday. But, Five Star as a party is in the early stages of collapse and the infighting among its high-ranking members will continue until such time as the coalition breaks.

Salvini was right back in August to dissolve the coalition. As Italy sinks economically and politically he is in the position to rally the populists, secure their support and gain support while the government takes all the blame.

And, as Zulianello suggests, since Lega is a properly constituted and functional organization, when it returns to government it will do so with a clear mandate and clearly-defined goals.

These are two things Five Star could never deliver on.

*  *  *

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Tyler Durden Tue, 01/28/2020 - 03:30
Published:1/28/2020 2:34:53 AM
[Markets] Dow Jones Newswires: Swedish steelmaker SSAB swings to bigger-than-expected loss Swedish steelmaker SSAB AB said Tuesday that it swung to a fourth-quarter net loss as a weaker market saw stock adjustments in Europe, while strikes in Finland and lower prices in its Americas operation all weighed on the result.
Published:1/28/2020 2:06:01 AM
[Markets] Elon Musk At War With German Environmentalists Protesting His New Gigafactory Elon Musk At War With German Environmentalists Protesting His New Gigafactory

It was just a couple of days ago that we first reported that Tesla would need to cut down "thousands of trees" in order to build its Gigafactory 4 in Germany.

In that article, we noted that the company needed to clear so much forest space to put up its factory that dozens of protesters recently organized a gathering known as a "Forest Walk" to protect against Tesla's tree removal activities at the site, according to Teslarati

The protesters were dressed in yellow vests, replicating the "Yellow Vest Movement" in France and are also concerned about what the deforestation may do to the drinking water in the area.

This past weekend, in a fit of hilarious and ironic virtue signalling cognitive dissonance, Musk responded to the criticism, saying on Twitter "this is not a natural forest — it was planted for use as cardboard & only a small part will be used for GF4."

Oh, well in that case, just cut down as many trees as you want, Elon. 

Musk also responded to criticisms about water usage at Gigafactory 4, lying saying "Tesla won’t use this much net water on a daily basis. It’s possibly a rare peak usage case, but not an everyday event."

Company planning documents, however, estimate that the factory would need about 98,000 gallons of water per hour. 

The company remains in the process of "jumping through hoops" to get the plant up and running, according to Bloomberg.

One of those hoops included clearing the area of wartime bombs. Disposal officers carried out controlled detonations of seven wartime bombs on Sunday at the site.

The next step will be "harvesters and trucks" rolling in to clear those thousands of trees...

...or as Elon Musk put it on Twitter: "The net environmental impact will be extremely positive!"

Tyler Durden Tue, 01/28/2020 - 02:45
Published:1/28/2020 2:06:01 AM
[Markets] Dow Jones Newswires: J. Sainsbury to invest $1.31 billion toward net zero emissions by 2040 J Sainsbury PLC said Tuesday that it would commit 1 billion pounds ($1.31 billion) over the next two decades toward the goal of becoming a net-zero emissions business.
Published:1/28/2020 1:34:04 AM
[Markets] Turkey's 'Truthophobia' Turkey's 'Truthophobia'

Authored by Burak Bekdil via The Gatestone Institute,

In 2014 the government of Turkey's strongman Recep Tayyip Erdogan banned YouTube and Twitter, fearing that millions of young Turks could otherwise read "dangerous content" on social media. The Constitutional Court declared the bans unconstitutional. In 2017, the Turkish government banned Wikipedia. That ban was removed only recently, after two and a half years. It is not that Wikipedia is a reliable source of information. Banning it altogether is a rogue state behavior. It is not, however, only about Wikipedia: in Turkey, truth, regardless of its source, is feared and often banned.

The World Report 2020, released by the Human Rights Watch, drew a realistic yet gloomy picture of civil liberties in Turkey:

"Executive control and political influence over the judiciary in Turkey has led to courts systematically accepting bogus indictments, detaining and convicting without compelling evidence of criminal activity individuals and groups the Erdogan government regards as political opponents. Among these are journalists, opposition politicians, and activists and human rights defenders...

"Authorities continue to block websites and order the removal of online content while thousands of people in Turkey face criminal investigations, prosecutions, and convictions for their social media posts. There has been a dramatic rise in the number of prosecutions and convictions on charges of 'insulting the president' since Erdogan's first election as president in 2014...

"An estimated 119 journalists and media workers at time of writing are in pretrial detention or serving sentences for offenses such as "spreading terrorist propaganda" and 'membership of a terrorist organization.' Hundreds more are on trial though not in prison. Most media, including television, conforms to the Erdogan presidency's political line."

Hence the nationwide lack of confidence in the judiciary as a constitutional institution, a sad reality that even Erdogan's government had to admit. Vice President Fuat Oktay said that only 38% of Turks had confidence in judiciary. The problem of trust is probably much worse than portrayed by the vice president. A survey by the Turkish pollsters ORC revealed that only 11.7% of Turks fully trusted the judiciary.

The ways through which the Turkish state silences dissent are typical of the unfree world. According to the findings of the Monitoring and Advocating Media Freedom project, the Erdogan government resorted to three most frequently used ways to target journalists in 2019:

"Vexatious charges: Journalists were repeatedly charged with 'insulting a public official' or 'insulting the president' under Articles 125 and 299 respectively of the Turkish penal code...

"Physical attacks: Physical attacks on journalists took place throughout 2019... The violence was largely attributed to political divisions, specifically between nationalists and conservatives...

"Internet restrictions: The government continued to obstruct freedom of expression online... On 1 August, a regulation mandating online content providers, including all online news outlets, to obtain a broadcasting license from the radio and television watchdog RTUK, was published..."

(According to the left-wing Birgün newspaper, 5,223 people -- including 128 children -- stood trial on the charge of "insulting the president" in 2018, with journalists often being singled out and the charge being especially damaging.)

Part of the problem is the Turks' notorious indifference to undemocratic practice -- not that they are unaware of the rights violations; it is just that Erdogan controls most media.

recent survey released jointly by the Amnesty International's Turkey chapter and Metropoll, a polling company, revealed the bitter truth about Turkish attitudes.

According to the survey 82.3% of Turks believe fundamental rights and liberties are violated in Turkey. In addition, only a third of them think that someone detained by the police is likely a criminal. Worse, only 37.7% of Turks think everyone is equal before the state.

A clear majority of Turks think that their rights are systematically violated and that they are not equal before law. Then half of them keep voting for Erdogan (and his allies). These two facts point to a third, and unpleasant conclusion: Millions of Turks know that their country is not free and just, but they keep voting for the leader who is responsible for the gross democratic deficit Turkey has undergone over the past 18 years.

This is a bad message to Erdogan: You will keep winning votes no matter how maliciously you crush dissent. We are with you and your undemocratic rule.

It was another bad year for Turkish democracy. A worse one may be in the offing.

Tyler Durden Tue, 01/28/2020 - 02:00
Published:1/28/2020 1:02:49 AM
[Markets] Assange Case Exposes UK's Solitary Confinement 'Torture' Loophole Assange Case Exposes UK's Solitary Confinement 'Torture' Loophole

Up until last week, Julian Assange had been held in unofficial solitary confinement inside of the Belmarsh prison healthcare unit - a loophole which the UK government began using in May, according to 21st Century Wire's Nina Cross.

Thanks to outcry by fellow inmates and Assange's legal team, Assange was moved out of the Belmarsh healthcare unit - which has been "weaponized to arbitrarily isolate and punish a prisoner."

Of note, more than 100 Yellow Vest protesters traveled from France on Saturday to join a demonstration outside of Belmarsh in support of Assange.

Up until now, UK authorities had denied Assange has been held in solitary confinement - or that it's even practiced in British prisons at all.

Until now, Assange has been locked in a cell alone for over 22 hours a day and deprived of association with other prisoners for several months.   This is in breach of both the European Prison Rules and the British government’s own prison inspectorate human rights standards ...


In an attempt to mitigate growing public outrage, Her Majesty’s Prison and Probation Service (HMPPS) has been sending out letters in response to the influx of complaints it has been receiving regarding the abuse of Assange.  In its response it refuses to address his case and produces a list of standards and laws written for the protection of prisoners as evidence he is in ‘safe hands.’  However, anyone who has followed the continued arbitrary detention of Assange in Belmarsh will know he has been placed effectively outside the reach of laws and standards; even access to his lawyers and legal documents, normally preserved by statutory prisoner rights – has been harshly restricted, all of which has had a crippling effect on preparation for his defence in a case of historical significance. -21st Century Wire

Meanwhile, the Brits are completely dismissing statements by UN Special Rapporteur on Torture, Nils Melzer, when they claim that "prisoners are not detained in solitary confinement."

Moreover, Cross notes that the UK's laughable statement that they care for all prisoners clearly ignores the UN Working Group on Arbitrary Detention, which says that Assange is being arbitrarily detained in violation of international law.

"What’s more, the British state’s dismissing out of hand any accusations  of ‘solitary confinement’ as a falsehood or public misconception – must surely undermine the work of prison charities and scholarship in law and prison systems which exists to shed light on the consequences of solitary confinement including ill-health and suicide," writes Cross.

Hence, the HMPPS letter can be viewed as a public relations exercise designed to promote the image of good governance, a facade designed to mask the institution’s deployment of the very same strategy practised by the government when called upon to answer for its abuse of Assange: denial and silence.

Solitary confinement, technically speaking, is described by the prison charity Penal Reform as "… when a prisoner is confined to a cell for 22 hours or more, that constitutes solitary confinement, regardless of the reason for this confinement or its name," while the prison ombusdman confirms that the definition has nothing to do with where it is.

“Segregated conditions are also sometimes applied outside of segregation units. Prisoners can be kept on the wing, but locked in their cells for the most of the day, and taken to shower and exercise separately from other prisoners on the wing.”  

So what was Belmarsh doing? While official prisoner segregation is allowed under rule 45, holding Assange in the medical wing allowed them to ignore several associated laws.

“45.—(1) Where it appears desirable, for the maintenance of good order or discipline or in his own interests, that a prisoner should not associate with other prisoners, either generally or for particular purposes, the governor may arrange for the prisoner’s removal from association accordingly.

(2) A prisoner shall not be removed under this rule for a period of more than 3 days without the authority of a member of the board of visitors or of the Secretary of State. An authority given under this paragraph shall be for a period not exceeding one month, but may be renewed from month to month

By holding Assange in unofficial segregation, he was excluded from ‘the rules’ and therefore may have been worse off than if he had been officially segregated:

“The regime for segregated prisoners (under Prison Rule 45 (YOI 49)) should be as full as possible and only those activities that involve associating with mainstream prisoners should be curtailed.” – SEG PSO

Read the rest of the report here.

Tyler Durden Tue, 01/28/2020 - 01:00
Published:1/28/2020 12:03:56 AM
[Markets] Dead President Walking? Dead President Walking?

Authored (satirically) by CJ Hopkins via,

I never thought I’d hear myself say this, but I’m a little worried about Donald Trump. I’m worried he may be on the verge of a sudden, major heart attack, or a stroke, or a fatal golfing accident.

Food poisoning is another possibility.

Or he could overdose on prescription medication.

A tanning bed mishap is not out of the question.

He could accidentally hang himself during autoerotic asphyxiation, or get shot by a lone-wolf white supremacist terrorist trying to start the RaHoWa.

The Russians could spray him with that Novichok perfume.

There are any number of ways he could snuff it.

I don’t mean to sound alarmist, but the Resistance is running out of non-lethal options for removing Donald Trump from office.

Here they are, in no particular order...


Resistance Non-Lethal Option No. 1 is winning the 2020 election, which isn’t looking very promising. The Democratic Party is in shambles. According to the polls, their current front-runner is a senile, hair-sniffing, finger-sucking freak who never met a credit card company or a healthcare lobbyist he didn’t like, and who rivals even Donald Trump when it comes to incoherent babbling.

Yes, that’s right, folks, it’s “Smilin’ Joe” Biden, vanquisher of the razor-wielding, swimming-pool-gangster “Corn Pop” to the rescue!

As far as I’ve been able to gather, the plan is for Joe to out-“crazy” Trump (and thus win back the “bull goose loony” demographic) by going completely off his medication and having a series of scary-looking petit mal seizures on national television.

That is, unless the impossible happens, and Biden is vanquished by Bernie Sanders (a/k/a “The Magic Socialist”), who Democratic Party bigwigs would sooner publicly immolate themselves than nominate, and who the corporate media are already accusing of being a lying, sexist. communist, crypto-Trump-loving, Jew-hating Jew.

Sanders, it seems, has gone totally “native.”

He’s out there, in the heart of the American darkness, like a geriatric Colonel Kurz, operating without any decent restraint, totally beyond the pale of any acceptable human conduct.

According to the latest reconnaissance, he is building another “revolutionary” army of fanatical, doped-up, hacky-sacking “socialists” that he will lead into the convention in July and deliver to Biden, or Elizabeth Warren, or whichever soulless corporate puppet the party honchos eventually nominate, and then obsequiously stump for them for the next five months. (Or, who knows, maybe Michael Bloomberg will put the Democrats out of their misery and just buy the party and nominate himself.)

The “Crush Bernie” movement is just getting started, but you can tell the Resistance isn’t screwing around. Hillary Clinton just officially launched her national “Nobody Likes Bernie” campaign at the star-studded 2020 Sundance Film Festival.

Influential Jewish journalists like Bari Weiss and Jeffrey Goldberg, and Ronald Lauder’s newly-founded Anti-Semitism Accountability Project, have been Hitlerizing him, or, rather, Corbynizing him.

Obama has promised to “stop him,” if necessary.

MSNBC anchor Joy Reid brought on a professional “body language expert” to phrenologize Sanders “live” on the air … and, as I said, they’re just getting started.

In any event, no matter who they nominate, they have no chance of winning in November.

How could they, given the total stranglehold the Russians now have on American democracy?

As Adam Schiff just reminded everyone, unless Donald Trump is removed from office, “we cannot be assured that the vote will be fairly won,” because at any moment Putin could order Trump to pressure the Ukrainian president into investigating Biden’s son’s corruption by refusing to fund the Ukrainian military’s resistance to Putin’s secret plot to occupy the entire Ukraine and use it as a covert base from which to launch an all-out thermonuclear war against the United States (which Putin already controls through his puppet, Trump, and his network of nefarious Facebook bots, which, according to this expert on NPR, are already brainwashing gullible Black people into voting for Bernie Sanders this time, or at least refusing to vote for Biden, like they refused to vote for Hillary last time … which, OK, I know, that sounds kind of racist, but we’re talking NPR here, folks. These people aren’t racists. They’re liberals!)

OK, I got a little lost there... the point is, if the election goes ahead, and Trump doesn’t have an embolism or something, odds are, we’re looking at four more years of Putin-Nazi occupation. Which brings us to...


Resistance Non-Lethal Option No. 2 is, of course, the current impeachment circus. I don’t even know where to start with this one.

After three and a half years of corporate-media-manufactured mass hysteria and Intelligence Community propaganda designed to convince the American public that Donald Trump is a “Russian asset” (and possibly Putin’s homosexual lover) and also literally the Resurrection of Hitler, the Democrats are trying to impeach the man for something that most Americans either (a) believe is common practice among members of the political class, (b) don’t entirely understand, or (c) do, but don’t give a shit about.

Seriously, it’s like they held a contest to see if anyone could think of something that would out-anticlimax the Mueller report, and this is what the winner came up with … an over-acted, sanctimonious snooze-fest, the stakes of which could not possibly be lower.

Sure, the corporate media are doing their best to cover every twist and turn of the “drama” as if the fate of democracy were hanging in the balance, but everybody knows it’s a joke … or, all right, almost everybody.

So we’re down to...


Resistance Non-Lethal Option No. 3 is to whip up so much mass hysteria over “white supremacist terrorism,” “the sudden resurgence of anti-Semitism,” “the imminent Putin-Nazi Apocalypse” (which has been imminent since the summer of 2016), and other iterations of Hitler hysteria, that people can’t really even think anymore, and will join the Resistance and pour into the streets in their millions and demand Trump resign.

The Resistance has been at this for over three years now, i.e., casting the neo-Nazi subculture that has always been part of the political landscape as a powerful, worldwide fascist movement that is going to rise up any minute and Hitlerize the entire Western world.

It isn’t working. People aren’t buying it. OK, sure, some liberals are still buying it. But most people aren’t, not anymore.

For example, the hysteria leading up to the recent gun rights rally in Richmond, which according to the corporate media had been infiltrated by “Nazi terrorists” who were plotting to publicly mass murder each other in a desperate attempt to finally launch the “Boogaloo,” or the “RaHoWa” … or whatever.

Apparently, a few days before the rally, the FBI got some neo-Nazis to agree to conspire to murder some people and then violently overthrow the U.S. government with their arsenal of homemade machine guns.

These neo-Nazi masterminds were allegedly members of “the Base,” i.e., one of these little neo-Nazi clubs that we’re all supposed to live in mortal fear of now … this one, as it turns out, run by a former (and possibly current) “security contractor.”

The governor declared a state of emergency. Anti-Terror forces were put on alert. A “no-fly zone” was implemented, presumably to prevent the Russians from dropping a division of Putin-Nazi paratroopers onto the lawn of the Capitol. The corporate media warned that it was probably going to be a bloodbath.

Well, the day came and went, and no Boogaloo. No bloodbath. No Putin-Nazi Apocalypse. Just a lot of gun owners and militia types parading around with their guns and gear. Antifa didn’t even show up this time … or, rather, the few “anti-fascists” that did were also armed and supporting the rally.

And that’s the problem with Non-Lethal Option No. 3... there are only so many times you can have the corporate media scream, “THE NAZIS ARE COMING!” and then not produce any actual Nazis. The Resistance has exceeded that allotment.

Which brings me back to where I started, and my concerns about Donald Trump, and his health, and the assorted tragic accidents that could befall him before we get to November. Because, unless you believe that the Intelligence Community (and the transnational empire it is part and parcel of) is prepared to sit by and allow Donald Trump to serve another four years as president … well, I wouldn’t be sharing any Diet Cokes or riding in any motorcades with him.

I don’t know, maybe I’ve been reading too much of that “conspiracy theory” stuff on the Internet, but Senator Schumer’s warning to Trump back in 2017 keeps playing in my head:

Let me tell you, you take on the intelligence community, they have six ways from Sunday at getting back at you.”

Relax, folks. I’m just kidding, of course. The Intelligence Community would never dream of doing anything … you know, illegal.

The Community doesn’t assassinate people, and commit all sorts of other atrocities.

That’s just a thing they do in the movies.

In reality, they would never assassinate a president, especially not one they had been telling everyone is a “Russian asset,” and “literally Hitler,” and a “traitor,” and a “dictator,” for over three years.

OK, those are pretty harsh words, but they probably don’t really mean all that stuff. Odds are, they’re just horsing around.

They’re a notorious bunch of jokesters, those CIA guys.

Tyler Durden Mon, 01/27/2020 - 23:45
Published:1/27/2020 11:05:13 PM
[Markets] U.K. To Decide On Huawei 5G Equipment On Tuesday  U.K. To Decide On Huawei 5G Equipment On Tuesday 

The U.K. government is expected to decide on Tuesday whether to ban Huawei 5G equipment from the country's telecommunication networks, reported BBC News.

Digital Minister Matt Warman said Monday that "security and resilience" of Britain's "telecom networks are of paramount importance" in tomorrow's decision.  

"We welcome open trade and inward investment, however, our economy can only prosper and unleash Britain's potential when we and our international partners are assured that our critical national infrastructure remains safe and secure," Warman said.

We noted earlier this month how the Trump administration was pressuring U.K. officials to outlaw Huawei 5G equipment.

There's speculation Monday that Prime Minister Boris Johnson could allow "core" Huawei parts in the backbone of networks.

Johnson told reporters that he needed a communication network that benefits the economy without jeopardizing national security. 

"We are going to come up with a solution that enables us to achieve both those objectives, and that is the way forward," he said.

Former Foreign Secretary Jeremy Hunt told BBC on Monday that he "wondered whether it was wise" for the U.K. to become entirely reliant on China for communication equipment.

"I would say if the decision goes the other way this week, as some of the signs seem to indicate it might, I hope there will also be some reflection in the U.S. because we have never needed the Western alliance to be stronger than now," Hunt said.

If Huawei 5G equipment is banned from U.K. communication networks on Tuesday, it would mean that E.E., Three, and Vodafone, would have to replace Chinese equipment already installed in the country's networks. 

Tuesday's Huawei decision will be important for Johnson. He will either side with the Trump administration and ban the Chinese telecom from communication networks. If he allows Huawei equipment to expand in the network, then it would likely draw intense anger from Washington.

Tyler Durden Mon, 01/27/2020 - 23:25
Published:1/27/2020 10:33:31 PM
[Markets] Escobar: Why The New Silk Roads Are A "Threat" To US Bloc Escobar: Why The New Silk Roads Are A "Threat" To US Bloc

Authored by Pepe Escobar via The Saker blog,

Under the cascading roar of the 24/7 news cycle cum Twitter eruptions, it’s easy for most of the West, especially the US, to forget the basics about the interaction of Eurasia with its western peninsula, Europe.

Asia and Europe have been trading goods and ideas since at least 3,500 BC. Historically, the flux may have suffered some occasional bumps – for instance, with the irruption of 5th-century nomad horsemen in the Eurasian plains. But it was essentially steady up to the end of the 15th century. We can essentially describe it as a millennium-old axis – from Greece to Persia, from the Roman empire to China.

A land route with myriad ramifications, through Central Asia, Afghanistan, Iran and Turkey, linking India and China to the Eastern Mediterranean and the Black Sea, ended up coalescing into what we came to know as the Ancient Silk Roads.

By the 7th century, land routes and sea trade routes were in direct competition. And the Iranian plateau always played a key role in this process.

The Iranian plateau historically includes Afghanistan and parts of Central Asia linking it to Xinjiang to the east, and to the west all the way to Anatolia. The Persian empire was all about land trade – the key node between India and China and the Eastern Mediterranean.

The Persians engaged the Phoenicians in the Syrian coastline as their partners to manage sea trade in the Mediterranean. Enterprising people in Tyre established Carthage as a node between the Eastern and Western Mediterranean. Because of the partnership with the Phoenicians, the Persians would inevitably be antagonized by the Greeks – a sea trading power.

When the Chinese, promoting the New Silk Roads, emphasize “people to people exchange” as one of its main traits, they mean the millenary Euro-Asia dialogue. History may even have aborted two massive, direct encounters.

The first was after Alexander The Great defeated Darius III of Persia. But then Alexander’s Seleucid successors had to fight the rising power in Central Asia: the Parthians – who ended up taking over Persia and Mesopotamia and made the Euphrates the limes between them and the Seleucids.

The second encounter was when emperor Trajan, in 116 AD, after defeating the Parthians, reached the Persian Gulf. But Hadrian backed off – so history did not register what would have been a direct encounter between Rome, via Persia, with India and China, or the Mediterranean meeting with the Pacific.

Mongol globalization

The last western stretch of the Ancient Silk Roads was, in fact, a Maritime Silk Road. From the Black Sea to the Nile delta, we had a string of pearls in the form of Italian city/emporia, a mix of end journey for caravans and naval bases, which then moved Asian products to Italian ports.

Commercial centers between Constantinople and Crimea configured another Silk Road branch through Russia all the way to Novgorod, which was very close culturally to the Byzantine world. From Novgorod, merchants from Hamburg and other cities of the Hanseatic League distributed Asian products to markets in the Baltics, northern Europe and all the way to England – in parallel to the southern routes followed by the maritime Italian republics.

Between the Mediterranean and China, the Ancient Silk Roads were of course mostly overland. But there were a few maritime routes as well. The major civilization poles involved were peasant and artisanal, not maritime. Up to the 15th century, no one was really thinking about turbulent, interminable oceanic navigation.

The main players were China and India in Asia, and Italy and Germany in Europe. Germany was the prime consumer of goods imported by the Italians. That explains, in a nutshell, the structural marriage of the Holy Roman Empire.

At the geographic heart of the Ancient Silk Roads, we had deserts and the vast steppes, trespassed by sparse tribes of shepherds and nomad hunters. All across those vast lands north of the Himalayas, the Silk Road network served mostly the four main players. One can imagine how the emergence of a huge political power uniting all those nomads would be in fact the main beneficiary of Silk Road trade.

Well, that actually happened. Things started to change when the nomad shepherds of Central-South Asia started to have their tribes regimented as horseback archers by politico-military leaders such as Genghis Khan.

Welcome to the Mongol globalization. That was actually the fourth globalization in history, after the Syrian, the Persian and the Arab.    Under the Mongolian Ilkhanate, the Iranian plateau – once again playing a major role – linked China to the Armenian kingdom of Cilicia in the Mediterranean.

The Mongols didn’t go for a Silk Road monopoly. On the contrary: during Kublai Khan – and Marco Polo’s travels – the Silk Road was free and open. The Mongols only wanted caravans to pay a toll.

With the Turks, it was a completely different story. They consolidated Turkestan, from Central Asia to northwest China. The only reason Tamerlan did not annex India is that he died beforehand. But even the Turks did not want to shut down the Silk Road. They wanted to control it.

Venice lost its last direct Silk Road access in 1461, with the fall of Trebizond, which was still clinging to the Byzantine empire. With the Silk Road closed to the Europeans, the Turks – with an empire ranging from Central-South Asia to the Mediterranean – were convinced they now controlled trade between Europe and Asia.

Not so fast. Because that was when European kingdoms facing the Atlantic came up with the ultimate Plan B: a new maritime road to India.

And the rest – North Atlantic hegemony – is history.

Enlightened arrogance

The Enlightenment could not possibly box Asia inside its own rigid geometries. Europe ceased to understand Asia, proclaimed it was some sort of proteiform historical detritus and turned its undivided attention to “virgin,” or “promised” lands elsewhere on the planet.

We all know how England, from the 18th century onwards, took control of the entire trans-oceanic routes and turned North Atlantic supremacy into a lone superpower game – till the mantle was usurped by the US.

Yet all the time there has been counter-pressure from the Eurasian Heartland powers. That’s the stuff of international relations for the past two centuries – peaking in the young 21st century into what could be simplified as The Revenge of the Heartland against Sea Power. But still, that does not tell the whole story.

Rationalist hegemony in Europe progressively led to an incapacity to understand diversity – or The Other, as in Asia. Real Euro-Asia dialogue – the de facto true engine of history – had been dwindling for most of the past two centuries.

Europe owes its DNA not only to much-hailed Athens and Rome – but to Byzantium as well. But for too long not only the East but also the European East, heir to Byzantium, became incomprehensible, quasi incommunicado with Western Europe, or submerged by pathetic clichés.

The Belt and Road Initiative (BRI), as in the Chinese-led New Silk Roads, are a historical game-changer in infinite ways. Slowly and surely, we are evolving towards the configuration of an economically interlinked group of top Eurasian land powers, from Shanghai to the Ruhr valley, profiting in a coordinated manner from the huge technological know-how of Germany and China and the enormous energy resources of Russia.

The Raging 2020s may signify the historical juncture when this bloc surpasses the current, hegemonic Atlanticist bloc.

Now compare it with the prime US strategic objective at all times, for decades: to establish, via myriad forms of divide and rule, that relations between Germany, Russia and China must be the worst possible.

No wonder strategic fear was glaringly visible at the NATO summit in London last month, which called for ratcheting up pressure on Russia-China. Call it the late Zbigniew “Grand Chessboard” Brzezinski’s ultimate, recurrent nightmare.

Germany soon will have a larger than life decision to make. It’s like this was a renewal – in way more dramatic terms – of the Atlanticist vs Ostpolitik debate. German business knows that the only way for a sovereign Germany to consolidate its role as a global export powerhouse is to become a close business partner of Eurasia.

In parallel, Moscow and Beijing have come to the conclusion that the  US trans-oceanic strategic ring can only be broken through the actions of a concerted block: BRI, Eurasia Economic Union (EAEU), Shanghai Cooperation Organization (SCO), BRICS+ and the BRICS’ New Development Bank (NDB), the Asia Infrastructure Investment Bank (AIIB).

Middle East pacifier

The Ancient Silk Road was not a single camel caravan route but an inter-communicating maze. Since the mid-1990s I’ve had the privilege to travel almost every important stretch – and then, one day, you see the complete puzzle. The New Silk Roads, if they fulfill their potential, pledge to do the same.

Maritime trade may be eventually imposed – or controlled – by a global naval superpower. But overland trade can only prosper in peace. Thus the New Silk Roads potential as The Great Pacifier in Southwest Asia – what the Western-centric view calls the Middle East.

The Middle East (remember Palmyra) was always a key hub of the Ancient Silk Roads, the great overland axis of Euro-Asia trade going all the way to the Mediterranean.

For centuries, a quartet of regional powers – Egypt, Syria, Mesopotamia (now Iraq) and Persia (now Iran) – have been fighting for hegemony over the whole area from the Nile delta to the Persian Gulf. More recently, it has been a case of external hegemony: Ottoman Turk, British and American.

So delicate, so fragile, so immensely rich in culture, no other region in the world has been, continually, since the dawn of history, an absolutely key zone. Of course, the Middle East was also a crisis zone even before oil was found (the Babylonians, by the way, already knew about it).

The Middle East is a key stop in the 21st century, trans-oceanic supply chain routes – thus its geopolitical importance for the current superpower, among other geoeconomic, energy-related reasons. But its best and brightest know the Middle East does not need to remain a center of war, or intimations of war, which, incidentally, affect three of those historical, regional powers of the quartet (Syria, Iraq and Iran).

What the New Silk Roads are proposing is wide-ranging, economic, interlinked integration from East Asia, through Central Asia, to Iran, Iraq and Syria all the way to the Eastern Mediterranean. Just like the Ancient Silk Roads. No wonder vested War Party interests are so uncomfortable with this real peace “threat.”

Tyler Durden Mon, 01/27/2020 - 23:05
Published:1/27/2020 10:06:49 PM
[Markets] California Sued After Concealing $320 Billion In Annual State Payments California Sued After Concealing $320 Billion In Annual State Payments

Authored by Adam Andrzjewski, op-ed via,

Just a few of the serious financial problems facing California include unfunded public employee pension promises, a potential state credit downgrade, an unprecedented homeless crisis, and a net out-migration of 912,000 residents since 2010.

One easy step California can take is to join every other state in the union and open up its state checkbook for review. Allowing citizens, journalists, watchdogs, academics, and public policy experts to review state spending would help the state get its fiscal house in order.

Unfortunately, last fall, California State Controller Betty Yee (pictured) rejected our sunshine request for the state checkbook. Oddly, the rejection didn’t argue the law, but instead claimed that the controller couldn’t locate a single one of the 49 million bills she paid last year.

This admission provides a troubling clue to California taxpayers who are wondering how and where their money is being spent. The answer is the people spending it literally don’t know. Or they at least say that don’t.

It is of course unimaginable, and laughable, that the state that is home to Silicon Valley can’t put basic transparency tech in place. That state’s feigned tech illiteracy begs the question: What are they trying to hide?

Taxpayers in California certainly want to know what’s happening to state funds. It shouldn’t take subpoenas and litigation to “find” up to $320 billion in annual state payments and show taxpayers how their money was spent.

So, our organization at, alongside our attorneys at Cause of Action Institute, a government oversight organization, filed an open records lawsuit in Sacramento state court. Our lawsuit begins the process of forcing open the state’s line-by-line expenditures.

We’ve never lost a state checkbook transparency fight. In 2012, we successfully sued Illinois Comptroller Judy Baar Topinka (R), and, in 2018, we sued Wyoming State Auditor Cynthia Cloud (R).

We believe the open government movement is revolutionizing U.S. public policy and politics. Just like the microscope transformed medicine, big data is modernizing government.

The purpose of transparency isn’t to scold state officials but to encourage accountability, trust, and better public policy. Here are just three of many critical issues facing the Golden State that could be improved by transparency:

  • State credit rating: The state auditor just issued a report saying the state’s $1.1 billion accounting system (FisCal) is so flawed that it could lead to a state credit downgrade.

  • Corruption: Controller Yee claims that 99.7 percent of all state payments were properly paid even though she told us she can’t find her receipts. Betty Yee is probably the only one of 40 million Californians who believes state government is that efficient, effective, and honest. Yee estimates the state only loses a mere 0.3 percent (less than one-third of one percent) of state dollars every year through waste, abuse, and fiscal mismanagement. The state's myriad problems suggest this is a fantasy.

  • Homeless populations: a 2014 state proposition taxed millionaires to provide funds for mental health services. How did San Francisco -- home to 7,500 homeless people -- manage its funds? Last summer, we published an interactive poop map featuring 130,000 instances of human waste in the public way, which is in part connected to the state’s homeless problem

California, a state whose $3 trillion GDP ranks it ahead of the United Kingdom, spends an enormous sum of money. The state spends more than $320 billion per year with federal taxpayers funding $106 billion of it. If taxpayers can’t follow the money, it will be hard for the state to address its mounting fiscal challenges.

Every state across America can produce a complete checkbook of public expenditures. Are we just dreamin’ to believe that California can produce a full record too?

*  *  *

Adam Andrzejewski is the CEO/founder of, dedicated to posting all government spending online.

Tyler Durden Mon, 01/27/2020 - 22:25
Published:1/27/2020 9:32:30 PM
[Markets] The Four Pillars Of Economic Understanding The Four Pillars Of Economic Understanding

Authored by Peter Boettke via The American Institute for Economic Research,

It is no exaggeration to say that learning economics changed my life. In fact, I would go as far as saying the two most pivotal moments of my young adulthood was meeting my future wife at 17 and being exposed to economics at 19.  Not only pivotal, but responsible for the good fortune and happiness I have had in the intervening years. 

Earlier this month I turned 60. I became an economics major 40 years ago after the powerful messages I learned from my teacher Dr. Hans Sennholz and the economists and ideas he alerted me to. It was simply the way he taught that excited my imagination, and my journey since that time has only fueled my curiosity and imagination since. 

I find everything about economics fascinating — its history, its sociology, its underlying philosophical debates, and most of all its ability in the hands of a real master to render the world in all its complexity intelligible. As James Buchanan taught us, economic theory is able to lift an ordinary individual to the heights of observational genius, while a genius unarmed with economic theory will often be reduced to very ordinary if not worse in their observations of how the world works.

Earlier this fall, I was part of a panel at the Southern Economic Association on Paul Rubin’s The Capitalism Paradox, along with Steve Horwitz and Sanford Ikeda. I have known of Ikeda since I was 19 because he was the star graduating economic student when I was first learning economics from Dr. Sennholz back at Grove City College. So, it was not surprising to me when Sandy in his comments summed up what he thought were the key ideas for teachers of economics to stress to excite the imaginations of subsequent generations of students. It was these ideas that changed my life.

Rubin’s book is highly recommended because he offers a useful corrective by stressing the importance of social cooperation among distant and disparate people, rather than the ruthless competitive nature of market society. Yes, market competition is unrelenting and valuable. But the by-product isn’t just the delivery of goods and services at least cost, but also the network of social relationships and bonds of cooperation that are formed even among strangers. Steve Horwitz recently gave a great talk on this in Greece, and was discussed at Coordination Problem. So our panel was united in its praise for Rubin’s work.

But, when Ikeda had his chance to summarize he placed the teaching of economics into 4 categories: Truth and Light; Beauty and Awe; Hope; and Compassion. My mind rushed back over the years to all the great teachers I have had in economics from Sennholz to Don Lavoie and Karen Vaughn, from Kenneth Boulding to James Buchanan and Gordon Tullock, and from colleagues such as Israel Kirzner and Mario Rizzo at NYU to Don Boudreaux, Tyler Cowen, Chris Coyne, Peter Leeson, Russ Roberts, Vernon Smith and Virgil Storr. They all hit these different categories in their teaching and writing with different levels of emphasis and all with great effect. A few hit all four constantly and they stand out above the crowd.

Truth and Light

Economics begins with the recognition of scarcity. There is certain shock value when you first are taught this idea and the notion that in our world we are constantly confronted with trade-offs, and as such notions of optimality are a function of the skill with which we as human decision-makers negotiate these trade-offs. 

Learning economics to a considerable extent is learning about all the implications of scarcity, and thus the persistent and consistent application of opportunity cost reasoning to all human affairs. Tullock (along with Richard McKenzie) achieve this with their The New World of Economics, which was originally published during the 1970s and which I read as an undergraduate economics student at Grove City College. 

Economics brings truth and the light to the darkness, and pierces through the fog to make sense of all human endeavors, whether in pursuit of the highest ideals or the basis of crass motives.  If you are being taught economics by Gordon Tullock, or for that matter Pete Leeson (The Invisible Hook and more recently WTF), be prepared to be shocked out of your comfortable complacency and instead learn about the logic and underlying governing dynamics of the world around you.

Beauty and Awe

Adam Smith sought to excite the imagination of his readers of The Wealth of Nations with two striking examples early on in the first book. We are asked to contemplate our situation in the world. We depend for our very survival on the cooperation of a great multitude of individuals, yet in our lifetime we have the occasion to make only a few close friends. Smith informs us, therefore, that we cannot rely on their benevolence to help us in our daily struggle for existence.  We must appeal to their own self-love. It is not, as he says, from the benevolence of the butcher, the baker and the brewer that we can procure our dinner, but with regard to their self-love.

Let that sink in; we require institutions that will enable us to engage in productive specialization, realize mutual gains from exchange, and achieve peaceful social cooperation among distant and disparate people. Smith hammers this point home with his example of the common woolen coat that exists on the back of the day laborer. He traces out the great multitude of individuals involved in this complex division of labor that must coordinate their activity with one another in order to produce even this simple product. Leonard Read and Milton Friedman would later use the story of a pencil to similar effect.

And how is that achieved? Friedrich Hayek’s great contribution was to show how the price system through the knowledge generating, utilization and communication functions can produce this complex web of interdependent relationships among economic actors near and far. Hayek even used the phrase “marvel” to shake his professional colleagues out of their complacency about the beauty and awe of the complex coordination of a free market economy.

The scientific imagination is piqued either through a sense of awe or a sense of urgency. Economics is capable of both, and we do a disservice to our students when we don’t expose them to both. My colleague Chris Coyne’s work in the field of post-war reconstruction (After War) as well as humanitarian aid (Doing Bad By Doing Good) demonstrates to his readers that getting the economics right is really a matter of life and death in the real-world. But this understanding of the urgency is based on a sense of awe at the power of the price system. 

This is reflected in important ways in Russ Roberts’ trilogy, The ChoiceThe Invisible Heart and The Price of Everything. Recently I made a post about the beautiful patterns of nature and the analogy to the market that Alfred Marshall draws in his Principles of Economics, and I think watching the rhythmic movement of the pendulum and the pattern produced is helpful to economics students to think about the complex pattern of economic relationships formed through the guidance of the price system. 

Prices guide us, profits lure us, and losses discipline us in our decisions, and property rights provide the institutional infrastructure required for all of this to take place. James Buchanan taught us that the number one job of the economics teacher was to develop an appreciation in their students of the spontaneous order of the market so that our students could become informed participants in the democratic process of collective decision-making. In developing that appreciation, it helps to teach them about the mystery of the mundane. 


But, learning economics and economic history teaches us even more; it teaches us about the “Great Escape” as Angus Deaton has dubbed it, as through the expansion of trade, refinements in the division of labor, technological innovations, and adoption of rules of the economic game that cultivate these developments rather than hinder them, humanity was able to get beyond the Malthusian struggle and the oppression of crushing poverty. Economics teaches us hope in the betterment of the human condition.

Entrepreneurs in the private sector act on price signals to constantly seek out deals by buying low and selling high, and in doing so bring mutual gains from trade. But these entrepreneurs are also constantly on the lookout for cost saving technologies in production or improvements in the delivery mechanism to consumers of their goods and services. And, don’t ever forget the innovations they introduce and the discovery of new products and new services that better satisfy the demands of consumers. Hope in the form of improved living conditions is born out of individuals being able to bet on ideas and bring those bets to life.

Hope is also a function of finding changes in the rules that will ease the costs of transacting and encourage the discovery of new opportunities for mutual gains from trade. Thus, public entrepreneurs can, and have, made tremendous improvements in the lives of millions (billions) by introducing changes in policy and more importantly in the legal and political structure that unleashes the creative powers of a free civilization as Hayek talks about in The Constitution of Liberty.  

In recent years, perhaps nobody has documented this message of hope from economics better than Deirdre McCloskey in her Bourgeois trilogy. These are advanced texts, but the basic message is accessible to everyone. And, I would argue that as economic teachers, it is imperative that you communicate. Tyler Cowen in his recent Arrow Lecture asks whether Economic Growth is a Moral Imperative; he answers in the affirmative. It would be valuable to have your students watch this discussion.


And, finally, economic teaching should stress how economic progress doesn’t result in gains only for the wealthy, but lifts the least advantaged from their previous precarious situation through material betterment. As Milton Friedman used to say, all ships rise in a rising tide. But it goes deeper than this empirical observation.

Economics as a tool of social criticism — perhaps its second most important role — is a rational method for assessing alternative policies and even economic systems. The strict adherence to value freedom in the analysis means that the economist takes the ends of the advocate as given, and limits their critical analysis to the effectiveness of the chosen means by the advocate to the achievement of the stated ends of the advocate for the policy or system. 

If the goal is to help the least advantaged get affordable housing, and the means chosen is rent control, then the economists examines the logic of choice, and the situational logic of that means/ends relationship. We study the structure of incentives and the flow of information embodied in those structures and the ability of the system to produce the desired results. This has been the economist’s way from the classical political economists to the modern textbook economics.

The much maligned Econ 101 is actually couched in these terms for anyone who wants to read closely, rather than assume that economists are engaged in normative theorizing parading as positive analysis.

The great economists from Adam Smith to Vernon Smith were all passionately concerned with the status of the least advantaged among us. Economics teaches with great compassion about the less fortunate, and focuses energy on the institutional remedies that will open up opportunities and eradicate barriers. 

As Lionel Robbins persuasively argued to my mind in The Theory of Economic Policy, the great British Classical Political Economists developed their theories in a manner that co-evolved with the development of British institutions of liberalism — private property, freedom of contract, rule of law. What must not be forgotten in all of this is that these liberal political economists, again reflected strongly in Hayek’s The Constitution of Liberty as well as in various writings of James Buchanan, sought a system of government that exhibited neither discrimination nor domination. It is a system designed to eliminate privileges, and to recognize the rights of all as dignified equals before the law.

I honestly think that this message of economics — truth and light; beauty and awe; hope; and compassion — can excite the imagination of every generation to explore the intricacies of economic theory, and study in detail both the history of this fascinating discipline and the practical history of economies throughout the world. 

We have to bring our students the truth and the light, but we also must instill in them a sense of beauty and awe at the complex coordination of the market, communicate the message of hope in our quest to improve the human condition, and speak to concerns and express our compassion for the least advantaged in our common cause of living in a society that grants freedom and dignity to all. As my colleague Virgil Storr (and Ginny Choi) establish in their recent book, Does the Market Corrupt Our Morals?, the answer is NO, it doesn’t. In fact, commercial society provides the foundation for our moral learning and improvement in our social relationships with one another.

With the increasing attacks on Econ 101, it is time for a renewed commitment by teachers to communicating to this generation the best of what is to be learned from economics.

Tyler Durden Mon, 01/27/2020 - 21:45
Published:1/27/2020 9:03:24 PM
[Markets] Vermont Introduces Bill To Add Emojis To License Plates Vermont Introduces Bill To Add Emojis To License Plates

The fine folks in Vermont, responsible for bringing us bright ideas like maple syrup chugging, Bernie Sanders and occasionally the baggie of low quality Canadian marijuana, could be adding another national trend to their resume: license plates with emojis. 

The state's distinctive green license plates could wind up being even more noticeable thanks to new legislation being introduced in the state that could allow emojis on license plates, according to the NY Post.

State Rep. Rebecca White has introduced the bill, which would allow drivers to add one of six emojis to their plate when registering a vehicle in Vermont. The symbols would be added to the plate's registration number and would not replace any letters or numbers assigned by the Commissioner of Motor Vehicles. 

"As long as they're appropriate, I'm all for it," said Mary-Jo Roldan to NBC News.

There were over 3000 common emojis at the time the bill was introduced and the bill doesn't say which ones drivers would be able to choose from. 

Local residents seem to be ecstatic over the idea. Vermont resident Pam Buck, of Weathersfield, said: "I guess it's an OK idea. I wouldn't say it's good. I wouldn't say it's bad. It's not hurting anybody."

Queensland, Australia passed similar legislation in 2019, allowing emoticons on state registered plates. The plates cost drivers $336 each. Drivers in Australia have the option to select from the laughing, smiling, wink, "love" or sunglasses emojis to put on their plates.

Vermont has not yet put a price on the proposed vanity plates. 

Tyler Durden Mon, 01/27/2020 - 21:25
Published:1/27/2020 8:34:28 PM
[Markets] "Prices Start To Sink At Record Paces" - Manhattan Luxury Home Prices Plunge To 2013 Levels "Prices Start To Sink At Record Paces" - Manhattan Luxury Home Prices Plunge To 2013 Levels

Luxury home prices in Manhattan continue to decline, pressured by Bill de Blasio's "Mansion Tax" and the capping of SALT deductions included in President Trump's tax deal. Prices of these luxury homes, which constitute the top 20% of the market, fell to their lowest levels since 2013, according to a new report via StreetEasy

Luxury homes, priced at or above $3,816,835, dropped 6.1% in the fourth quarter over the previous year. Sellers are beginning to accept a declining market that has shifted to buyers -- where prices are being negotiated to the low end – in return, this has created downward momentum in prices. 

StreetEasy said inventory soared last quarter by 12.2% over the previous year, with at least 4,354 luxury homes sitting on the market.

"With so much new construction saturating the Manhattan real estate market, we were bound to see prices start to sink at record paces," said StreetEasy Economist Nancy Wu. 

"This is happening across all price points and boroughs, as prospective buyers wait out the market from the comfort of their rentals. Market dynamics in 2020 will continue to favor the buyer across all price tiers, and many sellers will have to face the fact that if they want to sell, it may very well be for less than their initial asking price," Wu said. 

For all homes in the borough, the StreetEasy Manhattan Price Index fell 3.7% last quarter over the prior year, to $1,086,217. Inventory for homes in the district rose 3%, with homes staying on the market for at least 96 days, ten more than the prior year. The report notes that it's a buyer's market as inventory continues to build. 

The Median Asking Price Per Square Footage (PPSF) for Manhattan homes jumped 80% from $1,000 in 2010 to $1,800 in 2015 – has since declined 14% to $1,550. 

Total Sales Inventory for Manhattan homes has been surging in the last five years. 

With a decade-long economic boom starting to wane as the Federal Reserve cuts rates three times and injects hundreds of billions of dollars in emergency funds into REPO markets, sparking potential blow-off tops in stocks-- everybody's anxieties about a persistent slowdown could continue to weigh on luxury real estate in New York and elsewhere. 

Tyler Durden Mon, 01/27/2020 - 20:45
Published:1/27/2020 8:02:16 PM
[Markets] Dow Jones Futures Rise After China Coronavirus Slams Stock Market Rally; Apple, AMD, Starbucks On Tap; Acceleron Skyrockets Futures edged up after China coronavirus fears slammed the stock market Monday. China-exposed Apple, AMD and Starbucks report earnings Tuesday. Published:1/27/2020 8:02:16 PM
[Markets] Fed Policy And The Wuhan Coronavirus Fed Policy And The Wuhan Coronavirus

Submitted by Nicholas Colas of DataTrek,

When all you have is a hammer, everything looks like a nail. Abe Maslow, the same fellow who developed the “hierarchy of needs” paradigm in human psychology, popularized that phrase to warn scientific researchers about the perils of using tools inappropriate to the task at hand.

It is an especially relevant observation when it comes to Federal Reserve monetary policy, since the hammer of interest rates is the central bank’s chief tool. Balance sheet expansion, such as that used to combat recent repo market tensions, also rattle around in their toolbox, of course. But rate policy is their go-to implement to achieve the goals of stable prices and economic expansion.

With this week’s FOMC meeting and Chair press conference, the Fed’s hammer will see a fresh test, and one for which it is hardly suitable: addressing the growing global economic uncertainty around the Wuhan coronavirus. As we outlined last week in our review of a Davos panel on the subject, any vaccine is at best months away. In the interim, China is aggressively moving to quarantine entire cities and limiting mass gatherings. Cases are cropping up around the world, and while the illness seems to be less deadly than SARS it is spreading more quickly at present.

Capital markets are beginning to discount the possibility that the Fed will use their interest rate hammer to offset growing economic uncertainty caused by the outbreak:

#1: 2-year Treasury yields broke to below 1.5% on Thursday to 1.486% and closed Friday at 1.495%, which we interpret as a response to concerns about near term global growth. Why that’s an important development.

  • 2-years are keenly sensitive to market opinion about future rate policy.
  • This is the first time they are below 1.5% since September/October’s global bond rally related to fears over US-China trade talks and recession worries.
  • Yields here are now just below the current 1.50% – 1.75% benchmark for Fed Funds, implying that the central bank will cut interest rates.

#2: Fed Funds Futures have moved noticeably in the last week, with increasing odds for a 2H 2020 rate cut (or two):

  • Futures discount stable Fed Funds through Q1. The odds that rates remain unchanged through the March meeting have not budged in the last week and run 84% – 86%.
  • The story changes when you look at the odds around the June 2020 FOMC meeting. A week ago the probability of a rate cut by then was 14%; now it is 25%.
  • Last week’s trend to higher expectations for a 2020 rate cut increase as you look at September’s contracts. A week ago, the odds that rates would be lower than today were 37%; now they are 50%.
  • Fast forward to the December 2020 meeting (chart below, courtesy of the CME FedWatch Tool), and the odds that the Fed cuts rates this year rose last week to 68% from 54%. Moreover, the probability that the Fed cuts by 50 basis points or more rose from 17% to 30% last week.

In summary: it is far too early to tell what effect the coronavirus may have on the global/US economy, but markets are increasingly assuming the economic effects of this public health crisis will inform US central bank policy. While the Fed’s rate tool obviously plays no role in finding a treatment or vaccine for the coronavirus, investors expect the FOMC will do its best to inoculate the US economy against its effects. It is, however, still a hammer…

Tyler Durden Mon, 01/27/2020 - 20:25
Published:1/27/2020 7:31:43 PM
[Markets] "Ground Zero" For China's Virus - Hubei Province Prepares 100,000 Hospital Beds "Ground Zero" For China's Virus - Hubei Province Prepares 100,000 Hospital Beds

Authored by Eva Fu via The Epoch Times,

The epicenter of the coronavirus outbreak, China’s Hubei Province, is opening up 100,000 hospital beds in an effort to contain the disease, the province’s vice governor announced on Jan. 27.

At least 17 cities in the province have been placed under a lockdown, stranding tens of millions of people amid the Chinese New Year holiday, the country’s peak migration season.

Thousands have been infected with the deadly virus.

In a press conference on Jan. 27 evening, Hubei vice governor Yang Yunyan said authorities have designated 112 medical institutions to treat patients with the deadly novel coronavirus, according to Chinese state media. They have freed up around 100,000 hospital beds in the province, with 3,000 of them in Wuhan city alone, where the disease first broke out.

The urgency and scale of the authorities’ orders have raised fears that the outbreak has spread far more widely than authorities admit.

Another 24 medical centers will be mobilized to assist with patients who exhibit symptoms and are suspected to have the virus. More doctors and health workers have arrived in Hubei in order to relieve the exhaustion of frontline medical staff, Yang said.

Authorities have extended the national New Year holiday by another three days to Feb. 2, in order to prevent large crowds from gathering, which could lead to more infections, according to a statement by the cabinet-like State Council. All schools in China, from kindergarten to college level, will have their spring terms pushed back indefinitely until further notice.

So far, all provinces and regions except Tibet has reported infections.

Source: BNO

The country’s vice premier Li Keqiang arrived in Wuhan on Monday to coordinate efforts to contain the disease, as the Chinese regime came under growing pressure. The event, marking the first visit from senior Chinese Communist Party officials to the city since the outbreak began, came two days after Chinese leader Xi Jinping set up a “central leading team” to handle the situation. Li had been named head of the group.

Xi has called the outbreak a “grave situation.”

According to Wang Jiangping, vice director of China’s Ministry of Industry and Information Technology, hospitals in Hubei need 100,000 protective suits daily, but there are only about 40 such suppliers nationwide, with a total production capacity of 30,000.

“There’s a very acute conflict between supply and demand,” he said, adding that medical workers are also in urgent need for other supplies such as surgical masks.

Tyler Durden Mon, 01/27/2020 - 19:45
Published:1/27/2020 7:02:11 PM
[Markets] California Couple Charged With $910 Million Alternative Energy Tax Credit Ponzi Scheme California Couple Charged With $910 Million Alternative Energy Tax Credit Ponzi Scheme

The Securities and Exchange Commission has brought charges against a couple for orchestrating a $1 billion ponzi scheme involving alternative energy tax credits.

Unfortunately, that couple isn't Elon Musk and Grimes.

Instead, it's California based Jeffrey and Paulette Carpoff. The SEC alleges that the couple raised about $910 million from 17 investors between 2011 and 2018 by offering securities in the form of investment contracts through their two solar generator companies, C Solar Solutions and DC Solar Distribution. 

The couple is also being charged in a parallel criminal case by the U.S. Attorney’s Office for Eastern District of California.

Jeffrey Paulette

The SEC complaint states that "The Carpoffs allegedly promised investors tax credits, lease payments, and profits from the operation of mobile solar generators. In reality, the complaint alleges, most of the generators were never manufactured, and the vast majority of the purported lease revenue paid to investors in fact came from new investor funds."

It is also alleged that the Carpoffs "arranged for investors to receive false documents, including financial statements, lease arrangements, and generator certifications" and that "throughout the scheme, the Carpoffs siphoned off investor funds and used at least $140 million of investor money to fund their lavish lifestyle, which included 150 luxury and sports cars, dozens of properties, and a share in a private jet service."

Daniel Michael, Chief of the Enforcement Division's Complex Financial Instruments Unit said: "While the Carpoffs' pitch to investors seemed new and innovative, their alleged fraud was old and simple. This case is a reminder that fraudsters often try to lure investors by associating themselves with trendy technologies."

Like electric powered cars?

Regardless, the SEC charges the couple with violating the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement, and civil penalties

We highlighted this couple back in summer of 2019, noting that among those ripped off was Warren Buffett, who was taken for a cool $300 million. In 2016, new investor money accounted for $50 million of the company's claim of $55 million in revenue, according to a former employee.

“Within a short time, we were doing over $60 million in sales,” Jeff had told Inc. magazine in a December 2018 interview.

It's also worth noting that in addition to interviewing Carpoff, Inc. magazine has also recently featured both Elon Musk and Elizabeth Holmes on its cover. 



Tyler Durden Mon, 01/27/2020 - 19:25
Published:1/27/2020 6:36:56 PM
[Markets] San Francisco Activates Emergency Operations Center To Prepare For Coronavirus  San Francisco Activates Emergency Operations Center To Prepare For Coronavirus 

Increasing fears of coronavirus spreading across the U.S. have resulted in San Francisco Mayor London Breed to activate the city’s emergency operations center, reported the San Francisco Chronicle

“It’s, so we have a centralized location and process to prepare for what we need to do, to share public information, and to take any action if necessary,” said Jeff Cretan, a spokesman for Breed.

So far, there have been no confirmed cases in the Bay Area, but there are new reports that at least ten people have been tested for the deadly virus in Alameda County. 

On Monday, the CDC said 110 people are under observation and being tested for the virus across the U.S. While 5 cases have already been confirmed, another 32 have tested negative.

The emergency center is also coming online one day before a Boeing 767, filled with 230 Americans, is expected to depart from Wuhan Tianhe International Airport on Tuesday for California. 

There are more than 1,000 Americans trapped in the epidemic-stricken Chinese city of Wuhan, in which the U.S. State Department launched an emergency evacuation operation over the weekend. 

The plane is expected to land in Ontario, California, which is about 400-miles south of the Bay Area.

The CDC has stepped up screening for air travelers for the deadly virus arriving from Asia at West Coast airports. 

San Francisco activating its emergency center comes at a time when the University of Hong Kong’s med school revealed during a Monday presser that the deadly virus has likely infected more than 44,000 people in China. Meanwhile, Professor Neil Ferguson, at least the second UK academic to publicly share his projections, said over the weekend that 100,000 people could already be infected with the virus around the world, according to the Guardian.

If the coronavirus continues to spread across the world at its current rate, then it could become a global epidemic in the weeks or months ahead. It seems Bay Area officials are taking no chances with immediate preparations for the worst possible outcome. 

Tyler Durden Mon, 01/27/2020 - 18:45
Published:1/27/2020 6:01:43 PM
[Markets] Earnings Watch: Apple and AMD to take earnings stage amid coronavirus fears, stocks’ sudden swoon Two of the best performing tech stocks of 2019 are set to report results Tuesday, but they’ll do so with a shadow overhead.
Published:1/27/2020 6:01:43 PM
[Markets] Dow Jones Futures: China Coronavirus Slams Stock Market Rally; Apple, AMD, Starbucks On Tap; Acceleron Pharma Skyrockets Futures edged up after China coronavirus fears slammed the stock market Monday. China-exposed Apple, AMD and Starbucks report earnings Tuesday. Published:1/27/2020 6:01:43 PM
[Markets] The Three Countries Vying For Ultimate Power In The Middle East The Three Countries Vying For Ultimate Power In The Middle East

Authored by Yossef Bodansky via,

Two notable deaths in early January 2020 pushed the greater Middle East to increased tension and instability.

There emerges a growing risk, as a result, of a sudden discrete action — by design or by accident — which could spark a major confrontation nobody really wants yet everybody dreads.

First came the target killing by the US of Lt. Gen. Qassem Soleimani, the revered commander of the Iranian Revolutionary Guard Corps’ (IRGC’s) Quds Force (who was promoted posthumously from major general), and several Iranian, Iraqi, and Lebanese seniors at the Baghdad airport.

Then came the death from cancer of Oman’s Sultan Qaboos bin Sa’id al Said, who for five decades was the highly respected “responsible adult” and “voice of reason” of the greater Middle East.

Tehran interprets Soleimani’s target killing to be a major milestone in the US determination to resist and block, by force if necessary, the Iranian surge in the region. Hence, Tehran itself resolved to accelerate the implementation of the decision, made months beforehand, to banish the US from the region even at the risk of escalation and war.

Immediately after Soleimani’s death, a shaken Ayatollah Ali Hoseini Khamene‘i, Iran’s “Supreme Leader”, instructed the Iranian High Command to minimize direct and largely symbolic retaliation and revenge. Instead, Iran would now focus on an accelerated and intensified implementation of the anti US campaign.

The crux of the campaign was to make the US presence untenable through the aggregate impact of a multitude of proxy strikes on US facilities and interests, terrorism against US targets, and the destabilizing of local authorities to the point they would no longer be able or willing to host US facilities and personnel. Unfortunately for the Supreme Leader, this surge would take place without Soleimani’s intimate knowledge of the regional dynamics and the tight control he exercised over Iran’s proxies.

Hence, several players would try to exploit the uncertain times in order to push their own respective and explosive agendas, thus adding to the confusion.

The main engine of escalation and exacerbation of tension would be the determination of “the Middle Eastern Entente” of Iran, Turkey, and Qatar, originally consolidated in March 2019, to capitalize on the current situation and circumstances in order to maximize their gains against both the Arab world and the great powers involved in the region.

In early 2020, the leaders of the Middle Eastern Entente asserted their new policies. In his January 17, 2020, sermon, Ayatollah Ali Khamene‘i noted that God was guiding Iran’s ascent against the US.

“That a nation has the power and spirit to slap an arrogant, aggressive global power is a sign of God’s power. Therefore, that day too is a Day of Allah.”

Rather than avenge Soleimani’s death, he reiterated, “the main punishment (for the US) will be expulsion from the region”. On the same day, Turkish Pres. Reçep Tayyip Erdo?an’s soulmate, ?brahim Karagül, declared the arrival of a new era for Turkey. “The era of ‘defensive politics’ is over for Turkey! This is the rise of a superpower. ... Turkey confined to its borders cannot survive.” During a recent visit to Tehran, Qatari Emir Sheikh Tamim bin Hamad Al Thani concurred that unless the US demonstrated restraint in the Persian Gulf and the Middle East as a whole, drastic measures would have to be taken in order to guarantee security and stability for the entire region.

The overall situation had become fraught with danger because of the concurrent passing of Sultan Qaboos. For decades, Qaboos relied on his own wisdom and knowledge, as well as Oman’s unique Ibadite school of Islam (neither Sunni nor Shi’ite, but dates to soon after the death of Prophet Mohammed), in order to become a most trusted mediator and messenger. His discreet intervention helped prevent and contain many conflicts and crises from escalating out of control because he and his judgement were trusted by all.

Sultan Qaboos’ successor, Sultan Haitham bin Tariq, is an experienced diplomat, and well respected. But it may take a long time before he can fill his cousin’s huge shoes regionally. In the meantime, the absence of channels of communication engenders mutual mistrust and expedites inclination to act on worst case scenarios.

And all the while, the unfolding megatrends in the greater Middle East, especially in the Arab world, continue and intensify.

Most important, the demise of the modern Arab nation-state now appears to have become irreversible. While governments remain in place and leaders make decisions and implement policies, the “modern Arab nation-state” is, in fact, no more. Ultimately, even the Arab leaders themselves are cognizant of the development as reflected in the tepid and confused reaction to the popular riots in Iraq, Lebanon, and Jordan.

The internal stability and working of even the most important of states are unraveling. The crux is not the riots which attract media attention. The key is the transformation of society and the economy.

There is a growing disengagement of the grassroots from central governance. Instead, there emerges a growing reliance on regional, popular, and blood related frameworks: minorities, tribes, and urban extended families. Significantly, these sub state frameworks have saved the grassroots from the state level fratricidal carnage and foreign interventions of the recent decades.

There is no way the grassroots could accept the dismantling of their own lifesaving socioeconomic frameworks and agree to return to dependence on, and trust in, the state level frameworks which have failed them so badly. Consequently, the quest for localized self-sufficiency — both social and economic — severely undermines the legitimacy and power of the modern state.

Since in most areas the traditional tribal and minority habitats cross modern borders, the awakened localized entities ignore borders. The genie of secessionism and localized identities is out of the lantern, never to return back in.

The most important Arab states — Saudi Arabia and Egypt — show major internal cracks emanating from profound perceived delegitimization and mistrust of the ruling élites by the grassroots.

In Saudi Arabia, the erratic reign of Crown Prince Mohammed bin Salman bin ‘Abd al’Aziz al Sa’ud has united many in the region against the House of al Sa’ud. The radicalized northwest of Saudi Arabia (as well as southern Jordan) gravitates around the leadership of Islamist clerics. The economic powerhouse of the Hijaz is wrestling Islamic leadership from the House of al Saud; the oil rich Shi’ite east has regional identity (jointly with the Shi’ite majorities in the other Gulf states) which is pronouncedly pro-Iranian; and, most important, the bedouin tribes of Nejd, long the bedrock of support of the House of al Sa’ud, now reject their oath of allegiance and gravitate to the regional north south axis led by the Shamari Nation.

While some of these entities are hostile to each other, their common quest to rid themselves of the al Sa’ud reign is significantly stronger.

In Egypt, the intensifying struggles of the rapidly growing population (which is expected to cross the 100 million mark in 2020) over scarce and dwindling vital resources — basic food, Nile water, electricity, etc. — have morphed into the emergence of regional powercenters defined by ethnicity (mainly in rural areas), and narrow, localized interests (mainly in urban centers).

The Nubian, Beja, and Dom rural people of southern Egypt fight the encroachment of Arab farmers and reallocation of Nile water; and the Arab rural communities of the Delta fight the communities of central Egypt over the use of Nile water.

There are intensifying bitter disputes between the urban clusters of Asyut, Cairo, and Alexandria over scarce electricity; disputes which stifle the economy, diminishing food supplies for the sprawling poor, who lack of housing and infrastructure, and, overall, diminishes their hopes for having families and normal life. Again, the friction and traditional mistrust of key groupings are put aside in pursuit of a common goal: namely, to undermine the power and influence of the Cairo élites.

The potential collapse of Saudi Arabia and possibly Egypt removes the sole balancing element they represented for the catastrophic condition of most other Arab states: Yemen, Sudan, Libya, Iraq, Syria, Lebanon, and increasingly Jordan. All these states are consumed by fratricidal multielement carnage which has fractured and alienated their key population groupings to a point that reconciliation and coexistence may no longer be possible.

The attempts at governance and democratic reforms, formulating constitutions and running elections, are all exercises in futility because the grassroots are adamantly against the return to the state level frameworks which have so recently betrayed them and wrought so much suffering and losses.

The undermining and unraveling of the modern states are made worse by foreign interventions of the United States, which is making strenuous efforts through military and economic pressure to impose central rule over the distraught populace; and by a multitude of competing proxies, mainly Iran led, but also Turkey and Qatar led, undertaken to further their own regional interests and to take sides in the spreading fratricidal strife and carnage.

Also of paramount significance are the recent demonstrations and riots in non Arab Iran.

Unlike the demonstrations of the past decade, which were largely driven by economic hardships and ensuing government crackdowns, the current wave of demonstrations adds to the socioeconomic despair a distinct awakening of Iran’s minorities who rebel against the powers of the Persian dominated central Government. Concurrently, genuine and widespread nationalistic patriotism burst into the open in the massive funeral processions of Soleimani. As has happened throughout history, Iranians put their differences aside and rallied behind the banner to defend their motherland against external threats.

This demonstration of spontaneous grassroots patriotism is not lost on the chauvinistic elements in Tehran and convinces them to focus on furthering nationalistic external initiatives in order to not only further Iran’s historic interests and aspirations, but to also reduce the internal discontent over the socioeconomic near collapse of Iran.

For the “Middle Eastern Entente” of Iran, Turkey, and Qatar, these regional dynamics constitute both opportunities and threats. On the one hand, other weakened states in the region have thus far proven incapable of resisting the surge of the trio into regional preeminence. On the other hand, there rises from the ashes of the states and the plight of the fractured populace a vindictive radicalism which is a combination of militant Sunni Islamism and lust for blood revenge for all the torment of the past decade or so.

Hence, the Middle Eastern Entente escalates and intensifies the drive for regional power and dominance, both together and separately.

The three powers are pushing hard to transform the region irreversibly in their favor before there emerges a new Arab Sunni force to be reckoned with. A great priority of the three powers is suppressing the Fertile Crescent of Minorities (which includes Israel), because once it becomes viable, it will constitute anew the regional buffer separating between the aspirant foreign powers of Turkey and Iran and the predominantly Sunni Arab heartlands.

The Middle Eastern Entente fears the ascent of the minorities as a key outcome of the prevailing collapse of the modern Arab states.

Hence, the trio has resolved to move fast, push hard, and take major risks.

Most important is the close cooperation with radical Islamist forces — including Sunni entities — on account of common foes and despite contradictory objectives. Turkey is supporting jihadist forces from Syria, Iraq, all the way to Libya, Somalia, and Yemen; Iran sponsors a multitude of Sunni jihadists in Iraq Syria, Libya, Yemen and the HAMAS Islamic Jihad; and Qatar helps with funding and equipping all of them. Indeed, during the formal introduction of the new commander of the Quds Force, Brig. Gen. Ismail Qaani, he spoke in front of a row of flags of the IRGC and their predominantly Shi’ite formal allies and proxies. For the first time, the HAMAS flag was prominently displayed, a testimony of HAMAS’s formal joining of the Iranian army of proxies under the command of the Quds Force.

There is a formal division of labor between the members of the Middle Eastern Entente.

Iran focuses on the on land corridor to the shores of the Mediterranean by controlling the entire territory between western Iran and the Mediterranean; on controlling both shores of the Persian Gulf by empowering the Shi’ite populated oil rich areas; and on dominating the key choke points of the Strait of Hormuz and the Bab el Mandeb (the latter from Yemen).

Turkey focuses on establishing a security zone in northern Syria and Iraq by suppressing the Kurds in Turkey, Syria, and Iraq (while Iran suppresses its own Kurds); on exploiting the plight and ambitions of Jordan’s Hashemites in order to dominate the Hijaz and the Red Sea (also through Turkish presence in Somalia and Sudan); on increasing presence in the Persian Gulf by building bases in Qatar; and, through the recent agreement with the Western supported jihadist propped up “government” in Libya, on carving the eastern Mediterranean and separating Israel, Egypt and Cyprus from the Balkans and Europe.

Meanwhile, in the absence of Sultan Qaboos, there are no open channels of communications between the warring sides, no attempts to reconcile and/or mediate are made, and there are no viable efforts to calm things down.

Into this explosive mix enters the Israel factor.

Both Turkey and Iran have declared their commitment to liberating Jerusalem and destroying Israel as an important objective in their ascent to regional and all Islamic prominence. In recent months, both Turkey and Iran made concrete contingency planning to capitalize on the growing tension between Israel and HAMAS, Islamic JihadHizbAllah, and the Islamist forces in Jordan and the West Bank in order to intervene directly in the fighting with the declared objective to destroy Israel. The scope of the Iranian military preparations for such a confrontation is profound. Meanwhile, Qatar keeps a door open and coordinates with Israel the support for the HAMAS controlled Gaza Strip.

However, rhetoric notwithstanding, there is great apprehension about a major war with Israel.

Consequently, Iran and its proxies and allies remain grudgingly inclined to absorb the damage and casualties inflicted by Israel’s “Campaign Between Wars”: the ceaseless bombings of and raids on Iranian and Iran proxy strategic facilities and storage sites in Iraq, Syria, and Lebanon.

That said, there is strong resolve in both Tehran and Ankara to not give up on, or even alter, their ultimate strategic regional push, irrespective of the costs. There is growing willingness to intervene directly in regional conflagrations, to employ ever larger proxy forces, and, should the need arise, even national military forces. Such higher profile interventions, and thus also risk taking, are visible from Libya to Yemen, to the Persian Gulf, and particularly in Lebanon, Syria, and Iraq.

Both Iran and Turkey continue to push hard, cognizant that they might spark an escalation of significant magnitude. The contingency plans of both countries include concrete preparations for the total destruction of the region’s energy resources and infrastructure in case of a major conflict. Both countries also threaten Israeli vital interests (including Islamist takeovers of Jordan and the Sinai Peninsula) and increase the threat to the Israeli civilian rear (mainly by proxies like HizbAllah and HAMAS), cognizant that Israel is extremely sensitive to civilian casualties.

Meanwhile, there is a major realignment of the great powers in the region.

The US — largely irrelevant, if powerful — is grudgingly leaving the greater Middle East. The exit process started long before the Iranian decision to banish the US in cooperation with Turkey. The US no longer needs the region’s hydrocarbons because the US is self-sufficient and exporting. The tension with Europe and East Asia reduces the US interest in guaranteeing their energy supplies.

Moreover, control of the region’s oil market is not sufficient to guarantee US dominance over the global energy economy on account of the Russia led camp. With lavish US military and technological supplies and aid, Israel is strong enough to defend itself and its vital interests, but not enough to start a major regional war which could ensnare the US if something went wrong. Under such conditions, the imperative for the US to remain entangled in such a volatile region has diminished.

Enter the coalition of Russia and the People’s Republic of China (PRC) which has revived the historic Silk Road system of alliances and interests throughout the Eastern Hemisphere.

Their anti US strategy bolsters the standing of the Middle Eastern Entente. While both Russia and the PRC exercise strong support for vanquished state governments (mainly Syria and Iraq), theirs is a very pragmatic regional approach which accepts the collapse of the modern state system and focuses instead on reliance on the Fertile Crescent of Minorities (that includes Israel) for regional stabilization.

There is a division of labor in the Middle East between the PRC and Russia with the former responsible for economic and development issues, and the latter for security matters. The PRC and its protégés do need the region’s oil and gas badly, and are thus committed to preventing a conflict which would set the region literally aflame. Russia’s bitter historic enmity toward Iran and Turkey affects the Russian readiness to tolerate their reckless excesses. At the same time, Russia benefits from the relentless anti US drive of both Iran and Turkey.

Hence, both the PRC and Russia maintain very delicate balancing with the Middle Eastern Entente.

The PRC and Russia are determined to neither have a confrontation over the trio’s respective vital interests, nor tolerate their strategic ascent to preeminence over the entire region because this would eclipse or challenge the great power dominance by both the PRC and Russia. As well, both Russia and the PRC have excellent relations with Israel, and thus emerge as the sole viable channels between Iran and Turkey, and their pursuit of regional interests, and Israel in the hope of passing messages, defusing faceoffs and crises: thus preventing a major eruption from happening.

Ultimately, the profound, if latent, conflict between Russia and the PRC on the one hand and the Middle Eastern Entente on the other over which will be the real master of the greater Middle East is bound to dominate all long term relations and add to the regional friction and instability.

Thus, there is growing possibility that a miscalculated move, an operational accident, or an unintended infliction of excessive civilian casualties could spark an immediate regionwide eruption and a major explosion nobody would be able to contain.

The indigenous grassroots’ hatreds, tensions, frustration, and despair which have been building and intensifying for close to a decade, and especially since 2016, would then burst into the open. Then, nobody would be able to do anything but wait until the carnage and flames have exhausted themselves.

And so we wait ...

Tyler Durden Mon, 01/27/2020 - 18:25
Published:1/27/2020 5:34:23 PM
[Markets] The S&P 500 Just Broke a Streak of Not Moving 1%. Here’s What History Says Happens Next. After 70 relatively calm trading days, the S&P 500 finally closed with a move bigger than 1% on Monday. What could come next might not be that bad. Published:1/27/2020 5:01:08 PM
[Markets] The Future Of US Weather Prediction Will Be Decided During The Next Month The Future Of US Weather Prediction Will Be Decided During The Next Month

Via Cliff Mass Weather blog,

During the next few weeks, leadership in NOAA (the National Oceanic and Atmospheric Administration) and the National Weather Service (NWS) will make a key decision regarding the future organization of U.S. numerical weather prediction.  A decision that will determine whether U.S. weather forecasting will remain third rate or advance to world leadership.   It is that important.

Specifically, they will define the nature of new center for the development of U.S. numerical weather prediction systems in a formal solicitation of proposals  (using something called a RFP--Request for Proposals).

This blog will describe what I believe to be the essential flaws in the way NOAA has developed its weather prediction models.  How the U.S. came to be third-rate in this area, why this is a particularly critical time with unique opportunities, and how the wrong approach will lead to continued mediocrity.

I will explain that only profound reorganization of how NOAA develops, tests, and shares its models will be effective.  It will be a relatively long blog and, at times, somewhat technical, but there is no way around that considering the topic.  I should note that this is a topic I have written on extensively over the past several decades (including many blogs and an article in the peer-reviewed literature), given dozens of presentations at professional meeting, testified about  in Congress, and served on a number of NOAA/NWS advisory committees and National Academy panels dealing with these issues.

The Obvious Problems

As described in several of my previous blogs, U.S. numerical weather prediction, the cornerstone of all U.S. weather prediction, is behind other nations and far behind the state-of-the-art.   Our global model, the GFS, is usually third or fourth ranked; behind the European Center and the UK Met Office, and often tied with the Canadians.

We know the main reason for this inferiority:  the U.S. global data assimilation system is not as good as those of leading centers.  (data assimilation is the step of using all available observations to produce a comprehensive, physically consistent, description of the atmosphere).

The U.S. seasonal model, the CFSv2, is less skillful than the European Model and is aging, while the U.S. is running a number of poorly performing legacy modeling systems (e.g., the NAM and Short-Range Ensemble System).  Furthermore,  our global ensemble system has too few members and lacks sufficient resolution.  The physics used in our modeling systems are generally not state-of-the-art, and the U.S. lacks a large, high-resolution ensemble system capable of simulating convection and other small-scale phenomena. Finally, operational statistical post-processing, the critical last step in weather prediction, is behind that of the private sector, like or

The latest global statistics for upper air forecast skill at 5 days shows the U.S. in third place.

There is one area where U.S. numerical weather prediction is doing well:  high-resolution rapid refresh weather prediction.  As we will see there is a reason for this positive outlier.

The generally inferior U.S. weather modeling is made much worse by NOAA's lack of computer resources.  NOAA probably has 1/00th of what they really need, crippling NOAA's modeling research as well as its ability to run state-of-the-science modeling systems.

Half-way Steps Are Not Enough

Although known to the professional weather community for decades, the inferiority of U.S. weather prediction become obvious to the media and the general U.S. population during Hurricane Sandy (2012), when the European Center model provided a skillful forecast days ahead of the U.S. GFS.  After a number of media stories and congressional inquiries, topped off by a segment on the NBC nightly news about abysmal state of U.S. weather prediction (see picture below), NOAA/NWS leadership began to take steps that were funded by special congressional budget supplements.

New computers were ordered (the U.S. operational weather prediction effort previously possessed only had 1/10th the computer resources of the Europeans), an improved hurricane model was developed, and NOAA/NWS began an effort to replace the aging U.S. global model, the GFS.   The latter effort, known as the Next Generation Global Prediction System --NGGPS, included funds to develop a new global model and to support applicable research in the outside community.

During the past 8 years, there has been a lot of activity in NOAA/NWS with the goal of improving U.S. weather prediction, and some of it has been beneficial:

  • NOAA management has accepted the need to have one unified modeling system for all scales, rather than the multitude of models they had been running.

  • NOAA management has accepted the idea that the U.S. operational system must be a community system, available to and used by the vast U.S. weather community.

  • NOAA management has increased funding for outside research, although they have not done this in an effective way

  • NOAA has replaced the aging GFS global modeling system with the more modern FV-3 model.

  • NOAA has made some improvements to its data assimilation systems, making better use of ensemble techniques.

  • Antagonistic relationships within NOAA, particularly between the Earth System Research Lab (ESRL) and the NWS Environmental Modeling Center (EMC) have greatly lessened.

But with all of these changes and improvements in approach, U.S. operational weather prediction run by NOAA/NWS has not advanced compared to other nations or against the state-of-the science.  We are still third or fourth in global prediction, with the vaunted European Center maintaining its lead.  Large number of inferior legacy systems are still being run (e.g., NAM and SREF), computer resources are still inadequate, and the NOAA/NWS modeling system is being run by very few outside of the agency.

This is not success.  This is stagnation.

But why?  Something is very wrong.

As I will explain, the key problems holding back NOAA weather modeling can can be addressed (and quickly), but only if NOAA and Congress are willing to follow a different path.  The problem is not money, it is not the quality of NOAA's scientists and technologists (they are motivated and competent).  It is about organization. 

Let me repeat this.  It is all about ineffective organization.

With visionary leadership now at NOAA and the potential for a new center for model development, these deficiencies could be fixed.  Rapidly.

The REAL Problems Must be Addressed

So with substantial resources available, the acute need for better numerical weather prediction in the U.S., and the acknowledged necessity for improvement, why is U.S. numerical weather prediction stagnating?  There are several reasons:

1.  No one individual or entity is responsible for success

Responsibility for U.S. numerical weather prediction is divided over too many individuals or groups, so in the end no one is responsible.  To illustrate:

  • The group responsible for running the models, the NWS Environmental Model Center (EMC), does not control most of the folks that develop new models (located OUTSIDE of the NWS in NOAA ( the ESRL and NOAA labs).  

  • Financial responsibility for modeling systems is divided among several groups including OSTI (Office of Science and Technology Integration) and OWAQ (NOAA Office of Weather and Air Quality), and a whole slew of administrators at various levels (head of the National Weather Service, head of NCEP, head of EMC, NOAA Administrator, and many more).

U.S. weather prediction is not the best?  No one is responsible and fingers are pointed in all directions.

2.  The research community is mainly using other models, and thus not contributing to the national operational models.

The U.S. weather research community is the largest and best in the world, but in general they are NOT using NOAA weather models.  Thus, research innovations are not effectively transferred to the operational system.

The National Center for Atmospheric Research in Boulder, Colorado

Most American weather researchers use the weather modeling systems developed at the National Center for Atmospheric Research (NCAR), such as the WRF and MPAS systems.  They are well documented, easy to use,  supported by NCAR staff and large user community, with tutorials and annual workshops.  Time after time, NOAA has rejected using NCAR models, decided to go with in-house creations, which has led to a separation of the operational and research communities.   It was a huge and historic mistake that has left several at NCAR reticent about working with NOAA again.

There is one exception to this depressing story:  the NOAA ESRL group took on WRF as the core of its Rapid Refresh modeling systems (RAP and HRRR).  These modeling systems, not surprisingly, have been unusual examples of great success and state-of-science work in NOAA.

3.  Computer resources are totally inadequate to produce a world-leading numerical weather prediction modeling system.

NOAA currently has roughly 1/10 to 1/100th of the amount of computer resources necessary for success.  Proven technologies (like 4DVAR and high-resolution ensembles) are avoided,  ensembles (running the models many times to secure uncertainty information) are low resolution and small, and insufficient computer resources are available for research and testing.

Even worse, NOAA computer resources are very difficult for visitors to use because of security and bureaucracy issues, taking the better part of a year, if they are ever allowed on.

There is a lot of talk about using cloud computing, but there is still the issue of paying for it, and cloud computing has issues (e.g., great expense) for operational computing that requires constant, uninterruptible large resources.

With responsibility for U.S. numerical weather prediction diffused over many individuals and groups, no one has put together a coherent strategic plan for U.S. weather computing or made the case for additional resources.    Recently, I asked key NWS personnel to share a document describing the availability and use of NWS computer resources for weather prediction:  no such document appears to exist.

4.  There is a lack of careful, organized strategic planning.

NOAA/NWS lacks a detailed, actionable strategic plan on how it will advance U.S.  numerical weather prediction. How will modeling systems advance over the next decade, including detailed plans for coordinated research and computer acquisition.  Major groups, such as the European Center and UKMET office, have such plans.  We don't.   Such plans are hard to make when no one is really responsible for success.

NOAA has tried to deal with the lack of planning by asking  U.S. researchers to join committees pulling together a Strategic Implementation Plan (SIP), but these groups have been of uneven quality, have tended to produce long laundry lists, and their recommendations do not have a clear road to implementation.

5.  The most innovative U.S. model development talent is avoiding NOAA/NWS and going to the private sector and other opportunities.

U.S. operational weather prediction cannot be the best, when the best talent coming out of our universities doesn't want to be employed there.  Unfortunately, that is the case now.  Many of the best U.S. graduate students do not want to work for NOAA/NWS--they want to do cutting edge work in a location that is intellectually exciting.

EPIC:  The Environmental Prediction Innovation Center

Congress and others have slowly but surely realized that U.S. numerical weather prediction is still in trouble want to deal with this problem.  To address the issue, Congress passed recent legislation (The National Integrated Drought Information System Reauthorization Act of 2018 ), which instructs NOAA to establish the Earth Prediction Innovation Center (EPIC) to accelerate community-developed scientific and technological enhancements into operational applications for numerical weather prediction (NWP).  Later appropriation legislation provided funding.

Last summer, NOAA held a community workshop regarding EPIC and asked for input on the new center.  There was strong support, most participants supporting a new center outside of NOAA.  The general consensus:  it will take real change in approach to result in real change in outcome.  They are right.

Two Visions for EPIC

There are two visions of EPIC and the essential question is which NOAA will propose in its request for proposals to be released during the next month.

A Center Outside of NOAA with Substantial Autonomy and Independence

In this vision, EPIC will be an independent center outside of NOAA.  It will be responsible for producing the best unified modeling system in the world, supplying the one point of responsibility that has been missing for decades.

This EPIC  center would maintain advisory committees that would directly couple to model developers, and should have sufficient computer resources for development and testing.   It would build and support a community modeling system, including comprehensive documentation, online support, tutorials, and workshops.

Such a center should be in a location attractive to visitors and should entrain groups at NCAR and UCAR (like the Developmental Testbed Center).  It will maintain a vibrant lecture series and employ some of the leading model and physics scientists in the nation.

EPIC should be led by a scientific leader of the field, with a strong core staff in data assimilation and physics.  This EPIC center will be able to secure resources from entities outside of NOAA (although NOAA funding will provide the core support).

Such an EPIC center might well end up in Boulder, Colorado, the intellectual center of U.S. weather research (with NCAR, NOAA ESRL lab, University of Colorado, Joint Center for Satellite Data Assimilation, and more), and there is hope that UCAR (the University Corporation for Atmospheric Research) might bid on the new center.  If it did so and won the contract, substantial progress could be made in reducing the yawning divide between the U.S research and operational numerical weather prediction communities.

The Alternative: A Virtual Center Without Independence Or Responsibility

There are some in NOAA that would prefer that the EPIC center would simply be a contractor to NOAA that supplies certain services.  It would not have responsibility for providing the best modeling systems in the world, but would accomplish NOAA-specified tasks like external support for the unified modeling system and fostering the use of cloud computing.   It is doubtful that UCAR would bid on such a center, but might be attractive to some "beltway bandit" entity.   This would be a status-quo solution.

The Bottom Line

From all my experience in dealing with this issue, I am convinced that an independent EPIC, responsible for producing the best weather prediction system in the world, might well succeed. It is the breakthrough that we have been waiting for.

Why?  Because it can simultaneously solve the key issues that have been crippling U.S. operational numerical weather prediction centered in NOAA:  a lack of single point responsibility, that complex array of too many players and decision makers,  and the separation of the research and operational communities, to name only a few.

A NOAA-dependent virtual center, which does not address the key issues of responsibility and organization, will almost surely fail.

The Stars are Aligned

This is the best opportunity to fix U.S. NWP I have seen in decades.  We have an extraordinary NOAA administrator (Neil Jacobs) for whom fixing this problem is his top priority (and he is an expert in numerical weather prediction as well).  The nation (including Congress) knows about the problem and wants it fixed.  The President's Science Advisory (Kelvin Drogemaier) is also a weather modeler and wants to help.  There is bipartisan support in Congress.

During the next month, the RFP (request for proposals) for EPIC will be released by NOAA.  We will then know NOAA's vision for EPIC, and thus we will know whether this country will reorganize its approach and potentially achieve a breakthrough success, or fall back upon the structure that failed us in the past.

Tyler Durden Mon, 01/27/2020 - 17:45
Published:1/27/2020 5:01:08 PM
[Markets] The Dow Just Suffered Its Worst Drop Since October Because the Spread of Coronavirus Is Incomprehensible If Friday was a warning, Monday’s selloff was a sign that the coronavirus scare wouldn’t pass painlessly. Published:1/27/2020 4:31:17 PM
[Markets] DOJ Hires Antitrust Staff As "Broad Investigation" Into Big Tech Firms Accelerates DOJ Hires Antitrust Staff As "Broad Investigation" Into Big Tech Firms Accelerates

The US Department of Justice Antitrust Division has been on a hiring spree amid investigations into Silicon Valley tech giants, according to Reuters, citing two DOJ officials with knowledge of the matter.

The department is scheduled to post an advertisement for positions, potentially on Monday, for additional attorneys, paralegals with an interest in tech and others to work in San Francisco to focus on the tech industry, one of the sources said.

A job posting for five people for two-year Washington positions that dates from November specifies that the attorneys hired will work on a broad investigation of major digital technology firms into whether they engage in anticompetitive practices. The posting includes a link to the agency’s press release announcing the probes. -Reuters

Companies such as Amazon, Facebook and Google are facing a litany of antitrust probes by the US government, along with Congressional investigators and state attorneys general.

"We have capacity to take on a good number of folks," said the source, who added that the number of new hires in the antitrust division will depend on the caliber of applicants.

The division works in conjunction with the Federal Trade Commission (FTC) to analyze mergers to ensure they are legal, as well as accusations of price-fixing.

In July, the Wall Street Journal reported that the DOJ was opening a broad antitrust review into whether dominant technology firms are unlawfully stifling competition.

The review is reportedly centered around examining the practices of online platforms that dominate internet search, social media and retail services; the report notes that the new antitrust inquiry is "the strongest signal yet of Attorney General William Barr’s deep interest in the tech sector, and it could ratchet up the already considerable regulatory pressures facing the top U.S. tech firms."

The agency is also reportedly looking into how the most dominant tech firms have grown in size and might—and expanded their reach into additional businesses, as well as weather big tech firms have abused the power that comes with having such large networks of users.

The DOJ's Antitrust Division began 2019 with a staff of approximately 622, which dropped to around 600 over the course of last year due to a hiring freeze which has recently been lifted. In the past six months, 86 employees have been hired - including an unspecified number of attorneys, paralegals and others.

Tyler Durden Mon, 01/27/2020 - 17:25
Published:1/27/2020 4:31:17 PM
[Markets] The Ratings Game: Chip stocks catch brunt of tech decline, but coronavirus could benefit U.S. memory makers Chip-related stocks fell at a faster rate than the broader market Monday as coronavirus fears rattled investors, but analysts contend that the outbreak could have a positive effect for some domestic semiconductor companies.
Published:1/27/2020 4:31:17 PM
[Markets] Iraq Protest Death Toll Soars Past 600 After Fresh Weekend Unrest Iraq Protest Death Toll Soars Past 600 After Fresh Weekend Unrest

Over a weekend which late Sunday witnessed what was presumably Iraqi militia-fired missiles score a rare direct hit on the US Embassy in Baghdad, mass protests across multiple cities against both the Iraqi government and American forces' continued presence inspired by Shia firebrand cleric and nationalist Moqtada al-Sadr continued. While the protests stalled on Saturday after Sadr the night before appeared to have withdrawn support for the demonstrations, they were unleashed again Sunday with new ferocity which left at least two more protesters dead amid clashes with police. 

Large anti-government protests have been intermittent for the past few months; however, the last three days have been particularly intense with at least 15 killed and over 200 injured, according figures produced by Independent High Commission for Human Rights of Iraq. 

Fresh Iraq protests over the weekend. Image source: AFP/Getty via CNN.

This brings the total death toll since protests began in October to more than 600, according to the commission as well as Amnesty International. 

Sadr has both given support to the 'nationalist' protests and "million man march" demonstrations which erupted last week calling for an end to American military occupation; however, he's faced accusations of betraying the protesters to Iran when he briefly withdrew support Friday into Saturday, and given he's seen as part of the Shiite religious establishment.

His political faction is also the largest bloc in Iraqi parliament. The popular cleric stirred resentment upon announcing Friday that a "temporary halt" in the resistance to US occupation was needed. “We will do our best to prevent taking Iraq to another possible war,” he said. 

Leader of Iraq’s 'Sadrist Movement,' Muqtada Al-Sadr, via Middle East Monitor.

The most recent protester deaths were in the restive southern city of Nassiriya, per Reuters:

Unidentified gunmen shot dead two protesters in the southern Iraqi city of Nassiriya after security forces began a crackdown on months-long demonstrations against the country’s largely Iran-backed ruling elite.

And further it appears Iraqi police and security forces are back to using live ammunition in the ongoing crackdown:

At least 75 protesters were wounded, mainly by live bullets, in clashes in Nassiriya overnight when security forces attempted to move them away from bridges in the city, police and health source said.

Protests in Baghdad have continued into Monday, in an intensely volatile situation where overlapping aims are present, which includes not only a change in government but demands for the immediate withdrawal of US forces. 

Despite Friday's anti-American protests being impressive in size, with many pundits claiming anywhere from hundreds of thousands to over a million in the streets mainly in Baghdad, mainstream media in the West downplayed the numbers, with the Associated Press even falsely saying a mere "hundreds".

Added to the mix is the potential for US military retaliation against the "unruly" Shia militias - as one Iraqi leader called them - for the fresh attacks on the US embassy compound in Baghdad's Green Zone. 

Tyler Durden Mon, 01/27/2020 - 16:45
Published:1/27/2020 4:00:46 PM
[Markets] Project Syndicate: Three reasons coronavirus won’t derail China’s economy The Wuhan coronavirus will probably have only a limited negative economic impact, the former chief economist for the Asia Development Bank writes.
Published:1/27/2020 4:00:46 PM
[Markets] Dow industrials end down over 450 points as coronavirus fears rise Dow industrials end down over 450 points as coronavirus fears rise Published:1/27/2020 3:31:56 PM
[Markets] Is The Market Grossly Underestimating The Potential Impact Of The Coronavirus Epidemic? Is The Market Grossly Underestimating The Potential Impact Of The Coronavirus Epidemic?

Authored by Charles Hugh Smith via OfTwoMinds blog,

The potential for a consequential disruption in China's supply chains appears to be vastly under-appreciated.

Despite the current drop in stocks (less than 1.5% as this is written), there's a tremendous reservoir of complacency about the economic and financial impact of the coronavirus epidemic. The zeitgeist reflects an implicit confidence that the coronavirus will blow over like the SARS scare a few years ago and the impact on the global economy will be essentially zero.

Have all the risks already been fully discounted? Here are some of the reasons why the assumption that this will have little effect on the U.S. economy and stock market may be misguided:

1. Patient One (the first reported case of 2019-ncov) on 31 December was unlikely to be the person in which the mutation enabling person-to-person contagion occurred. The latest genetic analysis suggests the virus first mutated into its present form sometime between late October and late November.

It's thus highly likely the virus had already been spreading for at least a month before 31 December. The symptoms of this new virus are not that different from typical flu strains, so why would authorities spend the time and money searching for a novel flu in a patient? The only reason authorities become involved would be a cluster of flu/ pneumonia patients dying.

Hundreds of thousands of people die of the flu every year, between 12,000 and 50,000 in the U.S. alone, so the death of a patient with flu-like symptoms is not uncommon enough to trigger an official investigation.

This line of reasoning suggests there was already an expanding pool of virus carriers long before officials discovered the new virus and began acting to limit its spread.

If this is the case, then the virus may have spread outside Wuhan before officials reacted.

2. This virus is a new type, and this makes it especially dangerous as humanity may have limited immunity to viruses that are sufficiently different from existing variations.

There are several bits of evidence that this novel flu is both contagious and dangerous. One is that health workers have caught the flu from patients despite all precautions and anecdotal evidence that the disease has spread from one family member to everyone else in the household.

The other is the relatively high death rate. Based on data from Chinese authorities (likely incomplete) , about 3% of the patients have died. The great flu pandemic of 1918-19 killed about 2.5% of its victims, and since it was highly contagious, it's estimated 50 to 60 million people died in that pandemic--often young healthy people.

3. The incubation period for this flu may be up to 14 days, and someone who has it may be asymptomatic (display no symptoms) for 5 or 6 days. This means screening passengers for fever is essentially useless.

Even more alarming, the new virus doesn't always cause a fever, making screening for fever even less effective.

Despite these data points, the American populace is being assured that screening is effective and so it's perfectly safe to travel as usual. This complacent confidence appears to be unfounded.

4. The Chinese populace is highly mobile within China and the world. Hundreds of thousands of Chinese work in other nations, and a significant percentage of these offshore workers returned home for Lunar New Year and will be returning to their jobs in the U.S., Europe, Africa, Southeast Asia, the Mideast, etc. next week.

To assume that none of these returning workers are asymptomatic carriers of the flu is a stretch.

5. Researchers are busy developing a flu shot to offer some immunity, but if this virus is virulently contagious, the question becomes: can authorities outrace the spread of the virus? Realistic estimates of how long it will take to develop and test a vaccine are 6 to 7 months, and that's if everything works perfectly, i.e. the virus doesn't mutate, etc. Producing hundreds of millions of doses and administering the vaccine to hundreds of millions of people will take additional time.

6. The implicit model for this coronavirus in the mainstream is SARS, which was isolated and contained. But this new virus may be much more contagious and so the relatively rapid and successful isolation of SARS may be a misleading model.

7. Authorities seem to prioritize "don't panic" messages, as if fear of this flu is irrational. But fear of a risk that cannot be assessed with any confidence is entirely rational. The smart strategy is to lay low and wait for more evidence on the nature of the risk.

8. The potential economic impact of this virus is grossly underestimated. The Chinese economy is particularly vulnerable now for a number of reasons. In essence, all the low-hanging fruit of rapid development have been picked, and adding more debt to boost building and consumption is no longer as effective now that debt has soared.

The world has depended on China's skyrocketing consumption for growth for the past 30 years. Should China's economy actually contract due to the knock-on effects of the virus, the global economy will soon follow.

How fear triggers a domino-like effect in an economy is poorly understood. In an economy that's already teetering on recession, quarantines, disruption of travel and commerce and a generalized "circle the wagons" response to uncertainty will push the precarious economy over the cliff.

Once tourists cancel trips, incomes plummet and businesses are forced to close. There's no guarantee that they will re-open after months of recession.

If you fear catching a potentially life-threatening flu, you're unlikely to go shopping for a new car or furniture; you'll put that off if at all possible.

Then if you read about layoffs and recession, you decide the car and furniture can wait indefinitely.

This is how the transition from complacency and confidence to fear and caution ripples through the economy, as the initial impact unleashes knock-on effects that increase caution which then reinforces reduced spending and investment.

9. Confidence in the truthfulness and effectiveness of authorities is already low in China, and this loss of confidence will likely spread to other nations as people awaken to the authorities' obsession with "keeping the economy going" by discounting the risks with false assurances that "everything is under control."

When people realize everything is not under control and they've been misled to grease the wheels of commerce, the legitimacy of the state may come into question: if they downplayed the flu, putting me and my family at risk, why should I trust them about anything else? The epidemic has the potential to trigger a political crisis as well as a severe economic slump.

10. The potential for a downward spiral of confidence is high as authorities will be pressured to increase their reassurances that all is well at every new wave of evidence that the virus is spreading despite their efforts. Doubling down on "don't panic" as the virus spreads will eventually backfire and unleash the very panic they feared.

11. Global stock markets are at all-time highs or near-term highs, on the euphoric belief that central bank stimulus will push stocks higher essentially forever. The virus has to potential to refocus attention on sales, profits and future risks, and that could change the general mood from complacent confidence to uncertainty, which is Kryptonite to market confidence.

The virus might be the needle that will pop all the speculative bubbles, regardless of central banks' stimulus.

12. History suggests that this virus may rise in two waves. The initial wave may die down and everyone sighs with relief, assuming it's like SARS: everything's fixed, risk is back to zero. Restrictions are eased, travel bans lifted, etc. Then the second and much more virulent wave rises, catching everyone by surprise.

13. The potential for future mutations which increase the lethality of the virus are not being factored into current risk assessments. Assuming the virus will retain its current configuration is a leap of faith.

The potential for a consequential disruption in China's supply chains appears to be vastly under-appreciated. Again, the working assumption is that any disruption will be temporary and everyone in China will be back to work as usual in a few weeks. The market has yet to discount the possibility that China's supply chains will be disrupted for months, with all the ripple effects that would generate throughout the global economy.

The market also has yet to discount the possibility that China's consumption could crater (buying an iPhone 11 is no longer a priority, etc.) and knock-on effects in its currency and debt markets could disrupt global financial markets, potentially triggering insolvencies in overleveraged companies not just in China, but in the developing and developed economies as well.

While it's too early to predict global depression, it's also too early to predict a rapid return to pre-epidemic normalcy.

Here are some informative science-based links on the coronavirus, courtesy of longtime correspondent Cheryl A.:

*  *  *

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Tyler Durden Mon, 01/27/2020 - 16:25
Published:1/27/2020 3:31:56 PM
[Markets] U.S. stocks skid toward roughly 3-month low as coronavirus spread rattles Wall Street All three equity indexes are on track for their worst losses in months, as concern grows over the fallout from China’s coronavirus, with the death toll and number of infected climbing. Published:1/27/2020 3:00:14 PM
[Markets] Avenatti's Criminal Trial On Extortion And Fraud Charges Begins Next Week Avenatti's Criminal Trial On Extortion And Fraud Charges Begins Next Week

As far as we know, Michael Avenatti is still sitting in solitary confinement in the MCC. But fortunately for the "creepy porn lawyer," he won't need to wait too much longer for his day in court.

Reuters reports that lawyers in Avenatti's extortion case in Manhattan are expected to begin voir dire - the process of selecting jurors - next week.

Avenatti is best known as an antagonist to President Trump, a one-time presidential candidate and darling CNN & MSNBC contributor. He represented porn star Stormy Daniels in her fight to break an NDA she apparently signed after an alleged affair with the president more than a decade ago. Daniels' legal battle with Trump over allegations of defamation ended with a judgment against Daniels, who later accused Avenatti of cheating her.

The 48-year-old lawyer is charged with trying to extort Nike by threatening to publicize allegations that the sportswear company illegally paid families of college basketball recruits. According to recordings made by lawyers representing Nike (who wore a wire to the meeting after reporting his conduct to the FBI), Avenatti wanted Nike to pay him as much as $25 million to lead an 'internal investigation' into the company's behavior.

In a sign that Avenatti has a propensity to lie to and cheat his clients, the lawyer is also being charged with defrauding his client, Gary Franklin, a coach in a youth basketball league and Avenatti's 'source' for the Nike allegations.

He has pleaded not guilty, but the lawyer could face up to 40 years in prison if convicted on all counts.

Lawyers will start surveying potential jurors from the Bronx and Manhattan (two democratic strongholds) as they begin what will be a difficult selection process given Avenatti's notoriety. The trial is expected to last three weeks.

But even if he is acquitted on all counts (which is unlikely, seeing as the judge already dropped a few of the weaker counts), Avenatti must still face a separate case in California on a completely different set of charges.

Tyler Durden Mon, 01/27/2020 - 15:50
Published:1/27/2020 3:00:14 PM
[Markets] In One Chart: Drain the swamp? Spending on Washington lobbying rises to 9-year high Companies and groups last year increased their spending on Washington lobbying to a level not seen in nearly a decade, according to the latest disclosures.
Published:1/27/2020 3:00:14 PM
[Markets] Morgan Stanley: "The Correction Has Begun" But The Fed Will Keep It To 5% Morgan Stanley: "The Correction Has Begun" But The Fed Will Keep It To 5%

Having gotten dragged kicking and screaming into validating the late-2019 market meltup and even hiking his own year-end price target for the S&P500, Morgan Stanley's bearish equity strategist, Michael Wilson, was looking for just the right catalyst - such as the Chinese coronavirus pandemic - to announce that the Fed-liquidity driven rally is over and a long-overdue correction has begun. However, with the Fed still injecting ample liquidity into the market every month to the tune of about $60-80BN, Wilson finds himself trapped as he can't go "full bear" and instead has to be cognizant that the factor that dragged him into the bullish camp is still there, and will likely be there (or become larger) throughout the pandemic, which limits how bearish Wilson can be.

All of this emerged this morning when in his latest Weekly Warm Up note, Michael Wilson wrote that "market internals were already suggesting skepticism on a big growth reacceleration prior to the outbreak of the Coronavirus. However, with the breakdown of cyclicals and other "reflation" trades last week, concerns about the nascent recovery are rising."

As noted above, Wilson was quick to acknowledge that "liquidity has played a large role in the rally since October and index level prices appear ahead of the fundamentals" and as such, while he suspects "the first correction since October has begun", it will be contained to 5% or less for the S&P 500 as the Fed won't let sto(n)cks drop too much as "liquidity remains flush and high quality/low beta/defense (i.e. S&P 500) outperforms lower quality/high beta/cyclicals (small caps, EM, Japan, Europe)."

Coronavirus aside, Wilson first addresses the breakdown in cyclicals, which took place even before the pandemic headlines spooked traders, Wilson writes that he has "remained steadfast in our view that investors should stay up the curve on size and quality and favor defensive stocks relative to cyclical ones. That view has been anchored in our opinion that the recovery in global growth will be modest and led by EM as the US economy decelerates further in 1H2020 before stabilizing."

In January, Wilson's skepticism has been proven correct, "with the barbell of large cap quality growth and defense leading the way. This has become even more extreme in the past week, with cyclicals taking it on the chin, especially relative to defensives. In fact, this ratio is now trading below where it was in December 2018 when the S&P 500 was trading at 2400, nearly 30% percent below current levels."

In the same vein, Wilson also notes that small caps continue to underperform large, as "markets agree with the view that earnings growth is likely to remain disappointing for the small caps relative to large due to margin pressure and perhaps building credit issues as indicated by the persistent increase in downgrades within the high yield and loan markets." As shown in the chart below, the ratio of net upgrades is now the worst (most net downgrades) since the shale E&P crisis in 2015/2016 which sent dozens of energy companies into Chapter 11.

While this increase in downgrades had not hurt the performance of credit markets until last week, when a gaping divergence opened up between stocks and junk...

... Wilson believes it may have been holding back the performance of small caps all along, at least on a relative basis. In short, "it makes sense to stay underweight small caps until these credit downgrades subside, earnings expectations get more realistic, or the US economy shows signs of reacceleration rather than just stabilization."

Alas, anyone hoping that this is the signal for fundamentals to once again matter, not so fast.

While Wilson does not exactly jump on the JPMorgan bandwagon, which as a reminder earlier today urged its clients to "please buy the dip", he still thinks "liquidity is playing a large role in equity markets and with evidence of just a modest recovery led by ex-US economies, index level prices appear ahead of the fundamentals with a large skew toward large-cap, high-quality growth and defensive stocks."

Alas, and as Eric Peters said yesterday when he cautioned that "in each downturn, central bankers must step in more and more aggressively.... the process is reflexive and ultimately leads to a Minsky extreme," this means that while near-term risks have increased, Morgan Stanley believes that "corrections at the index level will be contained to 5 percent or less while the defensive skew outperforms both growth and cyclicals until rates show some signs of actually bottoming or hard data suggests the recovery will be more robust than we currently expect."  The next chart shows that defensives relative to secular growth remain above the lows from last summer when the Fed cut rates for the first time this cycle and appear  to be turning up again as growth concerns perhaps return.

Paradoxically, this means that the Fed's safety net will prevent a major selloff even if, or rather especially if the coronavirus epidemic results in collapse in economic supply chains and economic devastation. The irony: for stocks to drop, the economy and corporate profits will have to finally bottom and be on a solild uptrend, also known as just another day in the bizarro upside-down world of the "new abnormal."

Tyler Durden Mon, 01/27/2020 - 15:24
Published:1/27/2020 2:31:15 PM
[Markets] ‘I can’t think of another athlete who had a better transition’ — How Kobe Bryant pulled off the tricky pivot from sports to business Bryant’s business career was cut short when he died in a helicopter crash Sunday.
Published:1/27/2020 2:31:15 PM
[Markets] U.S. oil futures fall for a 5th straight session, hitting 3-month low U.S. oil futures fall for a 5th straight session, hitting 3-month low Published:1/27/2020 2:11:59 PM
[Markets] Boeing Has Many Problems. Its Wide-Body Jet Isn’t One of Them. Wall Street is starting to worry about something impacting Boeing other than the troubled 737 MAX jet. Production rates on Boeing’s biggest jets might come down. Is that a new problem for the stock? Probably not. Published:1/27/2020 2:11:59 PM
[Markets] Must Government Save Us From The Coronavirus? Must Government Save Us From The Coronavirus?

Authored by Jeffrey Tucker via The American Institute for Economic Research,

In the spring of 2014, when awareness of Ebola was just beginning to dawn, a case of infection appeared in the town of Harbel, Liberia. The biggest employer in the area is Firestone. The company immediately set up a quarantine area of its hospital for the infected woman, who soon died. 


They distributed hazmat suits to workers. They researched everything they could, built a treatment center, and set up a comprehensive response. Transmission stopped. Even now, the only cases seen in this area come from outside the community.

National Public Radio reported on the case and concluded:

even as the worst Ebola outbreak ever recorded rages all around them, Firestone appears to have blocked the virus from spreading inside its territory…. A key reason for Firestone’s success is the close monitoring of people who have potentially been exposed to the virus — and the moving of anyone who has had contact with an Ebola patient into voluntary quarantine. By most accounts, this Ebola outbreak remains out of control, with health care workers across West Africa struggling to contain it.

Another triumph of the market and human volition! Still, somehow, the lesson here has not penetrated.

As with every crisis in the history of the modern world, Ebola fears gave rise to debates over government power, just as the Coronavirus has today. 

China has kicked into gear the largest quarantine in modern history. As George E. Wantz,  distinguished professor of the history of medicine at the University of Michigan, has written

To combat the contagion, the Chinese government has taken the extraordinary step of quarantining the city of Wuhan, as well as neighboring districts and cities. The borders are sealed, and all transportation out is blocked. Officials closed the public transportation systems. Friday morning, more than 35 million people woke up facing aggressive curtailments of their freedom.

Is all this necessary? Wantz looks at the numbers:

It’s possible that this coronavirus may not be highly contagious, and it may not be all that deadly. We also do not know yet how many people have mild coronavirus infections but have not come to medical attention, especially because the illness begins with mild to moderate respiratory tract symptoms, similar to those of the common cold, including coughing, fever, sniffles and congestion. Based on data from other coronaviruses, experts believe the incubation period for this new coronavirus is about five days (the range runs from two to 14 days), but we do not yet know how efficiently this coronavirus spreads from infected person to healthy person. And because antibodies for coronavirus do not tend to remain in the body all that long, it is possible for someone to contract a “cold” with coronavirus and then, four months later, catch the virus again.

The case fatality rate, a very important statistic in epidemiology, is calculated by dividing the number of known deaths by the number of known cases. At present, the virus appears to have a fatality rate of about 3%, which mirrors that of the influenza pandemic of 1918. But what if there are 100,000 Chinese citizens in Wuhan with mild infections that we do not know about? That would lower the case fatality rate to a mere 0.02%,which comes closer to seasonal flu death rates. If that’s the case, a major disruption like the Chinese quarantine would seem foolish and cost a fortune in terms of public health efforts, interrupted commerce, public dissonance, trust, good will and panic.

In sum, this virus might be as serious as any seasonal flu. Still, when people are afraid, they have this irrational penchant for reaching out to government to save them. Never mind that the power might be abused or might not even be a necessary, much less suitable, power. Government is magic: if something is big, important, or crucial, people long for government to do it.

Do we need a Coronavirus Czar, operating under the Department of Homeland Security and the National Security Adviser? These are the same people who spy on your email, record your phone calls, watch your online habits, run the TSA security theater, and so on. What does any of this have to do with health? No one can doubt that the Coronavirus will be used, just like every real crisis before it, as a means of amping up government power. 

The thinking goes like this. The virus is terrifying. We can’t just allow people to wander around with the disease and infect others. We could all die under those conditions. So we need government to discern who has the disease, force these people against their will to stay away from others, and even put together a plan for how to deal with mass outbreak, even if that involves creating camps of sick people and keeping them all there by force.

What do you libertarians want? Total laissez faire?

The US government already has an extensive plan for dealing with communicable diseases, and these plans involve forcible quarantines. You can read all about it at the website for the Centers for Disease Control.

Regulations prescribed under this section may provide for the apprehension and examination of any individual reasonably believed to be infected with a communicable disease in a qualifying stage and (A) to be moving or about to move from a State to another State; or (B) to be a probable source of infection to individuals who, while infected with such disease in a qualifying stage, will be moving from a State to another State. Such regulations may provide that if upon examination any such individual is found to be infected, he may be detained for such time and in such manner as may be reasonably necessary.

These regulations are enforced, but you might be surprised at the light penalties:

Any person who violates any regulation prescribed under sections 264 to 266 of this title, or any provision of section 269 of this title or any regulation prescribed thereunder, or who enters or departs from the limits of any quarantine station, ground, or anchorage in disregard of quarantine rules and regulations or without permission of the quarantine officer in charge, shall be punished by a fine of not more than $1,000 or by imprisonment for not more than one year, or both.

So, if you are willing to risk coughing up $1K or going to the pokey for a year, you can pretty much walk around infected with anything, and infect anyone else? If that’s your goal, it’s not likely that such penalties are going to deter you. I can’t imagine that anyone thinks: “I would like to infect lots of people with my deadly disease but I’m rethinking it because I just can’t afford the $1,000 fine.”

In the meantime, the US government already has the power to create sick camps, kidnap and intern people upon suspicion that they are diseased, and keep people in camps for an undetermined amount of time.

The Surgeon General shall control, direct, and manage all United States quarantine stations, grounds, and anchorages, designate their boundaries, and designate the quarantine officers to be in charge thereof. With the approval of the President he shall from time to time select suitable sites for and establish such additional stations, grounds, and anchorages in the States and possessions of the United States as in his judgment are necessary to prevent the introduction of communicable diseases into the States and possessions of the United States.

Anyone concerned about human freedom should be uncomfortable with this policy, especially given the hysteria that surrounds the issue of communicable diseases. Rules don’t guarantee results, and government has no solid reason to be careful about who gets put into the camps and why. It is easy to imagine a scenario in which such powers end up exposing undiseased people rather than protecting people from the disease.

It’s true that quarantine powers have been around since the ancient world and have been invoked through US history from colonial times to the present. They are hardly questioned. I was once in a debate over the role of government and my opponent relied heavily on this power as proof that we need some government — because society is just too stupid to figure out how to deal with such a deadly problem.

On the other hand, abuse of such powers is even more frequent. The problem is the low threshold concerning risk. Once government has the power, it can use it any way it wants. In World War I, prostitutes were routinely arrested and quarantined in the name of preventing the spread of diseases. In the 1892 typhus outbreak, it became common to arrest and quarantine any immigrant from Russia, Italy, or Ireland even without any evidence of disease.

In 1900, the San Francisco Board of Health quarantined 25,000 Chinese residents and gave them a dangerous injection to prevent the spread of bubonic plague (it turned out later to have been entirely pointless). We know about the Japanese internment, which ended up promoting disease. In more recent times, fears of AIDS have led to calls for arresting Mexican immigrants to prevent the spread of disease.

And it’s not just about disease. The quarantine power has been used by despotic governments all over the world to round up political enemies under the thinnest excuse. Fear of disease is as good an excuse as any. For a complete list of concentration and internment camps, see this Wikipedia entry.

Is it really true that government needs quarantine power? Let’s think rationally and normally about this. Imagine that you are feeling not so great. You go to the hospital and it is discovered that you have a deadly communicable disease. Are you going anywhere? No. It’s preposterous. These days, you can’t even go to the office with a cough without eliciting the disdain from your fellow employees. I let out a slight cough the other day in a security line and found myself with a five-foot gap between myself and the people in front of and behind me!

Once a deadly disease is discovered, no one has any reason to have the attitude that one should just let it go, embrace death, and take others with you. It only takes a moment of reflection to realize this. You want to be where you can get well or at least minimize pain. If that means staying in isolation, so it is. Even if you don’t like this idea, others will make sure that you do understand.

Let’s say you just can’t stand it. You leap from the window and run. Truly, the whole of the social order would be organized against you, even in the absence of the use of coercion. You would stand no chance of getting so much as a place to sleep or a bite to eat from anyone, anywhere. And, in the real world, such a person is likely to be shot on sight.

Government power is not necessary in any respect. It is not likely to be effective, either. And when it is not effective, the tendency is to overreact in the opposite direction, clamping down and abusing, exactly as we’ve seen with the war on terror and China’s response to this virus, which might be as serious as seasonal flu outbreaks. Still, people assume that government is doing its job, government fails, and then government gets more power and does awful things with it. It’s the same story again and again.

Remember that it is not government that discovers the disease, treats the disease, keeps diseased patients from wandering around, or otherwise compels sick people to decline to escape their sick beds. Institutions do this, institutions that are part of the social order and not exogenous to it.

Individuals don’t like to get others sick. People don’t like to get sick. Given this, we have a mechanism that actually works. Society has an ability and power of its own to bring about quarantine-like results without introducing the risk that the State’s quarantine power will be used and abused for political purposes.

Tyler Durden Mon, 01/27/2020 - 15:10
Published:1/27/2020 2:11:59 PM
[Markets] IPO Report: IPO market braces for first billion-dollar deals of 2020—and Casper won’t be one of them The initial public offering market is expected to crank into gear in the next two weeks, with at least two billion-dollar deals on the slate, including a well-known consumer name that may be viewed as a safe bet in a nervous market.
Published:1/27/2020 2:11:59 PM
[Markets] Trump Welcomes Netanyahu To White House; 'Deal Of The Century' To Be Unveiled Tuesday Trump Welcomes Netanyahu To White House; 'Deal Of The Century' To Be Unveiled Tuesday

In a brief but hugely impactful pause in campaigning ahead of Israel's March 2 elections, Israeli Prime Minister Benjamin Netanyahu and Blue and White party rival Benny Gantz separately met President Trump at the White House Monday. 

Trump's "deal of the century" is set to be revealed Tuesday at noon, Trump told reporters while sitting alongside Netanyahu. The president sought to assure the press that the Palestinians would "ultimately" come around to giving their support, though statements of Palestinian leadership have made this highly doubtful.

"I think it might have a chance," he said. Trump touted that both Netanyahu and Gantz "like very much" what they've heard of the plan thus far

President Trump described the plan has having been "many, many years in the making"

The administrations last big move, albeit deeply controversial, was to relocate the US Embassy in Tel Aviv to Jerusalem in recognition of it as the official Israeli capital in 2018.

The Netanyahu visit is scheduled to last for over an hour, while the Gantz meeting is set for between 30 to 45 minutes. Gantz until days ago was uncertain if he would proceed with the controversial visit, given Trump's peace plan is expected to benefit and line up with Netanyahu's vision of Israel's future borders. Netanyahu is expected to stay in Washington until Wednesday evening, and is planned to meet with Trump again Tuesday just before the plan's release. 

"We'll see what happens," Trump said. "We have something that makes a lot of sense for everybody," the president added after describing that most people think of the prospect for Israeli-Palestinian peace as something impossible. 

Despite Trump's measured optimism, Palestinian Authority leaders as well as Hamas have previously repeatedly said the plan would be dead on arrival.

For its part the Palestinian side has not been invited to Washington, and even threatened over the weekend to withdraw from key provisions of the 1993 Oslo Accords. 

Last week an Israeli television news channel claimed to have obtained leaked details of the peace plan. Though unconfirmed, Israeli media reported some of the leaked key points as follows:

Setting out the reported specifics of the plan, the TV report said, without specifying a source, that it provides for:

  • Israeli sovereignty in all 100-plus West Bank settlements, all but 15 of which would be territoriality contiguous. (An estimated 400,000 Jews live in some 120 official settlements.)
  • Israeli sovereignty throughout Jerusalem, including the Old City, with only “symbolic Palestinian representation” in Jerusalem.
  • Were Israel to accept the deal, and the Palestinians to reject it, Israel would have US support to begin annexing settlements unilaterally.
  • The Palestinians will be granted statehood, but only if Gaza is demilitarized, Hamas gives up its weapons, and the Palestinians recognize Israel as a Jewish state with Jerusalem as its capital.

If any of the above are true it goes without saying that it's highly unlikely the Palestinians would unite under such a plan.

The PA says it can't acknowledge a 'deal' which it had no involvement in brokering or was not consulted on.

Tyler Durden Mon, 01/27/2020 - 14:55
Published:1/27/2020 2:00:23 PM
[Markets] These U.S. stocks are down the most as the coronavirus spreads DEEP DIVE U.S. stocks are heading toward their biggest one-day losses in several months, as the coronavirus spreads from China. The Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) each fell as much as 1. Published:1/27/2020 1:30:34 PM
[Markets] "You're Too Low" - Audio Offers Glimpse Into Final Moments Before Deadly Crash That Killed Kobe "You're Too Low" - Audio Offers Glimpse Into Final Moments Before Deadly Crash That Killed Kobe

As the whole world (minus a few embittered journalists and feminists who couldn't resist trashing Bryant's legacy in the hours after his death) mourns the death of NBA legend Kobe Bryant and his 13-year-old daughter Gianna, more information about the circumstances of the crash has begun to leak out via the press.

And in one of the most disturbing reports, Sky News has managed to obtain the audio recording between pilot and air-traffic controllers. It appears the helicopter was held up to allow for other aircraft to pass, and it circled for about 15 minutes until it got clearance from air traffic controllers to continue.

The controllers mention poor visibility around the Burbank and Van Nuys areas, but the pilot talks to controllers normally before communication suddenly goes dead near the crash site at Calabasas.

The conversation between the pilot and the control tower begins about 50 seconds into this video:

Below is a map of the chopper's flight path.

The chopper apparently crashed into a hillside, setting the surrounding brush on fire. The chopper was traveling at about 176 miles per hour when it hit the hillside at about 9:45 am PT on Sunday.

Another video that was shared by the New York Post and other media outlets shows the aftermath of the crash, as the smouldering wreckage can be seen stranded on a remote, sloping hill.

According to the Associated Press, investigators suspect that the chopper that was carrying Bryant and eight others likely crashed because of unfavorable weather conditions, including a thick fog that required Bryant to obtain special permission to fly. At the time of the crash, conditions were so poor that the LAPD and county sheriff's office had grounded its helicopters.

The notion that Bryant's Sikorsky S-76 just happened to experience twin engine failure just doesn't seem plausible, according to aviation experts quoted by the AP.

Sadly, Dr Jonathan Lucas, LA County medical examiner, said the terrain complicated any rescue efforts and would make it incredibly difficult to recover all of the victims' remains.

The nine victims in the crash were identified in media reports early Monday. They included a basketball coach known as the 'Mother of Defense'. A mother and daughter who were friends with the Bryants through the sports team and a pilot with more than 20 years of experience flying aircraft in the area.

Tyler Durden Mon, 01/27/2020 - 14:15
Published:1/27/2020 1:30:34 PM
[Markets] These are the stocks that are down the most Monday as the coronavirus spreads These are the stocks that are down the most Monday as the coronavirus spreads Published:1/27/2020 1:30:34 PM
[Markets] Dow Jones Falls As Much As 540 Points As These Industry Groups Outperform; Time To Sell Apple Stock? The Dow Jones Industrial Average is trading well off Monday's session low amid concern over how coronavirus will affect the Chinese economy. Apple is down. Published:1/27/2020 1:01:31 PM
[Markets] The main reason for big stock declines is not coronavirus, says Mark Hulbert The main reason for big stock declines is not coronavirus, says Mark Hulbert Published:1/27/2020 1:01:31 PM
[Markets] Key Words: The first stock-market ‘correction since October has begun,’ says Morgan Stanley analyst who called 2018 tech rout Michael Wilson, Morgan Stanley’s chief U.S. equity strategist, says the first major stock market pullback since October is under way.
Published:1/27/2020 1:01:31 PM
[Markets] Bottled Water Company Admits Dumping Deadly Arsenic Into CA's Ecosystem... Nobody Goes To Jail Bottled Water Company Admits Dumping Deadly Arsenic Into CA's Ecosystem... Nobody Goes To Jail

Authored by Jack Burns via,

Crystal Geyser Natural Alpine Spring Water’s bottled parent company, CG Roxane, LLC, pleaded guilty to one count of unlawful storage of hazardous waste and one count of unlawful transportation of hazardous material on January 9th. Yet, to date, not one person has spent one night in jail for releasing thousands of gallons of arsenic into California’s wastewater system.

Elemental arsenic and arsenic sulfate and trioxide compounds are classified as “toxic” and “dangerous for the environment” in the European Union under directive 67/548/EEC. The International Agency for Research on Cancer (IARC) recognizes arsenic and inorganic arsenic compounds as group 1 carcinogens, and the EU lists arsenic trioxide, arsenic pentoxide, and arsenate salts as category 1 carcinogens.

This extremely dangerous and potentially deadly practice of dumping the arsenic into the California ecosystem has essentially gone unpunished.

The company earns nearly $50 million per year in revenue from its spring water but was slapped on the wrist, some might say, with a $5 million penalty for discharging arsenic tainted water back into the ecosystem. The legal problems started for Crystal Geyser when it sourced spring water from the Sierra Nevada Mountains nearly two decades ago.

That water was and still is poisoned with arsenic as is much of the water in Western states. The company used sand filters to remove the arsenic. But in an effort to increase the filters’ effectiveness the company washed out the sand filters with chemicals, removing the build-up of arsenic, and releasing it into an outdoor holding pond. Yes, that’s right folks. They filtered out the arsenic, and then put it right back into the ecosystem in a concentrated form.

People Magazine published the news accompanied with a press release by the U.S. Attorney assigned to the case:

To maintain the effectiveness of the sand filters, CG Roxane back-flushed the filters with a sodium hydroxide solution, which generated thousands of gallons of arsenic-contaminated wastewater.

The company kept all of the arsenic in the holding pond for 15 years at which time it was told it would have to dispose of the arsenic-filled wastewater, a hazardous material which could kill people. But it was ultimately how the company disposed of the arsenic which got the private company into trouble with the government. According to the press release by the U.S. Attorney:

The arsenic-contaminated wastewater was ultimately transported to a Southern California facility that was not authorized to receive or treat hazardous waste…As a result, more than 23,000 gallons of the wastewater from the Arsenic Pond allegedly was discharged into a sewer without appropriate treatment.

The corporate crime has largely gone unpunished as no single employee has been held criminally responsible for enriching the naturally-occurring arsenic levels in the wastewater and releasing all 23,000 gallons into the sewer. With a fine as low as $5 million, a fine which could be disputed at a later date presumably with a new trial, the company could conceivably be laughing all the way to the bank.

To put it into a different perspective, if a citizen had poisoned the Californian wastewater with arsenic, that person, if convicted, would spend the rest of his life in jail convicted of domestic terrorism, conspiracy, and a whole host of other crimes. The fact no one is going to prison serves to illustrate how corporate free passes work.

That’s right America. A company who promises to give you the cleanest, purest, mountain spring water, took out the good stuff, sold it to you for a profit, then dumped the poisons found in the water right back into the wastewater system and no one went to jail, no one paid a high price, and the privately held company will just keep on getting wealthier at the public’s expense.

Tyler Durden Mon, 01/27/2020 - 13:55
Published:1/27/2020 1:01:31 PM
[Markets] Trump team defends president for 2nd day as impeachment trial resumes: Live blog Trump team defends president for 2nd day as impeachment trial resumes: Live blog Published:1/27/2020 12:30:34 PM
[Markets] The first stock-market ‘correction since October has begun,’ says Morgan Stanley analyst who called 2018 tech rout Michael Wilson, Morgan Stanley’s chief U.S. equity strategist, says the first major stock market pullback since October is under way. Published:1/27/2020 12:30:34 PM
[Markets] Howard Gold's No-Nonsense Investing: At America’s most ‘woke’ colleges, extreme liberal politics fails students and free speech Dogmatic thinking is leaving no room for debate and differing views on campus, writes Howard Gold.
Published:1/27/2020 12:30:34 PM
[Markets] Could We Be Heading Back Towards A Gold Standard? Could We Be Heading Back Towards A Gold Standard?

Authored by Lawrence Thomas via,

For anyone following the gold industry, a significant development that many in the finance industry may not be paying close attention to is the emergence of Judy Shelton within the Federal Reserve. 

President Trump recently nominated Judy Shelton and Christopher Waller to fill the two vacancies on the Federal Reserve Board of Governors. If confirmed, Mrs. Shelton has publicly advocated for lower rates and also the reintroduction of a gold standard. The president has openly criticized Fed Chairman Jerome Powell about not lowering interest rates quickly enough. His four-year tenure as Fed chair expires in February 2022.

This is a very interesting development because one can only assume if Trump is reelected, he could potentially appoint Mrs. Shelton as the next chairman. Which logically, makes a lot of sense as Trump continues his hard negotiation with China on fair trade.

 “When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates. Businesses fail as legitimately earned profits become currency losses,” she wrote in a February 2017 opinion article in The Wall Street Journal.

With the insanity of negative interest rates starting to come to fruition across many economies, naturally, the reintroduction of gold into monetary policy does not seem unreasonable. The primary objective of money is typically to be a medium of exchange, unit of account, but also a store of value. Gold has been doing this for thousands of years as Judy understands:

“Forget hawks and doves - this job needs a woodpecker, someone who’ll hammer away at the importance of stable money. The goal: not a strong dollar or a weak dollar, but a dependable dollar,” she wrote in an October 2017 opinion piece in the Journal.

The Fed should focus on stable money as a key factor in economic performance. Given that central banks today are the world’s biggest currency manipulators, it’s imperative that the next chairman prioritize the integrity of the dollar.”

Secondly, President Trump understands the gold market and its importance of it being a stabilizer in turbulent economic times.  He has publicly tweeted (see below) about gold which can confirm these claims:

Economically, maybe Trump assumes normalized interest rates are not coming back due to the endless money printing that took place after 2008. The world of negative yielding debt is beginning to be a natural reality which will continually debase  currencies globally and one of the only things to hedge this debasement is of course, gold. Shelton warned in 2019:

“Perhaps one of our elected representatives on Capitol Hill can explain to [The Fed] that when the low-grade fever of perpetual inflation becomes a full-blown economic malady - when the next financial bubble bursts with horrible consequences for the real economy - average Americans will pay the biggest price."

There continues to be record central bank gold buying, negative interest rates around the world, unprecedented public and private debt and an economic setting where there are deep trade disputes (China and U.S phase one deal is not a resolution to the trade war)  to go alongside geopolitical tensions  which clearly signifies that the world is in unchartered waters.

In these uncharted waters look for governments to slowly revert back to the oldest form of money, gold.

Tyler Durden Mon, 01/27/2020 - 13:20
Published:1/27/2020 12:30:34 PM
[Markets] New FICO credit-scoring system will show how precarious Americans' finances are New FICO credit-scoring system will show how precarious Americans' finances are Published:1/27/2020 12:00:15 PM
[Markets] The Dow Is Down 369 Points Because Coronavirus Is Spooking Investors STOCK ALERT Falling. The three major U.S. stock market indexes dropped sharply as worries grew about the spread of the coronavirus. Travel, gambling and technology stocks took significant hits. The Dow Jones Industrial Average dropped 369 points and the S&P 500 fell 1. Published:1/27/2020 12:00:15 PM
[Markets] Trend Breaks Trend Breaks

Authored by Sven Henrich via,

It’s that time of the year again when another exuberant rally gets too cocky, produces massive overbought readings as everybody is trampling long into stocks, is ignoring all the warning signs and then some outside event pulls the plug. Soon the downside will be again blamed on the algos that are never at fault for pushing stocks to extremes to the upside and soon all hopes will rest again on the Fed to prevent any downside getting too scary.

The Fed will have that opportunity again this week and can once again take cover behind the phrase “uncertainty” to stay “accommodative”.

Problem of course is that this time that the apparent trigger, the coronavirus, may turn into something more serious.

If it does then the Fed will be severely tested for one has to wonder if they left themselves exposed having already aggressively intervened:

Oh the hubris of it all. What if the Fed made a major mistake having been way to accommodative, exacerbating asset prices to the record tune of 157% market cap to GDP right in front of a major crisis? What if growth continues to slow as the bond market is suggesting? What if, gosh, it’s not different this time?

We can’t know the answers to these questions yet, but we can observe.

One of these observations points to a similarity in the monthly $NDX chart compared to the final rally run in 2007 versus now:

That final exuberant rally that ignored all warning sings, the final rally that makes bears look stupid and bulls exuberant.

Again, too early to tell, but the similarity is there.

What can be said with certainty for now is that the uptrends since the Fed gunned markets higher with liquidity in October have been broken. On all the major index charts.

Yields broke their trend, banks broke their trend, $SPX broke its trend, $NDX broke its trend. $VIX broke its downtrend.

And we can observe that the $NDX sell signal has indeed produced downside:

Trend breaks often times precipitate larger drops. They don’t exclude the possibility of further rallies or even new highs on occasion. After all markets are becoming short term oversold and the Fed will take center stage this week and lots more earnings are coming out.

But these trend breaks now also inform resistance for future rallies.

Markets overshot to the upside and now they are paying the price and are at risk of having made a sizable short term top. Two down days not a bear market make, but every top starts somewhere.

Just a week ago people were gleefully calling for $DJIA 30,000. Suddenly the $DJIA is nearly 1,000 points lower. Wall Street kept telling people to buy. Nobody said to sell.

And poof, most of the gains in 2020 are gone with several indices now running negative on the year:

Whether this all turns into just a short term correction or something more meaningful remains to be seen. I’ve questioned the sustainability of these price extensions above the underlying size of the economy:

Especially in context of a broader earnings picture that appears to have favored financial engineering via buybacks and a central bank included TINA effects versus actual substance:

For now we have technical trend breaks on a highly valued market with suddenly a lot more uncertainty ahead then just a week ago. Things have changed.

*  *  *

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Tyler Durden Mon, 01/27/2020 - 12:45
Published:1/27/2020 12:00:15 PM
[Markets] Where Should I Retire?: My retirement income is $95,000 a year, and I want a walkable, affordable beach town to spend the winter. Where should I retire? This beach town ‘cannot be on the West Coast’
Published:1/27/2020 12:00:15 PM
[Markets] CNBC's Jim Cramer: Here comes the panic, but don't rush to buy the stock dip CNBC's Jim Cramer: Here comes the panic, but don't rush to buy the stock dip Published:1/27/2020 11:30:19 AM
[Markets] The Conversation: Saying you’re politically independent is just a lie you tell yourself While 42% of Americans describe themselves as independents, three-quarters of them admit to leaning toward one party.
Published:1/27/2020 11:30:18 AM
[Markets] Intel, UnitedHealth share losses contribute to Dow's nearly 350-point fall DOW UPDATE Shares of Intel and UnitedHealth are seeing declines Monday afternoon, leading the Dow Jones Industrial Average selloff. Shares of Intel (INTC) and UnitedHealth (UNH) have contributed to the blue-chip gauge's intraday decline, as the Dow (DJIA) was most recently trading 342 points (1. Published:1/27/2020 11:30:18 AM
[Markets] Scientist Calls For "Draconian Measures" To Stop Virus In Hong Kong, Insists 44,000 Already Infected In Wuhan Scientist Calls For "Draconian Measures" To Stop Virus In Hong Kong, Insists 44,000 Already Infected In Wuhan

Now that health officials in China have admitted that patients infected with the novel coronavirus often become contagious long before symptoms emerge, and Canada may or may not have just confirmed its first case of human-to-human transmission, health officials around the world are finally listening to some of the experts who warned about the virus's lethal potential (and were rewarded with accusations of being an alarmist).

And nowhere is that advice being followed more closely than Hong Kong, where the city government has already inspired riots after considering using a new public housing project as a quarantine for virus victims.

The pushback to that plan was surprising and appears to be an isolated incident. Because University of Hong Kong academics are urging the city's government to embrace "draconian" measures to stop history from repeating itself.

Hong Kong was rocked by SARS 17 years ago, when the virus - one of seven coronavirus strains (a family that also includes nCoV and MERS) - tore through the city's financial district, causing 300 deaths, according to the SCMP.

As we mentioned earlier, the dean of HKU's med school revealed research during a presser on Monday showing that the virus had already infected nearly 44,000 people in Wuhan. Meanwhile, Professor Neil Ferguson, at least the second UK academic to publicly share his projections, said over the weekend that 100,000 people could already be infected with the virus around the world, according to the Guardian.

Lead researcher and dean of HKU’s faculty of medicine Gabriel Leung said their models indicated that the number of cases in China would double in 6.2 days. Officials around the world have only confirmed 2901 cases so far, while 2839 of those are in Mainland China.

Leung's remarks were captured in a twitter thread.

Among other things, Leung said sustained human-to-human transmission has already been proven.

"We have to be prepared, that this particular epidemic may be about to become a global epidemic," he said.

Though Leung warned that additional measures to contain the virus could improve projections, the team’s model predicted the number of infections in five mainland megacities – Beijing, Shanghai, Guangzhou, Shenzhen and Chongqing – would peak between late April and early May, and at the peak of the pandemic, as many as 150,000 new cases could be confirmed every day in Chongqing - China's At the height of the epidemic, as many as 150,000 new cases would be confirmed every day in Chongqing alonebecause of its large population and intense travel volume with Wuhan.

Since Leung sits on Carrie Lam's advisory committee, he said he would encourage "draconian" steps to stop the virus, including a travel lockdown, cancellation of all public gatherings, and forcing all companies to come up with work-from-home arrangements.

"Substantial, draconian measures limiting population mobility should be taken immediately," he said, calling for the cancellation of mass gatherings, along with school closures and work-from-home arrangements.

Possibly with an eye toward Beijing, Leung called on the government to take "one, two, three or more steps" to broaden the scope of the border closure.

Before we go, it's time for an admittedly macabre round of 'point-counterpoint'. Some experts claim the virus's lethal capacity is being exaggerated by the fact that there are probably hundreds or maybe thousands of Chinese who got the virus, but managed to tough it out on their own instead of seeking medical care. Others warn that at least some who were turned away from hospitals, or chose to never seek treatment out of fear, might have met an unfortunate fate.

Point: "There are many many more thousands of people in China who have gotten sick, just stayed home, gotten rest under comfy blankets, got better after a week, and are just fine. But they aren't counted because they didn't go to the hospital. This inflates the lethality rate."

Counterpoint: "There are many more Chinese rotting in their apartments who died weeks ago but haven't been counted"

Of course, nothing would put the market's mind at ease like a vaccine. That's why drug stocks have surged on Monday. In the meantime, some doctors are treating the illness with retrovirals used to combat AIDS. Still, experts are estimating a vaccine could take one-to-three months to develop.

HK wouldn't be alone in taking extreme measures to stop the virus. Taiwan over the weekend announced it would bar all visitors from mainland China.

At one point, a guest who appeared on CNBC Monday said investors should take the figures released by China and multiply those numbers by ten to arrive at the true statistics.

Speaking of draconian measures, the Philippines has taken the most drastic step so far: According to media reports, it's preparing to deport 500 Chinese to try and stop the virus's spread.

Now, imagine if Trump tried to do something like evicting all Chinese nationals traveling in the US...

Tyler Durden Mon, 01/27/2020 - 12:25
Published:1/27/2020 11:30:18 AM
[Markets] Which tech stock is best? Here's how the Big 5 stack up as they report earnings Which tech stock is best? Here's how the Big 5 stack up as they report earnings Published:1/27/2020 10:59:58 AM
[Markets] China Stocks In Tech Hammered As Coronavirus Fears Spread China technology stocks plunged Monday as the fallout from coronavirus continued to expand, also causing the Dow Jones Industrial Average to tank about 1.5%, along with markets globally. Published:1/27/2020 10:59:58 AM
[Markets] 'This Looks Like A Tactic To Sell Books': GOP Senators Pan 11th Hour Bolton Leak While Romney And Collins Play Ball 'This Looks Like A Tactic To Sell Books': GOP Senators Pan 11th Hour Bolton Leak While Romney And Collins Play Ball

Republican Senator Susan Collins of Maine supported comments made by Sen. Mitt Romney (R-UT) over whether former National Security Adviser John Bolton should testify in President Trump's impeachment trial, after a manuscript of his upcoming book was leaked to the New York Times which claims that President Trump explicitly linked a hold on Ukraine aid to an investigation of the Bidens.

"The reports about John Bolton's book strengthen the case for witnesses and have prompted a number of conversations among my colleagues," said Collins.

Collins echoed Monday comments by Romney, who said "it is increasingly apparent that it would be important to hear from John Bolton," adding that it is "increasingly likely" that other GOP senators would join the 11th hour call.

Other GOP Senators disagree - including Majority Whip John Thune, who said "I don't think it changes the facts ... I don't personally see it as a game changer."

Sen. John Cornyn (R-TX) said "This looks like a marketing tactic to sell books is what it looks like to me."

Of course, if Bolton doesn't testify, they'll call it a cover up.

Tyler Durden Mon, 01/27/2020 - 11:55
Published:1/27/2020 10:59:58 AM
[Markets] Key Words: CNBC’s Jim Cramer: Here comes the panic, but don’t rush to buy the dip CNBC host Jim Cramer talked about Monday’s sharp selloff in the stock market, which is shaping up to be the worst we’ve seen in several months amid mounting fears of the spread of the coronavirus.
Published:1/27/2020 10:59:58 AM
[Markets] The stock market’s biggest problem this week isn’t the coronavirus or Mideast tensions, strategist warns Longtime stock-market bull and National Securities strategist Art Hogan shared his bearish stance in a CNBC interview ahead of what looks to be a busy week of trading. He says the S&P 500 could see a pullback of as much as 5%. Published:1/27/2020 10:30:44 AM
[Markets] Deep Dive: Which tech stock is best? Here’s how the ‘big five’ companies stack up as they report earnings Amazon is the favorite among analysts, while Apple is ‘cheapest’ despite its stock’s recent run-up.
Published:1/27/2020 10:30:44 AM
[Markets] Saudis Scramble As Aramco Hits Post-IPO Lows, Talk Down "Psychological" Coronavirus Fears Saudis Scramble As Aramco Hits Post-IPO Lows, Talk Down "Psychological" Coronavirus Fears

Aramco's post-IPO has been an utter disaster, now down 12% since it soared to 38.5 SAR in mid-December.

On Monday, Aramco shares were trading around the 34 SAR level, close to all-time lows.

Oil is getting hammered to start the week, now at the lowest level in more than three-months, thanks to fears that demand could plunge in China as coronavirus uncontrollably spreads across the country.

Demand woes from Asia are coming at a time when oil markets remain oversupplied as the global economy continues to decelerate.

Aramco shares held the $2 trillion valuation mark of 37.50 SAR for less than four days last month, which is a level that Prince Mohammad Bin Salman (MbS) has justified as the fair value of the state-owned oil company.

MbS, Aramco, and Saudi newspapers have been promoting the oil company's $2 trillion valuations as the world's largest IPO. We noted last month that Western banks had avoided participation in the IPO, considering there were significant valuation concerns.

We mentioned how Wall Street banks valued Aramco at around the $1.2 to $1.5 trillion levels, now trading around $1.828 trillion.

With coronavirus spreading across the world, oil markets could remain under pressure for the coming weeks. This could result in a plunge in Aramco shares -- if 34 SAR support is broken.

Ole Hansen, head of the commodity strategy at Saxo Bank A/S, said, "a supply glut of fuel in China would filter through to the rest of the world through exports and on that basis the market is reacting in this defensive manner. The Saudis can try to stem the sell-off but while its being driven by the need to mitigate losses that will be difficult to control."

On Sunday night, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC was monitoring the coronavirus and how it was affecting Chinese demand. He said current price fluctuations are driven by "extreme pessimism" that is similar to what was seen in the 2003 SARs outbreak, "though it did not cause a significant reduction in oil demand."

"It is important that we do not exaggerate projections related to future decreases in oil demand due to events in China, and the market does not over-react based on psychological factors, driven by some traders in the market," the minister said.

Don't forget the last time a state-owned oil company had an overinflated valuation debuted on the public market -- and what happened shortly after was nothing less than devastation. Also, factor in a possible global epidemic that could certainly crash the global economy – it seems Aramco shares and commodities could be in a world of pain in the weeks ahead.

Tyler Durden Mon, 01/27/2020 - 11:25
Published:1/27/2020 10:30:44 AM
[Markets] Chesapeake Energy's stock is falling toward a 26-year low as crude oil sells off Chesapeake Energy's stock is falling toward a 26-year low as crude oil sells off Published:1/27/2020 10:00:30 AM
[Markets] Thhe stock market’s biggest problem this week isn’t the coronavirus or Mideast tensions, strategist warns Longtime stock-market bull and National Securities strategist Art Hogan shared his bearish stance in a CNBC interview ahead of what looks to be a busy week of trading. He says the S&P 500 could see a pullback of as much as 5%. Published:1/27/2020 10:00:30 AM
[Markets] JPMorgan: Please Buy This Dip JPMorgan: Please Buy This Dip

After JPMorgan clocked in its most profitable year in history in 2019 largely on the back of the Fed's QE4 which - as we remind readers again - was triggered by JPMorgan itself, which sparked a repo market crisis after yanking money market and repo liquidity forcing the Fed to first launch repos and then T-Bill purchases, the bank is not only convinced that the good times will continue to roll after the most powerful market meltup in history in the past 4 months, but that the current melt down on the back of fears over a global viral pandemic, is overdone and will end soon, presenting its clients with another delightful opportunity to BTFD.

As JPM's equity strategist Misla Matejka writes in his weekly Equity Strategy notes, "at the global equity level, we remain constructive" and while the JPM analyst acknowledges that "the latest health scare is likely to worsen before getting better, which could lead to more significant near term derisking" he notes that "past outbreaks have tended to drive only limited market falls." In summary, Matejka is so confident that the virus sell-off over the coronavirus pandemic, whose full proportions and damage remain largely unknown, says that "health scares, similar to the localised war campaigns, as well as the terrorist incidents, were historically buying opportunities, rather than the reasons for sustained selling."

To "validate" its optimism, JPMorgan looks at the last two decades, and finds four pandemics which posed a global health risk, noting that "each of these caused a significant number of deaths and impacted economic activity in the affected region." Matjeka specifically focuses on the 2003 SARS outbreak and confidently concludes that this time will not be different, and in fact will be much better due to "the much faster the pace of response from Chinese authorities."

Does this comparison make sense? Here is JPM's argument:

The current outbreak in China is reminiscent of the SARS (Severe Acute Respiratory Syndrome) pandemic which started in late 2002 and ended up infecting over 8000 people with 774 recorded fatalities.

In the case of SARS, the first case was detected in November 2002, WHO was notified on the 10th of February 2003, and the state council stepped up efforts in April, 2003. This time around, WHO was appraised of the situation much faster, and on 20th January President Xi ordered all-out efforts for prevention and control of the coronavirus.

That said, even JPM admits that "on the other hand, an average incubation period of seven days makes it difficult to contain the spreading. We note that some of the reported cases of the current coronavirus outbreak didn’t display any fever, further complicating the efforts to control the outbreak."

Going back to the implications of SARS on the economy, JPM's Chinese economists note that the tourism sector was hit particularly hard. Inbound tourism dropped 27% from 1Q to 2Q of 2003 and there was a significant drop in domestic tourism revenue. There was also a sharp drop in retail sales, in highway transportation, and the air fright decelerated notably. In contrast, sectors such as exports, IP, construction activity and fixed asset investment were largely unaffected by this pandemic.

Overall though, Matejka notes that "while a number of economic activity indicators showed a significant swing down, and then up during the 1H '13, the growth the growth delivery for the whole year has not materially changed."

The impact on equity markets was significant, as Hong Kong equities lost almost a fifth of their market capitalization over  the course of a few months during this epidemic. Chinese markets also severely underperformed during this period, down 15% relative.

As the uncertainty eased in late April – early May 2003, these markets started to recover. MSCI China and Hong Kong in particular reversed all of their losses over the following few months, and went on to make further significant gains.

Why is JPM so optimistic? Simply said, because if prior cases had a happy ending, no pun intended, then JPM sees no reason why this time should be different, and "the more equities fell initially, the more they subsequently rebounded. These episodes did not lead to a prolonged period of selling, and were the buying opportunity within weeks."

And that's how a global viral pandemic became just another reason to buy the dip.

Tyler Durden Mon, 01/27/2020 - 10:57
Published:1/27/2020 10:00:30 AM
[Markets] Airline stocks tumble, with American down 7%, after enactment of travel bans Airline stocks tumble, with American down 7%, after enactment of travel bans Published:1/27/2020 9:31:03 AM
[Markets] "Eveything Just Changed" - CoV Contagion Sparks Massive Treasury Short Stop-Out, Stock Dealers Flip "Short Gamma" "Eveything Just Changed" - CoV Contagion Sparks Massive Treasury Short Stop-Out, Stock Dealers Flip "Short Gamma"

A sudden awakening in markets that risk is a real thing - no matter how much liquidity central banks puke into the financial system - has sparked a massive drop in Treasury yields (and stocks have started to catch down to that reality)...

Source: Bloomberg

And as Nomura's head of cross-strategy Charlie McElligott notes, this morning sees this getting worse fast...

The 2020 resumption of the “Everything Duration” rally violently escalates to start the week as the Coronavirus contagion snowballs, with the already brutal short-squeeze in USTs experienced last week now blowing through stop-losses (10Y yields tagging1.60 earlier) and seeing UST futures across the curve at best levels since Fall ’19, with risk-assets sharply lower (Crude -3.0%) on negative global growth impact fears.

Friday’s latest COT / TFF data analysis from Ryan Plantz showed even more aggressive Spec selling of Duration in the last weekly reporting period of -$11mm / 01, which brings the total sold since November to a shocking -$110mm / 01—with WN contract an astounding 55% of that aggregate Duration selling (-$61mm alone), and Spec Shorts a remarkable 37% of the OI in WN, an all-time high.

Incredibly, 5Y Real Yields are now back to the most negative they’ve been since April 2017 - acting as a major bullish catalyst for Gold and Bitcoin.

In equity markets, the sudden move over the weekend has broken the virtuous cycle higher and as McElligott explains, this Coronavirus “black swan” has shocked-out the “extremes” recently seen in SPX / SPY consolidated options positioning, with prior 95%ile + $Gamma- and $Delta- positions now acting as a source of significant “de-risking supply” ($Gamma now to 52nd %ile since 2014, $Delta now 79th %ile)...

Our Dealer Gamma analysis actually shows that the Dealer Gamma position has now pivoted NEGATIVE on the move in futures below 3263 (ref 3245.50)...

...meaning that the lower we go from here, Dealers have to (perversely) “short more” into the down-move to dynamically hedge.

And here is where McElligott sees the big 'Minsky Moment' issue, as “Stability Breeds Instability” - the prior “short vol” halcyon referenced in Equities (“Long SPY” with a 2.2 Sharpe Ratio) has allowed for a massive accumulation of gross-exposure to US Equities futures positions for CTA Trend funds.

The Nomura QIS CTA model estimates that through last Friday, the gross-exposure of the S&P Futures position for CTAs is back to “extremes” last seen in January 2018 (a nearly +3 standard deviation gross-position dating back to 2002).

And things did not end well then.

Tyler Durden Mon, 01/27/2020 - 10:15
Published:1/27/2020 9:31:03 AM
[Markets] Dow skids 1.4% lower as coronavirus spread rattles Wall Street U.S. stock benchmarks on Monday fall sharply, with the indexes on track for their worst losses in months, as concern grows over the fallout from China’s coronavirus, with the death toll and number of infected climbing. Published:1/27/2020 9:31:03 AM
[Markets] The Dow is down more than 400 points in early trading The Dow is down more than 400 points in early trading Published:1/27/2020 9:00:37 AM
[Markets] Wall Street opens 1% lower on growing China virus fears Published:1/27/2020 9:00:36 AM
[Markets] Dow Dumps Into Red For 2019, Yields Near 4-Mo Lows Dow Dumps Into Red For 2019, Yields Near 4-Mo Lows

The Dow joined Small Caps and Trannies in the red for 2019 this morning as Coronavirus fears sparked global derisking...

And stocks are catching down to bond yields (as the latter near 4-mo lows)...

When will Mnuchin do something?

Tyler Durden Mon, 01/27/2020 - 09:56
Published:1/27/2020 9:00:36 AM
[Markets] Prevention, Control, & A Busy Week Ahead For Central Bank 'Stabilizers' Prevention, Control, & A Busy Week Ahead For Central Bank 'Stabilizers'

Authored by Michael Every via Rabobank,

As the death toll rises to 81 from just 2 one week ago it is clear that China’s efforts to contain the spread of the deadly coronavirus are failing to slow its spread. According to the country’s National Health Commission there are 2,744 confirmed cases on the mainland and more than 30,000 people are under observation.

As the human cost continues to rise, investors have become increasingly concerned about the potential economic consequences of the disease.

Markets are closed in several Asian countries to mark the start of the new Lunar year and Australia is also on holiday in respect of National day. Even so, bourses that were open have pushed significantly lower. The Nikkei 225 has closed down 2% this morning and prices of copper, iron ore and oil have slumped as investors anticipate supply chain disruptions across several industries and a broad slowdown in economic activity.

Echoing these fears Singapore’s trade minster Sing has commented that “we certainly expect there to be an impact on our economy”.

By contrast, Saudi Energy Minister has taken a more upbeat view commenting that the “extreme pessimism” that is impacting market confidence also occurred in 2003 as a result of the SARS crisis “though it did not cause a significant reduction in oil demand”.

The safe havens JPY and CHF are the best performing G10 currencies today. Losses in the FX space have been led by the South African rand and followed by the commodity currencies – the Russian ruble and the Mexican peso have dropped as oil plunged to a new year-to-date low. USD/RUB has cleared an important technical pivot around 62.20. The squeeze has the potential to extend towards the December 23 top at 63.1057 next. Hedge funds are facing the risk of a painful squeeze in USD/MXN if risk aversion continues to rise. According to the CFTC data, leveraged funds have amassed a record high long bets on the peso due to its attractive status of a carry trade currency. A break above the resistance area of 18.90-19.00 may catch many carry trade players short.

Confidence in the Italian markets has been boosted by the outcome of a regional election showing a strong result for the centre-left Democratic party. The result, which was a boost for PM Conte, was to the detriment of Salvini’s far-right League and its chances of toppling the government. Salvini had threatened to send an eviction notice to the government if his far-right coalition had prevailed on Sunday.

Week ahead

Sentiment this week will be heavily coloured by the spread and the impact of China’s coronavirus.

That said, it is a big week for earnings and these will be gleaned for insights into the relative strength of the US economy ahead of the January 29 FOMC meeting.

There is no expectation in the market of any imminent change in Fed policy, with the consensus expecting Chair Powell to reiterate that the economy is in a “good place”. In order to maintain stability in the money market, the Fed is expected to continue its USD60 bln monthly bill purchases. While there has been an improvement in some US economic data releases since the start of the year, the findings of the Q4 survey from the US National Association for Business Economics (NABE) were less than encouraging. Job openings fell the most in more than four years and as many respondents reported decreases as increases in employment at their firms. The survey was conducted between December 23 and January 8.

The BoE policy meeting on January 31 is more likely to have market participants sitting on the edges of their seats. Following a shockingly weak UK December retail sales data release, a weak CPI inflation report and some dovish commentary from a handful of MPC officials including BoE Governor Carney, expectations for a BoE rate cut surged earlier this month. These hopes were subsequently reined in by some better than expected UK data releases which underpinned the perception that the economy could be benefitting from a ‘Boris bounce’ after the December general election. As its stands the money market is less confidence about a January move than a week or so ago but a rate cut in the coming months is priced in. It is our view that the BoE could cut rates twice during the course of this year. The UK CBI January retail survey and the Nationwide January house price index will be watched this week.

January 31 will be significant in the UK for another reason. Three and a half years after the Brexit referendum in June 2016, the UK will finally leave the EU. The occasion will open the door for talks between the UK and the EU on their future relationship and for trade negotiations with other nations. Over the weekend, US Treasury Secretary Mnuchin stated that he did see a trade deal with the UK this year. In reference to the negotiations that will be taking place between the UK and the EU, he also suggested that a lot of issues can be dealt with simultaneously.

This morning Germany’s IFO January survey was disappointing despite the outlook for the country’s manufacturing sector has been softened in the past few weeks by some better economic data.

US New Home Sales data and the Dallas Fed activity survey are also due for release.

Tyler Durden Mon, 01/27/2020 - 09:14
Published:1/27/2020 8:31:47 AM
[Markets] As the coronavirus spreads, these stocks are the most vulnerable to its impact As the coronavirus spreads, these stocks are the most vulnerable to its impact Published:1/27/2020 8:00:04 AM
[Markets] Hong Kongers Riot Over Plans To Use Public Housing As Coronavirus Quarantine Hong Kongers Riot Over Plans To Use Public Housing As Coronavirus Quarantine

As if Hong Kongers didn't have enough of a reason to riot already...

Dozens of masked demonstrators started fires and built barricades, recalling some of the worst unrest of the pro-democracy movement protests last summer. In addition to barricading a road in Fanling district, protesters also scattered trash in the streets and hurled petrol bombs at the lobbies of buildings, Bloomberg reports.

Hong Kong has confirmed six cases of the Wuhan virus already, and the government had announced plans to block travel into Hong Kong from quarantined city.

The riots come after Hong Kong Chief Executive Carrie Lam upgraded the government’s response against the coronavirus to the highest level on Saturday, and warned that the outbreak could deepen Hong Kong's already punishing recession (which of course was caused by the pro-democracy movement and the months of unrest which have only recently begun to die down).

Some demonstrators were motivated by the fact that the quarantine would be disquietingly close to their homes. Others, because they didn't want approved applicants to lose their new homes. 

Hong Kong's government said it had at least three quarantine facilities lined up, and added that it was preparing a fourth.

Initially, the city denied that it was planning to use the site as a quarantine, but reporters showed that some of the apartments had already been furnished, apparently by the government.

In a statement, the government said it would cease any and all plans to use the housing in Fai Ming Estate as a quarantine, though this clearly wasn't enough to calm the demonstrators.

"The government acknowledges and understands that there is concern among some residents in the North District of the requisition of Fai Ming Estate," it said in a statement late Sunday. "Representatives of relevant government departments will attend North District Council meeting this Wednesday to explain and discuss on the issue. Meanwhile, the government will cease the related preparation work in Fai Ming Estate."

It's interesting that HKers would riot over something so critical to the public welfare. Ever since SARS swept through HK in 2003, killing 300 people, the city has been on high alert for communicable disease, which can spread like wildfire through the densely populated city. Police turned out on Saturday to fire tear gas into a crowd of demonstrators who gathered at the shopping hub in Mong Kok, the site of a violent 2016 protest deemed "the Fishball Revolution." A rally set for Sunday was cancelled because of fears about the virus.

First the protests and now this? Maybe 2020 just isn't Hong Kong's year (not that 2019 was).

Tyler Durden Mon, 01/27/2020 - 08:56
Published:1/27/2020 8:00:03 AM
[Markets] Retired Or Retiring Soon? Yes, Worry About A Correction Retired Or Retiring Soon? Yes, Worry About A Correction

Authored by Lance Roberts via,

When I was growing up, my father used to tell me I should “never take advice from anyone who hasn’t succeeded at what they are advising.” 

The most truth of that statement is found in the financial press, which consists mostly of people writing articles and giving advice on topics where they have little experience, and in general, have achieved no success.

The best example came last week in an email quoting:

“You recently suggested that you took profits from your portfolios; however, I read an article saying retirees shouldn’t change their strategies. ‘If you’ve got a thoughtful financial plan and a diversified investment portfolio, the general rule is to leave everything alone.'” 

This seems to be an entirely different approach to what you are suggesting. Also, since corrections can’t be predicted, it seems to make sense.” 

One of the biggest reasons why investors consistently underperform over the long-term is due to flawed investment advice.

Let me explain.

Corrections & Bear Markets Matter

It certainly seems logical, by looking the 120-year chart of the market, that one should just stay invested regardless of what happens. Eventually, as the financial media often suggests, the markets always get back to even. One such chart is the percentage gain/loss chart over the long-term, as shown below.

This is one of the most deceptive charts an advisor can show a client, particularly one that is close to, or worse in, retirement.

The reality is that you DIED long before ever achieving that 8% annualized long-term return you were promised. Secondly, math is a cruel teacher.

Visually, percentage drawdowns seem to be inconsequential relative to the massive percentage gains that preceded them. That is, until you convert percentages into points and reveal an uglier truth.

It is important to remember that a 100% gain on a $1000 investment, followed by a 50% loss, does not leave you with $1500. A 50% loss wipes out the previous 100% gain, leaving you with a 0% net return.

For retirees, this is a critically important point.

In 2000, the average “baby boomer” was around 45-years of age. The “” crash was painful, but with 20-years to go before retirement, there was time to recover. In 2010, following the financial crisis, the time to retirement for the oldest boomers was depleted, and the average boomer only had 10-years to recover. During both of these previous periods, portfolios were still in accumulation mode. However, today, only the youngest tranche of “boomers,” have the luxury of “time” to work through the next major market reversion. (This also explains why the share of workers over the age of 65 is at historical highs.) 

With the majority of “boomers” now faced with the implications of a transition into the distribution phase of the investment cycle, such has important ramifications during market declines. The following example shows a $1 million portfolio with, and without, an annualized 4% withdrawal rate. (We are going into much deeper analysis on this in a moment.)

While a 10% decline in the market will reduce a portfolio from $1 million to $990,000, when combined with an assumed monthly withdrawal rate, the portfolio value is reduced by almost 14%. This is the result of taking distributions during a period of declining market values. Importantly, while it ONLY requires a non-withdrawal portfolio an 11.1% return to break even, it requires nearly a 20% return for a portfolio in the distribution phase to attain the same level.

Impairments to capital are the biggest challenges facing pre- and post-retirees currently. 

This is an important distinction. Most articles written about retirees, or those ready to retire, is an unrealized assumption of an indefinite timeline.

While the market may not be different than it has been in the past. YOU ARE!

Starting Valuations Matter

As I have discussed previously, without understanding the importance of starting valuations on your investment returns, you can’t understand the impact the market will have on psychology, and investor behavior.

Over any 30-year period, beginning valuation levels have a tremendous impact on future returns.

As valuations rise, future rates of annualized returns fall. This should not be a surprise as simple logic states that if you overpay for an asset today, the future returns must, and will, be lower.

This is far less than the 8-10% rates of return currently promised by the Wall Street community. It is also why starting valuations are critical for individuals to understand when planning for both the accumulation and distribution, phases of the investment life-cycle.

Let’s elaborate on our example above.

We know that markets go up and down over time, therefore when advisors use “average” or “annualized” rates of return, results often deviate far from reality. However, we do know from historical analysis that valuations drive forward returns, so using historical data, we calculated the 4-periods where starting valuations were either above 20x earnings, or below 10x earnings. We then ran a $1000 investment going forward for 30-years on a total-return, inflation-adjusted, basis. 

The results were not surprising.

At 10x earnings, the worst performing period started in 1918 and only saw $1000 grow to a bit more than $6000. The best performing period was actually not the screaming bull market that started in 1980 because the last 10-years of that particular cycle caught the “” crash. It was the post-WWII bull market that ran from 1942 through 1972 that was the winner. Of course, the crash of 1974, just two years later, extracted a good bit of those returns.

Conversely, at 20x earnings, the best performing period started in 1900, which caught the rise of the market to its peak in 1929. Unfortunately, the next 4-years wiped out roughly 85% of those gains. However, outside of that one period, all of the other periods fared worse than investing at lower valuations. (Note: 1993 is still currently running as its 30-year period will end in 2023.)

The point to be made here is simple and was precisely summed up by Warren Buffett:

“Price is what you pay. Value is what you get.” 

To create our variable return assumption model, we averaged each of the 4-periods above into a single total return, inflation-adjusted, index. We could then see the impact of $1000 invested in the markets at both valuations BELOW 10x trailing earnings, and ABOVE 20x. Investing at 10x earnings yields substantially better results.

Starting Valuations Are Critical To Withdrawal Rates

With a more realistic return model, the impact of investing during periods of high valuations becomes more evident, particularly during the withdrawal phase of retirement.

Let’s start with our $1 million retirement portfolio. The chart below shows various “spend down” assumptions of a $1 million retirement portfolio adjusted for an 8% annualized return, the impact of inflation at 3%, and the effect of taxation on withdrawals.

By adjusting the annualized rate of return for the impact of inflation and taxes, the life expectancy of a portfolio grows considerably shorter. Unfortunately, this is what “really happens” to investors over time, but is never discussed in mainstream analysis.

To understand “real outcomes,” we must adjust for variable rates of returns. There is a significant difference between 8% annualized rates of return and 8% real rates of return. 

When we adjust the spend down structure for elevated starting valuation levels, and include inflation and taxes, a far different, and less favorable, outcome emerges. Retirees will run out of money not in year 30, but in year 18.

With this understanding, let’s revisit what happens to “buy and hold” investors over time. The chart below shows $3000 invested annually into the S&P 500 inflation-adjusted, total return index at 10% compounded annually, and both 10x and 20x valuation starting levels. I have also shown $3000 saved annually and “stuffed in a mattress.”

The red line is 10% compounded annually. While you don’t get compounded returns, it is there for comparative purposes to the real returns received over the 30-year investment horizon starting at 10x and 20x valuation levels. The shortfall between the promised 10% annual rates of return and actual returns are shown in the two shaded areas. In other words, if you are banking on some advisor’s promise of 10% annual returns for retirement, you aren’t going to make it.

Questions Retirees Need To Ask About Plans

What this analysis reveals is that “retirees” SHOULD be worried about bear markets. 

Taking the correct view of your portfolio, and the risks being undertaken is critical when entering the retirement and distribution phase of the portfolio life cycle.

Most importantly, when building and/or reviewing your financial plan, these are the questions you must ask and have concrete answers for:

  • What are the expectations for future returns going forward given current valuation levels? 

  • Should the withdrawal rates be downwardly adjusted to account for potentially lower future returns? 

  • Given a decade long bull market, have adjustments been made for potentially front-loaded negative returns? 

  • Has the impact of taxation been carefully considered in the planned withdrawal rate?

  • Have future inflation expectations been carefully considered?

  • Have drawdowns from portfolios during declining market environments, which accelerates principal bleed, been considered?

  • Have plans been made to harbor capital during up years to allow for reduced portfolio withdrawals during adverse market conditions?

  • Has the yield chase over the last decade, and low interest rate environment, which has created an extremely risky environment for retirement income planning, been carefully considered?

  • What steps should be considered to reduce potential credit and duration risk in bond portfolios?

  • Have expectations for compounded annual rates of returns been dismissed in lieu of a plan for variable rates of future returns?

 If the answer is “no” to the majority of these questions. then feel free to contact one of the CFP’s in our office who take all of these issues into account. 

With debt levels rising globally, economic growth on the long-end of the cycle, earnings growth weak, valuations high, and potential risk of a recession, the uncertainty of retirement plans has risen markedly. This lends itself to the problem of individuals having to spend a bulk of their “retirement” continuing to work.

Yes, not only should you worry about bear markets, you should worry about them a lot.

Tyler Durden Mon, 01/27/2020 - 08:25
Published:1/27/2020 7:29:23 AM
[Markets] Coronavirus Fears Are Hitting the Dow Hard. Travel Stocks Like Delta, Chip Makers, Are Plunging. U.S. stocks are set to open sharply lower as investors evaluate weekend news regarding China’s coronavirus outbreak. Travel and technology shares have been hit hardest. Published:1/27/2020 6:58:56 AM
[Markets] Global Stocks Crash As Coronavirus Pandemic Infects 3,000; China, Yuan Plummet Global Stocks Crash As Coronavirus Pandemic Infects 3,000; China, Yuan Plummet

Global markets are a freefalling, sea of red mess, as algos finally realized that last week's optimism that China's coronavirus epidemic "is contained" was actually dead wrong, and the result is Dow down over 400 points and S&P futures plunging below 3,250...

... because with nearly 3,000 people infected around the globe and over 80 dead, one thing is certain: the epidemic is anything but contained.

And so, after denying reality for over a week, global stocks finally tumbled on Monday with S&P futures plunged the most since October 2, as investors grew increasingly anxious about the economic impact of China’s spreading virus outbreak, with demand spiking for safe-haven assets such as the Japanese yen and Treasury notes.

"Any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalization,” Stephen Innes, chief Asia market strategist at Axitrader, wrote in a note Monday. “I’m starting to think cash is the right place to be for the next few weeks" Innes added making a mockery of Ray Dalio's cash forecast for the second time in three years.

As Saxobank notes, equities are finally beginning to contemplate the possibility that the virus 2019-nCoV in China will have significant economic impact as the lockdown is now affecting 56 million people. China has imposed travel bans, school closings in major cities and is extending the Lunar New Year. The market reaction already started Friday with the US equities declining as more news disseminated, but in today’s session Chinese related markets are hit hard.

“Investors will react quickly to any sign of negativity and this is no exception as China announces that the issue has become an emergency. This could keep oil prices fragile until the coronavirus shows signs of slowing down,” said Mihir Kapadia, chief executive at Sun Global Investments.

In Asian trading, the MSCI index of Asia-Pacific shares ex-Japan was off 0.4%, although trade in the region has already slowed for the Lunar New Year and other holidays, with financial markets in China, Hong Kong, Taiwan, South Korea, Singapore and Australia closed on Monday. Japan’s Nikkei average slid 2.0%, the biggest one-day fall in five months. Amid the Lunar New Year holiday, many markets in Asia were closed with China expected to be closed until at least Feb 3, however those who wanted to get out of China could do so thanks to the Singapore-tarded China proxy, the FTSE China A50 future, has plunged over 11% since the disease outbreak was reported.

The risk-off sentiment continued in European trading, where volumes and volatility surged, as Europe reacted to Asian equity weakness driven by weekend updates on the coronavirus spread. The Stoxx Europe 600 Index headed for its worst decline since October, with the mining group dropping by 4%. All Euro Stoxx 600 sectors are in the red with miners, travel and tech names posting the heaviest losses; a key measure of risk for the debt of Europe’s most fragile companies jumped to the highest in nearly two months. Adding to Europe's pain, Germany's IFO survey disappointed, confirming that the economic rebound in Germany is not a straight line as we have seen in previous rebounds since 2008. It all adds to uncertainty.

U.S. Treasury prices advanced, pushing down yields further, with the benchmark 10-year notes dropping to a 3-1/2-month trough of 1.627% in early Asian trade.

As yields plunged, so did oil and Brent crude futures fell to three- and five-month lows, respectively, with Brent plunging below $60 for the first time since October.

In Rates, German bonds rallied after closing their opening gap in early London trade with the curve bull flattening, spurred by a large block trade in bobl futures. One-way traffic in Italian bonds, 10y BTP rally ~230 ticks, tightening ~17bps to core after the weekend regional election. Amusingly, in Greece 10-year GGB yields drop to record lows after Friday’s upgrade by Fitch. Treasury curve bull steepens, 10-year yield drops ~6bps, with 2y and 5y supply due later today.

Emerging market equities are down 4.1% and cyclical sectors are leading the declines with especially travel, luxury goods, semiconductors and mining related stocks being hit the hardest.

Adding to risk-off sentiment we observe the VIX Index is close to 18, the highest level since October, which means that the equity market is shifting in a different state with lower expected returns and higher volatility. Remember as we have said many times in the past that the 22 level is the magical level where equity markets downside dynamics become very ugly. So stay alert and pay attention to news out of China and watch the VIX.

In the currency market, the concerns about the virus supported the yen, which strengthened as much as 0.5% to 108.73 yen per dollar, its 2-1/2-week high. The euro last stood at $1.1028 versus the dollar, having fallen to its eight-week low of $1.1019 on Friday. The offshore yuan dropped more than 0.5% to 6.9776 against the dollar, its weakest level since Jan. 6 and its biggest drop since October.

In other commodities, base metals slump, LME Nickel over 2% lower to underperform peers. Spot gold rose as much as 1.0% to $1,585.80 per ounce, the highest level since Jan. 8, as rising concerns over the spread of a virus outbreak in China and its potential economic impact prompted investors to buy the safe-haven metal.

In geopolitical news, Iran nuclear agency deputy chief said they have the capacity to enrich uranium at any percentage if the government decides to. There was an attack on the US embassy in Baghdad, Iraq where 3 rockets hit the embassy which left one individual injured although the injuries were only minor and the person later returned to duty, while the US embassy is said to have informed the Iraqi government that there will be a military response according to Twitter sources.

New home sales are among economic data due. Scheduled earnings include Sprint, Whirlpool

Market Snapshot

  • S&P 500 futures down 1.3% to 3,250.25
  • MXAP down 0.7% to 170.81
  • MXAPJ down 0.5% to 556.16
  • Nikkei down 2% to 23,343.51
  • Topix down 1.6% to 1,702.57
  • Hang Seng Index up 0.2% to 27,949.64
  • Shanghai Composite down 2.8% to 2,976.53
  • Sensex down 1% to 41,210.97
  • Australia S&P/ASX 200 up 0.04% to 7,090.54
  • Kospi down 0.9% to 2,246.13
  • Brent futures down 3.4% to $58.62/bbl
  • Gold spot up 0.8% to $1,583.27
  • U.S. dollar Index up 0.06% to 97.91
  • STOXX Europe 600 down 1.7% to 416.42
  • German 10Y yield fell 2.7 bps to -0.362%
  • Euro down 0.07% to $1.1017
  • Brent Futures down 3.2% to $58.75/bbl
  • Italian 10Y yield fell 2.2 bps to 1.064%
  • Spanish 10Y yield fell 5.2 bps to 0.296%

Top Overnight News from Bloomberg

  • Traders see nearly 60% chance of a Bank of England cut this week as of Monday. Economists are more cautious, predicting a 6-3 vote to keep rates on hold as the government prepares to negotiate a trade deal with the European Union that will help define the post-Brexit economy
  • Japanese Prime Minister Shinzo Abe’s upcoming choice of candidate to join the Bank of Japan board could shed light on the leader’s current thinking on the importance of achieving a stubbornly difficult inflation goal. be’s nomination to replace Yutaka Harada is scheduled to take place Tuesday morning, according to a document seen by Bloomberg
  • China’s escalating viral outbreak may end up hitting Japan’s fragile economy harder than the SARS outbreak of 2003, according to economists
  • Traders are pricing in a full quarter- point Federal Reserve rate cut this year amid fears of headwinds to global growth from the spread of the coronavirus. Economists for their part see the Fed holding rates steady this year and next, according to a survey by Bloomberg

A broad risk-averse tone resumed across asset classes following on from last Friday’s declines on Wall St. where the S&P 500 posted its worst weekly performance since August amid ongoing coronavirus fears, with the number of confirmed cases stateside now at 5. Furthermore, the latest official update from China stated the number of infected rose to 2744 with the death toll at 80, and China also warned that the coronavirus is getting stronger and the amount of cases could increase. This heavily pressured US equity futures which slipped around 1% in early trade and spurred safe-haven bids for T-notes and gold, while Nikkei 225 (-2.0%) sold off due to the virus outbreak fears, detrimental currency flows and against the backdrop of thinned conditions with nearly all major bourses in the region closed for holiday. India’s NIFTY (-1.0%) was also lower after large-scale protests yesterday regarding the Citizenship Amendment Act, but with losses limited amid corporate earnings including ICICI Bank. Finally, 10yr JGBs were underpinned on safe-haven buying due to the coronavirus jitters which also spurred T-notes to gap higher by about 10 ticks at the re-open, although the upward momentum for JGBs has since petered out amid the lack of BoJ presence in the market and absence of most regional participants.

Top Asia News

  • Abe’s Pick to Replace BOJ Board Member Could Come on Tuesday
  • Coronavirus Seen Hitting Japan’s Economy Harder Than SARS
  • Bidders Must Absorb $3.3 Billion Debt to Buy Air India

European stocks see hefty losses across the board [Eurostoxx 50 -2.2%] following muted but negative APAC session as the region experiences mass holiday closures. For reference, the pan-European Stoxx 600 index sees around 95% of its stocks in negative territory. UK’s FTSE 100 (-2.5%) sees slightly more pronounced downside amid heavy-bleeding from large-cap miners and energy names, in-fitting with price action in the respective complexes - Rio Tino (-4.8%), Antofagasta (-4.3%), Anglo American (-4.5%), Glencore (-4.5%), BP (-2.0%) and Shell (-2.0%).  Meanwhile, Italy’s FTSE MIB (-0.7%) fares better in light of the aftermath from the Emilia Romagna regional elections which diminished the chances of an Italian snap election, thus Italian banks cushion losses in the index with tailwinds from favourable BTP price action – Ubi Banca (+0.1%), Banco BPM (+0.1%), Intesa Sanpaolo (-0.1%). Sectors are broadly, but firmly in the red, with Materials (-2.8%) lagging amid the base-metal price action. Defensives meanwhile see losses to a lesser extent than their cyclical peers. Consumer discretionary names also remain a laggard amid the demand implications from the virus outbreak for luxury goods and travel names, such as: Swatch (-3.6%), Richemont (-3.0%), IAG (-6.0%) and easyJet (-5.5%). In terms of individual movers; William Hill (-1.7%) saw losses at the open amid a breakdown in expansion talks with CBS Sports. Bayer (-1.5%) conforms to losses seen in the region despite a pushback from a spokesperson regarding last-week’s sources reports of an imminent settlement to its Roundup weedkiller scandal. On the flip side, positive broker moves see RWE (+0.1%), Uniper (+0.1%) Orsted (+0.1%) and Italgas (+1.4%) in the green.

Top European News

  • Populists Humiliated in Italy Vote as Conte Gets a Respite
  • Axa Narrows Bids for Eastern Europe Unit to Generali, Austrians
  • Slovenian Prime Minister Resigns, Floats Holding Early Elections
  • Turkey Starts Probe of ‘Provocative’ Social Media Posts on Quake

In FX, broad losses experienced in the EM-sphere, led by downside in the Yuan as the coronavirus crisis claims more lives and spreads further towards the West (full analysis available on the Newsquawk feed). USD/CNH has gained traction and breached 6.9800 to the upside (vs. 6.9400 low), topping its 200 and 55 DMAs at 6.9817 and 6.9843 respectively – with talks of potential stimulus measures by the Chinese Government to cushion the economic impact of the outbreak. TRY and ZAR feel the Yuan contagion with USD/TRY looking for a test of 5.9500 to the upside whilst USD/ZAR inches closer to 14.6000, but could see mild resistance at 14.5970 (21st Jan high) with reported stops above the round figure and ahead its 200 DMA at 14.6105.

  • CAD, NOK, RUB - Energy-related FX succumb to losses seen in the complex as jitters materialise regarding the implications of the virus outbreak on global oil demand. The Rouble remains the most impacted as USD/RUB surpasses 62.50 (vs. 62.24 open) before stopping short of its 200 DMA (62.63). The Loonie meanwhile extends losses vs. the Buck as the pair found support ~1.3150 before taking out its 55 and 100 DMAs (at 1.3158 and 1.3178 respectively) ahead of the psychological 1.3200. Similarly, Norway’s oil-correlated Crown drifted lower since the open – EUR/NOK reclaimed 10.0000 (which also coincides with its 55DMA) to the upside and topped its 100 DMA (10.0183) – with potential resistance touted at 10.0500.
  • AUD, NZD - The antipodeans also drift in tandem with the risk aversion and headwinds from detrimental base metal price action amid the aforementioned virus woes. AUD/USD has given up its 0.6800-status as losses exacerbated amid the domino-effect coronavirus would have on the Australian economy via China’s anticipated economic slowdown – with reports noting that Chinese GDP could see a reduction of as much as 1ppt. The pair remains the marked G10 underperformer thus far and eyes 0.6755 (26th Nov low and 76.4% Fibo of the Oct to Dec move) to the downside for a potential support level, and with some AUD 800mln in options seen expiring at strike 0.6765. Meanwhile, its Kiwi counterpart looks to test its 55 DMA to the downside at 0.6550.
  • JPY, DXY - Safe haven flows have seen an early bid in the Japanese currency, as USD/JPY gapped below 109.00 at the open vs. Friday’s 109.25 close. Since then, the pair has fluctuated on either side of the round figure having found a base around 108.75, and with technicians eyeing 108.67 (100 DMA) and 108.52 (200 DMA) should the base fail to hold, and with 109.00 seeing circa USD 800mln in options expiries. DXY meanwhile remains flat intraday having notched a current range of 97.800-941 and with little by way of schedule data/speakers to sway the state of play.
  • EUR, GBP - Mixed session for the Sterling and Single Currency, but relatively muted action compared to some of its G10 and EM peers. EUR/USD saw some pressure amid a downbeat German Ifo Survey which reaffirmed that the German economy has a subdued start to the year, but somewhat echoed Markit’s assessment that the manufacturing sector is slowly emerging from its downturn. EUR/USD failed to glean much reprieve from the development in Italy after the Centre-Left bloc defeated Salvini’s league in regional elections, thus dimming the chances of a snap election. The pair hovers just above 1.1000, having clocked in a current range of 1.1015-35. Meanwhile, Cable found an overnight base at 1.3050 and took advantage of some weakness seen in the Single Currency. EUR/GBP drifts further below 0.8450 whilst GBP/USD meanders just under 1.3100, having eclipsed the level in recent trade.

In commodities, WTI and Brent front-month futures continue their downward trajectory amid the materialising concerns surrounding the virus outbreak’s impact on global growth, oil demand and overall sentiment. While some desks have drawn comparisons to the SARS virus in 2003, which trimmed 0.15ppts off of global growth, some believe that the comparisons may be slightly unfair, albeit some economists note that Chinese GDP could see a reduction of as much as 1ppt. WTI Mar’20 futures gapped lower at the open before downside exacerbated and prompted the contract to test levels close to USD 52/bbl to the downside, levels last seen in October 2019. Similarly, Brent Mar’20 surrendered the USD 60/bbl handle and currently posts loses around USD 2/bbl; the contract did find some support at USD 58.50/bbl. Elsewhere spot gold is bolstered by the flows in to safe-havens, with prices testing USD 1590/oz to the upside during APAC trade vs. Friday’s ~USD 1570/oz. The overall demand/global growth aspect of the outbreak of the coronavirus has led to sharp losses in base metal prices: copper slumped around 2% at one point and dipped below USD 2.62/lb vs. Friday’s ~USD 2.67/lb close, whilst iron ore futures fell as much as 6% at one point.

US Event Calendar

  • 10am: New Home Sales MoM, est. 1.53%, prior 1.3%
  • 10am: New Home Sales, est. 730,000, prior 719,000
  • 10:30am: Dallas Fed Manf. Activity, est. -1.6, prior -3.2

DB's Jim Reid concludes the overnight wrap

There’s a reasonable amount of drama to anticipate this week. The progress of the coronavirus will be the overwhelming key short term driver (latest below) as more and more concerns rise to the surface. As an aside the week ends with a landmark moment in history as at midnight CET on Friday the U.K. will finally leave the EU 43 months after the vote. Staying with the U.K., a finely balanced BoE meeting the day before might be the highlight elsewhere. The FOMC (Wednesday) will attract the usual interest even if the Fed seemingly have a high bar to act in either direction at the moment. Also watch today’s German IFO with expectations that it will match the strongest level since June. China’s official PMIs (Friday but possibly delayed as the holiday season has now been extended until February 2) could be a very important release for the globe but the reality is that the virus will impact these numbers from next month making trends difficult to decipher. Q4’s GDP numbers from both the US (Thursday) and the Euro Area (Friday), as well as the European flash CPI (Friday) will also garner some interest.

We also have some very high profile earnings this week with four of the five largest US companies reporting (Apple, Microsoft, Amazon, Facebook). On Friday night our US equity strategists reiterated their view of very stretched positioning in the market. They now see it in the 98th percentile of their historical dataset with systematic funds at all time high exposure. They also show that 3-5% pull backs typically happen every 2-3 months and we’ve now been without one for 3.5 months. In another two weeks this will put us in the 90th percentile through history (86th currently). See their report here.

Staying with the US and with great importance to US equity markets, it seems that Bernie Sanders has edged into the lead in the Democratic nomination race over the weekend with a probability of between 35-40% in bookmaker markets. He was 5th in the race and only just above 5% in mid October. Joe Biden probabilities range from c.31-37%. So pretty tight with Sanders climbing rather than Biden falling. This time next week Iowa will vote in the first primary so we’ll soon be giving this race a lot more macro attention. The polls (Emmerson College and YouGov) suggest he’s edged into a very narrow lead there, the same as with New Hampshire that polls 8 days later. A reminder that in our last monthly investor sentiment poll, 90% thought a Sanders Presidency would be negative for US equities. Should more risk premium be priced into markets therefore? Especially with positioning and valuations as stretched as our strategists believe.

Before we go through the two main central bank events of the week in more detail and review last week in markets we should go straight to Asia and for updates on the coronavirus. The latest is that there are now 80 confirmed deaths (up from 25 on Friday) and 2,774 confirmed cases (up from 835) with around 30,000 people under observation. Meanwhile, France became the first country in Europe to report cases of the virus. As of now, the global tally is 7 in Thailand, 3 in Japan, 3 in South Korea, 3 in the US, 1 in Canada, 2 in Vietnam, 4 in Singapore, 3 in Malaysia, 1 in Nepal, 3 in France, and 4 in Australia along with 8 in Hong Kong, 5 in Macao and 4 in Taiwan. Elsewhere, on Saturday China said that it is imposing a ban on all outgoing overseas group tours from today after banning all domestic group tours on Friday. China has now also banned wildlife trade across the country with the government saying that the shipping and sale of wild animals won’t be allowed, and breeding sites will be quarantined and warned citizens against the consumption of wild animals. Also about 56 million people in China are now under severe transport curbs.

Risk off continues to be the theme in Asian markets this morning as the concerns over the coronavirus continue to rise. Safe heaven assets are up with gold (+0.48%) and the Japanese yen (+0.18%) both higher while yields on 10y USTs are down -4.2bps to 1.643% and crude oil prices are down c. -2.35%. Meanwhile, Asian equity markets are declining with the Nikkei (-1.97%) and India’s Nifty (-0.43%) both down. Markets in Hong Kong, China and South Korea are closed for the NY holiday. As for Fx, the offshore Chinese yuan is down c. -0.50% to 6.9669 while most emerging market currencies are also trading weak. Elsewhere futures on the S&P 500 are down -0.98% while those on the Chinese equity market (SGX FTSE China A50) are down -5.19%.

In other news, the Italian government led by Prime Minister Giuseppe Conte were boosted by a victory in a regional election in Emilia-Romagna with interior ministry figures showing that support for the center-left bloc led by the Democratic Party was at around 50% while the group headed by Salvini’s Lega Party trailed at only 45%. Meanwhile, the support for the M5S dropped to only 5%. The election results should help the performance of BTPs albeit in a risk off environment.

We also got news over the weekend that three rockets hit the US embassy in Iraq's capital Bhagdad on Sunday with Bloomberg reporting that at least one person was wounded in the attack. It is not clear how serious the injuries are or whether the person was an American national or an Iraqi staff member. This indicates that geopolitical risks are likely to linger this year.

Now to the knife-edge BoE decision on Thursday (Mark Carney’s last meeting). This meeting follows a run of fairly weak economic data over the last few weeks but with last week’s strong employment data and better than expected flash PMIs (more later) confusing the picture. Our economists have expected a cut for a good couple of months now but markets are closer to 50:50. Sterling is at $1.3058 in Asia (-0.11%) as we approach the big day. It started the year at $1.3257 so net net the weak data in 2020 has impacted pricing.

As for the FOMC on Wednesday, our US economists write in their preview (link here) that the FOMC should hold rates steady, and that “the current stance is likely to be unchanged barring a “material reassessment to the outlook.” However, they do foresee a 5bp upward technical adjustment to the interest rate on excess reserves (IOER), though they write that “it is a close call given the communication challenges of such a move.” All eyes will be on Chair Powell’s press conference following the meeting for any new information. The full day by day week ahead is at the end.

Earnings seasons ramps up this week, with a number of large companies reporting. Tuesday sees reports from Apple, LVMH, Pfizer and SAP. Then on Wednesday we’ll get an array of companies, including Microsoft, Facebook, Mastercard, AT&T, Novartis, Boeing, McDonald’s, PayPal, General Electric and Banco Santander. On Thursday, releases come from Amazon, Visa, Roche Holding, Verizon, The CocaCola Company, Royal Dutch Shell, Unilever, Amgen and Samsung. Finally on Friday, we’ll hear from Exxon Mobil, Chevron and Caterpillar.

Now for last week where we ended weak as fear grew over the coronavirus. Global equity markets sold off with the S&P 500 coming off record highs to end the week down -1.03% (-0.90% Friday), with its decline on Friday actually its worst daily performance since early October. It was a similar story elsewhere, with the NASDAQ also down -0.79% (-0.93% Friday), and the STOXX 600 down -0.22% (+0.86% Friday before the late US sell-off). Chinese assets in particular suffered last week, though they were closed on Friday for the New Year holiday, with the Shanghai Composite index down -3.22% in its worst week since August, while the CSI 300 was down -3.63% in its worst week since May. Other risk assets also underperformed, with Brent crude down -6.41% (-2.18% Friday) in its worst weekly performance since December 2018 and its 3rd successive weekly decline. So probably not where a lot of investors thought we’d be for oil following the heightened geopolitical tensions that started the year between the US and Iran.

Safe havens were the beneficiaries, with 10yr bund yields falling every day last week, down -12.0bps (-2.7bps Friday), which is actually their biggest weekly decline since May 2018. 10yr Treasury yields were also down -13.8bps (-4.9bps Friday) in their biggest weekly fall since October, down to 1.684%, their lowest level since October. Other safe haven assets outperformed as well, with gold up +0.92% (+0.55% Friday) and the Japanese Yen +0.79% (+0.19% Friday) against the US dollar.

The main data release on Friday came from the PMIs, which were a mixed set of results, though their impact on markets was rather outweighed by the virus. For the Euro Area as a whole, the composite PMI surprised slightly to the downside, remaining at 50.9 against expectations for an increase to 51.2. The French composite PMI fell back this month, down to 51.5 (vs. 52.0 expected) amidst the ongoing strikes in the country, while the German reading surprised to the upside, with the composite PMI up to 51.1 (vs. 50.5 expected), which is the strongest reading since August. Here in the UK, the PMIs also surprised on the upside, with the composite PMI coming in at 52.4 (vs. 50.7 expected), and up from a contractionary 49.3 in December. Following the news, investors dialled back their expectations of a rate cut from the Bank of England this week, which now stand at around a 46% chance, down from 70.5% chance a week ago. For completeness, over in the US the composite PMI rose to a 10-month high of 53.1, in spite of the fact that the manufacturing PMI declined for a second successive month, down to 51.7 (vs. 52.5 expected).

Tyler Durden Mon, 01/27/2020 - 07:50
Published:1/27/2020 6:58:56 AM
[Markets] Earnings Outlook: Starbucks earnings: Dunkin’ customers love for Starbucks pumpkin spice lattes expected to boost sales Starbucks is scheduled to report fiscal first-quarter earnings on Tuesday.
Published:1/27/2020 6:29:28 AM
[Markets] U.S. stock futures fall sharply as worries over spread of China’s coronavirus intensifies Wall Street is braced for losses at the start of the weekend amid deepening worries over China’s coronavirus, with the death toll and the number of infected soaring. That’s as markets kick off a huge week for earnings. Published:1/27/2020 5:58:33 AM
[Markets] WaPo, CNN Reporters Spark Massive Backlash With 'Kobe Was A Rapist' Tweets WaPo, CNN Reporters Spark Massive Backlash With 'Kobe Was A Rapist' Tweets

What kind of sensible person would feel compelled to call Kobe Bryant a rapist and trash his legacy in the hours after the devastating helicopter crash that left the NBA legend and his daughter, Gianna, dead? Unsurprisingly, the answer to that question is staff reporters at CNN and the Washington Post, among other media outlets.

Bryant and his daughter were on their way to a travel basketball game. The victims in the crash also included another player and a parent. But that didn't stop the Washington Post's Felicia Somnez from sending a controversial tweet reminding the world about Bryant's "disturbing" rape case. The tweet was deleted, but a screenshot was preserved and published by the Daily Mail.

Sonmez said she received death threats after posting the tweet, and added that she was inundated with more than 10,000 harassing and insulting messages in the wake of her tweet.

We find it difficult to believe that she didn't anticipate this reaction. And unfortunately for her, this play for sympathy in the aftermath has decidedly backfired.


According to the Mail, Sonmez, a political reporter at WaPo, has been suspended from her position.

In response to Sonmez's claims that she was merely remembering Bryant's legacy "in totality," one twitter user cut right to the heart of why her tweet infuriated thousands of people.

The backlash was just as intense after CNN's Nathan McDermott tweeted about the "very credible rape allegation" made against Bryant, neglecting to mention that the charges were dropped and the victim admitted she went on to have sex with another man less than a day after the incident with Bryant.

Even reporters with obscure sports media organizations managed to incite a massive backlash (and boost their own profile) with their critical Kobe tweets. One reporter with College Hockey News decried the "sick" people on twitter for inundating her with insults after she had the "audacity" to suggest that "sexual assault victims deserve compassion too" in the hours after the crash.

Actress Evan Rachel Wood called Bryant a "rapist".

And there's the random smattering of radical feminists and #MeToo fanatics.

As a reminder of how much Bryant meant to millions of fans:

You want to show compassion for 'survivors' living with trauma? How about showing some compassion for the Bryant family and the millions of people devastated by the deaths of Bryant and his 13-year-old daughter?

So much for the tolerant, compassionate, left...

Tyler Durden Mon, 01/27/2020 - 06:49
Published:1/27/2020 5:58:33 AM
[Markets] Wuhan Mayor Offers To Resign As Coronavirus Death Toll Accelerates, Supply Shortages Intensify Wuhan Mayor Offers To Resign As Coronavirus Death Toll Accelerates, Supply Shortages Intensify

Investors who dismissed the threat to their P&Ls posed by China's coronavirus outbreak are suddenly realizing that they've made a grave miscalculation. What few Asian markets were open on Monday (most were closed for the LNY holiday) saw equities tank, and in the US, futures are pointing to a steep drop at the open - a sign that the market has found the excuse it needed to give back some of its torrid January gains.

With so much going on - the Bolton revelations, the deaths of Kobe Bryant and his daughter, the busiest week of earnings season, and the upcoming Fed meeting - the virus remains the most dominant theme - and with good reason.

As we reported late last night, the number of confirmed cases in China has tripled over the weekend. Health officials have confirmed 2,804 cases in China, where the deal toll has climbed to 80 - giving the virus a roughly 5% mortality rate. Over the weekend, we joked that the scapegoating was already beginning, citing a rash of public outrage directed at health officials and Wuhan, as well as the city's mayor, Zhou Xianwang.

In typically communist fashion, Zhou accepted responsibility for botching the initial response to the virus, and said he and the local party chief, Ma Guoqiang, would be willing to step down to quiet the public outrage. The government is scrambling to build not one, but two new hospitals in under two weeks to house coronavirus patients in Wuhan, yet doctors and nurses claim that they are still struggling with a shortage of supplies, even after local officials implored neighboring provinces to send assistance. Shortages of everything from beds to facemasks to personnel are still hurting the city's ability to treat new cases. That lockdown has obviously interfered with shipments of new supplies.

During a press conference on Sunday, Wang Xiaodong said in a press conference that the government was reinforcing medical supplies, but he triggered even more public anger as he Wang corrected himself twice about the number of face masks being made available in the province, initially putting the number at 10.8 billion, then changed it to 1.8 billion before correcting himself again to say that the real number was 1.8 million masks. Public anger was also directed at Wang because he neglected to wear a face mask during the presser, while Mayor Zhou appeared to wear his mask upside down. 

After appointing Premier Li Keqiang to head the party's committee to oversee the crisis response over the weekend, Li arrived in Wuhan on Monday, the SCMP reports. In a PR coup for the government, reporters followed Li as he visited patients and medical personnel fighting on the front lines of the outbreak and delivered some inspired speeches.

"You are trying every means to save lives," Li told medical staff at Jinyintan hospital, one of the designated institutions in Wuhan for treating infected patients. "When you are putting your efforts to save lives, you have to protect yourselves too."

Li will apparently remain on the ground in the province, where he will direct the effort to combat the virus's spread.

But the Chinese premier wasn't the only major figure to travel to Wuhan on Monday: The WHO director-general is traveling to the city to try and assess the situation on the ground.

Wuhan Mayor Zhou's announcement over the weekend that roughly 5 million people had already left Wuhan before the lockdown began made it seem like combating the virus's spread at this point would be virtually impossible. In Beijing on Monday, He Qinghua, the first-degree inspector of the Disease Prevention and Control Bureau, confirmed what many - including on CNBC reporter - suspected. In addition to the 11 million 'official' residents of Wuhan, the city is also host to millions of migrant workers from the countryside. Almost all of those workers have already returned home, threatening to spread the virus across China's impoverished rural areas where awareness of prevention strategies is minimal.

To fight this, China must mobilize a "grass roots" campaign of party officials.

"The awareness [of prevention and control] is relatively low in the countryside. We will need to fill the gap of this weak link," He said. "The most important thing now is mobilizing our cadres at the grass-roots level so we can do better in our prevention and control work at the community level."

Here's the latest roundup of cases, courtesy of the SCMP, which has consistently maintained the most accurate figures.


Even though researchers reportedly cast doubt on the virus's connection to the Wuhan food market illegally trading in wild animals, scientists on Monday said they had, in fact, found evidence of the virus at the market. A strain of the virus was isolated from samples taken at the market. The strain was isolated from environmental samples taken from the Huanan seafood market in Wuhan. A phot of the virus, known as 2019-nCoV, can be found below.

Per the SCMP, the virus was detected in 35 of the 585 environmental samples collected on Jan. 1 and Jan. 12, with 33 of the positive samples taken from the market’s western zone, where the wildlife trading business was concentrated.

Outside of the mainland, Taiwan reported its fifth case on Monday.

Several neighboring countries announced precautions to prevent the virus from crossing over from China: Mongolia has closed all educational institutions until at least March 2, and has closed its border with China to all pedestrian and vehicle crossings. Kazakhstan has suspended its 72-hour visa-free program for holders of Chinese passports. In Myanmar, the United Wa State Army, a political group for the Wa people, said it would shut down all entertainment in the autonomous territory, while imposing strict border checks on all outsiders. The group has also barred all large public gatherings and instructed the population to cease eating wild animals.

In Seoul, South Korean President Moon Jae-in said Monday that his administration was preparing a "complete enumeration" of people entering the country from Wuhan. And any travelers entering the country from China will need to fill out a 'health questionnaire'. Even Iran is taking precautions, prohibiting Chinese and people from Southeast Asia from bringing food into the country. Russian tour operators have stopped selling tours in China, and are only bringing Russian citizens back from the country.

According to Feng Luzhao, a researcher with the Chinese CDC, insisted that the most effective way to stop the spread of the disease would be to reduce travel.

"[We have decided] to extend the Lunar New Year holidays because [we want] to encourage people to stay home and avoid going to areas where infection may be prevalent and places with large crowds of people," Feng said. "[We believe] this can help curb the spread of the disease."

To try and stop the spread, China has ordered an 'extension' of the Lunar New Year Holiday, with several manufacturing hubs and other centers of industry deciding to stay closed into February.

Meanwhile, more health researchers in China are warning that the state is woefully undercounting the number of cases. A researcher at HKU med school announced that his new estimate for active cases in China is closer to 25,000.

Over in the US, a fifth case of coronavirus was confirmed in Arizona. With the trajectory of the virus confirming the worst fears of epidemiologists, we suspect this won't be the last case in the US.

Tyler Durden Mon, 01/27/2020 - 06:09
Published:1/27/2020 5:28:12 AM
[Markets] Dow futures down nearly 400 points as fears climb over China's coronavirus Dow futures down nearly 400 points as fears climb over China's coronavirus Published:1/27/2020 4:57:52 AM
[Markets] Europe Markets: European airlines and luxury-goods makers hit hard as China’s coronavirus spreads Airlines, mining stocks and luxury-goods makers were among the hardest hit on Monday as investors faced news of a spreading deadly coronavirus from China.
Published:1/27/2020 4:57:52 AM
[Markets] The Moneyist: ‘My siblings think I’m a know-it-all.’ My sister, brother and cousin live with my mother rent-free. She pays for their groceries and cellphones — what can I do? ‘In helping her, I found that most months she runs a deficit. She will pull from her savings to cover gaps.’
Published:1/27/2020 4:29:34 AM
[Markets] Ariana Airlines Plane Crashes In Afghanistan With 83 People On Board Ariana Airlines Plane Crashes In Afghanistan With 83 People On Board

The Daily Mirror is reporting that a state-owned Ariana Afghan Airlines plane crashed Monday in Afghanistan's central province of Ghazni. 

Arif Noori, the spokesman for the governor of Ghazni Province, told Reuters that “a Boeing plane belonging to the Ariana Afghan Airline, has crashed in the Sado Khel area of Deh Yak district of Ghazni province around 1:10 p.m. local time.”

Local media said 83 people were on board, but at this moment, there's no official report on the fate of the crew and passengers. 


Tyler Durden Mon, 01/27/2020 - 05:17
Published:1/27/2020 4:29:34 AM
[Markets] Another US Soldier Dies In Syria Under Trump's "Secure The Oil" Mission Another US Soldier Dies In Syria Under Trump's "Secure The Oil" Mission

A year after four Americans died in a bomb blast in northern Syria - the single deadliest day for the some 700 troops still there - another US solider has died

A 22-year-old U.S. Army Reserve soldier identified by the Pentagon as Spc. Antonio Moore was killed Friday in a vehicle rollover accident. 

Spc. Antonio Moore. US Army/AP

His combat engineering unit based out of North Carolina was conducting a route clearing operation in Deir Ezzor province in Syria's east, where US forces have been supporting Syrian Kurdish forces (SDF) in "securing the oil fields" — as President Trump has recently described the mission. 

Though numbers have varied, most reports put current troops levels in Syria at over 500, with the AP in a new report saying 750 troops deployed in the country, citing Defense Department officials. 

An official Army statement issued Saturday reads: “The 363rd Engineer Battalion is deeply saddened at the loss of Spec. Antonio Moore.” It continued: “Antonio was one of the best in our formation. He will be missed by all who served with him. We will now focus on supporting his family and honoring his legacy and sacrifice.”

Moore's reserve unit - 363rd Engineer Battalion, 411th Engineer Brigade, out of Knightdale, N.C. - was only somewhat recently established, in 2015, and includes only 100 service members.

US troops are present in Deir Ezzor (red above) and Hasakah provinces in the country's East. 

Congressional critics of US policy in Syria have questioned the White House's unilaterally stationing troops in harm's way, with no war powers vote  concerns which have only grown after Trump's public remarks about "taking the oil" in Syria. 

Meanwhile, the theater is growing more dangerous for the small American presence which is not wanted either by Syria, Russia, Turkey, or Iran. Concern has also grown that pro-Iran militias operating both in Syria and Iraq will seek to target US troops throughout the region and Washington's showdown with Iran grows more direct and confrontational. 

Tyler Durden Mon, 01/27/2020 - 04:15
Published:1/27/2020 3:28:46 AM
[Markets] Burning Trees For Heating Won't Help With Climate Change: UK Think Tank Burning Trees For Heating Won't Help With Climate Change: UK Think Tank

Authored by Irina Slav via,

A suggestion by the UK Committee on Climate Change to burn more wood and plant replacement trees as a sustainable alternative to fossil fuels has drawn criticism from think tank Chatham House, which says this is hardly the best approach to reducing emissions.

"Expanding forest cover is undoubtedly a good thing, if you're leaving them standing," energy expert Duncan Brack told the Daily Telegraph. However, Brack, who served as special adviser to the Department of Energy and Climate Change, suggested that burning wood for heating was not the most sustainable way forward. Calling wood burning a carbon neutral process is “highly dubious,” Brack added.

These claims, according to the Telegraph’s environment editor, Emma Gatten, rest on the assumption that the carbon footprint of chopping down trees and burning them is offset by planting new trees to replace them. This assumption excludes the fact that older trees absorb more carbon and that it takes time to replace a forest.

"You can leave trees standing and they will continue to absorb carbon for decades," Brack says.

"But the biomass industry implicitly assumes that forests at some point stop reach a saturation point for carbon intake and can be harvested and simply replaced." 

The benefit of planting trees to mitigate the effects of climate change has been put to the test on a wider scale as released last year found that reforestation could work, but it had to be done at a massive scale.

We need to plant 25 percent more trees than there are on Earth right now, or more than half a trillion in total, the study found. This would reduce the amount of carbon in the atmosphere by a quarter, erasing 20 years of emissions. Yet it would not solve the climate problem on its own, without a sustained effort to cut emissions, commentators on the study said.

Tyler Durden Mon, 01/27/2020 - 03:30
Published:1/27/2020 2:57:43 AM
[Markets] Dow Jones Newswires: Dr. Reddy’s Laboratories swings to net loss in third quarter Dr. Reddy’s Laboratories Ltd. said it swung to a net loss in its third quarter due to an impairment of a birth-control product.
Published:1/27/2020 2:27:44 AM
[Markets] U.S. stock futures tumble as China coronavirus spreads, worries escalate Wall Street is braced for losses at the start of the weekend amid deepening worries over China’s coronavirus,with the death toll and the number of infected soaring. That’s as markets kick off a huge week for earnings. Published:1/27/2020 1:57:50 AM
[Markets] Market Snapshot: U.S. stock futures tumble as China coronavirus spreads, worries escalate Wall Street is braced for losses at the start of the weekend amid deepening worries over China’s coronavirus,with the death toll and the number of infected soaring. That’s as markets kick off a huge week for earnings.
Published:1/27/2020 1:57:50 AM
[Markets] 'Biblical' Locust Plague With Mega-Swarms The Size Of Cities Descends On East Africa 'Biblical' Locust Plague With Mega-Swarms The Size Of Cities Descends On East Africa

As if the world's facing a looming new global pandemic weren't enough, here's yet another rare occurrence of apocalyptic proportions threatening to devastate the economy and way of life on an entire continent: the worse outbreak of desert locusts in seventy years is ravaging East Africa — specifically Kenya as hundreds of millions have swarmed in from Somolia and Ethiopia, reports the Associated Press

The hum of millions of locusts on the move is broken by the screams of farmers and the clanging of pots and pans. But their noise-making does little to stop the voracious insects from feasting on their crops in this rural community.

Men surrounded by a swarm of desert locusts in Kenya. Image source: AP

The by all accounts "huge" infestation is threatening to devastate communities and a region already long struggling with food security. One news source likened it to a Biblical Locust Plague With Swarms the Size of Cities.

The invading locusts are "deadly" in the sense that these 'mega-swarms' devour crops at incredibly rapid pace — at a faster rate of destruction than other natural disasters.  

The numbers and immediate destructive force are staggering, according to quotes in the AP:

  • About 70,000 hectares (172,973 acres) of land in Kenya are already infested.
  • A single swarm can contain up to 150 million locusts per square kilometer of farmland, an area the size of almost 250 football fields, regional authorities say.
  • One especially large swarm in northeastern Kenya measured 60 kilometers long by 40 kilometers wide (37 miles long by 25 miles wide).
  • Farmers are afraid to let their cattle out for grazing, and their crops of millet, sorghum and maize are vulnerable, but there is little they can do.

“Even cows are wondering what is happening,” one local farmer laments in the AP report. “Corn, sorghum, cowpeas, they have eaten everything.”

This as the mega-swarms consume the very fodder the livestock survive on.

There's additional concern that new rains after March could bring another explosion of the fast breeding locusts prior to the dry season taking their numbers back down.

Locust swarm in Katitika village, Kitui county, Kenya. Image source: AP

The UN Food and Agricultural Organization is reportedly mobilizing an emergency response, given even small swarms can wipe out crop fields at sizes constituting enough food that could have fed tens of thousands of people in a single day, which makes it a humanitarian disaster in the making. 

It's both the nature of their small size (about a finger's length) and the fact that they swarm in millions at a time that make preventative measures nearly impossible.

The UN agency listed some creative but futile methods suggested and/or initiated in the past: “Although giant nets, flamethrowers, lasers and huge vacuums have been proposed in the past, these are not in use for locust control.”

It added, “People and birds often eat locusts but usually not enough to significantly reduce population levels over large areas.”

Tyler Durden Mon, 01/27/2020 - 02:45
Published:1/27/2020 1:57:50 AM
[Markets] Cruelty To Animals Gets More Media Coverage Than Beheaded Christians Cruelty To Animals Gets More Media Coverage Than Beheaded Christians

Authored by Giulio Meotti via The Gatestone Institute,

First there was the beheading of 11 Nigerian Christians during the recent Christmas celebration. The next day, a Catholic woman, Martha Bulus, was beheaded in the Nigerian state of Borno with her bridesmaids, five days before the wedding. Then there was a raid on the village of Gora-Gan in the Nigerian state of Kaduna, where terrorists shot anyone they met in the square where the evangelical community had gathered, killing two young Christian women. There was also a Christian student killed by Islamic extremists who recorded his execution. Then pastor Lawan Andimi, a local leader of the Christian Association of Nigeria, was beheaded.

"Every day"says Father Joseph Bature Fidelis, of the Diocese of Maiduguri, "Our brothers and sisters are slaughtered in the streets. Please help us not be silent in the face of this immense extermination that is taking place in silence".

The Bishops' Conference of Nigeria described the area as "killing fields", like the ones the Khmer Rouge created in Cambodia to exterminate the population. Most of the 4,300 Christians killed for their faith during the last year came from Nigeria. Nina Shea, an expert in Religious Freedom, recently wrote:

"An ongoing Islamic extremist project to exterminate Christians in sub-Saharan Africa is even more brutal and more consequential for the Church than it is in the Middle East, the place where Christians suffered ISIS 'genocide', as the U.S. government officially designated."

Unfortunately, the murder of these Christians during the last month has been largely ignored by the Western media.

"A slow-motion war is under way in Africa's most populous country. It's a massacre of Christians, massive in scale and horrific in brutality and the world has hardly noticed", wrote the French philosopher, Bernard Henri Lévy.

While Christians were murdered in Nigeria, the global media ran a story of a pig being tied up and shoved off a bungee tower at a new theme park in China. The story went viral on BBCThe IndependentThe New York TimesSky NewsDeutsche Welle and many other mainstream media outlets. The Chinese pig got more media coverage than any of these murdered Christians in Nigeria. You often have to search for these martyrs on local African sites. "Pig Bungee Jumping Stunt In China Prompts Global Outcry", wrote the Huffington Post. Where has been the global outcry for the serial butchering of Christians just because they are Christians?

The killing of a gorilla in a Cincinnati zoo, committed to save a child's life, triggered more emotion and media coverage than the beheading of 21 Christians on a beach in Libya while they invoked the name of Jesus in Arabic and whispered prayers. ABC, CBS and NBC devoted six times more coverage to the death of one gorilla than they did on the mass execution of Christians.

"The world prefers to worry about pandas rather than about us, threatened with extinction in the land where we were born", said Nicodemus Daoud Sharaf, the Syrian Orthodox Archbishop of Mosul as well as a refugee in Erbil, the capital of Iraqi Kurdistan, home to many of the Christians who fled jihadis. When the Archbishop said that four years ago, it looked as if it were just provocation to shock Western public opinion. But Archbishop Sharaf was right.

The French-Lebanese writer Amin Maalouf also noted "threats to pandas cause more emotion" than threats to Christians. Archbishop Sharaf gave another example:

"In Australia they take care of frogs. One of our Syriac citizens, who's a builder, bought land, took money from a bank and wanted to build houses and sell them. Then when he wanted to get a certificate to build, in the middle of the land, he came across a hole with eight frogs in it. The government of Sydney told him: 'You can't build on this land'. He said: 'But I've taken money from the bank and I must get to work' and they pushed him to build in another place, making him pay $1.4 million to build a different place for these eight frogs. And yet we are the last people who speak Jesus' language. We are Aramaic people and we don't have this right to have anyone protect us? Look upon us as frogs, we'll accept that — just protect us so we can stay in our land".

In an era of round-the-clock information on our mobile phones, computers, televisions and social media, the abominations suffered by Christians have been left without images, while the brutality against the Chinese pig was streamed all over. Christians are an endangered species; pigs are not. "The International Union for the Conservation of Nature has several categories to define the danger of extinction that various species face today", according to Benedict Kiely, the founder of, which helps the Christians of the Middle East.

"Using a percentage of population decline, the categories range from 'vulnerable species' (a 30-50 per cent decline), to 'critically endangered' (80-90 per cent) and finally to extinction. The Christian population of Iraq has shrunk by 83 per cent, putting it in the category of 'critically endangered'".

If you search for a cover dedicated to this extinction you have to go on the confessional media, such as the British weekly Catholic Herald, which just noted "The end of Iraqi Christianity?" Or the French Catholic media, La Croix, telling the story of Syrian Christians:

"Before the start of the civil war in 2012, 20,000 Assyrians populated the banks of the Khabur, a river that crosses northeastern Syria and flows into the Euphrates. The occupation of part of the region by Isis in 2015 forced the majority into exile. The Khabur is today a dead valley".

One of the last Nigerian Christians was executed by an Islamic State child soldier. Slaughterhouses' workers go on trial in France for abuses to animals. But the same France has already repatriated more than 250 ISIS fighters, the same people who turn Iraqi churches into slaughterhouses.

Western media stirred global indignation about Russia's laws against "homosexual propaganda" prior to the Winter Olympics in Sochi. But the same Western media never protested the Islamist regimes that punish people with the death for converting to Christianity or countries where Christians are threatened with death if they do not convert to Islam.

Mauro Armanino, a priest of the Society for African Missions in Niger, who describes a situation of open genocide, writes:

"The repeated threats to the Christian communities in the border area with Burkina Faso have achieved the aim they set: to decapitate the communities and then fall prey to the fear of professing faith in Sunday prayers in the chapels....On Tuesday, January 14, in a village not far from Bomoanga, which, for over a year, has helplessly witnessed the kidnapping of Father Pierluigi Maccalli, a group of criminals who went to settle the scores with the chief nurse who works in a dispensary in the area, took the nephew from his home and was beheaded. In Bomoanga people no longer go to church on Sunday".

These persecuted Christians feel more and more alone in a world that sees them as intruders. They are as if suspended in a limbo, between an amnesic and weak West and a rising radical Islam. There seems to be no way to push the Western world to become aware of this tragedy that no one talks about and which could have fatal consequences for the future of our civilization.

"Out of fatigue or shame, or both, we close our eyes", writes Franz-Olivier Giesbert.

"Does the life of Christians from East, Africa or Asia count for a negligible amount? This is a question that we have the right to ask when we see the place that our dear media give to the killings and discrimination that Catholics and Protestants are subjected to on the planet: nothing or almost nothing, with a few happy exceptions. It is our hypocrisy that feeds the clash of civilizations".

So, shall we now return to our hypocritical indignation about the cruelty inflicted on Chinese pigs?

Tyler Durden Mon, 01/27/2020 - 02:00
Published:1/27/2020 1:27:25 AM
[Markets] The Margin: Video: Iranian jet carrying 130 passengers skids off runway, comes to a stop on a crowded city street A Caspian Airlines plane with 130 people on board skidded off the runway in the Iranian city of Mahshahr on Sunday, according to Al-Arabiya, as onlookers captured video footage that quickly went viral across social media.
Published:1/27/2020 12:57:33 AM
[Markets] Asia Markets: Nikkei falls as coronavirus fears rise; most Asian markets remain closed for holiday Stocks fell in Japan on Monday, as most Asian markets remained closed for the Lunar New Year holiday.
Published:1/26/2020 10:56:51 PM
[Markets] Dead Hand: Russian Real-Life Doomsday Machine Dead Hand: Russian Real-Life Doomsday Machine

Submitted by SouthFront,

The existing system of international relations and arms control treaties is slowly, but steadily crumbling. The Intermediate-Range Nuclear Forces Treaty is dead, with both Washington and Moscow publicly developing previously banned short-to-medium range missiles. The New START (Strategic Arms Reduction Treaty) is also moving towards its end in 2021, and it is likely that New START will not be renewed. The United States, China and Russia are developing hypersonic weapons, which are not limited by any existing arms control treaties. The major powers are preparing for a possible global conflict. The dismantlement of the system of international treaties is another factor increasing military tensions around the world.

Russia is actively working towards restoring lost Soviet capabilities and developing new strategic deterrence projects. One of them is the Dead Hand, also known as the Perimeter. This Cold War-era automatic nuclear weapons-control system is one of the most protected secrets and most important deterrence tools of the USSR and Russia.

The Dead Hand is the last line of deterrence in the event of a crippling nuclear strike. It entered into service in 1985, shortly after a major escalation in 1983, which had almost led to war between the US and the Soviet Union. It has been likened to a real-life doomsday machine. Upon activation and determination of an ongoing nuclear strike, the system sends out command missiles with special warheads that pass encrypted launch commands to all nuclear weapon carriers of the sea, air and ground components of the Russian Strategic Nuclear Forces.

In peacetime conditions, the system slumbers, waiting for a turn-on command or an alarm signal from the missile attack early-warning system. It has a human “firewall,” for example, an on-duty officer who would switch it into the fully automated mode. Therefore, there is no risk of an accidental or unauthorized missile launch. Having received a command or signal about missiles being launched from the territory of other countries, this Dead Hand goes into an automated combat mode. Through a wide-scale sensor network, it monitors signs of an incoming nuclear strike.

The decision to launch command missiles is made by an autonomous control and command system – a complex pseudo-artificial intelligence system. The system receives and analyzes a variety of information about seismic activity, radiation, atmospheric pressure, and the intensity of chatter on military radio frequencies. It monitors telemetry from the observation posts of the strategic missile force and data from early warning systems.

Before launching, the system reportedly checks for four conditions:

  1. Once the system is activated it first determines if a nuclear explosion has taken place on Russian territory;

  2. If this is determined, the system will then check the communication link with the General Staff operation center;

  3. If a connection is established the system will After some time – from 15 minutes to 1 hour – passing without any further signs of an attack, it will assume that a number of the officials with the authority to give the order to strike are still alive  and the system will shut down;

  4. If the General Staff operation center does not respond, the system sends a request to Kazbek, the automatic system for command and control of the Strategic Nuclear Forces. If there is no response there either, the system automatically transfers launch authority to the command bunker personnel and launches the retaliatory strike.

All of the channels through which the Dead Hand receives its information are backed up multiple times, to remove the possibility of false information being fed to it.

According to openly available data, the Dead Hand is an integral part of the “Zveno” system of air command posts, the development of which was carried out in the Soviet Union. The “Zveno” includes the airborne command and control post on the Il-86VKP aircraft, airborne radio relay on the Il-76RT aircraft, silo-based command missiles ‘Perimeter’ and mobile command missiles ‘Gorn’. In a period of threat, three Il-86VKPs would have the Supreme Commander-in-Chief of the Armed Forces, the Defense Minister and the Chief of the General Staff respectively on board. The Il-86VKP is able to launch an 8 km long antenna, which not even impulses from nuclear explosions can affect. Using this antenna the aircraft can transmit commands to launch all the country’s intercontinental missiles even if all underground command posts are destroyed by the aggressor’s nuclear strike. The radio relay aircraft Il-76RT would transmit commands to launch missiles in distant regions, including those deployed on submarines. In this way, the Dead Hand guarantees a devastating retaliatory strike in the event of communications disruption and the destruction of command posts after the first-strike surprise nuclear attack by the enemy. Its command missiles launch their warheads into space, where no hostile satellite or nuclear explosions can reach them and from there “wake up” nuclear forces to strike the aggressor.

The dissolution of the USSR in 1991 led to a deep social and economic crisis on the territory of the former Soviet republics. The Russian Armed Forces also entered a period of crisis. In 1995, the Dead Hand was removed from combat duty. After the start of the ‘Putin era’ and the restoration of proper funding for the R