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Dangerous Chemical Containers Still Leaking At Destroyed Beirut Port; Initial Cause Of Fire ...

Tue, 11 Aug 2020 14:45:00 GMT

Dangerous Chemical Containers Still Leaking At Destroyed Beirut Port; Initial Cause Of Fire RevealedTyler DurdenTue, 08/11/2020 - 10:45

In a continuing clean-up effort amid a dangerous and potentially toxic environment, leaking chemical containers are posing a challenge to crews working to inspect and secure the Beirut port section which was site of what's being deemed the largest non-military munitions explosion in history on August 4.

"Chemical experts and firefighters are working to secure at least 20 potentially dangerous chemical containers at the explosion-shattered port of Beirut, after finding one that was leaking, according to a member of a French cleanup team," the AP reports.

An international team, including French experts, is working to assess hazardous materials possibly leaking at the destroyed port, via AP.

Chemical containers were in many cases found punctured following the detonation of over 2,500 tons of ammonium nitrate.

"French and Italian chemical experts working amid the remains of the port have so far identified more than 20 containers carrying dangerous chemicals," AP continues.

“We noted the presence of containers with the chemical danger symbol. And then noted that one of the containers was leaking,” one French chemical expert working at the site said. “There are also other flammable liquids in other containers, there are also batteries, or other kind of products which could increase the risk of potential explosion,” he added.

An international response team working with the Lebanese government is attempting to identify and contain any leaked chemicals at ground zero for the blast — which was feared to have emitted dangerous gases into the air over the city in the wake of last Tuesday's deadly accident. The death toll has risen to over 200, including more than 6,000 injured, many of them severely.

More has been learned and confirmed about what precisely started the deadly fire which detonated the highly explosive and volatile ammonium nitrate, commonly used in fertilizer and professional explosives.

Lebanese media as well as Reuters has widely reported the fire started after welding work was done in the very warehouse containing the volatile chemical compound.

It appears the welding crew had no idea that both ammonium nitrate and (astoundingly) a cache of fireworks were being stored on site.

ROCKED: Eyewitness video shot from a boat off Beirut shows a dramatic new angle of the explosion that killed at least 160 people and injured thousands, with the Lebanese government resigning on Monday amid anger and unrest in the wake of the blast. https://t.co/6tgFYYPUPA pic.twitter.com/vjlwKm4brS
— ABC News (@ABC) August 11, 2020

It was reportedly maintenance work on the door of Warehouse 12 - now location of a huge crater which has forever altered the port and coastline.

Port officials reportedly tried to warn top government officials and the Lebanese judiciary for years that the ammonium nitrate, stored there since 2013 in unsafe conditions, was a ticking time bomb in their midst.

S&P 3,750... "Light At The End Of The Tunnel" Or Oncoming Train?

Tue, 11 Aug 2020 14:25:17 GMT

S&P 3,750... "Light At The End Of The Tunnel" Or Oncoming Train?Tyler DurdenTue, 08/11/2020 - 10:25

Authored by Lance Roberts via RealInvestmentAdvice.com,

Mentally, it has been a challenge to marry a market challenging all-time highs against a backdrop of weaker earnings, falling profits, surging unemployment, and a recessionary economy. Yet, here we are. While the bulls have set S&P targets to 3750 over the next 12-months while bearish signals persist. For investors it will be the difference in determining the “light” from the “train.”

As discussed in “Bulls Chant Into A Megaphone,”

“A breakout of the consolidation range, which was capped by the June highs, would put all-time highs into focus.”

Of course, we also discussed the importance of the issue of the “capitalization effect” on the market’s advance, mainly since Apple and Microsoft make up such a significant weight. As noted by Sentiment Trader last week:

“The most significant stock in the U.S. and nearly the world, Apple, keeps powering higher. At the end of June, the value of Apple alone was almost 80% of the Russell 2000 index’s market capitalization. As of today, it’s nearly 90%. Such is astounding – in the past 40 years, no single stock has come close to dwarfing the value of so many other companies. “

Recapping The Math

“Currently, the top-5 S&P stocks by market capitalization (AAPL, AMZN, GOOG, FB, and MSFT) make up the same amount of the S&P 500 as the bottom 394 stocks. Those same five also comprise 26% of the index alone. “

“What investors are missing is that the top-5 stocks are distorting the movements in the overall index.
Putting $1 into each of the top-5 stocks has the same impact as putting $1 into each of the bottom 394 stocks. Such is not a true representation of either the market or the economy.
As we have noted recently, if you own anything OTHER than those top-5 stocks, your portfolio is likely underperforming the market this year.”

The distortion in the markets caused by the flows into the Mega cap stocks will most certainly be a problem. While investors have chased markets higher, these Megacaps will eventually also lead the markets lower.

The question, as always, is the timing and catalyst, which eventually reverses the money flows.

In the meantime, the question is, what is the most logical next target for the S&P 500 if bulls can achieve new “all-time” highs?

Bulls Target 3750

Technical analysis works well when there are defined “knowns” such as a previous top (resistance) or bottom (support) from which to build analysis. However, when markets break out to new highs, it is becomes much more of a “wild @$$ guess” or “WAG.”

Lately, the bulls are running amok trying to predict how much higher the bull market can go. As noted on CNBC:

“We may stall here for a while into the fall, … but I think you’re going to get a rocket ship coming in the fall. I think the S&P is going to trade out above 4,000.” – Jeffrey Saut

When discussing the current “risk/reward ranges,” , 4000 was one of the targets discussed. To wit:

“With the markets closing just at all-time highs, we can only guess where the next market peak will be. Therefore, to gauge risk and reward ranges, we have set targets at 3500, 3750, and 4000 or 4.4%, 12.2%, and 19.5%, respectively.”

“Given there is no good measure to justify upside potential from a breakout to new highs, you can personally go through a lot of mental exercises. While there is certainly a potential the market could rally 19.9% to 4000, it is also just as reasonable the market could decline 22.2% test the March closing lows.
Just in case you think that can’t happen, just remember no one was expecting a 35% decline in March, either.”

No Real Basis For 4000

The problem with calls for “S&P 4000” is there is no technical or fundamental basis for the assumption.

From a fundamental perspective, if we assume current 2021 estimates are correct, the market will be trading at 26x forward reported earnings. However, given estimates are regularly 30% too high, forward reported earnings will be closer to $130/share leaving valuations at 30x.

Valuations may not seem to matter currently. However, if the economy continues to lag, and employment and wages weaken, they will. Corporate earnings and profits are going to become more critical. Already, the deviation between the market and corporate profits is at extremes. As with all extremes, an eventual reversion completes the cycle.

Furthermore, given the depth of the profits decline, it is improbable that earnings will remain at these levels and not worsen.

Importantly, while “valuations” may not seem to matter at the moment, they always, without exception, eventually do.

Technical Deviations

Secondly, the technical trends don’t support S&P 4000 either.

From the 2009 lows, the S&P has traded withing a fairly defined trend channel, as shown below. The upper bullish trend line, which coincides with the February 2020 market peak and the polynomial trend line, suggests 3750 as the next target.

As noted above, such would suggest a 12.2% advance from Friday’s close. While Saut’s 4000 number sounds excellent, such would violate trends that have existed for 11-years.

Furthermore, 3750, much less 4000, is going to stretch the deviation from the long-term bullish trendline (lower line) to more extreme levels. The last time the market reached this extreme was in February of this year. It is also notable that 3750 also intersects with the accelerated trendline from the 2016 lows.

As noted previously, trend lines and moving averages tend to act as “gravity.” The further away from the trendline, the market becomes, the greater the pull becomes.

Warning Signs

It the short-term, the market seems to be headed higher. However, it is worth remembering that every previous peak of the market since 2016 has been from “all-time” highs.

With the market at all-time highs, there are numerous warning signs of excess built up, which could trigger a reversion.

Low participation
An extremely low put/call ratio (speculative excess)
Markets trading 2- and 3- standard deviations above their means.
Large deviations from respective 200-dma’s
High levels of investor optimism (chart below)
A historical deviation between value and growth.
A high level of equity allocations
Technical extremes (RIAPro technical gauge below)

Currently, the evidence is mounting that markets are reaching the limits of the current move. By itself, these signs reflect the prevailing extremely bullish attitude of market participants. However, much like an explosive, at some point, an unexpected, exogenous event occurs. That event is the catalyst which ignites the chain reaction. The ensuing “reversion” to the trend catches overly confident “bulls” off guard.

Light At The End Of The Tunnel

The problem for investors currently is there is precious little that hasn’t already been fully priced into the market.

A full economic recovery
A return to full unemployment
More stimulus
Low bond yields
No recession
A return to pre-pandemic earnings levels

The problem comes when one, or more, of those things, fails to occur. Paul Singer of Elliot Management had a significant point in this regard:

“We cannot think of another time when the basic terms and conditions of making – and more to the point keeping – money were more challenged. The planet’s central bankers seem desperate to hold up all stock markets and keep them from tumbling to the floor. They think that’s the way to run monetary policy and, actually, fiscal policy as well. The fact that public policy is on a slippery slope to monetary ruin – and the slide is steepening – escapes their limited reasoning capability.
They appear to think that so long as there is a model or theory to support their policies and no immediate catastrophe, they can keep doing it. The political winds are hot and fierce, blowing in the face of economic freedom and profits. There has never been a time when it was more important to protect the downside, so that at least nominal capital values are preserved.
However, the reason capital doesn’t just build and build (given all the geniuses in the investment world) is simple: With normal approaches to money management, the march up in compounded value gets interrupted by big losses or wipeouts at infrequent, unpredictable intervals. Sometimes one can “see the train a’comin'”

However, most of the time, investors don’t see the “train,” but mistakenly believe it’s the “light at the end of the tunnel.”

Conclusion

Price action still confirms relative weakness as shown by the percentage of stocks above the 200-dma. Furthermore, the recent rally was primarily focused in the largest capitalization-based companies. These indications suggest market action remains reminiscent of a market topping process rather than the beginning of a new leg of the bull market. With the market trading 3-standard deviations above its 50-dma, and very overbought, such was the same setup we saw at the beginning of the year.

I am not suggesting that the market is on the precipice of another 35% plunge. I am suggesting that the current market and economic dynamics are not as stable as they were following previous market corrections.

The challenge for investors will be the navigation of the markets to ensure they see the “train,” and not the “light.”

Importantly, while the “always bullish” media tends to dismiss warning signs as “just being bearish,” such unheeded warnings have been detrimental.

Complacency is not a great option for managing your capital.

Trump 'Seriously Mulling' Capital Gains Tax Cut

Tue, 11 Aug 2020 14:11:57 GMT

Trump 'Seriously Mulling' Capital Gains Tax CutTyler DurdenTue, 08/11/2020 - 10:11

President Trump on Monday said he's "very seriously" considering slashing the capital gains tax via executive order, according to Bloomberg.

"We're looking at also considering a capital gains tax cut, which would create a lot more jobs," said Trump during a White House news conference.

The president can’t unilaterally cut the 20% long-term capital gains rate without Congress, but some advisers tell him he could issue an executive order that would slash tax bills for investors when they sell assets. The move, known as indexing capital gains to inflation, adjusts the original purchase price of an asset when it is sold so no tax is paid on appreciation tied to inflation. -Bloomberg

The move would undoubtedly face legal challenges by Democrats - which is apparently why President George H.W. Bush's administration ditched a similar plan, according to the report. Though given Trump's weekend executive order bypassing Congress to renew lapsed coronavirus relief funds and delay payroll taxes - it's hard not to wonder if the capital gains tax announcement is designed to goad his political opponents into openly opposing actions that benefit US taxpayers during an election year.

Last year, Trump passed on the idea of indexing capital gains to inflation despite urging from conservatives such as Sen. Ted Cruz (R-TX) and Americans for Tax Reform President Grover Norquist - saying "it's not something I love."

Most of the benefit of the tax cut would go to America's highest earners, with the top 1% receiving 86% of the benefit, according to Bloomberg, citing 2018 estimates by the Penn Wharton Budget Model - and could reduce federal tax revenue by $102 billion over a decade.

Trump is also considering a "cut in the middle income tax" which would require Congress to pass legislation - a move which is unlikely to happen before the end of the year.

Fact-Checking Fauci

Tue, 11 Aug 2020 13:55:43 GMT

Fact-Checking FauciTyler DurdenTue, 08/11/2020 - 09:55

Authored by Phillip Magness via The American Institute for Economic Research,

In recent congressional testimony Dr. Anthony Fauci, the primary architect of the Trump administration’s COVID response, painted a bleak picture about the United States’s ability to contain the pandemic. According to Fauci’s narrative, the United States is experiencing a resurgence in regional COVID outbreaks because it failed to sufficiently lock down back in March, and failed to comply with the existing lockdown orders. Fauci specifically contrasted this situation to several European states that imposed lockdowns around the same time, claiming the latter as a successful model for COVID containment.

There are several immediate problems with Fauci’s arguments, including the fact that COVID cases are showing clear signs of a summer resurgence in the same European countries that allegedly tamed the virus through harsh lockdowns in the spring. The American news media however has seized on Fauci’s narrative, and used it to call for renewed lockdowns. The New York Times and the Washington Post both editorialized in favor of a second stricter wave of nationwide lockdowns lasting until October – this despite there being no clear evidence that lockdowns actually work at taming the virus.

So how does the evidence behind this narrative stand up under empirical scrutiny? Let’s consider the claims.

Did the United States react too late?

According to the pro-lockdown narrative, the United States is experiencing a second COVID wave because it took a lackadaisical approach to locking down. We allegedly closed too late and reopened too early, leading to a failure to tame the virus in the spring. This same narrative often holds up Europe as a counterpoint for what a cautious, responsible, and evidence-based reopening process supposedly looks like.

I’ve investigated this claim previously using start and end dates for the lockdowns in various countries. Simply put, it is entirely without merit.

Most of the United States went into lockdown during the second and third weeks of March, following a set of Trump Administration recommendations that were based on the now-discredited Imperial College epidemiology model of Neil Ferguson. In total, 43 of 50 American states imposed shelter-in-place style lockdowns, with the holdouts consisting almost entirely of rural western states with low population density and few signs of the outbreaks that plagued the cities of the northeast at that time.

As far as timing goes, the US lockdowns came into effect at almost exactly the same time as not only Europe but the majority of the world. A few early outbreak hotspots such as Italy preceded this shutdown by about 2 weeks, and a handful of countries (Sweden, Taiwan, Belarus) bucked the international trend. But otherwise, the timeline clearly confirms that the American response directly coincided with most other countries.

Did the US reopen too early?

What about reopening then? As I also previously discussed, the United States has generally lagged behind most of Europe in removing the lockdown measures from March and April. Most European countries began their reopening efforts in late April or early May. As of June 1st, the United States’s COVID response stringency score – a measurement of lockdowns and related closures maintained by Oxford University’s Blavatnik School of Government – outranked every Western European nation except for Ireland and Belgium.

Although some US states such as Georgia, Colorado, and Texas began to reopen in late April, this process began no earlier than the first of their European counterparts. Far more often, American states have lagged behind Europe by as much as a month or longer. Several hard-hit states such as New York, New Jersey, and Massachusetts, as well as population centers such as California, adopted a strategy of extremely cautious and tepid reopening. Many extended their shelter-in-place mandates until late May or even June. They also adopted lengthy bureaucratic reopening guidelines that spread the process over several phases to the point that most of the US remains more heavily restricted than Europe to this very moment.

Equally revealing, we may still see the clear effects of the United States’ slower reopening in key metrics from Google’s publicly released cell phone mobility data. From the start of the lockdowns in March until roughly mid-May, US mobility patterns map almost identically onto at least three European countries that similarly locked down: Germany, the Netherlands, and Finland. All three of these countries began to reopen during the first and second weeks of May. Large swaths of the US, and particularly its population centers, remained under lockdown or only a heavily restricted reopening at this point.

The divergence in policies is clearly visible in Google mobility patterns. Whereas Germany, Finland, and the Netherlands all returned to near-normal levels of mobility in late May and June, the United States’ reopening process stalled around the same time and remains at a plateau that is still well-below normal.

The pattern also appears when we compare the US to other European countries, including those that – at least temporarily – had more stringent shelter-in-place orders in effect. In most European states, mobility patterns rebounded past the United States in early to mid-June after the American reopening stalled. Today, only the UK exhibits a more pronounced closure than the US while Spain similarly plateaued.

Were the US lockdowns less stringent than Europe?

According to Fauci’s testimony, the US imposed far less-stringent lockdown measures than Europe, which he then attributes to the resurgence in cases. This is a complex question to answer because European states varied quite a bit in their lockdown policies and the duration of each. That much noted, nation-level scores such as the Oxford stringency index belie the claim.

The Oxford index uses a 0 to 100 score to measure stringency, awarding points for a variety of policies including border closures, school closures, event cancellation, non-essential business closures, and shelter-in-place mandates, as well as other non-pharmaceutical interventions such as public information campaigns. From the start of the lockdowns in mid-March until June, the United States stringency score sat at 72.69 out of 100. This was comparable to the peak score for the Netherlands (79.63), Germany (73.15), Norway (79.63), Denmark (72.22), and Switzerland (73.15). It was also above Finland’s peak score (60.19) as well as Sweden (40.74), the latter of which did not go into lockdown and only adopted more modest social distancing guidelines.

The US did have a less-stringent score than some of the hardest-hit European countries – but only temporarily. Italy (93.52), France (90.74), Ireland (90.74), and Spain (85.19) imposed more stringent lockdowns than the US, but only for about two months between March and April before rapidly relaxing their restrictions.

Fauci presumably had this much smaller list of countries in mind when he claimed they employed a stricter lockdown than the US, although the evidence is flimsy at best. Measured on a per-capita fatality basis, Italy and Spain had more severe outbreaks than the US, and France currently sits at near-parity. These patterns may change, particularly as each country experiences a second wave in the late summer, but they do not exhibit even modest inverse correlation with the lockdown policies of each country. If anything, the more-stringent policies in locales such as Italy and Spain were likely reactive – they were imposed out of desperation in response to a viral outbreak that appeared to be spinning out of control in these early months. Indeed, the mobility data suggest as much with the most severe declines from the March-April period occurring in the hardest-hit locales and generally starting slightly before they went into lockdown.

Returning to the United States, we see similar variation in the mobility declines when we compare hard-hit states such as New Jersey and Massachusetts with non-lockdown states such as Wyoming and South Dakota (New York breaks somewhat from this trend somewhat, although this is likely a result of substantial in-state variation between hotspots such as New York City and the rest of the state).

These data suggest the claimed effects of more-severe lockdowns cannot be separated from either severity of the outbreak in a given region or the voluntary behavioral responses to the same. This problem afflicts both the worst-hit European countries and the worst-hit US states, but it does not illustrate a failure to impose sufficient lockdowns in each.

In sum, there’s no clear evidence that aligns with Fauci’s claims about European lockdown stringency. On the whole, the US locked down at a comparable level to several European countries according to the Oxford index, with the exception of the hardest-hit locales – and those locales only surpassed us during their peak outbreaks of March and April, followed by a much more rapid relaxation of the restrictions. Meanwhile the US has clearly retained its lockdown policies for longer than almost all of Europe, and continues to stall behind Europe’s reopening process.  

Is the US less compliant with public health mandates than Europe?

Although it is more of an implication than a claim from Fauci’s testimony, the media has embraced a final narrative that asserts the United States is less-compliant than Europe in obeying public health mandates. If this were true, the US might have nearly identical policies in place on paper and yet still perform poorly compared to European states where compliance was higher.

Unfortunately, compliance with public health mandates during COVID is difficult to measure. One exception is also a flashpoint of political debate in its own right – the wearing of masks.

Fortunately, extensive survey data exist to track mask-wearing habits of the public since the start of the pandemic. Last month the Economist magazine published a comparison of available survey response rates over time. Briefly summarized, roughly 70% of the US population indicates that it currently wears masks in public places. Mask-wearing has exceeded 60% in the US since early April, despite following several weeks of contradictory advice on masks from public health officials including Fauci himself. US mask-wearing rates are also higher than Canada. It also lags only slightly behind the roughly 80-90% usage rates in east Asian countries, where masks were already a much more common pandemic response.

The fascinating twist to the mask story though is Europe. Mask usage soared in Spain, Italy, and France during the peak of their outbreaks, topping just over 80% or slightly above the US. But mask-usage in Northern Europe remains far below US levels even to this day. No Scandinavian country topped 20% in mask usage even at the April peak of the pandemic (they’ve since declined in number), and the United Kingdom hovers at only 30% in the most recent polling from late June. All said, US mask-wearing is only slightly behind the worst-hit parts of Southern Europe and well ahead of Northern Europe. Insofar as masks may be used to signal compliance with a specific and high-profile public health mandate, there does not appear to be any evidence that the US has fallen behind other countries.

Making sense of it all

Collectively, the data above offer no clear support behind four major claims of the pro-lockdown narrative being spun by American media outlets in the wake of Fauci’s testimony. To the contrary, several data points directly conflict with both the express claims of Fauci’s testimony and its implied interpretations, as advanced by outlets such as the New York Times. The US response to the COVID-19 pandemic largely paralleled Europe in its early months, and only diverged from that pattern in the opposite direction of the media’s narrative. While Europe began to reopen and did so earlier and faster, the United States reopening has stalled.

What then are we to make of the recent case surges in the southern US and on the west coast? Most likely, they reflect the regional nature of the virus’s spread as it migrates into population centers than largely escaped the first wave in March and April. The threat of further spread remains a public health concern, particularly as it pertains to vulnerable populations such as nursing homes. But its pattern has little if anything to do with the lockdown orders – an ineffectual approach to mitigating the virus, but also one with severe social and economic harms.

Unfortunately, the pro-lockdown position favored by Fauci and several US media outlets has become a matter of ideological commitment. Whether they are doing so to rationalize the costs we have already incurred from this disastrous approach or to further politicize the pandemic response for a variety of electoral and partisan purposes, they have embraced a pro-lockdown stance that is unchained from any evidence or clear data.

It should not be surprising that their accompanying narrative to justify that stance is similarly detached from reality.

Big Ten Waffles After Public Outcry Including Trump Tweet: Might Not Cancel Season After All

Tue, 11 Aug 2020 13:35:00 GMT

Big Ten Waffles After Public Outcry Including Trump Tweet: Might Not Cancel Season After AllTyler DurdenTue, 08/11/2020 - 09:35

A headline-grabbing story originating in the Detroit Free Press shocked the college and sports world on Monday by reporting the Big Ten is set on cancelling the fall football season on coronavirus concerns. "It's done," a high-ranking source in the Big Ten was cited in the report.

"Multiple sources said early Monday morning that presidents voted 12-2 to not play this fall, though the Big Ten said Monday afternoon no official vote had taken place," according to the report, which was enough to drive headlines declaring the season was canceled.

However, an avalanche of pushback and public outry, from some players, coaches, and even the president of the United States, left the decision anything but final. "The student-athletes have been working too hard for their season to be canceled," Trump tweeted in response alongside the hashtag #WeWantToPlay, with a shared tweet by Clemson quarterback Trevor Lawrence.

The student-athletes have been working too hard for their season to be cancelled. #WeWantToPlay https://t.co/lI3CCKZ4ID
— Donald J. Trump (@realDonaldTrump) August 10, 2020

One college sports commentator noted: "A wild and wacky Monday ended without clarity from the Big Ten about a football season. Instead, the wait continues on a decision to play this fall, while pressure builds from some leagues and coaches."

The immediate public pushback appears to have worked or at least it delayed things, and reports now say the season might not be cancelled after all, with more high level Big Ten meetings set for Tuesday morning.

Not expecting any news tonight from #B1G, per sources. More meetings in the morning, sources say. In all my years covering Big Ten, can't remember a day when the league seemed more divided (presidents vs. coaches). Certainly could see presidents opting against a full postponement
— Adam Rittenberg (@ESPNRittenberg) August 11, 2020

Thus far the Ivy League, the Pac-12, and the Mid-American Conference, have all canceled their seasons.

While the majority of college presidents appear to stand on the side of cancellation for the sake of safety amid the pandemic, there are said to be other options being considered, like mere postponement of the game schedule.

Whatever happens, severe controversy is already ensured, given as SI describes:

"All of this was sparked by the Big Ten’s impending move to cancel its season. More than 24 hours after first reports published from ESPN, Yahoo Sports and SI of the Big Ten’s potential plans, the conference still hasn’t made an announcement and is now gripped in an internal strife that poured out into public Monday."

pic.twitter.com/NKvTXIpdqw
— TexAgs (@TexAgs) August 10, 2020

And further: "From high-ranking politicians to the league’s own coaches, a variety of personas strongly voiced their support for a 2020 season, some of them specifically targeting the Big Ten and commissioner Kevin Warren."

Gold, Silver, Bonds Hit As "Everything Duration"-Momo/Liquidity Trade Unwinds

Tue, 11 Aug 2020 13:22:35 GMT

Gold, Silver, Bonds Hit As "Everything Duration"-Momo/Liquidity Trade UnwindsTyler DurdenTue, 08/11/2020 - 09:22

Precious metals are getting pummeled this morning as real rates rise amid vaccine optimism and hotter than expected inflation data...

Bonds are also getting slammed with 10Y Yields back above 60bps at 10-day highs...

As Nomura's Charlie McElligott reiterates (from his call last week), "inflation expectations" are beginning to adjust higher - Inflation swaps in U.S. and Europe (fickle traders, no doubt) are beginning to tell a story of nascently accelerating global views towards forward inflation - something that was inconceivable to nearly all just a few months ago and now coinciding with the back-to-back weeks of U.S. M2 decline, showing a decrease in risk-aversion and saving and a “less bad” economic outlook from corporates.

And as real yields rise, gold prices fall...

As the Nomura MD has noted over the past few weeks, the SPX macro factor regime has transitioned from “Liquidity” macro factor measures which led the March Equities recovery:

1. Fed QE Expectations - 1y5y USD Rate Vol,
2. Fed Rate Cut Expectations - ED$ Curve,
3. USD Liquidity - FX Basis Swaps

...now into “Growth” inputs as the largest POSITIVE price-drivers for S&P 500 in the factor PCA model:

1. US and EU GDP NowCasting and
2. Inflation Swaps

But the most dramatic impacts of the reflation trade inflection are evident in the broad equity markets... where Nasdaq (tech - growth focused) is tumbling as Small Caps (financials/energy - value dominant) surge...

And as McElligott notes, US Equities factors are showing the most glaring expression of the market’s flat-footedness in their growth- and inflation- skepticism (and evidencing itself in the crowded “Everything Duration” Momentum-positioning which is evidently being de-grossed by somebody):

The current iteration of this U.S. Equities factor “Value / Momentum” swing (5d aggregate % chg) is a doozy, ranking as in the top six since at least 2010, going hand-in-hand with monster thematic- and sector- reversals.

The question is - how high will The Fed let nominal rate rise before it stomps on this reversal? As Morgan Stanely recently warned:

To be clear, we think that overall equity and credit markets can weather a modest rise in yields, driven by better data. Risk assets have frequently been happy to trade a better growth outlook for a higher discount rate, and we saw this pattern as recently as Monday when global PMIs surprised to the upside. But the rise in duration across asset classes, at its most expensive levels on record, suggests that the transition won’t be smooth.

Whether one is active or passive, August appears to be a good time to evaluate, and be honest about, your cross-asset duration exposure.

A Generational Opportunity In Commodities?

Tue, 11 Aug 2020 13:05:00 GMT

A Generational Opportunity In Commodities?Tyler DurdenTue, 08/11/2020 - 09:05

Authored by Jesse Felder via TheFelderReport.com,

I have been bearish on the dollar for the past couple of years. The main reason for this was the deteriorating fiscal situation here in the U.S. There is a good correlation between the federal deficit and the dollar over the long run. Lately, the fiscal situation has been deteriorating even more rapidly and, as a result, the dollar could easily decline 30-40% as it did during the last major bear market from 2002 to 2011.

You may recall that that bear market for the dollar was also a great time to own precious metals and commodities. The former has already had a terrific run which will likely continue for the next several years. The latter, however, has failed to keep pace – and that’s an understatement. In fact, while gold recently hit a new record high the CRB Index recently fell back to a level it first reached in 1973!

If the dollar is to decline again in a major way as a result of the rapid debt accumulation met with money printing for the explicit purpose of stoking inflation, commodities could prove be the best way to play it.

Better yet, considering just how cheap and out of favor commodities-focused equities have now become, they could present investors with a generational opportunity today.

New Zealand Revives Lockdown 2 Months After 'Declaring Victory' Over Coronavirus: Live Updates

Tue, 11 Aug 2020 12:49:25 GMT

New Zealand Revives Lockdown 2 Months After 'Declaring Victory' Over Coronavirus: Live UpdatesTyler DurdenTue, 08/11/2020 - 08:49

Summary:

Goldman weighs in on US outbreak
Auckland back on lockdown as first cluster of covid cases discovered in 102 days
Russia approves world's first COVID vaccine
Global COVID total tops 20 million

* * *

Update (0920ET): Here's an excerpt from Goldman's latest daily COVID research, which again affirmed that case numbers in the US continue to decline: "The number of new confirmed coronavirus cases has been declining nationally over the past few weeks, but case levels remain elevated in much of the country. The positive test rate has ticked down from its peak in July."

"But looking at additional testing data clouds the picture somewhat. The US is now performing fewer coronavirus tests nationwide compared to a couple weeks ago, with Florida and Texas contributing much of this decline. In these states and a few others, cases rose to very high levels in the summer virus resurgence and have now fallen sharply. But over the past few weeks as cases declined so did the number of tests conducted, leaving the positive test rate very elevated."

* * *

They really thought they had it licked.

After surmounting what was at worst an extremely mild outbreak, New Zealand declared "victory" over the coronavirus two months ago, only to see a mild spike two weeks later.

Since the very beginning, New Zealand's COVID-19 response effort, led by progressive prime minister Jacinda Ardern, was infused with the pinch of "compassionate" social justice, as the island nation focused on using it as an opportunity to look into how to recalibrate society to make more time for leisure by adopting a 4-day work-week.

But in its desperation to establish New Zealand as a liberal (and polar) antithesis to President Trump's America, Ardern made what now looks to be one critical error: She lifted practically all of the country's COVID travel restrictions after her sweeping "victory" declaration.

That, and slowly allowing businesses to reopen, has apparently helped give the virus all it needs for another flareup which, however comparatively minor to what's going on just next door in Victoria, Australia, has forced Ardern to order a new lockdown, just as doubts about the efficacy of such lockdowns are growing.

New Zealand announced on Tuesday it would shut down Auckland, its largest city (though not the capital), after four new cases of the virus were confirmed in the city, the first sign of new domestic spread after 102 days without any domestic COVID cases.

NZ's Director General of Health Ashley Bloomfield said the four confirmed cases were all within one family living in South Auckland. One patient is in their 50s. The family had no history of international travel. Family members have been tested and contact tracing - which might actually prove pretty effective with such a small body of the infected - is being carried out.

News of the cases sent panic across the country with media reporting people rushing to supermarkets to stack up, and businesses preparing to shut.

Prime Minister Jacinda Ardern said Auckland would return to a "level 3 restriction" beginning at noon local time on Wednesday as a "precautionary approach," which would mean people should stay away from work and school, and gatherings or more than 10 people would again be restricted. Though, with so few cases, even these economically-constricting decisions might be overkill.

Though fortunately, these restriction would be applied for three days until Friday, which she said would be enough time to assess the situation, gather information and make sure there's enough widespread contact tracing.

Meanwhile, the world finally crossed a major COVID-19 threshold last night: 20 million confirmed cases, according to JHU. As we reported last night.

As expected, Johns Hopkins has just confirmed that the number of confirmed COVID-19 cases worldwide has surpassed 20 million since the start of the pandemic. Of those, more than 700,000 have died.
It comes just days after the US, the world's biggest outbreak, topped 5 million, and Brazil, the No. 2, topped 3 million.

Aside from this, perhaps the biggest COVID-related news of the day is coming out of Russia, where Vladimir Putin just hailed the approval of the country's - and the world's - first COVID-19 vaccine to be approved by a regulator.

Day-Traders Send US Producer Prices Soaring In July

Tue, 11 Aug 2020 12:40:54 GMT

Day-Traders Send US Producer Prices Soaring In July Tyler DurdenTue, 08/11/2020 - 08:40

US Producer prices were expected to rise MoM following four declines in the last five months and they did, rising 0.6% MoM (double the expected 0.3% MoM rise). However, this was not enough to unwind the annual deflationary print (PPI -0.4% YoY)

Source: Bloomberg

This is the biggest MoM jump in headline PPI since Oct 2018.

Ex-food-and-energy, the beat was even more impressive with a 0.5% MoM spike vs 0.1% expected which lifted YoY Core PPI off its multi-year lows...

Source: Bloomberg

The biggest driver of this rebound was energy goods as food prices continue to slide.

However, even more stunning was a 7.8% surge in the index for portfolio management was a major factor in the
advance in prices for final demand services.

The indexes for machinery and vehicle wholesaling, automobiles and automobile parts retailing, long-distance motor carrying, legal services, and machinery and equipment parts and supplies wholesaling also moved higher. Conversely, prices for airline passenger
services decreased 7.0 percent. The indexes for automotive fuels and lubricants retailing and for guestroom rental also declined.

Over one-third of the July advance in the index for final demand goods is attributable to gasoline prices, which rose 10.1 percent. The indexes for diesel fuel, home heating oil, electric power, fluid milk products, and industrial chemicals also increased. Conversely, meat prices fell 8.0 percent. The indexes for residential natural gas and carbon steel scrap also decreased.

S&P Futures Hit All Time Highs On Stimulus, Vaccine Hopes; Gold, Silver Tumble

Tue, 11 Aug 2020 12:27:15 GMT

S&P Futures Hit All Time Highs On Stimulus, Vaccine Hopes; Gold, Silver TumbleTyler DurdenTue, 08/11/2020 - 08:27

S&P 500 futures hit a record high as investors shrugged off continuing U.S.-China tensions and instead focused on news of an approved, if largely unclear, Russian vaccine, and more stimulus optimism as President Donald Trump said he’s considering a tax cut on capital gains. According to Reuters calculations at the current levels, the benchmark index is set to open about 12 points below its Feb. 19 record peak of 3,393.52.

American Airlines and Carnival led a boom in travel shares in the premarket. The S&P 500 closed less than 1% below its record high on Monday as investors extended a rotation into value stocks from heavyweight tech-related names. At 8:00 a.m. ET, S&P 500 e-minis were up 23.25 points, or 0.69%, topping an all-time high of 3,372.25 points last hit on Feb. 20.
A rally in the tech megacaps including Amazon.com, Netflix and Apple that thrived during the shutdowns helped the Nasdaq reclaim its all-time high in June, while the Dow still remains about 6% below its peak.

“Equity has never looked cheaper compared to fixed income and the like,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said in a Bloomberg TV interview.“If you want any return, any yield, any income or even any growth you have to go to equities.”

In Europe and Asia, a broad rally from industrial goods to health-care shares set the Stoxx Europe 600 Index headed for its best increase since mid-June. The Stoxx 600 Europe index rose more than 2% , with auto shares leading the way after a surge in Chinese car sales. The Stoxx 600 Travel & Leisure Index jumps as much as 4.8%, to the highest since June 11, amid investor optimism about the development of a vaccine for the coronavirus and after InterContinental Hotels said it is seeing some very early signs of improvement as traveller confidence returns, sending its stock up 6.1%. The subgroup was among the biggest advancers in Europe’s Stoxx 600 Index, which is up 2.1% after President Vladimir Putin said Russia has registered its first Covid-19 vaccine, though some pharmaceutical companies have called Russia’s rushed registration dangerous. Airline stocks also rose: IAG +7.8%, EasyJet +6.5%, Lufthansa +4.7%, Ryanair +4%, Turkish Airlines +8%.

Earlier in the session, Asian shares ex-Japan gained nearly 1%, with Japan's Nikkei rising 1.9% after a Monday holiday. There were hopes Beijing’s sanctions on 11 U.S. citizens may end this round of tit-for-tat moves between the two powers.

“It has left the White House untouched,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore. “That gives some relief that China is still giving some priority to the (trade deal) dialogue,” he said.

Elsewhere, the resignation of Lebanon’s government after the devastating explosion in Beirut threatened to upend prospects of a debt restructuring deal in the next few months.

Market participants remain eager to see an agreement on the fifth federal aid bill to help Americans battle with the health crisis was far from over with U.S. cases surpassing 5 million last week. The mood remains cautious as sparring continues in the U.S. Congress over extending fiscal stimulus while economic data such as a steep drop in South Korean exports and a rise in UK jobless rates remain a cause for concern. But upbeat comments by U.S. Treasury Secretary Steven Mnuchin on the prospects for a bipartisan stimulus deal supported Brent crude futures at near five-month highs and kept the dollar index near a one-week peak.

Commerzbank analysts said markets were shrugging off doubts over the legality of Trump’s order and appeared convinced Congress would agree a deal

"Not without good reason, because in the election campaign both parties have an interest in presenting themselves well,” they said. "Who wants to be seen as the stingy bad guy even in times of great need?"

General optimism kept safe haven assets under gentle pressure, with gold falling back under $2000 an ounce, down more than 2%, even as the dollar slumped. Precious metals dropped with spot gold south of $2000 and spot silver just about holding onto a USD 28/oz handle having briefly dipped below the figure. No fundamental news flow coincided with the losses across precious metals but action could merely be a function of tech play alongside some profit taking/stops being triggered. But the most likely reason for the back down in gold prices is that 10Y real rates - which gold has been tracking tick for tick - also dipped from recent record lows.

In FX, the dollar slipped as European stocks follow Asian equities higher, with markets taking encouragement from falling hospitalization rates in California and New York and decreasing new infections in Hong Kong. The euro rose as much as 0.5% after ZEW data revealed investors raised their expectations of a rebound for the German economy in August. Italy’s 10-year yield premium over its German equivalent tightened to its lowest level since February.

In rates, ten-year U.S. Treasury yields were near a two-week high of 0.5870% while German yields likewise rose to two-week highs. Treasury yields were cheaper by 1bp to 2.5bp across the curve led by long end, steepening 2s10s, 5s30s by 1.6bp and 1bp; 10-year yields around 0.60% while bunds, gilts both lag by ~1bp. Ahead of 3-year auction, WI yield is ~0.160%, 3bp richer than July’s record low stop at 0.19%; refunding includes $38b 10-year Wednesday and $26b 30-year Thursday; all sizes are records.

In commodities, WTI and Brent continue to grind higher in early trade, with upside more-so a function of the overall risk tone as opposed to fresh fundamental catalysts, albeit prices remain underpinned by the recent upbeat assessment from Saudi, Iraq and Gulf members alongside the constructive outlook by Saudi Aramco post-earnings. Looking ahead, traders will be eyeing the weekly API inventory release, with expectations for crude stockpiles to decline by almost 4mln barrels, but ahead of the weekly release, participants will pay attention to the EIA Short Term energy Outlook which will include US crude production forecasts for the rest of 2020 and 2021. In terms of base metals, Dalian iron ore futures snapped its two-day losing streak as prices were bolstered by falling portside inventories, whilst LME copper prices saw early downside.

Looking at the day ahead, and data releases out include UK unemployment data for June, the German ZEW survey for August, as well as July’s PPI reading and the NFIB small business optimism index from the US. Otherwise, Fed speakers today include Barkin, Daly and Brainard.

Market Snapshot

S&P 500 futures up 0.6% to 3,371.75
STOXX Europe 600 up 1.8% to 371.07
MXAP up 1.1% to 169.75
MXAPJ up 0.6% to 562.38
Nikkei up 1.9% to 22,750.24
Topix up 2.5% to 1,585.96
Hang Seng Index up 2.1% to 24,890.68
Shanghai Composite down 1.2% to 3,340.29
Sensex up 0.9% to 38,507.25
Australia S&P/ASX 200 up 0.5% to 6,138.65
Kospi up 1.4% to 2,418.67
German 10Y yield rose 1.3 bps to -0.513%
Euro up 0.3% to $1.1768
Brent Futures up 0.8% to $45.33/bbl
Italian 10Y yield fell 0.8 bps to 0.795%
Spanish 10Y yield fell 0.2 bps to 0.253%
Brent Futures up 0.8% to $45.33/bbl
Gold spot down 2.1% to $1,985.04
U.S. Dollar Index down 0.2% to 93.44

Top Overnight News from Bloomberg

Britain’s mounting labor market crisis was underscored by a 220,000 slump in employment during the height of the coronavirus lockdown, the worst decline since the global financial crisis
Even as China continues to hit back at the Trump administration, leaders in Beijing are also signaling they want to ease tensions with the U.S. as the clock ticks down to the presidential election
Lebanon’s political leaders are expected to launch parliamentary consultations to choose a new prime minister after Hassan Diab’s government resigned on Monday over the devastating explosion at Beirut’s port
Hong Kong’s worst coronavirus outbreak is showing signs of coming under control as the city reported the lowest number of new local infections since its resurgence began over a month ago

A quick look at global markets courtesy of NewsSquawk:

Asian equity markets traded higher as risk appetite in the region improved on the tepid performance seen on Wall St where most major indices finished in the green but tech underperformed and indecision lingered amid the ongoing stimulus talks stalemate, mixed views on President Trump’s recent executive orders and ongoing US-China tensions. ASX 200 (+0.5%) was positive as top-weighted financials spearheaded the advances and with the broad sector gains offsetting the weakness in gold miners and tech, while Nikkei 225 (+1.8%) was buoyed on return from an extended weekend helped by a predominantly weaker currency and after bank lending increased by its fastest pace on record. Hang Seng (+2.1%) and Shanghai Comp. (-1.2%) conformed to the upbeat mood after the PBoC upped its liquidity efforts with a CNY 50bln reverse repo injection and although China announced sanctions against officials in retaliation to US sanctions on Hong Kong, they refrained from imposing them on Trump administration officials. Furthermore, casino stocks are red-hot after reports China is to remove the quarantine requirement for Macau effective tomorrow and Next Digital shares surged over 400% in an extension of yesterday’s sharp intraday turnaround as activists piled into the shares in a show of support following the founder’s recent arrest and amid speculation it could sell its listed entity as a shell for other firms to acquire for a back-door listing. Finally, 10yr JGBs were lower and approached 152.00 to the downside as they played catch up to the recent weakness in T-notes and as havens were shunned amid gains in riskier assets, while the lack of BoJ presence in the market also added to the dampened mood for JGBs.

Top Asian News

One of World’s Strongest Rallies Propels Kospi to Two-Year High
Tough-to-Impress Harvard Grad Molds Fortunes of China’s Rich
Singapore’s Economy Posts Worse Contraction in Second Quarter
Iron Ore Futures Gain as China’s Economic Recovery Fuels Demand

European equities trade higher across the board [Euro Stoxx 50 +2.7%], with upside accelerating after the cash open as sentiment improved following an initially bleak APAC handover – prompting DAX cash and Sept futures to gain above 13k, albeit fresh fundamental catalysts remain light throughout the session thus far; some modest impetus coincided with vaccine updates from Russia. Firm gains are also seen across all European sectors, with cyclicals/value clearly outpacing defensives, whilst the breakdown paints a similarly performance, with Travel & Leisure topping the chart, closely followed by Oil & Gas, Autos and Banks, whilst the other side of the spectrum sees Healthcare and Chemicals as the laggards. In terms of individual movers, UK listed Cineworld (+17%) extended on earlier gains and resides at the top of the Stoxx 600 amid reports that the group could go private. BP (+3.7%) coattails on the back of firmer energy prices coupled with source reports the group is said to be mulling the sale of its German chemicals’ unit DHC Solvent Chemie. Mediobanca (+5.9%) extends on opening gains after the ECB gave the green-light for shareholder Del Vecchio to increase his stake in the Co. to 13-14% from 10%.

Top European News

Hungary Inflation Surges, Putting Rate Policy Back in Focus
U.K. Jobs Crisis Worsens as Employment Drops Most Since 2009
Vestas Shares Surge as 2020 Revenue Guidance Reintroduced
Unilever Warns of Dutch Tax Proposal’s Risk for Plan to Move

In FX, another back up in US Treasury yields and mild steepening along the curve into record refunding has underpinned the Dollar to a degree, but a deeper retracement in spot bullion to test support around the psychological Usd 2000/oz level coincided with the DXY marginally eclipsing Monday’s high at 93.729. However, the Greenback has lost momentum against the backdrop of extended gains in global equities that is keeping high beta/cyclical currencies supported and safe-haven demand suppressed.

AUD/NZD/CAD/NOK – As noted above, the Aussie is benefiting from bullish risk sentiment to the extent that declines in NAB business sentiment and conditions have not weighed on Aud/Usd unduly, while the Kiwi is just keeping tabs with 0.6600 ahead of Wednesday’s RBNZ policy meeting even though the bias may be skewed towards a more dovish event compared to the prior assessment and guidance, while NZ reports a local outbreak of COVID-19 cases after a 100+ day run of no infections at all. Elsewhere, elevated crude prices are helping the Loonie and Norwegian Crown remain afloat around 1.3300 and 10.5800 vs the Buck and Euro respectively, with the former now looking for some independent impetus via Canadian housing starts.
EUR/CHF/GBP – All benefiting from the aforementioned Dollar fade, with the index now back under 93.500 again and Euro rebounding between 1.1723-83 parameters following a somewhat mixed ZEW survey, the Franc paring losses within a 0.9168-34 range and Pound maintaining 1.3050+ status, but not quite able to retest yesterday’s best a few pips over 1.3100 in wake of mostly weaker than forecast UK labour and pay data.
JPY – The Yen is marginally underperforming either side of 106.00 on a loss of safety premium and with Japanese markets back from their long holiday weekend, but little lasting reaction to a wider than anticipated Japanese current account surplus.
EM – Oil’s ongoing resurgence is helping the Rouble and Mexican Peso supplement gains vs the flagging Greenback. but the SA Rand has not been deterred by Gold’s meltdown or looming data and has breached key technical resistance in the form of the 100 DMA (17.6240) on the way up towards 17.5400. Similarly, the Turkish Lira is back in recovery mode as tighter CBRT funding conditions prompt some short covering, while Brazil’s Real awaits BCB COPOM minutes from the last meeting.

In commodities, WTI and Brent front-month futures continue to grind higher in early trade, with upside more-so a function of the overall risk tone as opposed to fresh fundamental catalysts, albeit prices remain underpinned by the recent upbeat assessment from Saudi, Iraq and Gulf members alongside the constructive outlook by Saudi Aramco post-earnings. The benchmarks experienced modest downside heading into the European cash open, in which prices briefly dipped below 45/bbl for the Brent Oct contract, whilst WTI Sep tested 42/bbl, before recovering lost ground and some more. Looking ahead, traders will be eyeing the weekly Private Inventory release, with expectations for crude stockpiles to decline by almost 4mln barrels, but ahead of the weekly release, participants will pay attention to the EIA Short Term energy Outlook which will include US crude production forecasts for the rest of 2020 and 2021. Elsewhere, precious metals are under pressure this morning with spot gold south of USD 2000/oz and spot silver just about holding onto a USD 28/oz handle having briefly dipped below the figure. No fundamental news flow coincided with the losses across precious metals but action could merely be a function of tech play alongside some profit taking/stops being triggered. In terms of base metals, Dalian iron ore futures snapped its two-day losing streak as prices were bolstered by falling portside inventories, whilst LME copper prices saw early downside amid the firming USD at the time; albeit, has since nursed losses.

US Event Calendar

6am: NFIB Small Business Optimism 98.8, est. 100.5, prior 100.6
8:30am: PPI Final Demand MoM, est. 0.3%, prior -0.2%; PPI Ex Food and Energy MoM, est. 0.1%, prior -0.3%
8:30am: PPI Final Demand YoY, est. -0.7%, prior -0.8%; PPI Ex Food and Energy YoY, est. 0.0%, prior 0.1%

DB's Jim Reid concludes the overnight wrap

The last 24 hours has pretty much fit the bill as far as slow news days are concerned in markets. That being said there was a somewhat notable milestone reached yesterday as the S&P 500 surpassed the all-time highs from February on a total return basis. This is a fairly astonishing feat when you consider that in late-March the index was down as much as -33.79% from those highs. In price terms it finished +0.27% yesterday which means it’s just -0.76% lower than its all-time closing high. That move also marked the S&P’s 7th consecutive advance for the first time since April 2019.

While the S&P nudged higher, the Dow Jones saw a much larger +1.30% gain, which is somewhat unusual given the strong correlation between the two indices. Indeed, it’s only the 6th time in the last decade that the Dow’s daily move has been more than one percentage point different to the S&P’s (even if 5 of them have been since the pandemic hit). At the other end of the spectrum though, the NASDAQ (-0.39%) slipped for a rare second consecutive session. At the margin the macro news acted as a bit of headwind and included the news of further Chinese sanctions on US officials after similar measures were announced by the US on Friday, with those sanctioned by China including the Republican senators Marco Rubio, Ted Cruz and Tom Cotton. Chinese Foreign Ministry spokesman Zhao Lijan said yesterday that “China has decided to impose sanctions on those individuals who behaved badly on Hong Kong-related issues”. And in a further sign that US-China tensions are showing no sign of abating any time soon, US Secretary of State Mike Pompeo tweeted yesterday that the arrest of Jimmy Lai under Hong Kong’s national security law was “further proof that the CCP has eviscerated Hong Kong’s freedoms and eroded the rights of its people.”

Meanwhile, markets continue to turn a bit of a blind eye to the lack of any progress on the next US fiscal package with no updates to report of yesterday. Nevertheless there was some more positive coronavirus news from the US, with the number of hospitalisations in New York State at the lowest since the start of the pandemic, and the number of cases in Florida at their lowest in over 6 weeks. California and Texas also reported a fall in hospitalizations. Overall, cases in the US grew by 44,647 in last 24 hours or +0.9% while at the same point last week cases had grown by 46,918 or 1.0%. Globally, the number of cases have crossed the 20 million mark. It is worth highlighting that it took 6 months for cases to reach 10 million after the first infection surfaced in China while the second 10 million took only 6 weeks. On the positive side, China has said that it will resume issuing tourist visas for visitors to Macau which has helped casino stocks rally in the region.

Indeed most Asian bourses have posted strong gains this morning. The Hang Seng (+2.40%) has led the way after underperforming on Monday, while the Nikkei (+1.81%) is up following Monday’s holiday. The Kospi (+1.60%) and ASX (+0.84%) all also up while futures on the S&P 500 are also up +0.26%. It’s been fairly quiet for overnight news, however President Trump did say that he’s “very seriously” considering a capital gains tax cut “which would create a lot more jobs”.

Back to yesterday, and over in Europe the moves were pretty similar to the US in terms of the upward direction for equities, though the STOXX 600 (+0.30%) still remains nearly 16% beneath its own record high in February, with European indices having underperformed their US counterparts since the pandemic hit. Energy stocks led the rally on both sides of the Atlantic thanks to a strong performance in oil prices, and both WTI (+1.75%) and Brent (+1.33%) saw solid gains. Staying with the commodities sphere, it’s worth noting that silver was up +2.93% at a 7-year high of $29.13/oz yesterday, though gold (-0.40%) continued to come down from Thursday’s record high with a 2nd successive decline. Looking at other markets, sovereign bonds advanced modestly in Europe, with yields on 10yr bunds (-1.7bps), OATs (-2.3bps) and BTPs (-0.8bps) all moving lower. Indeed yields on 10yr BTPs were down to 0.918%, their lowest level in nearly 6 months. US Treasuries gave up their gains however, with 10yr yields ending the session up +1.2bps at 0.577%. The MOVE index of implied Treasury volatility did nudge up yesterday however still remains just 2 points off the all-time lows from the end of July. Speaking of volatility, the VIX is now down to 22.13, the lowest since 21 February.

Elsewhere, in terms of data yesterday there weren’t a great deal of releases, though we did get the JOLTS job openings from the US, which rose to 5.889m in June (vs. 5.3m expected). That’s their second monthly increase since their low of 4.996m in April, but still over a million lower than their levels in January and February of just over 7m. On a less positive note however, the New York Fed’s Survey of Consumer Expectations showed that households’ expectations on their employment prospects and year-ahead financial situation worsened in July following two months of improvements.

To the day ahead now, and data releases out include UK unemployment data for June, the German ZEW survey for August, as well as July’s PPI reading and the NFIB small business optimism index from the US. Otherwise, Fed speakers today include Barkin, Daly and Brainard.

Schiff: The Most Unloved Gold Bull Market I've Ever Seen

Tue, 11 Aug 2020 12:12:06 GMT

Schiff: The Most Unloved Gold Bull Market I've Ever SeenTyler DurdenTue, 08/11/2020 - 08:12

Via SchiffGold.com,

Last week was a big week for precious metals. Gold broke above $2,000 an ounce and kept climbing, pushing over $2,075 later in the week. Meanwhile, silver blew through $28 and $29 ounce on Thursday and knocked on the door of $30. But even with another week of solid gains, there still seems to be a lot of skepticism about precious metals. Peter talked about gold’s bull run on his podcast and said it’s the most unloved gold bull market he’s seen in his entire career.

On Friday, we did finally got a corrective sell-off. Gold was down about $40 at one point and silver fell back below $28 for a time.

But even with the selloff, gold still closed well above $2,000 and was up 3% on the week. Silver ended up closing above $28 and saw a 15.5% weekly gain. Gold has closed higher for nine consecutive weeks. But as Peter pointed out, there have been down days.

Nothing goes up every single day, and gold and silver are not going to be the exception to that rule. There are no bull markets that are up every day. You’re always going to have down days.”

Peter said it seems investors haven’t figured this out. Gold and silver stocks started selling off Thursday even before spot prices dropped and they continued selling Friday. GDX (an index of gold mining companies) was down slightly on the week. Peter said this tells you a lot about the nature of this bull market and the wall of worry that is has been scaling.

I’ve been talking about this phenomenon on this podcast the entire time - that gold stocks have not really confirmed the bull market even though the bull market is taking place anyway, we haven’t seen it in gold stocks.”

Initially, a lot of people were saying the same thing about silver because it was lagging behind gold’s rally.

A lot of the reasons people were kind of diminishing the significance of the gold bull market was they said, ‘Hey, it’s not being confirmed by silver. Gold is going up but silver is going nowhere, and you can’t have a bull market in gold unless you have a bull market in silver.’ Well, OK. Now we have a bull market in silver. We’ve had a significant breakout in the price of silver. But still, people don’t believe this bull market. I mean, this is probably the most unloved gold bull market I’ve ever seen in my career.”

Peter said the fundamentals are better than any he’s ever seen.

The Federal Reserve is printing trillions of dollars. Fed Chair Jerome Powell has said it isn’t even thinking about thinking about raising interest rates. And there are reports that the central bank is set to make a commitment to ramping up inflation. All of this is extremely bullish for gold.

In a CNBC interview, US Global Investors CEO Frank Holmes said he can see $4,000 gold in the relatively near future with G-20 finance ministers and central banks “working together like a cartel and they’re all printing trillions of dollars.”

We’ve not seen this level where central banks are printing money at a zero interest rate. At zero interest rates, gold becomes a very, very attractive asset class,” Holmes said.

Peter said the technical charts look good for gold as well.

So, you’ve got a great chart. You’ve got great fundamentals. Yet still, people don’t believe this bull market. And the proof that they don’t believe the bull market is the gold stocks. They are not rallying the way you would expect. They are being dragged kicking and screaming to new highs by a relentless bull market that everybody assumes is over.”

Peter pointed out that there’s a difference between the buyers of gold and those who buy gold stocks. The buyers for gold and silver are real buyers — individual investors, and in the case of gold, central banks.

The buyers of physical metal are buying as an alternative to fiat money... They are voting with their feet. They are running away from their fiat currencies, and they are running towards a real monetary alternative in gold and silver.”

On the other hand, buyers of gold stocks tend to be stock buyers and speculators. Peter said he thinks the investment community doesn’t believe the gold rally is going to last. They don’t believe gold mining companies are really going to benefit from a temporary rise in gold. Peter mentioned that a lot of people seem to think the rally in gold is simply a function in COVID-19. In fact, the CNBC article highlighting Holmes’ comments cited a coronavirus vaccine as a development that could stop gold’s rally in its tracks. Peter said they don’t understand the fundamentals.

That’s obvious, because every time the price of gold goes up, they expect it to fall. And every time the price of gold falls, they think it’s going to keep falling because they feel that that’s some kind of vindication. Meanwhile, the price of gold keeps going up. … So, the price of gold continues to defy the so-called experts. It continues to quietly make new highs. And this bull market is just going to keep going until ultimately the gold stocks participate — just like silver. How long did it take before silver joined the gold party? It eventually did.

You have to focus on the fundamentals. A lot of investors aren’t doing that.

They’re not looking into the future and realizing the monetary fiscal policies that have already driven gold past $2,000 are going to continue and drive it past $3,000, $4,000, $5,000. So, all of this potential should be reflected in the share price of these stocks, but it’s not. And therein lies the opportunity.”

In this podcast, Peter also talks about President Trump’s ban on TikTok and his recent executive orders. Peter called the EOs bad economics and unconstitutional.

Nasdaq Tumbles Into Red, Erases Vaccine Spike As 'Momo Meltdown' Continues

Tue, 11 Aug 2020 12:02:22 GMT

Nasdaq Tumbles Into Red, Erases Vaccine Spike As 'Momo Meltdown' ContinuesTyler DurdenTue, 08/11/2020 - 08:02

All major US equity indices spiked in the early hours overnight on the back of optimistic vaccine headlines from Russia. However, while Russell 2000 futures are holding gains up over 1%, Nasdaq has tumbled into the red as the last few days trend of momo/growth vs value rotation appears to be accelerating...

As a reminder, the last two days have seen the biggest plunge in momentum since the early June quant-quake...

Source: Bloomberg

As the reflation trade inflects as money supply falls for two straight weeks...

Source: Bloomberg

...and momentum vs value flips...

Source: Bloomberg

The biggest two day rotation since the June collapse...

Source: Bloomberg

Cyclicals also dominated defensives...

Source: Bloomberg

If this is truly accelerating then that could begin to impact the mega-tech stocks driving the entire market, then look out below.

"I Wouldn’t Take It" - Former FDA Commissioner Scott Gottlieb Trashes Russia's ...

Tue, 11 Aug 2020 11:47:41 GMT

"I Wouldn’t Take It" - Former FDA Commissioner Scott Gottlieb Trashes Russia's 'First-In-The-World' COVID VaccineTyler DurdenTue, 08/11/2020 - 07:47

Former FDA Director Scott Gottlieb, who has been kicking himself for leaving the Trump Administration to spend more time "with family" late last year - only to miss out on what could have been a career-making turn as the nation's corona-savior - and trying to compensate by appearing on "Squawk Box" and myriad other cable-TV shows as a certified "expert", has some doubts about Russia's new COVID vaccine.

And that's hardly surprising. Since, to be fair, Gottlieb has expressed doubts for certain data dumps from Moderna and others which he has dubbed premature. Though it's also worth noting that he's on the board of Pfizer, a big-pharma giant that is working on its own COVID vaccine, having benefited from billions in promised and substantiated funding from the US government.

During Tuesday's appearance on CNBC's "Squawk Box", Gottlieb weighed in on the COVID issue du jour: the newly registered Russian vaccine, which President Putin has touted as a 'first in the world' accomplishment.

Gottlieb has his doubts:

"I wouldn't take it, certainly not outside a clinical trial right now, it appears it has only been tested in several hundreds patients at most," Gottlieb complained. He also warned that the "adenoviral vector" used by the Russian scientists is similar to the strategy being pursued by CanSino. And Gottlieb alleged the data out of the CanSino trial has been 'suboptimal'.

But it's not just the lack of clinical data that bothers Gottlieb: the adenoviral vector used by the Russian vaccine is also being used by CanSino, a Chinese pharma giant working on its own vaccine. Gottlieb says the data released from CanSino so far "hasn't been great"...and since Russia hasn't released much in the way of any data, Gottlieb says it's fair to question the results touted by the Russian government.

Gottlieb, however, did concede that it's "not a trivial vaccine," noting the complexity of the adenoviral vector. Still, "it's not at all clear how efficacious the Russian adenovirus vaccine is going to be".

“I wouldn’t take it,” says former FDA commissioner @ScottGottliebMD of Putin’s new #COVID19 vaccine. pic.twitter.com/qjbv4WFaCv
— Jim Roberts (@nycjim) August 11, 2020

Then again, Putin says he tested the Russian vaccine on his own daughter. And she only got a mild fever!

At this point, everybody speculating about the Russian vaccine will be doing so prematurely, as the scientific community awaits more details from the Russians.

At any rate, the latest 'news analysis' from Bloomberg warns readers of its website that most Americans won't be able to receive a vaccine until well into next year.

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One month after Russia's Gamelei Institute finished the first experimental vaccine trials on clinical subjects at Moscow's state medical college, Russia has set an international precedent by becoming the first country to register a COVID-19 vaccine with international medical authorities.

Russia declared the vaccine "ready for use" and extraordinarily "safe" despite "international skepticism," the Associated Press reported. Putin made the announcement during a "government meeting", where he also revealed that one of his own daughters had participated in the experimental trials.

"I would like to repeat that it has passed all the necessary tests," he said. "The most important thing is to ensure full safety of using the vaccine and its efficiency."

The trials established that a single course of the Russian vaccine is enough to establish immunity to COVID-19, while side-effects were minimal, with slight fevers appearing in Putin's daughter, and other subjecst.

“As far as I know, a vaccine against the coronavirus infection has been registered this morning (in Russia) for the first time in the world,” the President told members of the government. “I thank everyone who worked on the vaccine - it’s a very important moment for the whole world."

Of course, it's worth noting that Russia-linked hackers were accused of spying on and possibly stealing vaccine-related "medical secrets" gleaned form research conducted in the UK.

Putin insisted that vaccination in Russia should only be carried out on a voluntary basis.

"I know that it works rather effectively, forms a stable immunity, and, I repeat, it passed all the necessary inspections," the President added.

While the west raised alarms about potential safety issues caused by Russian "recklessness", Vadim Tarasov, a top scientist at Moscow’s Sechenov University, where the trials took place, said Russia the country had a "head start" as it has spent the last 2 decades dedicating significant resources to the virus. The technology behind the Russian vaccine is based upon adenovirus, otherwise known as the common cold, he added. Created artificially, the vaccine proteins replicate those of COVID-19 and trigger "an immune response similar to that caused by the coronavirus itself," Tarasov revealed.

Nikolay Briko, the Russian Health Ministry’s chief non-resident epidemiologist, echoed these sentiments."This vaccine wasn’t developed from scratch, the Gamelei Research Center had a serious, significant research base on vaccines," he was quoted as saying. "The technology of developing such a vaccine was perfected. So perhaps, the process was sped up due to the fact that the vaccine was not created from scratch. It is important that all stages (of vaccine research) are followed and that international requirements are adhered to."

To try and reassure the Russian public, Putin declared his daughter, who participated in the "experiment" suffered only a mild fever that quickly went away.

"One of my daughters got the vaccine. In this sense, she took part in the experiment. After the first vaccination, she had a temperature of 38, the next day - 37 and that was all."

The news that Putin administered the vaccine to his own daughter - one of two adult daughters known as Putin's children, although precisely which daughter received the vaccine wasn't revealed - elicited some snickers on Twitter.

Nothing says ‘we have a great vaccine’ than also saying ‘No, you can’t see our scientific data on the vaccine testing’
— Darth Putin (@DarthPutinKGB) August 11, 2020

Did Putin's daughter know she was getting the vaccine?
— Ivan the K™ (@IvanTheK) August 11, 2020

But believe it or not (clearly, the reporters at the AP are still skeptical), news of the world's first registered vaccine sent futures higher in premarket trading.

Of course, Russia's playing fast and loose with the "rules" allowed the experimental vaccine to be tested on Russian "elites" as early as April.

The first doses of the vaccine will be reserved for health-care workers and other vulnerable parties, Putin said. Russia says it hopes the vaccine will be available for mass innoculation early next year.

Justifiable Bullishness Or Is It Willful Blindness?

Tue, 11 Aug 2020 10:00:00 GMT

Justifiable Bullishness Or Is It Willful Blindness?Tyler DurdenTue, 08/11/2020 - 06:00

Authored by Lance Roberts via RealInvestmentAdvice.com,

Currently, there is much bullish commentary suggesting stocks can only go higher from here. Is the bullishness in the markets justifiable, or is it willful blindness?

John Stoltzfus, CIO of Oppenheimer, is clearly in the bullish camp:

“We remain very bullish on this market. You’re going to see money beginning to further move out of the bond market, and it makes all the sense in the world to be positioned in equities.”

This seems a little optimistic given the amount of money that has already flooded into the 5-largest “mega-cap” stocks which have accounted for a bulk of this years market returns.

Nonetheless, it is an interesting question.

From the bulls viewpoint the focus has been the ability for these companies to grow earnings.

The bearish view is the problem with valuations.

As noted in “COT Positioning – Back To Extremes,” the Nasdaq set repeated new highs in 2020, which is astonishing given the depth of the economic recession. To wit:

“While the S&P 500 is primarily driven higher by the largest 5-market capitalization companies, it is the Nasdaq that has now reached a more extreme deviation from its longer-term moving average.”

“Moving averages, especially longer-term ones, are like gravity. The further prices become deviated from long-term averages, the greater the “gravitational pull” becomes. An “average” requires prices to trade above and below the “average” level. The risk of a reversion grows with the size of the deviation.
The Nasdaq currently trades more than 23% above its 200-dma. The last time such a deviation existed was in February of this year. The Nasdaq also trades 3-standard deviations above the 200-dma, which is another extreme indication.”

It’s The Fed Stupid

The immediate conclusion is the drive higher in the markets is a function of massive amounts of liquidity being injected into the financial markets by the Federal Reserve. As shown below that was certainly the case during March and April.

However, since then the tapering of the liquidity injections by the Fed has been marked as the slowing uptake of the various programs reduced demand.

While there is indeed truth to the Fed’s impact on the market, it is not solely responsible for the dislocation of prices from the underlying fundamentals.

As shown, the decline in fundamentals didn’t start during the pandemic. The decline in earnings started in early 2019 as economic growth slowed, and accelerated during the pandemic. However, during that same period stock prices rose, which is almost entirely attributable to “valuation expansion.”

Dumb Money All In

E*Trade recently released survey data which showed that despite the market plunge in March, bullish sentiment has returned:

Bullish sentiment returns. Half of surveyed investors (51%) are bullish, rising 13 percentage points since last quarter.
Investors are more likely to believe the market will rise. Over half of investors (51%) believe the market will rise, skyrocketing 20 percentage points this quarter.
But volatility will persist. More than half of investors (56%) believe volatility will continue, gaining nine percentage points since last quarter.
And investors expect a long road to recovery. More than half (54%) believe it will take more than one year to recover from the pandemic, and just one out of five investors (23%) would give the economy an “A” or “B” grade.

You get the idea. Just one quarter after panic selling lows, investors are once again “back in the pool.” Despite the economy just printing a nearly 40% decline in Q2, and earnings having dropped by nearly 40% from their peak, the “dumb money” is back to chasing stocks.

In particular, not only are “retail investors” chasing stocks, they are doing it with increased leverage by using options. As noted by CNBC recently:

“Investors have reentered the market at a record rate following the coronavirus-induced sell-off in March, and as traders look to profit, options volume has soared to an all-time high.
The average daily value of options traded has exceeded shares for the first time, with July single stock options volumes currently tracking 114% of shares volumes.
In other words, the options market is now larger than the shares market.”

We have seen record lows in the Put/Call ratio three times in 2020. All three lead to corrections.

Willful Blindness

Willful blindness, also known as willful ignorance or contrived ignorance, is a term used in law. Being “willfully blind” describes a situation in which a person seeks to avoid civil or criminal liability for a wrongful act by keeping themselves unaware of the facts that would render them liable or implicated.

Although the term was originally used in legal contexts, the phrase “willful blindness” has come to mean any situation in which people avoid facts to absolve themselves of their liability.

“‘Willful blindness’ is most prevalent in the financial markets. Investors regularly dismiss the ‘facts’ which run contrary to their current opinion. In behavioral investing terms this is also known as ‘confirmation bias.'”

As markets rise, investors take on exceedingly more risk with the full knowledge that such actions will have a negative consequence. However, that “negative consequence” is dismissed by the “fear of missing out,” or rather F.O.M.O.

As “greed” overtakes “fear,” investors become more emboldened as rising markets reinforce the conviction that “this time is different.” Ultimately, when the negative consequence eventually occurs, instead of taking responsibility for their actions, they blame the media, Wall Street, or their advisor.

This currently where we are in the markets today.

Value Proves It

Investors know there is a rising risk of loss, but, they are willfully ignoring the facts and and piling into risk because the narrative has simply become “fundamentals don’t matter.” In 2020, investors are again chasing “growth at any price” and rationalizing overpaying for growth.

“Such makes the mantra of using 24-month estimates to justify paying exceedingly high valuations today, even riskier.”

This is also where there is the greatest disparity between growth and value on record.

There are two critical takeaways from the graph above:

Over the last 90 years, value stocks have outperformed growth stocks by an average of 4.44% per year (orange line).
There have only been eight ten-year periods over the last 90 years (total of 90 ten-year periods) when value stocks underperformed growth stocks. Two of these occurred during the Great Depression and one spanned the 1990s leading into the Tech bust of 2001. The other five are recent, representing the years 2014 through 2019.

In other words, there is high probability that investors chasing “growth” are going to pay a heavy price in the future..

It’s The Economy

The problem, as discussed in “Insanely Stupid,” the ability for stocks to continue to grow earnings at a rate to support high valuations will be problematic. Such is due to rising debts and deficits which will retard economic growth in the future. To wit:

“Before the ‘Financial Crisis,’ the economy had a linear growth trend of real GDP of 3.2%. Following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Instead of reducing the debt problems, unproductive debt, and leverage increased.
The ‘COVID-19’ crisis led to a debt surge to new highs. Such will result in a retardation of economic growth to 1.5% or less.”

Slower economic growth, combined with a potential for higher taxes, increases the probability that “risk” may well outweigh “reward” at this juncture.

Such doesn’t mean that stocks can’t go higher in the near term, and despite some wiggles along the way, it is quite likely they will simply because of momentum and lot’s of “bullish bias.”

“We’ve often noted that during times of unhealthy market environments, when fewer than 60% of stocks can hold above their 200-day averages, that periods of high optimism tend to lead to below-average forward returns.
We’re seeing that now, to a historic degree. Since we’ve been tracking this data, just over 20 years, there has never been a day when Dumb Money Confidence was at or above 80% while fewer than 60% of stocks in the S&P 500 were trading above their 200-day averages. Until now.” – Sentiment Trader

The Problem Of Eternal Bullishness

The problem of “eternal bullishness” is it leads to the “willful blindness” of risks, rather than having a healthy respect for, and recognition of, those risks. This leads to the unfortunate problem of being “all-in” on every hand which has a devastating consequence when a mean reverting event occurs.

Our job as investors is to navigate the waters within which we currently sail, not the waters we think we will sail in later. Higher returns come from the management of “risks” rather than the attempt to create returns by chasing markets.

I recently quoted Robert Rubin, former Secretary of the Treasury, in “This Is Nuts,” as it defined our philosophy on risk.

‘As I think back over the years, I have been guided by four principles for decision making. The only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty, we must decide and we must act. And lastly, we need to judge decisions not only on the results but also on how we made them.
Most people are in denial about uncertainty. They assume they’re lucky, and that the unpredictable can be reliably forecasted. Such keeps business brisk for palm readers, psychics, and stockbrokers, but it’s a terrible way to deal with uncertainty. If there are no absolutes, all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision.’” – Robert Rubin

Focus On Risk

It should be evident that an honest assessment of uncertainty leads to better decisions.

The problem with “Eternal Bullishness” and “Willful Blindness” is that the failure to embrace uncertainty increases risk, and ultimately loss.

We must be able to recognize and be responsive to changes in underlying market dynamics. If they change for the worse, we must be aware of the inherent risks in portfolio allocation models. The reality is that we can’t control outcomes. The most we can do is influence the probability of specific outcomes.

Focusing on risk not only removes “willful blindness” from the process, it is essential to capital preservation and investment success over time.

"More Robust Than Expected": Promising Preliminary Class 8 Data For July Has Analysts ...

Tue, 11 Aug 2020 09:30:00 GMT

"More Robust Than Expected": Promising Preliminary Class 8 Data For July Has Analysts Cautiously OptimisticTyler DurdenTue, 08/11/2020 - 05:30

Preliminary data for July shows that Class 8 commercial truck sales may have finally started to rebound.

Stung by both the pandemic and a legacy backlog dating back almost two years that has acted as a constant drag on new orders for the last 18 months, preliminary Class 8 orders were 20,300 units for July, up 27% sequentially and up 98% from 2019's numbers.

Despite the numbers being nowhere near 2017 and 2018 peak levels, July looks to mark the strongest month of the year for Class 8 orders so far, possibly telegraphing an optimistic second half of the year.

In an August 4 release reported by The Trucker, ACT Research's Kenny Vieth, president and senior analyst, said: “Preliminary data show that July orders for medium- and heavy-duty vehicles jumped to a six-month high.”

He continued: “The context of rising rates and improving carrier profits adds perspective to what is now occurring in Class 8 orders: Supply matters. With many drivers (and trucks) sidelined, there is now insufficient available capacity for rebounding freight volumes. There is a strong relationship historically between carrier profits and equipment demand.”

He also noted that the positive shift in numbers came despite the additional headwind of a slowing economy during the end of the month:

Vieth noted that during the last week of July, reports showed the U.S. economy for the second quarter of 2020 had dropped 9.5% from the first quarter and was 10.6% below the ending level for 2019.

Jonathan Starks, chief intelligence officer for FTR, says that despite the good month, he is still forecasting a slow recovery: “As we hit the height of summer demand, the freight markets showed strength and resilience and that led to additional orders for trucks. The order activity for both June and July was more robust than expected and is good news for the equipment producers. However, despite the increasing orders, FTR still expects the Class 8 market to maintain a slow, steady recovery.”

He continued: “The freight markets sustained a traumatic decline of volumes at the start of the pandemic and consumer demand, on an absolute basis, will remain weaker as we deal with high levels of unemployment and a Congress that has been unable to foster a bi-partisan solution to stimulate demand. The OEMs received a needed boost from July orders, activity that will help keep the industry moving in an upward direction.”

We will update this article when finalized July data becomes available, which should be in several days.

Global Lockdowns Set To Plunge 100 Million Into Extreme Poverty

Tue, 11 Aug 2020 09:00:00 GMT

Global Lockdowns Set To Plunge 100 Million Into Extreme PovertyTyler DurdenTue, 08/11/2020 - 05:00

Authored by Paul Joseph Watson via Summit News,

The impact of the global coronavirus lockdown is set to plunge 100 million people into extreme poverty, warns a new report by the Pulitzer Center on Crisis Reporting.

The report appears to pin the blame on COVID-19 itself for the economic impact, yet the actual culprit is discovered to be the “restrictions” put in place by governments in response to the pandemic.

From the report;

“With the virus and its restrictions, up to 100 million more people globally could fall into the bitter existence of living on just $1.90 a day, according to the World Bank. That’s “well below any reasonable conception of a life with dignity,” the United Nations special rapporteur on extreme poverty wrote this year. And it comes on top of the 736 million people already there, half of them in just five countries: Ethiopia, India, Nigeria, Congo and Bangladesh.”

The report notes that the impact of the lockdown on the poor in countries like India was “so abrupt and punishing” that their Prime Minister, Narendra Modi, begged for forgiveness.

The report will stir up further debate as to whether the global lockdown will prove more deadly than COVID-19 itself, with extreme poverty being directly linked to death and shortened life spans. According to research published by Imperial College London and Johns Hopkins University, around 1.4 million people are expected to die from untreated TB infections due to the coronavirus lockdown.

Experts have also warned that hundreds of thousands or even millions of people could die in the longer term as a result of the lockdown preventing them from receiving treatment for cancer and other serious illnesses.

Given that many of those sunk into extreme poverty as a result of the lockdown live in sub-Saharan Africa, this could also exacerbate mass immigration from that region into Europe.

“It’s a timely reminder that the the main cost of the lockdowns favoured by liberal policy-makers across the world will not be people in the West, but those hovering just above the poverty line in the developing world,” writes Toby Young.
“Thanks to the misguided enthusiasm of Western governments for imprisoning entire populations in their homes, thereby triggering a global recession, tens of millions of people will die of starvation in low-income countries.”

* * *

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Italian PM Giuseppe Conte Is Considering Digging A Tunnel Between The Mainland And Sicily

Tue, 11 Aug 2020 08:15:00 GMT

Italian PM Giuseppe Conte Is Considering Digging A Tunnel Between The Mainland And SicilyTyler DurdenTue, 08/11/2020 - 04:15

If there's one thing the pandemic has done globally, it has been forcing countries to look inward and reassess both their infrastructure and their reliance of products and services on China. The U.S. has already vowed to start making drug components domestically and President Trump has long been proposing infrastructure upgrades.

And in keeping with the trend of upgrading infrastructure - which hasn't quite been Italy's expertise anytime over the last few decades - Italian Prime Minister Giuseppe Conte has now said he is considering an underwater tunnel that links Sicily to mainland Italy.

Conte mulled the plans during a speech he gave on Sunday evening in which he announced several plans that appear to be focused on the country maintaining its infrastructure independence. Before building such a tunnel, Conte said that the country would need to improve its internal routes first.

As of today, Sicily is still the only region of Italy which cannot be serviced by the country's "Eurostar" trains.

The Strait of Messina Bridge has been proposed between the mainland and Silicy for years, but was cancelled in both 2006 and 2013 due to budget constraints. Now that the entire world has collectively decided to ignore budget constraints and allow Central Banks to do whatever they want, it's no surprise that a project connecting the 576 km between Calabria and the mainland may actually move forward.

At the same speech, Conte also said he wanted to focus on rolling out broadband across the country before reviewing whether or not China should be allowed to supply the country with 5G technology, Bloomberg reported.

“Italy needs a single grid and recent talks will be wrapped up with a clear path by the end of this month,” he said. Given the recent controversy surrounding Tik-Tok and ongoing questions about Chinese hardware and maintaining privacy, our guess is that Huawei may not be leading the list of infrastructure providers to help implement such a network.

But when it comes to the tunnel, there's one "genius" we can recommend...

Tesla Crushed In Germany By EVs From VW, Renault, & Hyundai Group

Tue, 11 Aug 2020 07:30:00 GMT

Tesla Crushed In Germany By EVs From VW, Renault, & Hyundai GroupTyler DurdenTue, 08/11/2020 - 03:30

Authored by Wolf Richter via WolfStreet.com,

Tesla’s share of the EV market plunged to 8.7% year-to-date, from 18.4% last year. Competition is now huge and across the spectrum. Tesla faces the same situation globally.

It has been a very ugly year in Germany for auto sales, except for EVs. The overall new vehicle market in Germany has plunged by 30% in the first seven months of 2019 to 1.526 million units. But EV sales have skyrocket by 65% over the first seven months, after having already skyrocketed by 88% in the same period in 2019, according to KBA, the German agency that handles nationwide new-vehicle registrations. Year-to-date, 61,105 EVs were sold, giving EVs a share of 4% of total new vehicle sales, up from less than 1% in 2018.

But Tesla got crushed. Its sales over the seven-month period fell from 6,816 in 2019 through July to 5,306 over the same period this year, and its share in the EV market plunged from 18.4% to 8.7%.

There are now three automakers that blew past it in Germany – Volkswagen Group, Renault, and Hyundai Group – while Daimler Group came in even with Tesla, and BMW group wasn’t far behind. This chart shows market share of each automaker, with all their EV brands and models combined:

By Automaker: The table shows registrations by automaker, each with all their EV makes and models combined, in July and year-to-date through July, in order of their share of the total EV market (right column).

By major brand: The table below splits out the major brands of each automaker that offer EVs. So, Volkswagen Group has five brands with EVs on this list: VW, Audi, Skoda, Porsche, and Seat. BMW Group has two brands on the list: BMW and Mini. Daimler Group also has two brands on it, Mercedes and Smart, as has Hyundai Group, Hyundai and Kia. In this lineup, Tesla is in third place, behind the brands VW and Renault. There are still a bunch of major brands that do not offer EVs in Germany, including Toyota, and those are not on the list:

Tesla is now in the process of building an assembly plant in Germany. But by the time it is up and running, more of the other major automakers that currently don’t offer EVs in Germany will offer them. And the giants with their numerous brands are gearing up to offer a whole spectrum of vehicles, across all categories and price classes.

To Tesla’s credit, it shook up the German automotive industry that for years had pooh-poohed EVs in favor of internal combustion engines, particularly diesels. Volkswagen Group was so focused on diesels that it couldn’t even see EVs.

But the fallout from the diesel-emissions-fraud scandal, which continues to fester in the German court system, has changed that. Consumers are turning away from diesels. And for automakers, EVs are the only major segment that is red hot, even during the pandemic. It’s where growth is. What Tesla accomplished was that it woke up the giants. And now they’re going after this market with all their might.

Tesla is facing the same situation globally: The giants have woken up and many of them are now offering or will soon be offering models across the spectrum, and Tesla has to get down in the trenches with them and compete on price, service, quality, reliability, and all the other mundane factors that regular consumers – not true believers – demand. And it’s going to get very tough.

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Turkey Sends Military For 'Gunnery Drills' Off Rhodes As Contested Gas Exploration Resumes

Tue, 11 Aug 2020 06:45:00 GMT

Turkey Sends Military For 'Gunnery Drills' Off Rhodes As Contested Gas Exploration ResumesTyler DurdenTue, 08/11/2020 - 02:45

Greece's military is once again said to be in a state of high alert with all troops prevented from leaving their duty stations or going on temporary leave. Not only has Turkey’s Energy Minister Fatih Donmez announced Monday that the Oruc Reis seismic exploration ship has been dispatched to the Mediterranean, but Bloomberg reports Turkey has launched naval exercises in the same region.

"Turkey launched naval exercises off two Greek islands and announced energy exploration research in the same area, projecting its military might amid heightened territorial tussles in the eastern Mediterranean," according to the report.

The naval drills are described as east and to the south of Rhodes and Kastellorizo, both which are among Greece's easternmost islands, and not far from Turkey's coast. The drills are expected to go multiple days running through this week.

Turkey's military engaged in exercises earlier this summer of Libya, via TRT World.

Greece's defense ministry says it'sprepared to "counter" any Turkish military maneuvers in a worsening situation which appears ripe for conflict, also given Turkey's oil and gas exploration plans have been source of intense controversy for the past year, resulting in threatened EU sanctions for violations of Greek and Cypriot waters. This as an urgent Greek Government Council for National Security meeting is expected to kick off Monday in Athens.

"Turkey doesn’t recognize Greece’s claim that its territorial waters start immediately south of Kastellorizo, the most distant Greek outpost," Bloomberg continues. "The gunnery exercises that will run through Tuesday, according to a Turkish navy website, are a message that Ankara won’t accept any agreement or move that would limit its own maritime interests in the Mediterranean."

Though as of a week ago it appeared a cooling of tensions could be on the horizon, with Athens and Ankara said to be in negotiations, Turkey abruptly halted its diplomacy after the announcement of a Greece and Egyptian deal defining their exclusive economic zones in contradiction to Ankara's interpretation.

Turkey denied the agreement as "null and void" — which means Turkey's expansionist claims are being contested by pretty much every Mediterranean country, also including Israel. The exception of course, is the Tripoli-based Libyan Government of National Accord (GNA), which lately inked its own agreement with Turkey defining broad swathes of the Mediterranean as within Turkey's rights.

Erdogan's office has since said that the Greece-Egypt deal effectively cut Turkey out of crucial dialogue, so it is forced to resume its energy exploration.“We were engaged in talks with Greece for the last two-and-a-half months in Berlin and had even agreed on a joint statement but Greece announced its deal with Egypt just a day before it,” the Turkish presidency spokesman Ibrahim Kalin told CNN-Turk television on Sunday.

Turkey has sought to argue that the so-called Turkish Republic of Cyprus, which remains unrecognized internationally, gives it expansive rights encompassing the whole of Cyprus, including areas that cut into Greece's waters. The EU, with France's Macron lately leading the way, has consistently sided with Greece and Turkey, condemning Turkey's maritime violations of EU member states' Exclusive Economic Zones.

Seattle Police Chief Resigns After City Approves Plan To Defund Department, Axe 100 Cops

Tue, 11 Aug 2020 06:16:29 GMT

Seattle Police Chief Resigns After City Approves Plan To Defund Department, Axe 100 CopsTyler DurdenTue, 08/11/2020 - 02:16

Seattle Police Chief Carmen Best has announced her resignation, effective September 2nd, after the City Council voted to slash spending on the Seattle Police Department by roughly $4 million out of the department's $400 million annual budget - or around 1%.

While the cuts may be largely symbolic - aside from the 100 or so of the city's 1,400 police officers ,who will be laid off or not replaced through attrition - the move, which also reduced Best's $285,000 annual salary, was enough to make her leave the force after 28 years with SPD.

Best, who in addition to trying to maintain order during the BLM protests while operating under a ban on tear gas, pepper spray and flash bangs, has been dealing with protesters showing up to her Snohomish County house. She also says she hasn't been included in any city council discussions regarding budget cuts, according to KING5.

So... because of the BLM movement that eventually came down to defund the Police led to a strong and successful Black women getting a paycut and having to resign a respected position. ???? BLM once again improving the lives of the Black community. ✊????
— Picture Pablo (@picture_pablo) August 11, 2020

In a Monday night letter, Best wrote:

"To the Women and Men of the Seattle Police Department –
I wanted to notify you that I will be retiring from the Seattle Police Department, effective September 2nd, 2020. I wanted you to hear this from me, but some media have reached this conclusion on their own.
This was a difficult decision for me, but when it’s time, it’s time."

#BREAKINGNEWS: Chief Carmen Best just emailed her resignation notice to Seattle police officers. pic.twitter.com/Y8y7etOXvU
— (((Jason Rantz))) on KTTH Radio (@jasonrantz) August 11, 2020

Responding to Best's resignation, Seattle Mayor Jenny Durkan said in a statement:

"Know that while I understand the Chief’s reasons, I accepted her decision with a very heavy heart. I have had the privilege to be with Chief Carmen Best in so many situations: with her family, at roll calls, in community meetings, and in nearly weekly meetings addressing public safety in Seattle. Her grit, grace and integrity have inspired me and made our city better. These last months, I knew Chief Best was the person to lead our city through this challenging time, to reimagine policing and community safety. Her leadership is unmatched nationwide, which is why it is a sad day for our City to lose her.
Carmen Best is still devoted to this department and our city. I regret deeply that she concluded that the best way to serve the city and help the department was a change in leadership, in the hope that would change the dynamics to move forward with the City Council."

A press conference is scheduled for 11 a.m. Tuesday with Durkan and Best.

The approved cuts to SPD fall far short of the 50% cut demanded by Black Lives Matter protesters, while several council members said on Monday that the changes were a starting point in what will be a lengthy process to reshape policing and public safety, according to AP.