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As Chauvin Verdict Draws Near, Facebook Clamps Down With Heavy Moderation

As Chauvin Verdict Draws Near, Facebook Clamps Down With Heavy Moderation

As the National Guard takes up positions across Minneapolis ahead of the Derek Chauvin verdict, Facebook has announced that it will be heavily moderating its platform to remove posts promoting civil unrest or violence in Minneapolis, according to Bloomberg.

The social media giant will remove posts that celebrate or praise the death of George Floyd – however there’s no indication from the report that Facebook will be removing posts used to coordinate protests – some of which will undoubtedly become riots. The company considers Derek Chauvin a public figure, and George Floyd an ‘involuntary public figure.’

Facebook will allow users to discuss the trial and attorneys, but will remove content which violates their policies on ‘hate speech, bullying, graphic violence and incitement.’ No word on whether they’ll remove clips of Rep. Maxine Waters inciting a mob before members of the National Guard were injured in a weekend shooting.

Any pages, groups, events and Instagram accounts which violate their policies will be removed by teams of moderators who will be monitoring events to determine whether locations are considered high-risk.

On Monday, jurors are set to hear closing arguments before they begin deliberating over whether Chauvin, a white former police officer, caused the death of George Floyd after restraining him on the ground by kneeling on him for roughly nine minutes on May 25, 2020. Floyd, a 46-year-old black suspect who had a massive amount of drugs in his system, advanced heart disease, and COVID-19 at the time of his death.

Police were originally called to the scene after Floyd allegedly used counterfeit money to pay for cigarettes. Chauvin’s attorneys have argued that he correctly followed training received during his 19 years with the Minneapolis Police Department.

As Reuters notes, “Prosecutors have told the jury they are weighing the guilt of only one man, but their verdict will nonetheless be widely seen as a reckoning in the way the United States polices Black people.”

Meanwhile, Black Lives Matter demonstrations have been raging across the country amid the trial.

The closest instance occurred just a few miles from the courthouse in downtown Minneapolis when a white police officer fatally shot a Black motorist, Daunte Wright, on April 11 in the suburb of Brooklyn Center after trying to arrest him on the belief he had missed a court appearance. The officer, Kimberly Potter, had meant to use her Tazer to stop him driving away but pulled out the wrong weapon, police say. She has been charged with manslaughter.

As angry protests swelled, Minneapolis and state officials have ramped up security precautions in the city. The tower in which the courtroom sits is ringed by barbed wire, high barriers and armed soldiers from the National Guard, and nearby businesses have boarded up their windows. Giant drab-colored military vehicles have become a common sight in city streets. -Reuters

Chauvin has been charged with second-degree unintentional murder, third-degree “depraved mind” murder and second-degree manslaughter. He has pleaded not guilty. 

In order for the second-degree murder charge to stick, prosecutors will have to prove to the 12 jurors that Chauvin committed felony assault which resulted in Floyd’s death – a crime which carries up to 40 years in prison, though the state’s sentencing guidelines call for 15 years given Chauvin’s clean record.

Tyler Durden
Mon, 04/19/2021 – 13:52

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Credit Suisse Prime Brokerage Heads Fired Over Archegos Blowup

Credit Suisse Prime Brokerage Heads Fired Over Archegos Blowup

Apparently, firing half a dozen executives including its head of risk management (Lara Warner, also one of the most high-ranking women in the global financial services industry) hasn’t done enough to quiet shareholders’ demands for change atop Credit Suisse, the Swiss banking giant that reported a $4.7 billion loss from the collapse of Archegos Capital Management, with billions of losses likely to follow from the collapse for Greensill.

As CEO Thomas Gottstein clings to his position, the Wall Street Journal reported Monday that John Dabbs and Ryan Nelson will immediately step down as co-heads of prime services, the prime-brokerage unit responsible for extending all that credit to Archegos (as a reminder, for an explainer on how Archegos built its $100 billion massively leveraged position, click here).

Bloomberg added that Roger Anerella was appointed interim head of prime services, while Doug Crofton was made head of Americas cash with responsibility for execution and advisory sales. Stuart McGuire has been put in a similar role for EMEA. Reps from CS declined to comment.

The two executives have agreed to stay on through mid-May to help with the transition.

According to the internal memo cited by WSJ, several other employees in the equity and risk-management shops also left.

Credit Suisse was saddled with heavy losses after Morgan Stanley and Goldman Sachs broke ranks to dump massive blocks of shares purchased as part of Archegos founder Bill Hwang’s massive concentrated bets on tech and media stocks including ViacomCBS and Farfetch. When the selling finally ended, Credit Suisse was left with the heftiest losses of any of the prime brokers that lent to Archegos.

Gottstein said “serious lessons will be learned,” perhaps reassuring shareholders who appear to want Gottstein to remain in place, if only to prevent more embarrassing churn at the top.

In fact, the latest round of ousters could be construed as a positive for everybody left standing, including Gottstein, as the per capita bonus pool just got that much bigger.

Tyler Durden
Mon, 04/19/2021 – 13:42

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LA Sheriff Blames “Defund The Police”-Progressive-Policies For Spike In Violent Crime

LA Sheriff Blames “Defund The Police”-Progressive-Policies For Spike In Violent Crime

Authored by GQ Pan via The Epoch Times,

Violent crime has soared in Los Angeles County this year because criminals have been emboldened by progressive law enforcement policies as well as the “defund the police” movement, the county’s sheriff says.

Los Angeles County Sheriff Alex Villanueva said the county recorded 60 homicides during the first two months of the year, compared to 21 in the year-earlier time frame, he told Fox News in an interview.

Villanueva specifically blamed new Los Angeles County District Attorney George Gascón, a Democrat who was elected to lead the nation’s largest prosecutorial office in December 2020, amid the widespread unrest and calls to “defund the police” following the death of George Floyd while in Minneapolis police custody.

Gascón’s victory over incumbent Jackie Lacey was seen as a repudiation by voters of more traditional, tough-on-crime policies, according to the Los Angeles Times.

“I recognize for many this is a new path,” Gascón, a former officer with the Los Angeles Police Department and district attorney in San Francisco, said after being sworn in.

“Whether you are a protester, a police officer, or a prosecutor, I ask you to walk with me. I ask you to join me on this journey. We can break the multigenerational cycles of violence, trauma, and arrest and recidivism that has led America to incarcerate more people than any other nation.”

Three months into his tenure, Gascón has directed prosecutors in his county not to seek the death penalty or defend existing death sentences, or to file any sentence enhancements, which he described in his special directive (pdf) as “a legacy of California’s tough-on-crime era.” He also created a “Use of Force Review Board,” made up of civil rights attorneys, community members, and policing experts, to review police uses of fatal force dating to 2012 for possible prosecution.

“They need to really pick and choose very carefully because for them it’s very easy to say, ‘Oh yeah, all cops are bad,’ and, ‘Let’s reform and defund the police,’” Villanueva said, referring to voters who back progressive policies and candidates.

“Yet they’re the very first ones to pick up 911 when someone’s crawling over their back gate trying to get into their house.”

University of Southern California Law Professor Jody Armour disagrees, saying that police are intensifying violent crimes in their communities with their own actions.

“That reservoir of resentment is actually, in and of itself, also a driver of crime,” Armour told Fox News. “Until that’s healed, we’re really not going to get at the spiraling crime problem.”

Tyler Durden
Mon, 04/19/2021 – 13:29

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Union Accuses Amazon Of Illegally Sabotaging Alabama Vote

Union Accuses Amazon Of Illegally Sabotaging Alabama Vote

Amazon said in a statement acknowledging the company’s landslide win in the NLRB union vote in Bessemer, Ala. earlier this month that it didn’t “intimidate” voters to secure its victory. Days later, outgoing CEO Jeff Bezos (who will likely control Amazon from the boardroom for years or decades to come) proclaimed in a letter to shareholders that he would strive to transform Amazon into a workers paradise (more specifically, he promised to remake Amazon into “Earth’s Best Eployer and Earth’s Safest Place To Work.”

Following the stunning defeat in this month’s unionization vote at Amazon’s fulfillment center in Bessemer, While we suspect many Amazon workers would settle for just a little more leniency to use the bathroom during their shifts without requiring the use of bottles, it looks like the fledgling union in Bessemer is already planning to push back after the massive defeat, alleging a wide-ranging conspiracy by Amazon to sabotage the vote.

Of the 3,215 ballots cast, there were 1,798 votes opposing the union and 738 in favor.

After months of accusing Amazon of fighting dirty, the Retail, Wholesale and Department Store Union at BHM1 in Bessemer has filed an official complaint with the  National Labor Relations Board claiming Amazon violated numerous NLRB rules and prevented a “free and fair” union election.

In the filing, which was leaked to Wired ahead of time, the union outlined 23 objections to Amazon’s conduct, arguing that the company “prevented a free and uncoerced exercise of choice by the employees.” Eight of the objections concern the collection box Amazon installed in the warehouse parking lot to collect ballots for the election. The RWDSU argues in the filiing that the collection box violated the procedural rules because the board never authorized the box and had denied Amazon’s request for one inside the warehouse. Meanwhile, the collection box was set up in a way that, the union alleges, created the impression that Amazon, not the NLRB, had control over the election and constituted improper voter surveillance

The other claims included in the complaint describe a coordinated campaign to allegedly coerce, frighten and intimidate workers into voting against the union.

The union’s 15 other claims outline a campaign to allegedly coerce, frighten, and intimidate workers into voting against the union. The RWDSU accuses Amazon’s “agents” of unlawfully threatening employees with the loss of their benefits and pay if the union won and warning that the facility might close altogether. The union claims Amazon stifled the right to free discussion by booting workers out of employee meetings for questioning anti-union talking points, selectively enforced social distancing rules against believed union supporters, and interfered with employees’ ability to talk to the union by pressuring local officials to change policies governing how workers exited the warehouse and change the timing of a nearby traffic light. The union accuses Amazon of creating “an atmosphere of coercion and intimidation” by hiring uniformed off-duty police officers to patrol the parking lot, watching employees and organizers. One claim cites an email Amazon supposedly sent workers, saying they’d have to lay off 75 percent of the proposed unit because of the union.

If the board rules in favor of the union, it could render the outcome irrelevant, despite Amazon’s crushing victory. The most likely outcome would be a “do-over”, according to Wired. But the board could also compel Amazon to bargain directly with the union.

Many unions choose not to even bother with NLRB elections, believing that holding an election against well-funded management (that also signs would-be voters’ paychecks) is like playing with a stacked deck. Wired seemed to suggest Amazon workers try the strategy of “recognition strikes”, which have been used by the Teamsters and others before. It means striking until an employer agrees to recognize a union that has majority support within the shop.

Wired also pointed out that Democrats in Congress are quickly moving to help strengthen unions, traditionally a cornerstone constituency of the Democratic base. The Protecting the Right to Organize Act passed the House in March. It includes several provisions that would level the playing field, including a ban on captive audience meetings – often used by employers to denigrate unions. Unfortunately for Amazon workers in Bessemer, and elsewhere in the US, Senate support currently falls well short of the 60 votes needed to get around the filibuster.

Tyler Durden
Mon, 04/19/2021 – 13:06

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Peter Schiff: Bernie Madoff Could Have Been Fed Chair Or Treasury Secretary

Peter Schiff: Bernie Madoff Could Have Been Fed Chair Or Treasury Secretary

Via SchiffGold.com,

When Federal Reserve Chairman Jerome Powell appeared on 60 Minutes recently, he was asked what it takes to become the head of the central bank. In a clip from podcast episode 679, Peter Schiff said that when you think about the actual qualification, Bernie Madoff would have made the perfect Fed chairman. Or perhaps the secretary of the US Treasury department.

So, what does qualify one to head up the Federal Reserve? Peter said that apparently, being clueless about economics helps.

You have to have absolutely no understanding about money, or banking. It helps to be a real good liar.”

Peter said perhaps a background in advertising or marketing would help.

That’s really what you’re trying to do, right? You’re trying to BS everybody and con everybody.”

Bernie Madoff recently died in prison. He was known as the architect of the biggest Ponzi scheme in history. Peter said his background was ideal for Fed chair.

He ran a Ponzi scheme. And that’s exactly what the US government is doing — is running a Ponzi scheme. Bernie Madoff may, in fact, be dead. But the greatest purveyor of Ponzi schemes is alive and well and lives on in the US government. I mean, Bernie Madoff was a piker of Ponzi schemes when compared to the US government. And so operating a private Ponzi scheme is a good job prerequisite for being Fed chairman.”

Peter said he would have made an even better Treasury Department secretary.

The US government operates two giant Ponzi schemes. One is Social Security. We take money from people currently working and give it to those who have retired. Meanwhile, we promise the people who are currently working that they will get paid out from the money put in by the crop of future workers.

That is pure Ponzi. That is the definition of Ponzi. It’s just that everybody knows it’s Ponzi and the government requires you to participate even though you know it’s a Ponzi. Because most people, if they had a choice, would opt out of Social Security. They wouldn’t want to take part in it.”

And there’s another government Ponzi scheme that’s not quite so apparent – the financing of the national debt.

How does the US government pay interest to current bondholders? It borrows the money from future bondholders. And when the bonds held by current bondholders mature, where does the government get the money to pay off those lenders? It gets it by borrowing more money from new lenders.

Well, that again is a Ponzi scheme. Now, more and more, those new lenders are the Federal Reserve. So, the government is getting money from the Federal Reserve to pay off the maturing bonds. And where is it going to get the money to pay off the Fed when those bonds mature? Well, they’ll get that money from the Fed too. So, the entire thing is a Ponzi scheme.”

But in this case, nobody is forced to participate. The Chinese, the Japanese, and individuals in the US are not forced to buy US Treasuries. In this case, the government would have been better off to keep the Ponzi nature of its financing quiet.

That’s why I thought Bernie Madoff would have been a much better secretary of the Treasury than a lot of the clowns that we’ve had.”

Whenever the US government gets close to the debt ceiling, the Treasury secretary marches out and talks about how important to raise it or the US government will default. Peter said he never thought it was a good idea to remind its creditors that we’re just a debt ceiling increase away from default.

In other words, if we can’t bring more people into the Ponzi scheme, we’re just going to default on the commitments we made to the people who are already in the scheme. And so what I was always saying was, ‘Look, Bernie Madoff would never make that kind of mistake.’ It is Ponzi 101 – when you are running a Ponzi scheme, the last thing you want to do is tell people it’s a Ponzi scheme. You’ve got to keep that real quiet. You’ve got to at least pretend that you’re going to pay your bills. So, maybe Bernie Madoff being an expert in Ponzies having kept his going for as long as he did, he may have been better at conning the world so that it wouldn’t recognize the Ponzi nature of what was going on.”

The crazy thing is that even though the US government basically revealed to the world that this is a Ponzi scheme, the world continued to loan America money.

And that’s part of the reason we haven’t already seen a collapse in the US Treasury market. People still don’t get it. Even with all this money printing and these huge deficits, and even with all of these price hikes, bond investors are complacent. They’re sitting there. They’re staring at potentially double-digit inflation – the 1970s on steroids. They’re looking right at that and they’re just there. They’re not selling their bonds. It’s like they’re like a deer in the headlights. They’re staring at this headlight from an oncoming car, and they’re kind of confused, or mesmerized, or scared. And so they just sit there and then they get hit by a car and die. Well, that’s what’s going to happen to these bond market investors. They’re sitting there like a deer in a headlight. They’re confused. They don’t know what’s going on. And the next thing you know, they’re going to be flattened by a Mack truck, and they’re going to be dead. Because their bonds are going to be killed by inflation.”

Tyler Durden
Mon, 04/19/2021 – 12:45

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“On Standby” – World’s Largest Aircraft Prepares To Hit Skies For Second Time

“On Standby” – World’s Largest Aircraft Prepares To Hit Skies For Second Time

Stratolaunch Systems Corporation, founded by the late billionaire Paul G. Allen, has built the world’s largest aircraft by wingspan and is set to hit the skies for a second time. 

According to the company, Stratolaunch’s airplane called the “Roc” conducted taxi tests on Friday, reaching speeds upwards of 127 mph. “We’re gearing up to hit the skies,” the company’s Twitter account said. 

On Monday morning, Stratolaunch stated that Roc is “on standby to fly today.” They said, “we’re waiting on the latest weather updates.”

The Roc is a dual fuselage design and has a 385 feet wingspan. The purpose of the aircraft is to air-launch rockets into low Earth orbit. 

The last time Roc flew was two years ago, in April 2019. The airplane flew for 2.5 hours, achieved a maximum speed of 189 mph, and soared to an altitude of 17,000 feet. The first flight allowed pilots to evaluate the airworthiness of the aircraft before landing successfully back at the Mojave Air & Space Port in California. 

With Roc on standby, the airplane could be imminently awaiting takeoff, dependent on weather conditions. 

 

Tyler Durden
Mon, 04/19/2021 – 12:23

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Fed’s Inflation Problem: Easy Money Creates More Market Than Reported Inflation

Fed’s Inflation Problem: Easy Money Creates More Market Than Reported Inflation

Submitted by Joseph Carson, former chief economist at AllianceBernstein

The Fed has an inflation problem, but it’s not the failure to meet an arbitrary target. The problem is that there is a significant separation between reported and market inflation. The uncoupling is not new and is a statistical issue. But it has become a thorny policy problem as easy money creates more market than reported inflation.

Statistical Separation—Reported Versus Market Inflation

In practice, there should be no difference between reported and market inflation. But in the statistical business of measuring and reporting consumer price inflation (CPI), there is.

Market prices reflect current economic conditions and measure what the consumer would pay, and businesses receive. That is how prices for goods and services are measured and reported in the consumer price index, except for one.

Price estimates for owner-occupied housing (which accounts for roughly one-quarter of the CPI) do not reflect market prices, nor are they based on data for owner-occupied homes. In the CPI, owner-occupied home costs are estimated based on what people could have earned had they rented their house.

However, since the late 1990s, the Bureau of Labor Statistics (BLS) has been using rents of primary residence as a proxy for the implied rent for owner-occupied housing, even though the markets’ characteristics and price trends are fundamentally different.

Two decades of rents and house price data show the scale of separation between reported and market inflation when statisticians use the data from one market to measure prices in another one (see chart).

That was most obvious during the housing bubble of the 2000s, but it is also apparent today. For example, in the middle of the housing bubble in 2005, the house price index reported by the Federal Housing Finance Agency (FHFA) increased 10.4%, or 100 basis points faster than the prior year. But the CPI owner-rent series was only up 2.3%, unchanged from the rent inflation rate of 2004. A similar separation between house prices and owner rents is occurring today. In the past 12 months, the FHFA house price index is up 12%, and owners rent is up 2%

Rent inflation should reflect supply and demand factors more than anything else. However, during robust housing markets and a dwindling supply of homes available for rent, the CPI shows a deceleration in owner-occupied housing rent inflation. Why? Because government statisticians use data from the rental market that reflect different supply and demand factors.

The statistical separation between reported and market inflation has become a policy problem. Policymakers claim that rising housing prices are a “win” for monetary policy but fail to realize that easy money creates more market inflation than reported inflation. The burst of market house prices and not estimated rent prices triggered the housing market collapse in the 2000s.

Market prices reflect the allocative decisions of the consumer. Those prices are the signals through which monetary policy needs to gauge its policy stance. The Fed’s inflation problem stems from its failure to distinguish between reported and market inflation. There is zero chance that a “bubble” will ever exist in implied rents or damage the real economy as it is an artificial price with no buyers or sellers. Market bubbles are the big ones as they have caused significant adverse economic outcomes.

Tyler Durden
Mon, 04/19/2021 – 12:04

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Apple Allows Parler’s Return To App Store

Apple Allows Parler’s Return To App Store

After removing the Trump-friendly social media platform, Parler, from the App Store back in January following the US Capitol riots, Apple has “approved” the app’s return following improvements to the moderation system, according to CNN, citing a letter Apple sent to Congress on Monday. 

The letter – addressed to Sen. Mike Lee and Rep. Ken Buck, said Apple’s app review team said Parler’s moderation process is now “sufficient” for it to return to the ?App Store?.

“Apple anticipates that the updated Parler app will become available immediately upon Parler releasing it,” Apple’s letter continued. 

Apple’s approval of Parler’s latest version comes as Big Tech companies colluded to crush the conservative social media platform out of existence, saying that it was a platform of ‘hate’ and ‘incited violence’ during the Capitol riots. 

Before it was banned, the social media app was the most popular platform for conservatives to speak their minds. The platform grew exponentially. It was ranked the number one app in Apple’s app store before it was taken offline. 

Right before the ban, former Parler CEO Matze wrote in a message on his platform that Apple “will be banning Parler until we give up free speech, institute broad and invasive policies like Twitter and Facebook and we become a surveillance platform by pursuing guilt of those who use Parler before innocence.”

“They claim it is due to violence on the platform,” Matze wrote of Apple, whom he also accused of being a “software monopoly,” a particularly relevant attack right now given an ongoing antitrust suit against Apple from Fortnite maker Epic Games. “The community disagrees as we hit number 1 on their store today.”

While the Parler app could be downloadable in the App Store imminently, it would not shock us if former President Trump starts posting from there, considering he’s still banned from Twitter.  

Tyler Durden
Mon, 04/19/2021 – 11:45

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Calm Before The Storm? Goldman Says ‘Buy The Dip’ In VIX

Calm Before The Storm? Goldman Says ‘Buy The Dip’ In VIX

After Friday’s big option expiration, SpotGamma points out that both QQQ and IWM start the week at/in a negative gamma position, which implies higher relative volatility in those indices.

There is also now a very wide range in distribution of SPX gamma (gamma is shallow and evenly dispersed 4100-4200 with a large “void” from 4100-4000).

The potential for higher volatility is reinforced by the fact that the S&P 500 is extremely stretched on a price-time basis. As Bloomberg’s Kriti Gupta notes, the S&P 500 is currently trading at around 16% above its 200-day moving-average (200DMA) – a level that seems to have spurred a selloff in the last eight months.

Source: Bloomberg

The 16% figure coincided with a 10% correction during the September tech wreck, a 2% drop in November and December, and then ~5% selloffs in January and February.

If we do get a ‘storm’ it will be coming after a shocking period of ‘calm’ (as liquidity provisions overwhelmed the global chaos) with The Dow Jones Industrial Average now having gone 30 days without a loss of more than 1%… the longest streak since right before the pandemic.

Source: Bloomberg

The calm across equity markets has coincided with a drop in trading activity. S&P 500 average trading volume as a share of market cap thus far in April has registered as the lowest since January 2020.

But, as SpotGamma notes, there is a VIX expiration on Wednesday which could shake things up, too… which fits with what Goldman Sachs’ Rocky Fishman is warning.

The nearly 10% rally for the SPX over the past six weeks has pushed the VIX down below 17 for the first time in the COVID era. The floor in implied volatility that has held since the aftermath of November’s elections was broken by several vol points. In Goldman’s view, this is an opportunity to add to short-dated hedges, as they expect a return to 2021’s prevailing high volatility risk premium before long.

Interestingly, VIX has been hitting lower levels with each SPX high – reversing the trend of 2018-2020.

Throughout the rally of 2021, the VIX has been falling, and hitting new lows each time the SPX hits a new high. While negative volatility-spot correlation is not unusual, it is a break from the trend of the last three years, in which new highs were often associated with nervousness about valuation levels.

The shift from rising spot levels at new highs to a regime of lower vol with each new high resembles 1997 and 1998 (highlighted in green); in each of those years, the aftermath of a major event left a period of new VIX lows with each SPX high, but markets became much more volatile soon thereafter in each case.

On a side note, Goldman points out that one contributing factor to the past weeks’ slide in implied volatility has been a reduction in single stock call buying. However, the current level of single stock option activity remains extremely high compared with any period prior to COVID, and we see single stock options as a continued, significant, source of demand for optionality.

However, while slowing interest rate volatility and outperformance in the vaccine rollout to DM countries have likely contributed to investor optimism that reduces demand for hedging, Goldman warns that as valuations rise and investors consider potential impact of several near-term risks, expect a return toward 2021’s prevailing high volatility risk premium in the coming weeks.

Tyler Durden
Mon, 04/19/2021 – 11:25

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Shares Of Chinese Battery Maker CATL Surge As Company Said To Be Considered For Apple’s EV Project

Shares Of Chinese Battery Maker CATL Surge As Company Said To Be Considered For Apple’s EV Project

Shares of Contemporary Amperex Technology were up as much as 9% in Shenzhen overnight on news that it could be the company involved in supplying batteries for Apple’s electric vehicle project.

The jump in shares marks the best day for the company’s stock in four months, Bloomberg reported Monday morning.

The report, which appears to be unconfirmed for the time being, was published in Xuangubao.cn, a Chinese online stock news platform. That platform did not report a source for the information.

A battery is “still being tested” for the project, according to Bloomberg, and the company did not respond for comment when asked about the news.

This news comes about a week after we reported that Magna’s joint venture with LG could be in line to produce Apple’s electric vehicles and that the entity was “very near” an EV contract. 

“LG Magna e-Powertrain is very near to signing contracts with Apple under which they could handle the initial volume production of Apple EVs. Contract details are still being discussed,” the report said at the time. Apple is expected to produce a limited number of first gen EVs to evaluate their marketability. 

“Because LG Group affiliates including LG Display, LG Chem, LG Energy Solution and LG Innotek are already included in Apple’s parts supply chain, Apple doesn’t have to worry about any supply chain issues. These LG affiliate are qualified to guarantee production yields and faster delivery of parts needed for Apple EVs,” a source told the Korea Times.

“As the LG brand is not that strong in the global EV industry, it needs a pretty competitive reference to show off its transformation efforts. From that standpoint, LG’s bet on the Apple EV is not that bad, and vice versa for Apple,” a second source said.

In addition to Apple, should a contract be signed, Magna also sports names like BMW, Honda, Hyundai, Volvo, Volkswagen and Toyota, among about 45 others, as OEM customers. CATL cooperates with Volkswagen in China and also has plans to supply companies like BMW and Daimler.

A prototype is expected in early 2024. 

Tyler Durden
Mon, 04/19/2021 – 11:08

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If Lockdowns Are Needed, Why Did More People Die In States That Locked Down Than Those That Didn’t?

If Lockdowns Are Needed, Why Did More People Die In States That Locked Down Than Those That Didn’t?

Authored by Will Jones,

One of the great things about America is that it has 50 states that can set their own policy across a broad range of areas, including on public health and lockdowns. This has allowed some to resist the stampede to impose swingeing restrictions on normal life in the hope of limiting transmission of SARS-CoV-2, and this provides us with a valuable control group in the great lockdown experiment that can give us an idea what might have happened if we hadn’t made some intervention or other.

During the autumn and winter a new surge in Covid infections prompted most US states, like most Western countries, to reimpose restrictions. But a few resisted. Eleven states did not impose a stay-at-home order and left people at liberty to leave their homes whenever they wished. Of these, four – Florida, Georgia, South Carolina and South Dakota – did not impose any restrictions at all and treated it pretty much like any other winter.

Although there are various differences between states that might have affected Covid outcomes, because they all form part of one country there are enough similarities to make comparisons useful. In particular, if lockdowns are effective and necessary to prevent hundreds of thousands of extra deaths (or the equivalent for the size of the population), then those states which didn’t lock down should have a far worse death toll. If the death tolls are not much worse, but about the same (or better), then lockdowns cannot be having a large impact on preventing Covid deaths.

In the chart above I have used data from Worldometer to plot the current total Covid deaths per million for each state. I have coloured the 11 states which did not lock down (i.e., impose a stay-at-home order) this winter in red. I have also calculated the average for the two groups of states, those which did not lock down over the winter and those which did, and coloured them in yellow.

As you can see, states which did not lock down over the winter, far from having many times more Covid deaths, have actually had fewer – 1,671 vs 1,736 deaths per million. There may be demographic or other reasons that some states have a higher or lower number of deaths than others so we shouldn’t read too much into the precise differences. But even so, if lockdowns are supposed to suppress the virus to low levels and thus prevent ‘hundreds of thousands’ of deaths (or the population equivalent), then how is this possible? The only conclusion is that lockdowns do not work as intended and do not suppress the virus.

This conclusion is reinforced by looking at the death tolls in the four states which imposed no restrictions at all over the winter, the average of which is 1,716 deaths per million, which is still below that of those which imposed lockdowns (1,736). Florida reopened in the autumn, Georgia and South Carolina in the spring of 2020, and South Dakota never closed. Yet overall they have suffered fewer Covid deaths per million than the states which imposed stay-at-home lockdowns this winter.

Those academic teams which produce models predicting doom for places which don’t impose the measures they recommend should be challenged to apply their models to these states and hindcast the last winter. Any model which cannot accurately reproduce the known outcomes for these states should be calibrated until it can. Otherwise, if it can’t get the answer right for the past, why should we trust it for the future?

The modelling teams at WarwickImperial and LSHTM can be found on Twitter (as can LSHTM’s Adam Kucharski) if anyone feels like putting these questions to them.

Tyler Durden
Mon, 04/19/2021 – 10:50

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In Huge Reversal, China Now Calls Bitcoin “Investment Alternative” After Years Of Crackdowns

In Huge Reversal, China Now Calls Bitcoin “Investment Alternative” After Years Of Crackdowns

With both India and Turkey cracking down on bitcoin, is China set to warm to the cryptocurrency that it has been waging a not so quiet capital control war with for the past four years? In a dramatic and material shift in Beijing’s tone after a crackdown on cryptocurrency issuance and trading nearly four years ago, CNBC reported that China’s central bank is now calling bitcoin an “investment alternative.”

Industry insiders called the comments “progressive” and are watching closely for any regulatory changes made by the People’s Bank of China.

“We regard Bitcoin and stablecoin as crypto assets … These are investment alternatives,” Li Bo, deputy governor of the PBOC, said on Sunday during a panel hosted by CNBC at the Boao Forum for Asia.

“They are not currency per se. And so the main role we see for crypto assets going forward, the main role is investment alternative” he added.

Whereas back in 2017, China was the world’s largest buyers of bitcoin as local savers and speculators used crypto to bypass China’s great capital firewall, Beijing promptly cracked down on this practice and not only banned so-called initial coin offerings but also shut down local cryptocurrency exchanges. The moves were prompted by concerns about financial stability. As a result, most of the recent activity has been driven by the US, not Asia… but that could soon change.

As investment alternatives, “many countries, including China, are still looking into it and thinking about what kind of regulatory requirements. Maybe minimal, but we need to have some kind of regulatory requirement to prevent … the speculation of such assets to create any serious financial stability risks,” Li said. He added that the central bank will keep its current regulations on cryptocurrencies.

As CNBC notes, Li’s latest comments highlight a potential shift in tone from the PBOC.

Flex Yang, CEO and founder of Babel Finance, called the comments “progressive” in an interview with CNBC on Monday. Babel Finance is a crypto financial services company.

“I think it is quite significant and is definitely different to their previous statements or positions on public cryptocurrencies,” Vijay Ayyar, head of business development at cryptocurrency exchange Luno, told CNBC by email.

“Governments are realizing that it is a viable and established, yet growing, asset class and need to regulate it. China regulating crypto would be another massive boost to the industry in China and globally,” Ayyar said, talking about the motivation behind the PBOC’s shift in tone. To be sure, China is not alone in changing its mind about bitcoin: over the past 4 years, Bitcoin has transformed from being purely a retail-favored asset and has become more mainstream in the financial world, gaining interest from institutional investors. Major corporations such as Tesla and Square in the U.S. have purchased large sums of bitcoin.

* * *

One possible reason for the huge shift in Chinese sentiment: as we reported two weeks ago, China has started to encourage more capital outflows to ease pressure on the Yuan.

“Amid the continued appreciation of the yuan since June 2020, China’s foreign exchange policies have focused on increasing the flexibility of the exchange rate, expanding capital outflows and controlling capital inflows,” Guan Tao, chief global economist at BOC International Co. Ltd. wrote in a Feb. 23 report (link in Chinese) on the preliminary balance of payments data. He said he expected this foreign-exchange policy mix to continue as the “orderly expansion of capital outflows is an important policy tool to cope with the appreciation pressure on the yuan.”

In other words, as we said on April 3…

In other words, don’t be surprised to see a fresh flood of Chinese real-estate buyers in Vancouver, California and the Tri-State area. Also, don’t be surprised to see a reversal in China’s long-running feud with Bitcoin as Beijing realizes that there is no better way to send money offshore than using crypto.

Two weeks later this is precisely what appears to be taking place.

Separately, a reminder that China is working on its own digital currency called the digital yuan, and is widely seen as the frontrunning among all of its central bank peers in the transition from fiat to digital. The aim is to replace cash and coins in circulation.

Tyler Durden
Mon, 04/19/2021 – 10:29

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Watch Live: Chauvin Closing Arguments Begin As Black Leaders Warn Of More Riots If Acquittal Reached

Watch Live: Chauvin Closing Arguments Begin As Black Leaders Warn Of More Riots If Acquittal Reached

After nearly three weeks of witness testimony and evidence that has seen the very nature of George Floyd’s death disputed by both the prosecution and defense, lawyers for both sides will give their closing arguments on Monday.

Readers can watch the closing arguments below:

Afterwards, jurors will be sequestered for deliberations that could take hours, minutes or even weeks. They could offer up a guilty or not-guilty verdict on charges of second- and third-degree murder, as well as manslaughter.

Over the weekend, black politicians and civil rights attorneys fanned out to give interviews that carried a similar message to Rep. Maxine Waters’ spirited (or impeachment-worry, as some might say) comments to protesters/rioters in Brooklyn Center, Minnesota, (which preceded targeted drive-by shootings against police).

Civil rights attorney Benjamin Crump, who is representing the families of Floyd and Daunte Wright, the 20-year-old fatally shot by a Minnesota police officer who claims she was reaching for her taser, put a spin on Waters’ message, saying protests would remain “emotional” (an interesting euphemism for “violent”) unless Chauvin is found guilty. “We cannot condone this inhumanity America, we cannot condone this evil that we saw on that video [of Floyd’s arrest],” Crump said during the Sunday morning interview, warning that if the trial’s outcome doesn’t set a new precedent, “people are going to continue having these emotional protests.”

Rep. Karen Bass, who, like Waters, is also a member of California’s overwhelmingly Democratic Congressional delegation, appeared on CNN’s “State of the Union” and said she expects a wave of outrage if Chauvin is acquitted on all three counts, adding: “We’ve seen people get off with minimal sentences” in “too many of these cases.” “I don’t think anyone in Minneapolis, frankly anyone in the U.S., and over a good part of the world, would understand any verdict other than guilty.”

Whatever happens to Chauvin, the public has already moved on to new acts of police violence, including the killing of Wright, and the shooting of Adam Toledo, a 13-year-old shot and killed by Chicago Police last month.

Of course, it’s not just Derek Chauvin’s fate that’s about to be decided here. Jonathan Turley, a Constitutional Lawyer and legal writer, explained in USA Today how the cases against Chauvin’s fellow officers would likely collapse if Chauvin is acquitted.

The trial of former police officer Derek Chauvin in the death of George Floyd is scheduled to begin March 29 after the difficult task of selecting a jury. The difficulty is not in finding a jury that reflects the community but finding one that does not. And it became even more difficult Monday when Minneapolis announced a $27 million settlement in a civil suit brought by Floyd’s family.

One juror had been dismissed by then after he admitted that he feared he or his family would be harmed if Chauvin was acquitted. Another was dismissed after saying property damage during Black Lives Matter protests might have been necessary to achieve justice. Their problem was that they reflected their community all too well.

Judging from the encampment around the courthouse with barbed wire, fencing and security, authorities are aware of the potential for violence. The greatest threat, however, could be found in how the prosecution has structured the case – and the danger of a cascading failure of not just the Chauvin case but of the cases against all four officers.

An unstable and vulnerable strategy

The prosecutors constructed the cases against Chauvin, Alexander Kueng, Thomas Lane and Tou Thao like an upside-down pyramid resting on a conviction of Chauvin. The main charges against Kueng, Land and Thao are as aiders and abettors to Chauvin’s alleged murder or manslaughter. If Chauvin is acquitted or the jury hangs on the charges, the prosecution of the other three officers becomes extremely difficult.

Prosecutors are aware of the instability and vulnerability of that strategy. For that reason, they fought to restore a third-degree murder claim to give the jury another option for a compromise verdict between the second-degree murder claim and the second-degree manslaughter case. In a case that is best suited for a manslaughter claim, there is a risk of overcharging a case that undermines the narrative of the prosecution. The second-degree murder claim does not require intent to murder Floyd but still requires a murder committed in the course of another felony. The third-degree murder charge requires a showing that Chauvin perpetrated “an act eminently dangerous to others and evincing a depraved mind, without regard for human life.

There are some very significant challenges for the prosecution, even with the infamous videotape of Chauvin with his knee on Floyd’s neck for more than 9 minutes. There is a palpable fear that even mentioning countervailing defense arguments will trigger claims of racism or insensitivity to police abuse. However, the jury must unanimously convict on the basis of beyond a reasonable doubt after considering a variety of such arguments, including:

  • When called to the scene due to Floyd allegedly passing counterfeit money, Floyd denied using drugs but later said he was “hooping,” or taking drugs.

  • The autopsy did not conclude that Floyd died from asphyxiation (though a family pathologist made that finding). Rather, it found “cardiopulmonary arrest while being restrained by law enforcement officer(s).” The state’s criminal complaint against Chauvin said the autopsy “revealed no physical findings that support a diagnosis of traumatic asphyxia or strangulation. Mr. Floyd had underlying health conditions including coronary artery disease and hypertensive heart disease.” He also was COVID-19 positive.

  • Andrew Baker, Hennepin County’s chief medical examiner, strongly suggestedthat the primary cause was a huge amount of fentanyl in Floyd’s system: “Fentanyl at 11 ng/ml — this is higher than (a) chronic pain patient. If he were found dead at home alone & no other apparent causes, this could be acceptable to call an OD (overdose). Deaths have been certified w/levels of 3.” Baker also told investigators that the autopsy revealed no physical evidence suggesting Floyd died of asphyxiation.

  • The toxicology report on Floyd’s blood also noted that “in fatalities from fentanyl, blood concentrations are variable and have been reported as low as 3 ng/ml.” Floyd had almost four times the level of fentanyl considered potentially lethal.

  • Floyd notably repeatedly said that he could not breathe while sitting in the police cruiser and before he was ever restrained on the ground. That is consistent with the level of fentanyl in his system that can cause “slowed or stopped breathing.”

  • Finally, the restraint using an officer’s knee on an uncooperative suspect was part of the training of officers, and jurors will watch training videotapes employing the same type of restraint as official policy.

Serious challenges in proving this case

These facts do not negate a claim of manslaughter since Floyd was clearly in distress, and Lane suggested that the officers move Floyd in light of his complaints. Chauvin overruled that suggestion.

Even with a manslaughter conviction, however, the case against officers like Lane would be difficult. Lane is shown as the officer who first confronted Floyd after he refused to show his hands. Lane yelled at Floyd to show his hands. After Floyd replied, “Please don’t shoot me, man,” Lane said, “I’m not shooting you, man.” Later, when Floyd struggled not to get into the police car and said he cannot breathe, Lane is heard offering to sit with him, roll down the windows and turn on the air conditioning. It is also Lane (who had only been on the force a couple days) who encourages Chauvin to move Floyd from the knee restraint position.

Lane might never see a trial if the case against Chauvin fails and causes a cascading failure. Not only could Chauvin be acquitted or left with a hung jury, but the impact could be the collapse of all four cases. That will be up to the jury. But if there is violence after the verdict, it will be far worse if the public is not aware upfront of the serious challenges in proving this case.

* * *

Yes, public anger will likely surge into another full-blown riot (with the self-righteous encouragement of Rep. Maxine Waters) if Chauvin is acquitted. But could you imagine what might happen if Chauvin is acquitted and the charges against his compatriots are dropped?

Tyler Durden
Mon, 04/19/2021 – 10:12

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Rabo: The Angry Public Wants To Give A Red Card To The Whole Global System

Rabo: The Angry Public Wants To Give A Red Card To The Whole Global System

By Michael Every of Rabobank

A red card for the whole system

IT’S RED!” A straight red card for Global Neoliberalism United, that is. 12 of Europe’s top football (‘soccer’) clubs are planning to break away from their already-lucrative elite domestic leagues, and their even-more lucrative Champions League, in order to form a breakaway closed-loop European Super League with no relegation and no cup competitions. In short, the richest (if not most successful) clubs, and the world’s most famous players, are potentially about to walk away from the entire global system of football – including the quadrennial World Cup – to keep all of the global money in the game rather than sharing just a little of it with others: this is of course backed by Wall Street and private equity to the tune of USD8bn.

Even the US football system sees the least successful team get first pick of the draft new players; by contrast, global football has long seen increasing returns to the biggest clubs and their subsequent de-anchoring from their own domestic and now pan-European leagues. Amazingly, this puts UEFA –an institution with the transparency and public affection of a Bond Villain– in the position of the good guys trying to hold the game’s gossamer-thin ties to its grassroots. This is, sadly, perhaps what the market wants though: endless ‘Clash of the Titans’ games with no consequences. No true fans needed, just click-bait viewers. In which vein, may I make some suggestions to the bankers setting up the new rules to make it even more neoliberal/lucrative?

  • Two halves of 45 minutes without ad-breaks doesn’t work – so let’s have 10x 5 minute ‘plays’ with 1 minute ad-breaks in-between before and after half-time’s 15-minute long ad-break;
  • Off-side and hand ball rules are confusing and stop goals being scored – so let’s get rid of them;
  • The middle of the field is irrelevant because no goals are scored there – so let’s cut it out and move the goals closer together;
  • The size of goals reduces the number of goals – so let’s make them twice as big; and
  • Defenders touching attackers risks injury, so you might not get to see your favorite player score in the Big Derby every week – so let’s make the sport non-contact.

If my contempt shines through here – good. As a third generation fan of one of the teams on this breakaway list, whose mother was waved a mascot in the stands by his grandfather – I am out. I will never love another team, but I no longer care what happens to the next iteration of this one. And as for the neoliberal Beautiful Game, the real beauty is that if the USD9bn invested proves misspent because fans don’t want to watch sport like a movie trailer rather than a movie, then all involved will just call for the referee’s Fed card.

European press will no doubt be dominated by this news today: yet the power-play here reflects the world around us in microcosm – and ‘reds’ are deeply involved again.

  • New US regulations mean companies will have to ask permission from the government to use any IT equipment and services from China or other countries deemed “adversaries” as of May, seen impacting up to 4.5m firms. This potential disruption comes on top of a shortage of semiconductors already seeing global production lines halted. So a rich, break-away, closed-loop league(?),…and just as a PBOC advisor states from 2025 China’s growth will slow sharply due to a demographic collapse, which will cause a crisis in consumption: so much for Wall Street/private equity straight-line projections on *that* front;
  • Jack Ma is reportedly being pressured to sell his stake in Ant Group; and
  • In the Netherlands, De Volkskrant reports Huawei would have had free access to national telco KPN’s mobile network in the past and could eavesdrop on all conversations, including the government: what does it imply about future choices of IT systems in Europe?

Then again, over the weekend France and Germany had another side-bar discussion with China, underlined they want to ratify the CAI investment deal despite EU parliamentarians being under Chinese sanctions, and Germany stressed ongoing cooperation. That’s as Deutsche Telekom is still working with Huawei, and VW states “…we will also stand by our engagement in Xinjiang, as long as we think it’s doable from an economic point of view.” Even so, after finishing the call Xi Jinping attacked the EU for plans to impose green tariffs to prevent ‘carbon leakage’ (and financial leakage from any Green New Deals – though what is China’s own ‘dual circulation’, one may ask?). This follows the pattern of their last video chat being followed by China arresting dozens in Hong Kong, leading to the aforementioned tit-for-tat sanctions on EU MPs. Someone doesn’t learn.

Ironically, Macron has just stated there has been a “naïve approach” towards Russia and “clear red lines” need to be set by the international community. Some would point out that these already exist in the form of Ukraine’s border. There, a huge Russian military force has been assembled, and continues to grow. Military (and financial) logistics suggest it must either go home soon – or be used.

Tellingly, Belarussian President Lukashenko has alleged an assassination attempt against him; Ukraine and Russia have both expelled diplomats; the Czechs have expelled 18 Russian intelligence operatives; and imprisoned Russian opposition leader Navalny, on hunger strike, may be close to death according to his family, something the US says would have “consequences”  – so the background music is ominous. Putin gives his annual address to the nation on Wednesday, which could be key. Yes, these tensions could rapidly fade away: but those with more military expertise than market analysts suggest the Russian aim could be to seize eastern Ukraine up to the Dnieper river, and the whole Black Sea coast through to Transnistria. If so, the potential consequences, and precedents, even raise the spectre of 1930’s-style break-aways from the League. (Tumbleweeds here, no doubt, from those in markets who don’t know the history I am referring to: they are too busy making magical straight-line projections about goals per game and Chinese consumer spending, all underwritten by expectations of central-bank bailouts.)

Relatedly, with Turkey banning crypto from the real economy, India planning to, and Wall Street in love with it (because it was going up – past tense), there are unconfirmed reports today that Cuba might adopt Bitcoin to try to work its way around US sanctions. To which I ask: only Cuba? That’s another awkward break-away/big money topic to focus on: so let’s not.

Indeed, let’s all talk about football today instead, why not, and see if the outrage already being expressed by the likes of the British Prime Minister is enough to stop this one microcosm of the problems that we face, in the hope that it is enough to assuage an angry public that would, if it could, give a red card to the whole global system.

Tyler Durden
Mon, 04/19/2021 – 10:05

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“No Medical Science” Behind Michigan Mandate To Mask 2-Year-Olds, Doctor Warns

“No Medical Science” Behind Michigan Mandate To Mask 2-Year-Olds, Doctor Warns

Mich. Gov Gretchen Wilmer is clearly seriously uncomfortable with Michigan’s newfound status as one of the epicenter’s of the US COVID outbreak, and while colleagues like Gov. Andrew Cuomo insist on moving ahead with reopening plans, the Wolverine State is now directing residents as young as two years old to mask up.

The Michigan Department of Health and Human Services said in a press release on Friday that the state planned to expand its COVID-19 restrictions — what Michigan’s DHHS calls “the strongest public health order in the Midwest” — and require masks be worn by “children ages 2 to 4” in order to “further protect the state’s residents.”

In the press release, the state said that “expanding the mask rule to children ages 2 to 4 requires a good faith effort to ensure that these children wear masks while in gatherings at childcare facilities or camps,” the announcement says, adding that the order “follows recommendations from the American Academy of Pediatrics and Centers for Disease Control and Prevention guidance.”

State public health officials also pointed out that while several key COVID metrics have been slowing – the share of COVID patients without hospital beds, the COVID case rates and the percent positive of tests coming back positive (although the speed of the declines has slowed somewhat) – the head of one of the state’s biggest nursing organizations warned that “Nurses are exhausted. Many hospitals are close to 100% capacity. RNs around the state are being put in the impossible situation of having to decide which patient to attend to. Nurses are working up to 18 hours at a time, often without breaks,” said Jamie Brown, president of the Michigan Nurses Association.

“We are begging for everyone in the community to do their part. Stay home. Wear a mask. Get a vaccine when you are able. We are barely able to keep our heads above water. We are in crisis. We need our communities’ help.”

While cases have climbed back in Michigan (driven in part – according to the press release – by variants like B.1.1.7) deaths have crept higher, but only slightly.

Source: mSightly

The order in its current form is set to last through May 24. As Michigander parents scramble to mask their rambunctious toddlers, Dr. Marc Siegel took to Fox News over the weekend to remind the world that there’s “no medical science” behind the order to mask two-year-olds.

“There’s no advantage, no medical science behind it…children as young as two are very unlikely to be spreading the virus,” Dr. Siegel said.

After passing 200MM vaccine doses administered last week, more than half of US adults have now received at least one dose of the vaccine. While the percentage who are fully vaccinated sits just below 35%.

Tyler Durden
Mon, 04/19/2021 – 09:45

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There Is No Way This Bull Market Doesn’t End Very Badly

There Is No Way This Bull Market Doesn’t End Very Badly

Authored by Lance Roberts via RealInvestmentAdvice.com,

There is no way this bull market doesn’t end very badly. We all know that is the reality of this liquidity-fueled market, but we keep investing for “Fear Of Missing Out.”

An excellent example of investor exuberance came recently in “Investors Go All In:”

“More importantly, over the past 5-MONTHS, more money has poured into the equity markets than in the last 12-YEARS combined.”

If that chart alone doesn’t get your “Spidey senses” tingling, I am not sure what will. However, I have a few more charts to share with you.

Technical Deviations

In the short term, fundamentals don’t matter. Such is because over a few days, weeks, or even months, what drives prices higher or lower is the psychology of investors. As such, we can look at technical deviations to determine how exuberant or not the market currently is.

For moving averages to exist, prices must trade both above and below that average. As such, moving averages act like gravity on prices. When prices deviate too far from the moving average, eventually, prices will revert to, or beyond, that average.

We can visualize the reversion in the chart below of the S&P 500 index versus its 200-dma. With the index currently more than 14% above its 200-dma, such should be a short-term warning to investors.

The following chart says much the same. Currently, the 50-day moving average is also significantly deviated above the 200-dma. Such suggests that not only will prices retest the 50-dma but eclipse that level in a reversion back to the 200-dma.

Notably, technical deviations in the short term do NOT mean the market will “crash” tomorrow. Markets can remain deviated for quite some time. However, when the deviations begin to diverge from the price index negatively, such has previously preceded more important corrections and bear markets.

A Very Leveraged Market

“Margin debt isn’t an issue. It provides the fuel for asset prices higher.” 

That is a correct statement.

Rising levels of margin debt are a measure of investor confidence. Investors are more willing to take out debt against investments when shares are rising. The more prices increase, the more they can borrow. However, the opposite is also true. Falling asset prices reduce the amount of credit available, and the liquidation of assets must occur to bring the account back into balance.

As discussed previously, “negative cash balances” are at a record.

I want to make a critical point here. Margin debt, like valuations, are “terrible market timing” indicators and should not be used as such. I agree and disagree that margin debt levels are simply a function of market activity and have no bearing on the outcome of the market.

As we saw in March of 2020, the double-whammy of collapsing oil prices and economic shutdown in response to the coronavirus triggered a sharp sell-off fueled by margin liquidation.

However, since then, the surge in margin debt has reached extreme levels. More importantly, as shown in the chart below, it isn’t the “level” of margin debt that reflects investor exuberance but rather the rate of change. In this case, we can see a very sharp spike in debt from the previous 12-month low. Such has only occurred near previous market peaks and bear markets.

As Jason Zweig recently penned:

Where ignorance is bliss, ‘tis folly to be wise,” wrote the British poet Thomas Gray. One of these days, perhaps sooner rather than later, stocks will stop going up and the importance of understanding what you own will reassert itself. For the time being, though, investors who used to think of themselves as wise may continue to look foolish.”

Fundamentals Will Matter, Eventually

As stated above, in the short term, fundamentals do not matter. However, in the long term, they matter a lot.

Currently, investors are overlooking fundamentals on the expectation the economy and earnings will improve to justify the market overvaluation. There is scant evidence over the last 20-years such will be the case.

The “Economic Activity Index” is an average of the 4-most essential components of organic economic activity. Interest rates have a long historical correlation to economic activity, along with inflationary pressures. Without productivity and business investment, jobs do not get created to support consumption which is ~70% of the GDP calculation.

Through the first quarter of 2021, the economic recovery expected by economists is running well ahead of what the index approximates. Furthermore, given much of the market’s advance is based on optimistic expectations, there is potential for disappointment.

Such is where fundamentals become extremely important. When, or if, expectations of recovery are disappointed, the market will begin to reprice itself for its intrinsic value. Given that the market is currently trading more than twice the level of underlying economic growth, which is where corporate profits come from, such suggests a significant risk.

The level of price versus sales, which occurs at the top of the income statement (and much less subject to manipulation, also suggests a risk.

10-year forward returns are below zero historically when the price-to-sales ratio is at 2x. There has never been a previous period with the ratio climbing to near 3x.

Of course, with markets trading well above 20x earnings, history further suggests that investors are likely to be disappointed in the future as markets reprice value.

Such is particularly problematic when investors chase stocks with no profits.

What could go wrong?

Conclusion

While we remain long-biased in our equity portfolios, we are chasing performance like everyone else. As I noted in “Fully Invested Bears:”

“While the mainstream media continues to skew individual’s expectations by chastising them for “not beating the market,” which is impossible to doour job is to participate in the markets with a bias toward capital preservation. As noted, the destruction of capital during market declines has the most significant impact on long-term portfolio performance.

From that view, as a portfolio manager, the idea of ‘fully invested bears’ defines the reality of the markets we live with today. Despite the understanding that the markets are overly bullish, extended, and valued, we must stay invested or suffer potential “career risk” for underperformance. 

Such is the consequence of the Federal Reserve’s ongoing interventions. Portfolio managers must chase performance despite concerns of potential capital loss. In other words, we are all ‘fully invested bears.’ We are all quite aware this will eventually end badly. However, in the short-term, no one is willing to take the risk of being grossly underexposed to Central Bank interventions.”

While it certainly may “feel” like the market “can’t go down,” it is worth remembering the sage words of Warren Buffett.

“The market is a lot like sex, it feels best at the end.”

We remain “bullish” on the markets currently as momentum is still in play. However, we are also continually taking precautions to monitor and manage risk accordingly.

For us, that means putting a spin on Warren’s quote:

“If you engage in the market in an unprotected fashion, you may not want the unexpected surprise.”

Tyler Durden
Mon, 04/19/2021 – 09:25

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Key Events In The Coming Week: All About Earnings And The ECB

Key Events In The Coming Week: All About Earnings And The ECB

As Jim Reid summarizes events over the next five days, there’s a reasonably eventful calendar for markets this week, with the highlights including Thursday’s ECB meeting and Friday’s release of the April flash PMIs from around the world. Investors will also be paying attention to the latest earnings releases, with a further 80 S&P 500 companies reporting, as well as the continued path of the pandemic as a number of places such as India have faced a big surge in cases. There have been around 5.1mn cases reported across the globe over the past 7 days, the highest weekly increase since the pandemic began. India contributed north of 1.4mn cases to this increase which is also its largest weekly gain and continues to remain the current epicentre of the virus. Elsewhere both Osaka and Tokyo may go into fresh state of emergency conduction as soon as today. On a more positive note, Fauci said that he expects a decision on how to resume vaccinating Americans with the J&J COVID-19 vaccine will probably come by Friday and added that “I doubt very seriously if they just cancel” the J&J vaccine. We wonder if the people who chose the J&J vaccine will fly to their vaccination spot using a 737 MAX.

From central banks, this week’s highlight will be the latest ECB decision on Thursday, along with President Lagarde’s subsequent press conference. In their preview, Deutsche Bank’s European economists write that a change in the policy stance is unlikely, and that a decision on whether or not to maintain the new faster pace of PEPP purchases will be made after a joint assessment of financing conditions and the inflation outlook at the Governing Council’s next monetary policy meeting in June. However, at this point it’s unclear whether they will maintain that higher pace beyond June. Although a latent recovery is building and ‘net-net’ issuance (net issuance, net of ECB purchases) ought to turn favorable for rates markets following the Q1 spike, the ECB consensus is cautious and determined to avoid a premature tightening in financing conditions.

Staying on Europe, another important event will take place in Germany today, as the Green party present their first chancellor candidate in the 41-year history of their party. This is an important one to look out for, as the CDU/CSU’s slump in the polls has put them only a few points ahead of the second-place Greens, so it’s no longer implausible that the next German chancellor could come from the Greens following September’s federal election. DB’s view is that the odds appear slightly tilted towards co-leader Annalena Baerbock being selected, which proved to be the case. In terms of the election result, a CDU-CSU/Green coalition is still seen as the baseline scenario, with Conservatives expected to regain polling momentum. Talking of which, it’s also possible that the CDU/CSU will agree on who will be their candidate over the next day as Armin Laschet and Markus Soeder have been having behind close door discussions since Friday to hammer out which of them will be on the ticket come September. Overnight, the headlines have leaned more favorably towards Markus Soeder with CDU lawmaker Christian von Stetten suggesting in an interview yesterday that Laschet’s leadership bid would be rejected by the CDU/CSU caucus in a vote on Tuesday if the issue isn’t resolved before then.

On the data front, it’s a lighter week ahead, with the main highlight likely to be at the end of the week with the flash PMIs for April. This will give us an initial indication of how global economic performance has fared at the start of Q2, and there’ll be particular attention on the price gauges as well as investors stay attuned to any signs of growing inflationary pressures. In terms of central banks, there are a few other decisions alongside the ECB, with Canada, Russia and Indonesia all deciding on rates. However, there won’t be any Fed speakers as they’re now in a blackout period ahead of their own meeting the week after.

Earnings season kicks up another gear this week, as 80 companies from the S&P 500 report along with a further 54 from the STOXX 600. Among the highlights include Coca-Cola and IBM today, before tomorrow sees reports from Johnson & Johnson, Procter & Gamble, Netflix, Abbott Laboratories, Philip Morris International and Lockheed Martin. Then on Wednesday we’ll hear from ASML, Verizon, NextEra Energy, and Thursday sees releases from Intel, AT&T, Danaher, Union Pacific and Credit Suisse. Finally on Friday, there’s Honeywell International, American Express and Daimler.

Source: Earnings Whispers

Courtesy of Deustsche Bank here is a day by day preview of the week ahead

Monday April 19

  • Data: Japan March trade balance, final February industrial production
  • Earnings: Coca-Cola, IBM

Tuesday April 20

  • Data: Japan February tertiary industry index, UK February unemployment, Germany March PPI
  • Central Banks: Bank Indonesia monetary policy decision
  • Earnings: Johnson & Johnson, Procter & Gamble, Netflix, Abbott Laboratories, Philip Morris International, Lockheed Martin

Wednesday April 21

  • Data: UK March CPI, Canada March CPI
  • Central Banks: Bank of Canada monetary policy decision
  • Earnings: ASML, Verizon, NextEra Energy

Thursday April 22

  • Data: US weekly initial jobless claims, March existing home sales, leading index, Chicago Fed national activity index, April Kansas City Fed manufacturing activity, Euro Area advance April consumer confidence
  • Central Banks: ECB monetary policy decision
  • Earnings: Intel, AT&T, Danaher, Union Pacific, Credit Suisse

Friday April 23

  • Data: Flash April manufacturing, services and composite PMIs from Australia, Japan, France, Germany, Euro Area, UK and US, UK April GfK consumer confidence, March retail sales, public sector net borrowing, Japan March nationwide CPI, US March new home sales
  • Central Banks: Central Bank of Russia monetary policy decision
  • Earnings: Honeywell International, American Express, Daimler

* * *

Finally, focusing on just the US, it’s a quiet week on the data front with Goldman writing that the key economic data release this week is the jobless claims report on Thursday. There are no speaking engagements from Fed officials this week..

Monday, April 19

  • There are no major economic data releases.

Tuesday, April 20

  • There are no major economic data releases.

Wednesday, April 21

  • There are no major economic data releases.

Thursday, April 22

  • 08:30 AM Initial jobless claims, week ended April 17 (GS 610k, consensus 625k, last 576k); Continuing jobless claims, week ended April 10 (consensus 3,700k, last 3,731k): We estimate initial jobless claims increased to 610k in the week ended April 17.
  • 10:00 AM Existing home sales, March (GS -4.5%, consensus -1.1%, last -6.6%): We estimate that existing home sales declined by 4.5% in March after falling by 6.6% in February. Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.

Friday, April 23

  • 09:45 AM Markit Flash US manufacturing PMI, April preliminary (consensus 60.5, last 59.1)
  • 09:45 AM Markit Flash US services PMI, April preliminary (consensus 61.5, last 60.4)
  • 10:00 AM New home sales, March (GS +11.5%, consensus +14.2%, last -18.2%): We estimate that new home sales rose by 11.5% in March, reflecting a sequential improvement after February’s 18.2% decline due to winter storms.

Source: Deutsche Bank, BofA, Goldman

Tyler Durden
Mon, 04/19/2021 – 09:15

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“It’s A Money Grab” – JPMorgan-Backed European Soccer ‘Super League’ Sparks Global Fury

“It’s A Money Grab” – JPMorgan-Backed European Soccer ‘Super League’ Sparks Global Fury

12 of world football’s soccer’s biggest and richest clubs announced Sunday they’ve formed a breakaway European “Super League” – with clubs Manchester United, Liverpool, Barcelona Real Madrid, Juventus and A.C. Milan among those to sign up. No German or French clubs have yet to be associated with the breakaway.

The breakaway league is due to start in August.

As Reuters reports, the clubs would share a fund of 3.5 billion euros ($4.19 billion) to spend on infrastructure projects and to deal with the impact of the COVID-19 pandemic. The money would not be available to spend on players.

“We will help football at every level and take it to its rightful place in the world. Football is the only global sport in the world with more than four billion fans and our responsibility as big clubs is to respond to their desires,” said Real Madrid president Florentino Perez, the first chairman of the Super League.

The move sets up a rival to UEFA’s established Champions League competition and was condemned by football authorities and political leaders.

UEFA issued a strong statement jointly with English, Spanish, and Italian leagues and football federations, saying they were ready to use “all measures” to confront any breakaway and saying any participating clubs would be banned from domestic leagues, such as the Premier League.

“The clubs concerned will be banned from playing in any other competition at domestic, European, or world level, and their players could be denied the opportunity to represent their national teams,” UEFA said.

We thank those clubs in other countries, especially the French and German clubs, who have refused to sign up to this. We call on all lovers of football, supporters, and politicians, to join us in fighting against such a project if it were to be announced. This persistent self-interest of a few has been going on for too long. Enough is enough.”

World soccer’s governing body FIFA expressed its “disapproval to a ‘closed European breakaway league’ outside of the international football structures”.

French President Emmanuel Macron and UK Prime Minister Boris Johnson both issued statements condemning a breakaway and supporting UEFA’s position.

“The president of the republic welcomes the position of French clubs to refuse to participate to a European football Super League project that threatens the principle of solidarity and sporting merit,” the French presidency said in a statement sent to Reuters.

“Plans for a European Super League would be very damaging for football and we support football authorities in taking action,” Johnson wrote on Twitter.

“They would strike at the heart of the domestic game, and will concern fans across the country. The clubs involved must answer to their fans and the wider footballing community before taking any further steps.”

JPMorgan is bankrolling this biggest upheaval of European soccer since the 1950s in a 4 billion-euro ($4.8 billion) bet that has already drawn heavy criticism from fans, domestic leagues and politicians.

As Bloomberg reports, the clubs have signed a binding agreement to commit to remaining part of the Super League for a set number of years, according to people with knowledge of the agreement. The binding agreement was a key driver behind JPMorgan’s investment, the people added.

The financing from JPMorgan has been set at an interest rate of between 2% and 3%, and set over a 23-year time frame, one of the people added.

Finally, as Unherd.com’s Paul Marshall writes, portraying the feelings of many followers of the ‘beautiful game’, The European Super League is a betrayal of clubs and communities

There are many ironies to the plans for a European Super League. There is the inclusion of Arsenal, who have never won the Champions League, and on the day of the announcement stormed to a 1-1 draw with Fulham, cementing their position in ninth place in the Premier League. And Tottenham, who have never won the Champions League, never won the Premier League, and last lifted its predecessor, the First Division, in 1961. Or what about the exclusion of Leicester City — who won the Premier League in 2016 and have just qualified for the Final of the FA Cup — as well as Nottingham Forest, who have won the top European elite competition two times more than Arsenal and Spurs put together.

But the biggest irony is the attempt by a bunch of American owners to create a closed shop in European football. In the interest of money-making and in the name of laissez-faire capitalism, they want to drive competition out of European sport.

For those who never quite understood the motivations of the Glazers, John Henry or Stan Kroenke, the key is the parallel (or lack of parallel) between the Premier League and the way American sports operate. The American owners of Manchester United, Liverpool and Arsenal have always dreamed of replicating American conditions on European soil — and thus replicating the riches of NFL and Major League Baseball owners. The Glazers have done very well out of their NFL franchise, Tampa Bay Buccaneers, and John Henry out of the Boston Red Sox.

But American rules are very different from European ones. Professional sports leagues in North America operate with a fixed number of teams, known as franchises. The franchisees have territorial rights, usually covering a large metropolitan area exclusively. New teams may enter the competition only by a vote of current members. The leagues operate in a closed system and do not have to contend with the inconvenience of promotion or relegation. Very occasionally a league may decide to grow by admitting a new team, the last new team to join the NFL being the Houston Texans in 2002.

There is another fundamental difference between American sports and European football, and that is the way the transfer markets work. New players out of college in America are recruited through an annual draft. This is scrupulously fair, even egalitarian. The NFL draft is seven rounds long, with each team getting a pick in each round, in reverse order of the finish of that season. The worst team picks first, the second worst next and the champion picks last. But there is also a salary cap, which  places a limit on the amount of money a team can spend on salaries.

Although the original intention of this may have been to level the playing field, the effect has been to enrich the owners in a closed system where the surplus can only go to the owners or the players. The problem in Europe is that there is no cap on footballers’ salaries so that the players get to keep much more of the surplus. It also leads to a free-for-all in the transfer market, with new teams constantly vying to enter the top leagues and new owners trying to pour in money, which they can spend freely on transfers in order to buy success.

With precious few rules around ownership and suitability, the Premier League is a constant lure to questionable money, whether it be Middle Eastern sheiks or Russian kleptocrats, who know that with a big enough budget they can buy the top players and secure the prestige which comes with success. Cue Manchester City and Chelski, the parvenus of the Premier League.

The lack of entry barriers is not specific to Europe — there are plenty of new owners in the US, too. The difference is that in Europe, without any restrictions, owners with enough money can be almost assured of getting their hands on a trophy — and this is what brings us to the closed shop “Super League” proposed by the Group of Six. It is a protectionist money grab intended to ossify a momentary status quo in the interests of the current owners, preventing even richer club-owners from muscling in.

And of course it is much worse than that. Football clubs are not just capitalist enterprises. Indeed they should not be seen as capitalist enterprises at all.  The leading clubs have illustrious histories — some, like Liverpool and Manchester United, with more than a share of tragedy, redemption and heroism. Clubs have souls. They play in a certain way. Manchester United always have brilliant wingers, and the No 7 is a hallowed shirt. Great Liverpool teams are built on a bedrock of dominant central defenders.

Football clubs have their origins in working men’s clubs or factory teams, bringing together their local communities in shared support of their local side. In areas which have seen the downsides of globalisation, they are one of the last great symbols and anchors of local community, even if some have become global brands. They represent the sense of place. They enrich and unite their towns and cities. They give local pride.

This is no doubt why the German clubs have refused to take part. With its 50+1 model, the Bundesliga has created a much more balanced model for football club ownership, trying to achieve a balance between staying competitive financially while preserving the association with and respect for the local supporters.

It is no surprise that Boris Johnson came out so quickly against the Super League proposal. He may not be a football fan, but he understands intuitively that this is about much more than the game. It is about the ties that bind. It is also about the globalisation debate that defined Brexit. Unfortunately it may not be sufficient for the Prime Minister just to tweet on this.

I bear the scars of trying to challenge the Glazer takeover of Manchester United, through the Green and Gold campaign and the Red Knights. There is no way of regaining control of the club unless the owners want to sell, and the Glazers acquired control through a legitimate takeover process (albeit by saddling the club with huge debts). Private markets cannot rescue English clubs and it is fairly clear that the Premier League have no intention of challenging the current ownership model.

The only hope is that the latest proposal triggers a long-overdue review of football ownership rules in the UK, one that reconnects football clubs with their supporters, protects local communities and deters the predators from the other side of the Atlantic.

*  *  *

We give the final word to Rabobank’s Michael Every, who took time out from his daily note on global markets and goings on to exclaim – IT’S RED! A straight red card for Global Neoliberalism United – summing up the situation perfectly.

In short, the richest (if not most successful) clubs, and the world’s most famous players, are potentially about to walk away from the entire global system of football –including the quadrennial World Cup– to keep all of the global money in the game rather than sharing just a little of it with others: this is of course backed by Wall Street and private equity to the tune of USD8bn.

If my contempt shines through here – good. As a third generation fan of one of the teams on this breakaway list, whose mother was waved a mascot in the stands by his grandfather – I am out. I will never love another team, but I no longer care what happens to the next iteration of this one. And as for the neoliberal Beautiful Game, the real beauty is that if the USD9bn invested proves misspent because fans don’t want to watch sport like a movie trailer rather than a movie, then all involved will just call for the referee’s Fed card.

Tyler Durden
Mon, 04/19/2021 – 08:58

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US Suffers 3rd Mass Shooting In 24 Hours As 5 Wounded In Louisiana 

US Suffers 3rd Mass Shooting In 24 Hours As 5 Wounded In Louisiana 

Murderous daily after murderous day, America quickly descended into a chaotic hellhole under the Biden administration as three multiple shootings were recorded within 24 hours on Sunday, according to Reuters. The surge of mass shootings comes as the Biden administration attempts to enforce stricter gun control. 

The latest mass shooting occurred late Sunday in Shreveport, Louisiana, where at least five people were injured when gunfire erupted. 

“We responded this evening to a traffic congestion and during that congestion, numerous shots were fired,” a Shreveport police spokesman told reporters.

The spokesman said many of the gunshot victims were transported to several regional hospitals. 

Across the US, it was the third multiple shooting in 24 hours. Earlier in the day, three people died in Austin, Texas and authorities are searching for a former detective wanted in connection with the fatal shooting. Separately, three people were killed and two wounded in a shooting at a bar in Kenosha County, Wisconsin, on Sunday morning. 

Sunday’s shootings come as the US is already on edge over a surge of mass shootings in the past month. 

So much for “unity” under the Biden administration – if former President Trump were still in power – the media would be crucifying him by now. 

The timing of the mass shootings comes as the Biden administration signed several Executive Orders allegedly designed to “curb gun violence” but really designed to abolish the Second Amendment and the Bill of Rights.

Tyler Durden
Mon, 04/19/2021 – 08:47

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Stock Market Leverage In La-La Land, Rises To Historic WTF High

Stock Market Leverage In La-La Land, Rises To Historic WTF High

Authored by Wolf Richter via WolfStreet.com,

Archegos shows how leverage is the great accelerator of stock prices on the way up, and on the way down. One of its bets, ViacomCBS, after skyrocketing, collapsed by 60%.

Vast, unreported, and at the time unknown amounts of leverage blew up Archegos Capital Management, dishing out enormous losses to its investors, the banks that brokered the swaps, and holders of the targeted stocks. The amount of leverage became known only after it blew up as banks started picking through the debris. ViacomCBS [VIAC] was one of the handful of stocks on which Archegos placed huge and highly leveraged bets, thereby pushing the shares into the stratosphere until March 22, after which they collapsed by 60%.

Archegos is an example of how leverage operates: It creates enormous buying pressure and drives up prices as leverage builds, and then when prices decline, the leveraged bets blow up as forced selling sets in. Most of the leverage in the markets is unreported until it blows up. The only type of stock-market leverage that is reported is margin debt – the amount that individuals and institutions borrow against their stock holdings as tracked by FINRA at its member brokerage firms. Margin debt is an indicator for overall leverage, and it has reached the zoo-has-gone-nuts level.

FINRA reported on Friday that margin debt jumped by another $9 billion to $823 billion in March, having soared by $163 billion in five months, and having exploded by 72% from March 2020 and by 51% from February 2020, to historic WTF highs:

Archegos is an example of how leverage is the great accelerator of stock prices, on the way up, and on the way down. Its massive bets on a handful of stocks, powered by huge leverage, drove up prices of those stocks because it created buying pressure with borrowed money. As prices rose, Archegos could borrow more to increase its bets. And then suddenly, when these stocks started selling off because other investors got out, Archegos got the margin calls, and leverage became the great accelerator on the way down.

While we don’t know how much total stock market leverage there is, we can look at margin debt as a measure of the trend. And the trend has reached whopper proportions. History shows that a big surge in margin balances preceded – and perhaps was a precondition for – the biggest stock market declines:

In a chart like this that covers over two decades, the long-term increases in the absolute dollar amounts are not critical since the purchasing power of the dollar with regards to stocks has dropped. What is critical are the steep increases in margin debt before the selloffs.

As the world has seen unfold with Archegos, the amounts of other types of stock market leverage aren’t known. Even Wall Street banks that deal with their clients don’t know about their clients’ total leverage at other banks. Each bank knew how much leverage Archegos had with it, but not how much it had with other banks, or that it had any leverage with other banks.

And when banks issued their margin calls – said to have been the second largest margin call in US history, after Lehman – and liquidated the underlying shares, they were selling those shares against each other. The first-out-the-door, including Goldman Sachs, came away relatively unscathed. Late movers, such as Credit Suisse got mauled.

That’s also a feature of leverage: The first-out-the-door pocket the gains and get away unscathed. Late movers get crushed.

And since everyone knows this, everyone is trying to get out the door first, which is not possible, but it speeds up the selloff.

Among the types of stock market leverage, in addition to margin debt, are derivative products, such as the swaps that sank Archegos, portfolio-based lending, and Securities-Based Loans. Each broker knows what they have on their books, presumably, but they don’t know what other brokers have on their books, and no one knows the total, and no one knows just how leveraged the markets are.

*  *  *

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Tyler Durden
Mon, 04/19/2021 – 08:25

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Clover Health Shares Pop For Second Day On Now-Debunked “Short Squeeze” Narrative

Clover Health Shares Pop For Second Day On Now-Debunked “Short Squeeze” Narrative

It appears the crowd over at WallStreetBets may be as relentless as they are oblivious. 

Shares of Clover Health – most recently known for plunging after noted short seller Hindenburg Research accused the company, and its resident advocate Chamath Palihapitiya, of failing to disclose a DOJ inquiry before going public – were up as much as 10% Monday morning on what appears to be a now-debunked notion that the company was sporting short interest that rivaled GameStop.

The company became a hot topic on Friday of last week, spiking 20% on the day to close the week, after S3 Partners – a company that is supposed to specialize in data analytics – apparently incorrectly reported during the week that Clover’s short interest as % of its float was more than 140%.

That led to reports like this one, from Benzinga, stoking the fires on Reddit’s WallStreetBets board with talks of yet another potential epic squeeze. The pump was also helped along by Twitter users and traders looking to bottle up some of the GameStop magic again:

Which is all good and well – except the denominator that S3 used to calculate its “short interest as a % of float” number – reportedly an incorrect float number used produced by FactSet – appeared to have been acknowledged as incorrect before the end of the day Friday.

The data was quickly challenged by others on FinTwit:

S3 issued a correction on Monday morning at about 0755EST, tacitly blaming FactSet for the data discrepancy and claiming their number of shares sold short “remained accurate”, despite the massive delta between the two “short interest as % of float” data points:

Prior to that, S3 partners had remained quiet on the situation, despite more than $2 billion in Clover shares changing hands on the surge Friday. When S3’s data was publicly called into question by the end of the day Friday, the company stood by its numbers and pointed the finger at FactSet.

The company’s resident “expert”, Ihor Dusaniwsky, also doubled down on what was, at that point, known to be a potentially incorrect calculation. 

The incorrect information caused Clover to record the “2nd highest increase in call option volume for any U.S.-listed company,” FinTwit personality @Keubiko noted. 

The company’s trading volume on Friday dwarfed any of its previous trading days. And, if Monday is any indication, Clover could be heading for another heavy-volume day.

But hey, who are we to spoil the SPAC party? Retail’s gonna retail…

Tyler Durden
Mon, 04/19/2021 – 08:10

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US Futures Dip From Record As Chinese Stocks Soar

US Futures Dip From Record As Chinese Stocks Soar

US equity futures slipped from record highs, European stocks held steady at the start of a new week and Chinese stocks soared the most in five weeks, as investors awaited a fresh round of corporate earnings with global shares sitting at record highs. The dollar slid following the crypto rout over the weekend. Gold rose and oil was flat.

At 07:30 a.m. ET, Dow E-minis were down 81points, or 0.24%, S&P 500 E-minis were down 10.75 points, or 0.26%, and Nasdaq 100 E-minis were down 46points, or 0.3% after briefly rising above Friday’s close during the European morning. Notable movers included Tesla, Activision Blizzard and PayPal which fell the most in premarket trading. IBM and United Airlines are due to report.

Blockbuster economic data from China and the US last week pushed the MSCI All-Country World Index to another record despite concerns surrounding the spread of Covid-19 variants. New infections in the past week surpassed 5.2 million, the most since the pandemic began, with emerging markets (i.e. India, Brazil) getting hit the hardest.

A pullback in 10-year bond yield from 14-month highs in April has also eased worries about higher borrowing costs, renewing interest in richly valued technology stocks. As Goldman explained over the weekend, the risk of another destabilizing increase in borrowing costs has also subsided, as bond yields have pulled back from recent highs amid rising investor concerns that the peak of the stimulus surge is now behind us. This week traders will look for further confirmation of the private sector’s recovery from the pandemic as the earnings season gathers pace.

And speaking of economic data, it takes a back seat this week to earnings as 79 S&P 500 companies report results this week including Johnson & Johnson, Netflix Inc, Intel Corp, Honeywell and Schlumberger.

“Our current view is that with short-term interest rates set to remain low for the medium term and our expectation that earnings will continue to increase, it is unlikely that the increase in long-term interest rates will trigger an equity market fall,” Russel Chesler, head of investments and capital markets at VanEck Australia, said in a note.

Looking at global markets, the MSCI world equity index climbed to a new peak, up 0.2% despite the weakness in US futures. Europe’s STOXX 600 rose to a record high before easing some gains, up 0.1% at 1105 GMT. Asian shares hit one-month highs overnight.

The Stoxx Europe 600 Index rises 0.2% to 443.27 with 205 members down, 377 up, and 18 little changed. Here are some of the biggest European movers today:

  • Juventus shares rise as much as 14%, the most in a year after the Italian soccer club joins some of the game’s wealthiest teams in announcing plans for a new “super league” that could transform revenue streams at the top level of the sport.
  • Arjo shares rise as much as 9.6% to a record high, as Swedish business daily Dagens Industri reiterates its recommendation to buy the shares of the medical-equipment maker.
  • Danone shares rise 1.2% after Bernstein notes that a sector rotation from consumer staples to those benefiting from economic reopening appears to be finished. The firm also raises the price target for the French food-processing company.
  • L’Oreal shares rise 1.3%. The company’s progress with e-commerce will help margins in the years to come, according to Goldman Sachs, which boosts the French beauty-products maker’s PT to a Street high while adding the stock to its “Conviction List.”
  • Pantheon Resources shares fall as much as 54%, the most since April 2018, after saying that the Kuparuk formation in Alaska was more “geologically complex” than expected.
  • Piraeus shares fall 30% to a record low as it resumes trading after reverse split and par value adjustment, with EU4.784 adjusted opening price.

Matthias Scheiber, global head of portfolio management at Wells Fargo Asset Management cited low interest rates, the rollout of COVID-19 vaccines and the fiscal stimulus package in the United States as reasons for his bullish stance on equities.

“Risk is coming down, volatility is coming down … we see the slow reopening of global economies, the rollout of the vaccine and the huge catch-up in demand so from that perspective it should be positive for economic growth. We had a strong rally in cyclical and value stocks since the start of this year – we would like to see confirmation in the earnings.”

Earlier in the session, Asian stocks rose after a dip in early trading, led by Chinese stocks that had their best day in five weeks. The MSCI Asia Pacific Index is set to climb for the fifth straight session, its longest winning streak in more than two months, amid lower longer-term U.S. Treasury yields. Health care and materials led gains for the gauge, which was up as much as 0.5%.

China’s CSI 300 Index closed 2.4% higher to become the region’s best performing major national benchmark amid easing concerns about the health of state enterprise China Huarong Asset Management, the country’s iconic distressed-debt manager which itself is so distressed  many speculated Beijing will let if fail. China’s financial regulator on Friday said Huarong had ample liquidity, the first official comments since the company missed a deadline to report earnings. Ebbing fears of contagion drove a rally in Huarong bonds.

Also in China, shares of automakers jumped on Huawei’s plan to invest in car technologies, while electronics firms rose ahead of Apple’s first product unveiling of 2021. Japan’s Topix ended the day down 0.2% as the governors of Tokyo and Osaka considered declaring another virus emergency as infections surge. The country posted a double-digit gain in exports for the first time in more than three years in March, official data showed Monday. India’s Sensex index slid 1.8%, the worst performer in Asia, as daily new coronavirus infections continue to top previous highs.

Wells Fargo Asset Management’s Matthias Scheiber said “We believe we are in the ‘buy the dip’ environment at this moment given that both fiscal and monetary policy are very supportive, so if we would see a correction … we would probably increase the equity position.”

In rates, the benchmark U.S. Treasury yield, which dropped as low as 1.528% last Thursday, was at 1.5782%. Yields were lower by less than 1bp across the curve within spreads likewise little changed; 10-year TSY outperforming bunds by ~2bp while broadly keeping pace with gilts. Treasuries held small gains with S&P 500 futures under pressure despite strong gains for Chinese stocks. Options activity picked up during Asia session, including large trades in 5- and 10-year tenors.  Overnight UST options activity included large bearish block trade via Jun21 10-year put spread and 5-year blocks re-jigging a big short position. Another heavy corporate new-issue slate is expected this week, a possible source of hedging flows.

In FX, the greenback fell against all of its G10 peers while the euro rose beyond $1.2030, the highest since March 4, amid news that Pfizer and BioNTech will supply the EU with an additional 100 million vaccine doses this year; Treasuries gained, outperforming bunds. The pound rose for a sixth straight session against the U.S. dollar, as the U.K.’s swift vaccination program and reopening schedule continued to bolster investor confidence. The yen also advanced as renewed tensions between U.S. and Russia spurred demand for haven assets; China rejected criticism from U.S. and Japanese leaders, adding to the risk-off sentiment. Australia’s dollar erased a drop as a rally in iron-ore prices offset weakness fueled by rising U.S.-China tensions.

“We have been highlighting over the past two months that USD could bottom out, in contrast to consensus, and believed that this would be a tactical problem for EM and for certain commodity trades,” wrote JP Morgan’s head of global and European equity strategy, Mislav Matejka, in a note to clients. “We think the risk of a firmer USD, through rising US-Europe interest rate differential, is not finished.”

Matejka also said that, although there is the technical potential for a correction in equities, he would not cut stocks exposure on the six- to nine-month horizon: “We think that it is more likely that we will be raising our year-end targets, rather than reducing them, as we move through the summer,” he said.

In commodities, oil prices fell as rising COVID-19 infections in India prompted concern than stronger measures to contain the pandemic would hurt economic activity. A recent surge in COVID-19 cases could see major parts of Japan slide back into states of emergency, with authorities in Tokyo and Osaka looking at renewed curbs.

Bitcoin was up 1% at around $56,850, nursing losses from Sunday, when it plunged as much as 14% to $51,541.

Looking at the week’s events, economic data is sparse and no Fed speakers scheduled ahead of April 28 FOMC meeting. Instead attention will be on earnings from IBM which are due later in the session. Netflix reports on Tuesday. Later in the week, American Airlines and Southwest will be the first major post-COVID cyclicals to post results. The European Central Bank meeting on Thursday will also be in focus this week. ECB President Christine Lagarde said last week that the euro zone economy is still standing on the “two crutches” of monetary and fiscal stimulus and these cannot be taken away until it makes a full recovery.

Market Snapshot

  • S&P 500 futures down 0.1% to 4,172.00
  • MXAP up 0.3% to 209.28
  • MXAPJ up 0.3% to 697.59
  • Nikkei little changed at 29,685.37
  • Topix down 0.2% to 1,956.56
  • Hang Seng Index up 0.5% to 29,106.15
  • Shanghai Composite up 1.5% to 3,477.55
  • Sensex down 1.7% to 47,982.83
  • Australia S&P/ASX 200 little changed at 7,065.64
  • Kospi little changed at 3,198.84
  • German 10Y yield fell 0.6bps to -0.268%
  • Euro up 0.3% to 1.2024
  • Brent Futures down 0.1% to $66.70/bbl
  • Gold spot up 0.5% to $1,785.97
  • U.S. Dollar Index down 0.40% to 91.19

Top Overnight News from Bloomberg

  • Markus Soeder’s bid to lead Angela Merkel’s conservative bloc into September’s German election is gathering pace, with Monday’s imminent announcement by the Greens of their chancellor candidate adding to pressure to end the deadlock
  • Russia hit back defiantly after the U.S. warned of “consequences” if jailed opposition leader Alexey Navalny dies on hunger strike, deepening the conflict over the dissident who’s already survived an alleged assassination attempt
  • China sought to allay fears it wants to topple the dollar as the world’s main reserve currency as Beijing makes bigger strides in creating its own digital yuan
  • Deutsche Bank AG is replacing its global pricing engine for emerging-market currencies in London with one in Singapore, drawn by surging trading in Asia and the increasing importance of the Chinese yuan
  • The mania that drove crypto assets to records as Coinbase Global Inc. went public last week turned on itself on the weekend, sending Bitcoin tumbling the most since February
  • U.K. house prices surged to a record this month with a tax break on purchases and rock-bottom interest rates prompting a “buying frenzy,” the property website Rightmove said
  • The unprecedented oil inventory glut that amassed during the coronavirus pandemic is almost gone, underpinning a price recovery that’s rescuing producers but vexing consumers.

A quick look at global markets courtesy of Newsquawk

Asian equity markets began the week with mostly cautious gains and US equity futures marginally pulled back from record highs with participants tentative ahead of further earning updates this week, and as COVID-19 uncertainty lingered after the number of global cases last week increased by over 5.2mln, which was a record despite the ongoing vaccination drive. However, there were comments from NIH’s Dr Fauci that a decision on whether to resume administering the Johnson & Johnson COVID-19 vaccine could occur as soon as Friday and that he would not be surprised if it is resumed in some form. ASX 200 (+0.2%) was positive with the kept afloat by outperformance in mining-related sectors and with M&A developments providing encouragement following news of a merger between Galaxy Resources and Orocobre, as well as reports that Crown Resorts received an unsolicited proposal on behalf of funds managed by Oaktree Capital. Nikkei 225 (+0.2%) initially swung between gains and losses as pressure from currency inflows was offset by stronger than expected trade data – including the largest increase in exports since November 2017 – and although Japanese stocks eventually improved, Toshiba shares were left in the lurch after CVC was said to plan a delay in submitting a formal proposal to acquire the Co. Hang Seng (+0.8%) and Shanghai Comp. (+1.3%) shrugged off the flat open and the continued US-China verbal jousting, to outperform their regional peers with the Hang Seng extending above the 29k level and strength seen in Chinese automakers after Huawei unveiled its intelligent driving system. There were also constructive comments regarding China Huarong Asset Management in which the CBIRC Vice Head stated the Co. is currently operating normally with ample liquidity and Chinese regulators were also said to have asked some banks not to withhold loans to the Co., while India’s NIFTY (-2.4%) was heavily pressured amid ongoing rampant COVID-19 cases which hit a fresh record high and with the capital of New Delhi said to have less than 100 ICU beds available in the entire city. Finally, 10yr JGBs were slightly higher amid the mild gains in T-notes and a relatively tepid BoJ purchase announcement totalling JPY 500bln mostly concentrated in 3yr-5yr maturities, while Aussie yields were also relatively unmoved after the RBA announcement to purchase AUD 2bln of government bonds.

Top Asian News

  • Packer Gets Crown Exit Path With $2.3 Billion Oaktree Offer
  • China Stocks Book Best Day in 5 Weeks as Tech, Car Firms Gain
  • Top India Homebuilder Drops in Debut After Decade-Long IPO Wait
  • Chinese Travel Site Trip.com Rises 4.6% in Hong Kong Debut

European equities kick off the trading week with another mixed/directionless session thus far (Euro Stoxx 50 -0.1%) despite the positive APAC handover, and amidst a lack of fresh catalysts as participants continue to ponder over the rising COVID cases globally alongside the broader recovery with the vast fiscal and monetary support present. US equity futures meanwhile are somewhat varied and have a negative bias, with the ES and NQ flat whilst the cyclically-driven RTY narrowly lags. Analysts at JPM noted that some technical and sentiment indicators are becoming stretched after the recent run higher across stocks. That being said, the analysts say they would not be reducing stocks exposure on a six-to-nine month horizon whilst acknowledging the potential for a technical correction – JPM continue to see dips as buys. Back to Europe, cash markets see no major outlier in terms of performance whilst sectors are similarly mixed, with outperformance seen Travel & Leisure whilst the early gains in the Auto sector, following the 2021 Shanghai Motor Show, faded with the sector now the laggard. Overall the sectors do now portray and over-arching theme. In terms of individual movers, ABN AMRO (+1.4%) trades firmer after the Co. has accepted the payment of EUR 480mln to settle an anti-money laundering investigation. Bayer (+1.4%) is also supported as the US FDA granted Orphan Drug status for Co’s Aliqopa for chronic lymphocytic leukaemia and small lymphocytic lymphoma. Conversely, CNH Industrial (-5.1%) sits at the foot of the Stoxx after it terminated discussions with FAW Jiefang around the On-Highway business, but will still continue with plans to spin-off the unit from 2022 onwards.

Top European News

  • HSBC Top Staff to Hot Desk After Scrapping Executive Floor
  • Juventus Stock Jumps Most in a Year Amid Super League Plan
  • Pfizer, BioNTech to Supply EU With 100M Additional Doses in 2021
  • Piraeus Bank Falls 30% After Share Capital Increase Terms

In FX, the Dollar and index have extended declines across the board as US Treasury yields maintain a mild bull-flattening bias, but also on increasingly bearish technical momentum as several Buck/major pairings breach key and psychological levels and the DXY itself breaches 91.500 to probe support around 91.300 within a 91.748-125 band. However, the index and Greenback in general may benefit from underlying bids into 91.000 given that the 100 DMA is in very close proximity at 91.019 today.

  • JPY/NZD/AUD – Better than expected Japanese trade data could be helping the Yen compound gains vs its US counterpart, and at this stage 108.00 appears far more achievable than a rebound towards 108.50 where the base of decent option expiry interest resides (1.9 bn from the half round number up to 109.65 to be precise). Meanwhile, the Kiwi and Aussie are taking advantage of their US peer’s predicament to form firmer bases above 0.7150 and 0.7750 respectively ahead of RBA minutes and NZ Q1 CPI on Tuesday.
  • CHF/EUR/GBP/CAD – Little sign of Franc buyers getting twitchy about a relatively big rise in Swiss sight deposit balances at domestic banks, as Usd/Chf tests 0.9150 and Eur/Chf eyes 1.1000 even though the single currency has made light work of breaching supposed option barriers at 1.2000 against the Dollar. Elsewhere, Cable is approaching 1.3900 after holding just above the big figure below and the Pound is starting the new week in a much better position vs the Euro after the cross reached circa 0.8719 last Friday, with Eur/Gbp now pivoting 0.8650. Similarly, the Loonie has turned the tables on its US rival to regain 1.2500+ status in advance of Canada’s first Federal Budget since 2019 then CPI and the BoC on Wednesday.
  • SCANDI/EM/PM – The Nok and Sek have picked up where they left off last week, on the front foot, with the former outperforming through 10.0000 vs the Eur and latter straddling 10.1000, while most EM currencies are benefiting from Usd weakness bar the Rub that remains below 76.0000 amidst ongoing investor jitters about Russia’s deteriorating international relations and stand-off with Ukraine. Turning to commodities, Xau has taken a bit of a breather before continuing its march to just over Usd 1788/oz with bullish chart impulses embellished by China reportedly allowing banks to import some 150 tonnes of Gold this month and in May.

In commodities, yet another choppy European morning for WTI and Brent front-month futures and within relatively tight ranges as markets await a concrete fundamental catalyst to latch onto. Participants in the interim will continue to balance the geopolitics with vaccination hurdles and rising COVID cases across some economies – with India and Canada recently telegraphing a worsening situation, with the former cancelling UK PM Johnson’s visit whilst its capital New Delhi announce fresh lockdown measures alongside some speculation pointing to India being put on the UK’s travel red list. Note that this comes ahead of next week’s JMMC/OPEC+ meeting in which eyes will be on any need to alter the output quotas set through July, with production set to steadily increase amid a projected rise in summer demand. The geopolitical landscape meanwhile remains mixed but fluid as ever, with sanguine rhetoric initially emanating from the Iranian JCPOA talks, although Tehran later suggested that negotiations still remain difficult. Elsewhere, developments regarding Russia have been abundant with Kremlin-critic Navalny now seemingly attended to by doctors after US has warned Russia there will be “consequences” if the opposition activist Alexei Navalny dies in jail, whilst EU expressed concern regarding Navalny’s health. Further, Russia is reportedly bolstering its warship presence in the Black Sea amid ongoing tensions with Ukraine and Moscow is also poised to announce a US sanctions list. WTI trades on either side of USD 63/bbl (62.67-63.42/bbl range) whilst its Brent counterpart holds its head above USD 66.50/bbl (66.17-95/bbl range). Spot gold and silver meanwhile glean support from the deteriorating Buck with the former now north of USD 1,775/oz (vs low 1,773/oz) whilst spot silver reclaimed USD 26/oz. In terms of base metals, LME copper has been bolstered further above USD 9,000/t amid the softer Buck, reaching a current peak of USD 9,430/t. Overnight, Singapore iron ore futures surged overnight with traders citing demand from the Chinese steel sector.

US Event Calendar

  • Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

It’s quite a strange feeling of pride that I feel today given I’m going to get my first Covid jab this afternoon. Maybe its pride at the human achievement, maybe its pride at doing my civic duty. I’m not 100% sure. By tomorrow morning when I’m likely feeling really groggy I’m sure that pride will fade. I nearly became a vaccine refuser as I tried to drive my car yesterday only to find the battery was dead. A call to the breakdown service has fixed this but its a consequence of lockdown as I’ve hardly used my car for 13 months. Thankfully I needed to make rare use of it yesterday or I wouldn’t have discovered the battery problem until just before my 20 mile drive to the vaccination centre. Anyway lets hope I’ll be well enough to be on EMR duties tomorrow.

In terms of markets a more successful vaccination campaign in Europe over the last couple of week has certainty helped the Goldilocks theme for now and the continent looks on surer footing now. In terms of wider markets even risk parity type trades have seemingly made a comeback of late. Indeed Bloomberg data suggests that the S&P 500 and 30yr Treasuries have now both rallied for a fourth week together for the first time since August 2008. So markets are back to being a bit dull for now but pretty buoyant. However positioning is becoming more stretched which should be watched. Our equity strategists reported over the weekend (link here) that their composite measure of US equity positioning is close to record highs (98th percentile). There remains a notable divide between the positioning of discretionary investors, which has moved up to a new peak (100th percentile), while systematic strategies exposure has also risen, but remains near historical median levels (46th percentile). A reminder that they think there is likely to be a 6-10% pull back (link here) when growth peaks which they think will occur over the next 3 months.

While we wait for such excitement we can all live vicariously through the big moves in Bitcoin over the weekend. After being as high as $64,869.78 this past Wednesday it traded as low as $51,707.51 yesterday down around 15% from Friday’s close. As we type its now at $56,987. It’s difficult to work out exactly why the sudden reversal occurred but the online chatter is linking it to speculation that the US Treasury may soon crack down on money laundering that uses digital assets. The market remains in a frenzy though as Dogecoin rose over 110% on Friday. Remember this coin was set up as a joke and was worth more than $50bn at one point over the weekend.

Asian markets have started the week on the front foot with the Nikkei (+0.24%), Hang Seng (+0.80%), Shanghai Comp (+1.30%) and Kospi (+0.26%) all up. Futures on the S&P 500 are down -0.14% while those on the Nasdaq are up +0.11% benefitting form a decline in 10y UST yields (-1.3bps) this morning. In Fx, the Russian rouble (-0.61%) is under fresh pressure this morning after the US warned Russia of “consequences” if jailed opposition leader Alexey Navalny dies. Indeed the geopolitical risks from the Russia story last week did seep into wider markets a little so certainly one to watch

There’s a reasonably eventful calendar for markets this week, with the highlights including Thursday’s ECB meeting and Friday’s release of the April flash PMIs from around the world. Investors will also be paying attention to the latest earnings releases, with a further 80 S&P 500 companies reporting, as well as the continued path of the pandemic as a number of places such as India have faced a big surge in cases. There have been around 5.1mn cases reported across the globe over the past 7 days, the highest weekly increase since the pandemic began. India contributed north of 1.4mn cases to this increase which is also its largest weekly gain and continues to remain the current epicentre of the virus. Elsewhere both Osaka and Tokyo may go into fresh state of emergency conduction as soon as today. On a more positive note, Dr Fauci has said that he expects a decision on how to resume vaccinating Americans with the J&J COVID-19 vaccine will probably come by Friday and added that “I doubt very seriously if they just cancel” the J&J vaccine. We are also expecting that the European Medicines Agency will issue their recommendation on the J&J vaccine over the week ahead.

From central banks, this week’s highlight will be the latest ECB decision on Thursday, along with President Lagarde’s subsequent press conference. In their preview (link here), our European economists write that a change in the policy stance is unlikely, and that a decision on whether or not to maintain the new faster pace of PEPP purchases will be made after a joint assessment of financing conditions and the inflation outlook at the Governing Council’s next monetary policy meeting in June. However, at this point it’s unclear whether they will maintain that higher pace beyond June. Our economists say that although a latent recovery is building and ‘net-net’ issuance (net issuance, net of ECB purchases) ought to turn favourable for rates markets following the Q1 spike, the ECB consensus is cautious and determined to avoid a premature tightening in financing conditions.

Staying on Europe, another important event will take place in Germany today, as the Green party present their first chancellor candidate in the 41-year history of their party. This is an important one to look out for, as the CDU/CSU’s slump in the polls has put them only a few points ahead of the second-place Greens, so it’s no longer implausible that the next German chancellor could come from the Greens following September’s federal election. Our German economists’ full preview can be found here, but their view is that the odds appear slightly tilted towards co-leader Annalena Baerbock being selected. In terms of the election result, our economists still see a CDU-CSU/Green coalition as their baseline scenario, as they expect the Conservatives to regain polling momentum. Talking of which, it’s also possible that the CDU/CSU will agree on who will be their candidate over the next day as Armin Laschet and Markus Soeder have been having behind close door discussions since Friday to hammer out which of them will be on the ticket come September. Overnight, the headlines have leaned more favourably towards Markus Soeder with CDU lawmaker Christian von Stetten suggesting in an interview yesterday that Laschet’s leadership bid would be rejected by the CDU/CSU caucus in a vote on Tuesday if the issue isn’t resolved before then.

On the data front, it’s a lighter week ahead, with the main highlight likely to be at the end of the week with the flash PMIs for April. This will give us an initial indication of how global economic performance has fared at the start of Q2, and there’ll be particular attention on the price gauges as well as investors stay attuned to any signs of growing inflationary pressures. In terms of central banks, there are a few other decisions alongside the ECB, with Canada, Russia and Indonesia all deciding on rates. However, there won’t be any Fed speakers as they’re now in a blackout period ahead of their own meeting the week after.

Earnings season kicks up another gear this week, as 80 companies from the S&P 500 report along with a further 54 from the STOXX 600. Among the highlights include Coca-Cola and IBM today, before tomorrow sees reports from Johnson & Johnson, Procter & Gamble, Netflix, Abbott Laboratories, Philip Morris International and Lockheed Martin. Then on Wednesday we’ll hear from ASML, Verizon, NextEra Energy, and Thursday sees releases from Intel, AT&T, Danaher, Union Pacific and Credit Suisse. Finally on Friday, there’s Honeywell International, American Express and Daimler.

To quickly recap last week, risk markets in Europe and the US continued to set new records as US government yields fell but Europe’s mostly rose possibly due to being past peak European pessimism now vaccine deployment is accelerating. The S&P 500 rose +1.37% on the week (+0.36% Friday), finishing at yet another record high. The index has risen for four straight weeks, the first time that has happened since August. The weekly move was broad based as sectors such as materials, healthcare, and real estate all led gains while technology shares also continued to improve as the NASDAQ rose +1.01% on the week. The tech-concentrated index is within a third of a per cent of its all-time highs. Market volatility has calmed over the last few weeks and this past week the VIX volatility index fell -0.4pts to 16.3 – the lowest levels since the pandemic started. European stocks rose to their own record highs as the STOXX 600 gained +1.20% over the week, with the CAC (+1.91%) and FTSE 100 (+1.50%) outperforming other bourses.

US 10yr yields finished the week -7.9bps lower (+0.4bps Friday) at 1.580% – the third weekly drop in yields over the last four weeks. 30yrs are four in four as discussed at their top. The week’s move was driven by the drop in real yields (-12.4bps) which overcame the increase in inflation expectations (+4.5bps). European rates were more mixed with 10yr bund yields gaining +4.1bps last week and UK gilts falling -1.0bps. There was also a tightening of peripheral spreads in parts of southern Europe as Italian BTPs (-2.1bps) and Spanish bonds (-2.5bps) tightened against 10yr bunds, while Portuguese bonds (+7.9bps) widened.

In terms of economic data from Friday, US housing starts in March was ahead of schedule with 1.739mn (vs 1.613mn expected) new construction after 1.457mn recorded in February. The preliminary University of Michigan consumer sentiment index for April showed a less-than-expected rise to 86.5pts (vs. 89.0pts expected) from 84.9pts. Meanwhile in Europe, new EU car registrations for March was up +87.3% after being down -19.3% in February. The final Euro Area CPI reading for February was +0.9% m/m and +1.3% y/y in-line with earlier estimates.

Tyler Durden
Mon, 04/19/2021 – 08:01

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Feds Warn Parents To “Stop” Using Peloton Treadmill After Child’s Death, Release Horrifying Video 

Feds Warn Parents To “Stop” Using Peloton Treadmill After Child’s Death, Release Horrifying Video 

Sales of the Peloton Bike and Peloton Tread (treadmill) erupted during the virus pandemic as people worked out at home. As soon as the lockdowns took effect in March 2020, the home-fitness business took off. But there appears to be a problem with one of Peloton’s products. The U.S. Consumer Product Safety Commission (CPSC) warned over the weekend that consumers should stop using Tread if there are young children or pets at home.

CPSC’s advisory was published on Saturday and read: 

“The U.S. Consumer Product Safety Commission (CPSC) is warning consumers about the danger of popular Peloton Tread+ exercise machine after multiple incidents of small children and a pet being injured beneath the machines. The Commission has found that the public health and safety requires this notice to warn the public quickly of the hazard.”

“To date, CPSC is aware of 39 incidents including one death. CPSC staff believes the Peloton Tread+ poses serious risks to children for abrasions, fractures, and death.” 

“In light of multiple reports of children becoming entrapped, pinned, and pulled under the rear roller of the product, CPSC urges consumers with children at home to stop using the product immediately.” 

The advisory comes as regulators continue to investigate a child’s death by a Tread. 

Shares of Pelotons slumped more than 5% premarket Monday on the news. 

JPMorgan Chase & Co. analyst Doug Anmuth recommended clients buy the dip related to the CPSC’s warning.

“Peloton emphasizes that the Tread+ is safe when its warnings and safety instructions are followed, and the company will neither stop selling nor recall the Tread+,” Anmuth told clients in a research note. He added that CPSC’s advisory on Tread won’t delay the company’s launch of a lower-priced Tread. 

Over the weekend, CPSC released a disturbing video of the Tread safety incident. 

Peloton released a statement countering CPSC’s advisory and called it “misleading and inaccurate.” 

Tyler Durden
Mon, 04/19/2021 – 07:17

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GameStop Shares Jump 6% As CEO Quits In Latest C-Suite Departure

GameStop Shares Jump 6% As CEO Quits In Latest C-Suite Departure

GameStop CEO George Sherman has become the latest, and most senior, in a string of GameStop executives who have left the company recently, stumbling out one by one, all presumable victims of GameStop Chairman/savior Ryan Cohen’s housecleaning.

Sherman announced Monday that he will be stepping down, effective July 31. His exit is hardly a surprise; Reuters first reported on rumors that the company had already started the search for Sherman’s successor earlier this month. Other executives who have left the firm since Cohen’s ascension to the chairman’s seat in January include: include chief financial officer Jim Bell and chief customer officer Frank Hamlin.

The company has hired several executives as well – a series of current and former Amazon employees brought on to execute Cohen’s e-commerce vision. They include Elliott Wilke, who will serve as the company’s chief growth officer, Jenna Owens, who will serve as chief operating officer, and Matt Francis, who will serve as the company’s first chief technology officer.

RC Ventures, Cohen’s investment firm, has amassed an approximately 13% stake in GameStop, which it is working to transform into a major e-commerce player that sells a wide variety of merchandise with fast shipping.

Although the news had been telegraphed well in advance, that didn’t stop GameStop shares from ramping 6% in premarket trading.

Shares had climbed as much as 9.4% to $169.23 earlier Monday after Reddit user Keith Gill, who helped fuel the rise in the stock this year, doubled down on his bet on the video-game retailer. As we reported over the weekend, Gill now owns more than 200,000 share.

Speaking of Gill – better known by (one of) his online handle(s) “RoaringKitty” – might Cohen find a way to bring the independent millionaire investor into the fold as well? Regardless of whether that would make sense from an organizational standpoint, it could propel the stock higher.

Tyler Durden
Mon, 04/19/2021 – 06:33

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