Supreme Court Takes New Step In Jan. 6 Case, Orders DOJ To Explain Themselves

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

The U.S. Supreme Court on April 23 directed the U.S. Department of Justice to reply to a man convicted in the Jan. 6, 2021, breach of the U.S. Capitol.

The U.S. Supreme Court in Washington on April 8, 2024. (Madalina Vasiliu/The Epoch Times)

Justices said the department’s response to Russell Alford is due May 23.

Mr. Alford was convicted by a jury of four misdemeanor counts but is challenging two of the charges, arguing that they don’t apply to his conduct.

The charges should not have been brought because the laws on which they’re based bar disorderly and disruptive conduct in a Capitol building and in a restricted building, but Mr. Alford merely entered the Capitol and stood silently against a wall before exiting, the Supreme Court was told in a filing from Mr. Alford’s lawyers.

U.S. District Judge Tonya Chutkan, an appointee of President Barack Obama, originally rejected Mr. Alford’s request to dismiss the counts, finding that his “mere presence inside the Capitol disturbed the public peace or undermined public safety.”

A federal appeals court, after reviewing the rejection, upheld it in January. While Mr. Alford was “neither violent nor destructive ... a jury could rationally find that his unauthorized presence in the Capitol as part of an unruly mob contributed to the disruption of the Congress’s electoral certification and jeopardized public safety,” the ruling stated.

“The court should grant review because this case presents an important question of federal statutory interpretation,” Mr. Alford’s lawyers wrote to the Supreme Court, describing the appeals court ruling as “establish[ing] a slippery and counter-textual standard for criminalizing conduct in settings for political activity.”

One of the laws, 18 U.S.C. § 1752(a)(2), bars people from “knowingly, and with intent to impede or disrupt the orderly conduct of government business or official functions, engages in disorderly or disruptive conduct in, or within such proximity to, any restricted building or grounds when, or so that, such conduct, in fact, impedes or disrupts the orderly conduct of government business or official functions.”

The other, 40 U.S.C. § 5104(e)(2)(D), makes it a crime to “utter loud, threatening, or abusive language, or engage in disorderly or disruptive conduct, at any place in the grounds or in any of the Capitol Buildings with the intent to impede, disrupt, or disturb the orderly conduct of a session of Congress or either house of Congress, or the orderly conduct in that building of a hearing before, or any deliberations of, a committee of Congress or either house of Congress.”

The lower court rulings were wrong in part because they focused on the effects of Mr. Alford’s conduct, not the nature of the conduct, according to the writ to justices.

That focus “collapses the conduct element into the harm element by giving the adjectives no apparent force,” they said. They argued later that merely being present “is not disorderly conduct unless the presence is in defiance of an order to disperse.”

If the court grants the petition, it would review the case and decide if the rulings were appropriate.

The Department of Justice’s Solicitor General, Elizabeth Prelogar, told the court on April 12 that the government was waiving its right to file a response to the filing, “unless requested to do so by the court.” The petition was distributed to justices on April 18 for their scheduled May 9 conference. Then, on Tuesday, justices directed the Department of Justice to file a response to Mr. Alford.

Lawyers for Mr. Alford and the government did not respond to requests for comment.

If justices take up the petition and rule in favor of Mr. Alford, a number of other Jan. 6 defendants and convicts could see charges thrown out.

Obstruction Charge

The court already agreed to review another charge brought against many Jan. 6 defendants.

Justices sat for oral arguments on April 16 concerning obstruction of an official proceeding, a charge brought against former police officer Joseph Fischer after he entered the Capitol on Jan. 6.

One of Mr. Fischer’s attorneys said the charge should not have been brought because the law was only intended to be used in cases of evidence tampering.

Ms. Prelogar told justices that the charge was proper because it was “not limited to evidence impairment.”

Justice Neil Gorsuch, appointed by former President Donald Trump, wondered whether the government would bring the charge against people who heckled the court.

“Would a sit-in that disrupts a trial or access to a federal courthouse qualify? Would a heckler in today’s audience qualify, or at the State of the Union address? Would pulling a fire alarm before a vote qualify for 20 years in federal prison?” he asked.

Another justice later questioned if protesters blocking access to a trial would face the charge, noting that protests have taken place in the past at the Supreme Court but the government did not charge the protesters under the law.

Ms. Prelogar said the law might apply in such cases, if there was proof of “corrupt intent.”

Justices are due to hand down a decision in the case at some point in the future.

Tyler Durden Wed, 04/24/2024 - 17:30

US Steps Up Monitoring As FDA Warns Bird Flu Found In Pasteurized Milk From Grocery Stores

Dairy cattle moving between states must be tested for the bird flu virus, U.S. agriculture officials said Wednesday as they try to track and control the growing outbreak.

AP reports that the federal order was announced a day after health officials said they had detected inactivated remnants of the virus, known as Type A H5N1, in samples taken from milk during processing and after retail sale. They stressed that such remnants pose no known risk to people or the milk supply.

“The risk to humans remains low,” said Dawn O'Connell of the federal Administration for Strategic Preparedness and Response.

The new order requires every lactating cow to be tested and post a negative result before moving to a new state. It will help the agency understand how the virus is spreading, said Michael Watson, an administrator with the U.S. Department of Agriculture's Animal and Plant Health Inspection Service.

“We believe we can do tens of thousands of tests a day,” he told reporters.

Until now, testing had been done voluntarily and only in cows with symptoms.

As The Epoch Times' Zachary Steiber reported earlier, commercially available milk from grocery stores has tested positive for highly pathogenic avian influenza (HPAI), the U.S. Food and Drug Administration (FDA) announced on April 23.

The FDA said in a statement it has been testing milk from cattle that have been sickened with the influenza, commonly known as the bird flu or H5N1, as well as milk “in the processing system, and on the shelves.”

“Based on available information, pasteurization is likely to inactivate the virus, however, the process is not expected to remove the presence of viral particles. Therefore, some of the samples collected have indicated the presence of HPAI using quantitative polymerase chain reaction (qPCR) testing,” the agency said.

While samples tested positive, that does not mean they contain an intact pathogen, according to the FDA.

“Additional testing is required to determine whether intact pathogen is still present and if it remains infectious, which determines whether there is any risk of illness associated with consuming the product,” the FDA said.

The agency is injecting samples into fertilized chicken eggs to see whether any active virus replicates, among other experiments. It is also completing testing on samples taken from pasteurized milk from across the nation.

“To date, we have seen nothing that would change our assessment that the commercial milk supply is safe. Results from multiple studies will be made available in the next few days to weeks,” the FDA said.

The agency did not immediately respond to a request for comment for more details, including how many samples tested positive and which stores the milk that tested positive came from.

Bird flu has been confirmed in 33 herds of cattle in eight states after spreading to ruminants for the first time in the United States earlier this year, according to the U.S. Department of Agriculture. One person, a farm worker in Texas, has also tested positive for the influenza.

U.S. authorities previously said that milk from diaries with sickened animals was “being diverted or destroyed so that it does not enter the food supply” and that “pasteurization has continually proven to inactivate bacteria and viruses, like influenza, in milk,” but critics noted the authorities produced no evidence of testing to back up their position.

“There could be viruses in the milk on grocery shelves right now,” Gail Hansen, a veterinary expert who was formerly the state public health veterinarian for the Kansas Department of Health and Environment, and Andrew deCoriolis, executive director of the group Farm Forward, wrote in a recent op-ed.

Ms. Hansen said on the social media platform X that the FDA finding virus particles was “a little bit better than finding whole virus” but was “still not good.”

Rick Bright, the former director of the Biomedical Advanced Research and Development Authority at the U.S. Department of Health and Human Services, noted the shifting language from the government. The FDA now says that pasteurization “is very likely to effectively inactivate heat-sensitive viruses like H5N1 in milk from cows and other species.”

It also acknowledged that “no studies on the effects of pasteurization on HPAI viruses (such as H5N1) in bovine milk have previously been completed,” although it pointed to previous studies on effective pasteurization.

Yaneer Bar-Yam, president of the New England Complex Systems Institute, said the findings mean “milk from sick cows is being used” in the commercial supply. While pasteurization likely makes the milk safe, that safety is “not guaranteed,” he added.

Some experts emphasized that, at present, there were no indications that the positive tests meant the virus detected was infectious.

“There is no evidence to date that this is [an] infectious virus and the FDA is following up on that,” Lee-Ann Jaykus, an emeritus food microbiologist and virologist at North Carolina State University, told the Associated Press.

But Angela Rasmussen, a virologist, said on X that the positive samples “suggests there are undetected herds shedding virus into the milk supply” because they show intact virus “was once present.”

“It’s hard to say more as no raw data was shared, so we just have to take their word for it,” she added.

Tyler Durden Wed, 04/24/2024 - 17:10

"We Need To Splinter The UniParty Into A Thousand Pieces" - Stockman Slams Washington's Foreign Aid "Clusterf**k"

Submitted by David Stockman via Contra Corner blog,

The UniParty's Day Of Infamy, Part 1

The clusterf*ck in the US House of Representatives this past weekend is surely the final straw. The dreadful grip of the UniParty on national security policy has finally produced sheer madness in a single package. To wit:

• $95 billion of foreign aid boondoggles that do not benefit America’s homeland security in the slightest.

• An extension of section 702 of FISA that wantonly expands an already egregious affront to the Fourth Amendment.

• The illegal transfer of billions of sovereign assets stolen from Russia to its enemies in Kiev.

• A national security ban on 15-second TikTok videos about dances, pranks, pets and poppycock viewed overwhelmingly by under 30-year-old Americans whose viewing habits are of zero value to the Chicoms in Beijing.

It is bad enough that there is not an iota of informed consideration behind any of this. But what is really alarming is that every single House Democrat (210) voted in favor of $61 billion for the Ukrainian Demolition Derby. This included a 97-0 vote among so-called Dem “progressives”, who also voted 96-0 in favor of aid to Taiwan—the purpose of which is surely not a more pacific neighborhood on the Pacific Rim.

Once upon a time, the Democrats were the party of the peace candidates. No more, which surely explains their fury at RFK, who is.

At the same time, only fourteen Republicans voted against all four components of this wholesale assault on constitutional liberty and fiscal rectitude. As we have previously documented, America is now careening on fiscal automatic pilot toward a $140 trillion 4/23/24, 12:40 PM The UniParty’s Day of Infamy, Part 1 https://davidstockman.substack.com/p/the-unipartys-day-of-infamy-part 2/11 public debt by mid-century, but the overwhelming share of House Republicans choose to hammer the US economy with even more debt to fund pointless foreign aid boondoggles, while shackling private citizens and entrepreneurs with government intrusions based on the paranoid lies of the national security state.

In this context it was the predictable histrionics of the bevy of neocon warmongers on the editorial board of the Wall Street Journal that brought home the full extent of the challenge. Namely, that the mainstream narrative in the Imperial City and among the nation’s elite media is so utterly wrong-headed and morally obtuse that only the complete abandonment of the core framework of contemporary national security policy can save the day.

Accordingly, the “domino” theory needs be repudiated once and for all. Likewise, the Washington-Jefferson doctrine of “no entangling alliances” needs be revived in place of the vestigial cold war notion that informs Washington’s current destructive and bankrupting policies. We are referring to the wholly obsolete notion that America’s homeland security depends upon a worldwide system of military alliances, bases and kinetic power projection capabilities that enable Washington to function as the great Global Hegemon, who is ready, willing and able to intervene in virtually any spate that erupts among the 8 billion peoples of the planet.

The fourteen GOP stalwarts listed below essentially said, no dice to these tired, dangerous, costly and risible formulations: Neither Russia nor China pose even a remote military threat to the American homeland, while proxy wars and economic sanctions against “adversaries” demonized by the Deep State actually undermine domestic liberty and prosperity for no justifiable reason of homeland security at all.

With respect to the latter, for instance, there is no real reason for the sweeping multihundred billion cost to the American economy of sanctions and trade restrictions on China, Iran or Russia. And, similarly, there are no security threats in the world today that even remotely justify the national security state’s intrusion into the rights and privacies of American citizens.

Still, the pseudo-intellectuals at the WSJ trotted out Hitler, Tojo and the “isolationist” epithet as if these references prove anything at all, when, in fact, none have any real relevance to the world of today. There are simply no industrial state tyrants on the march anywhere on the global horizon that resemble even the apparent facts of the 1930s, let alone the actual historical realities of the matter.

The fact is, Stalin and Hitler were sui generis. They were one-time accidents of history arising from the folly of Versailles and the punitive peace of the victors enabled by Woodrow Wilson’s pointless intervention in a European war that would have otherwise ended in stalemate and the mutual exhaustion and bankruptcy of all the combatants.

That is to say, the DNA of the world’s nations is not infected with incipient tendencies toward totalitarianism and aggression. Maintaining the global peace and pacific commerce of the nations does not depend upon an alliance of virtuous interventionists or a Global Hegemon, prepared to enforce its writ at the slightest breakout of local and regional quarrels and conflicts.

At the end of the day, laissez faire is the path to prosperity in both economics and international affairs. Military alliances and Hegemons everywhere and always fall captive to the arms merchants they foster.

It is not surprising, therefore, that the honor roll from last weekend’s rampage of folly by the UniParty consists of a mere 14 House Republicans, who were awarded the scarlet “I” by the war-happy globalists at the Wall Street Journal:

Fourteen Republicans voted against all four bills on the House floor, including the one that would force a sale of TikTok from Chinese ownership. Here’s the dishonor roll in alphabetical order: Andy Biggs (Ariz.), Lauren Boebert (Colo.), Andrew Clyde (Ga.), Elijah Crane (Ariz.), Matt Gaetz (Fla.), Bob Good (Va.), Paul Gosar (Ariz.), Marjorie Taylor Greene (Ga.), Andy Harris (Md.), Thomas Massie (Ky.), Troy Nehls (Texas), Ralph Norman (S.C.), Matt Rosendale (Mont.), Chip Roy (Texas).

The unavoidable meaning of the votes is that these Members don’t believe the U.S. should support allies threatened by authoritarians on the march. Like Republicans in the 1930s who slept while Hitler and Tojo advanced, these Republicans apparently think America can sit out these fights in splendid isolation. But history suggests that if they prevail, American sons and daughters would eventually have to fight. Better to help allies who want to help themselves.

The isolationist caucus lost this round, but this GOP tendency is dangerous. Another 17 Members voted for arms for Israel but not for Taiwan and Ukraine. Do they want to encourage a Chinese invasion? Perhaps if Florida is attacked, they’ll awaken to the reality of the world’s growing dangers.

No, Florida is not about to be attacked by Putin, Xi or the Ayatollahs. This is just scary bedtime story stuff that no informed adult should accord any credibility whatsoever.

Needless to say, the GOP most rabid neocon and warmonger, Senator Lindsay Graham, is neither informed nor, apparently, even of adult mind.

His incoherent, bloodthirsty rant actually made the WSJ editorialists sound thoughtful by comparison.

“Here’s what I will tell you. If you give Putin Ukraine, he will not stop,” Graham said during an interview on “Fox News Sunday.” “This is not about containing NATO and if you give him Ukraine, there goes Taiwan because China’s watching to see what we do.”

“I want to know what they’re talking about over there before they kill us here. And if you shut this thing down, you’ve turned the war into a crime,” Graham said. “We’re not fighting our crime, we’re finding a bunch of people who would kill all of us if they could get here. So, when you intercept information from a foreigner overseas talking about America, I want to know what they’re talking about.”

The Ukranian military, with our help, has killed about 50 percent of the combat power of the Russians,” Graham said Sunday. “This is the year [of] more. They’re going to have more weapons, but we also want them to have new weapons.”

Nor was the House GOP to be outdone by Senator Graham’s bellicose fulminations. Recently resigned Rep.  Ken Buck let it be known that if you actually understand that America’s homeland security is in no way enhanced by Washington’s misguided proxy war on Russia, as does Rep. Marjorie Greene, why then you surely are a traitor in the pay of Vlad Putin himself:

“Well, Moscow Marjorie has reached a new low,” Buck said of his former colleague.

“She is just mouthing the Russian propaganda and really hurting American foreign policy in the process. She’s acting completely irresponsibly. And again, when history looks at this period of time, Russia invaded Ukraine, Ukraine is fighting for its freedom, and we should be with the freedom fighters in this war.”

Of course, the insanity of $200 billion of NATO funds already wasted; hundreds of thousands dead; millions fleeing the country to avoid the mayhem of war and the cruelty of being drafted as cannon fodder to serve the perverted pleasure of Washington’s armchair warriors; and the civilian infrastructure of one of Europe’s largest countries in shambles—all have nothing whatsoever to do with “freedom fighters”.

The undeniable fact is that there is nothing at stake worth fighting for in Ukraine that even remotely resembles democratic virtue. It has been a cesspool of egregious corruption virtually since the fall of the Iron Curtain in 1991, and recently even required a visit from the head of the CIA to tell Zelensky and his fellow thieves to “knock it off” on the corruption front.

To the contrary, as the venerable anti-war writer William Astore put it, the real purpose of Ukrainian installment of the Forever Wars is the enrichment of the merchants of death who have captured the levers of power in Washington:

Of course, this is yet another triumph for the MICIMATT: the military-industrialcongressional-intelligence-media-academe-think-tank complex. Its power and greed are almost irresistible. Add that to AIPAC, threat inflation, and fear-mongering and perhaps it is irresistible until the U.S. empire final collapses under the weight of its own folly.

Yet all of the mindless bellicosity of the Washington interventionists is not simply ludicrous nonsense from an empirical viewpoint. More importantly, the current neocon/interventionist Washington consensus blatantly repudiates the sage advice of both George Washington and Thomas Jefferson from more than 220 years ago. Together they articulated a theory of foreign policy that was not “isolationist” at all, but realist and evidence-based.

That is, these wise Founders held that foreign policy should be based on the facts and circumstances of national interest at any given point in time, and that when the facts change and alliances become obsolete, they should be jettisoned.

From George Washington’s Farewell Address: “The great rule of conduct for us, in regard to foreign nations, is in extending our commercial relations, to have with them as little political connection as possible. Europe has a set of primary interests, which to us have none, or a very remote relation. Hence, she must be engaged in frequent controversies the causes of which are essentially foreign to our concerns. Hence, therefore, it must be unwise in us to implicate ourselves, by artificial ties, in the ordinary vicissitudes of her politics, or the ordinary combinations and collisions of her friendships or enmities… it is our true policy to steer clear of permanent alliances with any portion of the foreign world…”

As further amplified by Jefferson in his 1801 inaugural address, this realist doctrine viewed external military alliances to be arrangements of convenience and should be freely abandoned or reversed as indicated by changing needs of the national interest. Citing Washington’s Farewell Address as his inspiration, Jefferson described the doctrine as-

“peace, commerce, and honest friendship with all nations—entangling alliances with none.”

That famous phrase is precisely the policy cornerstone that fits today’s realities. America’s homeland security doesn’t require militarized alliances or the wherewithal to maraud militarily around the globe because there are no military-industrial-technological powers that can threaten its security.

Accordingly, institutions like NATO may well have served the national interest 70 years ago with respect to Stalinist Russia and its military capacities and intentions toward its erstwhile but estranged wartime allies in the West. But even there the open archives from both sides of the cold war cast considerable doubt on whether Stalin and world communism were actually on the march or had either the intention or military capability to enslave western Europe, to say nothing of the American homeland on the far side of the Atlantic and Pacific Moats.

As it happened, the Henry Wallace peaceful accommodationist wing of the Roosevelt coalition may have been closer to the truth than the Wall Street based coteries of Henry Stimson, James Forrestal, Dean Acheson and the abominable Dulles Bothers, who actually formulated the nation’s cold war policies during that era.

But that question was resolved once and for all in 1991 when the Soviet Union disappeared into the dustbin of history, and not because of NATO or even Reagan’s Star Wars threat. The real reason was that centralized state communism doesn’t work: Neither for the people it exploits and oppresses, nor for the ruling elites and state-empowered comrades who may have delusions of grandeur about the sustainability of their own rule, to saying nothing of extending it to peoples beyond their borders.

Yet even as the true lesson of Soviet Communism’s collapse marched across the pages of history after 1991, the entrenched military-industrial-foreign policy apparatus was not about to relinquish its power, budgets and perks, just as Eisenhower had warned in another of America’s great Farewell Addresses in 1961. In fact, NATO morphed into something far more obnoxious than a cancellable alliance that had accomplished its mission and was slated for early retirement under the Washington-Jefferson doctrine.

And well it should have been because after 1991, there was no there, there. The Russian rump of the Soviet Union even today has a GDP of merely $2.2 trillion compared to the $28 trillion GDP of the USA and $46 trillion for all 32 NATO countries combined. And Russia has a military budget of barely 6% of NATO’s $1.25 trillion of combined defense expenditures and but one aircraft carrier.

Furthermore, the latter is a 20th century relic that has been in drydock repair since 2017 and is outfitted with neither an armada of escort ships and warplanes or even a crew. The Russian military, therefore, has no way to land on the shores of New Jersey or even enter the Brandenburg Gate in Berlin, for that matter. Nor is Putin stupid enough to invade Poland, which offers nothing but centuries of animosity to all things Russian.

Then again, if Poland really believed all the anti-Putin rhetoric spouted by its rightwing government, it would be spending a lot more on defense in 2024 than $30 billion and 3.1% of GDP; nor would it be offering to house NATO nuclear weapons next door to the Russian Bear, as its president did this week.

“If our allies decide to deploy nuclear arms on our territory as part of nuclear sharing, to reinforce NATO’s eastern flank, we are ready to do so,” Polish President Andrzej Duda said in an interview published today by the Fakt newspaper.

In truth, Duda’s offer is just another case of client state politics run amuck. Rid the scene of Washington’s entangling alliance with the relic of NATO, and the voters of Poland would be looking for a new government. And they would do so even as they were sending it leaders to Moscow to seek mutual accommodation from the natural trade and commercial relationships that are inherent in its geography.

The fact is, 33-years after the demise of the Soviet Union NATO is not simply a pointless obsolete relic. It has morphed into the greatest armaments marketing and sales organization in the history of mankind. The only benefit that came from betraying Bush the Elder’s promise to Gorbachev that NATO would not expand a “single inch” to the east has accrued to the defense contractors, especially the US based giants.

As RFK has cogently pointed out, when the NATO alliance mushroomed from 16 nations to now 32 countries, every one of the new members had to conform their weapons systems and munitions to NATO standards. Not suprisingly, Lockheed, Boeing, Northrup Grumman, Raytheon, General Dynamics and United Technologies prospered mightily–even as they effectively roamed the halls of Congress spreading the lies embedded in the above Wall Street Journal rendition of dominoes and the essentiality of Washington’s obsolete global alliances.

Yet two of the four components of Saturday’s abomination were directed against China, predicated on the same illusion that led to the vast threat-inflation with respect to the Soviet Union. To wit, Chinese Communism, even in the thinly veiled guise of “red capitalism”, is no more viable or sustainable than the Soviet version.

At the end of the day, if you don’t have free markets, constitutionally protected property and personal rights of expression and assembly and honest bankruptcy courts to dispose of failed economic bets, you do not have a sustainable economy or permanently rising prosperity. Period.

To the contrary, China is a vast house of economic cards and statist malignancies propped up by $50 trillion of unpayable debt incurred in barely two decades. Accordingly, it is utterly dependent upon the hard currency earnings from $3.5 trillion of annual exports, mainly to the West, to keep its vast excess of infrastructure and housing investment from capsizing the whole Rube Goldberg Contraption. In the event of war, this export lifeline would soon find its way to Davy Jones’ Locker, along with China’s entire jerry-built economy.

So, it’s not going to be invading anyone, probably not even Taiwan. Chairman Xi and his team of rulers may love to quote Mao and color themselves red ideologically, but they also know that what stands between them and an uprising of China’s oppressed 1.5 billion inhabitants is a consistent and reasonably rising level of internal prosperity.

That rules out a Chinese Armada of black ships heading for the coast of California. Indeed, even the Navy they have today consists of two repurposed Soviet Era aircraft carriers and one new build of far less formidable and lethal capacity than Washington current Gerald Ford class carriers. And its other 400 Navy vessels consists largely of coastal patrol vessels that likely would not make it to the shores of California in one piece.

In terms of lethal firepower, in fact, the US Navy has 4.6 million tons of displacement, averaging 15,000 tons per ship. By contrast, China’s Navy has but 2.0 million tons of displacement, averaging only 5,000 tons per boat. That is to say, the Chinese Navy is totally visible, assessable and trackable, and is not remotely of the size and lethality that would make an invasion of America remotely plausible.

Finally, the main military capacity that is needed for homeland security in the present world, of course, is America’s triad strategic deterrent including 3,800 nuclear warheads. At any moment in time these are scrambled and dispersed -

• along the ocean bottoms among 16 Ohio class subs each bearing 80 independently targetable warheads.

• aloft in the global airspace on a fleet of 66 B-2 and B-52 heavy bombers  

• buried deep in hardened underground silos bearing more than 1,000 ICBM warheads.

This awesome retaliatory force cannot possibly be detected or 100% neutralized by a would-be nuclear blackmailer.

As it happens, the triad deterrent costs about $65 billion per year according to a recent CBO analysis, and full protection of the US shorelines and airspace behind the great ocean moats could bring a total Fortress America model of homeland defense to $400 billion per annum, at most.

The other $500 billion in today’s 050 function represents the ill-gotten budgetary conquests of the military-industrial-intelligence complex, and all the think tanks, NGOs and beltway bandits who make a living getting paid by DOD, State, AID, NED etc. to manufacturing inflated threats and scary stories about sinister foreigners. Such malefic malarky was on full display in the US House last weekend. Accordingly, there is only one cure. A powerful force from outside the beltway needs to splinter the UniParty into a thousand pieces.

That’s the real mission of Robert F Kennedy’s Jr. independent candidacy for President, as we will further amplify in Part 2.

Tyler Durden Wed, 04/24/2024 - 16:50

Meta Shares Are Crashing After Zuck Spooks Investors Over "Significant" AI Spend

Update (1715ET): During the earnings call, CEO Mark Zuckerberg said that his commitment to Meta building the best AI models out there leads him to believe that “we should invest significantly more in the coming years."

And the return may take a while...

“It’s worth calling that out that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook, where we’re investing in scaling a new product but aren’t yet monetising it,” he said on a call with investors.

“But building the leading AI will also be a larger undertaking then the other experiences we’ve added to our apps and this is likely going to take several years.”

The market did not like that and the stock is now down almost 20% - erasing all the gains since the last earnings:

*  *  *

After yesterday's eruption by the first Mag7 member Tesla, which missed across the board but gave an extremely cheerful outlook where Musk vowed he would release a lower-priced EV as soon as this year, moments ago the second, and far bigger, Mag7 member - and who really cares about Mag7 any more, it's all about the Fabulous Four these days - Meta reported results which were a mirror image: while the company beat across the board, its guidance was a mess, with revenue disappointing while projected CapEx surging by 10%, and the stock is plunging 13% after hours.

Here is what META just reported for Q1:

• Revenue $36.46B, beating est. $36.12B
• Q1 EPS $4.71, beating est $4.30

And while the historical numbers were solid, it was the guidance that spooked the market:

• Meta sees Q2 Revenue of $36.5B to $39B, with the mid-range below the est. $38.24B

Yet while revenue guidance was disappointing, the company expects to spend even more to get there, and its capex forecast increased dramatically with attention finally turning to how much money this AI dream will actually cost...

• Full-year capital expenditures expected to be $35-$40 billion, from prior range of $30-$37 billion

In other words, Zuckerberg is still betting the metaphorical house - and investing in it - on AI. Parsing the company's language on capex, the color from CFO Li on next year’s increase in spending says the company will “invest aggressively” to support “ambitious” AI research and product development.

Still, the market is not impressed - it vividly recalls how much money the company burned on the catastrophic metaverse dead end - and as Bloomberg notes, ever since Meta’s rollout for its expensive metaverse/virtual reality plans, investors have been laser-focused on expenses and how quickly those will pay off. With AI, the company appears to have a longer grace period since it’s an industrywide bet, but even that will soon come under scrutiny for Meta, seeing as its expected capex is ticking up now for the year.

And sure enough, the advertising-funded social network could not wait to turn the attention to AI, with CEO Mark Zuckerberg’s quote in the earnings release, citing its new large language model (Llama 3) just released:

“The new version of Meta AI with Llama 3 is another step towards building the world’s leading AI. We’re seeing healthy growth across our apps and we continue making steady progress building the metaverse as well.”

Turning to the company's actual metrics, the total number of people using Meta’s apps (Facebook, Instagram, WhatsApp and Threads) rose 7% year-over-year to 3.24 billion.

That’s the only user metric we’re getting from Meta, which said last quarter it would stop consistent reporting of MAUs and app-level metrics.

Turning to revenue, ad revenue dropped sequentially as it always does in Q1 but rose YoY...

... with Average Revenue per User dropping but higher than a year ago.

 

... as the average price per ad rose significantly in Q1.

... although the growth in ads delivered declined.

Meanwhile, even as ad revenue dipped, expenses as a % of revenues are once again rising.

Putting it all together, and taking a quick look at the stock price, we can conclude that the market is not impressed, as META shares are tumbling 13%, wiping out some $135BN in market cap...

... on pace for their worst drop since Oct 2022 and vaporizing all gains since the last earnings report.

... as we officially enter the "show me the monAI" phase and as focus among investors right now is on spending “and the fact that they’re raising capex guidance by 10%” according to Bloomberg tech analyst Mandeep Singh, who adds that “investors are fearful. Whenever this company talks about spending more, the alarm bells start ringing."

The plunge in META stock is weighing on the Nasdaq and other social media stocks post-market. Shares of Snap are down 3.3%, while Pinterest has shed nearly 4%. Reddit is down 1.3%.

The company's earnings presentation is below (pdf link)

And now we await the earnings call to see if Zuck can save this catastrophic earnings report.

Tyler Durden Wed, 04/24/2024 - 16:33

The Next Global Hegemon Has To Be Even Larger Than The US

By Michael Every of Rabobank

"Where it will end is very much up for grabs."

Yesterday’s manufacturing PMIs shouted “stagflation”, even if some heard “rate cuts”. German manufacturing was 42.2, French 44.9, and Eurozone 45.6, as services were 53.3, 50.5, and 52.9 - but Europe must now factor in logjams appearing at key ports due to unsold Chinese EVs and the knock-on effects of the Houthi’s blockage of Suez; the UK prints were 48.7 and 54.9; and the US both 50.9 - but its fine print said: “Manufacturing has now registered the steeper rate of price increases in three of the past four months, with factory cost pressures intensifying in April amid higher raw material and fuel prices, contrasting with the wage-related services-led price pressures seen throughout much of 2023.”

Yesterday’s bigger picture was as big as it gets. No, not the UK “putting its economy on a war footing” in raising defence spending to 2.5% of GDP by 2030. It’s already at 2.32% despite UK armed forces being nowhere near ready for war. (Of more interest was that a tax cut might be dropped to fund this incremental spending: a ‘guns or butter’ decision we will see lots more of.)

Rather, the ECB’s Panetta gave a speech echoing Mario Draghi’s call for “radical change. He stated for the EU to thrive it needs a de facto national-security focused POLITCAL economy centered round: reducing dependence on foreign demand (i.e., fewer net exports – sorry, Germany/Netherlands!); enhancing energy security (green protectionism); advancing production of technology (industrial policy); rethinking participation in global value chains (tariffs/subsidies); governing migration flows (so higher labour costs); enhancing external security (huge funds for defence); and joint investments in European public goods (via Eurobonds… to be bought by ECB QE for a ‘strategic bond portfolio’?) Oddly, the people who spend their time transcribing every syllable of what the ECB says when it points to a slight shift in the timing of a 25bp rate move were quiet about a speech which promised to transform the entire EU economic and market architecture!

However, this is what we said Europe would do to try to achieve strategic autonomy. It’s also what I argued Western economies would do in 2016’s pre-Brexit, pre-Trump ‘Thin Ice’, which underlined that once you remove any leg of the free market ‘table’, the whole thing topples over. So, it’s now modern-day Hamiltonian economics – unless it’s “Build Back Better” all over again.

This is a global, fundamental issue. In 2025, we get either Bidenomics 2.0 or Trump 2.0: in either case we are going to see more huge fiscal deficits, protectionism, and industrial policy, but in the latter case, perhaps on steroids. At the same time, China is going to keep being mercantilist on its own steroids. Likewise, Japan and even Australia(!) are heading in that direction. Clearly, we need some understanding of what this all means beyond monthly PMI up- or down-ticks.

Narrowly, Trump 2.0 could mean a USD and US asset meltdown, or a further USD and US asset spike and an emerging market meltdown. It depends on how it’s implemented and how the world responds.

More broadly, the global system is close to massive structural change. As the Financial Times op-eds today, the US and EU can’t embrace national-security “infant industry” arguments, seize key value chains to narrow inequality, and break the fiscal and monetary ‘rules’, while also using the IMF and World Bank --and the economics profession-- to preach free-market best practice to EM ex-China. And China can’t expect others not to copy what it does. As the FT concludes, “The shift to a new economic paradigm has begun. Where it will end if very much up for grabs.”

And “up for grabs” is the key point. As far back as 1820, Hegel argued that bourgeois society was incapable of internally solving its problems of social inequality and instability arising from its tendency to over-accumulate wealth at one pole and deprivation at the other, and a "mature" civil society was thus driven to seek external solutions through foreign trade, colonial, or imperial practices. In 2024, Europe just made the point for him – but what was their alternative?

In 2020, I warned we needed a new ideological “-ism” to guide our *political* economy out of the mess it was in: Hamiltonianism is it, as predicted. However, we each want it only for ourselves, not for others. There appears no likelihood of a Global New Deal to distribute value chains and green technology so everybody gets a fair share. Yet without it, we are back to a world of all vs. all, as warned in ’Thin Ice’ – and now openly with violence. That was why we dreamed the post-WW2, post-Cold War neoliberal one-world dream: it wasn’t just so the rich could feast on the poor; it also held up a simple, illusory ideology the world could buy into to end all conflicts.

Such arguments sound silly to PMI-monomaniacs, but they matter deeply for policy. For example, in the UK there was a public St. George’s Day debate over whether it was free-market capitalism or its empire that led to the UK becoming global hegemon. Free marketeers say it was all markets, so more markets please; Hamasniks on campuses say it was all the latter, so more “decolonisation”, please. The implications are enormous.

The awkward historical fact is that it was capitalism and empire that enriched the UK. Free markets and the rule of law were essential; but so was empire – in particular India. As Arrighi (2007), notes: “India's huge demographic resources buttressed British world power both commercially and militarily. Commercially, Indian workers were forcibly transformed from major competitors of European textile industries into major producers of cheap food and raw materials for Europe. Militarily…Indian manpower was organized in a European-style colonial army, funded entirely by the Indian taxpayer, and used throughout the nineteenth century in the endless series of wars through which Britain opened up Asia and Africa to Western trade and investment. As for the financial aspect, the devaluation of the Indian currency, the imposition of the infamous Home Charges through which India was made to pay for the privilege of being pillaged and exploited by Britain, and the Bank of England's control over India's foreign-exchange reserves, jointly turned India into the "pivot" of Britain's world-financial and commercial supremacy.”

In short, free markets and forcing others not to be free has worked very well: denying that won’t help. Addressing what a global structure looks like that keeps the former but doesn’t do the latter, and which doesn’t produce inequality and destabilisation, is the issue. Or, given that may be a utopia, we at least need to predict what the all vs. all world looks like. (Which is what we did in predicting Europe would embrace the “radical” policy changes now floated even at the ECB.)

On all vs. all, the global capitalist hegemon has shifted over time to a successively larger polity/geography (Italian city states > Dutch United Provinces > England/the UK > the US) through economic or real war, with the complexity of the expanding global system requiring ever greater resources to sit at its centre. However, the US alone can no longer carry the world on its shoulders. The Triffin Paradox looms over the global role of the dollar --and any would-be successor; and the US will not be the net importer for everyone, the net provider of financial assets to all savers, nor the world policeman for all who require it. Indeed, the latter three stand in fundamental contradiction to each other.

This implies the next global hegemon has to be even larger than the US (or we fragment):

• Maybe the US will fail at a Hamiltonian relaunch and China is the next hegemon: but that implies geopolitical chaos ahead given the US won’t go home quietly.
• Maybe the US will succeed at Hamiltonianism, and the world/markets will shift accordingly.
• Maybe the scale needed for US hegemony involves it ‘bolting’ on Japan, South Korea, Canada, Mexico, Australia, and perhaps the UK and a ‘new look’ EU. But that implies a bifurcated world, with lots of bumps before we set up any buffers.
• Maybe the US will prefer what Kautsky called Ultra-Imperialism: making a global deal with China and Russia to carve out spheres of influence, and setting oligopolistic rules that benefit all three. Where does ‘old look’ Europe sit if so? Very uncomfortably, in all likelihood.

These are discussions we need, but we aren’t seeing them due to a key point Arrighi makes. The late stage of a global system has a ‘false dawn’ as the economy shifts from producing things, which make ever less profit due to competition, to producing financial assets, which make money while destabilising society and the global system itself. The Dutch Golden Age was just before it was pushed off the world stage by European mercantilism and the British; the late 19th century and early 20th century British belle époque was just before WW1; the boom in US financial services was as its industrial base has rotted away – and as wars start to break out again all over.

Those illusory good times, for some, take the market’s eyes off the prize: it’s no wonder few want to read Hamilton rather than a headline about rate cuts, and few seriously engage with what strategic decoupling and reindustrialisation might look like even when we are already seeing it via tariffs, the CHIPS Act, and the IRA. Not even when Trump may do far more, and the ECB says the EU should do it too!

Tyler Durden Wed, 04/24/2024 - 16:20

Yen Dumped, Yield-Curve Pumped, Bonds & Bitcoin Slump

Quiet macro day with Durable Goods Orders looking like a beat - but only because of sizable downward revisions - as orders and shipments are actually down on a YoY basis.

Source: Bloomberg

But stocks were messy with an opening bid immediately squelched and post-EU-close ramp faded into the US close. Small Caps were the day's laggard as Nasdaq outperformed while The Dow and S&P desperately tried to get green...

Nasdaq and The Dow got back above their 100DMAs while Small Caps cannot hold above theirs...

Goldman's Chris Hussey pointed out that, despite an uptick in rates today (yields on 10-year Treasuries are up 6bp to 4.66%), yield sensitive sectors like Tech, Utilities, and Real Estate are outperforming.

On the flip side, Industrials are lagging on the back of particularly weak earnings in Transports.

Source: Bloomberg

And stepping even further back, 9 of the 10 worst-performing stocks in the S&P 500 today reported results after the close yesterday, or before the open this morning -- highlighting how earnings are driving stocks amidst a macro vacuum (at least for today).

Volumes were muted today once again, according to Goldman's trading desk, as they noted once again that hedge funds were slightly better to buy (buying Indust., Info Tech, Disc.), Long-Onlys slight for sale (selling Mats, Disc.,).

TSLA had a big day - its best since Jan 2022 - after earnings last night (that reaffirmed its strategy wasn't too crazy)...

The basket of MAG7 stocks ended unchanged after a strong open thanks to TSLA's gains as traders await META's earnings after the bell...

Source: Bloomberg

Treasury yields were higher across the board today (with the long-end underperforming) as the following two-day chart shows, the 10Y & 30Y yields are back above pre-PMI levels from yesterday while 2Y is at the lows from yesterday...

Source: Bloomberg

The yield curve (2s30s) steepened dramatically once again, now up 14bps in two days, back to one-month highs (still inverted)...

Source: Bloomberg

The dollar ended modestly higher on the day, pulling back during the US session from overnight gains...

Source: Bloomberg

Yen was slammed (again) as traders continue to call The BoJ's interventionist bluff...

Source: Bloomberg

...as JPY is now well below the last intervention threshold (back at its lowest in 34 years)...

Source: Bloomberg

Bitcoin took another kicking today, tumbling back to a $63,000 handle...

Source: Bloomberg

...once again driven by extreme selling pressure from the perpetual futures market...

Amid all the excitement today, gold ended unchanged and traded in a narrow range...

Source: Bloomberg

Crude prices slipped back from yesterday's surge despite a big crude draw...

Source: Bloomberg

Finally, Goldman's Dominic Wilson and Kamkshya Trivedi highlight how geopolitical tensions and stickier than expected US inflation prints have transitioned markets to trading more of a 'policy shock' than a 'growth upgrade'...

...a development that is making directional trades trickie.

Tyler Durden Wed, 04/24/2024 - 16:00

Alvin Bragg Has His Trump Trial, All He Needs Now Is A Crime

Authored by Jonathan Turley,

Below is an expanded version of my column in the New York Post on the start of the Trump trial and much awaited explanation of District Attorney Alvin Bragg on the underlying alleged criminal conduct. The curious aspect of the case is that the prosecutors are stressing that they will prove largely uncontested facts. Indeed, if all of these facts of payments, non-disclosure agreements, and affairs are proven many of us (including liberal legal experts) are doubtful that there is any cognizable crime.

Here is the column:

For many of us in the legal community, the case of Manhattan District Attorney Alvin Bragg against former president Donald Trump borders on the legally obscene: an openly political prosecution based on a theory that even some liberal pundits have dismissed. Yet, this week the prosecution seemed like they were actually making a case for obscenity.

No, it was not the gratuitous introduction of an uncharged alleged tryst with a former Playboy bunny or planned details on the relationship with a former porn star. It was the criminal theory itself that seemed crafted around the standard for obscenity famously described by Supreme Court Justice Potter Stewart in the case of Jacobellis v. Ohio, 378 U.S. 184 (1964): “I shall not today attempt further to define [it] … But I know it when I see it.”

After months of confusion of what crime they were alleging in the indictment, the prosecution offered a new theory that is so ambiguous and undefined that it would have made Justice Stewart blush.

New York prosecutor Joshua Steinglass told the jury that one of the crimes that Trump allegedly committed in listing the payments to Stormy Daniels as a “legal expense” was New York Law 17-152. This law states “Any two or more persons who conspire to promote or prevent the election of any person to a public office by unlawful means and which conspiracy is acted upon by one or more of the parties thereto, shall be guilty of a misdemeanor.”

So they are arguing that Trump committed a crime by conspiring to unlawfully promote his own candidacy. He did this by paying to quash a potentially embarrassing story and then reimbursing his lawyer  with other legal expenses.

Confused? You are not alone.

It is not a crime to pay money for the nondisclosure of an alleged affair. Moreover, it is also not a federal election offense (which is the other crime alleged by Bragg) to pay such money as a personal or legal expense.

It is not treated under federal law as a political contribution to yourself.

Yet, somehow the characterization of this payment as a legal expense is being treated as an illegal conspiracy to promote one’s own candidacy in New York.

The Trump cases have highlighted a couple of New York’s absurdly ambiguous laws.  Under another law, New York Attorney General Letitia James secured an almost half of billion dollar judgment against Trump for loans where the alleged victims not only did not lose a dime but were eager for more business from his company. The law does not actually require any loss to a victim to impose a roughly $500 million penalty against a defendant that James pledged to bag in her campaign for office. While the over and under valuing of assets is common in the real estate area, James singled out Trump.

James declined to explain how this law could be used against other businesses since actual losses or injuries are not viewed as necessary. Businesses would just have to trust her and her judgment. In other words, the law could have sweeping applications, but we will know a violation under the civil law when we see it.

As with James, Bragg saw it in Trump. His predecessor did not see it. He declined charging on this basis. Bragg did to.  He stopped the investigation. However, after a pressure campaign, Bragg might not be able to see the crime but he certainly saw the political consequences of not charging Trump.

In New York, prosecutors are expected to have extreme legal myopia: they can see no farther than Trump to the exclusion of any implication for the legal system or legal ethics.

Of course, neither he nor his office has never seen this type of criminal case in any other defendant. Ever.

We have never seen a case like this one where a dead misdemeanor from 2016 could be revived as a felony just before any election in 2024.

The misdemeanors in this case, including falsifying these payments, expired with the passage of the statute of limitations. But Bragg (with the help of Matthew Colangelo, a former top official in the Biden Justice Department) zapped it back into life by alleging a federal election crime that the Justice Department itself rejected as a basis for any criminal charge.

So now there is a second crime that is hard for most of us to see, at least outside of New York. Trump is accused of conspiring to promote his own candidacy by mislabeling this payment, even though it was part of a larger legal payment to his former counsel, Michael Cohen.

They do not see a crime in analogous mislabeling of payments by Democratic candidates.

Take Hillary Clinton who served as senator from New York and ran for president against Trump. For months before the 2016 election, Hillary Clinton’s campaign denied that it had funded the infamous Steele dossier behind the debunked Russian collusion claims. That was untrue. When reporters tried to report on the funding story, one journalist said Elias that “pushed back vigorously, saying ‘You (or your sources) are wrong.’”

It was later discovered that the funding was hidden as legal expenses by then-Clinton campaign general counsel Marc Elias. (The FEC later sanctioned the campaign over its hiding of the funding.). Times reporter Maggie Haberman declared, “Folks involved in funding this lied about it, and with sanctimony, for a year.”

Elias even went with John Podesta, Clinton’s campaign chairman, in speaking with congressional investigators and Podesta denied categorically any contractual agreement with Fusion GPS.

While the funds were part of the campaign budget, they were listed as legal expenses and the Clinton people continued to insist that such payments to a former intelligence figure to put together the dossier was a legal expenditure.

It is not clear if Trump even knew how this money was characterized on ledgers or records. He paid the money to his lawyer, who had put together this settlement over the nondisclosure agreement. Cohen will soon go on the stand and tell the jury that they should send his former client to jail for following his legal advice.

In addition to running for president, Trump was a married host of a hit television show. There were ample reasons to secure a NDA to bury the story. Even if money was paid to bury these stories with the election in mind, it is not unusual or illegal. There was generally no need to list such payments as a campaign contribution because they were not a campaign contribution in the view of the federal government.

It is not even clear how this matter was supposed to be noted in records. What if the Trump employee put “legal settlement in personal matter” or “nuisance payment”? Would those words be the difference

Again, it is not clear.

But that does not appear to matter in New York.

The crime may not be clear or even comprehensible.

However, the identity of the defendant could not be more clear and the prosecutors are hoping that the jury, like themselves, will look no further.

Tyler Durden Wed, 04/24/2024 - 15:25

First-Time Buyers Must Earn $120,000 To Afford The Average Home

Earlier today we reported that for at least 40% of Americans - up from 27% just two years ago - the American Dream is dead and buried and has been replaced with the American nightmare: renting for life.

And here's why: according to a new survey from Clever Real Estate, a St. Louis-based real estate company, thanks to the galloping housing inflation, the median-priced home in the U.S. now costs $332,494, with NAR and Census Bureau data reporting that the median Existing and New Home sale price has risen to $393,500 and $430,700...

... meaning prospective buyers need an annual income of at least $119,769 to afford it with a 10% down payment.

That's about $45,000 more than the typical household earns annually ($74,755). Even with a 20% down payment, home buyers would need to earn at least $98,202, still well above the typical salary.

The last year that the median buyer put down 20% was 1989, according to data from the National Association of Realtors (NAR). Today, the median buyer puts down just 15% of a home's purchase price.

The median U.S. income earner ($74,755) with 10% down could only afford a home that costs $207,529 — 38% less than the current median-priced home.

A median-income family aiming to afford a median-priced home would need a hefty 45% down payment, or mortgage rates would need to drop from the current rate of 7.2% to 4% to make it work.

Even with a savings rate of $1,000 each month, it would take a household five and a half years to amass the $66,500 needed for a 20% down payment on a home priced at the median of $332,494.

As it stands, 61% of Americans find themselves priced out of the market even with a 20% down payment.

The median home is affordable for median earners in just four states (West Virginia, Ohio, Iowa, and Indiana)...

... and only six of the 50 largest metro areas:

1. Pittsburgh, PA
2. Cleveland, OH
3. St. Louis, MO
4. Memphis, TN
5. Indianapolis, IN
6. Birmingham, AL

Unsurprisingly, Los Angeles is the least affordable city, where buyers need an income of a whopping $249,471 to comfortably afford a median-priced home — nearly three times the actual median income of $87,743.

Read the full report at: http://www.listwithclever.com/research/how-much-house-can-i-afford-2024

Tyler Durden Wed, 04/24/2024 - 14:45

Market Is Splendidly Indifferent To Rising Inflation Risks

Authored by Simon White, Bloomberg macro strategist,

There continues to be scant evidence of inflation hedging in markets despite clear signs price-growth risks are rising.

Inflation remains in focus this week as we get the first quarter’s update for US PCE on Friday. Regardless of one data point, the trend is clearly that inflation has stopped falling, with multiple leading indicators suggesting a recurrence.

It’s not just in the US though. Globally, inflation is resurfacing. Through last year, the Citi Inflation Surprise indices were falling almost everywhere. Year-to-date in 2024, they are now rising in two-thirds of the countries the indices cover.

But that is not being priced in markets. Ven Ram points out that two-year Treasuries would struggle to sell-off on even a sticky core PCE print later this week, and that’s probably true in the nearer term. But even two-year yields are not yet pricing in the likelihood of a proper inflation shock that would require several more hikes from the Federal Reserve. That’s not a base case at the moment, but its probability is still underpriced.

Yields have been rising, and so have gold and silver, but there is a distinct lack of the inflation urgency seen in 2021 and early 2022, when CPI was hitting decade highs and the Federal Reserve had not yet responded with interest rate hikes.

As one sign of the relative complacency, take two ETFs that are designed to hedge inflation, INFL and IVOL.

These saw marked inflows in 2021, but the flows have been muted since the Fed started raising rates in 2022 and have remained so.

There have also been no marked pick-up in flows to ETFs of inflation-linked bonds, such as the TIP ETF.

Similarly shorting interest in Treasuries continues to be minimal. JPMorgan’s Client Treasury Survey is registering a near series-low of outright shorts, while short interest in the TLT long-term UST ETF is low and has barely risen.

There are no inflation alarms ringing. But that could prove to be misguided as inflation shows clear signs of resurfacing.

This is even more so as the structural backdrop, with increasingly coordinated fiscal and monetary policy, is conducive to a secular rise in price growth.

Tyler Durden Wed, 04/24/2024 - 13:25

Subpar Record 5Y Auction Tails, Pushes Yields To Session Highs

One day after the US sold a record amount of 2 Year paper in a very strong auction, the Treasury has followed that up with a record amount of 5 year paper, this time in a less than impressive sale.

The $70BN in 5Y paper was up $3BN from $67BN last month and was the highest amount on record offered for the tenor. But don't worry there will be plenty more record auctions in the future: after all, the US has now crossed into the Minsky Moment and it is now issuing debt just to pay the interest on its existing debt.

The auction priced at a thigh yield of 4.659%, up sharply from 4.235% last month and the highest since October's cycle high of 4.899%. Unlike yesterday's 2Y auction which stopped through, today's sale modestly tailed the When Issued 4.655% by 0.4bps.

The Bid to Cover was also weaker than last month, dropping from 2.41 to 2.39, and just below the 2.411 six-auction average.

The internals were also subpar, with Indirects sliding to 65.7% from 70.5% last month, if almost on top of the recent average of 65.4%. And with Directs taking down 19.2%, above the 17.9% recent average, Dealers we left holding 15.0%, just below the recent average of 16.7%.

Overall, this was a mediocre and forgettable auction, and one which accelerated the move higher in bond yields which are now at 4.654%, just shy of session highs.

Tyler Durden Wed, 04/24/2024 - 13:21

Romney & The Wrong Question: Senator's Statement On Trump's Guilt Captures The Problem With The Manhattan Trial

Authored by Jonathan Turley,

Yesterday, Sen. Mitt Romney (R-UT) had a much covered interaction with CNN’s Manu Raju who asked him about Trump’s criminal trial and whether he was guilty of the underlying criminal conduct. Romney responded “I think everybody has made their own assessment of President Trump’s character, and so far as I know you don’t pay someone $130,000 not to have sex with you.” I have previously defended Romney in his votes on impeachment despite our disagreement on the constitutional standard. I also understand that he was making a more general comment on character.

However, his response is precisely what Manhattan District Attorney Alvin Bragg is seeking from the jury: a verdict on Trump as a person rather than the underlying criminal allegations.

Trump is currently facing 34 counts of falsifying business records in the first degree regarding payments made to Daniels during the 2016 presidential election. As I discuss today in the New York Post, many of us (including liberal legal experts) still question whether there is any crime alleged by Bragg. Raju reasonably asked Romney for his own view.

Romney is an interesting person to ask. He is not only a critic of the President from within his own party but he is a former businessman who has had to deal with complex reporting and business obligations.

Romney’s response must be encouraging for Bragg.

Rather than address the ambiguous criminal allegation, Romney suggested that Trump was guilty as charged in having a tryst with a former porn star.

The defense is not contesting the payment and the fact of the affair is not central to the allegations.

The question is whether the payments were unlawfully denoted as legal expenses with the intent to somehow steal the 2016 election.

Asked Mitt Romney about the hush money allegations against Trump.

“I think everybody has made their own assessment of President Trump's character, and so far as I know you don't pay someone $130,000 not to have sex with you." pic.twitter.com/ofBL15MJw1

— Manu Raju (@mkraju) April 23, 2024

It is not a crime to use a NDA or other means to quash an embarrassing story.

Bill Clinton had a host of lawyers quashing allegations of affairs and sexual assaults throughout his presidency. He ran into trouble when he committed perjury in the effort to hide what Hillary Clinton called one of his “bimbo eruptions.”

Moreover, denoting this as a legal expense, on the advice of counsel, is not necessarily wrong. It is not clear how it should have been to be denoted. A “nuisance payment”? The campaign of Hillary Clinton and its general counsel Marc Elias hid the funding of the Steele dossier as a legal expense and was fined by the government for doing so. They litigated the question and insisted that that is precisely what it was.

Romney is precisely what Bragg is looking for in these jurors. Smart and savvy, he still viewed the question of the trial as whether Trump had an affair with Stormy Daniels.  If so, it was not a legal expense. Yet, quashing the story and avoiding any litigation was a legal matter with the eventual crafting of the NDA.

There are a lot of motivations for NDAs of this kind. Trump was married. He was the host of a hit television show (with a clause on termination for scandalous conduct). And, yes, he was also seeking to be president. He wanted these stories killed and friends like David Pecker were helping in that effort. What those facts say about the former president’s “character” will remain a matter of public debate and, as Romney said, most long ago reached their own conclusions. Yet, it is the crime not the character of Trump that is at issue in Manhattan.

Alvin Bragg would like the trial to remain a verdict on character, which is why he started the trial discussing not the Daniels matter but an uncharged affair and settlement with a former Playboy bunny. It is why he fought hard (and succeeded) in being able to question Trump about past cases involving an alleged assault and fraudulent conduct. As legal experts continue this week to debate if there is even a crime alleged in the indictment, Bragg is making a case that Trump’s lack of character is beyond a reasonable doubt.

To be fair, Romney was not giving a full interview on the case in his statement to CNN and may well have some reservations about the Bragg indictment. However, Bragg is likely hoping that “everybody has made their own assessment of President Trump,” including twelve jurors currently sitting in the Manhattan courtroom.

Tyler Durden Wed, 04/24/2024 - 13:11

Cocoa Drops Most Since April 2009, Some Losses Recovered In Muti-Day Volatility Rollercoaster

Cocoa futures in London on Tuesday plunged the most since April 2009, tumbling as much as 8.1%, while prices slid as much as 7.7% in New York. Prices recovered some losses on Wednesday morning. It appears the downdraft was caused by fast-money traders taking profits after a record high of $12,250 per ton was recorded in New York on Friday. 

Cocoa prices faded record highs as "opportunistic fast traders" exit positions to take profits after bearish signals flashed in recent sessions, Tristan Fletcher, chief executive officer at ChAI, a platform that uses AI to analyze commodity markets, told Bloomberg. 

Last week's catalyst for record-high prices came after data about grindings—where cocoa transforms into butter and powder used in candy—showed that demand destruction has not materialized despite soaring prices. 

Here's the cocoa grindings data from last week that served as fuel for bulls (via Barchart): 

Cocoa also has support on signs that global cocoa demand remains resilient despite record-high prices. Last Thursday, the National Confectioners Association reported that North American Q1 cocoa grindings rose +9.3% q/q and +3.7 % y/y to 113,683 MT. Also, last Thursday, the Cocoa Association of Asia reported that Q1 Asia cocoa grindings rose +5.1% q/q, although they fell -0.2% y/y to 221,530 MT. In addition, the European Cocoa Association reported that Q1 European cocoa grindings rose +4.7% q/q, although they fell -2.2% y/y to 367,287 MT.

Paul Joules, an analyst at Rabobank, wrote in a note that grindings figures are "an indication that for now demand is holding up despite current pricing," adding that "demand destruction will come, but clearly it's taking longer to filter into grind data than the market was anticipating."

Famed commodity trader Pierre Andurand told Bloomberg via an emailed interview, "We will finish the year with the lowest stocks-to-grinding ratio ever, and potentially run out of inventories late in the year." He added that cocoa prices "could break $20,000 later this year" based on the thesis of worsening drought and disease ravaging the world's largest cocoa farms in West Africa.

Paul Torres, a London-based trading and agricultural consultant, said, "I do not foresee prices falling significantly," adding that prices could range between $8,000 to $10,000. 

Torres noted: "There could be just some easing of the frenetic moves we've seen."

Meanwhile, analysts from JPMorgan recently told clients that cocoa prices in New York could come down to around $6,000 a ton in the medium term, while Citi analysts said a bear market could begin in early 2025.

There is some good news for cocoa supply: Bloomberg quoted Marijn Moesbergen, sourcing lead at Cargill, at the World Cocoa Conference in Brussels on Wednesday as saying cocoa production is expected to bounce back next year as the El Nino effect won't be in play. 

"The current prices are maybe a bit overshooting. The question indeed is what will be the new equilibrium between this supply issues versus what will be the demand impact going forward," adding, "That question will be answered in the coming period." 

The combination of a worsening global supply deficit plus bullish grindings data might only suggest prices have to head higher. 

Tyler Durden Wed, 04/24/2024 - 13:05

Cities' "Doom Loops" Are Even Worse Than You Imagined

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is why those who understand these dynamics are getting out, even though the city was their home.

A correspondent who prefers to remain anonymous sent me this account of the "doom loop" that is playing out in many American cities. The correspondent makes the case that the Doom Loop is not limited to specific cities, but is a universal dynamic in all US cities due to the core causes of the Doom Loop: financialization and the multi-decade decay of cities' core industrial-economic purpose / mission.

I have edited the text slightly, with the correspondent's approval.

The context of the Doom Loop is the process and politics of this decay are the second-order results of central bank easy money (free fiat). That led to financialization becoming the city's core function and the subsequent loss of the city's previous mission. The people living in cities just haven't gotten the message yet.

As such, there is no reversing the process until the centralization of capital itself is reversed.

The typical media articles on metropolitan "doom loops" make it seem like not every city is headed down the path. Now that financialization does not require a physical presence, every city above a certain size will share the same experience. There will be local variations which impact the trend, such as a potential utility as a large pool of voters (i.e. a vote farm), but the decline is part and parcel of financial 'virtualization.'

It is inevitable.

Even hosting one of the twelve central reserve banks won't save you.

The process when a city loses its purpose but persists due to inertia follows this basic pattern:

1. Corporate consolidation costs the city its financial base as Fortune 100 corporations are sold to conglomerates closer to the centers of finance.

This is one more second-order effect of easy money: global corporations can easily finance the acquisition of multi-billion dollar companies.

2. In the past, cities received huge government subsidies for re-development, but none for ongoing maintenance. All the redevelopment projects looked great at first, but with little funding for maintenance, they've gone downhill and many are now dangerous.

Today, the only redevelopment is done by the billionaire class who make most of their money from (surprise) finance. Once the billionaire loses interest, it's gone, too.

I would rather find myself in a developing-world city than an American downtown, at least there would be people around. Many American downtowns are literally apocalyptic.

3. Major league sports are increasingly an exercise in force protection. It's like going inside a forward firebase in Iraq. People still get shot in the stands from guns fired outside the bubble. Unsurprisingly, some major league teams are exploring space outside the cities despite their stadiums being only 20 years old.

4. When federal agencies build new facilities, they're essentially fortresses with direct entrance/egress from the highway. They add little to nothing to the surrounding economy.

5. Real estate, sales and personal property taxes in cities are typically the highest within the state. As tax revenues decline, cities' political leaders increase business taxes and start floating ideas such as taxing non-profit organizations: a financial death spiral indeed. Should taxes increase, organizations and companies have said they will leave.

6. In the industrial economy, the core purposes of cities were derived from advantageous locations and key transportation assets (first water, then rail, then roads, and later aviation). In the information age, those benefits are diminished or gone. As a result of their transportation advantages, cities became manufacturing and warehousing hubs. Those too are diminished or gone.

7. Cities have lost their core economic purpose and are choking on their high legacy costs. The proposed substitute purposes--entertainment and bourgeois lifestyles--are not true substitutes. Fine dining and secure condos with delivery do not replace actual economic functions.

8. Making matters worse, the upper-middle class doesn't want affordable housing in their enclaves, as it lowers property values. So the workers needed to keep the city functioning can no longer afford to live there. Yes In My Backyard (YIMBY) movements to promote affordable housing are not enough.

9. Much of the politics the media focuses on are a consequence of decline, not a cause, and the net result of all the in-fighting is some version of stasis: all sorts of solutions are proposed, but since none address the core sources of decline or the cities' high legacy costs, they boil down to rearranging deck chairs on the Titanic.

This is why those who understand these dynamics are getting out, even though the city was their home.

Of related interest:: The Real Estate Nightmare Unfolding in Downtown St. Louis: The office district is empty, with boarded up towers, copper thieves and failing retail--even the Panera outlet shut down. The city is desperately trying to reverse the 'doom loop.'

*  *  *

Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

Tyler Durden Wed, 04/24/2024 - 12:45

Apple Slashes Vision Pro Shipment Projections By 50% As Demand For $3,500 Headset Craters

In what will come as a surprise to exactly nobody, the revolutionary if ridiculously overpriced Vision Pro virtual reality headset, which retails for $3,500, is not selling.

While it was hardly necessary - at least for anyone with a functioning frontal lobe -  an analysis published this morning by the widely-read TF International Securities analyst Ming-Chi Kuo (best known for gathering intelligence from his contacts in Apple's Asian supply chain), who back in January correctly reported that Apple has lowered its 2024 iPhone shipments to a 15% decline, reported that Apple has cut its full year Vision Pro shipments to 400–450k units by as much as 50% versus the market consensus of 700–800k units or more.

Kuo also notes that Apple cut orders before launching Vision Pro in non-US markets, which means that "demand in the US market has fallen sharply beyond expectations, making Apple take a conservative view of demand in non-US markets."

Of course, it's not like anyone - except of course for AAPL's multimillionare management team - had expected that $3,500 heavy neck braces would sell like hot cakes - so it's not exactly a surprise to anyone, excpet Apple which is now "reevaluating its headset roadmap, potentially delaying the launch of a more affordable mixed-reality headset beyond 2025."

Below we excerpt from the full note.

1. Apple has cut its 2024 Vision Pro shipments to 400–450k units (vs. market consensus of 700–800k units or more).
2. Apple cut orders before launching Vision Pro in non-US markets, which means that demand in the US market has fallen sharply beyond expectations, making Apple take a conservative view of demand in non-US markets.
3. Apple is reviewing and adjusting its head-mounted display (HMD) product roadmap, so there may be no new Vision Pro model in 2025 (the previous expectation was that there would be a new model in 2H25/4Q25). Apple now expects Vision Pro shipments to decline YoY in 2025.

The weak-than-expected Vision Pro demand means that the following new trends are likely to be below market expectations.

1. MR headset devices. The challenge for Vision Pro is to address the lack of key applications, price, and headset comfort without sacrificing the see-through user experience. In contrast, VR is also a niche market, but at least there are proven successful applications (games), and trend visibility is better than MR.
2. Pancake. As the upgrade of optical specifications for smartphones has slowed down for several years, investors expect Pancake, which has a significantly higher unit price than lenses, to become a new growth driver for the optical sector. Weaker-than-expected shipments of Vision Pro will lower Pancake’s contribution to the optical industry in the foreseeable future than investors’ expectations.
3. Micro OLED. Vision Pro/MR headset is the most critical application of Micro OLED. With key applications not growing as expected, the timeframe of mass production and adoption of Micro OLEDs in other small-sized consumer electronics devices will be delayed.

Judging by the meltup in AAPL stock - as the rest of the tech sector is grinding lower - it seems that the catastrophic launch of the Vision Pro isn't news to anyone.

Tyler Durden Wed, 04/24/2024 - 12:25

Yields Will Trigger "Serious Earthquakes" Across The Economy, Former Floor Trader Says

Submitted by QTR's Fringe Finance

Jack Boroudjian is a legendary former floor trader and now Chairman of SmartXData. Aside from over 30 years of industry experience, Jack is a published author "Secrets of the Trading", Wiley 2007 and has countless articles published in industry periodicals and websites. Jack appears regularly as a paid, guest contributor for CNBC, both domestic and Asia, and has done over 5000 global guest Television appearances. Jack graduated with honors and distinctions from Loyola University of Chicago and is happily married with two adult children.

Jack and I discussed monetary policy, fiscal policy, the move in gold, politics and why the bond market may take the spending keys away from the Biden administration for more than an hour last weekend.

"People have been conditioned to buy dips, and quite frankly, it was almost forced upon us," Jack explains. He points to several factors that shaped this behavior: "The Fed keeping money very loose, the lack of alternative investment avenues, and no real competition for capital—all of these elements contributed to creating a market condition that was, if you think about it, almost obscene."

Boroudjian draws on his experiences from the trading floors to illustrate his point: "It almost feels like what we used to call on the floor of the exchange, the big sucking noise. You'd hear people getting sucked into positions, all chasing the same strategy, and then, suddenly, the market would correct."

He reflects on the impact of such corrections: "I've seen the market correct by 20%, 30% numerous times in my life. But consider this: a 30% correction now equates to 1,500 S&P points. That's more than most people have ever witnessed in their lifetimes."

"Because there are still way too many people convinced that this little 5% pullback is a blip—it's nothing more than a hiccup. I've had at least half a dozen people tell me it's an election year; there's no way they'll let the market break. But the reality is this: if anybody really wants to know what's going on, I would suggest reading Nassim Taleb's book, 'Black Swan.' It talks about it.”

Jack continues: “Nassim was a trader at First Boston—many don't know his story, but I used to handle him on the floor. He was an options trader in the pit and he went broke. This is one of the most brilliant minds on Wall Street, and he went broke as a floor trader. He got off the floor and ended up making billions of dollars. What took him down was a black swan, something that came out of nowhere that he did not expect, and that's exactly what we could see happening now. Could it be something that we've already seen the beginnings of?"

Talking about gold, Jack said: "So fundamentally, something has shifted in the last few months in the gold market. If you've noticed, central bank buying has never been this strong before. All of a sudden, you're starting to see Russia pay for things with gold. People are now paying for Russian oil with gold.”

“Gold is becoming the currency that Bitcoin was hoping to be one day. And it's really starting to turn into something more tangible than fiat currency. It gives you a reflection of how people are starting to feel about paper money. They're starting to realize that maybe there's a problem there. So when central banks start to buy gold, that tells you there is more than just a technical breakout. There's a fundamental shift happening, whether they believe that there is a debasement that is going to occur and continue to occur. And if that's the case, then you will see them stockpile gold, or they see it as a safe haven and see huge problems down the road. And I hope that's not the case,” he continued.

Jack explained that watching the 10 year is going to be the way to gauge the health of the economy.

"This is what I keep telling people: watch the 10-year yield. Keep an eye on the 10-year and the 30, but more importantly, the 10, because that's the part of the curve that the Fed really cannot manipulate. They can do the short end of the curve, but they can't do the long end.”

He continued: “Why do I say that? We used to call them the bond vigilantes in the old days. They were the people that would come in and you'd start to see them hitting that bond market, especially on the long end, because of what you just described. When the bond market starts to understand that the biggest expenditure on the balance sheet now is going to be servicing the debt, bigger than defense, bigger than anything else, you'll start to see bonds get hit, especially on the long end. That's one of the reasons we've started to see the 10-year doing what it's been doing.”

“I think we see a five, maybe even five and a half percent 10-year before we're done here,” Jack said. “And if that's the case, that is going to trigger some serious earthquakes within real estate and other sectors of the economy. So to me, we're on the precipice. You can feel it. But how long will we be here? I don't know. It feels like something can break at any time. But then again, you know what? We could be two years early. And if that's the case, it could stay ridiculously overbought for two years."

"The 10-year bond is the most liquid. It's the one that everybody—the Chinese, the Saudis—is holding. That's the fixed income note of choice for the entire world."

"The one thing that I know about the Treasury market is that less than 5% of the people in finance understand the Treasury market, which is scary when you think about it. And that's the truth, Chris. Think about that. Less than 5%. That's the going rate. And everyone knows stocks. And as you were talking about it, people that have been in the market for the last 10 years have seen the stock market go nothing but up and seen a bond market that's gone nothing but down. But the reality is that this bond market is poised to do something historical in my mind."

You can listen to my full interview with Jack at this link and for more on how treasury auctions work, you can read this piece: Treasury Auctions Explained For People With Short Attention Spans

QTR’s Disclaimer: I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have not been fact checked and are the opinions of their authors and are either published with the author’s permission or under a Creative Commons license. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

Tyler Durden Wed, 04/24/2024 - 12:05

Tennessee Republicans Pass Law Allowing Teachers To Be Armed - Democrats Cry "Fascism"

Tennessee House Republicans on Tuesday passed legislation to allow some trained teachers and school staff to carry firearms despite aggressive opposition from Democrats and gun control advocates calling for the bill to be defeated.  The bill is all but guaranteed to become law within weeks, as Gov. Bill Lee can either sign it or allow it to become law without his signature. Lee has never vetoed a bill.

The law requires criminal and mental health background checks of prospective teachers along with training courses and approval from school administrators.  Democrats railed against the bill, suggesting that training courses are not enough and that it was "unfair" to burden teachers with the job of defending their classrooms from potential assailants.  This argument is strange because teachers are already burdened with the job of protecting students from harm (not to mention their own lives), they just haven't had the means to do that job until now. 

Democrats also stated that armed teachers would "lead to tragedy," with expectations that merely having a gun in or near a school would inevitably cause a shooting with the teacher at fault.  Of course, if a teacher wanted to come to school armed to commit a crime, there's nothing stopping them anyway (except perhaps another armed teacher).

Angry protesters screamed "blood on your hands" when the bill was passed by the House as they attempted to disrupt proceedings.  Protesters were eventually cleared from the building by police.  Representative Justin Jones, a Democrat and activist politician who has been the subject of multiple expulsions from the House, tried to film the event with his cell phone while chanting along with protester and was removed.  Democrats accused Tennessee Republicans of "fascism."

Tennessee Republicans just cut off debate and passed a bill to arm teachers in our schools.

The public chanted “Blood on your hands!” as the Speaker ordered troopers to clear the gallery.

This is what fascism looks like. pic.twitter.com/9mg67oWMxM

— Rep. Justin Jones (@brotherjones_) April 23, 2024

And here we find the disconnect that anti-gun advocates don't grasp:  They seem to believe that the mere presence of a gun will automatically trigger violence, as if it has magical powers to attract and inspire evil.  In reality, the problem is evil people, not "evil" objects.  There's nothing stopping a bad person from acquiring and using a firearm for terrible purposes at any place of their choosing.  Gun free zones only prevent good people from carrying.

Furthermore, why is it that Democrats rabidly defend pornography and sexualized propaganda in schools, but they're aghast at the notion of teachers being trained to defend children from violent attackers?  One might start to think that Democrats want school shootings to continue, but why would that be...?

Keep in mind that the passage of the bill comes one year after the mass shooting at the Christian Covenant School in Nashville.  The shooting was perpetrated by Audrey Hale, a far-left trans activists who was allegedly motivated to make a political statement.  Her manifesto which was confiscated by the FBI still has yet to be released.  Suspicions abound that this is only being done because Hale was part of the LGBT community. 

Not surprisingly, leftist activists and Democrats alike defended Audrey Hale as "just another victim" of the shooting while some even argued that the murders were justified because of Tennessee's attempts to stop transgender surgeries for minors.  

When common sense is labeled "fascism" the likelihood of reconciliation between leftists and conservatives grows dim.  Is it only "democracy" when leftists get their way?  Are Democrats really outraged by the idea of teachers being able to effectively save the lives of students or act as a deterrent so that potential mass shooters never consider going through with an attack?  Or, are they outraged because they secretly fear that the strategy of armed teachers will work? 

Democrats ignore mass shootings in minority neighborhoods all the time because these murders don't serve their purposes.  What they want, what they need, are shootings where the tragedy can be turned into political capital.  Their true intent is to achieve gun confiscation, and if there are no more school shootings because teachers are armed, then they'll no longer have the leverage they desire.     

Tyler Durden Wed, 04/24/2024 - 11:45

Hong Kong Bitcoin And Ether ETFs Officially Approved To Start Trading On April 30

Authored by Zoltan Vardai via CoinTelegraph.com,

The first wave of spot Bitcoin and Ether exchange-traded funds (ETFs) have been officially approved to start trading in Hong Kong on April 30.

Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), announced the official approval of the first batch of spot Bitcoin and Ether ETFs on April 24, according to a press release shared with Cointelegraph.

The first batch of approved Hong Kong-based ETFs also include China Asset Management’s (ChinaAMC) Bitcoin and Ether-based ETFs, which will start trading on April 30.

The ETFs will offer retail and institutional investors a safer and more convenient way to invest in the underlying digital assets under a regulated framework, according to Thomas Zhu, head of digital assets and head of family office business at ChinaAMC. He wrote in the official announcement:

“The in-kind feature also attracts coin holders by offering the ease of converting coins to fully regulated ETFs managed by professional fund managers and regulated custodians. With the growing adoption of ETFs in institutional asset allocation and retail trading in Hong Kong, we expect robust demand for our offerings.”

There are currently over 205 approved ETFs in Hong Kong, according to the financial regulator’s homepage.

List of approved Hong Kong ETFs. Source: SFC

Unlike the cash-creation model of the United States spot Bitcoin ETFs, Hong Kong aims to offer in-kind creation models for ETFs that enable the creation of new ETF shares by using BTC and ETH. 

Hong Kong’s in-kind ETF creation model could be a significant opportunity to considerably increase assets under management (AUM) and trading volume for these products, according to a research note by Bloomberg ETF analyst Rebecca Sin, shared in a March 26 X post by Eric Balchunas:

“Hong Kong is aiming for in-kind creation of the ETF, unlike the US, where the transaction is cash only — in the US, it’s cash in, Bitcoin ETF out, while Hong Kong aims for Bitcoin in, ETF out. This could be an opportunity for the market.”

Hong Kong ETFs could see a potential fee war

The launch of the first ETFs in Hong Kong could lead to issuers racing to offer the lowest fees to customers, according to an April 24 X post by Bloomberg ETF analyst James Seyffart. He wrote:

“A potential fee war could break out in Hong Kong over these Bitcoin and Ethereum ETFs. Harvest coming in hot with a full fee waiver and the lowest fee at 0.3% after waiver.”

The fees for the first ETFs are already lower than previously expected, which is a promising sign, according to Eric Balchunas, senior ETF analyst at Bloomberg, who wrote in an April 24 X post:

“Fees are 30bps, 60bps, and 99bps which is on average lower than we thought, good sign.”

Tyler Durden Wed, 04/24/2024 - 11:25

Chinese Have "Grabbed Gold By The Throat" As Capital Flight Accelerates

“Chinese speculators have really grabbed gold by the throat...”

That is how John Reade, chief market strategist at the World Gold Council, describes the scramble in the communist nation among investors looking to move money anywhere but in the yuan or Chinese assets.

As evidenced by soaring Chinese FX outflows, the recent surges in 'alternate currencies' such as bitcoin and gold strongly suggest where the Chinese are seeking safety.

Of course, worsening geopolitical tensions, unprecedented fiscal profligacy by the Biden administration that shows no signs of slowing, and a Fed that seemed willing to support that spending with rate-cuts that were wholly un-necessary based on the 'data' they are so 'dependent' on (prompting fears of a policy error) are all factors driving precious metals higher, but, as Bloomberg reports, juicing the rally is unrelenting Chinese demand, as retail shoppers, fund investors, futures traders and even the central bank look to bullion as a store of value in uncertain times.

China and India have typically vied over the title of world’s biggest buyer. But that shifted last year as Chinese consumption of jewelry, bars and coins swelled to record levels. China’s gold jewelry demand rose 10% while India’s fell 6%. Chinese bar and coin investments, meanwhile, surged 28%.

And there’s still room for demand to grow, said Philip Klapwijk, managing director of Hong Kong-based consultant Precious Metals Insights Ltd. Amid limited investment options in China, the protracted crisis in its property sector, volatile stock markets and a weakening yuan are all driving money to assets that are perceived to be safer.

“The weight of money available under these circumstances for an asset like gold - and actually for new buyers to come in - is pretty considerable,” he said.

“There isn’t much alternative in China. With exchange controls and capital controls, you can’t just look at other markets to put your money into.”

But, there is another side to the Chinese demand for gold - speculators.

Long gold positions held by futures traders on the Shanghai Futures Exchange (SHFE) climbed to 295,233 contracts, equivalent to 295 tonnes of gold.

That marks a rise of almost 50 per cent since late September before geopolitical tensions flared up in the Middle East.

A record bullish position of 324,857 contracts was hit earlier this month, according to Bloomberg data going back to 2015.

While the scale of gold's rally has surprised many analysts, The FT points out that some point to activity on SHFE and the Shanghai Gold Exchange - where trading volumes on a key contract have doubled in March and April relative to last year - as a big driver of the rally, as Chinese investors aim to diversify from their crisis-ridden property sector and sagging stock market...

Additionally, Bloomberg reports that although China mines more gold than any other country, it still needs to import a lot and the quantities are getting larger.

In the last two years, overseas purchases totaled over 2,800 tons — more than all of the metal that backs exchange-traded funds around the world, or about a third of the stockpiles held by the US Federal Reserve.

Even so, the pace of shipments has accelerated lately. Imports surged in the run-up to China’s Lunar New Year, a peak season for gifts, and over the first three months of the year are 34% higher than they were in 2023.

And finally, as evidence of Chinese demand (or the scale of the capital flight), the premium being paid for the precious metal over western prices is soaring...

Of course, China’s authorities, which can be quite hostile to market speculation and extremely hostile to capital flight, have warned, via their state media mouthpieces, that investors should be cautious in chasing the rally in gold.

But, this is made all the more ironic given the fact that it is the Chinese central bank that is among the most prolific buyer of bullion in recent months...

Do as we say, not as we do... or maybe investors should ask 'what does Beijing know?'

Tyler Durden Wed, 04/24/2024 - 11:05

Overconfidence In NFL Drafts: A Lesson For Investors

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Most NFL general managers (GMs) are optimistic and displaying overconfidence today as they prepare for tomorrow’s NFL draft. The draft is a once-a-year opportunity for GMs to acquire talent.

Like investors, GMs often think they are smarter than their competitors, aka the market. Yet, they frequently have similar mindsets and follow the same narratives that drive their competition.   

As we will share, overconfidence and groupthink among football GMs and investors are behavioral flaws that often harm performance. Having the tools and strategies to mitigate our behavioral traits is extremely valuable and can lead you to better returns.

Overconfidence In The NFL

Four of the first five picks in the draft are expected to be quarterbacks. Not only is the quarterback the most important position on the field but this year’s draft is hyped as having several future greats.

Based on data from Warren Sharp, an NFL analyst, most of the quarterbacks taken in the early rounds will be average. His Fox Sports article entitled The success rate of first round QBs makes Lamar Jackson’s case for him, quantifies just how poor the odds are of drafting the next Super Bowl-winning quarterback. 

There have been 38 quarterbacks drafted in the first round since 2011, the year the NFL changed the collective bargaining agreement.

These 38 first-round quarterbacks have made a total of 1,909 starts. Their record? 1034-1035-7.

He claims that of those 38 quarterbacks, only one, Patrick Mahomes, has won a Super Bowl. Furthermore, of the 28 from that group who are no longer on their initial contracts, the average time they were a starter was a mere 3.4 years.

Despite the proven mediocrity of quarterbacks taken in the first round, we have little doubt that overconfidence will be on full display by the GMs drafting quarterbacks with their top picks after they make their selections.

Groupthink In The NFL

This behavioral trait arises when people seeking conformity think and act similarly. Typically, groups reach a consensus opinion without proper evaluation and with minimal alternative viewpoints.

For instance, it is widely accepted that the four quarterbacks likely to go in the top five, Williams, Daniels, Maye, and McCarthy, will be excellent pros. Most NFL analysts offer differences between the quarterbacks but praise the physical and mental traits they believe will make them NFL starts. Very few analysts have poor ratings on any of those four quarterbacks.

Choosing one of the four quarterbacks is comforting. Simply, GMs have cover if their pick is a dud. Who could have known? Every expert thought he would be a superstar!

Investor Overconfidence And Groupthink

Replace players with investment ideas and GMs with investors. The overconfidence and groupthink mentality impacting GM draft day decisions are similar to those investors always face.

We quantified the odds of GMs picking above-average quarterbacks earlier. Per DFA Funds, the odds of an investor outperforming the market are even more daunting.

We saw from the data above that an investor has about a 75% chance of underperforming the market in any given year, which means you have a 25% chance of beating the market in any given year.

The message to take away from that statistic is to leave your confidence at the door!

Regarding groupthink, most investors, like GMs, find comfort in knowing that many other investors are doing the same thing. Market narratives are a form of groupthink. Narratives help explain market movements and trends. Often, a narrative develops after a trend has started. In other words, rightly or wrongly, the narrative is the rationale.

Today, narratives appear to be quicker to form and longer lasting. Maybe the advent of social media has allowed for their quicker dissemination and growth.

Narratives describe the mindset of a group of investors. When you unknowingly invest based on a narrative, you are likely setting yourself up for failure.

Strategies To Combat Behavioral Traits

Appreciating that GMs have a one in three chance of successfully using a precious top-five draft pick on a quarterback or that only a quarter of investors will beat the market, we best have tools to manage our behavioral traits and improve our odds of success.

Zig

Warren Sharp advises GMs to “zig while others zag.”

To zig is to have a contrarian mindset. For instance, it’s important for your portfolio to have popular stocks leading the market higher. But at the same time, understand that confidence can wane quickly, and a new set of stocks will take the throne soon enough. Don’t overstay your welcome in a narrative.

It wasn’t that long ago that the Magnificent Seven stocks were all the rage. Their returns handily beat almost every stock and index. Holding a meaningful subset of the seven stocks was vital to keep up with the broad market indexes. However, the Magnificent Seven’s period of outperformance has either ended or is on pause. But, the narrative still thrives, and whether it’s already happening or will occur shortly, investing in the aged groupthink will catch many investors offside.

Take Profits 

It’s hard to sell when others are buying. Still, when the narrative-driven stocks fall out of favor, the prior profits and reduced position sizes will bolster returns and lessen the risk of underperforming the market.

Appreciating what the market, and not popular narratives, tell you is equally vital. For instance, have you noticed that utilities and energy are the best-performing sectors lately? Those solely holding the Magnificent Seven and neglecting other sectors are falling behind.

The SimpleVisor table below shows the relative performance of the Magnificent Seven stocks and XLU, the utility ETF, versus the S&P 500 over various time frames. Other than NVDA, most of the seven have been underperforming the market as of late. Also, the once poorly performing utility sector has been beating the market for the last 45 days. Selling the Magnificent Seven 45 days ago to buy utilities would go against groupthink, but it was a smart call.

Appreciate Your Options

The GMs with the top five picks have a precious option. Instead of picking a quarterback with limited odds of success, they can trade the pick to another team. In exchange, they might receive multiple high-level draft picks, boosting the odds of success.

Other positions in the NFL draft have much better success rates than quarterbacks. If a GM can set aside their confidence in their ability to pick the right quarterback, they can increase the odds that they could easily land at least two very good players and possibly a pro bowler. Maybe they can even use one of the picks to get a quarterback in the later rounds. Let’s not forget Brock Purdy, the San Francisco quarterback who led the 49ers to the Superbowl, was Mr. Irrelevant, the last person taken in the draft.

Investors have options, too. Many stocks, sectors, and factors will likely outperform the market but do not fit the narrative du jour. While buying what others aren’t may be uncomfortable, it may be more profitable.

The other lesson is to diversify. Putting most of your eggs in one basket can significantly impact your relative performance. You will underperform if you are proven wrong, as is most common.

Let Winners Run

One of the most popular Wall Street sayings is, “Cut your losses short and let your winners run.”

If our chances of beating the market are one in four, doesn’t it make sense to trade your portfolio actively? Many investors do the opposite. Their confidence and the attraction of groupthink keep them in underperforming stocks. At the same time, alternative stocks that are less followed may be the best bets.

It can be appropriate and profitable at times to follow the crowd. However, at all costs, don’t ignore alternative views.

 

Summary

We risk underperforming the market by falling victim to our natural behavioral traits. Therefore, we owe it to ourselves to entertain and understand alternative views. As odd as it may seem these days, we need to watch FOX News and read the New York Times. We must challenge ourselves to understand better things that may not be comfortable.

Seek out and study the views of others with whom you disagree. By better understanding opposing opinions, you will strengthen your existing views or better recognize flaws in your current logic. Either way, an investment thesis is better for it.

Most importantly, remember that you are only human. The Patrick Mahomes of the investment world are few and far between. At times, overconfidence is a good trait, but it can also be a critical flaw.

Tyler Durden Wed, 04/24/2024 - 10:45

WTI Jumps After Bigger-Than-Expected Crude Inventory Build, Gasoline Demand (Reportedly) Slumps

Oil prices are drifting lower this morning, despite API reporting a surprise crude inventory draw last night, as hopes that geopolitical tensions are easing (hope is not a strategy) combined with a reduced expectation of economy-juicing rate-cuts are weighing on crude prices.

Supporting the upside, the US Senate, meanwhile, passed tougher measures against Iran in response to its attack on Israel earlier this month, with President Joe Biden saying he’ll sign the legislation into law. But the market is clearly calling Biden's bluff on this threat as he faces soaring pump prices domestically which will do nothing to help his "but I fixed inflation" narrative into the election...

Source: Bloomberg

However, for now, all eyes are on the official inventory and supply data for any signs of overall tightness, and refined products demand as the summer driving season is fast approaching.

API

• Crude -3.23mm (+500k exp)

• Cushing -898k

• Gasoline -595k (-1.5mm exp)

• Distillates +724k (-1.0mm exp)

DOE

• Crude -6.4mm (+500k exp)

• Cushing -659k

• Gasoline -634k (-1.5mm exp)

• Distillates +1.6mm (-1.0mm exp)

Confirming API's report, the official data showed crude inventories plunging last week by the most since January. On the product side, it was mixed with gasoline drawing down by distillates building...

Source: Bloomberg

There was a 909k b/d drop in the adjustment factor versus last week, the biggest decline since February, coinciding with the big increase in crude exports. At 257k b/d this week’s balancing measure was pretty small by its own highly volatile standards.

Source: Bloomberg

The Biden admin added 793k barrels to the SPR last week - the largest addition since January... and probably the last!

Source: Bloomberg

Implied gasoline demand fell yet again, nearly slipping back below 2022 seasonal levels for the first time since early March.

The figure typically sees decent growth at this point in the year, yet a post-Spring Break slump appears to have become the norm since 2020.

In comparison to pre-pandemic demand, the figure is at its lowest since 2014.

Source: Bloomberg

US crude production was flat at 13.1mm b/d (near record highs) and we note a very modest rise in rig count trends starting...

Source: Bloomberg

WTI was trading around $83.00 ahead of the API data and jumped back into the green for the day after the crude draw...

The conflict in the Middle East has "undoubtedly exacerbated tensions in an already volatile region," Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.

"While the recent attacks have been downplayed, the potential for further escalation cannot be entirely dismissed."

However, "there's a lesson to be gleaned from this situation, particularly in how swiftly demand responded to higher oil and gasoline prices, as evidenced by the increase in U.S. oil stockpiles," he said.

Finally, timespreads are signaling tighter conditions, with the gap between Brent’s two nearest contracts widening to $1.05 a barrel in backwardation, a bullish pattern in which the nearer contract trades at a premium to the next in sequence. That compares with 69 cents a week ago.

Tyler Durden Wed, 04/24/2024 - 10:38