Goldman Ignores Dismal Payrolls Print, Expects Fed To "Double Pace Of Tapering" And Sees First Rate Hike In June

With most analysts and strategists on Wall Street puzzled by the bizarre divergence between the Establishment and Household Surveys in today's jobs report, as the former suggested employment rose just 0.1% in November, while the latter suggests employment surged by 0.7%, a divergence that was summarized best by Danny Dayan, CIO at Dwd Partners, who said this was “one of the weirdest reports I have ever seen", Goldman has decided to make life simple for itself and in his post-mortem, Goldman's chief economist Jan Hatzius steamrolls the negative data while praising the positive, to wit: "Nonfarm payrolls rose 210k in November, 340k below consensus. The household survey was significantly stronger however, with 1.1mn job gains—or 1.9mn after adjusting to match the nonfarm payroll methodology. The unemployment rate declined 0.4pp to 4.2% despite rebounding labor force participation."

Hatzius then echoes our observation by pointing out that the seasonal adjustment factor was likely skewed, noting that "the payroll survey response rate was the lowest for a November in 13 years," while the payroll seasonal factors were also more restrictive than Goldman expected (by around 100k). As such Goldman places "more weight than usual on the household survey this month." Here is why:

The household survey was extremely strong, as employment increased by 1.1mn, the employment to population ratio increased by 0.4pp to 59.2%, the labor force participation rate increased by 0.2pp to 61.8%, and the unemployment rate fell by 0.4pp to 4.2%. Adjusted measures were even stronger, as the employment measure adjusted to reflect payrolls methodology increased by 1.9mn, due to declines in the number of workers on unpaid absence (-266k), that had a job but weren’t at work (-248k), and that are self-employed (-186k). The U6 underemployment rate also improved (-0.5pp to 7.8%), reflecting the increase in employment and a drop in the number of part-time workers for economic reasons (-137k). The number of workers reporting being on temporary layoff declined a bit (-141k to 801k) while the number of permanent job losers also declined (-205k to 1,921k). As a result, the share of unemployed workers that reported being on temporary layoff decreased by 2.7pp to 11.8% and is now below its pre-pandemic level (13.7% in 2019).

Goldman then also notes that its composition-corrected wage tracker stands at +4.0% in Q3, signaling a pace of wage growth that is notably higher than last cycle but still consistent with the Fed’s goal. Meanwhile, composition-adjusted wage growth had been running at a 5-6% annualized pace of wage growth in Q2 and Q3, that, if sustained, would likely be inconsistent with the Fed’s inflation goal although "the sequential slowdown in AHE growth in October and November suggests that wage growth will cool now that unemployment benefits have expired."

And so, even though hourly earnings rose at the slowest monthly pace since March, Hatzius is confident that this time his Fed forecast will be correct and says that he "continues to expect the FOMC to double the pace of tapering at the December meeting and then to deliver the first rate hike in June 2022."

Of course, when the Omicron strain leads to widespread shutdowns, an economic lockdown and massive layoffs putting the Fed's tightening cycle on indefinite hiatus, expect Goldman to promptly revise its uberhawkish forecast because nobody on Wall Street can possibly see things developing before they actually take place.

Tyler Durden Fri, 12/03/2021 - 12:30

OK, Your Euro$ Curve Has Inverted, Now What?

Authored by Jeffrey Snider via Alhambra Investments,

So, the eurodollar curve has inverted. Bad news. Now what?

While this is a major milestone in the monetary system’s decidedly anti-inflation/growth journey, it is hardly the end point of it. On the contrary, though it takes a lot of negative, deflationary potential to distort the curve in this way, we need to see if the market sticks with that potential rather than just some flashing rush of otherwise fleeting concern (for the record, this hasn’t happened; once upside-down, it has in the past stayed upside-down).

Day 2 of inversion, and, yes, the curve is a tiny bit more overturned than yesterday. Even though the whole curve itself moved up somewhat, falling prices nearly across-the-board, therefore a higher nominal curve level, we are instead interested in the shape of it independent of how it might move up or down.

For the time being, our focus for now remains on the twisting. And we shouldn’t expect much more out of it. At least, for now.

Therefore, inversion Day One did indeed stick around for Day Two. Not good.

What might we expect over the coming weeks and months?

Using both the 2006-07 example as well as the more recent, and darn near carbon copy 2018 curve, it may be that this small amount of upside-down is all we get for some time. Though it then may seem insignificant, it is actually that amount of time rather than depth of inversion which is important as a leading indication.

Going back to three years ago, from the initial inversion on June 13, 2018, the nominal eurodollar futures curve moved a little bit up and down throughout the summer and early autumn. It was practically unchanged until October, and then things started to heat up.

By early November 2018 (shown above), even then the same greens/blues inversion was still no more than 4 bps. Seemingly a pittance, therefore easy to just ignore how it hadn’t completely blown up even after four and a half months.

However, the curve also developed a miniscule inversion right in the reds. And though this one was just half a bip, that seemingly trivial amount of upside-down along with those several months stuck in distortion greens and blues, those together were a powerful and absolutely clear sign the situation was substantially deteriorating.

Remember, Jay and the media were more confident all the time (and, in September, data like payrolls and the unemployment appeared to make that confidence seem inspired).

Within days from the start of November, the landmine blew the whole thing apart which removed all doubts. It was no longer just greens and blues, reds and even whites were in total disarray. The unambiguous implication of wreckage and potential for more and worse was finally clear and out in the open (not just eurodollar futures, it was everywhere from oil contango to inverted parts of the yield curve!)

Even the Fed by early January could no longer deny and pretend the situation was as it had told the public to expect. The embarrassing early January flip flop greeted a “Fed pause” that then mutated into outright rate cuts by July 2019.

Epic Flip Flop; From Surefire Inflation to ‘Muted’ in Three Weeks

All as the eurodollar futures curve had thoroughly priced/predicted throughout the last half of 2018 right on into 2019. Even when it didn’t seem like much at all, just a few basis points, the fact those inverted few hung around and hung around, distorted the curve week after week, month after month, it was actually a very ominous warning of what was to come.

Given this example, this is what we’ll be watching – along with all the usual suspects including the flatter and flatter Treasury curve as well as what might be another crack at zero by the JGB 10s. The dollar’s rise. There are others, as well.

These things are progressions, and rather lengthy ones. In today’s day-to-day focused world, it’s easy to lose sight of what this all really means; or just get bored with it since it might not seem like anything has changed. You see an inversion and it is shocking at first, if only because it really, really shouldn’t be there. But then if or when it doesn’t really seem to do much thereafter, maybe you relax and lose focus.

Then, “suddenly”, bam, the landmine and the whole landscape changes; or, more accurately, the landscape doesn’t really change, it just becomes so obvious and obviously bad that there’s no alternative but to pay close attention.

In other words, at this stage it’s not the depth of inversion, it’s that it is and remains there at all for any further length of time. Nothing so offends the natural financial order as this; ugly and foreboding even at a outwardly minimal state.

Put it this way: if it takes quite a lot of bad vibes just to get the curve, any curve, inverted just the bare minimum (like yesterday) in the first place, what level of pessimism, skepticism, and downright risk aversion must there be hidden from within the shadows to keep it there for any length of time at any depth?

That’s what we are contemplating already today.

Tyler Durden Fri, 12/03/2021 - 12:25

China Creates New State-Owned Mining Giant To Tighten Control Of Rare Earth Supplies

Now that aggressive foreign policy toward China has attracted bipartisan consensus, evidenced by the fact that President Biden has opted to keep certain tariffs imposed by the Trump Administration in place, Beijing is looking for new ways to squeeze Washington. For years now, we have been warning about the risk of China cutting off supplies of 17 rare earth metals critical for the production of tech gadgets.

Earlier this year, we reported that Beijing was keeping a rare-earth export ban in its "back pocket". Now, it appears the CCP is moving to tighten state control over rare earth production so that they might more easily control who gets the metals.

Whereas rare earth metals were previously mined by six major Chinese firms, the CCP is merging assets from several state-owned firms to create China Rare Earth Group. The new mining giant will be based in resource-rich Jiangxi Province; it's expected to allow Beijing more leverage over the supply, and by extension, the price, of these incredibly valuable commodities that are essential for the production of chips and other components used in high-tech products from computers to weapons systems.

China is believed to control up to 90% of global supplies of rare earth metals. Only a small number of rare earth mining operations exist outside China. As for where the rest are mined, the chart below offers some insight.

Some say China's control over the global market for rare earths is diminishing, but the truth is this is only slightly true.

You will find more infographics at Statista

Washington has long worried that Beijing might use its control over rare earth supplies toward "strategic ends", and WSJ reports that the this latest push to consolidate the industry comes at a time of "increased sensitivity" toward the West. Beijing has also cited environmental concerns, since opening new mines can irradiate entire neighborhoods.

The US has taken some steps to encourage more rare earth production in Australia, a staunch ally that has also recently curried Beijing's wrath. Back in February, the US Defense Department signed a technology investment agreement with Australia’s Lynas Rare Earths which the Pentagon called "the largest rare earth element mining and processing company outside of China." According to the terms of the deal, Lynas will establish a light rare-earth processing facility in Texas. President Biden has also issued an executive order naming rare-earth minerals as one of four key areas in need of more robust policy options to reduce supply-chain risks.

A visit in 2019 to a rare earth refinery by President Xi was seen by many as a sign that rare earth miners had finally "arrived", to use vague economic parlance.

Beijing has been coy about its plans. 'China has no intention to use rare earths as a countermeasure against any country,' the state-run Global Times wrote earlier this year, However, it added that this remains an option when "foreign companies hurt China’s interests."

Tyler Durden Fri, 12/03/2021 - 12:16

S&P 500 Futures Had a Bad Week, Worse Lies Ahead

By Mark Cranfield, Bloomberg Markets Live commentator and analyst

S&P 500 futures have a distinctly bearish tone after a week of whiplash trading, which began with the post-Thanksgiving Day meltdown.

Though it hasn’t been a one-way street lower, intraday bounces for the contract have been fading at lower peaks.

That is a clear enough signal for short-term traders to see if they are positioned for a declining asset.

And even though non-farm payrolls did miss forecasts, the Fed won’t be derailed from its path to tighter policy.

Moreover, the blackout period ahead of the Dec. 15 FOMC decision begins this weekend, which means there won’t be any walking back of the hawkish noises heard this week.

The decline from November’s peak for S&P futures is starting to look like the turning point in a long march lower, which will set the pace for a global bear market next year.

 

Tyler Durden Fri, 12/03/2021 - 12:00

Who's Hiring And Who's Firing In November: More Head-Scratchers

As discussed extensively earlier, there were some pretty striking disconnects in today's jobs report: while the headline payrolls number was a huge miss and printed the lowest monthly gain of 2021, the unemployment rate tumbled, the labor participation rate jumped and the number of employed workers actually surged by 1.1 million according to Household survey. In short, the establishment survey suggested employment rose just 0.1% in November, while the household survey suggests employment surged by 0.7%. As Danny Dayan, chief investment officer at Dwd Partners, put it best, this was “one of the weirdest reports I have ever seen."

TD Ameritrade chief market strategist JJ Kinahan added some more details to the confusion: “Obviously, the top-line numbers in the November jobs report disappoint, which is a strange contradiction to the unemployment rate having come down so significantly."

Then there was Dennis DeBusschere of 22V Research who was laconic: “WOW ... OK. This number was all over the place. Significant miss on the headline number. But that’s not the story. The u-rate declined significantly with a slight increase in participation. That is because the household employment number was +1.1 million, which is a huge number. Now, household is a volatile number, but it’s hard not to assume this will ultimately be viewed as a somewhat positive report for the labor market -- unless we are totally missing something on the household reading. So we would fade the move lower in short rates.”

Of course, as we also showed earlier, a big reason for the confusion was the gaping seasonal adjustment factor used by the BLS to "normalize" the November number. Had it used a more in-line adjustment, payrolls would have increased by some 300K more, or above 500K, and in line with expectations.

In other words, one month from today we expect the BLS to revise today's 210K print some 200-300K higher.

And while we wait, here is our traditional breakdown of the components of the establishment survey, looking at which jobs increased and which dropped, with the knowledge that all of these will change dramatically next month.

Here too, some peculiarities emerge. As Jefferies economist Thomas Simons notes, "retail trade payrolls fell 20K (vs +38K in October), while leisure & hospitality payrolls rose only 23K after rising 170K in October and averaging well over 100K for the last few months. We had thought there would be a pickup in both of these, but November was curiously soft on this front. It is not clear if this is a seasonal issue, or some sort of shift in terms of the timing of holiday help, but overall the payroll data does not match up with the alternative indicators of labor market activity that we track.”

Meanwhile, TDA's Kinahan further notes that "this report contains a few head-scratchers: for example, leisure and hospitality are up only slightly, and retail being down is odd for this time of year. But we did see strong numbers in important areas -- warehousing, construction, and manufacturing, to name a few."

With that in mind, here is the full breakdown:

• Professional and business services added 90,000 jobs in November. Job gains continued in administrative and waste services (+42,000), although employment in its temporary help services component changed little (+6,000). Job growth also continued in management and technical consulting services (+12,000) and in computer system design and related services (+10,000).
• Employment in transportation and warehousing increased by 50,000 in November and is 210,000 above its February 2020 level. In November, job gains occurred in couriers and messengers (+27,000) and in warehousing and storage (+9,000).
• Construction employment rose by 31,000 in November, following gains of a similar magnitude in the prior 2 months. In November, employment continued to trend up in specialty trade contractors (+13,000), construction of buildings (+10,000), and heavy and civil engineering construction (+8,000).
• Manufacturing added 31,000 jobs in November. Job gains occurred in miscellaneous durable goods manufacturing (+10,000) and fabricated metal products (+8,000), while motor vehicles and parts lost jobs (-10,000). Employment in machinery declined by 6,000, largely reflecting a strike.
• Employment in financial activities continued to trend up in November (+13,000) and is 30,000 above its February 2020 level. Job growth occurred in securities, commodity contracts, and investments in November (+9,000).
• Curiously, employment in retail trade declined by 20,000 in November, with job losses in general merchandise stores (-20,000); clothing and clothing accessories stores (-18,000); and sporting goods, hobby, book, and music stores (-9,000). These losses were partially offset by job gains in food and beverage stores (+9,000) and in building material and garden supply stores (+7,000).
• Employment in leisure and hospitality changed little in November (+23,000), following  large gains earlier in the year. Leisure and hospitality has added 2.4 million jobs thus far in 2021, but employment in the industry is down by 1.3 million, or 7.9 percent, since February 2020.
• Health care employment was about unchanged in November (+2,000). Within the industry, employment in ambulatory health care services continued to trend up (+17,000), while nursing and residential care facilities lost 11,000 jobs.

And visually:

While the overall picture was mixed, even the one job sector which has kept on giving since Lehman, namely employees in food services and drinking places (or waiters and bartenders) added just 11K jobs in November.

Well, at least they are still hiring.

Which brings us to a curious point: as Bloomberg economist Carl Ricadonna observes, "the jobs deficit relative to February 2020, which currently stands at 3.9 million jobs, is entirely comprised of workers who lack a college degree. College-educated workers are now about 2% above their February 2020 employment levels and continue to see the strongest job growth, with high-school-educated workers still about 5% below pre-pandemic levels. Employment among workers with less than a high-school diploma actually declined over the last three months."

The good news: all those who spent over $100,000 to major in feminist studies, can take comfort that they will always have a job waiting for them in America's food service industry.

Tyler Durden Fri, 12/03/2021 - 11:40

Scientists Find "Trigger" For Rare Blood Clots Created By AstraZeneca Jab

As vaccine-makers scramble to retool their products, a team of researchers working between the US and UK believes it has found the "trigger" that causes extremely rare blood clots in some patients.

The side effects, first exposed over the spring and summer, have hurt sales of the UK-developed jab, which was a collaboration between AstraZeneca and Oxford University.

According to scientists, who published their findings in the journal Advances, a protein in the blood is attracted to certain ingredients in the vaccine. This phenomenon can kick off a chain reaction involving the immune system that sometimes culminates with the production of dangerous blood clots.

Despite this, AZ has sought to play down fears about the clots, since regulators in the UK, Australia and Europe (though notably not the US) have approved the jab, insisting that risks of these "rare" blood clots was far outweighed by the protections it offered the vaccinated. However, the jab has often come with restrictions, like in the UK, where the government has asked those under 40 to take a different vaccine.

Now, the world is learning once again that breakthrough infections are much more common than they were initially told. What's more, scientists are still trying to determine whether omicron can surpass protections offered by the jabs and natural infection from earlier variants.

Most insist that infections with this new variant are mostly mild, especially since several vaccinated individuals have reportedly been infected and suffered only minor symptoms.

As for the AstraZeneca jab's blood clots, the BBC has created a diagram purporting to illustrate how the process works:

In its report, the BBC added that there were two initial clues for the researchers investigating the rare blood clots:

• The greater risk of clots was seen only with some of the vaccine technologies
• People with clots had unusual antibodies that were attacking a protein in their blood called platelet factor four

So far, all vaccines used in the UK work by delivering a kernel of genetic code from SARS-CoV-2 into the body to train the immune system. Some jabs package that code up inside spheres of fat, while the AstraZeneca jab uses an adenovirus (specifically a common cold virus from chimpanzees) as its microscopic postman.

Ideally, this breakthrough should help AZ tweak its vaccine to eliminate this side effect - assuming that's even possible. But it's also reminder that vaccine-makers are still working to refine their product to eliminate these rare but dangerous side effects.

Tyler Durden Fri, 12/03/2021 - 11:23

Maxwell Trial Day Four: The Five Stages Of Grooming, Contractor Remembers 'Underage Girls'

imagine doing a court illustration of ghislaine maxwell while she stares directly at you and draws you right back pic.twitter.com/zGQBSkSbzl

— ¬(abcdentminded) (@abcdentminded) December 2, 2021

Authored by Dave Paone via The Epoch Times (emphasis ours),

The morning began with testimony from Paul Kane, the director of finance at Professional Children’s School in New York City.

Prosecuting attorney Andrew Rohrbach questioned Kane about student files. Each student at the school has a file that includes financial aid, transcripts, college applications, and recommendations.

The prosecution’s witness from Dec. 2, an alleged victim referred to only as “Jane,” attended this school.

This was quickly objected to by defense attorney, Laura Menninger, as hearsay. It was overruled.

Menninger also argued to the court that there is third-party handwriting on the application and its accuracy is not verified.

The evidence was offered again, and objected to again, leading to a sidebar.

Ultimately, it was admitted under seal.

Written on the application, under “financial responsibility,” was “Mr. Jeffery Epstein.”

Under cross-examination by Menninger, Kane testified he was not sure if Epstein did indeed pay for the tuition.

The prosecution called its first expert witness, Dr. Lisa Rocchio, a clinical and forensic psychologist.

She rattled off her list of qualifications, including treatment and evaluation of children who’ve suffered sexual abuse.

Rocchio disclosed that she’s being paid for her services by the prosecution.

She spoke in great detail about “grooming,” which is a series of deceptive practices to engage children in sexual activities.

Rocchio explained the five stages of grooming.

The first is the selection and identification of a victim, usually from a vulnerable population.

The second is access and isolation, usually a location where children are regularly present.

Lies and deception to gain trust are third. The perpetrator will meet the needs of the potential victim, making him or her “feel unique, or special in some way,” accompanied by money and access to things they don’t have.

Fourthly, the perpetrator will desensitize the victim to touch, “slowly and gradually moving the line” of what’s appropriate. Hugs may escalate.

The perpetrator will also normalize sex, possibly with dirty jokes at first, then risque movies that evolve into pornography, and then actual sexual abuse.

And lastly, by maintaining a relationship through control over the victim, the perpetrator has less of a chance of being exposed.

Rocchio added victims are often from families with financial difficulties, or single parents.

She spoke of “delayed disclosure,” where the younger the victim, the less likely he, or she, will disclose the abuse, but will eventually do so in adulthood.

The five stages of grooming, as well as Rochhio’s additional testimony, corroborated Jane’s testimony from Dec. 2, mirroring it on just about every aspect.

During Rocchio’s direct testimony, there were several objections from defense attorney Jeffery Pagliuca.

Judge Alison Nathan referred to two of them as “conflicting objections.”

Under cross-examination, Pagliuca attempted to discredit the five stages of grooming, starting by saying there are scientific disagreements about the subject, specifically her version of it.

He had her admit she hasn’t given any of the witnesses a physiological evaluation and she’s being paid up to $45,000 for her services to the prosecution.

Pagliuca moved on to how delays in disclosure are sometimes reliant on unreliable memory.

There were three objections to this line of questioning from prosecuting attorney Lara Pomerantz. All were sustained.

Pagliuca asked Rocchio about “confabulation,” where the brain connects the dots of events, and blanks that are filled in aren’t accurate.

This was followed by another objection that was sustained. There were two more objections to the next two questions. Both sustained.

Pagliuca objected to an answer to a question he asked.

He went on to argue that behavior that fits into Rocchio’s definition of grooming could be perfectly normal. Rocchio replied that only if it’s not intended to lead to sexual abuse.

Pagliuca ended with a study about grooming presented to nearly 400 students. The study had five vignettes that included grooming and one that didn’t. Many of the students could not identify which were the grooming behaviors and which one was not.

The prosecution’s final witness of the day was Juan P. Alessi, who first started working for Epstein as a subcontractor at his Palm Beach, Florida, residence in 1990.

In 1991, he was hired full-time. He testified his job responsibilities “changed gradually over the years.” Ultimately, he oversaw much of the Palm Beach staff, including cleaners, maintenance, and gardening.

His wife was also employed by Epstein.

Alessi testified that he reported directly to the defendant, Ghislaine Maxwell.

Just as the prosecution did with Epstein’s pilot, Lawrence P. Visoski, Jr., who testified earlier this week, attorney Maurene Comey spent a lot of time having Alessi describe each room in the house, even going over diagrams of the interior and exterior.

Alessi testified there were “many, many, many females” he saw “hundreds of times” by the pool, and 75-80 percent of them were topless. They interacted with Maxwell.

After several years on the job, said Alessi, he and his staff were required to perform “extensive preparation,” of the house, sometimes with only a few hours’ notice.

Alessi said he was given “a tremendous amount of instruction” from Maxwell, which was mostly verbal. However, in 2001 or 2002, he received a printed booklet, entitled “Household Manual.”

He stated it included 30, or more, pages of checklists for proper presentation of the house.

Alessi reviewed the booklet while on the witness stand. Since the edition of the manual was dated after he had left the job, he went through it, page by page, stating which pages, or portion of pages, he recognized.

He recognized a majority of the booklet.

During cross-examination, Pagliuca argued since Alessi had left Epstein’s employment after this booklet was printed, this edition was not the one submitted as evidence.

Alessi discarded his copy after his employment ended in 2002.

Under redirect, Comey went over specific entries in the manual.

They included, “Do not discuss personal problems with guests,” “Remember that you see nothing, hear nothing, say nothing except to answer a question directed to you,” and “NEVER [in both bold and uppercase] discuss Mr. Epstein’s, or Ms. Maxwell’s, activities or whereabouts. Respect their privacy.”

Alessi testified that he saw what appeared to be two underage girls at the Palm Beach residence. One he remembered as Jane, and the other as Virginia Roberts.

He estimated both their ages as 14 or 15.

He met Jane in 1994 and saw her at the house with her mother at least three times, but then without her mother four or five times.

Since Alessi also worked as a driver, he had driven Epstein, Maxwell, Jane, and Maxwell’s Yorkie, Max, to the airport and witnessed all of them boarding the plane.

He related the same story with Roberts.

Comey presented Alessi with one of the several address books—referred to as “directories”—which Epstein and Maxwell used regularly.

Alessi reviewed it Wednesday night.

He believed it was from after his employment, because his name wasn’t in it, and it was thinner, and with a smaller font than the ones he remembered.

Alessi identified Jane’s real name and contact information in it.

Pagliuca asked Alessi to take note of the boxes, circles, and arrows that were handwritten in the directory, as well as the Post-It notes protruding from the pages.

Alessi confirmed he did not know who wrote the notations or added the Post-Its.

Pagliuca hypothesized that someone could have photocopied an original directory, bound the pages, possibly removing some, and that Alessi has no personal knowledge of how it was produced and kept for the past 19 years.

Comey had Alessi review a phone message book, which kept a carbon copy of each handwritten message. Alessi was often the one who answered the phone.

Alessi stated which messages were in his handwriting, which were in his wife’s, and which were unknown to him.

Once again, the dates of some messages were after Alessi’s employment.

Pagliuca argued no one knew where the completed books went after they were placed in a closet and objected to the evidence being admitted because the handwritings weren’t authenticated.

The evidence was admitted.

Since it was not ready for viewing, the prosecution will circle back to it when it is.

Part of Alessi’s job was to clean the room after Epstein had a massage. Alessi testified earlier that Epstein often had three massages a day, by professional masseuses.

Once, while cleaning after a massage, he found a sex toy, which he rinsed off—while wearing gloves—and placed in Maxwell’s wicker basket.

The basket included pornographic tapes and a black, leather “costume.”

As Visoski testified, the house in Palm Beach was decorated with many photos of topless women, which appeared to be taken poolside at the house. He believes they were shot by Maxwell.

In 2004, two years after his employment for Epstein ended, Alessi was having both financial and marital problems.

He returned to the Palm Beach estate and snuck in through a sliding door.

“I made the biggest mistake of my life,” he said. Alessi stole $6,300 in $100 bills.

According to Alessi, Epstein rang him up and said, “We need to talk.”

Alessi met with Epstein, who had a photo of the crime in progress. They came to an agreement: Epstein considered the money a loan, which Alessi paid back.

While Alessi spoke to the police, there were no charges filed.

Tyler Durden Fri, 12/03/2021 - 11:06

Stocks Extend Losses, Break Below Key Technical Support

Update (1100ET): US equity market dip-buyers are notably absent and Nasdaq And Small Caps are now down 2% on the day (after being up 0.5% before the 'good news' hit)...

This has pushed the majors below key technical support once again. S&P < 50DMA, Nasdaq <100DMA, and Dow <200DMA (Small Caps are already well below the 200DMA)...

As SpotGamma notes, things start to get a little more exciting if the S&P drops to 4500 as Gamma flips...

And we are getting close...

*  *  *

Plunging unemployment and record high ISM Services... what is their to complain about?

Sadly - for equity investors - a lot! This 'good news' is very definitely 'bad news' for the only thing that levitates stocks - Fed liquidity - as it offers yet more cover for an accelerate taper and earlier and more aggressive rate-hike trajectory.

STIRs are pricing in an increasingly hawkish Fed...

And stocks don't like that...

It appears - just like in Dec 2018 - stocks are in search of the new strike price for Powell's Put (stocks fell 20% before Powell flip-flopped and sent the yield curve soaring again)...

Meanwhile, the yield curve has ripped back to flatter on the day...

As a Fed policy mistake is also priced in.

Tyler Durden Fri, 12/03/2021 - 10:55

Berkshire's Munger Warns Market Is "Even Crazier" Now Than During The DotCom Boom

Charlie Munger is still alive and still dropping market truth bombs whenever he speaks.

At the Sohn conference in Sydney on Friday, The Australian Financial Review reports that the 97-year-old curmudgeon exclaimed that markets are wildly overvalued in places and that the current environment is “even crazier” than the dotcom boom of the late 1990s that subsequently led to a bust. 

“I consider this era an even crazier era than the dotcom era,” he warned.

He is not wrong...

Investor demand for U.S. technology stocks amid the pandemic has taken the Nasdaq 100 to a relative record against the Dow Jones Industrial Average. The ratio between the two gauges has exceeded a peak set during the dot-com bubble.

On an absolute basis, US stocks have never been more expensive relative to sales...

...and never been more expensive relative to the nation's GDP...

Of course, it would not be Charlie Munger without his now ubiquitous rage against cryptocurrencies wishing they didn’t exist, and praised China for taking action to ban their use.

“I wish they’d never been invented,” he said.

“And again I admire the Chinese, I think they made the correct decision, which was to simply ban them. In my country, English-speaking civilization has made the wrong decision, I just can’t stand participating in these insane booms, one way or another.”

As Bloomberg reports, while the S&P has more than doubled since the pandemic lows of March last year, Bitcoin is up over 1000%. But, investors have poured almost $900 billion into equity funds in 2021 - exceeding the combined total from the past 19 years - according to data from Bank of America Corp. and EPFR Global.

Finally, it appears Munger missed the outcome of COP26 as he explained hos bullish he is on renewable energy:

“I love the fact that we’re rapidly reducing the burning of coal and the burning of gasoline and diesel,” he said.

“I think that’s a smart thing for the world to be doing and it would be smart even if there were no global warming.”

We will forgive the almost-centenarian for missing the facts on this one.

Tyler Durden Fri, 12/03/2021 - 10:44

It's The Taper, Stupid!

Submitted by QTR's Fringe Finance

It is astounding to me how much market commentary I have seen over the last 48 hours placing blame for the market “volatility” (read: 2% off all time highs) on the Omicron variant.

The extent of our recent “volatility”.

While there are definitely still some uncertainties about the new variant, early indications make it look as though it is not going to be meaningfully deadlier than other variants and that, one way or the other, we will be able to deal with Omicron and see our way through it - just as we did with the Delta variant. That is, unless the government implements more of what one trader calls a “criminal” response to Covid and issues more lockdowns and mandates.

While Omicron uncertainty has likely contributed slightly to market volatility, I don’t think it is the driving force behind it. Rather, I believe that current volatility is a result of Jerome Powell’s surprising, and so far unrelenting, hawkish stance that a taper and rate hikes look to be necessary.

In fact, several Fed governors have commented over the last 48 hours about potentially accelerating both rate hikes and tapering. This language, as I noted days ago, is an admission that the Fed has lost control of inflation.

In fact, it looks as though inflation has gotten so bad that the Fed is going to have to try and attempt to “stick the landing” of presenting hurried tapering and rate hike plans to the market. Of course, the Fed won’t really be able to stick the landing on either because politicians on the left and castrated on-air finance personalities will cry foul as soon as the market has a 10% pullback as a result of higher rates (just as they did on the Covid crash).

But for now, the company line is that we are going ahead with rate hikes and looking to accelerate the taper. This - not the Omicron variant - is what is moving markets.

I said just days ago that Powell doesn’t even need to say anything for the market to continue to stay volatile at this point because his standing position on the matter is very hawkish. Yet, instead of saying nothing, he went as far as to reaffirm his hawkish stance on Wednesday of this week. From my piece earlier this week:

If the Fed does look to accelerate the taper and toss around the idea of rate hikes in order to try and rope inflation in, as indicated, I think we can expect further downside in equity markets in December, as I predicted about a week ago. In fact, Powell doesn’t even have to re-acknowledge what he said yesterday, he simply has to say nothing until the Fed’s next official nod to the markets.

As I said during my interview yesterday with Jack Boroudjian, tapers cause markets to crash: it is that simple. Just take a look at what happened in December 2018. This time is not going to be different. If the Fed goes ahead and decides to taper, you can expect risk assets to get smacked.

Small caps and technology have gotten the “worst of it” during this volatility and I continue to believe that that will be the trend.

The Russell 2000 and NASDAQ are just so chock-full of overvalued, cash burning companies that the world would actually be better without – malinvestment that should’ve been corrected years ago - that I believe those indexes will move disproportionately lower.

I also continue to be profoundly negative on ARKK, an actively managed fund whose flagship component and largest weighting is up 90.6% in the last twelve months, yet has still somehow managed to plunge -11.9% over the same time period.

That takes some very special “active management”.

Source: Ycharts

In fact, just yesterday after hours, another Cathie Wood holding, Docusign, took a 25% haircut.

Wood contends that the growth from her companies will eventually make up for this volatility in the very long term, but I think her portfolio of egregiously overvalued names represents the first head on the chopping block if market volatility continues. And, as I noted days ago, if Tesla ever starts to sell off, ARKK holders should look out below.

As I’ve said before, I also think there will be somewhat of a rotation trade back into cash generating blue chip names, consumer staples and the few companies that still pay a dividend and have modest price to earnings ratios - one of which I profiled as my favorite just weeks ago.

Some of my other favorite names that I am looking to buy if they continue to sell off are well-known blue chip staples that have seen their stocks trade sideways or disproportionately lower over the last couple of months, despite growth-style P/E’s for some. I’d argue names like Disney (DIS) and Walmart (WMT) offer GARP (“growth at a reasonable price”) should they keep selling off. I also love Johnson & Johnson (JNJ)(my largest holding in my all-dividend portfolio which I add to almost daily) and Intel (INTC), which I believe will undergo a renaissance and eventually retake its throne as king of chips - if it isn’t bought out first at these levels.

Gold has continued to selloff on the expectation that a taper is actually coming.

Source: Ycharts

The selloff could easily continue for the short- to mid-term, at least until we get to the point that gold needs to be bought as a volatility hedge due to a taper, or the point where the Fed finally caves and stops its plans for tapering or raising rates. It will be interesting to see how inflation may drive the Fed’s decision making going forward.

Heading into the weekend and into the back end of this month, traders would do well to focus their energies more on Fed commentary than on developments with the Omicron variant, barring any massive change with what we know regarding the new strain. Obviously, if Omicron turns out to be a flesh eating variant of the virus that kills people instantly, that is going to have a profound effect on equity markets (Neel Kashkari heard shouting it the background: “Not if I can help it!”).

But for the time being, thank God that doesn’t seem to be the case. Heading into 2022, I still think the markets could be in for a collapse, as I wrote here, as it appears that this is the only man that can move markets in this day and age:

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DISCLAIMER: 

I own JNJ, WMT, DIS and INTC. I own ARKK, IWM, SPY puts. I own puts and calls in GLD and own a host of gold-related and precious metals related names. None of this is a solicitation to buy or sell securities. Positions can always 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 get shit wrong a lot. 

Tyler Durden Fri, 12/03/2021 - 10:25

ISM Services Survey Explodes To Record High (And So Does Cost Inflation)

After the mixed final data for US Manufacturing in November (Markit PMI down, ISM up), expectations were for both Markit and ISM to show the Services sector weakened modestly in November.

• Markit US Manufacturing dropped from 58.4 to 58.3

• Markit US Services dropped from 58.7 to 58.0 (better than the 57.0 flash print)

• ISM Manufacturing rose from 60.9 to 61.1

• ISM Services exploded higher from 66.7 to 69.1

Spot the odd one out...

Source: Bloomberg

That is the highest ISM Services print... ever...

The IHS Markit US Composite PMI Output Index posted 57.2 in November, down from 57.6 in October but still signalling a marked overall expansion in private sector activity. Output was led by the service sector as factories were hampered by supply chain disruptions.

Sharper increases in manufacturing and service sector input prices led to the fastest rise in cost inflation on record (since October 2009). Alongside greater fuel and material costs, firms noted a steeper uptick in wage bills. Although the rate of charge inflation softened from October, it was the second-sharpest on record as firms sought to pass on higher costs to customers.

On the bright side, 'Exam Glove' prices are down (so let's all rush out and get our prostate tests!!)

Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:

“US business activity continued to grow at a solid rate in November, adding to signs that the pace of economic growth is accelerating in the fourth quarter after the Delta-wave induced slowdown of the third quarter. While growth is not matching the surge seen earlier in the year when the economy reopened, the fourth quarter expansion should be well above the economy’s long-run trend to mark a solid end to the year.

“Growth is lopsided, however, being led by the service sector as manufacturing remains heavily constricted by supply shortages and, in some cases, labor supply issues. These constraints are also increasingly affecting service providers, as evidenced by the service sector reporting a near record build-up of uncompleted orders during November as companies often lacked the capacity to meet demand. Cost pressures in the service sector also spiked higher in November, generally linked to higher prices paid for inputs and staff due to shortages, the rate of inflation running just shy of May’s all-time peak.

“While business expectations for the year ahead rose in November, the vast majority of the survey data were collected prior to the news of the Omicron variant, which casts a renewed shadow of uncertainty over the outlook for business and poses a downside risk to near-term growth prospects.“

Just as a reminder, with regard to ISM Services' outlier move, ISM's index of supplier delivery times held at the second-highest on record, indicating delays are still well-extended... and this 'disruption' in the supply chain is integrated entirely bullishly into the headline index (reflecting record demand as opposed to disrupted supply chains and many points of failure around the world).

Tyler Durden Fri, 12/03/2021 - 10:04

Smith & Wesson Shares Crash After Earnings Miss Shows Panic-Hoarding Guns Is Over

Smith & Wesson Brands, Inc. shares crashed on Friday after the company's Q2 earnings report missed analysts' estimates as panic hoarding guns by Americans eased. 

Sales fell 7.3% in the quarter as gun demand subsided, prompting Cowen to downgrade the stock from "outperform" to "market perform". Cowen analyst Cai Von Rumohr slashed the price target to $22 from $38. The average price target is approximately $30.50. 

Shares of Smith & Wesson are down more than 17% in premarket to about the $19 handle. 

Rumohr said the quarter's huge miss, share loss, increasing channel stocks, and reversal of strong pricing are tough comparables for the upcoming quarters. He was unclear if the stock would remain popular considering the increased popularity of ESG issues.

Mark Smith, President and CEO, said, "throughout the past 18 months of unprecedented demand levels for our industry, our focus has continued to be on the long term – and our team has been hard at work positioning Smith & Wesson for continued impressive operating results and maintaining our market leadership regardless of market conditions." 

"During our second quarter, as demand levels eased from historical highs experienced during the height of the pandemic, the results of those efforts and our flexible model were evident," Smith said. 

The first suspicion we had that panic hoarding was subsiding was after reviewing ammo prices in June. At the time, we pointed out prices were dramatically slumping from COVID highs.

Then September's FBI background checks for firearms plunged to the lowest levels in 22 months which sealed the deal that panic hoarding guns lost momentum. 

Since the pandemic began, millions of new gun owners and existing gun owners have bought pistols, shotguns, and rifles and loaded up on ammo. As for Smith & Wesson shares, the next level of support to test will be around $17. 

Tyler Durden Fri, 12/03/2021 - 10:00

The Reason Behind Today's Massive Payrolls Miss: A Huge Seasonal Adjustment Flaw

In recent months, the BLS itself admitted that it has a big problem in applying its traditional, pre-covid seasonal adjustments to a data series that was thrown out of all seasonal norms by the covid pandemic. This is why teacher jobs yoyo-ed for months and why the BLS was forced to make substantial upward revisions for each of the past 6 months, with most deriving from a flawed seasonal factor revision.

Well, it appears that a big reason for today's huge, 5-sigma miss in total payrolls...

... even as the rest of the report was surprisingly solid, with the unemployment rate dropping, the number of unemployed workers sliding, and the household survey showing more than 1.1 million employed Americans, is that the BLS once again used a flawed seasonal adjustment which will prompt a sharp upward revision to the November print when it is revised next month.

As Southbay Research explains further today,

During COVID, the BLS admitted to two significant failures that led to substantial data distortion:

1. Data collection: in 2020, the BLS discovered that their new COVID-created remote sampling incorrectly classified some payroll, resulting in underreporting hundreds of thousands of workers.
2. Seasonal Adjustments: The BLS used their traditional methodology of applying a ratio to the raw Non Seasonally Adjusted data, which overstated job losses

The seasonal adjustment factor is important:  The Dept of Labor recognized the problem with the weekly Jobless Claims, where they also applied a ratio multiplier. They shifted away from the multiplier and began using absolute numbers as of August 29, 2020

Why does it matter? The answer is obvious: the SA is supposed to remove the 'normal' seasonal labor swings.  For example, we know bad weather typically hits construction in November, so layoffs in that sector are expected and smoothed out.

So historically speaking, ex recessionary periods, November sees 200K~300K in additional hiring.  Basically the seasonal shopping hiring. And so we see an equivalent level of offsetting Seasonal Adjustment.  Except for this November: as shown in the chart below, the November adjustment was a record -568K, more than double the average seasonal adjustment of the past decade of -277 and well above the 2008 high of 389K.

Had the NSA number of 778K been adjusted by the average, of 268, we'd have, 510k, more in line with ADP and "only" half of the establishment survey.

The implications: i) hiring, as hinted by the Household model, is quite strong but is hidden by model mechanics; and ii) more importantly, the faulty application of seasonal adjustment methodology lowered the November payrolls print by at least 200K; or as SouthBay summarizes it, "Far from being a weak November" this was a pretty strong report.

Tyler Durden Fri, 12/03/2021 - 09:43

Buzzfeed Union Strikes, Investors Get Cold Feet As SPAC Debut Looms

Did Buzzfeed's union of overpaid and under-worked digital media workers help to drive away investors in the SPAC that was supposed to take the flailing digital media company public?

Yesterday, members of the Buzzfeed union walked off the job to protest what they claimed was the company's refusal to discuss a fair labor contract.

The NewsGuild of New York, which represents the journalists, said they plan to stop working for one day to call attention to the stalled contract negotiations, which have been grinding on for two years. The union says management has proposed 1% guaranteed wage increases per year and a salary floor of $50,000. While these levels might seem reasonable for a business where reporters are on average paid substantially less than that, the Buzzfeed union finds they are unacceptable.

And anybody who goes against the union will likely be ostracized by their coworkers and the rest of the blue-check-mark brigade.

"That is not a sustainable living wage, and it is not enough to attract a true diverse talent pool that’s crucial to the future of BuzzFeed,” the union said in a statement.

This drama with the company's spoiled union couldn't come at a worse time for the VC-funded digital media darling which has seen its prestige decline along with its readership over the past 5 years. After raising hundreds of millions of dollars in VC funding during the middle of the previous decade, Buzzfeed has faced intensifying pressure to show profits, with only mixed results.

On the cost side, its paid employees are constantly worried about being made redundant. Who can forget the story exposing Buzzfeed's most popular writer as a high school student who produces popular quizzes on the site...for free.

With shares of the new Buzzfeed SPAC debuting on Friday, there were reports earlier in the week claiming that some of the deal's institutional backers were getting cold feet. Yet, while Buzzfeed has clearly missed its fundraising target, the company has at least raised enough to allow it to continue with the offering.

Amazingly, the deal values Buzzfeed at $1.5 billion. It's expected to complete the aquisition of Complex Networks as well on Friday.

Tyler Durden Fri, 12/03/2021 - 09:38

World Health Organization Says "No Evidence" Booster Jabs Would Offer "Greater Protection" To The Healthy

Authored by Paul Joseph Watson via Summit News,

The World Health Organization has questioned the UK government’s decision to roll out hundreds of millions of booster jabs to its population, asserting there is “no evidence” they would offer “greater protection” to the healthy.

UK Health Secretary Sajid Javid’s says the country has secured an additional 114 million vaccine doses for 2022 and 2023 to “buy time” and that everyone over the age of 18 will be offered one by the end of January.

Dr. Mike Ryan, head of the WHO’s emergencies program, questioned the logic behind this decision.

“Right now, there is no evidence that I’m aware of that would suggest that boosting the entire population would necessarily provide any greater protection for otherwise healthy individuals against hospitalization and death,” he said.

Ryan also noted that the UK was in a “luxurious position” of being able to offer booster shots to its entire population given that many poorer countries don’t even have even vaccines to give all their people one dose.

UK medical authorities have also seized upon the Omicron variant to insist that more children receive vaccines.

This is odd given that the variant has become noted for only causing “mild” symptoms in younger populations.

Experts argue that dismissing Omicron as “mild” is dangerous because South Africa has a very young population (average age 27) and we don’t know how it will impact older people.

They then say the solution is to vaccinate more younger people.

Makes total sense.

*  *  *

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Tyler Durden Fri, 12/03/2021 - 09:25

Bizarre Handwritten Notes Detail Daily Affirmations By Theranos Co-Founder Holmes And Boyfriend Balwani

As the Elizabeth Holmes fraud trial continues, the exhibits being introduced by lawyers are becoming more and more bizarre.

Most recently was the submission to the court of handwritten notes Holmes and her boyfriend/co-worker, Ramesh “Sunny” Balwani, wrote to themselves about how to run their business and how they planned their day. 

The notes were written between 2005 and 2009, according to Holmes, the Wall Street Journal reported this week. 

Holmes said of the notes that they were to help her focus. “Even if I didn’t have a natural instinct for business, that I could be taught to overcome that through a formula for success,” the WSJ reported her as saying.

Holmes' notes show a daily morning schedule that includes "thanking God than most things are not logical", "praying" and notes on what Holmes would order for lunch. 

"I do not react. I am not impulsive. I know the outcome of every encounter," Holmes wrote to herself. "My hands are always in my pockets or gesturing. I am fully present."

Notes from Balwani entitled "Non-Negotiables" lay out his morning routine, as well.

"Every morning, I will force myself out of bed and spend 30 minutes (never a minute less) to write what I want from my day," he writes. "I will never meet with anyone for more than 5 minutes unless I have written down why I am meeting with them."

Balwani continues: "I will always give crisp, clean goals and feedback to my subordinates, even if they don't like it - especially if they don't like it. I will first write this down (goal & action) and help them focus on their actions and results, not politics."

You can read all three pages of Balwani's notes here.

We have been keeping up with key elements of testimony during the trial.

For example, during testimony last week, Holmes reportedly pushed back on accusations about lying about Theranos' work with drug companies and blamed scientists and doctors who worked for her, saying she "believed what they had told her about Theranos’s technology," according to the NY Times. 

“We thought this was a really big idea,” she reportedly said on the stand.

Holmes presented as a " an impressive and ambitious chief executive when describing the early days of Theranos," the NYT wrote. She discussed patents in her name and help she got from Stanford University professor Channing Roberton. 

The report described her as "relaxed and confident" in giving testimony. 

She also fielded answered questions about preliminary studies conducted by Theranos with drug companies in 2008 to 2010. The testimony was to show that the startup did, in fact, work with drug companies when it was claimed that they didn't. 

“Merck sent data back to Theranos showing how well we performed compared to their traditional assays,” she said on the stand. She also detailed attempts to work with the Army's Telemedicine and Advanced Technology Research Center. 

“One was seeing if there were markers in the blood to see if we could predict PTSD. One was diabetes management,” Holmes testified.

Holmes' lawyers, meanwhile, have focused on investors not doing enough due diligence, a portfolio of patents the company was able to create and unearth "kernels of truth" that were buried amongst the company's lies. They have tried to paint a picture of a young company in the early 2000s, NBC reported. 

Putting Holmes on the stand was a "must" given the evidence compiled against her, the NY Times wrote.

Tyler Durden Fri, 12/03/2021 - 09:05

 

 

Clients reach out to us all the time with specific questions about, well, everything: Investing, markets, the economy, specific companies – pretty much whatever headlines might be causing that day’s confusion. We do our best to provide the necessary context to fully understand any of these concerns. This is why you see all of our blog posts, podcasts, media appearances, and books from the RWM team: We are trying to simplify the complicated and confusing world of investing.

Over the past few years, an increasing number of those questions have been about crypto: At first Bitcoin, then blockchain, then Ethereum, other coins, Web3.0, and now the metaverse.

The most asked question: “Should I invest in this?”

Our conservative response: “Feel free to put a couple of percent of your liquid assets into whatever coins or technology appeals to you. The caveat: If it works out, great, but if it does not, it should not meaningfully affect your standard of living.”

The frequent and surprising follow-up: “Great! Can you guys do this for us?”

Our answer over the past few years has been “No, we are sorry, but it is too difficult, too expensive, and too complicated for any RIA to intelligently manage this; the institutional grade technology just isn’t there yet.”

But as of today, our answer changes: “Sure! Speak to your advisor, it will take a few minutes to set up an account, you can purchase the RWM Wisdom Tree Crypto Index in a separately managed account (SMA). It’s a modified market cap-weighted index that consists of 36% Bitcoin, 20% Ethereum, and 4% of each of 11 other assets that provide broad crypto exposure. We will handle everything else for you.”

~~~

There is a much longer and more interesting story behind this:

Michael Batnick is head of research at RWM. He seeks out interesting ideas on behalf of RWM clients. As the crypto question kept coming up more often, Michael undertook a deep dive into the entire crypto complex to see what was available for advisors.

What he learned was a surprise to all of us:

First, there was no easy, inexpensive RIA-specific diversified crypto solution available.

Second, given our general preference for an indexing approach over stock picking or coin selection, we were stymied by the lack of choice for RIAs. There were not many good options: From the clients’ point of view, Wallets were a non-starter.

Third, what we did see was a DIY nightmare. One company managed your wallet, a different one did the trading, a different one was responsible for giving you regular updates. It was neither simple nor inexpensive for busy clients who were running their own businesses nor had time-consuming jobs.

“Find a simple, inexpensive, secure solution” became the driver here, and I believe we have accomplished just that. The solution that Batnick created had three key requirements:

1. Safe, secure, and reliable for financial advisors and their clients. If this did not happen, the entire project was a non-starter.

2. Simple, no more complex than opening an RIA account; easy to do, easy to execute a purchase (or sale); easy to add more money to the account.

3. Index-based: meaning, inexpensive, with low turnover and no coin selection required by the investor to complicate things.

To make this happen, we partnered with three firms with demonstrated domain expertise:

• Wisdom Tree has been a leader in Indexing for decades. We have always admired their leadership and expertise. The firm has committed itself towards crypto, and their CEO recently explained why I am all in on DeFi.

• Gemini is our custody infrastructure and crypto-native exchange partner. The Winklevoss (founders of Gemini) have built a best-in-class exchange that is both secure and compliant for wealth managers who want to offer crypto investments to their clients.

• OnRamp offers a comprehensive integration platform for crypto assets. They make all of the many moving parts here come together easily and seamlessly. They are the technology layer that makes all of this work (We were seed investors in OnRamp, as was Wisdom Tree).

No single company we looked at had expertise in all of these things, and putting together a consortium to get this done was the best route to make something worthwhile occur. I believe the results validate this approach.

~~~

Over the years, I have called Batnick one of our “secret weapons;” he is the chief architect of this project, the person who let nothing stop this from going forward. Between his blog, book, and podcast, I guess it’s time for me to stop calling him that — the secret is out…

 

 

 

See also:
The RWM Wisdom Tree Index

Sign up to be informed about the Index

We Built a Crypto Index

The Gang Launches a Crypto Index

Ritholtz Wealth Management and WisdomTree Collaborate to Launch Innovative and Diversified Crypto Index (Press release)

Smart Tickets: Creators Capturing Secondary Market Sales (April 7, 2021)

 

 

 

 

 

 

The post Introducing RWM Wisdom Tree Crypto Index (SMAs) appeared first on The Big Picture.

Rabobank: The IMF Warning Of "Economic Collapse" Should Get Headlines

By Michael Every of Rabobank

"Economic Collapse" you say?

The IMF are warning of “economic collapse”, which should get headlines. Not because the IMF have any kind of track record of being timely or right about anything, but because the Fund so rarely says anything negative for fear of being seen as precipitating the crises which the policies it imposes always end up creating anyway. Besides a total lack of surprise on first seeing the headline, my initial thought was “Yes, but where?” There are so many candidates as:

• Supply chain issues are being swept out to sea in lieu of having a rug large enough. (A ship outside a port is not at a port; a container dumped outside a port is not in a port – success!)

• Just about everyone at the Fed now says tapering needs to be accelerated and rate hikes happen far sooner than we had thought. On top of all the debt we added under Covid. The curve flattening we see speaks volumes on that.

• Janet Yellen says "I'm ready to retire the word transitory. I can agree that that hasn't been an apt description of what we're dealing with." What adjective is she thinking of instead as she pushes more stimulus for groups with the highest marginal propensity to consume without addressing supply-chain issues? Confusingly, Yellen also said the Fed should keep a close eye on rising wages to avoid a 70’s-style "wage-price spiral". THIS IS NOT HER JOB, and without wage gains there is no way to escape the economic paradigm she seems determined to shift…or is it OK to give people benefits, but not for them to earn that money?

• Oil prices

• The US government may see a shut down as soon as this evening, and perhaps even technical debt default, with just one senator now able to force this to happen.

• The Australian Financial Review plaintively asked yesterday how long the can can be kicked on the $7 trillion debt Chinese developers are carrying. Kaisa is now the new Evergrande, it seems, which I was being told repeatedly was a firm-specific “contained” issue a few months ago. It wasn’t. It isn’t. It cannot be given the scale of borrowing and the policy shift away from bubbles. But that doesn’t mean we are going to get a Chinese GFC – just a long growth slowdown, with real financial pain for some investors, and the likelihood surely being that foreign investors are near the top of that list?

• On which note, the race from both the US and the Chinese sides to stop offshore listings of Chinese firms continues apace – with Didi taking the lead in a move back to Hong Kong.

• Moreover, China is warning China-linked US businesses: you cannot ‘make a fortune in silence’, with Vice-foreign minister Xie Feng telling them to push the White House towards a ‘rational’ China policy and end ‘ideological’ conflicts over trade and tech. Many US firms of course will, and if you look at alleged Democratic attempts to drop human rights provisions on imports from Xinjiang in pending legislation, some US politicians are already receptive. However, this also risks making some other politicians warier of US business being in China, and there is an election in 2022. Or, as the WTA show, some firms may just act unilaterally.

• Turkey is slashing rates in the face of rising inflation – which only developed economies can, while not understanding “transitory”. As the lira collapses against the Dollar, Ankara seems to be sending the signal this FX metric does not matter. If it is wrong, the consequences will be painful: hyperinflation is mentioned in a far from unconnected economy. Yet if it is right, the message for the US ought to be clear: and Turkey is extremely important in geostrategic terms.

• The US warns Russia of “terrible consequences” if it moves on Ukraine, as Moscow says Ukraine’s possible move to retake Russian enclaves is a risk to it, giving both the US and Russia a casus belli - yet only one with a military force in place. Russia is also putting missiles on islands contested by Japan.

• The US and Iran are pessimistic about the 2015 nuclear deal, and Israel defiant, as Tehran negotiates how you should in the Middle East – as if you can walk away. By contrast, the US is negotiating like the 1980’s “Wilma, that bird stole my hairpiece!” tourists or European diplomats who think box-ticking stops deadly ticking boxes.) "I have to tell you, recent moves, recent rhetoric, don't give us a lot of cause for ... optimism," says Secretary of State Blinken, trying to keep a poker-face against Russia and Iran (and China) simultaneously, while holding a pair of 2s. (With three US aces not being used ‘because reasons’.)

• OPEC+ may have stuck to a looming output hike, but oil did not fall for long, and longer-term European electricity prices are back at record highs. Imagine if the Russia/Ukraine and Iran thing goes wrong.

• In France, Les Républicains voted for hard-right Ciotti in the first round of voting for their presidential candidate over the better-known ‘French sovereignty first’ Barnier: the victor wants a referendum ‘to stop mass immigration’, and to set up ‘a French Guantánamo bay’. If he wins, he will be competing against Le Pen, who needs no explanation, and newcomer Zemmour, who is literally running on a “they will not replace us” platform. And President Macron, who is hardly a cultural leftist of late, having just reintroduced Greek and Latin into schools. Of course, none of this has anything to do with ECB acronyms, so markets will blindly shrug it all off, (hard) right?

• Regardless, markets are already seeing lunatic volatility anyway, with hedge funds allegedly piling out, retail pundits piling in, and some funds almost certainly seeing year-to-date gains made via let’s-ignore-underlying-risks-and-buy-all-of-the-things strategies suddenly wiped out, leaving them only a few trading days between now and year end to ensure their books don’t close looking as ugly as the IMF’s description of the economic outlook. Expect Hail Mary trading in response?

Anyway, back to the IMF. "We may see economic collapse in some countries unless G20 creditors agree to accelerate debt restructurings and suspend debt service while the restructurings are being negotiated," IMF chief Kristalina Georgieva said in a blog, adding that it is critical private creditors also offer relief. Yet exhale: the Fund was ‘only’ talking about the outlook for very poor countries! Carry On Regardless while extolling the virtues of diversity and inclusion, please.

Remind me again – how did these very poor countries get so much debt without servicing ability in the first place? Why wasn’t the IMF advising capital controls and Hamiltonian-style growth models to prevent it? And why aren’t these countries allowed to tell their central banks to buy all their worthless assets at par to bail everyone out? After all, that’s what developed economies get to do!

On top of this we also have a US payrolls report today that may actually matter – and regular readers will know it’s rare that I say that. The expectation is 550K after 531K last month. Anything stronger or weaker and goodness knows where Powell, Yellen, curves, the Dollar, China, Turkey, Russia, and Iran, as well as Europe (and US tourists in it shouting “Wilma, that bird stole my hairpiece!”) will sit. Or slump.

Hey, but Happy Friday.

Tyler Durden Fri, 12/03/2021 - 08:49

November Payrolls Huge Miss: Just 210K Jobs Added, But Unemployment Rate Tumbles

With the median Wall Street economist expectation of a 550K print, just slightly above last month;s 531K, and whisper numbers of 564K, any number that came at or above (and wasn't a huge miss) would be seen by the market as validating the Fed's accelerated taper which could be announced as soon as Dec 15. Alas it was not meant to be, because moments ago the BLS reported that in November, the US added just a tiny 210K jobs (down a stunning 336K from October's upward revised 546K), and the smallest monthly increase since December!

Needless to say, this was a huge miss to consensus expectations of 550K, and coming in at less than half the expected number the actual print was a whopping 5 sigma miss!

With the November gains, total payrolls remain some 3.9 million, or 2.6 percent, from its pre-pandemic level in February 2020.

Still, as CNBC's Steve Liesman notes, this number does seem suspect and the reason is because as Goldman noted overnight, the BLS has revised up each of the prior six payrolls reports (including +235k with last month’s release). It is thus probable that this month will also be revised higher, especially since the BLS revealed that the change in total nonfarm payroll employment for September was revised up by 67,000, from +312,000 to +379,000, and the change for October was revised up by 15,000, from +531,000 to +546,000. With these  revisions, employment in September and October combined is 82,000 higher than previously reported. So yes, the upward revisions continue.

Adding to the confusion is that the Household Survey found employment rose by a whopping 1.136 million, up from just 359K last month, a substantial divergence from the more closely watched Establishment survey.

Some more details from the BLS:

• Workers unable to work due to bad weather came in at 37,000. The historical average for November is 74,000.
• Another 163,000 workers who usually work full-time could only work part-time due to the weather last month.
• The number of persons employed part time for economic reasons, at 4.3 million, changed little in November. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. This figure was about the same as in February 2020.
• The number of persons not in the labor force who currently want a job was 5.9 million in November, little changed over the month but up by 849,000 since February 2020. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job. Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was little changed at 1.6 million in November. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey

Perhaps the bigger story was the plunge in the unemployment rate, which tumbled from 4.6% to 4.2%, beating estimates of 4.5%, and coming below the bottom of the range of 4.3%-4.6%.

The chart above shows that the black unemployment rate dropped by 1% to 6.7%. It still has a ways to go before hitting it record lows... hit under Trump.

Additionally, as Bloomberg notes, the key metric in the household survey aside from the headline unemployment rate -- the prime working-age (25-54) employment-to-population ratio -- jumped by half a percentage point last month, marking the strongest advance since July. At 78.8%, there’s still ground to cover to return to the pre-pandemic level of 80.5%, but if we keep going at this rate, we’ll be there sometime next year.

The underemployment rate for young adults aged 16 to 24 in Nov. was 13.5%, with the total unemployed aged 16-24 at 1,584,000, the marginally attached workers aged 16-24 at 390,000 and those employed part-time for economic reasons aged 16-24 at 860,000. The youth civilian labor force (aged 16-24) was at 20,533,000.

As DeBusschere of 22V Research said, “WOW...OK. This number was all over the place. Significant miss on the headline number. But that’s not the story. The u-rate declined significantly with a slight increase in participation. That is because the household employment number was +1.1 million, which is a huge number. Now, household is a volatile number, but it’s hard not to assume this will ultimately be viewed as a somewhat positive report for the labor market -- unless we are totally missing something on the household reading. So we would fade the move lower in short rates.”

Helping the plunge in the Unemployment rate is that the number of people Unemployed dropped from 7.419MM to 6.877MM. And with the labor force rising from 161.458MM to 162.052MM, the labor force participation rate jumped to 61.8% from 61.6% previously, the highest. print since the onset of Covid

There was some more disappointment on the wage front, with average hourly earnings at 4.8%, missing expectations of 5.0% Y/Y, and flat from a downward revised 4.8% in October. On a M/M basis earnings rose 0.3%, also missing expectations of a 0.4% increase.

Average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents to $31.03. Over the past 12 months, average hourly earnings have increased by 4.8 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees rose by 12 cents to $26.40.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.8 hours in November. In manufacturing, the average workweek edged up by 0.1 hour to 40.4 hours, and overtime was unchanged at 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 34.1 hours.

* * *

Looking at the components of the report, in November, notable job gains occurred in professional and business services, transportation and warehousing, construction, and manufacturing. Of note, it was another bad month for hiring in leisure and hospitality: "employment in leisure and hospitality changed little in November (+23,000), following large gains earlier in the year. Leisure and hospitality has added 2.4 million jobs thus far in 2021, but employment in the industry is down by 1.3 million, or 7.9 percent, since February 2020." Tetail trade also had a poor month. Here are the details:

• Professional and business services added 90,000 jobs in November. Job gains continued in administrative and waste services (+42,000), although employment in its temporary help services component changed little (+6,000). Job growth also continued in management and technical consulting services (+12,000) and in computer system design and related services (+10,000).
• Employment in transportation and warehousing increased by 50,000 in November and is 210,000 above its February 2020 level. In November, job gains occurred in couriers and messengers (+27,000) and in warehousing and storage (+9,000).
• Construction employment rose by 31,000 in November, following gains of a similar magnitude in the prior 2 months. In November, employment continued to trend up in specialty trade contractors (+13,000), construction of buildings (+10,000), and heavy and civil engineering construction (+8,000).
• Manufacturing added 31,000 jobs in November. Job gains occurred in miscellaneous durable goods manufacturing (+10,000) and fabricated metal products (+8,000), while motor vehicles and parts lost jobs (-10,000). Employment in machinery declined by 6,000, largely reflecting a strike.
• Employment in financial activities continued to trend up in November (+13,000) and is 30,000 above its February 2020 level. Job growth occurred in securities, commodity contracts, and investments in November (+9,000).
• Employment in retail trade declined by 20,000 in November, with job losses in general merchandise stores (-20,000); clothing and clothing accessories stores (-18,000); and sporting goods, hobby, book, and music stores (-9,000). These losses were partially offset by job gains in food and beverage stores (+9,000) and in building material and garden supply stores (+7,000).
• Employment in leisure and hospitality changed little in November (+23,000), following  large gains earlier in the year. Leisure and hospitality has added 2.4 million jobs thus far in 2021, but employment in the industry is down by 1.3 million, or 7.9 percent, since February 2020.
• Health care employment was about unchanged in November (+2,000). Within the industry, employment in ambulatory health care services continued to trend up (+17,000), while nursing and residential care facilities lost 11,000 jobs.

Commenting on the report, Bloomberg's Chris Antsey notes that this his is "a bad-news report from the perspective of the Fed and the Biden administration. It suggests that the job market is tight, even though we’re making less-good progress in returning payrolls to their pre-pandemic level. It strengthens the argument of those saying that Covid-19 has imposed structural changes to the job market, and that pre-pandemic levels of employment aren’t the right metric to use when thinking about full employment."

Others were more cheerful: "While the headline number disappointed relative to expectations, the big household survey figure, the rise in the workweek, the increase in the participation rate and employment to population ratio, along with the near 5% average weekly earnings print, all point to a Fed that will quicken the pace of taper as many have said, and we’ll see how that goes before debating rate hikes,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

In his reaction to the market's kneejerk response which saw futures jump and yields initially dip then spike, BMO's Ian Lyngen writes that “treasuries were modestly bid immediately ahead of the payrolls report with 10-year yields as low as 1.418%. Since the release, we’ve seen the market rally a bit further, but is largely range-bond at the moment. The slight steepening impulse is a fade into the weekend; even if there is a policy angle underlying the sentiment.”

Chris Zaccarelli at Advisor Alliance said that “we expect this report is a positive for equities and more negative for the bond market, although the knee-jerk reaction in markets has not shown this. Lower interest rates are not what we would expect given the Fed is likely to taper and raise rates more quickly. Clearly there is a lot of skepticism in the bond market over the strength of this economy.”

Others were more sarcastic: “One of the weirdest reports I have ever seen,” said Danny Dayan, chief investment officer at Dwd Partners. “The yield curve should be steepening on this in a big way, but rates market participants may be too wary to try that again.”

Indeed, as Bloomberg analyst Katia Dimitrieva notes, ;ots of data in this report point to the structural shifts in the workforce and a clear gulf between workers and employers:

• Number of people not in the labor force but who want a job remains about 850,000 higher than pre-pandemic
• Long-term unemployed (jobless for 27+ weeks) is 1.1 million higher than pre-pandemic and barely budged in November
• Number of people working part-time but wanting full-time remains 4.3 million

Yet as some noted, today's data may be completely meaningless and comparable to the Feb 2020 report when the world was going into lockdown, but employment data didn’t show it yet. With Omicron having arrived, and it's just a matter of time before it imposes a new round of lockdowns, today's data sadly tells us nothing about how bad the US economy is about to be hit in order to make it easy for Biden to rush out a new round of trillions in stimmies.

Tyler Durden Fri, 12/03/2021 - 08:34

Didi Shares Pump And Dump On Proposed NYSE Delist; Here's What Wall Street Thinks

Update (0828ET): Didi Global Inc. pumped then dumped in premarket as the company's board of directors decided to delist from U.S. exchanges and list on Hong Kong.

Didi's shares initially jumped more than 14% and have since erased all gains, plunging 23% from the high of around the $9 handle to the $7 handle. 

Here are the top headlines (via Bloomberg) surrounding China stocks: 

• Didi Prepares U.S. Delisting, Hong Kong Share Debut 
• U.S. Regulators Move Step Closer to Delisting Chinese Firms 
• China Tech Rout Deepens to $1.5 Trillion as Didi Emboldens Bears 
• Didi, Others Could Seek Homecoming on U.S. Delisting Threat

Bloomberg has compiled a list of analysts responding to the Didi situation:

Atlantic Equities (Xiao Ai) 

• An NYSE delisting is "very disruptive" to near-term liquidity 
• While the U.S. holders will continue to have access to some liquidity, there will inevitably be disruption and an impact on trading volume 
• Unclear as to whether Didi is fully in compliance with all the requirements for a Hong Kong listing 
• Recommends investors hold Hong Kong listed shares of companies with dual listings

Bloomberg Intelligence (Marvin Chen) 

• Valuations for additional offerings may be impacted, particularly in the current environment, given the heightened uncertainty on regulations and China policy 
• "Generally H.K. equities trade at lower multiples. And in the current environment, definitely their valuation expectations will be reset." 
• Hong Kong and mainland exchanges, brokers and other market participants could benefit from increased fund raising activity in the region

Guosen Securities (H.K.) (Gary Ching) 

• American investors will be keen on selling ADRs if they are forced to delist from the U.S., which will add pressure on their share prices 
• The SEC news hurt sentiment on H.K. tech stocks, especially for companies listed both in the H.K. and U.S. 
• The Didi delisting news raises market concerns about pressure on Chinese firms' pressure to delist from the U.S. market, since many technology companies' structures are similar to Didi's In the long run, the returnees will benefit the Hong Kong market

First Shanghai Securities (Linus Yip) 

• It might take at least 3-6 months for Chinese firms to delist from the U.S. and then relist in Hong Kong 
• The process may affect their financing for a bit, but the impact could be limited

IG Asia (Jun Rong Yeap)

• "While the risks of delisting have already been brought up previously, a step closer toward a final mandate seems to serve as a reminder for the regulatory risks in Chinese stocks"

UOB Kay Hian (Hong Kong) (Steven Leung) 

• The negative impact will likely be short-term, as this is not the first time and there have been U.S.-listed Chinese companies moving to the H.K. already 
• "I would expect more delisting from the U.S. to come, but they should not be in a rush," as the year-end slow season approaches

United First Partners (Justin Tang) 

• Didi will be the template for other Chinese companies following that same path 
• A U.S. delisting would see a company lose exposure to investors who can only trade on American exchanges 
• "This will see the so-called 'cross-listing premium' erode compared to companies not listed in U.S. markets"
• Chinese stocks that have been delisted can still trade OTC in the U.S., but with "significantly lowered" liquidity and investor protection 
• The cost of capital will be higher

* * * 

Didi Global Inc. shares trading in New York jumped as much as 14% premarket after it said it would begin to delist from U.S. stock exchanges and list in Hong Kong. 

According to a company press release, the ride-hailing giant's board of directors "has authorized and supports the Company to undertake the necessary procedures and file the relevant application(s) for the delisting of the Company's ADSs from the New York Stock Exchange, while ensuring that ADSs will be convertible into freely tradable shares of the Company on another internationally recognized stock exchange at the election of ADS holders."

"The Board has also authorized the Company to pursue a listing of its Class A ordinary shares on the Main Board of the Hong Kong Stock Exchange," the press release continued. 

The move comes after the Cyberspace Administration of China requested Didi's top executives to develop a plan to delist from U.S. stock exchanges last week due to concerns about leakage of sensitive information. 

A delisting from the NYSE could spell trouble for U.S.-listed Chinese firms as Sino-U.S. tensions heat up. What may follow could be a series of US-to-China transfers.

Indeed, as noted recently, two decades of Chinese firms listing on U.S. exchanges could be coming to a close, as Beijing seeks to crack down on variable interest entities (VIE), a loophole used by tech companies to raise billions of dollars in capital from overseas investors. 

Chinese companies have used VIE to exploit a loophole and set up a legal business structure in which an investor has a controlling interest despite not having a majority of voting rights. This allowed them to raise money from overseas investors by bypassing Beijing's restrictions on foreign investment. We noted in early September that Beijing would soon close the loophole.  

The prospect of banning VIEs is part of a yearlong campaign to curb the power and address data security concerns of China's internet sector. Beijing has called the rise of big tech a "reckless" expansion of private capital.

And just yesterday, the SEC shared its final plan for forcing Chinese firms to delist from U.S. exchanges should they refuse to open their books and abide by stringent American auditing standards.

In response to the increasing rift in financial markets between the two largest superpowers, the Hang Seng Tech Index, which tracks Chinese tech stocks, plunged 2.7% before closing 1.5% lower

Here's what Bloomberg Intelligence is saying about the Didi situation:

Didi's plans to sell shares in Hong Kong and delist in the U.S. reduces risk of a messy, forced delisting by regulators in both China and the U.S. and may signal that Chinese authorities' crackdown on it has peaked. The company's statement bolsters our view that a Hong Kong IPO will come before a U.S. delisting, with a seamless conversion of ADSs into Hong Kong-listed shares. -- Matthew Kanterman and Tiffany Tam, analysts

It appears that Didi will now serve as the blueprint for other US-listed Chinese companies to quietly pack their bags and relist in Hong Kong. 

Tyler Durden Fri, 12/03/2021 - 08:28