Kering Tumbles On Profit Warning As Gucci Revamp Stumbles 

Gucci owner Kering SA's problems in mainland China are only mounting as the French luxury giant issued a profit warning. As a result, shares of the company in Paris plunged to a six-year low. 

Lackluster Chinese demand for the luxury goods maker, which includes the Gucci, Balenciaga, Bottega Veneta, Yves Saint Laurent, Creed, and Alexander McQueen brands, sparked turmoil in Paris trading on Wednesday. Shares were down as much as 10%, tumbling to lows not seen since October 2017. 

Kering said its sales in the first quarter dropped 11%, citing "tough market conditions" in its Asia-Pacific unit, particularly in China, one of the world's largest luxury goods markets. 

• Group first-quarter revenue: €4,504 million, down 11% as reported and down 10% on a comparable basis

"Kering's performance worsened considerably in the first quarter. While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our Houses, starting with Gucci, exacerbated downward pressures on our topline," Francois-Henri Pinault, chairman and chief executive officer of Kering, wrote in a statement.

Pinault continued, "In view of this revenue decline, together with our firm determination to continue investing selectively in the long-term appeal and distinctiveness of our brands, we now expect to deliver sharply lower operating profit in the first half of this year. All of us are working tirelessly to see Kering through the current challenges and rebuild a solid platform for enduring growth."

Here's a snapshot of the first quarter earnings (courtesy of Bloomberg):

• Comparable revenue -10%, estimate -10.2% (Bloomberg Consensus)

• Gucci revenue on a comparable basis -18%, estimate -19.4%

• Yves Saint Laurent revenue on a comparable basis -6%, estimate -6.75% 

• Bottega Veneta revenue on a comparable basis +2%, estimate -0.05% 

• Other Houses revenue on a comparable basis -6%, estimate -4.23% 

• Eyewear & corporate revenue on a comparable basis +9%, estimate +18.1%

• Revenue EU4.50 billion, -11% y/y, estimate EU4.47 billion 

• Gucci revenue EU2.08 billion, -21% y/y, estimate EU2.05 billion

• Yves Saint Laurent revenue EU740 million, -8.2% y/y, estimate EU737.1 million

• Bottega Veneta revenue EU388 million, -1.8% y/y, estimate EU381.5 million

• Other Houses revenue EU824 million, -7.4% y/y, estimate EU834.4 million

• Eyewear & corporate revenue EU536 million, +24% y/y, estimate EU517 million

In the financial outlook, Kering warned that, considering "deterioration revenue trends," the company now expects "a decline of 40 to 45% in first-half 2024 recurring operating income compared to the first half of 2023." 

In February, Pinault stated, "Our priority is to get Gucci back on track," adding that this "won't happen overnight."

Kering has scrambled to turn the sinking ship around, as Gucci accounts for half the group's sales. 

Here's what Wall Street analysts are saying about Kering's profit warning amid fears the revamp of Gucci is faltering (list courtesy of Bloomberg): 

Deutsche Bank (buy, PT cut to €460 from €540)

• Kering has followed up its surprise first-quarter revenue pre- release with a bigger-than-expected flow-through into first-half Ebit guidance, analyst Adam Cochrane says

• There are "limited green shoots" with regards to Gucci at this stage, and will have to wait until the third or even fourth quarter to see if the Sabato proportion of the collection hit 30-40%

RBC Capital Markets (outperform, PT cut to €430 from €440)

• While Gucci's margin cut is "optically bad," it was well- anticipated and largely in the price, analyst Piral Dadhania says

•  Performance is currently challenged, with no improvement in second-quarter trading, but the market will likely focus on sequential revenue growth improvement driven by new product introductions

Bryan Garnier (neutral, PT cut to €350 from €405)

• Kering was even worse than expected, says analyst Loic Morvan, even amid marginal signs of improvement at the top and bottom- line in the second half

Jefferies (hold, PT cut to €360 from €370)

• Kering's update confirmed Ebit under pressure in the first half, with Gucci's recovery expected to be only gradual over this year, writes analyst James Grzinic

• Analyst is encouraged that the group is seeking external partners for real estate holdings, but triangulating Gucci's renaissance remains a "challenging affair"

Morgan Stanley (equal-weight, PT cut to €365 from €405)

• Management's tone was cautious on the call regarding the sales and profit trajectory for the remainder of the year, analyst Edouard Aubin writes

• The warning is more a function of incremental operating deleverage rather than proactive investments behind the brands

Citi (buy, PT €470)

• Citi analyst Thomas Chauvet says that Gucci's design transition and new brand aesthetics might be slower-than- expected in driving brand heat and store traffic

• The greatest source of uncertainty this year is the shape of demand in subsequent quarters, and its impact on profitability

Bloomberg Intelligence

• Gucci's rebuild is dragging toward 2025, analyst Deborah Aitken says, adding that overhaul efforts are taking longer, while Kering's second-biggest brand YSL is also weaker, which requires deeper investment

• Sabato de Sarno's collection will take until the third quarter for fuller own-retail store visibility, pushing the resumption of growth to 2025

This all plays into the slowdown of the global luxury market, reflected in the MSCI Inc. index of global luxury stocks, finding three lower highs since peaking during the Covid mania of late 2021. 

Another ominous sign is the flashing red from the watch market just days ago. 

Swiss Watch Exports Crash In China & Hong Kong https://t.co/i2LXXHa5aK

— zerohedge (@zerohedge) April 19, 2024

The underperformance of luxury results from shoppers who are pulling back on spending, especially in Asia, as the Chinese economic recovery has yet to impress anyone. 

Tyler Durden Wed, 04/24/2024 - 09:40

Jack Dorsey's Block Announces Development Of 'Full Bitcoin Mining System'

Authored by Turner Wright via CoinTelegraph.com,

Payments firm Block, formerly known as Square, has announced plans to develop a Bitcoin mining system in response to challenges faced by mining operators.

In an April 23 blog post, Block said it had completed development of a three-nanometer chip used for BTC mining, which led to the firm announcing a “full Bitcoin mining system.”

Block — then Square — CEO Jack Dorsey suggested a collaborative approach to decentralize Bitcoin mining in October 2021.

“We’ve spent a significant amount of time talking to a wide variety of bitcoin miners to identify the challenges faced by mining operators,” said Block.

“Building on these insights and pursuant to our goal of supporting mining decentralization, we plan to offer both a standalone mining chip as well as a full mining system of our own design.”

Source: Jack Dorsey

Block completed a prototype design of a five-nanometer BTC mining chip in May 2023, claiming at the time the centralization of chip development in the hands of a few companies was harmful to the ecosystem.

The firm called on the mining community to provide additional feedback for the system, asking for comments on challenges it faced in purchasing miners, maintenance, transparency and software issues. 

Intel announced in 2023 that it planned to end shipping for its Blockscale 1000 Series ASIC (application-specific integrated circuit) mining chips in April as part of cost-cutting measures.

Such chips are often used for mining proof-of-work cryptocurrencies, including Bitcoin.

The Bitcoin halving on April 19 cut the block reward for miners from 6.25 BTC to 3.125 BTC.

The event will likely shake up the market as miners compete for fewer rewards for the same work until the next halving, expected in another four years.

Tyler Durden Wed, 04/24/2024 - 08:50

Durable Goods Orders Suffers Biggest YoY Decline Since COVID Lockdowns

The roller-coaster ride that is 'Durable Goods New Orders' continues this morning after the last six months of so have seen monthly swings higher and lower with no trend discernible whatsoever (especially noteworthy given yesterday's slump into contraction for the Manufacturing PMI) amid the on-again-off-again turmoils of Boeing's orders.

Preliminary March data showed a slightly better than expected 2.6% MoM rise (2.5% exp) in the headline orders print. However, thanks to the downward revisions, Durable goods orders are now down 2.2% YoY... the biggest YoY drop since the COVID lockdowns...

Source: Bloomberg

This is the 8th downward revision of durable goods orders in the last year...

Source: Bloomberg

Under the hood, defense and non-defense capital goods orders rose with non-defense aircraft orders surging over 30% MoM...

Source: Bloomberg

But... it looks like the AI bubble just burst as Computer & related Products orders plunged 3.9% MoM - the biggest drop since COVID lockdowns...

Source: Bloomberg

Finally, and more problematically, core capital goods shipments - a figure that is used to help calculate equipment investment in the government’s gross domestic product report - saw only a small 0.2% MoM rise, which left core shipments down 1.2% YoY - the biggest YoY drop since the COVID lockdowns...

Source: Bloomberg

More 'bad' news to BTFD?

Tyler Durden Wed, 04/24/2024 - 08:40



 

 

At the Money: What Data Matters and What Doesn’t  (April 24, 2024)

Bill McBride has spent the past 20 years taking apart economic data, creating “opinion-free” analysis of the economy, and accurately identifying booms, busts, bubbles, and recoveries in real-time, including the great financial crisis and its subsequent housing bottom + recovery. He discusses the data that matters, and the data that doesn’t, and how investors can tell them apart.

Full transcript below.

~~~

About this week’s guest:

Bill McBride has been publishing Calculated Risk since the early 2000s, where his economic analysis has become required reading among investors, most especially those who focus on the housing market.

For more info, see:

Calculated Risk Blog

Calculated Risk Substack

Masters in Business (interview)

LinkedIn

Twitter

~~~

 

Find all of the previous At the Money episodes here, and in the MiB feed on Apple Podcasts, YouTube, Spotify, and Bloomberg.

 

 

 

TRANSCRIPT

 

[Music:  So remember every picture tells a story, don’t it? Every picture tells a story, don’t it? Every picture tells a story, don’t it? Every picture tells a story, don’t it?]

Barry Ritholtz: When it comes to the economy, it seems like everybody has an opinion about what’s going to happen next. Are we getting a recession? Can we execute a soft landing? Is the Fed about to cut rates? Or are they standing pat? And what about inflation? Has it stabilized at a bottom, or is it about to pick up again?

The answers to these questions are mostly just opinions and guesses from folks with rather questionable track records. As it turns out, you can cut through all of this confusing noise and let the economic data tell you its own story.

I’m Barry Ritholtz, and on today’s edition of At the Money, we are going to discuss how to allow economic data to reveal itself to you without the guesswork, opinions, or the usual pundit pontifications. To help us unpack all of this and what it means for your portfolio, let’s bring in Bill McBride. He runs Calculated Risk.

Bill has used economic data to create opinion-free analyses of the economy over the past two decades, and he has accurately identified the problem. booms, busts, bubbles, and recoveries in real-time and at major turning points, including the Great Financial Crisis and its subsequent housing bottom and recovery.

So Bill, let’s just start with economic data. Typically, it’s noisy, most of the time, not especially meaningful. How do you identify what data series to follow, and which releases are important?

Bill McBride: Well, there are several major releases on the employment report, and the GDP report, and since my major focus is on the housing market, there are also housing starts and new home sales, but I follow quite a few other data releases.

Mostly just to see if something’s not tracking what you kind of expect. And it’s really kind of the surprises that change your views or bring you insights, into what’s actually changing in the economy.

Barry Ritholtz: So it sounds like you’re paying the most attention to nonfarm payrolls, which comes out every month, GDP, which comes out quarterly, and then housing, sales, and new home starts, both of which are monthly. Do I have that right?

Bill McBride:  That’s correct. I think those are the major releases to follow.

Barry Ritholtz: Do you think those have the most predictive value as to what happens next?

Bill McBride:  I think the employment report actually tells you the best of what’s happening now. The GDP report tends to, you know, it’s quarterly, it’s, it gets heavily revised.

The unemployment rate is monthly and so you know when the unemployment rate’s at 3. 9 that the economy’s in pretty good shape. New home sales and housing starts do have some predictive value.  Not always, but generally, if new home sales and housing starts are increasing, the economy is going to be fine for the next few years.

If they decrease sharply, there’s a potential for a recession, but it’s not, you know, no model is perfect. We saw a number of major economists get fooled by the inverted yield curve and, and the sharp drop in housing starts and new home sales that were related to the pandemic.

So you always have to take everything with a grain of salt, but I think, there is some predictive value in, in housing starts.

Barry Ritholtz: I like the concept of GDP, Unemployment, and Housing Starts as past, present and future. It really gives you a broad range of what’s going on.

But let’s talk about the flip side of that. What do you think people both investors and economists pay too much attention to? And what data series perhaps, should they be spending less time with?

Bill McBride: I think probably the one people should ignore the most is, uh, is anything doing with sentiment?  It’s more of an opinion, especially in the last decade or two. We’ve seen a real political tinge to it. Especially on the conservative side. When there’s a democratic president  The economy is terrible to many Republicans. And the Democrats, it’s a little bit the same way, but there are some surveys that that’s all it does is really tell you who’s president.

Barry Ritholtz: That’s, that’s fascinating. I always find it amusing when. You look at certain models that have a survey component. Owner’s equivalent rent. What do you think you can rent your house for always kind of cracks me up. And the one that really I couldn’t agree with you more about ignoring sentiment is the Federal Reserve asking ordinary people, where do you think inflation is going to be in five years? I can’t imagine a more useless question than that.

Bill McBride:  There’s probably a little value to that. But I, I understand what you’re saying. Sentiment in general is hard to measure.

Barry Ritholtz: So let’s talk a little bit about inflation. Are there things that you pay close attention to? Rent, food, fuel, mortgage rates? What are you looking at when you want to figure out what’s happening in the world of inflation?

Bill McBride: Inflation is an especially interesting topic right now, obviously, because it impacts what the Fed’s going to do, which also, impacts interest rates. Part of the problem is we had a huge surge in rent. related to household formation, really mostly in 2021, but going into 2022. And now asking rents are basically flat year over year and have been for some time now.

But the measure of rents that go into CPI and PCE. They include renewals, which they should, you know, the people that are getting and renewals are still catching up to the fact  The rent surged a year or two years ago. But this is this is a key point is monetary policy cannot impact what happened to rents two years ago It can only impact what’s happening today, and today’s rents are basically flat asking rents.

So, you know, there’s a different people where sometimes renters say to me, well, wait, my rent still going up. Yeah, but that’s because it’s a renewal and monetary policy doesn’t impact that at all. So when you look at the CPI reports for the last few months, the government’s reporting, one of the sentences in there has been  50 percent is related to rents (or something close to that) of the CPI increase.

So what I’ve been doing is I’ve been taking rents out of the inflation measures to see where we’re at. And we’re much closer., and for several months, we were at the Fed’s target. So this is a little balancing act for the Fed is how much should they look at rents and how much should they exclude it from what they’re doing.

Now, very recently, in the last two or three months, we’ve seen services pick up a little again. And so that is concerning.  But still, if you look at the Cleveland Fed, the median CPI, I think it was close to 4 percent last month annualized.  If you take out rents, it was under 2%, so it was at the Fed’s target.

So this is, this is really one of the key areas on inflation that I’m looking at.

Barry Ritholtz: Let’s talk real estate. There are so many different elements that go into residential housing. It’s people’s incomes, what mortgage rates are at, local housing supply, and the aforementioned rentals. What do you watch most closely in this area? What do you think people should be watching that perhaps they’re not?

Bill McBride: I think, the key to watch is inventory. Um, that’s, that’s important. You know, it’s a there is supply and demand. We still have pretty good demographics. We have a large cohort in the home-buying age group in their thirties. On the flip side, the inventory, of course, has been very low, but it’s starting to increase.

It’s still 30 percent below kind of a normal level. But since sales are down so much, I’ve been looking more at months of supply, and that is probably going to get back to 2019 levels later this year (2024). And that says that you know, house prices will basically be flat to only up slightly by the end of the year, I think.

Barry Ritholtz: In 2022 and 2023, just about every economist out there was looking for a recession. You were not, and you got it right. What were you seeing that told you a recession was not imminent when everybody else seemed to be stuck on the inverted yield curve?

Bill McBride: Well, you know, there were several several economic analysts who didn’t think there would be a recession.

Claudia Sam, who you’ve interviewed recently. Jan Hatsias, Goldman Sachs chief economist, who everybody should read if they get a chance, in 2022, I didn’t see there was no reason to expect a recession at all. In 2023, you started seeing some signs of a possibility. The Federal Reserve staff was even predicting a recession in 2023.

The key thing that people were looking at was the inverted yield curve, which is still inverted. And the fact that housing starts dropped off pretty sharply. But what they weren’t looking at was the other parts of pandemic economics, if you will. Auto sales had been really depressed because of supply issues. And so that meant auto sales were going to pick up in 2023, which they did.

And there were other parts of the economy that had similar things where the supply issues were going to start easing up from the pandemic. If you factored in pandemic economics, I was saying, Hey, we need to watch, but I don’t think we’re going to have a recession.

And we didn’t.

Barry Ritholtz: So given all of the above,  if investors want to focus on one or two data series to give them some idea of where we are and where, where we’re going, what two data series should they be paying attention to over the next few years?

Bill McBride: The unemployment rate and the payroll report is, is, is critical.

What’s important over time changes. There are times when the weekly unemployment claims is very important. That’s not now. That’s important when you really do think that there’s a possibility of a recession — if that really starts climbing sharply, that’s probably your key indicator, but that only matters in that particular situation.

Right now, probably the most important thing is, is the inflation reports. And being able to look at them, look at them with taking the rents out to kind of get a feel for what’s happening. because of this unusual thing that just happened with rents. So I, you know, I would definitely be following both of the inflation reports, CPI and the PCE report.

Barry Ritholtz: So to wrap up, investors should realize they don’t need to follow every data release, every news report, every economic announcement that comes out, but you should be aware of where we are in the cycle. When we’re closer to a recession, when things are in danger of slowing down, um, the weekly new unemployment claims are worth tracking, but in the meantime, you should be watching unemployment rates, you should be watching housing starts, and lastly, you should be paying attention to both CPI and PCE reports to give you a sense of when the Fed, or if the Fed, is going to cut or not.

I’m Barry Ritholtz, and this is Bloomberg’s At The Money.

[Music: Every picture tells a story, don’t it? Every picture tells a story, don’t it?]

 

~~~

 

The post At The Money:  Bill McBride on What Data Matters and What Doesn’t appeared first on The Big Picture.

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 19, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 3 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.2 percent compared with the previous week and was 15 percent lower than the same week one year ago.

“Mortgage rates continued to move higher last week, reaching their highest levels since late 2023 and putting a damper on applications activity. The 30-year fixed rate increased for the third consecutive week to 7.24 percent, the highest since November 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications declined, as home buyers delayed their purchase decisions due to strained affordability and low supply. The ARM share of applications increased to 7.6 percent, consistent with the upward trend in rates, as buyers look to reduce their potential monthly payments.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.24 percent from 7.13 percent, with points increasing to 0.66 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 15% year-over-year unadjusted.  
Red is a four-week average (blue is weekly).  
Purchase application activity is up slightly from the lows in late October 2023, and below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and has mostly flat lined since then.

How Nvidia Uses Gold

Via SchiffGold.com,

What is Nvidia? If you’re a committed gamer the question may sound like nonsense. Nvidia, which was founded in 1993, is a tech company that makes GPUs and other products. It originally specialized in making products for the video game industry, that assisted in 3D rendering. If you were a committed gamer, you probably owned their products. If you weren’t, you might not have heard of them.

But with sudden advances in artificial intelligence, it has been everywhere in the news because its products can also be used for artificial intelligence. Its fourth-quarter revenue from Q4 2022 to 2023 literally increased 265%.

A decade ago, its market capitalization hovered around $10 billion In 2016, it was around $50 billion.. As of April 2024, it was worth over $2 trillion. The Motley Fool ranked it third most valuable publicly traded company in the world, just behind Apple. It is now over five times more valuable than Walmart. It is one of the best-performing stocks of the last few years.

Sometimes the stock market, particularly tech stocks, are placed in a different mental bucket than traditional investments and stores of value, such as gold and silver.

But often precious metals are more closely connected to tech than some think.

And that is because one of the essential components in many of its products is gold. Nvidia uses various metals to make its products- gold of course, as well as tantalum, tungsten and tin. SchiffGold has long covered how demand for industrial silver use is forecasted to rise, but many high-tech industries depend on the industrial use of gold as well.

GPU microchips are made with gold as well as other metals like minum, silicon, and copper because of their useful conductive properties. Of course, the monetary value of gold provides an incentive to minimize its use, but the chemical properties of gold remain so useful that manufacturers continue to use gold in chips and sometimes in internal computer wiring and switches despite their cost.

As competition for the best GPUs heats up and the price of GPUs is likely going to rise due to advances in artificial intelligence, the cost of the metal in GPUs will become less relevant to the overall cost of gold. 

This means that manufacturers can use more gold in their products without dramatically increasing the cost of their GPUs and other products.

Perhaps that’s why some savvy investors are betting on both gold and artificial intelligence companies.

One prominent example is Stanley Druckenmiller who shifted his allocation away from big tech and towards AI and gold.

More gold may currently be used for investment or jewelry than in high-tech, but it’s intriguing that humanity’s newest and most advanced technology, artificial intelligence, has looped around to depend on our oldest kind of money.

Gold’s resilience depends on its historic, current, and future usage as money. It’s buoyed by its beauty and use in jewelry and decoration. But its value is also driven by its unique chemical features that power the greatest technologies in the world.

The cost of gold encourages companies to seek alternatives to it, but its natural features guarantee that it’s still used as a vital component of computers and GPUs despite its cost.

Tyler Durden Wed, 04/24/2024 - 06:30

Senates Passes $95 Billion Aid Bill For Ukraine, Israel And Taiwan, Forces Sale Of TikTok

The republicans do what they always do best: fold like cheap lawn chairs.

Moments ago, in a 79-18 vote, the Democrat-controlled Senate passed a long-delayed $95.3 billion foreign-aid package sending $60.8 billion in ammunition and military equipment to Ukrainian soldiers, as well as billions of soon-to-be-embezzled dollars to the offshore real estate agents of Ukraine's corrupt oligarchs while also fortifying Israel’s missile defense systems with $26.4 billion, and leaving $8 billion for Taiwan as if that will do anything to stop a Chinese invasion. Oh, and speaking of Chinese invasions, the Senate also just forced the sale of the China-owned TikTok in the U.S.

There will be, of course, no change to the invasion at the southern US border because here too Republicans keep folding like cheap lawn chairs to the Democrat ploy to flood the US with illegal aliens who will get free shit for life if only they keep voting for the blue team.

The bill had broad support in the Senate, with backing from almost all Democrats and a majority of Republicans. Several Republicans who had opposed an earlier iteration of the package, which came after a failed push to attach it to a border-policy overhaul, switched their vote to support Tuesday’s bill. The breakdown of the votes is as follows:

GOP NO VOTES:

• Barrasso
• Blackburn
• Braun
• Budd
• Cruz
• Hagerty
• Hawley
• Johnson
• Lee
• Lummis
• Marshall
• Rubio
• Scott (FL)
• Schmitt
• Vance  

DEM NO VOTES:

• Merkley
• Sanders
• Welch

The vote brought to a close months of pointless sound and fury, and endless debate over Ukraine, that allegedly split the Republican Party,  with rank-and-file members openly rebelling against their leaders, who succeeded in outdemocrating the democrats.

Biden, McConnell, Schumer, Johnson, and major media players are taking a victory lap over pushing through an additional $61 billion in funding from struggling taxpayers as year 3 of the Ukraine proxy war begins. They want to own this and absolutely should be forced to own this.

— Mollie (@MZHemingway) April 24, 2024

The theatrical "fight" also called into question both how far the US would go to defend Ukraine, now in the third year of trying to repel Russia’s invasion, as well as America’s leadership role in the world, once the latest rescue funding is exhausted in a few months, which it will be, with the Ukraine having made zero progress in its war with Russia.

The measure passed the House on Saturday and now goes to President Biden’s desk. Biden, who has been pushing for a big foreign-aid package since the fall, said he would quickly sign the measure into law Wednesday.

President Biden on Senate’s passage of $95 billion aid package with funding for Ukraine, Israel and Taiwan: “I will sign this bill into law and address the American people as soon as it reaches my desk tomorrow so we can begin sending weapons and equipment to Ukraine this week.” pic.twitter.com/eOAbtzNqWq

— Joey Garrison (@joeygarrison) April 24, 2024

As broken down below, the measure contains money for Ukraine, Israel and Taiwan, as well as humanitarian aid for Gaza—largely matching an earlier Senate bill—plus additions made by the House, such as sanctions on Russia and Iran and the TikTok provision. Leaders in the GOP-controlled House also changed roughly $9.5 billion in economic aid to Ukraine into forgivable loans rather than grants, to make it more politically palatable to Republicans, as if Ukraine will ever repay anything.

Senate Majority Leader Chuck Schumer (D., N.Y.) credited the White House as well as Republicans who backed Ukraine for advancing the measure, noting that House Speaker Mike Johnson (R., La.) put his political future on the line when he moved forward with the package.

“In a resounding bipartisan vote, the relentless work of six long months has paid off,” Schumer said on the senate floor. In a statement, Biden thanked lawmakers of both parties, saying they answered “history’s call at this critical inflection point” by sending a message to allies and foes about American power.

And just like that the deeply embedded deep state operative formerly known as the House speaker has become the media's darling overnight:

All it takes to get the media to change from mocking and reviling you to slobbering you with praise is to do what they want. It only takes $100B and the betrayal of your voters' policy goals, but what are those silly things compared to praise from the media! https://t.co/id0VrzC77D

— Mollie (@MZHemingway) April 24, 2024

Of course, while superficially the bill says "aid to Ukraine" where the majority of the money is really going is to the US military industrial complex. As the WSJ reports, the proposal has roughly $60 billion for Ukraine, most of which would flow to the U.S. defense industry for additional weapons such as ammunition and rocket launchers. The new aid comes on top of the more than $100 billion spent on the Defense Industry Kyiv since Russia invaded in February 2022.

And while most muppets in the House and Senate are clearly in the pocket of the military-industrial complex and the deep state, a few holdouts remains.

Sen. Eric Schmitt (R., Mo.), who voted against the measure, called the support for Ukraine to defend its borders “an insult to the American people” while the U.S. struggles with an influx of migrants at its own border with Mexico.

Sen. Ted Cruz (R., Texas) called his opposition to the proposal’s advancement “one of the toughest votes I’ve cast during my years in the Senate,” saying he couldn’t overcome his concern that humanitarian aid would end up in the hands of terrorists, among other worries.

Others were more "malleable" in their ideological beliefs.

Sen. Markwayne Mullin (R., Okla.), who switched from voting against the Senate’s aid package in February to supporting the revised version on Tuesday, said that the politics were complicated.   “Our approach this time was to make sure that the politics are set, meaning that President Trump was on board, it’s something that could be passable, it’s something that could be explained,” he said.

Sen. James Lankford (R., Okla.), who also switched his vote, said he didn’t want to “punish Israel and Ukraine” over the lack of border provisions. Lankford had led a failed bipartisan effort to find a compromise on immigration, which was shot down by Republicans earlier this year as not tough enough.

Asked why some Senate Republicans were slow to support aid for Kyiv, 3000-year-old Senate mummy Mitch McConnell cited the “demonization of Ukraine” by conservative political commentator Tucker Carlson. “He had an enormous audience, which convinced a lot of rank and file Republicans that maybe this was a mistake,” McConnell said in a press conference. Carlson declined to comment.

Mummified Mitch also laid blame on former President Donald Trump, Democrats and the border crisis for the amount of time it took to get most Republican lawmakers to acquiesce in continuing to fund the Ukrainian war effort.

“I think the former president had sort of mixed views on it,” he said of Trump’s position on Ukraine aid. “We all felt that the border was a complete disaster, myself included,” McConnell continued, noting that the attempt earlier this year to attach border security provisions to Ukraine funding required senators to “deal with Democrats … and then a number of our members thought it wasn’t good enough.”

“And then our nominee for president didn’t seem to want us to do anything at all,” McConnell said. “That took months to work our way through it.”

Last but not least, the bill also starts the clock on TikTok’s Chinese-controlled owner ByteDance to find a new owner for the video app in the U.S. within a year, or risk a shutdown. But the matter is expected to be decided by the federal courts which means that it will quietly die on some bench in the corrupt US legal system. A court dispute would likely require judges to weigh the national security objectives of the ban against the First Amendment rights of TikTok and its users.

Tyler Durden Wed, 04/24/2024 - 05:58

Meet The New ETFs That Are Offering '100% Downside Protection'

If 100% downside protection is the norm for banks that are too big to fail on Wall Street, why shouldn't it be for everyday investors?

This is the question that a number of ETF innovators are apparently asking, as a wave of new ETFs offering '100% downside protection' are getting ready to hit the market, in the push to find the newest ETF fad. 

After all, something has to replace all of the ESG ETFs that have shuttered in the last year.

Calamos Investments has introduced new exchange-traded funds offering partial returns tracking the S&P 500, Nasdaq 100, and Russell 2000, coupled with complete downside protection through derivatives, Bloomberg reported this week.

The inaugural ETF, Calamos S&P 500 Structured Alt Protection ETF, aims to mirror the SPDR S&P 500 ETF Trust's price returns up to a 9.65% cap.

Full protection requires purchasing the ETF on its launch day, May 1, 2024, and maintaining the investment until April 30, 2025. This ETF, and others soon to be launched, will use call and put options to manage market volatility, though their effectiveness in fully safeguarding against losses is not guaranteed.

Matt Kaufman, head of ETFs at Calamos commented: “With risk-free rates north of 5% today, options-based product issuers are able to deliver meaningful upside participation with 100% capital protection."

He continued: "For those issuing ‘protective’ products, the cost of hedging by selling an option — or series of options — to offset the premium to buy a protective put becomes cheaper as rates rise.”

Issuers are launching funds that blend equity exposure with downside protection amid fluctuating interest rates, Bloomberg writes. 

For example, the Innovator Equity Defined Protection ETF, launched in July, has amassed $230 million by offering complete downside protection over two years. BlackRock, the top ETF issuer globally, is also proposing similar funds.

Unlike earlier "buffer ETFs" introduced in 2018 that protect against initial losses up to a point (such as the first 10%), these new funds from Calamos offer less upside potential but greater downside security.

Kaufman concluded: “For people as they age, nearing retirement — they can’t afford the significant drawdowns of the market, but they also can’t afford to not be in the market. So this gives them an opportunity.”

Tyler Durden Wed, 04/24/2024 - 05:45

AI Chatbots Refuse To Produce 'Controversial' Output - Why That's A Free Speech Problem

Authored by Jordi Calvet-Bademunt and Jacob Mchangama via TheConversation.com,

Google recently made headlines globally because its chatbot Gemini generated images of people of color instead of white people in historical settings that featured white people. Adobe Firefly’s image creation tool saw similar issues. This led some commentators to complain that AI had gone “woke.” Others suggested these issues resulted from faulty efforts to fight AI bias and better serve a global audience.

The discussions over AI’s political leanings and efforts to fight bias are important. Still, the conversation on AI ignores another crucial issue: What is the AI industry’s approach to free speech, and does it embrace international free speech standards?

We are policy researchers who study free speech, as well as executive director and a research fellow at The Future of Free Speech, an independent, nonpartisan think tank based at Vanderbilt University. In a recent report, we found that generative AI has important shortcomings regarding freedom of expression and access to information.

Generative AI is a type of AI that creates content, like text or images, based on the data it has been trained with. In particular, we found that the use policies of major chatbots do not meet United Nations standards. In practice, this means that AI chatbots often censor output when dealing with issues the companies deem controversial. Without a solid culture of free speech, the companies producing generative AI tools are likely to continue to face backlash in these increasingly polarized times.

Vague and broad use policies

Our report analyzed the use policies of six major AI chatbots, including Google’s Gemini and OpenAI’s ChatGPT. Companies issue policies to set the rules for how people can use their models. With international human rights law as a benchmark, we found that companies’ misinformation and hate speech policies are too vague and expansive. It is worth noting that international human rights law is less protective of free speech than the U.S. First Amendment.

Our analysis found that companies’ hate speech policies contain extremely broad prohibitions. For example, Google bans the generation of “content that promotes or encourages hatred.” Though hate speech is detestable and can cause harm, policies that are as broadly and vaguely defined as Google’s can backfire.

To show how vague and broad use policies can affect users, we tested a range of prompts on controversial topics. We asked chatbots questions like whether transgender women should or should not be allowed to participate in women’s sports tournaments or about the role of European colonialism in the current climate and inequality crises. We did not ask the chatbots to produce hate speech denigrating any side or group. Similar to what some users have reported, the chatbots refused to generate content for 40% of the 140 prompts we used. For example, all chatbots refused to generate posts opposing the participation of transgender women in women’s tournaments. However, most of them did produce posts supporting their participation.

Freedom of speech is a foundational right in the U.S., but what it means and how far it goes are still widely debated.

Vaguely phrased policies rely heavily on moderators’ subjective opinions about what hate speech is. Users can also perceive that the rules are unjustly applied and interpret them as too strict or too lenient.

For example, the chatbot Pi bans “content that may spread misinformation.” However, international human rights standards on freedom of expression generally protect misinformation unless a strong justification exists for limits, such as foreign interference in elections. Otherwise, human rights standards guarantee the “freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers … through any … media of … choice,” according to a key United Nations convention.

Defining what constitutes accurate information also has political implications. Governments of several countries used rules adopted in the context of the COVID-19 pandemic to repress criticism of the government. More recently, India confronted Google after Gemini noted that some experts consider the policies of the Indian prime minister, Narendra Modi, to be fascist.

Free speech culture

There are reasons AI providers may want to adopt restrictive use policies. They may wish to protect their reputations and not be associated with controversial content. If they serve a global audience, they may want to avoid content that is offensive in any region.

In general, AI providers have the right to adopt restrictive policies. They are not bound by international human rights. Still, their market power makes them different from other companies. Users who want to generate AI content will most likely end up using one of the chatbots we analyzed, especially ChatGPT or Gemini.

These companies’ policies have an outsize effect on the right to access information. This effect is likely to increase with generative AI’s integration into search, word processors, email and other applications.

This means society has an interest in ensuring such policies adequately protect free speech. In fact, the Digital Services Act, Europe’s online safety rulebook, requires that so-called “very large online platforms” assess and mitigate “systemic risks.” These risks include negative effects on freedom of expression and information.

Jacob Mchangama discusses online free speech in the context of the European Union’s 2022 Digital Services Act.

This obligation, imperfectly applied so far by the European Commission, illustrates that with great power comes great responsibility. It is unclear how this law will apply to generative AI, but the European Commission has already taken its first actions.

Even where a similar legal obligation does not apply to AI providers, we believe that the companies’ influence should require them to adopt a free speech culture. International human rights provide a useful guiding star on how to responsibly balance the different interests at stake. At least two of the companies we focused on – Google and Anthropic – have recognized as much.

Outright refusals

It’s also important to remember that users have a significant degree of autonomy over the content they see in generative AI. Like search engines, the output users receive greatly depends on their prompts. Therefore, users’ exposure to hate speech and misinformation from generative AI will typically be limited unless they specifically seek it.

This is unlike social media, where people have much less control over their own feeds. Stricter controls, including on AI-generated content, may be justified at the level of social media since they distribute content publicly. For AI providers, we believe that use policies should be less restrictive about what information users can generate than those of social media platforms.

AI companies have other ways to address hate speech and misinformation. For instance, they can provide context or countervailing facts in the content they generate. They can also allow for greater user customization. We believe that chatbots should avoid merely refusing to generate any content altogether. This is unless there are solid public interest grounds, such as preventing child sexual abuse material, something laws prohibit.

Refusals to generate content not only affect fundamental rights to free speech and access to information. They can also push users toward chatbots that specialize in generating hateful content and echo chambers. That would be a worrying outcome.

Tyler Durden Wed, 04/24/2024 - 05:00

Flying Cars Are Becoming Reality In China

Multiple Chinese companies are focused on commercializing flying cars, utilizing a design that is different from the popular eVTOL aircraft that have been developed over the last several years, according to a new report from Nikkei this week. 

XPeng AeroHT, an affiliate of the electric vehicle startup, plans to market a dual-mode eVTOL vehicle capable of both driving on roads and flying. The Civil Aviation Administration of China is currently reviewing the aircraft for commercial certification.

Nikkei reports that pre-orders in China are set to start in October, with mass production anticipated next year, targeting tourism companies and outdoor enthusiasts. Initially priced around 1 million yuan ($138,000), XPeng AeroHT aims to reduce costs in the future and is also planning to expand internationally.

Qiu Mingquan, vice president at XPeng AeroHT commented: "Normal eVTOL vehicles cannot drive on the ground, but our model is dual use."

"If large-scale mass production becomes possible, we can dramatically reduce costs," Qiu said, adding: "The Middle East is an important market for us, given the level of regulation, openness to new things and cost."

And, hey - the best part is you almost can't even notice a difference from a regular looking car!

As is blindingly obvious from the above photo, XPeng AeroHT is developing an integrated eVTOL aircraft that doesn't require detachment, with the flight propeller folding on top during road use.

It debuted a concept model at a Las Vegas trade show in January. Meanwhile, EHang's two-seater EH216-S, capable of a 25-minute flight per charge, began sales on April 1 after receiving type certification in October. Last month, EHang was authorized for mass production and plans to partner with hospitality businesses for tourism services.

The report notes that China leads globally in eVTOL development, holding 50% of the world’s models, significantly ahead of the U.S. and Germany. This surge is supported by advancements in EV technologies like high-density batteries essential for eVTOLs, with Chinese firms like CATL at the forefront.

Other Chinese initiatives include Guangzhou Automobile Group's GOVE eVTOL with a detachable aircraft section, and Geely’s Aerofugia, a six-seater for longer flights. China's burgeoning "low-altitude economy," which includes eVTOLs, drones, and helicopters, is being actively promoted by the government alongside biotech and space industries, with local support measures from cities like Shenzhen and Guangzhou.

However, the expansion faces challenges such as limited takeoff/landing infrastructure and undefined traffic regulations for eVTOLs.

One eVTOL executive told Nikkei: "We will be forced to fly relatively infrequently for the next few years."

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

Wind Overtakes Fossil Fuels As The UK's Largest Power Generation Source

Authored by Charles Kennedy via OilPrice.com,

The UK saw two consecutive quarters of wind power overtaking fossil fuels as the single-largest source of electricity generation for the first time, per data from think tank Ember quoted by Reuters columnist Gavin Maguire.

In the first quarter of 2024, wind-generated a total of 25.3 terawatt hours (TWh) of Britain’s electricity, higher than the 23.6 TWh generated from fossil fuel sources, Ember data showed.

As a result, wind power generated an average of 39.4% of the UK’s electricity between January and March 2024, versus a 36.2% share of fossil fuel generation.  

Wind power generation, however, could begin to dip with warmer and still weather in the summer months, Reuters’s Maguire notes.

Last September, a report prepared for power group Drax showed that Britain has now installed more wind capacity than any other type of power source, with wind power capacity overtaking combined-cycle gas power stations for the first time and ending more than a century of fossil fuels dominating the electricity system.

As of June 2023, Britain’s fleet of wind farms reached 27.9 gigawatts (GW) of capacity, exceeding the gas-powered stations total capacity of 27.7 GW, according to the study prepared by experts from Imperial College London and the University of Sussex for the quarterly Drax Electric Insights.

For the whole of 2023, power generation from renewable technologies matched the previous record high of 2022 but renewables’ share of electricity generation increased to a record 47.3%, UK government data showed last month.

Wind generation hit a record-high share of 28.7% of generation in 2023, up from just 2.7% back in 2010.

Generation from fossil fuels fell to a record low, a share of 36.3%, but generation from gas remained the principal form of UK generation at 34.3%, the statistics from the UK’s Department for Energy Security and Net Zero showed.

Low carbon power generation, of renewables and nuclear combined, increased to a record-high share of 61.5% in 2023.

Tyler Durden Wed, 04/24/2024 - 03:30

Germany Arrests EU Parliament Aide On China Espionage Charges

A staffer who worked for a high profile German member of European Parliament for years has been arrested on charges of spying for Chinese intelligence, Germany’s federal prosecutor’s office announced on Tuesday.

Identified only as Jian G., he had reportedly been a staff member for German MEP Maximilian Krah going back to 2019. Krah is with what mainstream media commonly dubs the "far-right" AfD (Alternative for Germany party).

"In January 2024 the accused repeatedly shared information about negotiations and decisions in the European Parliament with his intelligence service employer," the prosecutors office said.

European Parliament, Getty Images

The suspect has also been accused of spying on and monitoring Chinese opposition communities inside Germany. Beijing has long been suspected in the West, including the US, of keeping close tabs on the political leanings and activism of expat enclaves via a network of spies connected to consulates.

German interior minister Nancy Faeser subsequently announced on X, "If it is confirmed that there was espionage for Chinese intelligence services from within the European Parliament, then that would be an attack on European democracy from within. Whoever employs such a person carries responsibility."

The investigation into "Jian G", who was detained Monday, was led by German domestic intelligence services. Recent days and weeks have seen other arrests in Europe of suspected Chinese spies, including a couple in the UK in recent days.

On Tuesday China's foreign minister reacted by denouncing the "hype" surrounding such cases, describing it as more anti-China propaganda aimed at political manipulation and to ratchet pressure on Beijing.

According to Politico, "The bombshell arrest, which rocks the AfD while it polls in second place nationally, sparked calls from one top European lawmaker for a tougher crackdown on Chinese and Russian infiltrators attempting to influence EU democracy."

Tyler Durden Wed, 04/24/2024 - 02:45

"Let's Debunk The Myth That Mass-Migration Brings An Economic Benefit", Says Former UK Immigration Minister

Authored by Thomas Brooke via ReMix News,

The notion that mass immigration brings a net economic benefit to a developed nation is a myth that needs to be debunked, a former U.K. government minister who resigned over the spiraling numbers arriving in Britain has claimed.

In an interview with the Conservative Home website, Robert Jenrick, the Conservative MP who stepped down from his role as immigration minister in the Home Office last year, called the government’s post-Brexit immigration policy a “complete disaster” and a “betrayal to voters” who for decades have elected parties promising to cut the number of new arrivals into Britain.

“The numbers are just so large that it has a proportionally much greater impact on everyone’s lives. This cuts to the housing crisis, why we have such low productivity, and why we have concerns about community cohesion and integration,” he told the site.

Net migration is at record levels in Britain since the U.K. left the European Union, peaking in the year to December 2022 at 745,000. It subsequently fell to 672,000 in the year to June 2023, but after leaving the European Union Single Market, this is a paradox that Jenrick finds difficult to accept.

“For years, politicians made promises to cut legal migration they knew they couldn’t keep because ultimately the UK was beholden to the EU’s freedom of movement.

“The great reform was the Conservative Party delivering Brexit, which finally took back control of the levers of migration. But the decisions made in the immediate aftermath of the Brexit vote were a betrayal to voters — they created a system that was even more liberal than the one before by lowering the salary threshold, creating a graduate route and an unregulated social care visa,” he said.

“Frankly, these decisions were two fingers up to the public, and in public policy terms they’ve been a complete disaster.”

Prime Minister Rishi Sunak has made “stopping the boats” a key pledge throughout his tenure in Downing Street — a nod to the illegal immigration crisis on England’s southern shores as thousands of undocumented migrants are transported across the English Channel from mainland Europe where they claim asylum and use human rights laws to avoid deportation.

However, despite attempts to combat this issue through the flagship Rwanda policy — a plan to deport migrants to the African nation for offshore processing — Jenrick believes that this is the tip of the iceberg when it comes to tackling immigration.

“To me, legal migration has always been the more important issue,” he explained.

“I’m 42, and for my entire adult life, if not longer, political parties of all persuasions have stood at elections saying they’re going to bring down the level of legal migration.

“All alighted on this challenge, said they were going to take action, and all ultimately failed.”

The Conservative MP challenged the view that mass immigration has a net economic benefit on a developed country like Britain, highlighting that just 15 percent of non-EU migrants who came to the country last year arrived with work visas.

“So, the overwhelming majority of people were students, dependants, or were those coming as refugees.”

The figure is actually slightly higher than 15 percent. In the year to June 2023, 968,000 non-EU migrants arrived in Britain, of which just 169,000 were the main applicants on a work visa, amounting to 17.5 percent.

“One can make arguments for and against each of those categories, but they’re not people who are demonstrably making an economic contribution to this country.”

He warned the economic model that Britain has adopted when it comes to immigration isn’t working.

“If importing hundreds of thousands of foreign workers to the UK was a route to prosperity, the U.K. would be one of the richest countries in the world,” he said, adding that Britain has been in a recession in terms of GDP per capita for almost the last two years.

“I care about the prosperity of our own citizens, not the overall size of the economy.”

The former immigration minister accused businesses in Britain of becoming “hooked on the drug of imported foreign labor” and said the government had done too little to “boost training for young people in our country” to take on jobs in key sectors like construction.

He urged the government to adopt a “highly selective” immigration policy that enables it to choose the types of people that will make an economic contribution to Britain, noting that there is no longer the bogeyman of the European Union to fall back on as a reason why immigration figures should remain as high as they are now.

“What we need is radically reduced, highly-selective, high-skilled, and high-productivity migration,” Jenrick added, suggesting that an annual cap could “serve as a democratic lock” on Britain’s immigration policy and ensure that promises to the electorate to bring down the numbers are met.

Several studies support Jenrick’s observation that mass immigration is an economic drag on developed nations.

In November 2021, a Danish Ministry of Finance report revealed that the net cost of immigration from non-Western countries, after tax contributions had been deducted, amounted to €4.2 billion in 2018.

Similarly, a study from the University of Amsterdam published in December last year revealed the net cost to the Dutch public sector for decades of mass immigration between 1995 and 2019 was €400 billion, averaging €17 billion a year.

The research categorized the types of migrants arriving in the Netherlands during that time by nationality, revealing that those arriving from other EU and European countries had a net positive contribution to the Dutch economy, while those coming from countries such as Turkey and Morocco had cost the Dutch taxpayer the most with a net negative contribution of €200,000 and €260,000, respectively.

Read more here...

Tyler Durden Wed, 04/24/2024 - 02:00

A $250 Million War Game And Its Shocking Outcome

Authored by Nick Giambruno via InternationalMan.com,

At a cost of $250 million, Millennium Challenge 2002 was the largest and most expensive war game in Pentagon history.

With over 13,500 participants, the US government took over two years to design it.

The exercise pitted Iran against the US military. Washington intended to show how the US military could defeat Iran with ease.

Paul Van Riper, a three-star general and 41-year veteran of the Marine Corps, led Iranian forces in the war game. His mission was to take on the full force of the US military, led by an aircraft carrier battle group and a large amphibious landing force in the Persian Gulf.

The results shocked everyone…

Van Riper waited for the US Navy to pass through the shallow and narrow Strait of Hormuz, which made them sitting ducks for Iran’s unconventional and asymmetric warfare techniques.

The idea is to level the playing field against a superior enemy with swarms of explosive-laden suicide speedboats, low-flying planes carrying anti-ship missiles, naval mines, and land-based anti-ship ballistic missiles, among other low-cost but highly effective measures.

In minutes, Van Riper emerged victorious over his superior opponent and sank all 19 ships. Had it been real life, 20,000 US sailors and marines would have died.

Millennium Challenge 2002 was a complete disaster for the Pentagon, which had spent a quarter of a billion dollars to set up the extensive war game. It produced the exact opposite outcome they wanted.

So what did the Pentagon do with these humbling results?

Like a child playing a video game, they hit the reset button. They then rigged and scripted the game so that the US was guaranteed to win.

After realizing the integrity of the war game had been compromised, a disgusted Van Riper walked out mid-game. He then said:

“Nothing was learned from this. And a culture not willing to think hard and test itself does not augur well for the future.”

The main lesson of Millennium Challenge 2002 is that aircraft carriers—the biggest and most expensive ships ever built—wouldn’t last a single day in combat against even a regional power like Iran. Russia and China would have an even easier time dispatching them. They are overpriced toys.

That means the US has wasted untold trillions on military hardware that could prove to be worthless in a serious conflict.

Nonetheless, the US government still parades aircraft carriers around the world from time to time to try to intimidate its enemies.

However, it’s a flawed strategy prone to catastrophic results if someone calls their bluff.

While Millennium Challenge 2002 occurred more than 20 years ago, it is of paramount importance today.

Iran has substantially improved its asymmetric and unconventional warfare capabilities. It’s doubtful the US military would fare much better today than 20 years ago.

In short, war with Iran today could be even more disastrous than the Millennium Challenge 2002 simulation.

Unfortunately, war with Iran is an increasingly probable outcome as tensions in the Middle East are at their highest point in generations and are trending higher.

Previously, I lived in Beirut, Lebanon, for several years while working for an investment bank. The experience was effectively an advanced training course in Middle East geopolitics. Today, it helps me see the big picture in the region… and unfortunately, it isn’t pretty.

I think the next big war in the Middle East is coming soon and could be the biggest one ever. It will focus on Iran.

The market doesn’t appreciate how close we are to a big war and the implications of it.

But this distortion in the market is a blessing. It’s handing us a golden opportunity.

First and foremost, I think there’s a huge opportunity to profit in the oil market right now.

I’m certainly not cheering for war. I despise war, which is the health of the State.

Regardless, a big war is highly likely, with significant investment implications that would be foolish to ignore.

In short, we are only one escalation away from potentially the biggest oil shock in history as the Middle East is on the verge of the largest regional war in generations.

Fortunately, it doesn’t have to blindside you, your family, or your portfolio.

Quite the contrary.

That’s precisely why I just released an urgent new report with all the details, including what you must do to prepare. It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now. Click here to download the PDF now.

Tyler Durden Wed, 04/24/2024 - 00:05

Chinese FX Outflows Soar, Priming The Next Bitcoin Surge

Last October, when we pointed out that China's FX outflows had just hit a whopping $75BN - the single biggest monthly outflow since the 2015 currency devaluation - we concluded that the "unfavorable interest rate spread between China and the US will "likely imply persistent depreciation and outflow pressures in coming months", or in other words, September's biggest FX outflow in years is just the beginning, and very soon - in addition to geopolitics and central banks - the world will also be freaking out about the capital flight out of China... not to mention where all those billions in Chinese savings are going and which digital currency the Chinese are using to launder said outflows."

We wrote that on October 20 when Bitcoin was trading just under $30,000, a level it had been for much of 2023. And, just as we correctly predicted at the time...

Clockwork: every time China FX outflows surge, bitcoin erupts.

From last Friday: China Capital Flight Panic Eruptshttps://t.co/j0eWLnbFMq

— zerohedge (@zerohedge) October 24, 2023

... following this surge in Chinese FX outflows, bitcoin - traditionally China's preferred means to circumvent Beijing's great capital firewall since gold is, how should one put it, a bit more obvious when crossing borders - promptly exploded more than 100% higher in the next 4 months.

And while conventional wisdom is that this surge in the price of the digital currency was largely due to the January launch of Bitcoin ETFs, what many missed was a Reuters story in January which confirmed our thesis from back in 2015, according to which much more than ETFs, and much more than rapidly shifting sentiment or frankly any day-to-day newsflow, it is China's massive wall of inert capital that has been the biggest driver of bitcoin moves, and never more so than during periods of FX and capital outflows which usually precede some form of capital controls.

We bring all this up because six months after our first correct prediction that China's spike in FX outflows would send bitcoin surging, it's time to do it again.

One wouldn't know if, however, if one merely looked at the official Chinese FX reserve data published by the PBOC, here nothing sticks out. In fact, at $3.246 trillion, reported Chinese reserves are now near the highest level in past four years, and monthly flows are very much stable as shown in the chart below.

The problem, of course, is that as we have explained previously China's officially reported reserves are woefully (and perhaps purposefully) inaccurate of the bigger picture.

Instead if one uses our preferred gauge of FX flows, one which looks at i) onshore outright spot transactions; ii) freshly entered and canceled forward transactions, and iii) the SAFE dataset on “cross-border RMB flows, we find that China's net outflows were $39bn in March, up from $11bn in February and the fastest pace of outflows since the September spike in FX outflows which we duly noted half a year ago.

How did we get this number? The portfolio investment channel showed net outflows in March. The Stock Connect channel showed net outflows of US$8bn vs. US$5bn inflows in February, and inflows to the bond market slowed in March (US$6bn, vs. US$11bn in February)...

... primarily on record net selling of central government bonds.

Finally, the current account channel showed also net outflows in March, mainly as services trade related outflows picked up.

At the time when FX outflows were re-acclererating, the broad USD strengthened further in March, and USD/CNY spot drifted higher, as one would expect when there is capital flight... Oh, and Bitcoin hit a record high above $70K.

And while Chinese policymakers are still keen on maintaining FX stability - the countercyclical factors in the daily CNY fixing remained deeply negative and front-end CNH liquidity tightened notably in recent weeks - the reality is that with China desperate to boost its exports at a time when its great mercantilist competitor, Japan, has hammered the yen to the lowest level in 3 decades, it is only a matter of time before the currency devaluation advocates win, as they did in 2015. 

We hope that we don't have to remind readers that the first big trigger for bitcoin's unprecedented eruption higher starting in 2015 was - you guessed it - China's August 2015 FX devaluation.

So don't be surprised if in the next 6 months Bitcoin doubles again, and the move has nothing to do with ETF inflows, the halving, or frankly anything else taking place in the US... and instead is entirely driven by China's massive wall of money which at last check was almost 3x bigger than the US.

Tyler Durden Tue, 04/23/2024 - 23:25

Biden Admin To Pay $139 Million To Victims For FBI Failures In Sex Abuse Investigation

By Tom Ozimek of The Epoch Times

The Biden administration has agreed to pay over $138 million to victims of convicted sex abuser Larry Nassar while acknowledging the FBI’s failures to properly investigate warnings that the sports physician was exploiting his position to molest young girls under the guise of treatment.

The Department of Justice (DOJ) said in an April 23 statement that it had settled 139 civil claims arising from allegations of sexual abuse committed by Mr. Nassar, who was earlier found guilty of having abused hundreds of victims under the pretext of performing medical treatments.

The settlements—which total $138.7 million—resolve administrative claims made against the DOJ alleging that the FBI failed to carry out an adequate investigation into Mr. Nassar’s actions.

Larry Nassar, a former team USA Gymnastics doctor who pleaded guilty in November 2017 to sexual assault charges, stands in court during his sentencing hearing in the Eaton County Court in Charlotte, Michigan, U.S., Feb. 5, 2018. (Rebecca Cook/Reuters)

A DOJ watchdog found in July 2021 that parts of the FBI’s response to allegations against Mr. Nassar, as well as the agency’s investigation into his actions, were inadequate.

The “FBI failed to conduct an adequate investigation of Nassar’s conduct,” Acting Associate Attorney General Benjamin Mizer said in a statement.

“For decades, Lawrence Nassar abused his position, betraying the trust of those under his care and medical supervision while skirting accountability,” he continued.

“These allegations should have been taken seriously from the outset. While these settlements won’t undo the harm Nassar inflicted, our hope is that they will help give the victims of his crimes some of the critical support they need to continue healing,” Mr. Mizer added.

The $138.7 million will be distributed to the claimants.

There have been other settlements involving Mr. Nassar, who was the U.S. women’s gymnastics team doctor.

In total, settlements concerning the convicted sex abuser have totaled nearly $1 billion, including Michigan State University agreeing to pay $500 million to over 300 women and girls whom he assaulted. "Institutional Betrayal" After allegations of Mr. Nassar’s abuse were first reported to the FBI Indianapolis Field Office by the president of USA Gymnastics in 2015, local field agents failed to respond “with the utmost seriousness and urgency that the allegations deserved and required,” the 2021 report by the DOJ’s Office of Inspector General (OIG) found.

Further, the report found that two FBI officials lied during their interviews to cover up or minimize their errors. One of the agents also made a false statement to the media in 2017 and 2018 about how his office handled the Nassar case.

That agent also violated the FBI’s conflict of interest policy by discussing a possible job with the U.S. Olympic Committee while he was involved with the Nassar investigation.

The watchdog noted the seriousness of the former agents lying during the investigation into their conduct in the years after the events but said there wasn’t enough to bring a federal criminal case.

The Justice Department has acknowledged that it failed to step in. For more than a year, FBI agents in Indianapolis and Los Angeles had knowledge of allegations against him but apparently took no action, an internal investigation found.

FBI Director Christopher Wray spoke to survivors of Mr. Nassar’s abuse at a Senate hearing in 2021, expressing contrition for the agency’s failures. The assault survivors include decorated Olympians Simone Biles, Aly Raisman, and McKayla Maroney.

“I’m sorry that so many different people let you down, over and over again,” Mr. Wray said. “And I’m especially sorry that there were people at the FBI who had their own chance to stop this monster back in 2015 and failed.”

After a search, investigators said in 2016 that they had found images of child sex abuse and followed up with federal charges against Mr. Nassar.

Continue reading at the Epoch Times

Tyler Durden Tue, 04/23/2024 - 23:05

"That's Concerning": US Indo-Pacific Commander Warns China Becoming More Aggressive As Economic Recovery "Failing" 

One of the biggest questions of our time is whether China and the United States can escape Thucydides's Trap. It seems that, in the short term, the US will likely avoid direct conflict with China, but in the long term, there will be a slow march toward conflict in the Indo-Pacific region. 

On Tuesday, Admiral John Aquilino, the head of the US Indo-Pacific Command (INDOPACOM), told reporters in Tokyo that China has become increasingly aggressive across Asia. 

"We all need to understand that it's moving very fast," Aquilino said, as quoted by Bloomberg. 

He said, "The buildup of military power despite a bad economy, the increased narrative of all things inside the 10-dash line are Chinese sovereign territory, then the actions that are going toward enforcement."

After serving three years as the head of INDOPACOM, Aquilino will step down. He oversees 380,000 soldiers, sailors, Marines, airmen, guardians, Coast Guardsmen, and Department of Defense civilians. 

He warned about rising tensions near the Second Thomas Shoal, where the Philippines has held the line since World War II. A recent incident of Chinese vessels using water cannons to block Philippine military vessels has been an ominous sign for some military observers. 

Aquilino also spoke about China's economy, indicating the world's second-largest economy "has drastically been reduced" because of a "real-estate market crash."

"You go ask any economist if the Chinese are going to deliver 5.3% growth, and they will tell you, 'No way,'" Aquilino said.

Aquilino also called North Korean leader Kim Jong Un's regime "disgusting" for spending large sums of money on the military while a food shortage ripples through the country. 

Aquilino's comment comes days before US Secretary of State Antony Blinken travels to China. He is expected to convey Washington's "deep concerns" about Beijing's support for Russia's defense industrial base.

"We're prepared to take steps when we believe necessary against firms that ... severely undermine security in both Ukraine and Europe," Blinken told reporters ahead of Wednesday's trip. 

David Asher, a senior fellow at the Hudson Institute, commented on Aquilino's remarks by stating:

"Admiral Aquilino has been a forward-thinking, leaning, and acting US Combatant Commander in the Indo-Pacific. But the facts on the ground and sea have been allowed to strategically favor Communist China which has fortified coral reefs and atolls across the South China Sea and fan its naval forces across the region from the seas surrounding Japan to Taiwan to the Philippines and Vietnam. 

"China's relentless expansionism has been largely unopposed. Beijing cannot be allowed to continue its expansionist wave. It's time for the US, Japan, and Australia to link up and provide active protection to the Philippines and start to begin freedom of navigation missions to Taiwan. Incoming Commander Admiral Sam Paparo will have a lot on his plate." 

Russia's war of aggression against Ukraine and soaring turmoil in the Middle East, including Israel and Iran, with risks of conflicts flaring up in the Indo-Pacific region, are all confirmations that a multipolar world has emerged. 

That said, we have noted that defense spending worldwide has surged, pushing the defense industry into a bull market:

• World Stumbles Into "More Dangerous Decade" As Defense Spending Soars, Says Military Think Tank

• Germany Reportedly Goes On Military Spending Spree To Hit NATO Spending Minimums For First Time

• Lockheed Martin Wins $17BN Interceptor Contract To Protect US Homeland

• German Tank Builder Says "New Decade Of Security Policy Begins" As Defense Bull Market Roars

• SAAB CEO Says Rising War Risk Drives Defense Spending; Missile Stocks In Bull Market

• Global Military Spending Hits All-Time High Of $2.4 Trillion

There's a bull market in global defense stocks. 

The multipolar world will only bring more chaos and destruction. 

Tyler Durden Tue, 04/23/2024 - 22:45

Are The Mass Pro-Palestine Protests On College Campuses Just One Big Virtue Signal?

Submitted by Brandon Smith via Alt-Market.us,

As a general rule, rebels without a cause will eventually latch onto the nearest cause of opportunity.  It really doesn't matter what it is, for activists with ample time on their hands and plenty of trust fund money these protests fill the void and make them feel like they have meaning.

Such is the case with the political left and their infatuation with Gaza (or any movement rooted in Islam).  It's been noted by many commentators that the relationship between Islamic fundamentalists and the far-left is a bizarre one.  After all, almost every element of Sharia Law is completely antithetical to the proclaimed values of progressives including equal rights for women, equal rights for gays and the leftist penchant for atheism.  All of these beliefs might get a person executed in a host of Muslim governed countries, but for some reason the leftist mob wants in on the Islamic bandwagon.  

Whatever your opinion is on the war or the governments involved it's clear that it has nothing to do with woke activists in the western world.  The war is simply a vehicle which they hope they can hijack and attach their own agendas to.  Primarily, progressives view Israel as a symbol of western "colonialism" and in their minds anything colonial must be destroyed.  Their concerns for Palestinians are peripheral, if their concerns exist at all.  This is about visibility and a chance to create chaos.

If you believe in "karma" then you might suggest that the Israelis have been setting themselves up for this reaction for a long time.  Israeli tied propaganda organizations like the Anti-Defamation League (ADL) have been fomenting leftist insanity for decades and defending every aspect of the social justice religion.  They helped create a golem that they can't control and now it's turning on them.

Of course, it's not the Israeli government that's suffering any real consequences; rather, it's conservatives abroad as well as Jewish students attending western universities.  After many years of the ADL crying wolf (racism and antisemitism) over secret Nazis that didn't really exist, now they finally have something legitimate to complain about.

Woke protesters marched out in tandem within multiple universities across the US in a relatively well coordinated disruption action.  New York University, Columbia, Yale and Berkeley were all involved but much of the media focus was on NYU and Columbia.  Activists linked arms and allegedly blocked Jewish students from entering campus facilities.  The atmosphere has become so volatile that Jewish religious leaders are calling on students to leave such institutions for their own safety.   

The NYPD has responded with a blitz on the protests.  Encampments have been torn down and mass arrests have ensued.  Police could not immediately share how many people had been arrested or issued with summonses because the situation was ongoing.  Faculty members were among those arrested, an NYPD spokesperson told CNN.  

NYPD have torn down the encampments and made mass arrests at Columbia. pic.twitter.com/TRR68DU2ry

— Ian Miles Cheong (@stillgray) April 23, 2024

These developments have some interesting implications for the US going forward.  In particular, polls show that Joe Biden is gradually losing favor among young voters because of his continued military and monetary support of Israel.  His most rabid base is turning on him, which means the November election is looking better and better for Donald Trump.  

That said, there is the continuing problem of fabricated rationales.  Just as the death of George Floyd was shamelessly exploited by the left and Democrats as a radicalization moment, Gaza is also being used erroneously as a foil for increasingly aggressive mobilizations of people that, frankly, just want a reason to burn stuff. It's likely that as the conflict continues to escalate western countries will see larger and more violent protests in major cities.

Does anyone in the Middle East care what a bunch of college kids in the US have to say about Gaza?  No, why would they?  Can the US government influence the developing war for the better?  Maybe, but they aren't going to.  But stopping the war is not necessarily the goal of US based activists.    

Donald Trump has loudly voiced his own political support for Israel on a number of occasions so a change in White House leadership probably won't lead to the economic or strategic isolation of Israel.  Unless the war ends soon, which is improbable now that Iran is involved, we may be seeing nationwide protests and riots yet again.  Different excuse, same results. 

*  *  *

The views expressed above do not necessarily represent those of ZeroHedge.

Tyler Durden Tue, 04/23/2024 - 22:25

These Are The Worst States To Be A Gun Owner In 2024

Does your state support your 2nd Amendment rights or make it exceedingly difficult to keep and bear arms?

Ammo.com has ranked the worst states to be a gun owner below...

How?

By analyzing each state’s current laws, upcoming laws, concealed carry guidelines, self-defense statutes, and 2A-centric taxes in order to identify the worst states for gun owners in 2024.

Report Highlights

• Hawaii is the #1 worst state for gun owners due to strict purchasing and carry laws, as well as defying the Supreme Court on the individual’s right to carry.

• California is the #2 worst state for gun owners due to its permit-to-purchase and reciprocity laws.

• New York, Illinois, and New Jersey take the #3, #4, and #5 spot in our list of worst states for gun ownership due to strict purchasing and carrying requirements.

• North Carolina, Maine, and Ohio fall into spots #25, #24, and #23 due to new restrictive legislation with some relaxed carry laws.

• Some states rank lower than others due to excessive infringements, additional taxes, and the current Governor’s 2A statements.

• State and local laws defining Stand Your Ground vs. Duty to Retreat vary and should be evaluated on a case-by-case basis.

Jump to a state: AL | AK | AZ | AR | CA | CO | CT | DE | FL | GA | HI | ID | IL | IN | IA | KS | KY | LA | ME | MD | MA | MI | MN | MS | MO | MT | NE | NV | NH | NJ | NM | NY | NC | ND | OH | OK | OR | PA | RI | SC | SD | TN | TX | UT | VT | VA | WA | WV | WI | WY

Read the full report on the worst states to be a gun owner in 2024 at Ammo.com.

Tyler Durden Tue, 04/23/2024 - 22:05

Kim Jong Un Oversees "Nuclear Counterattack" Drill

North Korean leader Kim Jong Un oversaw salvo launches of the country’s "super-large" multiple rocket launchers in what state media presented as simulation drills of a nuclear counterattack against enemy targets, state media revealed Tuesday.

The day prior, the South Korean and Japanese militaries reported suspected launches of artillery and ballistic missiles from the north. Pyongyang subsequently confirmed it tested new systems including 600mm multiple rocket launchers, said to be capable of delivering tactical nuclear warheads.

State media referred to the United States and South Korea, which have been conducting a series of joint military exercises over many months, as "warmongers" while describing the necessity of exercises focused on nuclear counterattack.

Kim has described that the north's new rocket launchers are as accurate as a "sniper's rifle". Kim observed the exercises from an observation post, a new set of photos released by KCNA shows.

According to a state media description, as cited in AP:

It said the rockets flew 352 kilometers (218 miles) before accurately hitting an island target and that the drill verified the reliability of the "system of command, management, control and operation of the whole nuclear force."

Part of the drill included a salvo of missiles sent toward "the potential enemy" which included targets on and outlying island with a range of just over 350km.

US officials have previously indicated the recent spate of more aggressive statements from Kim should be taken seriously.

"While the officials added that they did not see an imminent risk of a full-scale war on the Korean Peninsula, Mr. Kim could carry out strikes in a way that he thinks would avoid rapid escalation," a NY Times report issued early this year said.

Watch: Images released by the North Korean state media show what it says is the leader Kim Jon Un overseeing a “nuclear counterattack” drill.#NorthKorea

Read more: https://t.co/NZnJKkBPhN pic.twitter.com/bBIwoqwLg4

— Al Arabiya English (@AlArabiya_Eng) April 23, 2024

All of this is said to be part of Kim's new policy of "open hostility" in response to US provocations on the peninsula, including starting last summer the docking of a US nuclear submarine at a South Korean port.

Tyler Durden Tue, 04/23/2024 - 21:25