Tyson Foods CEO Unsure When Nation's Collapsing Beef Herd Will Reverse

Tyson Foods CEO Donnie King spoke at the BMO Global Farm to Market Conference in Toronto on Wednesday, expressing much uncertainty about when US ranchers will rebuild tight cattle herds meaningfully. 

Reuters was the first to report King's comments at BMO's farm conference. He stated ranchers had been pressured in recent years to offload cattle due to high grain costs and drought, which, in return, sent the nation's beef cattle herd plunging to the lowest in more than half a century. 

King provided some encouraging news, citing slightly lower grain costs and improved grazing conditions in the Midwest as factors in increasing the US herd. However, he noted that a high-interest rate environment is a significant headwind. 

All in all, King's comments did not provide confidence that the nation's beef cattle herd would reverse from seven-decade lows as ranches continue offloading cows to slaughterhouses. The latest figures from the US Department of Agriculture show that the nation's cattle herd is 87.2 million head (as of Jan. 1), the lowest level since 1951. Data from USDA in the chart below only goes back to 1974. 

Shrinking herds means fewer cows, as the latest slaughter price per 100 pounds is around $186, the highest ever and in breakout territory. 

We have explained that ranches have been culling more cows for several years because of droughts, surging feed costs, and high interest rates. 

• Dwindling US Cattle Herd Implies Supermarket Beef Prices May Rise Even More
• Hamburger Prices Might Continue To Rise As US Cattle Herd Shrinks
• US Cattle Prices Hit Nine-Year High As National Herd Drops To Half-Century Low
• US Beef Prices Hit Record High As Nation's Cattle Herd Expected To Shrink Through 2025

This perfect storm has sent beef prices at the supermarket to record highs. 

Lane Broadbent, president of KIS Futures Inc. in Oklahoma City, told Bloomberg earlier this year that herds aren't expected to rebound before at least 2026. 

We suspect retail prices will go higher until demand destruction is achieved. Seasonally, outdoor cookouts ignite an upswing in beef demand in the coming weeks. 

Can the Fed just print more beef? Oh wait, no, but you know who can: Bill Gates.

Tyler Durden Wed, 05/15/2024 - 18:40

Diesel Takes Another Hit And May Be Driving Down Broader Oil Market

By John Kingston of FreightWaves

With the benchmark diesel price used for most fuel surcharges down for the fifth week in a row, diesel consumers should be reveling in the fact that market trends appear to have completely thrown out concerns about the Middle East conflict and are focused on the markets for both diesel and gasoline as primary drivers.

The Department of Energy/Energy Information Administration average weekly retail diesel price fell 4.6 cents Monday to $3.848 a gallon. The five consecutive declines have taken that price down 21.3 cents a gallon during, and the price is now at a level not seen since the end of January.

Whatever impact that oil markets may have felt from the conflict in Gaza, the Iran-Israel back-and-forth and the diversions of shipping away from the Red Sea (which may have faded from the news but continue) are apparently having no impact on oil prices. A reaction to those developments would tend to be macro in nature and would generally impact crude more than products.

But market weakness continues to show up in products markets, including diesel. And diesel in particular is getting a great deal of focus of late. 

Diesel is increasingly being viewed as one of the primary reasons for the gradual fall in oil markets that has been occurring since early to mid-April. Whereas a few months ago, the rising price of oil was primarily attributed to a tight market for gasoline, the more recent weakness in oil overall is being laid firmly at the feet of the diesel market.

In his weekly report released Sunday, energy economist Philip Verleger noted that diesel weakness is becoming more structural because of the growing role of renewable diesel, which is made not from petroleum but from feedstocks such as plant oils and animal fats, including those captured in grease traps at restaurants.

In the report, Verleger noted that weekly EIA data on distillate consumption in the U.S., which is about 90% diesel, has been running anywhere from 400,000 to 600,000 barrels per day less than pre-pandemic levels. While some analysts are looking at that and concluding it is the function of a slow trucking market, Verleger’s report cited the fact that the data isn’t capturing the consumption of renewable diesel. 

“Taxes and regulations promulgated by the US Environmental Protection Agency have prompted refiners to convert crude oil processing facilities to produce renewable diesel, making more renewable fuel available,” Verleger wrote. “The higher renewable diesel use will cut US petroleum consumption. At this juncture, it seems that none of the … most-quoted forecasts of global oil demand have been adjusted to account for this replacement.”

Refining company earnings calls with analysts often feature management discussion of renewable diesel and its impact on the refiners’ bottom line. For example, on the latest Phillips 66 call, CEO Mark Lashier reviewed the company’s expanding renewable diesel operations and said that as a result of them, “we have gained valuable operational experience and market knowledge that positions us for success in our expanding renewable fuels business.”

But on the latest round of calls, talk about the weak diesel market — its crack spread against Brent crude is down about 20 cents a gallon in two months — did arise. 

The view that diesel demand is weak was rejected by Gary Simmons, the executive vice president and chief operating officer at Valero. He said on the company’s first-quarter earnings calls that diesel sales at Valero are about 2% higher than those of a year ago. 

But he added that he expects diesel demand will be “flat to slightly down compared to last year.” “However, some of the freight indices appear to be turning, and indicate we could start seeing better demand,” Simmons said. 

Brian Mandell, executive vice president of marketing and commercial for Phillips 66 (NYSE: PSX) said on the company’s call that even though Ukraine’s attacks on Russian refining capacity have probably taken about 200,000 barrels per day of Russian diesel supplies off the market, diesel prices have been suppressed by the warm winter in the northeastern U.S. — where heating oil, a distillate, is heavily used for home warmth — and by refiners coming out of maintenance season strong.

But the result has been reduction in refinery operating rates in Europe and Asia because of refining margins for distillates, which he said are around breakeven.

The weak market for products relative to crude is most visible in the 3-2-1 crack spread, a basic indicator of refinery probability. It is calculated by taking the price of two barrels of gasoline plus one barrel of diesel, converting it to a price per barrel and subtracting the price of crude, either Brent or West Texas Intermediate.

The Brent 3-2-1 on Monday, based on CME prices, fell to close to $21 a barrel. Two months ago, in mid-March, it was approximately $29.

Tyler Durden Wed, 05/15/2024 - 18:20

'Guns & Butter': Putin Explains Reason Behind Major Cabinet Shake-Up

Russian President Vladimir Putin has for the first time explained the rationale behind this week's major cabinet reshuffling, which for the first time of the Ukraine operation saw Sergey Shoigu removed as defense minister (and 'promoted' to head of the national security council), and former minister for economic development Andrey Belousov moved into the defense chief spot. He described the decision as due to the dramatic rise in the defense budget and military spending.

Putin said of Belousov: "He understands perfectly well what needs to be done in order for the economy of the entire security complex – and the Ministry of Defense as its key component – to fit into the overall economy of the country," according to state media translation.

Getty Images

The Russian president was addressing a gathering of top military officers. "This is extremely important and relates to the innovative development of industry and taking into account the capabilities of the economy and the budget," he said, explaining further: 

"This relationship between ‘guns’ and ‘butter’, so to speak, must be organically integrated into the overall development strategy of the Russian state," Putin said. "I hope that Andrey Removich [Belousov] will handle this task in the best possible way."

Putin noted that Russia’s military spending has grown to approximately 8.7% of GDP in 2024. While not quite the 13% that the Soviet Union was spending in the 1980s at the height of the Cold War, “these are significant resources, and we have to use them very efficiently and effectively,” the president explained. 

The appointment had raised eyebrows inside and outside Russia given Belousov has no military experience, nor has he been involved in strategic decision-making regarding the war in Ukraine. Instead, Belousov has always been a 'numbers guy' and Russian central bank planner.

The United States was among those countries claiming that the big shake-up points to a destabilizing trend in the Kremlin due to significant losses suffered by Russia in the context of Ukraine, as well as the sometimes devastating cross-border attacks on Russian soil.

The Biden administration on Monday said it shows signs of "desperation" for Moscow sustaining the high costs of the Ukraine invasion, also amid unprecedented Washington sanctions aimed at Moscow (but which have by and large backfired).

Putin has just spelled out clearly what many observers had already posited - Andrei Belousov’s appointment as defence minister is "linked not least to the fact that spending on the military is growing" pic.twitter.com/j3IsKQbg7o

— Francis Scarr (@francis_scarr) May 15, 2024

"Our point of view is that this is further indication of Putin’s desperation to sustain his war of aggression against Ukraine, despite it being a major drain on the Russian economy and the heavy losses of Russian troops, with some estimates as high as 315,000 casualties," State Department spokesman Vedant Patel said to a press briefing.

Tyler Durden Wed, 05/15/2024 - 18:00

Money's Grim Future

Authored by Alan Lash via The Brownstone Institute,

Prepare for total control of your economic life. That is the message from Brownstone Fellow Aaron Day at his 4-hour workshop in San Jose, California last Saturday, May 11th.

Day has written the excellent book The Final Countdown, which carefully describes the increasingly aggressive assaults on our freedoms by our government and by the global elites. He has just begun a series of workshops around the country to deliver that message and to show us a way to resist. The book was published just last year, but Day acknowledges during the presentation that he had to make alarming updates to his slides from current news, not even weeks old – more government intrusion, more legislation, and more spurious arrests, all attacking our ability to interact freely and transact our business.

As in the book, the presentation begins with a fictional account of a family set in the near future in a Western democracy, but perhaps all too familiar to current denizens of China, with their controlled currency and social credit scores. The image is easy to dismiss; it could never happen here. And yet, Day goes on to show how it actually is happening here. With a litany of article after article, official statement after statement, and video after video he makes his case. It is happening – he leaves no doubt.

Day gives ample historical reference points as well. How did we get here? It has been a long time coming. The constant push of globalist powers to remove our freedoms and control all resources has been in the works for a century. Perhaps it has never been different; the powerful seek more power, and the levers of technocracy make that easier than ever. The difference now is that the reach is truly global. There has been ever-increasing control over food, water, energy, and even the space we occupy and the air we breathe. 

The particular focus of the workshop is on CDBCs in America and throughout the West. Our central bank has been developing digital currency for some time, hoping to eliminate our ability to keep our business to ourselves. In this new world, all our actions can be easily monitored, tracked, and nudged into whatever direction the elites deem right or beneficial to their wealth and status. 

Within the two hours of historical facts, somber reflections, and sometimes horrifying news, the audience did not sit quietly and take the emotional beating. On the contrary, there was already much knowledge of these events, grunts of awareness, gasps of disbelief – we all knew it, but perhaps didn’t know it was this bad, with all the detail that Day presented. 

Digital currency is in the works, folks, and it is undoubtedly coming, sooner than we all think. One more emergency is all it could take for the government to say we are all doing this now. 

The audience was generally older, probably retired, or with a nest egg they were hoping to protect from debasement. A lively bunch, clearly committed to freedom, voiced their questions often in the quickly paced session. Each query exhibited a tacit but palpable urgency from the attentive crowd, who are all fully aware that what Day exposits is not some futuristic dystopian fantasy, but soon to be the new reality as he predicts.

The age of the audience is to be expected, perhaps: with time and money on their hands, they are probably more aware of the unfolding events with a perspective of history and have more wealth to lose. Indeed, many of the questions the audience asked centered around their ability to maintain their legacy when a CDBC replaces the dollar – how do I protect my assets when the currency falls and centralized control follows? 

But that is not the point, says Day. The point is not that our money is a store of value; the point is that it is a medium of exchange. It is not the inherent value of gold or crypto that is important, whether it goes up or goes down; its importance is its utility and its freedom from tracking by the State.  

Viewing the importance of money through this lens of freedom and impact on the future, we could easily see that those with truly the most to lose were largely not present at the workshop. The young adults – whose lives will be impacted the most gravely should the economic stranglehold ensue – will not make their financial decisions freely according to their own obligations, their own goals, and their own dreams. 

Every purchase will ultimately have to pass the test of the State’s agenda: did they use too much gas or too much water? Did they say something against the State? Will it be possible for them to attain the kind of comfort that their parents attained, out of the State’s watchful eye? If Day’s CDBC roadmap to economic tyranny is deployed, he clearly demonstrates what follows, and he proves it by citing recent events. 

The second part of the workshop focuses on what can possibly be done to counter this insidious march into economic slavery. Unfortunately, as Day describes, it is not possible to simply pack up and move out. Even with ample wealth and mobility, escape is not possible. Day recounts the stories of several colleagues who tried a different way – many of them arrested for saying too much and being too influential. Live in a different country? Doesn’t matter. We’ll call our people there and have you picked up. 

No, the only true way to beat this movement into CDBC tyranny is to stand in the light and refuse to participate. Use other methods to transact your business wherever you can and get others to do likewise. See which businesses will accept payment in crypto, and get yourself a wallet. Giving the waiter a tip? Give her a Goldback. 

As Day also makes clear, no one such solution will work; we have to use them all, as the effort to undermine the options is well underway. You may have heard that the largest threat to the dollar, Bitcoin, has been subverted into a system to be controlled by insiders, who are ultimately influenced by the State. Roger Ver’s recent book, Hijacking Bitcoin, tells this story. Tellingly, Ver, a citizen of St. Kitts since 2014, was arrested in Spain at the behest of the US just weeks ago.

Day explains that this is the point of using every way possible to sidestep the use of the dollar. If one method gets too big it becomes compromised by attacks of the State. 

The other important takeaway from the workshop is the idea of self-custody. Any crypto account you keep, or any asset anywhere, should be kept under your own custody, where only you have the keys. This is not possible with many cryptocurrencies by their construction, and not possible if you leave custody with a bank. It’s a lot harder for the State to go after millions of anonymous accounts than to go after one central repository that has the keys. Day notes which cryptos do and don’t allow self-custody. If you trade crypto through a large exchange, they too will most likely keep the keys.

I have only touched on the depth and breadth of Aaron Day’s workshop. It is well worth the time to understand the evil before us and practical ways to combat it. We will all need to work together to keep our financial freedom. Get in touch with Aaron via email and ask him to visit your city and present his workshop, or sign up to receive information through his website. Share those valuable lessons with your family and friends, and pay particular attention to the youth. It is their world being taken from them before they even get the chance to call it their own.   

Every attendee walked out of the workshop empowered with practical tools for resisting the move to CBDC. We each had a crypto wallet set up on our phone, to which one of Aaron’s sponsors donated $5 in self-custody crypto. We also left with a New Hampshire Goldback, currently worth $5, and a Citizens for Sound Money 1/5 oz round of silver worth about $5. As Aaron explained, there is growing acceptance of these forms of payment everywhere. Goldbacks can be used in Utah, Nevada, Wyoming, New Hampshire, and South Dakota. The workshop also included a signed copy of Aaron’s book.

On my drive back home after the workshop I met some friends at a local pub. I tried out my newfound power as I attempted to buy a beer with the Goldback, going through all the waiters all the way up to the owner. He looked the gold foil leaf up and down examining the obvious care and purpose in its making. He scowled. “I don’t think so,” he said. 

We have a ways to go in California. I for one will keep trying, and encourage all to join me in the pursuit of economic freedom.

Tyler Durden Wed, 05/15/2024 - 17:40

Bill Hwang Wanted To Become A "Wall Street Legend", Prosecutors Allege In Opening Statements

As the Bill Hwang trial began making its way through its first week, prosecutors described the family office manager as someone attempting to "become a legend on Wall Street" to jurors, according to the Financial Times. 

The trial of Hwang in Manhattan began this with hopes of uncovering motives behind his historic collapse that caused $100 billion in collateral damage.

Prosecutor Alexandra Rothman told the court in her opening statement: “From the inside these two men turned an investment business into a crime business, all because the defendant Bill Hwang wanted to become a legend on Wall Street..."

Hwang’s defense argued, meanwhile, that he was merely a committed investor who backed companies like ViacomCBS and Discovery.

One of his lawyers, Barry Berke, told the court Monday: “Mr. Hwang . . . most certainly put his money where his mouth is.” 

On Tuesday, testimony was heard from UBS risk manager Bryan Fairbanks, who revealed that UBS was startled to discover Archegos' main investments were in less liquid firms like Viacom, Discovery, and Tencent Holdings, contrary to earlier assurances of stable tech holdings like Apple and Google, according to Bloomberg.

This revelation made UBS anticipate significant losses, he said. Concerns grew as UBS felt Archegos prioritized other banks during portfolio liquidation to meet margin calls.

On a crucial call on March 25, Hwang unsuccessfully tried to reassure his major prime brokers by claiming he could stabilize Archegos' positions quickly, despite alarming loss figures.

“They weren’t trying to do anything to meet the margin call,” Fairbanks wrote in an email on March 25.

Meanwhile, Hwang's defense highlighted UBS's financial motives and attempted to expose potential biases in testimony, suggesting that UBS overlooked risks due to lucrative fees from Archegos.

The charges in Hwang's trial come from the 2021 collapse of the $36 billion dollar Archegos and Reuters has said that testimony could last up to 8 weeks. Prosecutors have said that Archegos' collapse led to $100 billion in shareholder losses at companies he held.

The trial is set to shed a light on how major Wall Street players accommodated, and potentially turned a blind eye, to risky tactics from a wealthy client. Hwang is being accused of using total return swaps to take massive positions in companies without holding their underlying stock. 

As Reuters notes, the company faced crippling margin calls in March 2021 due to falling stock prices. This, in turn, led to significant losses for Archegos and its lenders, including Credit Suisse and Nomura Holdings.

Archegos founder Bill Hwang and CFO Patrick Halligan, charged with racketeering conspiracy and multiple counts of fraud and market manipulation, have pleaded not guilty.

They contest the prosecutors' claims of market manipulation, which some legal experts view as a challenging case for the government. The trial is expected to feature testimony from Archegos’s guilty-pleading head trader and Chief Risk Officer, alongside potential appearances from bank executives.

Hwang was arrested in April 2022 and charged with racketeering conspiracy, securities fraud and wire fraud in connection with a scheme to manipulate the share prices of public companies in order to boost profits. He was then released on $100 million bail. 

According to the 40-page indictment, Hwang engaged in a "fraudulent scheme" that included "interlocking deceptive acts and misconduct, through false and misleading statements to security-based swap ("SBS") counterparties and prime brokers and manipulative trading designed to artificially move the market, which, in tandem, increased Archegos’s assets under management from around $4 billion to over $36 billion in just under six months."

Tyler Durden Wed, 05/15/2024 - 17:20

Precarious: One Misfortune Away From Insolvency

Authored by Charles Hugh Smith via OfTwoMinds blog,

As a result, a significant percentage of households that are considered middle-class are one misfortune away from insolvency.

We can summarize the changes in our economy over the past two generations with one word: precarity, as life for the bottom 90% of American households has become far more precarious over the past 40 years, despite the rising GDP and "wealth" as measured in phantom capital.

This reality is expressed in the portmanteau word precariat, combining proletariat (someone whose livelihood comes from their labor) and precarious: outside of government employment, work has become far more precarious. Where it was still common 40 years ago to work for a company for much or most of one's career and have a private-sector pension, now private-sector pensions have vanished, replaced by self-managed 401K funds, and private-sector work is characterized by a series of not just job changes but career changes.

The source of one's livelihood can dry up and blow away almost overnight, and to fill the hole many turn to gig-work with zero benefits that saddles the worker with self-employment taxes (15.3% of all earnings, as the "self-employed" gig worker must pay both the employee and the employer shares of Social Security-Medicare payroll taxes).

This isn't true self-employment, of course, as true self-employment means the owner-worker can hope to extract the full value of their labor; in contrast, much of the value of the gig work is skimmed off by corporate platforms (Uber et al.). The gig worker is a precariat wage-slave, not a self-employed owner of their own labor and enterprise.

Forty years ago, households with healthcare insurance being driven into bankruptcy by medical bills was unknown. Now this is commonplace. We're forced to ask, what exactly does "insurance" even mean if our share of the medical bills is so burdensome that we're forced into insolvency?

This is just one of many examples of the increasing precarity of life in America. Need dental work? "Insurance" covers only the basics; the rest requires savings, an inheritance, a line of credit or a top 10% income.

Speaking of income, even a substantial earned income doesn't go that far nowadays. Consider what a typical family spends on what we consider middle class birthrights: eating out, going to a movie, etc.



This budget of a household earning a top 1% income (top 2% in high-income states) of $500,000 is interesting on several fronts. Those living in lower-cost states may view it as bloated beyond belief, while those living in NYC, Los Angeles, San Francisco et al. will view it as entirely realistic: yes, property taxes are $20,000, "enrichment" childcare costs $42,000, and so on.

What's not realistic is $5,000 for home maintenance and $18,000 for three vacations a year. Given the age of American houses (40 years being average), the poor quality of a significant portion of recent construction and the soaring cost of labor, $5,000 doesn't buy much in the way of maintenance. A more realistic estimate for pretty much anything serious is $20,000, and $50,000 is remarkably commonplace for even modest kitchen makeovers. The $18,000 in charitable donations may be sucked up by a new roof.

As for vacations, unless it's a very short trip, a camping trip or travel to a low-cost destination, $6,000 per vacation may not be realistic.



The point of this exercise is to examine the buffers needed to survive a serious misfortune, such as losing one's job or a medical crisis. Two generations ago, costs were lower and households generally had enough savings or credit to cover the emergency expense or survive a bout of unemployment. With costs now prohibitive, modest savings are no longer enough.

As a result, a significant percentage of households that are considered middle-class are one misfortune away from insolvency. The concentration of income and wealth into the top 10% isn't just a statistical abstraction; in the real world, it means the buffers of the bottom 90% have thinned while the buffers of the top 10% have increased: for the family holding hundreds of thousands of dollars in 401K accounts and sitting on $1 million in home equity, a $25,000 medical or home repair bill is an inconvenience, not a push off the cliff into insolvency.



This precariousness extends into small business as well. Costs have soared and buffers have thinned. A great many small enterprises are one misfortune away from closing / insolvency.

As the tide of precarity rises, the apologists and cheerleaders of the status quo are cheerily predicting a "Roaring 20s" of widespread prosperity ahead. Correspondent David E. forwarded this cartoon which captures the current zeitgeist perfectly:

*   *   *

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Tyler Durden Wed, 05/15/2024 - 17:00

Crypto-Libertarian Erik Voorhees Warns Your Chatbot Queries Are Not Safe 

Crypto-libertarian Erik Voorhees, fresh off his passionate defense of crypto in the 'Gold vs. Bitcoin' debate recently hosted by ZeroHedge, spoke with crypto news site Unchained's Laura Shin and Venice's COO Teana Baker-Taylor about the alarming honeypots of user search history data on AI chatbot platforms that could potentially be harvested. 

Venice is one of Voorhees' latest crypto ventures. It is a private, uncensorable, open-source competitor to OpenAI's ChatGPT, powered by a decentralized crypto network.

Around the 25-minute mark, Shin asked Voorhees about the risks that OpenAI, Anthropic, and or other big AI companies could be doing with user search data. 

Voorhees responded: 

"Great question that's really like the most important question. So status quo today is you're using anthropic or OpenAI chat - you send in your question and it goes to that company and they store it forever and it's attached to your identity - right so they know that Lura Shin asked this question - um and they know that the AI responded back to you and they know what that is - and not only do they know that that question that conversation but they know your entire history of all conversations that you asked yesterday last year tomorrow and 10 years from now. All of it is associated with your identity. 

"In the best case that's not that big of a deal, but in reality, what it means is - all your information - and essentially like parts of your mind like think your intellectual inquiries that you pursue - the things you think - the things you want to debate - the questions you have about life - and like big topics um can be known by Third parties." 

"Advertisers for example, like that's not a huge deal if an advertiser knows something about you. But what if like uh a government knows something about you. What if um what if the Biden Administration learns that you are like uh you know orchestrating uh Trump's re-election campaign. What is what is the pressure on uh Biden Administration and OpenAI to use that information for something that people would consider corrupt and dangerous."

"These are very slippery slope arguments, um and it does not really matter what, like you know Anthropic's privacy policy says. If they have your information it will be shared with other parties today or tomorrow and probably both. And you can never get it back. So um that's the status quo - uh for people that are comfortable with that like keep using those services. that's okay."

Voorhees then explained how Venice AI prides itself in user sovereignty: "But like Venice was like well, um let's make a service that's just as easy" OpenAI and others, "but instead of like spying on you and recording all your information and attaching it to your identity forever let's just not do that." 

*   *   * 

Here's the full interview:

Tyler Durden Wed, 05/15/2024 - 16:40

Soft CPI & Sloppy Sales Spark Run To Record Highs For Stocks; Bonds, Bullion, & Bitcoin All Bid

Nothing good - all bad... and new record highs for stocks.

SuperCore CPI hotter than expected (but headline and core CPI in-line/small miss), Retail sales way uglier than expected (but gas station spending surged), homebuilder sentiment slumped, and Empire Fed Manufacturing ugly...

Source: Bloomberg

Both 'soft' and 'hard' data is now falling...

Source: Bloomberg

...and the stagflationary threat continues to grow...

Source: Bloomberg

...but the market doesn't care about growth - it spiked rate-cut expectations on the 'cool' CPI (two cuts fully priced in for 2024 and three more cuts - at least - in 2025)...

Source: Bloomberg

And that lifted stonks across the board with Nasdaq leading the way to new record highs (Dow & S&P first new record close since March)

Market volumes were dramatically elevated today, according to Goldman's trading desk (+45% vs the trailing 20 days), as hedge funds (on an illustrative basis) recovered half the losses from the last two nasty days...

Source: Bloomberg

Goldman trader John Flood highlighted the fact that it feels like sentiment during the last  “meme” craze was one of confusion and bewilderment where some funds were willing to hold on and trying to wait out the retail crowd. This time around, HFs collectively are just not nearly as exposed to high SI/float stocks as they used to be, so the risk is a lot more manageable, and funds tend to react much more quickly given past lessons.

Source: Goldman Sachs

'Most Shorted' stocks dumped back yesterday's gains today as the meme-stock mania stalled...

Source: Bloomberg

VIX plunged back to a 12 handle today...

Source: Bloomberg

Treasuries were bid today with yields down 8-10bps across the curve (with the belly slightly outperforming the wings)...

Source: Bloomberg

With the swing lower in 10Y yields erasing all the increase in yields since April's CPI print...

Source: Bloomberg

The dollar followed a similar pattern to yields, erasing all of the post-April CPI gains...

Source: Bloomberg

Gold surged back near record closing highs ($2392).  Interestingly, gold was trading at exactly the same level it was before April's CPI ahead of today's CPI...

Source: Bloomberg

Bitcoin soared back above $66,000 - this was Bitcoin's best day since March 2023!...

Source: Bloomberg

Crude prices rebounded strongly today after early weakness (following inventory draws). The 100DMA once again acted as support with WTI closing back above it...

Source: Bloomberg

Finally, we noted at the start how ugly the US Macro data was, but there is a potential silver lining...

Source: Bloomberg

The Citi US Macro Surprise Index has a very regular seasonal pattern and 2024 is following it closely... with the positive surprises set to come from here as fiscal year-end looms. Is the 'no landing' narrative about to be realized?

Tyler Durden Wed, 05/15/2024 - 16:00

April Cass Data Shows No Improvement In Freight Demand

By Todd Maiden of FreightWaves

Another month passed without signs a recovery in the freight cycle was on the horizon. “Still waiting for it,” Cass’ April update on volumes and pricing stated.

The shipments component of the Cass Freight Index fell again in the month, down 1.6% seasonally adjusted from March and 4% lower year over year (y/y). The Tuesday data showed volumes were hovering around the late 2023-January 2024 cycle trough. The April reading was the lowest since January, which is typically the slowest part of the year and weaker than normal this year due to severe winter storms.

A later Lunar New Year and the Baltimore bridge collapse were cited as detractors to demand during the month. The report also said additions to private fleets are negatively impacting results at the for-hire fleets.

“Private fleets are now more actively competing for spot freight to fill empty backhauls, lengthening below-trend for-hire demand levels,” the report said.

The y/y comparisons for the shipments index get easier in the coming months. The forecast is for the data set to decline 3% y/y in May. A prior forecast called for the index to turn positive by June, but that appears in jeopardy now.

Cass’ expenditures index, which measures all dollars spent on freight including fuel surcharges and accessorial charges, fell 16.8% y/y in April and 1.9% from March on a seasonally adjusted basis. Backing out the decline in shipments implies rates were off 13% y/y in the month, which was the smallest decline in implied rates since last May.

The y/y comps also get easier this summer. The index is expected to decline 16% y/y in the first half of 2024 and 10% for the full year.

The Truckload Linehaul Index, which excludes changes in fuel and accessorial charges, declined 3.8% y/y but ticked 0.1% higher than the March reading.

The TL rate index includes both spot and contract freight. It has largely been flat for the past year.

“With spot rates steady over the past several months, downward pressure on the larger contract market is lessening, with some instances of contract rate increases bucking the downtrend recently,” the report said.

Schneider Nationalwas the lone carrier to report improvement in contractual rate negotiations during the first-quarter earnings season. It said contract renewals turned positive in the period for the first time in six quarters, with pricing up by a low-single-digit percentage. However, it was also quick to say that it’s “not calling an inflection in the market” yet.

The linehaul index’s two-year-stacked comp (to April 2022) was down more than 15%, which was the biggest decline ever recorded in the data set.

“Goldilocks economic conditions of strong growth and disinflation are largely holding, a rising tide which eventually should lift all boats,” the report said. “But at the moment, the freight growth being generated by the economy is being handled by railroads and private fleets.”

Data used in the indexes is derived from freight bills paid by Cass Information Systems, a provider of payment management solutions. Cass processes roughly $40 billion in freight payables annually on behalf of customers.

Tyler Durden Wed, 05/15/2024 - 15:25

Biden Readies $1BN In Bombs For Israel Despite Progressive & Swing State Voter Revolt

The Biden administration continues to speak out of both sides of its mouth when it comes to Israel and Gaza policy as Progressive Democratic voters continue peeling off in droves, declaring that they can't in good conscience vote for Biden in November.

On Tuesday, the contradictions continued and abounded, as the White House informed Congress it is planning a new $1 billion arms transfer to Israel. And ironically this will mark the first new package since Biden earlier this month announced it paused a weapon shipment to Israel on human rights concerns.

Pool photo/AP

A State Department report has since found that US weapons have likely been used in a way contrary to international humanitarian law, but stopped short of condemning Israel for war crimes.

The Wall Street Journal first broke the news of the new package, writing "The Biden administration notified Congress on Tuesday that it was moving forward with more than $1 billion in new weapons deals for Israel, U.S. and congressional officials said, a massive arms package less than a week after the White House paused a shipment of bombs over a planned Israeli assault on Rafah."

Here's what the newly proposed package includes:

• $700 million in tank ammunition
• $500 million in tactical vehicles
• $60 million in mortar rounds

This follows on the heels of Congress passing and Biden sighing into effect the $95 billion package of foreign aid for Ukraine, Israel, and Taiwan.

Biden's threats to pause shipments of offensive weapons to Israel has come under criticism by Democrat pro-Israel hawks in the last several days. White House Press Secretary Karine Jean-Pierre has responded this week by saying: "We strongly, strongly oppose attempts to constrain the President’s ability to deploy US security assistance consistent with US foreign policy and national security objectives."

Meanwhile, Democrats continue to be angry over the Gaza crisis:

Approximately 13% of poll respondents in six swing states who voted for U.S. President Joe Biden in 2020 but would not vote for him again said that his foreign policy or Israel's war on Gaza were the most important issues determining their vote.

The figure comes as part of a new set of polls released Monday from The New York Times, Siena College, and The Philadelphia Inquirer that show former President Donald Trump narrowly leading Biden in 5 out of 6 crucial battleground states.

"We have warned that this would happen for months, and the Democratic Party didn't give a damn," author and organizer Daniel Denvir wrote on social media in response to the news.

We have warned that this would happen for months and the Democratic Party didn’t give a damn. pic.twitter.com/8KtC294lVZ

— Daniel Denvir (@DanielDenvir) May 13, 2024

The policy debate continues raging within Israel itself, with Minister of Defense Yoav Gallant on Wednesday calling on Netanyahu to affirm that Israel won't govern Gaza after Hamas is defeated.

Tyler Durden Wed, 05/15/2024 - 15:05

Coalition Of States Sue Biden Admin, California Over Electric Vehicle Mandates

Authored by Katabella Roberts via The Epoch Times,

A coalition of Republican-led states is suing the Biden administration and the State of California in an attempt to prevent new electric vehicle mandates on truck owners and operators throughout the country from going into effect.

Two legal challenges were filed over the new emissions rules, Nebraska Attorney General Hilgers said in a statement on May 13.

They include a petition for review filed by a coalition of 24 states in the U.S. Court of Appeals for the D.C. Circuit which challenges the Biden administration’s new regulation setting stronger greenhouse gas emissions standards for heavy-duty vehicles.

That petition lists the U.S. Environmental Protection Agency (EPA) and its administrator Michael Regan as defendants.

In the legal filing, plaintiffs argue the EPA’s rule imposing stringent tailpipe emissions standards for heavy-duty vehicles effectively forces manufacturers to produce more electric trucks and fewer internal combustion trucks.

The EPA has said the new rules, which are set to take effect for model years 2027 through 2032, are needed to help combat climate change and will help avoid up to 1 billion tons of greenhouse gas emissions over the next three decades.

However, the infrastructure needed to support such vehicles is “virtually nonexistent” and they also have shorter ranges and require longer stops, according to Mr. Hilgers.

The new regulation will also negatively impact the economy and put extra pressure on power grids, according to the lawsuit.

Electric Trucks ‘More Expensive’

A separate coalition of 17 states and the Nebraska Trucking Association also filed a lawsuit in the U.S. District Court for the Eastern District of California seeking to block a package of regulations that they say are “targeting trucking fleet owners and operators.”

That lawsuit lists the EPA and the California Air Resources Board as defendants.

Plaintiffs in the lawsuit are challenging a string of California regulations called “Advanced Clean Fleets” which aims to “accelerate a large-scale reduction in tailpipe emissions focusing on zero-emissions medium- and heavy-duty vehicles,” according to the California Air Resources Boards’s (CARB) official website.

The rules would ban big rigs and buses that run on diesel from being sold in California starting in 2036.

According to the CARB, the new regulation will save around $26.5 billion in statewide health benefits from criteria pollutant emissions and save fleet owners $48 billion in operating costs.

However, those regulations force truckers in and out of California to “retire their internal-combustion trucks if they want to come to California” and “transition to more expensive electric trucks” by 2035, the states wrote in the lawsuit.

The regulations could also damage the U.S. economy, they added.

Rules Could Impact ‘Untold Number of Jobs’

According to Mr. Hilgers, the rule also applies to “fleets that are headquartered outside of California if they operate within California” which he argues could have significant nationwide effects on the supply chain.

Both lawsuits argue that the Biden administration and California regulators are exceeding their respective authorities in introducing the rules.

The multi-state coalitions are being led by Nebraska.

The state is joined in its legal challenge by attorneys general from Alabama, Arkansas, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Missouri, Montana, Oklahoma, South Carolina, Utah, West Virginia, and Wyoming.

Additionally, the Arizona State Legislature and the Nebraska Trucking Association have joined the lawsuit.

In a statement, Mr. Hilgers claimed California and an “unaccountable EPA” are “trying to transform our national trucking industry and supply chain infrastructure.”

“This effort—coming at a time of heightened inflation and with an already-strained electrical grid—will devastate the trucking and logistics industry, raise prices for customers, and impact an untold number of jobs across Nebraska and the country,” he continued. “Neither California nor the EPA has the constitutional power to dictate these nationwide rules to Americans.”

The Nebraska attorney general added that he was proud to be leading efforts to “stop these unconstitutional attempts to remake our economy.”

The Epoch Times has contacted the EPA and the CARB for comment.

Tyler Durden Wed, 05/15/2024 - 14:45

America's 'Bunker-Buster' Bomb Production To Triple As World Fractures Into Dangerous Multi-Polar State

Munitions stockpiles are running low across the West, whether in Europe or the United States. Supplying Ukraine with arms in its war against Russia has forced Western militaries and defense firms to either make plans or begin boosting the production of bombs, missiles, artillery shells, and suicide drones. 

 On Tuesday, the US Air Force announced a tripling in its monthly production of the giant 30,000-pound Massive Ordnance Penetrator, known as the "bunker-buster." It's the largest non-nuclear bomb the US has in its stockpiles and can only be deployed by a Northrop Grumman B-2 Spirit stealth bomber. 

Bloomberg was among the first to report an increase in bunker-buster bomb production, citing a USAF statement: "Will significantly increase production as needed."  

Officials at the facility told Bloomberg journos during a March tour by General Charles Brown, chairman of the Joint Chiefs of Staff, that new bunker-buster bomb production could rise from currently two, to as many as six or possibly eight bombs per month. 

The Oklahoma plant is being upgraded to support higher production of 2,000- to 30,000-pound bombs. A ribbon-cutting ceremony is scheduled for July 30, and production ramps are expected soon after. 

Ukraine isn't the only conflict area draining Western supplies of munitions. The US has been supplying Israel with bombs and missiles as the conflict with Hamas rages on. And there's a further risk of broadening conflict in the region with Iran. Let's not forget China and the South China Sea. 

Maiya Clark of the Heritage Foundation recently explained the US military-industrial complex can't just turn on a switch and produce more bombs:

"Once the stockpiles are expended, the Department of Defense cannot simply buy more munitions — manufacturing takes years."

Clark continued: 

"Ramping up production after operating at a smaller capacity takes time; contractors have found that it will take them around two years to deliver new Javelins to the Department of Defense (DOD), for example." 

She warned:

"This creates a problem in the present—after all, the war in Ukraine could continue for some time—and it illuminates what could potentially be a much larger problem in the future. The lack of surge capacity creates the risk that, in a protracted war, the US would deplete its stockpiled munitions before replacements could be manufactured and delivered." 

This all plays into an important theme of soaring global military spending as the world fractures into a chaotic, multi-polar state. There's a bull market in defense. 

Tyler Durden Wed, 05/15/2024 - 14:25

Stimulus Today Costs Dearly Tomorrow

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Since the pandemic-related bazooka of fiscal stimulus, the outstanding Federal debt has risen appreciably. In nominal dollar terms, the recent debt surge is mindboggling. However, the increase is on par with the government’s negligent ways over the last fifty years.

The red bars show the percentage increase in debt starting in 1966. The bars reset to zero every time they hit 50%. The numbers to the left of each series of bars correspond to the number of quarters it took for every 50% increase.

Over the last sixteen quarters, 2020 through 2023, the outstanding federal debt has risen by 46%. Of the 11 times the debt has increased by 50% since 1966, five occurred over 15 quarters or less.

That said, the repercussions of relying on stimulus for economic growth and growing debt faster than the ability to pay for it have significant economic consequences. The recent surge in debt will only further handicap our economy and prosperity in the future.

There are predominantly two ways our growing debt load negatively impacts economic growth, as we will share.

#1 Manipulated Interest Rates Cripple Capitalism

Growing debt faster than one’s income is a Ponzi scheme. No matter how politicians sugarcoat fiscal stimulus, there are no two ways around such a characterization. Individuals and corporations that run such a scheme ultimately end up bankrupt. The same holds for governments, but they tend to have much longer runways.

The Federal Reserve allows the government to perpetuate its Ponzi scheme. The Fed keeps borrowing costs lower than they should be through lower-than-market interest rates and asset purchases.

Not only is the growing ratio of debt to income problematic, but it is also a sure sign that the debt in aggregate is used for unproductive purposes. In other words, the debt costs more than the financial benefits it provides. If it were productive debt, income or GDP would rise more than the debt.

In the long run, unproductive debt reduces a nation’s productivity, aka economic potential.

Negative Real Rates And QE

A lender or investor should never accept a yield below the inflation rate. If they do, the loan or investment will reduce their purchasing power.

Regardless of what should happen in an economics classroom, the Fed has forced a negative real rate regime upon lenders and investors for the better part of the last 20+ years. The graph below shows the real Fed Funds rate (black). This is Fed Funds less CPI. The gray area shows the percentage of time over running five-year periods in which real Fed Funds were negative. Negative real Fed Funds have become the rule, not the exception.

Starting in 2008, with QE, the Fed began using its balance sheet to manipulate interest rates further. Currently, the Fed holds $8 trillion in Treasury and mortgage-backed securities. Their Treasury holdings account for almost 25% of all Treasury securities outstanding to the public.

By reducing the supply of bonds on the market, they effectively lower interest rates below where the free market would price them. This makes fiscal stimulus more appetizing for politicians and, by default, encourages even greater federal debt loads.

Like the Fed’s negative real rate interest rate policy, QE also reduces interest rates, allowing for more unproductive federal and private sector debt.

#2 Negative Multiplier

As we note, debt increasing faster than economic growth proves that borrowing and spending are unproductive. Unproductive government debt or private sector debt also results in a negative economic multiplier. Essentially, the ultimate expense of the debt outstrips its benefits over the long run.

Economists define the multiplier effect as the change in income divided by the change in spending. Over an extended period, if the change in spending is more significant than the change in income, the effect of said spending is negative. Replace GDP for income and government debt for spending to compute the government’s spending multiplier.

Multiplier = Change Income / Change Spending

Government Multiplier = Change GDP / Change Debt Outstanding

To help appreciate the negative multiplier, let’s consider the two rounds of stimulus checks sent to the public during the pandemic. Consumers and businesses spent a large percentage of the funds on goods or services that no longer provide economic benefit. The initial result of the direct stimulus was a massive boost to economic activity. Three to four years later, the economic growth spurt is finished, and the debt and its annual interest costs remain. The interest on the debt is capital that will not be put to productive use.

Yesterday’s tailwind is slowly becoming tomorrow’s headwind.

There are other economic considerations as well.

Ricardian Equivalence

This economic theory states that when individuals anticipate tax increases to finance current and future government spending, they increase their savings to offset the expected tax burden. Therefore, any increase in government spending financed by debt may not stimulate consumption and investment, potentially resulting in a negative multiplier effect.

Crowding Out

High levels of government borrowing can lead to crowding out of private investment. This occurs when government borrowing forces higher interest rates, making it more expensive for businesses and individuals to borrow for investment. Further, as banks are asked to hold more government debt, they have less ability to lend to the private sector. Consequently, private investment, likely to be more productive than government spending, may decline.

Capitalism Is Eroding

The graph below shows why capitalism matters. It plots the Heritage Foundation’s Index of Economic Freedom, a measure of capitalism, versus the average family wealth for 137 countries. As shown, economic freedom and wealth have a strong positive correlation.

With that relationship in mind, government spending is a key component of the economic freedom index. Massive government stimulus spending reduces our index score. Further, while not a part of the score, manipulation of free market interest rates also detracts from the benefits of capitalism. As our index score falls, denoting the retreat from capitalism, so does our wealth.

Summary

Nothing is free, it’s just a question of how it’s paid for. While the government spends like there is no tomorrow and the Fed does everything in its power to help them, we must understand that the longer-term consequences of their actions are weaker economic growth and growing wealth disparity, as we discuss in Fed Policies Turn The Wealth Gap Into A Chasm. To wit:

QE may have served as an emergency way to add bank reserves to the system and boost confidence. However, its continued use, even during economic prosperity periods, only makes the wealth gap wider.

We should take the matter personally because, as we have shown, there is a strong link between government borrowing and our prosperity. While the cost of deficits may not be higher taxes, it does show up invisibly in lesser wages and wealth than we otherwise could attain. Any wonder why millennials are on track to be the first generation to fail to exceed their parents in income?

Tyler Durden Wed, 05/15/2024 - 14:05

Goldman Warns Copper "Is Having A Cocoa Moment" 

In a Goldman Materials note this morning covering China and copper, analyst James McGeoch pointed out that the base metal is "having a Cocoa moment." 

Comex copper futures for July delivery jumped nearly 5% to $5.12 a pound, exceeding an earlier record for the most active contract set in March 2022. According to Bloomberg, the short squeeze "prompted a scramble to divert metal in other regions to US shores."  

Comex copper futures are breaking out. 

Comex copper futures are in one of the biggest-ever backwardation periods - a clear indication of severely tight supply. 

"Short spread and futures holders are being squeezed," Michael Cuoco, head of hedge fund sales for metals and bulk materials at StoneX Group, told Bloomberg. 

Here's more commentary on the copper squeeze in the US via McGeoch: 

Copper got funky on LME close, the …Copper we see arb positions driving  (short CMX/long LME basis producer hedges and other factors) and have seen big unwinds on this, the spread got to +$900 (o’night it got to 1200t….saw people shorting it at $600 and getting stopped out literally hours later). There is also a seemingly large Chinese/Asian position (the arb CMX/SHFE getting bought again over night). The financial flows are typically more CMX heavy (options and outrights) and the change in liquidity. mkt structure is compromised as there is not that much Copper available on CMX to be delivered. For the next two weeks its likely to stay unhinged, as the positions are all against July expiry and we are unsure how it solves ahead of that, ie the delivery mechanism to solve.

Short-squeeze in commodities markets occurs when traders are forced to exit positions due to increasing margin calls or the threat of having to deliver physical material. 

Jia Zheng, head of trading at Shanghai Dongwu Jiuying Investment Management, explained that the surge in the July contract was partly driven by a squeeze on traders involved in reverse arbitrage, where they short Comex and go long on Shanghai copper.

This coincides with dwindling copper mining supplies and a surge in AI data center investments across the US. Additionally, the US and UK have banned Russian aluminum, copper, and nickel.

ZH's The Market Ear penned a note earlier indicating the parabolic price action in copper is getting overextended. 

Tyler Durden Wed, 05/15/2024 - 13:45

Bitcoin Paves The Way For A New Era Of Free Market Banking

Authored by Nick Giambruno via InternationalMan.com,

Hal Finney was a pioneering computer scientist, cryptographer, and prominent Cypherpunk who played a crucial role in the early development of Bitcoin.

He was one of the first supporters, contributors, and adopters of Bitcoin.

In short, Finney was a visionary who understood Bitcoin’s potential before almost everyone else.

In December 2010, Finney wrote:

“There is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins.

Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the blockchain.

There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

I believe this will be the ultimate fate of Bitcoin, to be the ‘high-powered money’ that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers.

Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin based purchases are today.”

Bitcoin banking takes the “free banking” concept and makes enormous improvements.

The free banking era in the US lasted from the 1830s to the early 1860s. Minimal regulations and the absence of a central bank characterized it.

Banks were permitted to issue their own currency, known as banknotes, that circulated as money. These banknotes were supposed to be redeemable on demand for the gold or silver reserves they represented.

The value of these banknotes fluctuated based on the perceived solvency of the issuing bank and the distance from the bank itself, as people were less willing to accept notes from distant or unknown banks.

Similarly, Bitcoin banks hold BTC as a reserve asset and issue digital eCash notes redeemable for Bitcoin (either onchain or on the Lightning Network) anytime on demand. These eCash notes are like digital versions of the gold-backed banknotes during the free banking era, but with several significant improvements.

The best way to think of Bitcoin banking is as a massive upgrade to the existing custodial banking models.

Below are a few benefits.

• Private transactions

• Fungibility between different eCash notes

• Low barrier to entry

• Minimizing trust

• Low switching costs

• Convenient and easy to use

• Redeemable at any time

• Backup and recovery of funds

First, we have to understand the basic structure of how a Bitcoin bank could work.

Bitcoin banks are likely to take the form of a federation.

This model reduces trust by distributing control over a group of people or entities. This federated group issues, verifies, transfers, and administers the digital eCash notes—but only if there is consensus among the federation members to take these actions.

The main idea of a federation is that you are reducing the amount of trust needed to run a system by distributing control.

The federation holds its Bitcoin reserves in a multisig wallet, a special type of wallet that requires multiple people’s authorization to spend the funds. Think of it as a safe that requires multiple keys to open.

There will likely be a wide variety of Bitcoin banking federations. Some will be small and focused on local communities, while others will be large and geared towards providing commercial-scale operations.

Naturally, there are risks with any system that depends on trust or third parties.

Bitcoin banks have risks, too, but the main point is that they significantly reduce these risks compared to centralized systems. Specifically, you have to trust that the members of the federation will not form a majority quorum to steal the Bitcoin held in the multisig wallet that backs customer deposits or debase their eCash notes. I’ll discuss these and other risks later.

Here’s how it works.

Someone who wants to obtain eCash notes will first download the software to interact with the federated Bitcoin bank. Then, you will send Bitcoin (onchain or Lightning) to the federated Bitcoin bank and receive eCash notes in return.

With a federated Bitcoin bank, you can also sell something and receive eCash notes in your wallet. You could also earn eCash notes from your employer as they deposit your salary into your wallet, just like they do with your traditional bank account today.

Bitcoin banking federations are meant to be interoperable with the Lightning Network—an open, peer-to-peer network built on Bitcoin that allows for nearly instantaneous transactions and almost zero fees. You can use eCash notes anywhere that Lightning is accepted.

With Bitcoin banking federations, you can withdraw to another federation or your own Bitcoin wallet (onchain or Lightning) anytime on demand.

Unlike self-custody wallets, Bitcoin banking federations can help users recover their funds if they lose access to their wallets.

Suppose you want to spend your eCash with a merchant with a different Bitcoin banking federation. This is where the Lightning Gateways come in. They are market makers who provide liquidity between Bitcoin (onchain and Lightning) and various eCash notes issued by different banking federations for a small fee.

When you send an eCash payment to a merchant at a different banking federation, you will send the eCash to a Lightning Gateway, which will then send the correct eCash to the merchant. Or suppose the Lightning Gateway doesn’t have liquidity in the merchant’s eCash notes. In that case, it will find another Lightning Gateway that does, send that Lightning Gateway a Lightning payment, and then the second Lightning Gateway will forward the payment to the merchant in its eCash note.

In short, Lightning Gateways will provide liquidity that increases the fungibility between numerous eCash notes issued by different Bitcoin banking federations.

It’s like seamlessly sending a payment from PayPal to a user on Cash App, Venmo, or another platform.

If this seems complicated, don’t worry. This just explains how a Bitcoin banking application on your phone would work under the hood. It does all of this in the background without your input. For the user, it will be a seamless experience of simply scanning a QR code and authorizing a payment on a phone application.

Most internet users do not know how TCP/IP or SSL works, but they use it daily in the background as they browse the web. I expect a similar dynamic with Bitcoin, the Lightning Network, federated Bitcoin banks, and various Bitcoin-backed eCash notes.

The graphic below does an excellent job illustrating how transactions with different eCash notes from different federated Bitcoin banks would work. It’s from Eric Yakes, author of The 7th Property: Bitcoin and the Monetary Revolution, which I consider the best resource for understanding the mind-bending potential of Bitcoin banking.

Source: Eric Yakes

Bitcoin Banking and Privacy

Financial privacy is one of the biggest benefits federated Bitcoin banks will offer over traditional custodians.

Chaumian eCash is what will enable it.

The name is a nod to cryptographer and Cypherpunk David Chaum, who created a way to provide secure and anonymous online transactions, much like using cash in the physical world.

With Chaumian eCash, users can spend money online without revealing their identity or transaction details to anyone, including the recipient or the federated Bitcoin banks and Lightning Gateways involved in the transaction.

One of the key features of Chaumian eCash is its use of blind signatures, a cryptographic technique that allows a federated Bitcoin bank to sign and validate eCash notes without actually seeing the transaction details.

In other words, a federated Bitcoin bank knows a valid eCash note has been issued and spent, but it doesn’t know who spent it or on what. Further, they will not be able to know individual account balances nor the identity of those who redeem an eCash note for Bitcoin.

Those running a federated Bitcoin bank will only be able to know the total amount of BTC held in reserves in the federation’s multisig wallet and the total amount of eCash notes outstanding for redemption.

This is a revolutionary improvement in financial privacy over existing custodial solutions, which offer no privacy whatsoever.

The strong privacy protections that Chaumian eCash offers enable another critical benefit: censorship resistance.

With PayPal, Venmo, traditional bank accounts, and other traditional custodial financial services, they can block a payment or cancel your account whenever they want under any pretext they find convenient.

With federated Bitcoin banks, they are unable to censor or block transactions. Thanks to the strong privacy protections from Chaumian eCash, they can’t know the details of each transaction, so they can’t block or prevent them.

In short, with federated Bitcoin banks and Chaumian eCash, we have, for the first time, a convenient custodial solution that is resistant to censorship.

Fedimint

Perhaps the most promising implementation of federated Bitcoin banks is Fedimint.

Fedimint is an open-source protocol that allows anyone to create a federated Bitcoin bank with a few clicks.

Using Fedimint to set up a federated Bitcoin bank costs nothing. No licenses or permission is needed.

In short, Fedimint could do to the banking cartels what Uber did to the taxi cartels.

Rug Pull Risk

Like all Layer 2 solutions, federated Bitcoin banks are a trade-off. They are less secure than self-custody but offer more convenience, ease of use, and privacy, among other benefits.

Specifically, you have to trust that the members of the federation will not collude to form a majority quorum to steal the Bitcoin held in the multisig wallet that backs customer deposits.

The size of that quorum will vary between different federations. The larger the quorum, the more distributed the risk.

It could be as small as a 2-of-3 setup, meaning there are three authorized users, and two are needed to spend the Bitcoin reserves in the federation’s multisig wallet, or as large as a 99-of-100 and anything in between.

Rug pull risk will naturally vary between different banking federations.

Local Bitcoin banking federations could mitigate this risk because known community members would operate them. They would likely suffer serious legal, reputational, and physical consequences for stealing their neighbors’ money.

With larger commercial Bitcoin banking federations, depositors could mitigate this risk with private insurance, rating agencies, and other market solutions.

In any case, ongoing due diligence of federated Bitcoin banks will be important. Depositors will have to do this or find someone to do it.

Centralization Risk

Trusted third parties are centralized vulnerabilities. Governments can capture and coerce them.

This is precisely how governments used the gold standard to bootstrap the fiat currency system into existence.

First, people used physical gold as money. Then, to scale, they necessarily turned to third parties, like banks, that stored gold and issued gold IOUs to facilitate trade. Governments captured those third parties and then gradually removed the gold backing from the IOUs until they were nothing more than confetti. In short, that is how the fiat currency system was born.

Could something similar occur with Bitcoin?

Bitcoin has a great chance of avoiding this fate because of its extreme portability and decentralization.

In the past, government agents could simply show up at a bank and demand they hand over their physical gold reserves to a centralized depository.

Let’s presume government agents would even be able to identify someone running a federated Bitcoin bank.

What could they do?

If the federated Bitcoin bank had been set up with sufficient geographical and political diversification, there’s not much they could have done. They could, at most, detain the one person in their jurisdiction running the federated Bitcoin bank.

Let’s say there was a quorum of 7-of-10, and the other nine federation members were located in different political jurisdictions. The Bitcoin reserves would be safe because the one person the government agents detained could not reach a quorum to spend them. The other nine federation members could then take further defensive measures to ensure the safety of the federation’s BTC.

In short, it would be exponentially more challenging for governments to capture, coerce, and centralize federated Bitcoin banks than it was for them to do the same with banks under the gold standard.

Hal Finney noted that there will likely be a market for the various eCash notes, and their values will fluctuate depending on how the market evaluates their risk. I expect eCash notes with more exposure to riskier jurisdictions to trade a discount to their Bitcoin reserves to reflect this risk.

Remember, with the open-source Fedimint protocol, anyone can easily form a federated Bitcoin bank. This low barrier to entry also helps mitigate the centralization risk.

With the traditional banking system—and banking under the gold standard—the government needs to control a relatively small number of banks and entities. With federated Bitcoin banks, anyone could potentially operate one—permission from a centralized banking cartel is not required.

Here’s the bottom line.

If governments attempted to capture, centralize, and coerce federated Bitcoin banks, I believe it would be a fruitless game of whack-a-mole.

Debasement Risk

There is also a risk that the people running a federated Bitcoin bank could secretly collude to debase their eCash notes.

Consider the example of the bankrupt exchange FTX, which created many more claims to Bitcoin than the actual BTC held in reserve. FTX account holders who thought they owned Bitcoin and did not withdraw were left holding the bag.

I think several factors will mitigate this risk with federated Bitcoin banks.

First, the cost of switching to another federated Bitcoin bank or withdrawing is low and can occur anytime. The ease at which a potential bank run could occur should put fear in the hearts of those attempting any debasement scheme.

I expect other market-based incentives, such as memberships in exclusive clubs for Bitcoin banks with the best reputations and other reputation systems, will help minimize the debasement risk.

The low barrier to entry to creating a federated Bitcoin bank and low switching costs means there will likely be cut-throat competition. If the market suspects a Bitcoin bank is debasing its eCash notes, it will be an excellent opportunity for a competitor to grab market share.

Likewise, speculators could play an important role. They will be there to short the eCash notes of Bitcoin banks suspected of engaging in debasement.

Conclusion

Bitcoin is a revolutionary innovation for the base monetary layer and provides a foundation for a new financial system.

Consider the implications of the trustless Bitcoin base layer in combination with the Lightning Network, federated Bitcoin banks issuing Chaumian eCash, and other trust-minimized Layer 2 solutions for scaling and convenience.

The amount of value they could unlock is astonishing. It could usher in a new era of free banking worldwide.

While the Bitcoin megatrend is no longer in its infancy, it is still early, and you are not too late. Bitcoin has a long way to go before it emerges as the world’s dominant money and displaces the traditional financial system.

I have little doubt The Bitcoin Supremacy will be one of the biggest financial trends of the decade. I believe that patient investors will reap substantial gains.

That’s why I’ve just released an urgent PDF report revealing three crucial Bitcoin techniques to ensure you avoid the most common—sometimes fatal—mistakes.

Check it out as soon as possible because it could soon be too late to take action. Click here to get it now.

Tyler Durden Wed, 05/15/2024 - 13:25

The Grain That Feeds The World Is At Risk Of An Upside Breakout 

Rice is a staple food for over 3.5 billion people worldwide, especially in Asia, Latin America, and Africa. It's grown in over 100 countries, with 90% of the world's rice produced in Asia. We have been tracking the prices of Thai white rice, which surged to 15-year highs in 2023 and has since consolidated at these highs with risks of a further upside breakout. 

According to new data from the Thai Rice Exporters Association, Thai white rice 5% broken, an Asian benchmark, rose nearly 6% to $649 a ton, inching closer and closer to last year's highs. Since early 2022, prices have surged 64%. 

We continue to follow Thai rice prices because rice is a critical staple food for billions of people worldwide. 

Here are some of the risks we've pointed out in the last few years:

• Sept. 2022: The Stage Is Being Set For A Massive Global Rice Shortage

• May 2023: Global Rice Shortage Looms, Set To Be The Biggest In Decades

• May 2023: Thai Rice Crop In Crosshairs Of El Nino As Farmers Are Warned About Water Shortages

• July 2023: "So It Begins ": US Supermarkets Hit With Buying Panic As India Bans Rice Exports

• August 2023: Rice Crisis Sends Prices To Highest Levels Since 2008

• September 2023: "Go Easy On The Curry": HSBC Warns Rice Crisis Reminiscent Of '2008 Asian Food Price Scare'

• November 2023: Rice Nears 15-Year High As Global Food Crisis 'Much Worse Than 2008'

The good news is that global food prices measured via the UN's Food and Agriculture Organization print below the 2010 Arab Spring level, an area of risk where high food prices cause social instabilities in third-world countries. However, some of the latest prints show that food inflation could increase. 

If prices do surge from here, let's remind readers of this 2008 headline from The Guardian:

Food inflation is certainly not going away. That's evident in the prices of cocoa, OJ, coffee, beef, and many other items at the supermarket. 

Tyler Durden Wed, 05/15/2024 - 13:05

Venezuela Moves "Substantial Quantities" Of Troops To Guyana Border

By Charles Kennedy of OilPrice.com

Venezuela has moved “substantial quantities of [military] personnel and equipment to the border with Guyana amid its territorial dispute over the Essequibo region.

The update comes from the Center for Strategic and International Studies in Washington D.C., which this week released a report on the latest developments in the Venezuela-Guyana dispute.

The think tank talks about an expansion of a military base on Anacoco Island in the area, with new roads and a bridge getting built in the past few months. A local airport is also being expanded, CSIS also said, citing satellite imagery and social media posts.

According to the report’s authors, the activity could be preparation for a “manufactured crisis” before or after Venezuela’s next elections, set to take place in late July.

The Essequibo region encompasses about two-thirds of Guyana’s territory and is where most of its oil resources lie, and the site of massive discoveries and new production by Exxon and partners.

The International Court of Justice previously ruled that Essequibo is part of Guyana, although this is still not recognized by Venezuela. A written agreement was penned in December between the two that denounced the use of force, instead calling for a commission to address the disputes.

However, after a December referendum, in which Venezuelans overwhelmingly voted that Essequibo is part of their country, the government pushed with its annexation attempt. The buildup of troops began in February this year and prompted expectations of an imminent military conflict.

At the time, Caracas said it had the right to shore up its borders in response to U.S. military exercises in Guyana toward the end of the year and the presence of a UK anti-narcotics vessel that is in Guyanese waters. The Venezuelan government has also criticized Exxon for depending on the U.S. military for its security and for its exploitation of Guyana’s oil resources.

Tyler Durden Wed, 05/15/2024 - 12:45

CPI Does Not Signal Re-Emergence Of Disinflationary Trend

Authored by Simon White, Bloomberg macro strategist,

Today’s CPI data shows the gap between CPI and PPI continues to rise, a proxy for profit margins.

After a rise and fall through the pandemic, they are persistently rising again. 

Profits are positioned to be one of the main vectors of persistent consumer inflation in this cycle.

Yields are in an interim trend lower as recessionary risks resurface, but the primary uptrend is intact.

There will be another bond selling opportunity later in the summer.

This rise in the profit-margin proxy matches the message from the primary services component of the PPI data...

Nothing moves in a straight line, and it is far too early to declare that the disinflationary trend has resumed.

Tyler Durden Wed, 05/15/2024 - 12:05

RFK Jr. Cries 'Collusion' After Biden And Trump Ditch Him For Debate

Update (1252ET): With recent analysis from both Goldman and TS Lombard suggesting that 3rd party candidates could have a huge impact on the 2024 election, wildcard candidate RFK Jr. has accused Trump and Biden of 'colluding to lock American into a head-to-head match-up that 70% say they do not want.'

"They are trying to exclude me from their debate because they are afraid I would win. Keeping viable candidates off the debate stage undermines democracy," he said in a post to X.

Presidents Trump and Biden are colluding to lock America into a head-to-head match-up that 70% say they do not want.

They are trying to exclude me from their debate because they are afraid I would win. Keeping viable candidates off the debate stage undermines democracy.…

— Robert F. Kennedy Jr (@RobertKennedyJr) May 15, 2024

Amazing...

Do people understand what Biden just did?

He is ditching the debates held by the bipartisan debate commission and creating his own so that he can remove RFK Jr, who qualifies under the traditional bipartisan rules.

This is literally the opposite of Democracy. pic.twitter.com/OI6PScGvkl

— Geiger Capital (@Geiger_Capital) May 15, 2024

Trump, meanwhile, has also accepted an Oct. 2 debate - except he wants it on Fox News.

*  *  *

Update (1148ET): After a morning of geriatric shit talking, President Biden and former President Trump have agreed to a June 27 debate hosted by CNN.

The date means that the two will debate before either candidate's nominations are formally complete, and will be their first televised encounter since 2020.

The debate will be held in CNN's studio in Atlanta, per Axios, citing a network announcement. No audience members will be present, per the Biden campaign's demands.

*  *  *

President Biden on Wedensday says he won't participate in the decades-old tradition of three fall debates by the bipartisan Commission on Presidential Debates, and has proposed two televised debates in June and September - with no audience, RFK Jr. can't participate, and Trump's mic will be muted when Biden is speaking. Oh, and they can only be hosted by a regime-friendly network.

Outlined in a video message and a letter to the commission, Biden called for direct negotiations between his campaign and the Trump campaign over rules, moderators, and network hosts for the one-on-one debates. He proposed a separate VP debate in July, after the Republican nominating convention and before the Democratic nominating convention.

"Donald Trump lost two debates to me in 2020, and since then he hasn’t shown up for a debate. Now he is acting like he wants to debate me again. Well, make my day, pal. I’ll even do it twice," Biden said in a video released Wednesday, poking fun at Trump's trial schedule in which the former President is free on Wednesdays. "So let’s pick the dates, Donald. I hear you’re free on Wednesdays."

According to Biden campaign chair Jen O'Malley Dillon, the commission's proposed schedule and difficulty in keeping candidates from violating debate rules are the reason for the proposal, the Washington Post reports.

"The Commission’s model of building huge spectacles with large audiences at great expense simply isn’t necessary or conducive to good debates," she wrote in a letter. "The debates should be conducted for the benefit of the American voters, watching on television and at home — not as entertainment for an in-person audience with raucous or disruptive partisans and donors, who consume valuable debate time with noisy spectacles of approval or jeering."

Here's the notice. https://t.co/peSh2ZW0ZX pic.twitter.com/hBcUBHp27o

— Stephen L. Miller (@redsteeze) May 15, 2024

Trump responded to the challenge, telling Fox News' Brooke Singman "I'm ready to go…The dates that they proposed are fine…Let's see if Joe can make it to the stand-up podium," adding "The proposed June and early September dates are fully acceptable to me. I will provide my own transportation."

EXCLUSIVE: @realDonaldTrump tells me:

“I'm ready to go…The dates that they proposed are fine…Let's see if Joe can make it to the stand-up podium.”

"The proposed June and early September dates are fully acceptable to me. I will provide my own transportation."

— Brooke Singman (@BrookeSingman) May 15, 2024

Trump and the RNC have also shown interest in ditching the commission, which has held presidential debates since 1988. They have already scheduled three presidential and vice presidential debates starting on Sept. 16, as well as a presidential candidate meeting in Texas that would have been simultaneously broadcast by major networks.

"Let’s set it up right now," Trump told Biden in a May 9 video posted to Truth Social. "I’m ready to go anywhere that you are."

The two camps will conduct extensive negotiations over the coming weeks, with Biden's team requesting that only broadcast networks which hosted Republican primary debates in 2016 and Democratic primary debates in 2020 should be eligible to host - meaning CNN, ABC News, Telemundo and CBS News.

To that end, Biden has 'received and accepted an invitation from CNN for a debate on June 27th.'

I’ve received and accepted an invitation from @CNN for a debate on June 27th. Over to you, Donald. As you said: anywhere, any time, any place.

— Joe Biden (@JoeBiden) May 15, 2024

As far as moderators go, Biden's team has proposed that the host be picked from networks' "regular personnel," and that the actual debate have firm time limits on answers, equal speaking time, alternative turns to speak, and microphones that are only active during each candidate's turn.

DEBATE: Biden’s debate challenge to Trump came with fine print:

• No live audience
• RFK Jr. is banned
• Trump’s mic is muted when Biden speaks
• Only hosted by NPR, CNN, MSNBC, ABC, or CBS
• Moderated by Democrat-aligned reporter pic.twitter.com/ST4ZKTcMFA

— @amuse (@amuse) May 15, 2024

Tyler Durden Wed, 05/15/2024 - 11:48

Did Michael Cohen Commit Perjury In The Trump Trial?

Authored by Jonathan Turley,

Below is a slightly expanded version of my column in the New York Post on the first day of cross examination for Michael Cohen. He still has one day of cross examination ahead of him on Thursday. With the government resting after Cohen’s cross examination, I believe that an honest judge would have no alternative but to grant a motion for a directed verdict and end the case before it goes to the jury. Judge Juan Merchan will now have to give the full measure of his commitment to the rule of law. Given the failure to support the elements of any crime or even to establish the falsity of recording payments as legal expenses, this trial seemed to stumble through the motions of a trial. Michael Cohen was only the final proof of a raw political exercise. For critics, some of Cohen’s answers appear clearly false or misleading. Like their star witness, the prosecutors have shown that they simply do not take the law very seriously when there is an advantage to be taken. Cohen has truly found a home with the office of Manhattan District Attorney Alvin Bragg.

Here is the column:

On Tuesday, the prosecution surprised many by suddenly announcing that it would rest its case against former president Donald Trump with the completion of testimony by Michael Cohen.

It was surprising because the prosecution never clearly stated the crime that it was proving, the elements of that crime, or even why denoting payments related to Stormy Daniels were not properly recorded as legal expenses.

Indeed, the only thing the prosecutors proved was that, in the pantheon of dishonesty, there are liars, pathological liars . . . and Michael Cohen.

Cohen spent the last two days insisting that he used to be a liar but lied to help former President Donald Trump. If that is the thrust of his testimony, it is just the latest lie told by Cohen under oath.

Cohen has lied to Congress, courts, special counsels, the IRS, the banks, and virtually every creature that walks or crawls on the face of the Earth.

Notably, his past conviction for business and tax fraud were not taken in the interests of Trump but himself.

When he admitted on the stand that he lied during his prior plea agreement, that was not to assist Trump who he had already denounced. It was to advance his own interests.

There is every indication that Cohen is still lying.

Cohen repeatedly said that he could not remember even recent calls after recounting calls from eight years ago with crystal clarity. He said that he could not remember if he leaked information in the case to CNN. However, these paled in comparison to other glaring moments.

Take, for example, his testimony on his unethical decision to secretly record a Sept. 6, 2016 telephone call with Trump.

It was a breathtaking betrayal that most lawyers would not contemplate, let alone carry out.

When asked by the prosecutors about that act, Cohen bizarrely claimed that he did so to guarantee that David Pecker, the former publisher of the National Enquirer, would “remain loyal to Mr. Trump.”

No one seriously believes that this is true. It does not even make sense. Pecker was speaking to Trump about the payments and even met with him at the White House.

Playing for him a call with Trump would produce nothing but confusion rather than pressure for Pecker.

Moreover, why would Cohen tape the call without letting Trump know? The obvious motive was to squirrel away material to use against Trump if he ever needed a little leverage.

Again, it was for Cohen.

Cohen’s testimony showed that he has consistently acted in his sole interest.

After portraying his sudden cooperation with prosecutors as a type of Road to Damascus, jurors learned that all roads lead back to Cohen and his bank accounts.

After telling the jury that he has dedicated his life to righting the wrongs of Trump and holding him accountable, he admitted that he repeatedly acted to undermine the prosecution in order to make a buck.

Told by prosecutors to stop doing public interviews, Cohen did not care. He did roughly two dozen television appearances and recorded hundreds of podcast episodes.

He admitted that Trump is mentioned in virtually every episode, of which he did roughly four a week.

He recounted how he raked in millions on books, including one titled “Revenge.” He admitted that he is selling items like a $32 shirt with a photo of Trump in a jumpsuit behind bars and a coffee mug with the phrase “send him to the big house, not the White House.”

He is also peddling a reality show called “The Fixer,” in which he promises viewers, “I am your fixer.”

After just a few hours of cross examination, it was clear that Cohen is the same grifter saving himself — one Venmo at a time.

Yet, Cohen continued to reframe reality in his own self-constructed image.

When asked about his TikTok antics, he portrayed his postings as a type of sleep deprivation therapy, explaining that “having a difficult time sleeping and [he] found an out.”

No sane prosecutor would rely on Cohen, let alone make him the entirety of their case.

The prosecutors did not even bother to show that Trump was responsible for or knew about how the payments were recorded on ledgers and business records.

They also just shrugged away the need to show why denoting these payments as “legal expenses” was fraudulent — or what the correct description might be.

Those details might be demanded in any other courtroom, but this is New York and the defendant is Donald Trump.

For Bragg and his team, it is all about what they can get out of this case despite the law.

In that sense, they found a kindred spirit in their star witness, and Michael Cohen has finally found a place that values what he calls on his reality show promo his “particular set of skills.”

Tyler Durden Wed, 05/15/2024 - 10:45