Goldman Expects A Structural Bull Market For Commodities In 2021, Sees Gold Hitting $2300 Tyler Durden Thu, 10/22/2020 - 12:00

A weaker U.S. dollar, rising inflation risks and demand driven by additional fiscal and monetary stimulus from major central banks will spur a bull market for commodities in 2021, Goldman's chief commodity strategist Jeffrey Currie said on Thursday, also predicting that "all commodity markets are in, or moving toward, a deficit with inventories drawing in all but cocoa, coffee and iron ore."

The bank, which notes that markets are increasingly concerned about the return of inflation, forecast a return of 28% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 17.9% return for precious metals, 42.6% for energy, 5.5% for industrial metals and a negative return of 0.8% for agriculture.

A key catalyst for the bank's bullish call is that "nearly all commodity markets are in, or moving toward, a deficit with inventories drawing in all but cocoa, coffee and iron ore."

As Currie adds, "such broad-based deficits are usually only seen late in the business cycle, underscoring the unique environment markets are in. Given that inventories are drawing this early in the cycle, we see a structural bull market for commodities emerging in 2021." In the strategist's view, the bull market will be driven by three major themes:

1. structural under-investment in the old economy,
2. policy driven demand and
3. macro tailwinds from a weakening dollar and rising inflation risks. "These drivers remain consistent with the bank's bullish views from the start of this year, and have now been intensified by COVID-19 disruption and the subsequent global policy response."

Some more thoughts from Currie on the tightening in commodity markets:

Commodity markets have been mostly range bound since this summer, in our view caught between a longer-term bullish outlook for 2021 and near-term concerns around the timing of a vaccine amid rising COVID cases across Europe and the US Midwest (see Exhibit 4). However, it is important to emphasize that nearly all commodity markets are in, or moving toward, a global deficit with inventories drawing in all but cocoa, coffee and iron ore. Such broad-based deficits are usually only seen late in the business cycle,underscoring the unique environment markets are in.

As global demand remains tepid for consumer-related commodities like oil, the deficits further underscore how significant the drop in supply has been and how the supply response function has changed. For oil, the sharp drop in capex is now having an impact on non-OPEC decline rates, with capital markets refusing to fund shale drilling, only debt rollovers. In metals, we have seen a sharp drop in maintenance capex and supply disruptions dragging into 2021. This suggests that even if demand falters in coming weeks as winter exacerbates COVID-19, markets will likely continue to rebalance, barring an outright collapse in demand. In our view, base metals and agriculture have more near-term upside than oil, with smaller inventories to move through before prices begin to rise.

Goldman then shows the following chart which reveals the growing deficit across key commodities, as well as the key macro catalysts for higher commodity prices in coming months:

Hedging that even if demand falters in coming weeks as winter exacerbates COVID-19, Goldman still expect markets will continue to rebalance, "barring an outright collapse in demand." Goldman takes a more contained view on energy saying that while inventories of oil remain high, "upside in energy prices will likely come after winter." However, non-energy commodities face immediate upside as balances have tightened ahead of expectations, driven by large Chinese demand and adverse weather shocks, according to the Goldman strategist.

Focusing on Gold, Currie said that expansionary fiscal and monetary policies in developed market economies continue to drive interest rates lower and create demand for hedging the tail risks of inflation, lifting demand for precious metals. As a result, Goldman forecasts gold prices at an average of $1,836 per ounce in 2020 and $2,300 per ounce in 2021, and expects silver prices to be at around $22 per ounce in 2020 and $30 per ounce next year.

Non-energy commodities could see an “immediate upside” as the market balances tighten ahead of expectations on strong demand from China and weather-driven risks, the Goldman Sachs analysts said.

The bank maintained a “neutral” view on commodities in the near term and “overweight” in the medium term.

"Bias, Hatred, & Rudeness" - Trump Posts Full Raw '60 Minutes' Interview Tyler Durden Thu, 10/22/2020 - 11:41

Just as he promised, President Trump has just posted the full, unedited interview with Lesley Stahl from '60 minutes'.

He tweeted:

"Look at the bias, hatred and rudeness on behalf of 60 Minutes and CBS."

Trump began by asking Stahl to "just be fair..." after she warned him "are you ready for tough questions."

When she refused to accept his responses to various questions, Trump jabbed:

"...to you, nothing I've said will be good enough... You just come in here with that negative attitude"

And during a discussion of the fact that she refused to address any of the questions about Hunter Biden, Trump pointed out quite honestly that:

"you discredit yourself, I don't have to"

The interview did not end with Trump storming out as the media has claimed but it certainly ended in disagreement with Trump saying " I think we have enough of an interview here already, let's go" following a handler's warning that there was a 5 minute window to a meeting with the vice president.

Full interview below

Then added the following ahead of the debate:

"Tonight’s anchor, Kristen Welker, is far worse!"

How long before Facebook removes this clip?

USA Today Refused To Publish Hunter Biden Scandal Op-Ed, So Here It Is Tyler Durden Thu, 10/22/2020 - 11:28

Authored by Glenn Harlan Reynolds,

SO USA TODAY DIDN’T WANT TO RUN MY HUNTER BIDEN COLUMN THIS WEEK. My regular editor is on vacation, and I guess everyone else was afraid to touch it. So I’m sending them another column next week, and just publishing this one here. Enjoy! This is as filed, with no editing from USAT.

*  *  *

In my 2019 book, The Social Media Upheaval, I warned that the Big Tech companies — especially social media giants like Facebook and Twitter — had grown into powerful monopolists, who were using their power over the national conversation to not only sell ads, but also to promote a political agenda.

That was pretty obvious last year, but it was even more obvious last week, when Facebook and Twitter tried to black out the New York Post’s blockbuster report about emails found on a laptop abandoned by Democratic presidential candidate Joe Biden’s son Hunter.

The emails, some of which have been confirmed as genuine with their recipients, show substantial evidence that Hunter Biden used his position as Vice President Joe Biden’s son to extract substantial payments from “clients” in other countries. There are also photos of Hunter with a crack pipe, and engaging in various other unsavory activities. And they demolished the elder Biden’s claim that he never discussed business with his son.

That’s a big election-year news story. Some people doubted its genuineness, and of course it’s always fair to question a big election-year news story, especially one that comes out shortly before the election. (Remember CBS newsman Dan Rather’s promotion of what turned out to be forged memos about George W. Bush’s Air National Guard service?)

But the way you debate whether a story is accurate or not is by debating. (In the case of the Rather memos, it turned out the font was from Microsoft Word, which of course didn’t exist back during the Vietnam War era.) Big Tech could have tried an approach that fostered such a debate. But instead of debate, they went for a blackout: Both services actually blocked links to the New York Post story. That’s right: They blocked readers from discussing a major news story by a major paper, one so old that it was founded by none other than Alexander Hamilton.

I wasn’t advising them — they tend not to ask me for my opinion — but I would have advised against such a blackout. There’s a longstanding Internet term called “the Streisand effect,” going back to when Barbara Streisand demanded that people stop sharing pictures of her beach house. Unsurprisingly, the result was a massive increase in the number of people posting pictures of her beach house. The Big Tech Blackout produced the same result: Now even people who didn’t care so much about Hunter Biden’s racket nonetheless became angry, and started talking about the story.

As lefty journalist Glenn Greenwald wrote in The Intercept, Twitter and Facebook crossed a line far more dangerous than what they censored. Greenwald writes:

“Just two hours after the story was online, Facebook intervened. The company dispatched a life-long Democratic Party operative who now works for Facebook — Andy Stone, previously a communications operative for Democratic Sen. Barbara Boxer and the Democratic Congressional Campaign Committee, among other D.C. Democratic jobs — to announce that Facebook was ‘reducing [the article’s] distribution on our platform’: in other words, tinkering with its own algorithms to suppress the ability of users to discuss or share the news article. The long-time Democratic Party official did not try to hide his contempt for the article, beginning his censorship announcement by snidely noting: ‘I will intentionally not link to the New York Post.’”

“Twitter’s suppression efforts went far beyond Facebook’s. They banned entirely all users’ ability to share the Post article — not just on their public timeline but even using the platform’s private Direct Messaging feature.”

“Early in the day, users who attempted to link to the New York Post story either publicly or privately received a cryptic message rejecting the attempt as an ‘error.’ Later in the afternoon, Twitter changed the message, advising users that they could not post that link because the company judged its contents to be ‘potentially harmful.’ Even more astonishing still, Twitter locked the account of the New York Post, banning the paper from posting any content all day and, evidently, into Thursday morning.”

This went badly. The heads Facebook and of Twitter, Mark Zuckerberg and Jack Dorsey, are now facing Senate subpoenas, the RNC has filed a complaint with the Federal Election Commission, arguing that Twitter’s action in blacking out a damaging story constituted an illegal in-kind donation to the Biden Campaign, and most significantly, everyone is talking about the story now, with many understandably assuming that if the story were false, it would have been debunked rather than blacked out.

CNN’s Jake Tapper tweeted: ”Congrats to Twitter on its Streisand Effect award!!!” Big Tech shot itself in the foot, and it didn’t stop the signal.

Regardless of who wins in November, it’s likely that there will be substantial efforts to rein in Big Tech. As Greenwald writes, “State censorship is not the only kind of censorship. Private-sector repression of speech and thought, particularly in the internet era, can be as dangerous and consequential. Imagine, for instance, if these two Silicon Valley giants united with Google to declare: henceforth we will ban all content that is critical of President Trump and/or the Republican Party, but will actively promote criticisms of Joe Biden and the Democrats.

“Would anyone encounter difficulty understanding why such a decree would constitute dangerous corporate censorship? Would Democrats respond to such a policy by simply shrugging it off on the radical libertarian ground that private corporations have the right to do whatever they want? To ask that question is to answer it.”

“To begin with, Twitter and particularly Facebook are no ordinary companies. Facebook, as the owner not just of its massive social media platform but also other key communication services it has gobbled up such as Instagram and WhatsApp, is one of the most powerful companies ever to exist, if not the most powerful.”

He’s right. And while this heavyhanded censorship effort failed, there’s no reason to assume that other such efforts won’t work in the future. Not many stories are as hard to squash as a major newspaper’s front page expose during an presidential election.

As I wrote in The Social Media Upheaval, the best solution is probably to apply antitrust law to break up these monopolies: Competing companies would police each other, and if they colluded could be prosecuted under antitrust law. There are also moves to strip them of their immunity under Section 230 of the Communications Decency Act, which protects them from being sued for things posted or linked on their sites on the theory that they are platforms, not publishers who make publication decisions. And Justice Clarence Thomas has recently called for the Supreme Court to revisit the lower courts’ interpretation of Section 230, which he argues has been overbroad. A decade ago there would have been much more resistance to such proposals, but Big Tech has tarnished its own image since then.

Had Facebook and Twitter approached this story neutrally, as they would have a decade ago, it would probably already be old news to a degree — as Greenwald notes, Hunter’s pay-for-play efforts were already well known, if not in such detail — but instead the story is still hot.

More importantly, their heavy handed action has brought home just how much power they wield, and how crudely they’re willing to wield it. They shouldn’t be surprised at the consequences.

Wisconsin Confirms Foxconn's Taxpayer-Backed LCD 'Factory' Isn't Real Tyler Durden Thu, 10/22/2020 - 11:05

Days before the State of Wisconsin denied Foxconn's request for state tax credits - in the form of direct payments from the state to Foxconn's bank account - related to the "factory" built by the world's largest contract tech manufacturer in Mount Pleasant, Wisconsin. The project was announced shortly after President Trump's upset election victory, but quickly ran aground as reporters complained that the facility being built by Foxconn bore little resemblance to the enormous Gen 10.5 LCD factory the company had promised.

In fact, the factory isn't even big enough to serve as a smaller Gen 6 LCD "fab". In a report published this week by the Verge, following an FOIA battle with the state of Wisconsin, shows that the factory isn't really a factory at all - it's essentially a warehouse that would be better suited for product demonstrations than commercial use.

The determination essentially confirms the state's worst fears: Foxconn and its founder, Terry Guo, never intended to actually build a factory in Wisconsin. They were merely in it to try and take advantage of whatever 'tax credits' the state - at the time led by Republican Gov Scott Walker - might hand out.

So far, the state has seemingly wasted hundreds of millions of dollars on preparations for the factory site. But thanks to Foxconn's repeated failures to hold up its end of the bargain as laid out in a contract between Foxconn and Wisconsin's Division of Executive Budget and Finance, the state entity responsible for overseeing the project, none of the state subsidy money has been disbursed.

And in this latest document, which offers more insight into why the state has decided to withhold the money (read more about the original denial here),

Joel Brennan, Wisconsin Secretary of the Department of Administration and one of the state officials who signed the memo shared by the Verge, told its reporter that "clearly the Gen 6 that’s been discussed and built in Mount Pleasant is not similar to other Gen 6 fabs around the world.” Brennan said the memo was an attempt to share the state's findings and those of industry experts to try and cut through the confusion and mystery that has permeated the project.

"There was justified criticism of the [former Governor Scott] Walker administration for entering into this contract, and not really getting any outside experts for an industry that was new to Wisconsin,” Brennan said. “This is about making sure that we can use the best expertise that we have inside and outside state government so that we can make the best decisions possible.”

At the end of the day, all that Foxconn gave the state of Wisconsin was empty promises and empty buildings, the state alleged.

As the Verge recently reported, Foxconn has filed a request to use the site for storage. Any 'assembly' work that might be done at the factory would likely be late stage final assembly, which wouldn't have anywhere near the kind of impact on the local economy that Foxconn promised.

As the memo makes clear, it's likely that Foxconn entered into the deal as an attempt to effectively scam an American state. As the memo explains, Foxconn has engaged in hiring practices that appear specifically designed to fool the state in parting with the subsidy money: the company hires new graduates from the US and abroad in binges right before a state subsidy deadline, only to fire them all during the following weeks and months.

The company has, for more than a year now, maintained an eerie silence, refusing to engage with the state, or answer any questions from the oversight board, while continuing to lodge requests - for subsidies, or for change-of-use, or whatever else the company might need - related to what is by all accounts a "fake" factory. Only 281 people are employed by the project, according to the state, a tiny fraction of the 13,000 workers it was supposed to hire.

For its part, Foxconn is playing hard ball. It has accused the state of reneging on its promises, and has claimed that many of its Chinese workers have experienced a 'culture clash' like that depicted in the Netflix doc "American Factory". Now, it appears Terry Gou has found a new way to keep the scam running a little longer: he's promising to ramp up work on the factory if President Trump wins.

"Foxconn will work as a partner with those who treat the company as a partner," Gou wrote. "Foxconn will remain committed to the completion and continued expansion of our project and investment in Wisconsin as long as policymakers at the federal, state, and local levels remain committed to Foxconn and the very important technology development goals driving the company’s investments, as President Trump has done."

Regardless of what happens on Nov. 3, this appears to be just another confidence game being run by a 'Taiwanese' company that nevertheless has close ties with Beijing. Read more about the 'fake American factory' in the memo here.

Stocks Bounce Higher After Pelosi Comments Tyler Durden Thu, 10/22/2020 - 10:55

Update (1055ET): House Speaker Pelosi began her weekly press conference by saying that "progress has been made this week" and adding that she believes "we are just about there" on the stimulus deal.

That sent stocks higher...

But it appears some algos have got tired as the bounce is not very impressive...

*  *  *

Amid a chaotic week of stimulus headlines, US equity markets suddenly just snapped lower led by Nasdaq...

No immediate catalyst was obvious for the move aside from a lack of stimulus "hope" or "optimism" comments this morning. Some have suggested that the move could simply be positioning ahead of House Speaker Pelosi’s upcoming presser.

Pushing Nasdaq to 2-week lows...

The dollar is rallying modestly on the day (and bond yields are higher but not reacting to this drop in stocks)

Time to unleash the Kudlow.

Will Black And Latino Voters Deliver Another "Trump Miracle" In 2020? The Numbers Suggest It Could Happen... Tyler Durden Thu, 10/22/2020 - 10:47

Authored by Michael Snyder via The End of The American Dream blog,

Could it be possible that President Trump has one more miracle up his sleeve?  At this point, many Democrats are anticipating a Joe Biden landslide on Election Day even though his own campaign manager admits that the “inflated national public polling numbers” should not be trusted.   The truth is that both campaigns know that this is going to be a tight race that comes right down to the wire, and there are two key groups of voters that have traditionally been heavily Democratic that could end up swinging the election to Trump.  The Biden campaign has been counting on Black and Latino voters to vote like they normally do, but recent numbers indicate that may not happen this time around.

For example, Tom Del Beccaro has pointed out that a survey that was conducted by Rasmussen in September showed that Trump had an approval rating of 45 percent among the Black community…

In September, according to polling done by Rasmussen, Trump’s approval rating among African Americans reached 45%. Keep in mind that President Trump only received 8% of the Black vote in 2016. If Trump received just 16% of the Black vote this November, let alone an even higher number, that would all but secure states like Michigan for Trump.

In addition to Michigan, a dramatic shift in the Black vote could also help Trump win the critical swing state of Pennsylvania, and I will discuss that more below.

But first let’s talk about the movement that we are seeing among Latino voters.  If you can believe it, one recent survey actually had Trump leading among Latino voters in the state of Florida…

Trump could well receive a historic level of support from Latino Voters in 2020. In Florida, a NBC/Marist poll had Trump leading among Latinos 50% to 46% over Biden, whereas, in 2016, Hillary won among Latinos in Florida 62% to 35%. That would be a 15% swing toward Trump if it held up on Election Day.

After the first debate between Biden and Trump, a Telemundo poll showed Trump winning the debate overwhelmingly 66% to 34%. Snap media polls tend to reflect the sentiment of their viewers. Thus, it is no surprise that CNN viewers said Biden won the debate. The fact that Telemundo viewers decisively picked Trump as the winner, along with polls like those cited above in Florida, portend Trump getting the highest ever Latino support of any Republican presidential candidate.

Trump narrowly won Florida in 2016, and he desperately needs to win it again in 2020.

If these numbers are anywhere close to accurate, he would seem to have a really good shot of doing so.

Another encouraging sign for the Trump campaign is the fact that Republicans continue to narrow the voter registration gap with Democrats in the state.  Just check out these numbers…

There currently are 5.30 million registered Democrats and 5.17 million registered Republicans in the state – an edge of about 134,000 voters in favor of the Democrats. But the size of that margin has fallen from 327,000 in 2016 and 658,000 in 2008.

Since Trump won the state when the gap was 327,000 in 2016, you would have to think that his chances are pretty good now that the gap has been reduced to just 134,000 here in 2020.

Meanwhile, Republicans are also narrowing the voter registration gap in the state of Pennsylvania…

Three months ago, the Philadelphia Inquirer conducted a similar analysis when it found that “since the 2016 primary election, Republicans have added about 165,000 net voters, while Democrats added only about 30,000. Democrats still maintain an 800,000-voter edge over Republicans. But that’s down from 936,000 in 2016, when Trump still won the state by less than 1%.”

This is another must win state for Trump, and as I alluded to above, a shift in support among Black voters could potentially be huge.  Core urban areas such as Philadelphia have traditionally been crucial when Democrats have carried the state, and so if Trump can carve into that advantage a good bit that may be enough to keep Pennsylvania in his column this time around.

This was supposed to be a year when Democrats absolutely swamped Republicans when it came to registering new voters, but the truth is that they have been dropping the ball in state after state.

Another two key swing states where Republicans have been registering more voters than Democrats are Nevada and North Carolina…

In Nevada, where Democrats routinely out-register Republicans in the run-up to elections, the GOP has bested Democrats for at least five months since the pandemic hit. In North Carolina, where a competitive Senate race could determine which party controls the upper chamber, Republican registration has leapt by 51,381 over Democratic since mid-March.

Nobody really expects Trump to win Nevada, but if enough Latino voters shift his way we could end up seeing a major surprise.

Black voters make up a sizable portion of the voting population in North Carolina, and everyone is expecting a very tight race there, and so moving the needle just a little bit among those voters could make all the difference for Trump in that state.

Before I end this article, there are two really memorable quotes that I would like to share with you.

The first comes from Republican consultant Charlie Gerow.  He has been deeply immersed in Republican politics for decades, and this is how he responded when he was asked where things currently stand in Pennsylvania…

“I’d say we’re where we were four years ago, maybe slightly better,” Gerow told me. “Of course, an incumbent should be very far ahead at this stage if they’re going to win. But Trump’s a special case. I believe there’s a significant under-vote that doesn’t show up in the polls. A lot of Trump supporters don’t want to be visible.”

Gerow adds that the polls aren’t catching the surging enthusiasm for Trump in the state’s western oil tier. “These counties that were traditionally rock-ribbed Democratic are registering Republicans, a sign of a Trump victory bigger than last time,” he says. “It’s hard to fathom the support for Trump in the western region until you see the yard signs and talk to the folks in the bars and after church.”

This next quote comes from a Democratic strategist named Chris Kofinis.  He believes that Joe Biden will definitely win the popular vote, but he is warning that all of the national polls that we are seeing are lulling Democrats into a false sense of security…

National polls are absolutely, utterly useless and worthless. They will consistently show a Biden lead, by a small amount or a large amount, because all of the blue states, like California and New York, are going to go overwhelmingly to Biden. There’s no question that Biden will win the popular vote. But what national polls ignore is battleground states where you’re talking about leads of a few percentage points. In my opinion, national polls should be banned from existence in the last month of an election. We don’t elect the president nationally. Why are we doing national polls? It’s ridiculous. It puts out a false narrative that gives people either a false sense of security or a false sense of dread.

It will be fascinating to see how the race evolves over these last two weeks.

Most of the national polls still look really good for Biden, but most Americans are still convinced that Trump will end up winning.

In fact, a recent Gallup survey found that 56 percent of Americans believe that Trump will win and only 40 percent of Americans believe that Biden will win.

As I write this article, the numbers show that 37.3 million Americans have already voted, and that number is jumping higher with each passing day.

In the end, this election will probably be determined by just six states.  The results in Florida, Pennsylvania, Michigan, Wisconsin, North Carolina and Arizona are going to mean everything, and the Biden campaign feels like they have the upper hand at this point.

But if Trump can convince enough Black and Latino voters to come his direction, that could change everything.

*  *  *

Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.

Half Of Europe's Small Businesses Face Bankruptcy As Virus Cases Spike  Tyler Durden Thu, 10/22/2020 - 10:15

European equities slumped to near one-month lows on Thursday, as soaring COVID-19 cases across the continent weighed on sentiment. In recent months, virus cases have spiked across Europe, with Spain becoming the first country on the continent to surpass the one million infection mark. At the same time, Italy has just set a record increase in daily cases.

The surge in European coronavirus cases has shifted sentiment lower for businesses, with downside risks emerging for the continent's economy in the fourth quarter. 

Bloomberg, citing a new McKinsey & Co. survey conducted in August, describes a particularly gloomy outlook for Europe's small and medium-sized businesses, warns that at least half of them could enter into bankruptcy proceedings in the next year if revenues continue to stagnate. 

The survey, of more than 2,200 SMEs in Europe's five largest economies, was conducted in August before coronavirus cases on the continent started to spike. With some countries, Ireland, France, and Spain, reimposing stricter social distancing measures to mitigate the virus spread, this could easily result in more economic pressure that would ultimately squeeze SMEs. 

h/t Refinitiv/ Fathom Consulting 

McKinsey found 20% of SMEs in Italy and France could file for bankruptcy within the next six months. Like the US, European SMEs account for two-thirds of the workforce and at least half of economic value-added. A further collapse of SMEs is a warning sign of an economic recovery that doesn't resemble a "V-shaped" recovery. 

"The pandemic has hit European firms hard, with 70% reporting lower revenues. That level was even higher in Italy and Spain, reflecting the severity of the virus and lockdown measures in those countries," Bloomberg said. 

h/t Bloomberg 

In a recent interview, ECB President Christine Lagarde told French newspaper Le Monde that Europe's economic recovery is "running out of steam" amid a second wave of the virus pandemic. 

"The second wave of the epidemic in Europe, particularly in France, and the new restrictive measures that accompany it add to uncertainty and weigh on the recovery," Lagarde said.

Eurozone GDP could plunge by as much as 8% in 2020, according to the latest ECB predictions. 

"If the situation deteriorates, this will obviously darken our forecasts, which we will revise in December," Lagarde said. 

As for Rabobank strategist Piotr Matys, who was quoted by Reuters, he believes the virus pandemic storm never left, but during the summer period, "we were in the eye of the storm, I think." 

"Some governments assumed the worst was over... but now the invisible enemy is hitting even harder and I am worried about the fragile economic recovery," said Matys. 

In short, Europe will need to unleash another fiscal or monetary cannon to save SMEs from imminent doom as rising cases force some countries to reimpose strict social distancing measures. This is more bad news for investors who thought a "V-shaped" recovery was around the corner. 

Existing Home Sales Soar To Highest Since 2006 Tyler Durden Thu, 10/22/2020 - 10:08

Existing home sales soared 9.4% MoM in September, almost double the +5.0% expectation

Source: Bloomberg

This is the highest level of sales since May 2006...

Source: Bloomberg

Now that's a 'V'...

Median home prices soared 14.8% from last year to $311,800 amid a tumble in inventory to just 2.7 months supply.

.

Central Banks: Gold's Greatest Ally Tyler Durden Thu, 10/22/2020 - 09:55

Authored by James Rickards via The Daily Reckoning,

You’re likely aware of the price action in gold lately. Gold has rallied from $1,591 per ounce on April 1 to $1,907 per ounce as of today. That’s almost a 20% gain in a little over six months, even with selloffs along the way.

Today’s price of $1,907 per ounce is nearly double the low of $1,050 per ounce at the end of the last bear market in December 2015. That’s highly impressive, but it’s only the beginning.

The history of gold bull markets (1971–80 and 1999–2011) shows that the most powerful gains come toward the end of the bull market, not at the beginning.

That means even if you’ve missed out on the gold rally so far, you could still score huge gains as gold trends toward $10,000 per ounce or higher over the next four years.

$14,000 gold is entirely possible by 2026. How?

If we simply average the performance of the past two bull markets and extend the new bull market on that basis, we would expect to see prices peak at $14,000 per ounce by 2026.

As I’ve stated on multiple occasions, I didn’t just come up with these numbers out of the blue or to be controversial.

They’re simply the implied non deflationary price of gold based on the M1 money supply and assuming it will have a 40% gold backing.

What’s driving this bull market in gold?

It’s not retail investors (apart from a small number who understand the dynamics), and it’s not institutional investors (institutional portfolio allocations to gold are typically about 1–2%).

Instead, the steady buying is coming from central banks (especially Russia and China) and from the super-rich, who typically store their gold in private non-bank vaults in Switzerland and other good, rule-of-law jurisdictions.

The drive toward larger portfolio allocations to gold (in some cases up to 10%) is coming not just from the rich themselves but from their wealth managers and portfolio advisers.

This is a sea change.

For decades, wealth managers have rejected gold and pushed their clients into stocks, corporate credit and alternative investments, including private equity. All of those portfolio allocations backfired when the coronavirus came along. Equity markets have since recovered, due in no small part to massive intervention by the Fed.

The Fed doesn’t entirely explain the rally, but it’s certainly played a critical part. The market is nonetheless set up for another fall. The upcoming election is just one catalyst.

Not only will uncertainty reign until Election Day. It will continue to reign after Election Day.

If Trump wins, the Resistance will not take it well. They will challenge the outcome in court, deny the legitimacy of a Trump victory, and extreme elements in the Resistance will burn American cities.

If Biden wins, his behind-the-scenes handlers will come to the fore with demands for high taxes, more regulation, the Green New Deal and other elements of the Socialist agendas.

Markets are not fully priced for any of this. They’re not priced for anti-Trump chaos, and they’re not priced for the Bernie Bros’ hidden agenda that will be foisted on Biden.

Meanwhile, corporate credit downgrades have been at all-time highs, and that market is being propped up by the Fed in non sustainable ways. Private equity looks increasingly illiquid as IPO markets dry up, and most hedge fund investors have badly underperformed.

This leaves gold as one of the best performing asset classes around.

But it’s still early. Here’s how I expect the process to play out…

As confidence in the dollar erodes due to Fed money printing and congressional super-deficits, investors gradually look for alternative stores of wealth, including gold.

These trends begin slowly and then gather momentum. As the dollar price of gold begins to soar, investors take notice. Even more people invest in gold, driving the price still higher.

Investors like to say that the price of gold is going up. But what is really happening is that the value of the dollar is going down (it takes more dollars to buy the same amount of gold).

This is the real inflation and the real dollar collapse most investors miss at the early stages.

Eventually, confidence in the dollar is lost completely, central bankers need to restore confidence, and they turn to some type of gold standard to do so.

We’re a long way from that point right now.

But if central banks, the super-rich and their advisers are all jumping on the gold bandwagon, what are you waiting for?

Gold’s worst-ever bear market (2011–15) is behind us, and gold is positioned for new highs of over $3,000 per ounce in the short run and much higher over the next several years.

The time to go for the gold is now.

Senate Panel Votes To Subpoena Zuckerberg, Dorsey Over NY Post Censorship Tyler Durden Thu, 10/22/2020 - 09:37

The Senate Judiciary Committee has voted to authorize subpoenas for Facebook and Twitter CEOs, Mark Zuckerberg and Jack Dorsey, to compel testimony over their companies’ censorship and suppression of the notorious New York Post article about Joe Biden’s son.

Republicans are finally ratcheting up pressure on Facebook, Twitter and most other social media companies over their now overt anti-conservative bias ahead of the presidential election Nov. 3.

The panel voted 12-0 to compel the testimony of Mark Zuckerberg and Jack Dorsey, after Democrats on the committee had boycotted the hearing over the nomination of Judge Amy Coney Barrett.

While it is not clear when the Judiciary hearing would take place, both CEOs along with Google’s Sundar Pichai, are scheduled to testify before the Senate Commerce Committee on Oct. 28. That hearing is to focus on content moderation, data privacy and media consolidation. This new hearing is in addition to that.

Thursday’s vote came about a week after Facebook and Twitter moved to restrict the spread of a controversial article in the New York Post suggesting that Hunter Biden, Democratic presidential nominee Joe Biden's son, had organized a meeting between a Ukrainian businessman and his father, who was vice president at the time. That claim was based on emails obtained from a hard drive with no substantive links to anyone involved.

Republicans have seized on the socials' decisions to accuse them of anti-conservative bias and attack tech’s legal liability shield. That law, Section 230 of the Communications Decency Act, is likely to come under fire during any hearing with the Big Tech CEO’s.

Meanwhile, as Glenn Greenwald asks, we are curious "what happened to the supposed rigorous "fact-checking" process this Dem operative working for Facebook said was being applied to the NY Post emails? I'd love to see the conclusions. What did Facebook find about the authenticity of these emails? Speak up."

Yeah, what happened to the supposed rigorous "fact-checking" process this Dem operative working for Facebook said was being applied to the NY Post emails? I'd love to see the conclusions. What did Facebook find about the authenticity of these emails? Speak up. https://t.co/uilPjgDdKv

— Glenn Greenwald (@ggreenwald) October 21, 2020

New Biden Biz Partner Emerges, Confirms "Big Guy" Joe Directly Involved In China Deal Tyler Durden Thu, 10/22/2020 - 09:35

Former Hunter Biden business partner Tony Bobulinski has confirmed that an email published in the New York Post's  bombshell exposé is indeed genuine - something the Biden camp hasn't disputed, and that the "Big Guy" described in one of those emails is none other than Joe Biden himself. Bobulinski also says Joe Biden was lying when he said he and Hunter never discussed business dealings.

"My name is Tony Bobulinski. The facts set forth below are true and accurate; they are not any form of domestic or foreign disinformation. Any suggestion to the contrary is false and offensive. I am the recipient of the email published seven days ago by the New York Post, which showed a copy to Hunter Biden and Rob Walker. That email is genuine.' -New York Post

Bobulinski issued the statement late Wednesday, affirming that, contrary to Joe Biden's claims that he never discussed business dealings with Hunter, the former Veep actually profited from his son's dealings, which were undertaken with the full support of the Biden family. 

Bobulinski claims cash and equity positions and 10% stakes in dealings were set aside for "the big guy," - aka Joe Biden. 

Bobulinski said: "I've seen Vice President Biden saying he never talked to Hunter about business" - "I've seen firsthand that that's not true."

"I've seen firsthand that that's not true, because it wasn't just Hunter's business, they said they were putting the Biden family name and its legacy on the line."

According to Bobulinski, he was the CEO of Sinohawk Holding, a holding company partnership between now-bankrupt CEFC China Energy Co. and the Biden family. He said the Chinese weren't in partnership for any kind of commercial purpose: they were there to pay for "influence" in the US. 

"I realized the Chinese were not really focused on a healthy financial ROI. They were looking at this as a political or influence investment. Once I realized that Hunter wanted to use the company as his personal piggy bank by just taking money out of it as soon as it came from the Chinese, I took steps to prevent that from happening"

In the final weeks of the presidential campaign, Joe Biden has labeled Hunter Biden's emails as a "smear" campaign against him, and Democrats like Adam Schiff have accused these reports of being linked to a Russian intelligence operation, even though intelligence officials have said there's no evidence that this is true.

Here is Bobulinski's statement in full (emphasis ours):

My name is Tony Bobulinski. The facts set forth below are true and accurate; they are not any form of domestic or foreign disinformation.  Any suggestion to the contrary is false and offensive. I am the recipient of the email published seven days ago by the New York Post which showed a copy to Hunter Biden and Rob Walker. That email is genuine. 

This afternoon I received a request from the Senate Committee on Homeland Security and Government Affairs and the Senate Committee on Finance requesting all documents relating to my business affairs with the Biden family as well as various foreign entities and individuals. I have extensive relevant records and communications and I intend to produce those items to both Committees in the immediate future. 

I am the grandson of a 37 year Army Intelligence officer, the son of a 20+ year career Naval Officer and the brother of a 28 year career Naval Flight Officer.  I myself served our country for 4 years and left the Navy as LT Bobulinski.  I held a high level security clearance and was an instructor and then CTO for Naval Nuclear Power Training Command.  I take great pride in the time my family and I served this country.  I am also not a political person. What few campaign contributions I have made in my life were to Democrats. 

If the media and big tech companies had done their jobs over the past several weeks I would be irrelevant in this story.  Given my long standing service and devotion to this great country, I could no longer allow my family’s name to be associated or tied to Russian disinformation or implied lies and false narratives dominating the media right now.

After leaving the military I became an institutional investor investing extensively around the world and on every continent. I have traveled to over 50 countries.  I believe, hands down, we live in the greatest country in the world.

What I am outlining is fact.  I know it is fact because I lived it.  I am the CEO of Sinohawk Holdings which was a partnership between the Chinese operating through CEFC/Chairman Ye and the Biden family.  I was brought into the company to be the CEO by James Gilliar and Hunter Biden.  The reference to “the Big Guy” in the much publicized May 13, 2017 email is in fact a reference to Joe Biden.  The other “JB” referenced in that email is Jim Biden, Joe’s brother.

Hunter Biden called his dad ‘the Big Guy’ or ‘my Chairman,’ and frequently referenced asking him for his sign-off or advice on various potential deals that we were discussing. I’ve seen Vice President Biden saying he never talked to Hunter about his business. I’ve seen firsthand that that’s not true, because it wasn’t just Hunter’s business, they said they were putting the Biden family name and its legacy on the line.

I realized the Chinese were not really focused on a healthy financial ROI.  They were looking at this as a political or influence investment. Once I realized that Hunter wanted to use the company as his personal piggy bank by just taking money out of it as soon as it came from the Chinese, I took steps to prevent that from happening.

The Johnson Report connected some dots in a way that shocked me — it made me realize the Bidens had gone behind my back and gotten paid millions of dollars by the Chinese, even though they told me they hadn’t and wouldn’t do that to their partners.

I would ask the Biden family to address the American people and outline the facts so I can go back to being irrelevant — and so I am not put in a position to have to answer those questions for them. 

I don’t have a political ax to grind; I just saw behind the Biden curtain and I grew concerned with what I saw. The Biden family aggressively leveraged the Biden family name to make millions of dollars from foreign entities even though some were from communist controlled China.

God Bless America!!!!

All of which will likely be "muted" in tonight's highly anticipated debate.

Central Europe Reports Record Jump In COVID-19 Cases; US Hospitalizations Hit 2-Month High: Live Updates Tyler Durden Thu, 10/22/2020 - 09:24

Summary:

• Germany, Romania, Poland and Hungary report new records
• US hospitalizations at 2 month high
• Brazil says AZ-Oxford trials to continue
• EU puts pressure on WHO for more transparency
• South Korea sees rise in cases
• Spain warns outbreak "out of control"

* * *

Thursday is shaping up to be another rough session for Europe in terms of COVID-19, as Germany just reported more than 10,000 new cases (a new record) for one of Europe's best performers, along with Hungary, Romania and Poland, which all reported fresh record numbers of new cases as well.

While cases continued to decline in India, the state of West Bengal notably bucked the trend on Thursday when it reported 4,069 new cases, its biggest daily tally yet, after a major Hindu street festival brought thousands together across the region. All told, India reported just 55,639 new cases in the past day, up from 54,044 the day before. India's death toll jumpd by 702 to 116,616.

Finally, in the US, the number of COVID-19 patients occupying American hospitals hit 40,000 for the first time since August, according to a Reuters tally. The milestone comes as midwestern states like Wisconsin, North Dakota and South Dakota lead the third wave of the US outbreak. Hospitals have seen the number of patients climb 36% over the past 4 weeks. New York reported more than 2,000 cases in a day yesterday for the first time since May.

After a patient enrolled in AstraZeneca's COVID-19 vaccine trial reportedly died, authorities in Brazil said they wouldn't pause the trial, run by AZ and the University of Oxford, after the death of the volunteer. The volunteer was said to be a Brazilian who had received the placebo, suggesting that his death wasn't related to COVID-19 or the trial.

Here's some other big COVID-19 news from overnight and Thursday morning:

German Health Minister Jens Spahn tested positive for the coronavirus, the health ministry says, adding that he had placed himself in home quarantine (Source: Nikkei).

The European Union wants the World Health Organization to become more transparent about how countries report emerging health crises, a draft proposal on reforming the U.N. agency says, according to Reuters. The paper, drawn up by the German government after discussions with other member states following criticism of China's initial handling of the COVID-19 pandemic, is the latest to outline the EU's monthslong plans to address WHO's shortcomings on funding, governance and legal powers (Source: Nikkei).

Tokyo reports 185 new infections, up from 150 the previous day and bringing the capital's total to 29,520.

India's COVID-19 tally tops 7.7 million after 55,839 new cases were reported in the past 24 hours, up from 54,044 the previous day. The death toll jumped by 702 to 116,616.

South Korea confirms 121 new cases, up from 89 a day ago. Total infections reach 25,543 with 453 deaths.

Romania reported a record 4,902 new coronavirus cases in the past 24 hours, bringing the total number of infections to over 196,000. It also registered 98 deaths, the highest daily toll so far. The total number of fatalities stands at 6,163 (Source: Bloomberg).

India’s government has set aside about 500 billion rupees ($7 billion) to vaccinate the world’s most populous nation after China against the coronavirus, according to people with knowledge of the matter (Source: Bloomberg).

Poland registered 12,107 new coronavirus cases in the past 24 hours, a 21% jump from the previous record set a day ago, according to data published by the Health Ministry on Thursday. The death toll in the country of 38 million rose by a record 168 to 4,019. The government is due to announce further restrictions on Thursday in its battle against the pandemic. Slovenia reported a record 1,663 daily infections while the number of hospitalized patients doubled in the past 10 days to 357 (Source: Bloomberg).

One day after becoming the first European country to top 1 million cases, Spain warned that the spread of coronavirus is out of control in certain parts of the country, according to Health Minister Salvador Illa. "We are in the middle of a second wave, it’s no longer a threat but rather a reality," Illa said in an interview on Madrid-based Onda Cero radio. "In some parts of our country the epidemic isn’t under control, so we need to take more drastic measures (Sources: Bloomberg).

Senate Committee Advances Barrett SCOTUS Nomination Amid "Pure Theater" From Democrats Tyler Durden Thu, 10/22/2020 - 09:18

Update (0915ET): The Senate Judiciary Committee has voted 12-0 (every Republican on the panel supported her nomination and no Democratic senator voted. ) to advance Amy Coney Barrett's nomination for the Supreme Court, despite the 'boycott' by all committee Democrats (that'll show 'em) protesting the "shame process.".

"As you know our Democratic colleagues informed the committee last night that they will not participate in the hearing, that was their choice. It will be my choice to vote the nominee out of committee. We're not going to allow them to take over the committee," Graham said on Thursday.

The Senate is set to vote on Barrett's confirmation on October 26th.

Watch:

*  *  *

Authored by Jonathan Turley,

I recently wrote about how the Barrett confirmation hearing is proof that Benjamin Franklin was right when he wrote that “it is hard for an empty sack to stand upright.” Now that analogy is becoming reality as Democrats plan to leave actual empty seats in today’s hearing to vote on the nomination. It is all an effort to convince Democrats voters that the senators are really angry over the nomination and fighting like the dickens to stop it. It is, of course, pure theater with no real impact on the nomination but voters seem to demand little more from politicians today than visceral distractions.

The Committee rules do stipulate at least two members from the opposing party must be present for a quorum. However, committees have proceeded in the past with a majority and the Committee could simply change the rules. All sides will then be satisfied.  The Republicans will get their vote and the Democrats will get their show — and the voters will get little beyond the same low-grade performance art from “the world’s most deliberative body.”

The boycott comes after Democratic senators, and particularly Sen. Dianne Feinstein, faced rising criticism over their civility during the Barrett nomination.  Democratic voters wanted a professional wrestling match with pile drivers and chair slams.  Even though they know it is fake, they wanted the senators to at least pretend that they were trying to hurt each other. Instead, they watched a largely civil and often friendly exchange between senators. It was entirely out of sync with the demands of an age of rage.

The final outrage apparently came with the hug that Feinstein gave Chairman Lindsey Graham at the end of the hearing after saying that this was “the best set of hearings that I’ve participated in.” No hug has been so lethal since Sherlock Holmes embraced Professor Moriarty before their plunge over the falls of Reichenbach. The display of collegiality sent many liberals into immediate apoplexia with some demanding that Feinstein step down as ranking member. The president of the pro-choice group NARAL, Ilyse Hogue, declared the gesture as “wildly out of step with the American people. As such, we believe the committee needs new leadership.”  It was certainly “wildly out of step” with the current American politics which demands nothing short of unhinged  and irrational rage.

In an astonishing move, Minority Leader Chuck Schumer went out of his way to demean Feinstein and publicly say that he gave her a stern talking to. Other colleagues have notably failed to come to her defense — leaving her twisting in the wind rather than risk the ire of Democratic base by supporting their long-time colleague.

The Democrats are reportedly planning to bring back the pictures of people who will be victimized by Barrett if she votes against the Affordable Care Act (ACA) in a case set for a November 10th argument.  I have previously written how unfair and unprecedented this display has been for a confirmation hearing. Not only are Democrats now basing their confirmation votes on the expected vote of a nominee in a pending case, but they are misleading the public on the actual case.  As I previously discussed, senators have been open about voting against Barrett unless she assures them that she will vote to preserve the Act. Sen. Mazie K. Hirono (D., HI) announced recently that she would vote against Barrett because “she will vote to strike down the Affordable Care Act.” In reality, the ACA case is unlikely to be struck down. The Court may uphold the lower court in declaring the individual mandate of the original ACA to be unconstitutional, but the real issue is whether that provision can be “severed” from the rest of the statute. Most legal experts believe that the Court has a clear majority favoring severance and preserving the rest of the act. The law was originally saved by Chief Justice John Roberts who felt that the individual mandate was constitutional. Congress later nullified the mandate.  He and Justice Brett Kavanaugh are viewed as likely votes to sever. Even if the ACA were struck down however both parties are committed to the continued protection of pre-existing conditions.

None of that matters. The Democrats continue to parade these giant pictures that are designed to portray Barrett like some judicial serial killer surrounded by her victims. Now, they will not even be in the room. The pictures will be all that remains on the Democratic side, a fitting symbol of a now literal empty-sack strategy.

Biden Offloads Court Packing Decision To Commission Which Will Study Overhaul Options Tyler Durden Thu, 10/22/2020 - 09:14

Joe Biden says that if elected, he will create a bipartisan commission to study overhauling the nation's court system, which is "getting out of whack." The former Vice President's announcement is effectively a punt over whether he will pack the Supreme Court following the expected confirmation of Judge Amy Coney Barrett following the death of Justice Ruth Bader Ginsburg.

In comments to "60 Minutes," Biden says the commission would consider over six months "a number of alternatives that go well beyond packing."

Biden still won’t take a position on court packing. He wants to appoint a commission to study it, which is a typical Washington, DC punt. I don’t think I’ve ever seen a weaker leader than Joe Biden. https://t.co/hWV3TcbAlC

— Ari Fleischer (@AriFleischer) October 22, 2020

As Bloomberg noted on Wednesday, alternatives to packing the court include:

Term limits

Jurisdiction stripping - making laws which could limit the Supreme Court from reviewing them, as well as stripping lower courts of the ability to review legislation. The move could also "confine legal challenges to geographic regions where courts are generally sympathetic."

Supermajority requirement - requiring that some cases achieve a two-thirds vote or even unanimity, as opposed to simple majority.

Balanced Bench - A proposal in which the US Supreme Court would start with 10 justices; five chosen by Democrats and five by Republicans, with lifetime appointments.

Lottery System - Each judge on federal appeals courts would be appointed as an associate justice on the Supreme Court. Every two weeks, a panel of nine justices would be randomly selected from that pool to hear cases.

Fears Of Biden Capital Gains Tax Hike Spark Avalanche Of Private Company Sales Tyler Durden Thu, 10/22/2020 - 08:47

At the start of the month, we reported that as part of his proposed tax reform, Joe Biden would increase the maximum tax rate for long-term capital gains by a whopping 66%, from 20% currently (23.8% when accounting for the additional 3.8% ACA tax) to as high as 39.6%, for those making over $1 million or for proceeds of a business sale over $1 million. A summary of the changes tot he US tax code under a Biden admin is shown below.

We also observed that while this cap gains increase wouldn't affect most small-timer Robinhood traders (except for the really talented ones), it would have a drastic hit on major market players and corporate strategies involving exit events that include more than $1 million in proceeds, as the following analysis from Benchmark Corporate showed: assume a $2.0M EBITDA (small or medium) business receives a valuation multiple of 10x for a total transaction value (taxable gain) of $20.0M. Under the Biden Plan, the seller would lose $3.92M in the sale. To receive the same net proceeds, a multiple of 13.2x would need to be secured.

We concluded that "this kind of dramatic revision to post-transaction cash flows under a Biden regime is - to say the least - concerning, although because the media has barely discussed Biden's tax plan (or any of his other policies for that matter) and instead focusing on Trump, Trump, Trump, the impact of Biden's tax long-term cap gains will come as a shock to the market."

Yet while the media may be ignoring the gamut of tax implications a Biden presidency would unleash, bankers have been busy generating fees from the upcoming tax law overhaul, and as Reuters reports investment bankers have a simple pitch to their corporate owner clients: hire us to sell your company now or pay at least twice as much in taxes if Democratic presidential candidate Joe Biden has his way.

Of course, Biden would have to win the presidency and the Democratics would have to gain control of the Senate for his tax proposals to become law. While this is far from certain, this prospect has been seized on by bankers hungry for new business.

"We urge all of our current and potential clients to take note of the potential forthcoming changes, along with their associated consequences, as they consider an exit strategy for their business in the near future," Houlihan Lokey bankers wrote in a note earlier this month, perhaps after having read our post.

While the bankers' pitch is geared toward individuals and families, it also targeted private equity firms who control companies and can decide when to sell them. It also targets company founders, who may only sell one business in their lifetime, making it the most important transaction of their lives.

The strategy to rush and sell before a Biden administration arrives appears to be working: according to Dealogic, sales of privately held U.S. companies totaled a record $253 billion in the third quarter, up fivefold from the second quarter and up 51% from the third quarter of 2019. This is despite the COVID-19 pandemic suppressing corporate valuations in some sectors.

"Since the summer we have seen a lot of dialogue from family offices about exploring a sale of some assets. Many of these investors are sophisticated about how they handle their affairs from a tax perspective," said PJT Partners partner David Perdue.

One of the U.S. companies pursuing a deal because of tax considerations is Asplundh Tree Expert LLC, a family-controlled tree-trimming firm, according to people familiar with the deliberations. According to Reuters, the family that has owned Asplundh since 1928 has been keen to hold onto the company and resisted overtures to sell to private equity firms hungry for a quick flip. When one of these firms, CVC Capital Partners Ltd, convinced the Asplundh family to sell it a minority stake in 2017, it had to use a buyout fund it manages that is dedicated to retaining holdings for a decade or more, rather than cashing out after a few years.

But after decades of holding out, the Asplundh family is now working with investment bankers to cash out on part of its stake, because of its concerns about upcoming changes in the tax system, Reuters reports, noting that the family is seeking a valuation for Asplundh of as much as $10 billion.

To be sure, even if Biden wins and implements his tax plan, corporate owners may still have time to cash out. Most of President Donald Trump’s corporate tax cuts, which were enacted into law in 2017, became effective in 2018, a year after he came into office. Still, the big uptick in the divestitures of privately owned companies shows how some of their owners view Biden’s election victory, and subsequent tax changes, as likely.

And while small and medium business owners of private businesses are the biggest losers as they are now forced to liquidate to avoid a major hit to their equity value, the winner from a potential Blue Sweep is - drumroll - Wall Street, which will collect billions in transaction fees.

Goldman Sachs advised on more sales of privately held U.S. companies year-to-date than any other, followed by Morgan Stanley, JPMorgan and Bank of America. One can almost sense a conflict of interest in these banks relentlessly pushing for a blue wave as the most likely outcome on Nov 3.

Pandemic Emergency Jobless Claims Soar As California Cleans Up Fraud Tyler Durden Thu, 10/22/2020 - 08:35

After the previous week's disappointing resurgence in initial jobless claims, this week saw the number of Americans filing for first time unemployment benefits plunged to 787k (870k exp) - the lowest since the pandemic lockdowns began...

Source: Bloomberg

Continuing claims also printed better than expected, tumbling below 9million for the first time since March...

Source: Bloomberg

However, its not all puppies and unicorns - while federal/state claims tumbled, the Pandemic Emergency Claims number soared

Source: Bloomberg

Over half a million additional claims in this group in each of the last two weeks...

Source: Bloomberg

Finally, bear in mind that California has completed its pause in processing of initial claims and has resumed reporting actual unemployment insurance claims data based on their weekly claims activity. This News Release reflects actual counts for California for the current week and revisions to the two prior weeks... which meant a huge plunge in California...

So take all of this data with a pinch of salt.

Blain: The Market Has No Memory Tyler Durden Thu, 10/22/2020 - 08:25

Authored by Bill Blain via MorningPorridge.com,

Why The Worry?

“ Giving elected representatives the keys to the printing press is the equivalent of giving a gambling addict the keys to the casino.”

Equity Markets feel kind of lacklustre and dull at the moment. Despite a host of corporate news and developments (including the delicious threat of trust and monopoly action against Tech), there is an awful lot of negative noise out there holding back investors. 

On the plus side there are lots of reasons to be positive!

The first thing to cheer about is there is absolutely nothing to worry about in terms of the trillions of additional sovereign debt being raised to fight the effects of the Coronavirus Pandemic. 

The extraordinary success of the EU’s SURE bond issue on Tuesday highlights how the rules on Sovereign Debt have changed. Governments worried about how they pay the costs of pandemic support measures and furloughs should take a good look and rip up their rules on balanced budgets and prudence! (Yes… I am writing this for Rishi Sunak et al to consider…)

The EU was looking to raise €17 bln for its debut bond off the €100 bln programme. They received over €233 billion in orders. The bonds were placed at a negative yield on the 10-year tranche! The investors who didn’t get allocated are furious the EU doesn’t want their money….

It’s been a truly extraordinary bond issue. But I don’t pull back on anything I said about the programme on Tuesday. The deal was a success because investors want somewhere “safe” to park money, and they absolutely value the ECB Put: the ECB can buy up to 50% of the deal via its QE programmes, therefore guaranteeing liquidity. 

The fact the ECB is now tied into guaranteeing that liquidity in perpetuity is nailed on. Should the ECB ever try to raise European rates or scale back on QE, then the price of all bonds will demonstrate the effects of financial gravity – and destroy the reputation of the EU as an issuer. (Except, that’s not quite true: Blain’s Market Mantra No 8 states: “The Market Has No Memory”… which explains why investors keep buying names like Argentina time and time again.)  

The thing is…. the EU just got offered a quarter of a trillion Euros from investors desperate to accept a negative yields to lend them money!!! The borrower was The European Union, an unelected creeping Autocracy of Brussels Bureaucrats who haven’t had their budgets signed off in years. Moody’s might rate them Aaa, but they rated a lot of stuff similar. The member of states of the EU signed off on the SURE lending programme and a further €750 bln of recovery lending, yet still can’t agree on banking union, or closer political tie up. They haven’t agreed how to budget. (The assumption Germany pays is understood by everyone – except the Germans.) Yet the EU still managed to get a quarter of trillion euros in demand in the blink of an eye… 

Just think of how much real countries using their own real money could go out and raise… ?Our problems are solved. Yay!

(No seriously… the EU deal highlights the opportunities to go borrow money today to rebuild Western Economies… We can worry about paying it back later…. Coming next.. a German 100-year zero-coupon negative-yield bond priced at -1%: meaning investors give Germany €100 today and Germany gives them back zero in 2120. And everyone is smiling…?)

Meanwhile, The Pandemic and what to buy!

Back in the real world, the pandemic is still the dominant threat to growth and future prosperity. As new waves of infection raise new lockdowns across Europe (1 million cases in Spain), and numbers in the US rise, the outlook looks bleak. However, while sectors like hospitality and travel are struggling, many other sectors are demonstrating considerable resilience – they are not only thriving, but are set to remain strong when – not if – a more sustained recovery sets in. That is going to happen either as we get better at “crushing the curve” to keep hospitals open, or a vaccine changes the equation. 

I also detect a change in investment approach. Recently I’ve written about Tech stocks – asking if this the time to shift from the Tech Darlings that have driven stock price recovery since March, into more “Fundamentally-Driven” stocks: companies that are dull, boring, and predictable, making profits and paying dividends by doing effectively the same thing they’ve been doing for years. 

Wow… what a novel investment concept: investing in the proven results of dull, boring, predictable companies that do what it says on the tin, rather than the hopes and promises of whoosh Tech Unicorns. Fundamentals include the old economy, stuff like mining, manufacturing, trade, selling or whatever. Successful companies thrive because they have the skills and experience to do so. 

At present, ultra-low interest rates and negative yields favour equity upside over bonds’ negative returns. Stock prices have also been inflated by the effects of zero and negative interest rate policy. Because of the pandemic recession, companies and industries aren’t doing particularly well making and selling more stuff – but are seeing their stock price remain high because equities look a better investment relative to other financial assets. As the pandemic fades and profits expectations grow, they are going to look even more attractive – driving further upside. 

At the moment we have a curious situation: stocks are pricing in recovery despite the pandemic, but are already overpriced because of ultra-low rates. Which factor do you favour? Rates are likely to remain lower for longer (central banks have already said so), so despite the apparent stock price stagflation and bubble threat, it feels and looks like there is plenty of room for a further leg up for equities. 

What is going to trigger upside?

And, talking of the Elephant or Donkey in the Room: US Elections…

I will go with resumed growth… but it’s only 12 days till the US election and it’s the other dominant theme overhanging markets. The two sides continue to pump vitriol at each other; headlines are dominated on clearly bogus fake news about how awful the respective candidates are. There is an excellent John Authers piece this morning on BBerg: Investors Surfing the Blue Wave Trade Need a Hedge.

The real issues underlying the election are getting buried in the noise: tax and stimulus policy, job creation, competition, pandemic recovery, equality of opportunity, strengthening the western alliance and democracy, trade, rebuilding US infrastructure, and how to really make America great again while not turning into a cesspool of polarized hatreds. These would all seem more important issues – but I guess we will find out more in tonight’s “Presidential” debate.

What’s most depressing about the US election? Watching and listening to otherwise smart intelligent well-meaning people taking up cudgels and making insane compromises on candidates. It looks more like ancient Rome at times – as wanna-be emperors compete to buy the empire. 

What’s good about the Election.. it will be over. (quite when we don’t know…)

Who will win? The polls show a small-tick up for Biden yesterday. Of course, both sides say they are winning. Rule 1 of any Election is to always, always, always present yourself as Winning. 

People like to be on the winning side as campaigns build momentum. If the campaign is knocked back, or suddenly the polls are much closer than they thought, and voters can be convinced their candidate is no longer the favourite and is actually losing… then they don’t show up at the polls. Not for one moment would I suggest the simultaneous plethora of stories saying Trump is actually leading in mail-in votes, or why the polls are wrong and his lead is being underestimated, all appearing at the same time, are connected in any way. But, to win an election you need to control and direct the narrative – see Rule 1 above. 

It may well be the polling firms have still not figured out why they got it so wrong in the past and are still getting it even more wrong today.  If these stories are right and mail-in votes and social-media sentiment are all going Trump’s way, then yet again we have the remarkable situation of US pollsters – clever, well paid professionals - being substantially wrong and not having learnt from the mistakes of the past. 

However - it’s worth remembering that in 2019 the polls in the UK – which are run by essentially the same organisations and use the same methods by which US polls are run – tracked the election outcome almost exactly after getting the numbers massively wrong in 2016. Since then they refined their methods and got it right. UK Polls predicted the Tories to win 43.8% and they got 45% of the vote. They nailed Labour at 33% which is exactly what they got. They called the number of seats each party nearly perfect. 

Futures Slide Ahead Of Final Debate, On Lack Of "Stimulus Optimism" Tyler Durden Thu, 10/22/2020 - 08:19

S&P futures traded lower, alongside shares in Europe and most of Asia - but since rebounded from overnight lows - as worries about a delay to U.S. economic stimulus, surging virus cases across Europe and concerns about tonight's final presidential debate and election interference weighed on sentiment. Investors also braced for another high level of weekly jobless claims, while with just 12 days to go until the US election and Europe’s struggle to contain second waves it's become increasingly tricky for markets, according to Citi. As risk sentiment soured overnight, the USD bottomed out at yesterday’s lows, while oil and cryptocurrencies rose.

ES futures tumbled to session low just above 3,400 late on Wednesday night, when the top U.S. spy chief accused Iran of making its most direct efforts to interfere in the closing days of the presidential election, saying the Islamic Republic faked a series of intimidating messages to Democratic voters.

This followed another volatile session on Wednesday, when US shares closed lower amid signs that a stimulus package is unlikely to become law before the election, as we have said all along. Nancy Pelosi and Steven Mnuchin "made progress" in their latest talks and will speak again Thursday even as the odds remained long for a deal that could pass in the Senate.

With no meaningful progress on fiscal policy, markets "are reacting to the heightened political instability that comes with the confirmation of efforts to manipulate the presidential race," said Saxo strategist Eleanor Creagh. "The ability for either candidate to seize upon accusations of foreign interference is heightened and raises the probability of a contested outcome, particularly as the race could be closer than polls currently indicate."

Tesla climbed about 5% after the electric-car maker reported its fifth consecutive quarterly profit on record revenue of $8.8 billion. Chipotle fell 4% as it posted a drop in quarterly profit, hurt by higher beef prices, delivery costs and coronavirus-related expenses. Coca-Cola also edged lower ahead of its quarterly report.

"There is increasingly a recognition that no fiscal package agreement ahead of the election is likely," said James McCormick, global head of desk strategy at NatWest Markets. "The Covid-19 resurgence is certainly a background issue for risk assets, but the fiscal debate in the U.S. has been the main short-term question."

In Europe, the Stoxx Europe 600 Index initially fell more than 1% trading at the lowest level since Oct. 2, with energy and chemicals leading losses among sectors, but has since rebounded into the green helped by gains in travel and retail stocks. British Airways owner IAG plunged after warning it won’t break even based on cash flow in the fourth quarter. 

Earlier in the session the MSCI Asia Pacific Index slid 0.6% with Asian markets mixed: Japan's Topix and South Korea's Kospi fell, while Taiwan's Taiex and Thailand's SET increased. The Topix lost 1.1%, with Recruit and Daiichi Sankyo contributing the most to the move. The Shanghai Composite Index retreated 0.4%, driven by China Life and Fosun Pharma.

There was more bad news on the virus front, as there is increasing evidence that the pandemic is worsening around the world. German infections jumped to a record and Spain’s heath minister said the spread of coronavirus is out of control in certain parts of the country. U.S. hospitalizations for Covid-19 have reached a two-month high.

In FX, the dollar advanced against most of its Group-of-10 peers, with the Bloomberg Dollar Index rebounding from its lowest level since early September touched Wednesday. The euro erased early gains; the pound weakened while Gilts sold off as traders waited for more concrete evidence the U.K. and European Union could be moving toward a Brexit trade deal. The yuan led a decline in emerging Asian currencies as tensions between Washington and Beijing resurfaced and claims emerged of attempted foreign interference in the U.S. election. The U.S. designated six more Chinese publications as “foreign missions,” adding to the list of media outlets it describes as controlled by Beijing which must meet requirements similar to those imposed on embassies and consulates in America. Thai Prime Minister Prayuth Chan- Ocha ordered the withdrawal of the week-old state of emergency in the nation’s capital that barred large gatherings, in a bid to pacify pro-democracy protesters.

In rates, Treasuries gained as the U.S. session gets underway, leaving long-end yields richer by ~2bp in a bull-flattening move. Risk-aversion mounted amid stimulus delay, rising virus cases and U.S. election concerns stoked by foreign interference accusations. Yields across front-end remained anchored, flattening 2s10s by 1bp and 5s30s by 1.7bp; 10-year yields around 0.81%, richer by ~1bp vs. Wednesday close. Bunds (2bp) and gilts (4bp) both lag Treasuries; gilts notably underperform following 2035 and 2050 debt sales. Treasuries advanced during the Asian session after a top U.S. intelligence official warned Iran and Russia are attempting to interfere with the Nov. 3 election, where the possibility of a close race and a protracted vote count has alarmed investors.

In commodities, WTI and Brent currently trade around the unchanged mark, same as gold. Overnight, Goldman Sachs said it expects a bull market to emerge for commodities in 2021. Spot gold is modestly softer this morning as while the DXY remains below the 93.00 mark and was subdued at the start of the European session it has been gradually picking up and remains in proximity to highs.

The highlight of the day will be the final presidential debate before the U.S. election between Trump and Biden, live from Nashville, Tennessee. Looking ahead, the number of Americans filing for state unemployment benefits last week is expected to dip slightly but remain firmly above 800,000 as support from fiscal stimulus faded.

Market Snapshot

• S&P 500 futures down 0.2% to 3,425.75
• STOXX Europe 600 down 0.5% to 359.04
• German 10Y yield rose 0.5 bps to -0.583%
• Euro down 0.06% to $1.1854
• Italian 10Y yield rose 5.2 bps to 0.578%
• Spanish 10Y yield unchanged at 0.205%
• Brent futures up 0.1% to $41.78/bbl
• Gold spot down 0.3% to $1,918.69
• U.S. Dollar Index up 0.1% to 92.69
• MXAP down 0.5% to 176.13
• MXAPJ down 0.2% to 585.62
• Nikkei down 0.7% to 23,474.27
• Topix down 1.1% to 1,619.79
• Hang Seng Index up 0.1% to 24,786.13
• Shanghai Composite down 0.4% to 3,312.50
• Sensex down 0.5% to 40,521.87
• Australia S&P/ASX 200 down 0.3% to 6,173.75
• Kospi down 0.7% to 2,355.05

Top Overnight News from Bloomberg

• Germany should brace for a continued rapid spread of the coronavirus and the number of serious infections and deaths is sure to rise, the nation’s RKI public health institute warned Thursday; Germany joined Italy in reporting another record gain in coronavirus infections, as France and Spain became the first countries in Western Europe to pass 1 million cases since the start of the pandemic
• House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will pick up discussions a stimulus package again Thursday with time running ever shorter for a deal before the election and President Donald Trump seeking to blame Democrats for any failure
• Riding on the coattails of this week’s record-busting European Union bond sale, Italy is tapping into demand from yield-hungry investors. Orders have already exceeded 70 billion euros ($83 billion) at the nation’s 30-year bond offering through banks on Thursday, according to a person familiar with the sale, who asked not to be identified because they’re not authorized to speak about it. Price guidance has been tightened to about seven basis points over similar-maturity debt from 10 basis points earlier, the person said
• China is preparing to grant additional quota for funds to invest in securities overseas, Caixin reported, a move that would allow more capital to flow out of the country

Asia-Pac equities traded with losses across the board as the region took its cue from the downbeat Wall Street handover, which saw the Dow reverse its earlier gains and the S&P and Nasdaq close the day with modest losses as participants tracked stimulus developments. In terms of the electronic reopen, US equity futures opened flat but lost ground after the FBI Director announced that US has identified Russia and Iran to have taken action in order to interfere with the 2020 election, with under a fortnight to go until voters head to the polls. This sentiment reverberated into APAC indices – losses in the ASX 200 (-0.3%) were led by the oil and mining sectors, whilst Nikkei 225 (-0.7%) saw lacklustre performances across its industrial, auto and pharma names, while airliner ANA holdings fell to the foot of the index after sources suggested the Co. is to post a record annual loss and shed half of its fleet. KOSPI (-0.7%) also held onto losses in-line with the regional performance, whilst a South Korean business lobby group called on Japan to ease its restrictions on exports of key industrial products to South Korea in a bid to help improve strained ties between the two countries. In China, Hang Seng (+0.1%) and Shanghai Comp. (-0.4%) conformed to the glum tone, and with geopolitical tensions heating up as the Pentagon confirmed last week’s source reports that it notified US Congress of three possible military sales to Taiwan, a move repeatedly contested by Beijing. Finally, JGB futures track action in the fixed income futures complex amid a lack of pertinent data, auctions or news flow.

Top Asian News

• Thai Premier Lifts Bangkok State of Emergency From Thursday
• Hong Kong’s Property Market Takes Hit From Cathay Job Cuts
• State Department Approves $1.8 Billion in Weapons for Taiwan

European equities (Eurostoxx 50 -0.2%) are so far enduring another session of losses with downside in futures accelerating once again alongside the opening of cash products; however, as we enter US hours we have seen a modest pick-up in performance with price action moving closer to the U/C mark on the day – for reference, ES -0.2%. As was the case yesterday, there was a lack of incremental macro catalysts (beyond some of the slightly more downbeat updates on the US stimulus front yesterday) for the move in what has been a relatively busy morning of corporate updates for the region thus far. Sectors trade relatively mixed on the session with slight underperformance observed in health care and oil & gas names with the latter unable to benefit from a modest pick-up in crude prices.  Notably, and in spite of downbeat COVID updates from Spain and Germany, travel & leisure names are eking mild gains. Of note and of concern for the sector, prelim Q3 results for IAG (U/C; initially -5.0%) saw the Co. miss on revenue expectations, lower capacity and downgrade its outlook in what is set to be a tough earnings season for airliners. Food & beverage names have been granted some reprieve by earnings from Pernod Ricard (+2.7%) who exceeded expectations for Q1 revenue and anticipate a return to growth by H2. Also, of note for the CAC 40 is gains in Schneider Electric (+2.5%) post-earnings with the Co. beating expectations of revenues and raising FY guidance. Other notable corporate updates include Unilever (+0.4%) who posted a beat on revenues and underlying sales growth whilst maintaining its dividend. To the downside, there were a slew of disappointing Scandi earnings from the likes of Telia (-2.2%), Alfa Laval (-3.0%) and SEB (-1.6%) who are notable laggards within the Stoxx 600.

Top European News

• Siberia Gold Field Has World’s Largest Reserves, Polyus Says
• Germany’s New Coronavirus Cases Jump to a Record of 12,331
• Pandemic Out Of Control in Parts of Spain, Health Minister Says
• British Airways Owner Cuts Flights as Virus Surge Hits Sales

In FX, some respite for the Greenback after Wednesday’s steeper decline and all round selling pushed the index down through 92.500, but the recovery looks fragile amidst the ongoing impasse on US fiscal stimulus and inferences that a deal may well not be settled until after the election, even though the 2 sides are said to have narrowed differences and further talks are scheduled. The DXY and Buck more broadly may also be drawing underlying support on sentimental or psychological grounds, if not truly technical impulses, given the fact that a pseudo double bottom was not breached to expose 92.000, albeit many pundits point out that the bearish trend and tide will unlikely turn unless the index rebounds through 93.000 and holds above the round number. Ahead, IJC, housing data and a trio of Fed speaker and the DXY is currently near the top of a 92.903-603 range.

• NZD/NOK – The Kiwi and Norwegian Crown are both former against the grain, with the former benefiting from Aud/Nzd tailwinds rather than NZ specifics ahead of Q3 CPI data, but the latter perhaps gleaning traction from a marked improvement in Q3 industrial sentiment rather than labour force survey-based unemployment that was higher than expected in August. Nzd/Usd is holding comfortably above 0.6650 as the cross hovers around 1.0660, while Eur/Nok is still eyeing support ahead of 10.9000 after repelling several upside approaches towards or just beyond 11.0000.
• CAD/JPY/EUR/GBP/AUD/CHF – All narrowly mixed vs their US counterpart, with the Loonie paring post-Canadian retail sales losses between 1.3177-36 parameters and the Yen pivoting 104.60 following yesterday’s big figure+ ascent through decent option expiries and prior October highs. However, today’s expiry interests may offer more resistance, as 2.9 bn lie at 104.55-50 and 2.1 bn from 104.10 to 104.00 that coincides with last month’s Usd/Jpy low. Elsewhere, the Euro is straddling 1.1850, the Pound is consolidating circa 1.3100 awaiting BoE rhetoric, Chancellor Sunak and probably any Brexit developments as trade talks resume above all else. Meanwhile, the Aussie is just keeping sights on 0.7100 in advance of October PMIs and the Franc continues to straddle 0.9050 in wake of a somewhat mixed Swiss KOF Autumn update outlining 2 scenarios (baseline -3.6% 2020 GDP and -4.9% worst case if the pandemic spread persists).
• SEK/EM – The Swedish Krona is still lagging and not deriving much momentum from what could be construed as positive news via the Riksbank’s latest business survey showing a gradual recovery in the economic situation and less need on balance to provide financial support to some sectors. Conversely, the Turkish Lira is maintaining a bid unlike other EMs in anticipation of another boost from the CBRT at midday, with the consensus looking for a 175 bp hike.

In commodities, the crude complex has fared somewhat better than European equity bourses & US futures with WTI and Brent currently around the unchanged mark; albeit, most recently the benchmarks have experienced a pull-back from earlier highs. Fundamental updates explicitly for the complex have once again been sparse throughout the European morning aside from bank updates which include ABN Amro forecasting WTI averaging USD 34/bbl in 2020 and USD 43/bbl in 2021, alongside Goldman Sachs expecting a bull market to emerge for commodities in 2021. Given the lack of specific fundamental updates price action will likely once again be at the whim of broader sentiment with focus on stimulus updates ahead of the weekend’s latest deadline from Speaker Pelosi. Elsewhere, amidst the mornings European earnings Anglo American tightened their FY20 copper production guidance to 630-660k/T compared to analysts’ expectations for ~631k/T for the period and the prior 638k/T for FY19. Separately, spot gold is modestly softer this morning as while the DXY remains below the 93.00 mark and was subdued at the start of the European session it has been gradually picking up and remains in proximity to highs; as such, the yellow metal is ~USD 6/oz softer but still a similar magnitude from overnight lows.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 870,000, prior 898,000; Continuing Claims, est. 9.63m, prior 10m
• 10am: Leading Index, est. 0.6%, prior 1.2%
• 10am: Existing Home Sales, est. 6.3m, prior 6m; Existing Home Sales MoM, est. 5.0%, prior 2.4%
• 11am: Kansas City Fed Manf. Activity, est. 11, prior 11

DB's Jim Reid concludes the overnight wrap

US equities fluctuated and Treasury yields rose yesterday as markets reacted to yet another day of stimulus negotiations, though uncertainty remained as to whether a deal would be agreed by the election on November 3rd. In some ways it was one of the more positive days for newsflow, with Speaker Pelosi saying that she “has a prospect for an agreement” with Secretary Mnuchin, although she also acknowledged that it might not come together until after the election. White House Chief of Staff Meadows also said that the two sides were aiming to agree on the framework within 48 hours but did not say whether a vote would be held. The Senate remains the biggest hold up in the talks however, with questions as to whether Majority Leader McConnell and other Republican lawmakers there would agree to any bill near the $2.2 trillion that Democrats have been holding out for.

Yesterday McConnell said he may “not mind” going forward with the bill after the election. However it is unclear whether his Republican colleagues would still support it as there have been a number dissenting voices already, including Senator Mitt Romney earlier in the week, while Senator John Thune, the second-ranking Republican Senator, said that the Senate would not have 13 Republican votes to pass the size of stimulus that the Speaker is seeking. Other senior Republicans felt that any deal should be agreed to and passed now, as it may be hard to know how the political mood will be after the election. With less than two weeks to the election, time is running short for both sides.

After moving between gains and losses throughout the day, the S&P 500 ended the session down -0.23%. It was the second smallest loss for the broad index since the end of August, and cyclical industries such as energy (-1.99%), transportation (-1.75%) and banks (-0.82%) led the declines. Intraday, the VIX rose to its highest level in over a month before settling at 28.7pts, which is just slightly down from Tuesday’s two-week high. Meanwhile yields on 10yr Treasuries had risen +3.7bps, rising above 0.8% for the first time since June, though this morning they’re down -1.2bps at 0.811%. There was also a further steepening in the yield curve yesterday, with the 5s30s curve up +2.4bps to a new 3-year high, as the 2s10 curve also steepened (+3.1bps) to its highest since early June. The dollar slid (-0.49%) for the fourth straight session to its lowest level since the first week of September.

Staying on the US, S&P 500 futures have moved lower overnight (-0.67%) overnight after a top US intelligence official (as per Bloomberg) warned that Iran and Russia are attempting to interfere with the presidential election, which will only raise concerns that the result might be disputed. The news is also acting as an overhang on the Asian session with the Nikkei (-0.68%), Hang Seng (-0.14%), Shanghai Comp (-0.83%), Kospi (-0.92%) and Asx (-0.38%) all trading lower this morning. In line with this risk-off move, the US dollar index has moved up +0.20% this morning. Meanwhile, the onshore Chinese yuan is down -0.22%, marking the first decline in 5 sessions after Caixin reported that China is preparing to raise the qualified domestic institutional investor quota by $10bn, which would allow more funds to be invested in securities overseas.

Attention will remain on the US today, as the final presidential debate takes place this evening between President Trump and former Vice President Biden at 9:00pm ET. As we’ve mentioned before, the debates haven’t tended to move the dial much historically, and the unprecedented quantity of early voting this year means that the number of remaining voters will be even lower this time around. Nevertheless, it represents the last set-piece opportunity in which the two candidates will meet, and is one of the final chances to change the contours of the race. In the polling averages, Biden leads Trump by 9.9pts according to FiveThirtyEight and 7.5pts on RealClearPolitics. The format will be the same as the first debate with six 15-minute segments, though to stop interruptions this time, the opening 2-minute answers at the start of each segment will see the other candidate’s microphone muted to prevent interruptions. Subject to news developments, the topics down for discussion tonight are fighting Covid-19, American families, race in America, climate change, national security, and leadership.

On the coronavirus, new records in cases were set across Europe yesterday as governments continue to re-impose restrictions on their citizens. Here in the UK, a record 26,707 cases were confirmed, while the number of hospitalisations in England rose above 6k for the first time since late May. Elsewhere, both Italy (15,199) and the Netherlands (8,789) also reported new highs, and Spain has become the first nation in Western Europe to record 1 million coronavirus cases in total. It should be noted however that testing today is much more widespread than it was during the first wave back in March, so countries are much better at picking up the extent of the virus than they were before. Elsewhere, German health minister Jens Spahn tested positive for the virus, while the Czech Republic announced the closure of all non-essential shops from today in order to stop the virus’ spread. Switzerland is also preparing new measures, with Swiss Interior Minister Berset saying the government was readying a new round of restrictions that would target events and crowds of people.

European assets suffered against the backdrop of rising case numbers, and equities lost further ground across the continent. By the close, the STOXX 600 had fallen another -1.29% yesterday in its 3rd consecutive move lower, while the DAX was down -1.41%. Sovereign bonds declined across the board too, with yields on 10yr bunds (+1.8bps), OATs (+1.7bps) and BTPs (+5.5bps) all moving higher.

Over in the US, New York saw the number of new cases rose above 2,000 for the first time since May. The recent rise in cases is now translating into further hospitalisations in the US with nearly 40k people currently in hospital, the most since late summer. 37 states are reporting increased hospitalisations and 21 of those have reported new records or approaching previous highs in the last week. Elsewhere in the US, trials of vaccines by AstraZeneca and Johnson & Johnson may resume as soon as this week according to US government officials. There was particular interest in the AstraZeneca study after a participant in Brazil died, but Bloomberg reported “a person familiar with the matter” saying that person had not received the shot. Staying on vaccines, the Indian government is expecting a covid-19 vaccine to be ready for sale as early as December if clinical trials are successful. That makes India the third country after the UK and US that could see a vaccine around then. So an important month to watch.

Sterling had its strongest performance against the US Dollar since March yesterday, with a +1.55% advance, as the news came through that the UK had agreed to restart trade talks with the EU. Optimism rose throughout the day, especially following a speech by the EU’s chief negotiator, Michel Barnier, in which he acknowledged compromise from both sides would be required to reach a deal. In a statement saying that talks would now restart from today, Downing Street welcomed this acknowledgement from Barnier, and the two sides have jointly agreed a set of organising principles for the further negotiations, with the initial phase of these taking place in London from today until Sunday. In terms of the reaction elsewhere, gilts lost ground throughout the day, with 10yr yields closing up +5.5bps.

There wasn’t a lot of data to report on yesterday, though CPI inflation in the UK rose to +0.5% in September (vs. +0.6% expected). The release remains below the BoE’s 2% inflation target, and came as BoE Deputy Governor Ramsden also said yesterday that there was “considerable headroom” for more QE. As a reminder, our UK economist’s view is that there’ll be a further £60bn of QE next month. Canada also released their CPI reading yesterday, which similarly showed an increase to +0.5%.

To the day ahead now, and the main highlight will be the aforementioned US presidential debate. Otherwise, data releases today include the weekly initial jobless claims from the US, September’s existing home sales and leading index, as well as the Kansas City Fed manufacturing index for October. From the Euro Area, there’ll also be the advance consumer confidence reading for October. Central Bank speakers include BoE Governor Bailey and chief economist Haldane, the ECB’s Panetta, and the Fed’s Barkin, Daly and Kaplan. The Central Bank of Turkey will also be deciding on rates. And finally, earnings releases include Intel, Coca Cola, AT&T, Danaher and Union Pacific.

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Hunter Biden Laptop Linked To FBI Money Laundering Investigation Tyler Durden Thu, 10/22/2020 - 08:09

During its initial round of reports involving emails and photos allegedly belonging to Hunter Biden, which had been gleaned from a laptop the political scion had allegedly abandoned at a Delaware computer-repair shop (some on the left insist that the material was hacked, but they didn't dispute the authenticity), the New York Post confirmed that the FBI had taken the original laptop from John Paul Mac Isaac, the shop owner who originally reported the laptop after finding "disturbing content" on its hard drive.

To back this up, the New York Post published several documents showing the subpoena and 'Request for Property' forms from the FBI. Now, Fox News is reporting that the FBI seized the laptop for its connection with a money laundering investigation in late 2019.

According to Fox News, multiple federal law enforcement officials, as well as two separate government officials, confirmed the authenticity of these documents, which bore the signature of FBI Special Agent Joshua Wilson.

The document has a "Case ID" section, which is filled in with a hand-written number: 272D-BA-3065729.

Source: Fox News

Citing its official sources, Fox News explains that "272" is the bureau classification number for 'money laundering'. while '272D' refers specifically to "Money Laundering, Unknown SUA [Specified Unlawful Activity]—White Collar Crime Program." One official described the 'D' designation as meaning "transnational or blanket" crime.

"BA" means the report was filed at the Baltimore field office, which has jurisdiction in Wilmington, where the subpoena was carried out.

Since the FBI can't open a case without "sufficient evidence" that there was a crime committed, the paperwork suggests that the "disturbing" images that both Mac and Rudy Giuliani have alluded to might have constituted some kind of criminal activity, be it "child pornography", as Giuliani has complained, or something else.

Another document obtained by Fox News was a subpoena for JPMI to testify last December, which also suggests that laptop and the hard drive may have carried the "fruits" of criminal activity.

Source: Fox News

As he recently discussed, Giuliani, this week, turned over a copy of the hard drive to New Castle County Police Department in Delaware.

Last week, DNI John Ratclife confirmed that the Hunter Biden emails weren't a part of some "Russian disinformation campaign," and it appears Fox News' FBI sources weren't very helpful in d uncovering the nature of the crime, or the investigation, that may or may not be ongoing (since all of this apparently happened a year ago).

Turkish Lira Crashes To Record Low After Another Central Bank Surprise Tyler Durden Thu, 10/22/2020 - 07:40

The central bank of Turkey continues to surprise markets.

One month after the Turkish central bank stunned FX traders on Sept 24 when the covid-cripped economy whose FX reserves are collapsing announced a 200bps rate hike, going into today's meeting the consensus of 27 analysts was for the CBRT to hike by another 150-200 bps with a median forecast for an increase of 175 basis points to 12%, and the lira surging in recent days to reflect that.

However, it was not meant to be, and in the second Turkish shock in one month, the Turkish central bank instead left the reference rate on hold. The press release said that "a significant tightening in financial conditions has been achieved, following the monetary policy and liquidity management steps taken to contain inflation expectations and risks to the inflation outlook. Accordingly, the Committee has decided to keep the policy rate unchanged, while enhancing flexibility in liquidity management and continuing with liquidity measures until inflation outlook displays a significant improvement."

The bank also said that the "expected moderation in imports has started with the phasing out of pandemic-related supportive policies" and added that "the strong recovery in exports of goods, relatively low levels of commodity prices and the level of the real exchange rate will support the current account balance in the upcoming periods. As a result of fast economic recovery with strong credit momentum, and financial market developments, inflation followed a higher-than-envisaged path."

At this point it is unclear if the Erdogan regime believes in lower or higher rates to fight inflation.

However in yet another surprise, while the CBRT kept the policy rate on hold, the central bank adopted unconventional tightening by raising the upper bound of its interest-rate corridor. Specifically, the CBRT set the margin between the CBRT Late Liquidity Window lending rate and overnight lending rate as 300bps. That means the LLW lending rate is now 14.75% vs 13.25% prior and that the central bank will prefer less conventional measures going forward, in what appears to be a market test of how traders would respond.

Sadly for Erdogan, they did not respond as the CBRT had desired because in kneejerk reaction, the USDTRY rallied 2% on the decision, as the Lira plunged to a new record low of 7.9797...

... and just shy of the 8.00 psychological level, as all those who were expecting a continuation of the tightening cycle were just stopped out.

And that's how you lose money in an instant if you expect continuity from an authoritarian ruler.