US Exports, Imports Crater Most On Record As China Refuses To Comply With Trade Deal Tyler Durden Thu, 06/04/2020 - 12:05

While today's trade balance print at $49.4 billion came generally in line as expected, the relative calm on the surface belies what has been a stunning collapse in absolute trade levels.

The problem is how the US got to that deficit print, and this is where it gets ugly: April exports were $151.3 billion, $38.9 billion less than March exports. In percentage terms, the 20.5% export drop was the biggest on record, going back to 1992. At the same time, April imports were $200.7 billion, $31.8 billion less than March imports, and a decline of 13.7%, also the most since records started in 1992.

The decline in merchandise exports was widespread with companies shipping less capital equipment, motor vehicles, consumer goods and industrial supplies such as oil. The nation also received fewer capital and consumer goods, vehicles and food from overseas producers as the US economy was put on ice.

Reflecting the global pandemic and lockdowns, the value of travel-related imports and exports slumped to $4.4 billion, an all-time low in data back to 1999.

Combined, the value of U.S. exports and imports decreased to $352 billion, the lowest since May 2010!

However, since both exports and imports tumbled by roughly a similar amount, the move in the total monthly trade balance was far more muted, sliding from $42.3BN to $49.4BN.

To be sure, foreign trade was already easing prior to the pandemic, and now, but faced with what Bloomberg called unprecedented supply-chain disruptions, a previously incomprehensible surge in U.S. unemployment and a drop-off in demand, the world’s largest economy has pulled back more dramatically.

Meanwhile, in a double whammy for the Trump administration, there was no sign of any real progress on the phase 1 deal with China, with soybean exports still lagging their 2019 pace.  

Source: Brad Setser

Furthermore, while China is generally obligated to elevate its imports from the US (on par with 2017 levels) as per the Phase 1 Trade deal, YTD data shows that there is virtually no pick up compared to 2018 or 2019.

Worse, food exports are at risk of declining after Chinese government officials this month telling state-run agricultural companies to pause purchases of some American farm goods including soybeans.

Meanwhile, in the latest slap for the Trump admin, the report showed the trade deficit with China growing as imports of merchandise from China rebounded in April to $35.2 billion from $24.2 billion in March, while exports edged up to $9.3 billion, leaving a deficit of $7.2 billion.

White House Plans $1 Trillion For Next Stimulus Round: Report Tyler Durden Thu, 06/04/2020 - 11:57

One day after Merkel's coalition overcame ideological difference and passed a €130BN stimulus for the foundering German economy, the US is already out contemplating the next fiscal infusion, with Bloomberg reporting that the Trump administration now envisions as much another $1 trillion in the next round of economic stimulus - a number that seems oddly low at a time when some believe the US fiscal deficit may hit $8 trillion in 2020 - though the discussions scheduled for this week have been delayed.

Mitch McConnell told White House officials behind closed doors that "another round of fiscal stimulus from Congress could be just under $1 trillion", a figure that administration officials are reportedly comfortable with.

Some more details from Bloomberg:

Top aides had planned to meet this week to discuss the next round of pandemic relief as more than 40 million people have lost jobs since states began restricting public activity in March. That meeting has been removed from the calender and has not been rescheduled yet, according to the people, who spoke on condition of anonymity.

The White House has been consumed this week with protests sweeping the nation over police brutality following the death in police custody of a black man in Minneapolis. Senate Republicans had no plans to act on a stimulus bill this month.

Any potential measure will likely not pass until after July 20, which is when a two-week recess scheduled to begin on July 3 begins.

As a reminder, last month the US passed a $3.5 trillion relief measure with nearly $1 trillion in aid for states and local governments facing revenue shortfalls. That bill would also provide a new round of direct stimulus payments to individuals along with money for testing and contact tracing.

Since it is now safe to say that any fiscal prudence or conservatism is dead and buried, and that the next $1 trillion will be followed by many more trillions as the US unleashes the full force of the helicopter army, we will just show the latest chart of Federal spending - a level which is about to explode much, much higher - without commentary.

 

 

COVID-19 Triggers Transformation Into A New Economy Tyler Durden Thu, 06/04/2020 - 11:45

Authored by Patrick Hill via RealInvestmentAdvice.com,

This is Part 2 of a two-part article including sections 4 – and 5 – please read Part 1 for sections 1) COVID-19 Unique Event, 2) Virus Drives the Economy, and 3) Outlook for the U.S. Economy

Introduction

“The economy was a very nice photo, than the pandemic turned it into a jigsaw puzzle that’s all messed up, now we’re trying to put it together and figure out if all the pieces are still here or not.”

- Mohammed A. El-Arian, Chief Economist, Allianz

The novel COVID-19 virus has driven the world economy into the deepest recession since the Great Depression while shattering the linkages that previously held it together. Two months into the crisis and economists are still trying to figure out what has happened to supply chains and demand channels. As El-Arian, notes key components of the economy may be missing.

Some components will need to be created. Then all these components will need to realign into a “New Economy.” The challenge of rebuilding the economy will be influencing consumer behavior. Consumer spending is 70% of GDP.  Thus, growing employment is crucial toward increasing consumer confidence and recovery.  The central question is: how will the economy shift a growth track? We’ll look at crucial signposts along the way in building a new growth track by presenting the following topics: (The first three are from Part 1)

1. COVID-19 – Unique Event – Examines the unique characteristics of the pandemic and how they set up certain economic trends.  Part 1

2. Virus Drives the Economy – Looks at how the virus is driving the economy, how it is out of control and what strategies are working toward containment – Part 1

3. Outlook For U.S. Economy – Takes a new perspective by overlaying the virus cycle with a deep U shaped economic cycle and how economic activity changes during each stage.  – Part 1

4. New Economy – Describes the transformation of our society and how these changes will create losing and winning new businesses and how consumers will likely have conservative spending and saving habits – Part 2

5. What We Need To Do To Create a New Economy – Recommends a federal team of scientific experts to be authorized to lead virus containment, investment in self-renewing innovation centers in hard hit pandemic areas and focus employment development on climate change solutions – Part 2

New Economy

The New Economy will feel different, much more virtually driven by software, the Internet, and be home centric. All major aspects of consumer behavior will be affected by the panipression (combination of panic, recession, and depression) experience opening new opportunities for products and services. In contrast, others will see reduced demand and be forced to close. Investors will want to watch these social trends as they cluster into a set of needs where businesses can flourish and become profitable.

Similar to the deep psychological scars of the 1930s, it will take time to repair the emotional, social, and mental damage of the pandemic. Today, a social trend called the Ameri-Can spirit is helping to heal people in a wave of unifying, uplifting virtual programs. Celebrities, social groups, and crowdsourced teams are using Internet hashtags links to raise funding for charities to provide financial assistance to restaurant workers, hotel workers, farmworkers, meat processing staff, entertainment crews, and thousands of others that have been furloughed or laid off. This Ameri-Can spirit plus our culture of entrepreneurship will create a new economy that will be robust.

Businesses will provide new services or products targeted at a cluster of behaviors related to values, social styles, and desires. Social distancing will change our behaviors so groups of behaviors will disappear, be sustained, or begin to emerge. Socially people will have to be encouraged to take a trip, get on a plane, or have an experience outside of their home when they have so many alternatives.

Let’s look at key consumer and business segments and how they may be transformed:

Hospitality

Consumers will be seeking experiences they cannot get at home.  We expect to see more experience-based travel packages that include hotel, meals, and an experience like a Costa Rica eco tour as a destination. For sought after destinations like Hawaii, Europe or Disneyland, the attractiveness will still be there. However, for small resorts, villages, or towns with a singular appeal, they will have to differentiate and create traffic in innovative ways to hold out during the contraction and trough stages of the recession.  Airlines are already making ‘pandemic cleanliness promises’ and will continue to build on making passengers feel safe.  Hotels will need to make guests feel safe as well and focus on the destination appeal, amenities, and service to a far greater degree than they needed to in the past. Local restaurants that shifted to take out during the pandemic and survived will be able to go back to their usual food fare if it has new appeal.  The foodservice industry is likely to be even more competitive than before, with the major chains surviving and the local community restaurants failing during the lockdowns. The rental car industry has many choices with some firms with high debt levels, so we may see industry consolidation.

Work At Home

Home will become a central focus for new services.  More services will come to the home than ever before with added twists and features for:  meal delivery and pickup, car servicing, pet grooming, mobile dentistry, and laundry delivery.  As workers are likely to have little savings and limited credit, so car sales will likely drop, replaced by even more ride-sharing.  The auto industry will be faced with declining auto sales yet, there will be increased demand for cars by ride-sharing drivers and new autonomous car services.   Personal fitness or yoga training will be offered online, along with many personal development classes held virtually. The number of car trips to work will decline causing gasoline demand to drop lower than pre-pandemic levels. Car rentals for out-of-region trips will be in even higher demand as fewer consumers will own a car.   E-Commerce will continue to grow as people have become accustomed to most things being delivered to their homes. Retailers will need to differentiate their offerings by expertise that consumers can’t get online.  For example, going to a nursery to buy a plant means seeing the plant’s condition. To close the sale, the consumer will want to ask an expert gardener how to plant it and care for it.  Shopping malls will need to develop attractions or experiences to motivate consumers to leave their homes and shop. 

Work at Office or Plant

Companies will soon discover that having employees work at home as many days as possible will reduce their costs.  The need for office space will likely be reduced, and the need for a variety of support services like cafeterias, lounges, team rooms, etc. will decline.  The need for shared office tenant spaces will fall. After all, except for key meetings, it is cheaper to have their employees work from home and eliminate or reduce office space, computer systems, utilities, and all the overhead of an employee office. Manufacturers will figure out how to achieve the same level of production using fewer employees. Production management systems will continue to be installed with sophisticated automation systems using artificial intelligence features. As more robots are installed we expect they will stay in place so manufacturing employment will not return to pre-COVID-19 levels. Features like non-touch time clocks, automated employee temperature monitoring, and other pandemic related services will probably be kept in place post-COVID-19.

Technology Services

Consumers already using the internet 24 hours a day will be looking for more ways to use laptops and internet services.  Demand for high-speed internet services will be even greater. Many consumers use personal assistants like Alexa. We expect using personal assistants to gain new users after their shelter-in-home experience.  We can expect to see more artificial intelligence features added to ‘dumb’ devices like refrigerators to provide monitoring of food usage, make recommendations, and suggest food purchases based on usage. Home security systems do surveillance today like turning on lights while a person walks from room to room.  These systems may add employee temperature surveillance, so companies will know how healthy their employees are at home.  There is likely to be increased stress from the blurring of family versus home life, and issues related to child care. This stress may impact work from home so firms will be interested in monitoring work at home activity. Firms will be able to use retina scans to determine how focused a worker is on his screen. The scans will be reported back to companies to know when their employee was at their computer, and for hourly workers, how many hours they have worked.

Health

After their pandemic experience, consumers will be obsessed with their fitness. Some consumers may look for their doctor to become a ‘health consultant’ helping them to stay healthy with a focus on preventive medicine, diet, and lifestyle management.  Artificial intelligence will be applied to diagnostics as medicine becomes ever more complex and expensive to reduce doctor’s hours and costs. Telemedicine will become the norm for visits as patients will want to stay home if they can.  In some cases, doctor’s offices and clinics will shrink in size as being ‘on-premise’ for doctor visits will be a premium service. Clinics will shift some services to urgent care. Consumers will take even more control of their health, use more online advice services, and drug delivery apps. The use of stress reduction virtual apps will soar to help people transition into normal life as they use mindfulness to go out ‘into the real world’ again.

Entertainment

The merging of the internet with television and streaming channels will be accelerated.  Internet applications like polling, audience interaction, and 3D experiences will merge with consumers doing things at home they would otherwise go out to do.  During quarantine, entertainers have opened their homes to produce programs they used to do from studios. We expect more mixing of these personal entertainer ‘home visits’ to create an artificial intimacy with audiences that are not with them in person. The boundaries between movies, television shows, and gaming will continue to blur. For example, group ‘Minecraft games’ with a host and multi-player options become the norm. The focus on delivering entertainment to the home means less need for studio space and expensive studio crews. Audiences will still demand live concerts, though we expect to see more tie-ins with virtual pre-concert events and games along with post-concert follow up with entertainers.

Learning

Higher education will transition into lower-cost online learning. College online learning will become the standard.  In person education will be ‘extra’ at the college level.  The emphasis online learning to the home in elementary grades will place new stress on teachers and require far more sophisticated software for learning than is available today.  Small colleges that focus on ‘in person’ learning experiences will be hard pressed to attract students during the lockdown or reopening phases of the pandemic control. We expect that many small colleges may be forced to close or merge their curriculum and teaching staff with other larger schools that have the ability to attract a large enough student base to be financially viable.

Housing

Home sales will take a long time to recover from the market contraction of the pandemic.  Millennials have often been the first to be laid off, have little savings, and spend more on experiences than saving for large purchases. Major incentives will have to be offered by builders and existing homeowners as the market will be slow to return to pre-pandemic sales levels. Homes will be remodeled, and new homes built to accommodate the home centric needs for office space, closed off family rooms, and sound dampening for video conferencing privacy.  Apartments that offer ‘work-at-home’ floor plans and capabilities will be in demand while smaller apartments will see reduced demand.  The pandemic may force home buyers to think about leaving the city and its density to suburbs or even further out since they can use the internet to do their job. An essential homebuyer requirement that their home is near their office will no longer be as crucial in locating a home for purchase.

Banking

Many banks have closed their retail offices due to social distancing.  We expect banks to close many retail offices as being too expensive. Thus, customers to see a banker will need to make an appointment to see their banker at a specific branch. Virtual banking relationships will be the norm. Direct digital transfer of funds will grow leaving banks out of money transfers, particularly between customers and small businesses. Tap and go credit cards will be a standard way of handing a transaction at stores without touching cards or receipts.  Digital wallets with financial account information will be readily adopted as tech savvy millennials become the dominant consumer group.

Consumers will think about money differently as a result of a panipression experience. Not having money for food, rent, or utilities will leave emotional scars and teach new habits.  Similar to the Great Depression generation, consumers are likely to use less credit, increase their savings and be careful about getting over-leveraged with significant purchases. They will make conservative investments similar to baby boomers after the 2008 recession, who did not reinvest in stocks. Building consumer spending will likely take three or more years to reach previous levels.

The New Economy will feel different, much more virtually driven by software, the internet and home centric. All major aspects of consumer behavior will be affected by the panipression experience opening new opportunities for products and services. In contrast, others will see reduced demand and be forced to close. Investors will want to watch emerging social trends as they cluster into a set of needs where businesses can flourish and become profitable.

What We Need To Do To Create A New Economy Virus Containment

Challenge: The most crucial next step is to contain the virus and provide people with the confidence to go about their social life without the fear of becoming infected.

Proposal: Provide unifying intelligent leadership at the federal level to overcome the virus. The people need support, compassion, and hope, not divisive politics, bickering, and conspiracy theories as a basis of policy. A federal team of scientists using facts, research, and the latest techniques for pandemic containment needs to be authorized to bring the virus under control quickly. Other countries like Germany have focused their efforts on containment without politics leading to moderate success in virus containment.

Self-Renewing Economy Investment

Challenge: Rural areas of the country were already in recession from being hollowed out by manufacturing moving overseas.  The pandemic has ravaged inner-city areas where many hourly workers lived in tight quarters.  Small businesses across all regions are reeling from the lockdowns temporally shutting their businesses down, forcing them onto a financial cliff.

Proposal: Build New Economy innovation development centers using the Silicon Valley model. We see promise in using a Silicon Valley model of integrated partnerships between venture capitalists, company incubators, universities, and local government to build new businesses.  The model has been used in places like Portland, Oregon with their Silicon Forest and in Salt Lake City with their Silicon Slope to build successful self-renewing economies.  We recommend that this model be used to target inner-city regions, rural areas, or any area where the pandemic has taken a toll on the local economy.  Since the federal government has limited funding we recommend the government act as a ‘seed’ investor to jump-start these development centers with partner investments by venture capitalists and cash rich firms like Apple, Google, and Microsoft.  To ensure a well-trained labor force, the centers could be located near university campuses and integrated into degree or certification programs. The Department of Education could assist with scholarships for workers that need tuition and fees financial aid to study at the universities.

Climate Change Solutions

Challenge: While the focus over the next three to five years will rightly be on containing the virus and rebuilding the economy, the existential climate change problem continues to go unsolved.  The impact of climate change is already felt in rising seas flooding coast side cities and mega wildfires destroying millions of acres.

Proposal: Focus employment development in renewable industries.  The pandemic economic slowdown has reduced carbon emissions by 8% during the past two months, according to experts.  The latest U.N. climate change analysis recommends that an 8% a year reduction in emissions be continued until 2030 to achieve the global emissions reduction target of 2 degrees Celsius. A U.N. sponsored Science Based Targets Initiative organization of 890 companies has endorsed shifting investments and employment toward reaching the 2030 emissions reduction target. A diverse set of 165 U.S. companies are SBTI members including: Walmart, Target, Coca-Cola, Adobe, Microsoft, Hewlett-Packard, Owens-Corning, Whirlpool, Proctor & Gamble, and Verizon. We should start now solving the next major global challenge by focusing on federal, non-government organizations, private research, and business development on innovative solutions to climate change problems.  Focusing on climate change for job creation ensures that we tackle two major issues: employment and climate change.  With so many workers unemployed we should shift their skills to a new industry that has been growing fast and is urgently needed while offering long term careers

Final Comment

We expect corporate leaders to take the lead in employment development for a long term economic transformation as political divisions will continue.  We noted in our post: A Pandemic Iceberg Hits the ‘Unsinkable’ US Economy’ that the fabric of a robust labor safety net needs to be built to mitigate the impact of an economic crisis like COVID-19 on labor in the future.  It is in the interest of executives to build businesses where workers are thriving, not just surviving. The focus must be on building an innovative economy that is creating new jobs through entrepreneurship. Otherwise, we are faced with a stagnating economy dependent on government transfer payments. We conclude with the following declaration from that post:

“Americans built the most innovative, self-renewing, wealth building economy in the world.  It is the American spirit of entrepreneurship combined with invention, self-sacrifice, equal opportunity, and creativity that will build the businesses of the future. These new businesses will adjust to new social realities and pave the way for workers to gain job security and become confident enough to spend at robust levels.”

Florida Reports Largest Jump In New Cases Since April: Live Updates Tyler Durden Thu, 06/04/2020 - 11:30

Summary:

• NY to allow drive-in, drive thru graduations
• Florida reports most new cases since April for 2nd straight day
• Global cases top 6.5 mil
• Deaths top 485k
• Hong Kong sees another alarming cluster
• China allows foreign airlines to apply to return to service
• Russia, Mexico, Brazil all see alarming jump in cases, deaths
• Experts say Russia likely underestimating deaths in St. Petersburg by considerable margin
• Backlash to the hydroxychloroquine backlash intensifies

* * *

Update (1120ET): As deaths and new cases reported in Florida over the last few days have increased, we warned that the market would eventually wake up to the uptick in new deaths and cases in certain states. The state reported its largest daily gain in six weeks yesterday as the number of cases neared 60k. Now, on Thursday, public health officials in the state have reported another multiweek high. Florida reported 1,317 new COVID-19 cases over the last day, the highest level since April 17.

New numbers released by the Florida Department of Health officials Thursday show the state has a total of 60,183 cases, and a death toll that on Thursday climbed to 2,607. Hospitalizations across the state increased to 10,652.

US stocks sold off a little on the news, suggesting investors are starting to worry again about a recurrence of the virus.

More than half of the state’s cases are concentrated in Miami-Dade, Broward, Palm Beach and Monroe counties in the southern part of the state.

Both Florida...

...and Georgia...

Source: New York Times

...have seen cases reported Thursday at 2x the level from the day before.

Meanwhile, in New York State, Gov Cuomo revealed that the state had expanded its testing capacity closer to its target, with the state now clocking 50k tests per day.

Watch his press briefing below:

Giving my daily press briefing now. Watch Live: https://t.co/54mzDp8WjG

— Andrew Cuomo (@NYGovCuomo) June 4, 2020

The governor who helped perpetuate racist police tactics in his state by killing a push to legalize recreational marijuana - removing much of the pretext cops often use to unnecessarily stop young black and brown men also urged protesters to get tested for COVID-19, while adding that he stands with the protesters for "meaningful" reform.

This is a moment for national change. For reform.

Change comes when it’s demanded by the people.

I stand with the peaceful protesters for effective, meaningful reform.

— Andrew Cuomo (@NYGovCuomo) June 4, 2020

Is that going to include reforming your state's drug laws, Governor?

Finally, after NJ and Conn. moved to allow schools to hold graduation ceremonies starting in July, Cuomo said.

Is Andrew Cuomo out of his mind-if you R peacefully protesting, wear a mask - but for graduation - drive in & drive through only... and we will keep evaluating. Then proceeds to talk about his own child's graduation and is going to give her his watch to prove how much he cares. pic.twitter.com/fdolP0G2TP

— PatriotsDontSleep (@PatriotsDontSlp) June 4, 2020

Some couldn't help but let out a justified groan.

* * *

While investors have been too distracted by the violence and unrest unfolding in the streets of the US (and now several European cities, with more unrest expected in Hong Kong) to care much about the coronavirus outbreak. We suspect this shift in focus has helped fuel the market's astonishing rally over the last two weeks.

There's no question that the US has been transfixed by the tumult sparked by the police murder of George Floyd, even as the violence and looting has mostly hurt black communities and black-owned small businesses, while the legal system has dutifully proceeded with the prosecution of all four officers involved in the killing.

Investors ignore these developments at their own peril: because over the last few days, a surge in new cases and deaths reported in Russia, Brazil and Mexico has breathed new life into the international outbreak, even as many Americans speculate that perhaps President Trump had a point when he said the virus might run its course by the summer, lockdown or no lockdown.

More experts cast doubt on Russia's figures as its case total hit 441,108, as St Petersburg recorded 1,400 more deaths than average in May, according to official statistics cited by the Times of London, which which suggest that the government may have deliberately suppressed the true number of deaths. Officials say 177 people died last month of Covid-19 in St Petersburg, Russia’s second-biggest city. The majority of the “excess” deaths were likely to have been a result of pneumonia caused by coronavirus, even though many were labeled simply as pneumonia.

Globally, coronavirus cases topped 6.5 million as of Thursday morning, while deaths neared 400k, at 386,464.

According to figures released Thursday morning, Russia's total number of infections passed 440,000 cases, while deaths continue to mount. The coronavirus death tolls in Brazil and Mexico have soared to new daily records, with 1,349 and 1,092 confirmed deaths reported over the past day, even as the countries begin to ease lockdown restrictions. Brazil now has more than 32,000 deaths, while Mexico ha more than 11,000.

NBC News reports that the jump in deaths in Brazil has been driven by Brazil’s indigenous populations, through which the virus is spreading quickly, with deaths caused by the disease increasing more than five-fold in the past month.

At least two US senators have accused China of hiding potentially critical data from the WHO, data that could have changed the course of the outbreak abroad, even as a Chinese officias deny reports about the WHO's frustrations with prying early data from Chinese experts. 

As backlash to the hydroxychloroquine backlash intensifies, a new study published by the NEJM claimed the drug "proved ineffective" for that purpose in a study that tested people who were "in close contact with the disease". We're not sure what that means. However, the Lancet's decision to retract a warning about hydroxychloroquine elicited a triumphant editorial from WSJ, which outlines the history of how bias appears to have tinged the world's interpretation of these studies.

France's Bastille Day military parade is set to be replaced by a ceremony on the Place de la Concorde square in central Paris, President Emmanuel Macron's office announced on Thursday, angering millions of French citizens, who enthusiastically celebrate the dawn of the first French Republic every year.

China appears to have turned the other cheek after the US officially barred the return of Chinese airlines running flights in the US, China's aviation authority said that 95 foreign airlines that have suspended services in the country can now apply to resume flights. We're curious to see which airlines will get the green light.

While the UK continues to resist pressure to start reopening its borders, Spanish Tourism Minister Reyes Maroto said that all restrictions to border crossings with France and Portugal will be lifted beginning on June 22.

Hong Kong confirmed five new cases on Thursday, all of which it claimed were imported. But that number belies the alarm that prompted the evacuation of some tenants from a Sha Tin building after six people living in the building had tested positive "preliminarily". We're waiting to hear more on that.

Pakistan, meanwhile, registered its highest single-day rise in coronavirus cases for the third consecutive day on Wednesday, with 4,801 new cases taking the country's total tally to 85,264.

US Protest Arrests Surpass 10,000; Officials Fear New COVID-19 Explosion As Jails Swell Tyler Durden Thu, 06/04/2020 - 11:26

A new nationwide tally produced by the Associated Press finds protest arrests across America has topped 10,000 since the death of George Floyd in Minneapolis last week.

Events quickly spiraled in many major American cities into rioting, looting, and general lawlessness as mobs of angry protesters took ever entire city blocks; however, many demonstrations have remained peaceful — surprisingly such as protests in Flint, Michigan — notable given its recent history of tensions with local government over the water crisis. 

Los Angeles has seen the most arrests nationwide, accounting for over a quarter, while the second most is in New York, with Dallas and Philadelphia to follow. 

Protest arrests in Dallas. Image source: NBC DFW

The bulk of arrests have been for low-level offenses like curfew violation or failure to disperse, while multiple hundreds have been detained for looting and burglary.

Another interesting finding is related to the 'outside agitators' theory pushed by some mayors and governors of various states, who have alleged most of the rioting and looting was carried out by people outside their states.

"The AP found that in a 24-hour period last weekend, 41 of 52 people with protest-related arrests in the city had a Minnesota driver's license," The Hill summarizes of the figures." "About 86 percent of the more than 400 people arrested in Washington, D.C., as of Wednesday afternoon were from the District, Maryland or Virginia."

Not even Hollywood could come up with a scene this lawless #riots2020 pic.twitter.com/cumAzIzo2Y

— Murad Gazdiev (@MuradGazdiev) June 3, 2020

Perhaps the most important statistics to come out of the week of protest mayhem, however, will be related to the coronavirus spread within the protesting throngs.

Over the weekend and at the start of the week US health officials warned of the protest risks regarding the potentially deadly virus:

The risk is even more pronounced when factoring in the more than 5,600 demonstrators who have been arrested, according to The Associated Press.

Not only are jails crowded indoor spaces, but protesters sat in vehicles at close range for an extended period of time, which increases the risk for onward transmission of the virus, Osterholm explained.

Via AP

The country went from observing months of strict lockdown, stay-at-home orders, and social distancing measures to witnessing tens of thousands squeezed into city streets - and often clashing in 'close quarter combat' scenarios with police lines - pretty much overnight. 

It's expected a dreaded second wave could come out of this, especially given the current protest epicenters of New York, Minnesota and Los Angeles were already hard-hit places in terms of COVID-19.

Stocks Suddenly Plunge After Nasdaq Surges To All-Time Record High Tyler Durden Thu, 06/04/2020 - 11:21

Update (1115ET): Well that de-escalated quickly...

It is not clear what the catalyst (if any, other than sell the all-time-high) for the move was but it began to accelerate around 1100ET...

*  *  *

The Nasdaq 100 has officially broken to a new all-time high this morning, surpassing the prior Feb 19th 2020 highs...

There's just one thing...

Trade accordingly.

 

 

The Absolute Insanity Of Retail FOMO In Just Three Headlines Tyler Durden Thu, 06/04/2020 - 11:20

We have written extensively about the sheer retail FOMO euphoria that has gripped markets (How Retail Investors Took Over The Stock Market; "It's Like Gambling, Isn't It?": First Time Retail Investors Piled Into Stocks During March Plunge; "For Guys Like Me, It's All About Sheer Luck": Why Retail Traders Are Facing "Catastrophic Losses") so we won't dwell on this topic suffice to point out the stock chart of (the aptly named) Genius Brands - a company that makes educational DVDs and CD music - and just three headlines, all hitting within one hour, and revealing the insanity of what happens when everyone pours into the market.

• Genius Brands stock soars 40%, has rocketed 3,309% over the past month;  Jun. 4, 2020 at 9:44 a.m. ET by Tomi Kilgore
• Genius Brands stock turns lower, falls 12.5% ahead of volatility halt after rising as much as 47.9% earlier;  Jun. 4, 2020 at 10:26 a.m. ET by Tomi Kilgore
• Genius Brands registers to offer 60.1 mln shares for sale by selling stockholders; Jun. 4, 2020 at 10:29 a.m. ET by Tomi Kilgore

And the result:

And yes, GNUS is the most popular stock on Robinhood today...

... where retail investors flooded the microcap company, resulting in the completely unwarranted surge in its stock price.

Project Veritas Infiltrates Violent Antifa Cell Tyler Durden Thu, 06/04/2020 - 11:10

An undercover journalist with Project Veritas successfully infiltrated Portland's Rose City Antifa cell, capturing footage of a meeting in which members discussed how to "get out there and do dangerous things as safely as possible."

Antifa has been a fixture at the nationwide Black Lives Matter protests against police brutality (with varying degrees of success) which began after the May 25 death of 46-year-old black man George Floyd at the hands of white Minneapolice police officer Derek Chauvin, who pressed his knee to Floyd's neck for more than eight minutes as onlookers begged him to stop.

According to National Security Adviser Robert O'Brien on Sunday, the violence "is being driven by Antifa."

A protester with an antifa flag draped over his shoulders stands at a rally to demand justice for George Floyd and support of the Black Lives Matter movement in Boston on May 31. (Photo by Matthew J. Lee / The Boston Globe via Getty Images)

And in Portland, members of Antifa are actively plotting ways to commit violence against their enemies while not getting caught.

"Practice things like an eye gouge, it takes very little pressure to injure someone's eyes," member Nicholas Cifuni was recorded saying by the Project Veritas journalist.

"Police are going to be like: ‘Perfect, we can prosecute these [Antifa] fuckers, look how violent they are.' And not that we aren't, but we need to fucking hide that shit," he added. 

"Consider like, destroying your enemy. Not like delivering a really awesome right hand, right eye, left eye blow you know. It's not boxing, its not kickboxing, it's like destroying your enemy."

"The whole goal of this, right, is to get out there and do dangerous things as safely as possible," said Rose City Antifa member 'Ashes'.

"They do not hesitate to either push back or incite some kind of violence. In our classes and in our meetings, before we do any sort of demonstration or Black Bloc, we talk about weapons detail and what we carry and what we should have." -Project Veritas undercover journalist

Watch:

"Project Veritas does not condone any violence whatsoever. It is a sad time in our nation’s history with Antifa activists hijacking #blacklivesmatter protests in cities across the country, attacking the police and engaging in violence," said Project Veritas Founder and CEO, James O’Keefe.

"In many places, it appears the violence is planned, organized & driven by anarchic left extremist groups — far-left extremist groups using Antifa-like tactics."

President Trump announced earlier this week that Anitfa would be designated a terrorist organization.

To that end, the Rose City Antifa cell has repeatedly planned for, and engaged in "direct confrontation" with participants in pro-Trump rallies. In 2018, they notably clashed with members of Patriot Prayer and the pro-Trump "Proud Boys," which resulted in a viral video of a member of Antifa being knocked out during a melee started by the violent "resistance" group. 

And in 2017, Berkeley police recovered several caches of weapons from members of Antifa who were had planned to attack Trump supporters.

Here are some of the prohibited items that have already removed from the park today. https://t.co/3qx3smYwgk pic.twitter.com/A70VCxFYEu

— Berkeley Police (@berkeleypolice) April 15, 2017

You know, terrorist stuff... 

Some Facts Worth Knowing Tyler Durden Thu, 06/04/2020 - 11:05

Authored by Walter Williams, op-ed via Townhall.com,

Imagine that you are an unborn spirit in heaven. God condemns you to a life of poverty but will permit you to choose the country in which you will spend your life. Which country would you choose? I would choose the United States of America.

A recent study by Just Facts, an excellent source of factual information, shows that after accounting for income, charity and noncash welfare benefits such as subsidized health care, housing, food stamps and other assistance programs, "the poorest 20% of Americans consume more goods and services than the national averages for all people in the world's most affluent countries." This includes the majority of countries that are members of Organization for Economic Co-operation and Development, including its European members.

The Just Facts study concludes that if the U.S. "poor" were a nation, then it would be one of the world's richest.

As early as 2010, 43% of all poor households owned their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage and a porch or patio. Eighty percent of poor households have air conditioning. The typical poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other cities throughout Europe. Ninety-seven percent of poor households have one or more color televisions -- half of which are connected to cable, satellite or a streaming service. Some 82% of poor families have one or more smartphones. Eighty-nine percent own microwave ovens and more than a third have an automatic dishwasher. Most poor families have a car or truck and 43% own two or more vehicles.

Most surveys on U.S. poverty are deeply flawed because poor households greatly underreport both their income and noncash benefits such as health care benefits provided by Medicaid, free clinics and the Children's Health Insurance Program, nourishment provided by food stamps, school lunches, school breakfasts, soup kitchens, food pantries, the Women, Infants & Children Program and homeless shelters.

We hear and read stories such as "Real Wage Growth Is Actually Falling" and "Since 2000 Wage Growth Has Barely Grown." But we should not believe it. Ask yourself, "What is the total compensation that I receive from my employer?" If you included only your money wages, you would be off the mark anywhere between 30% and 38%. Total employee compensation includes mandated employer expenses such as Social Security and Medicare. Other employee benefits include retirement and health care benefits as well as life insurance, short-term and long-term disability insurance, vacation leave, tuition reimbursement and bonuses. There is incentive for people to want more of their compensation in a noncash form simply because of the different tax treatment. The bottom line is that prior to the government shutdown of our economy in the wake of the coronavirus pandemic, Americans were becoming richer and richer. The question before us now is how to get back on that path.

Speaking of the COVID-19 pandemic, Just Facts has a couple of interesting takes in an article by its co-founder James D. Agresti and Dr. Andrew Glen titled "Anxiety From Reactions to Covid-19 Will Destroy At Least Seven Times More Years of Life Than Can Be Saved by Lockdowns."

Scientific surveys of U.S. residents have found that the mental health of about one-third to one-half of all adults has been substantially compromised by government reactions to the COVID-19 pandemic. There are deaths from non-psychological causes, such as government-mandated and personal decisions to delay medical care, which has postponed tumor removals, cancer screenings, heart surgeries and treatments for other ailments that could lead to early death if not addressed in a timely manner. Interesting and sadly enough, New York state enacted one of the strictest lockdowns in the U.S. but has 22 times the death rate of Florida, which had one of the mildest lockdowns.

As I pointed out in a recent column, intelligent decision-making requires one to not only pay attention to the benefits of an action but to its costs as well.

1000s Descend On "Illegal Vigil" In Hong Kong's Victoria Park Honoring Victims Of Tiananmen Square Massacre Tyler Durden Thu, 06/04/2020 - 10:45

Authorities may have banned an official peaceful demonstration honoring the anniversary of the Tiananmen Square massacre and passed a new law making "shows of disrespect" toward the Chinese National Anthem, but thousands of Hong Kongers are still finding ways to honor the 31st anniversary of a massacre where hundreds, or more likely thousands, of peaceful protesters were murdered by the Chinese military.

From this angle, Victoria Park looks almost as busy as it did last year. Hongkongers have come out in force #june4th pic.twitter.com/3dzDiS9diP

— Rachel Blundy (@rachelblundy) June 4, 2020

Beijing banned the peaceful vigil - an annual tradition - for the first time this year amid a crackdown on Hong Kong's freedoms spurred by the pro-democracy movement that brought chaos and disorder to the streets of HK.

Twice, pro-democracy lawmakers disrupted proceedings as the new national anthem law was being passed.

Despite the declaration, crowds poured into Victoria Park to light candles and observe a minute of silence at 2009PA (0809ET). Many chanted “Democracy now" and "Stand for freedom, stand with Hong Kong." Police stood by, playing recordings warning attendees not to engage in the vigil. Police also cited the need for social distancing to be maintained.

Police cited the need for social distancing during the coronavirus outbreak in barricading the sprawling park, but activists saw that as a convenient excuse.

"We all know the Hong Kong government and the Chinese government really don’t want to see the candle lights in Victoria Park," said Wu’er Kaixi, a former student leader who was No. 2 on the government’s most-wanted list following the Tiananmen Square crackdown.

Thousands in Hong Kong defy ban on Tiananmen vigil https://t.co/0JxzrLeR0Y pic.twitter.com/ZqyLYVaunb

— Andy Vermaut (@AndyVermaut) June 4, 2020

Hundreds and possibly thousands of people were killed when tanks and troops moved in on the night of June 3-4, 1989, to break up weeks of student-led protests that had spread to other cities and were seen as a threat to Communist Party rule.

"The Chinese Communists want us all to forget about what happened 31 years ago," Wu'er told the AP in Taiwan, where he lives. "But it is the Chinese government themselves reminding the whole world that they are the same government...doing the same in Hong Kong."

Tiananmen Square itself was empty on Thursday, as Chinese police once again engaged in the practice of placing known dissidents under house arrest for the day.

Meanwhile, police arrested protesters in other parts of the city.

Lockdowns "Maximize Economic Pain For Minimal Health Gains" Tyler Durden Thu, 06/04/2020 - 10:30

Authored by Abigail Devereaux via The American Institute for Economic Research,

The novel coronavirus has done severe economic damage all over the globe. The Congressional Budget Office (CBO) stated on June 1, 2020 that it could take nearly a decade for the economy to grow back to levels forecasted this January. As economists, we want to understand just how much damage has been done to what people and sectors and how that damage was perpetrated. There’s usually more than one perp in a Depression. 

First, the coronavirus obviously causes direct health effects that can impact economies. Note that economists like myself are not suggesting illness or death is bad primarily because of their economic effects; the social and personal costs of pandemics are devastating on their own. Second, people voluntarily change their consumption, work, and personal behavior in reaction to pandemics, without the need for any intervention. Third, political interventions like stay-at-home orders and business closures coercively change consumption, work and personal behaviors in ways that impact economies.

In this study, I’m interested mostly in the effects of political interventions. No one person can do much to affect mass, decentralized behavioral changes. But political officials taking advice from epidemiological and economic experts can directly and severely affect state and regional economies. 

The numbers I use to track these intervention-based effects are state-specific insured unemployment claims from March 1, 2020 until May 9, 2020, the most recent reflected week at the time of writing. I group states by their lockdown status circa the most recent reflected week. Generally, I index insured unemployment rates to 0% on March 1, 2020, so what you’re seeing in these charts is the difference between the unemployment rates in each state reflecting the two weeks ending on March 1, 2020 and the unemployment rates in each state reflecting the two weeks ending on May 9, 2020. 

First, let’s look at the series for all states from March 15, 2020 (rates are extremely stable before that) and May 9, 2020. Each thin line is a state’s own series, colored by group. States locked down but with stated lockdown end dates are red, states locked down with no stated end dates are orange, states partially or fully reopened are blue, and states with no official lockdown are green. Thick lines in the series represent group averages. 

Next, let’s take a look at each group. I start with states that were still locked down on May 9, since their group average (15.5% insured unemployed) is the highest of all the groups. 

Washington (29.5% indexed to March 1 and 31.2% unindexed unemployment), Nevada (25.3% indexed to March 1 and 26.75% unindexed unemployment), and Hawaii (22.45% indexed to March 1 and 23.42% unindexed unemployment) have the highest levels of unemployment in the closed group.

In the next graph, I look at the states locked down on May 9 whose lockdowns didn’t have definitive end dates. 

There aren’t many states in this group as of May 9. It’s important to note that some states started their lockdowns in March and April with indefinite lockdowns and by May 9 had formulated plans with on-paper end dates or phased reopenings. 

The next graph looks at states amidst a partial or full reopening as of May 9. Note that this group consists of both states whose reopenings were weeks old and states whose reopenings were brand new as of May 9. For the sake of rigor I disincluded states that reopened on May 9, and kept those states in the “closed” group. 

Florida is the obvious outlier of this graph, with 29.5% indexed to March 1 and 31.2% unindexed unemployment.

The final graph looks at the states with no formal shutdown orders, or what I call “no lockdown” states.

While the outlier of this small group, Arkansas, did not have a formal lockdown order, it did shut down restaurants, elective surgeries, casinos, venues and salons throughout the state.

Here are the group averages on their own graph: 

What story do these graphs tell? An incomplete story, to be sure, like watching a very small part of a crime scene in which there are several perpetrators unfold before one’s eyes. Here’s a summary table of where group averages were on May 9: 

In general, states that were still closed on May 9 had the highest average insured unemployment rates relative to the average for that same group on March 1. The unemployment rate of fully locked down states was at least double than states that had no formal lockdown. States that were fully or partially opened by May 9 fared better than fully locked down states, but as a group had almost double the average insured unemployment rate of states without a formal lockdown. 

It’s important to issue a few caveats upon further study of this unfolding scene. 

First: many states are still today (the beginning of June 2020) in the middle of reopening. Some states like Washington and Wisconsin have seen challenges (in the case of Wisconsin, successful) to their ongoing lockdown. 

Second: there is no direct tradeoff between economic health and population-level health. It isn’t clear to what extent lockdowns will reduce COVID-19 fatalities and infections in the long run, as the imposition of general quarantines naturally slow the rate at which a population reaches herd immunity given that they are designed to slow the spread of the virus. 

If general quarantines damage the economy enough to send it into its worst depression since the Great One our grandparents lived through, but do not significantly reduce fatalities and infections in the long run, get us foreseeably closer to a workable vaccine, or protect the most vulnerable in particular, then lockdowns might maximize economic pain for minimal health gains. 

This is what the unemployment data seem to say at the moment. Economists should continue to look at this and other numbers for clues that can help us understand how best to put together the story of this unfolding scene, so that if some kinds of interventions turn out to be perpetrators instead of panaceas, we know to advise against employing them in the future.

Bond Market On Edge Of Chaos As 10Y Yields Blow Out To CTA Liquidation Trigger Tyler Durden Thu, 06/04/2020 - 10:17

After trading in a tight 20bps range for the past two months, 10Y yields are blowing out and have jumped to the highest level since March 26.

There have been a bevy explanations for the move, including that markets have now priced in virtually all of the monetary stimulus from central banks (after today's surprisingly large, €600BN QE expansion by the ECB) and that supply/demand fundamentals are once again going to matter (with trillions in new issuance coming in the US), or that the move is simply due to reopening optimism, with Nomura noting that investor sentiment—an expression of investors’ willingness to take on risk—has made its way up from pessimistic to neutral, and the improvement is starting to have an effect on where Nomura estimates that global macro hedge funds have backed out of the totality of their long positions in US government bonds, and now have a net position in the aggregate that is either flat or slightly to the short side. The improvement in the US economic surprise index may be helping to fuel this trend.

As a result of the actions of global macro hedge funds in the market, and following the latest push higher in yields, Nomura thinks that it is possible that CTAs (systematic trend-following investors with a top-down perspective) are being pressed into a further portfolio shift away from overweighting bonds towards overweighting equities. For the moment, CTAs’ positions still show a preferential tilt towards long positions in bonds (DM government bond futures). However, the prospect of a bottoming out in the economy (as pointed to by the improvement in the economic surprise index) has probably made bond-buying a less appealing idea from a technical standpoint as well.

Indeed, if we look at the one-month rolling correlations between actual CTA performance (as measured by the SG CTA Index) on the one hand and stock market or bond market performance on the other, we find that CTA performance has been inversely correlated with the performance of equities (normally an indication of short positions) and positively correlated with the performance of bonds (normally an indication of long positions). If nothing else, this would seem to make it clear that CTAs have been slow to get on board the current equity rally, and that a sell-off in bonds is still the pain side for them.

So at what level do CTAs capitulate on their bond longs and turn short, unleashing a selling cascade?

According to Nomura's CTA position index (representing our estimate of the positioning of CTAs based on real-time data) CTAs to still have a net long position in 10yr UST futures, "although with a conspicuous notch recently where that position appears to have hit a ceiling." This means that should the pressure created by global macro hedge funds’ sell-off of USTs increase to the point that the 10yr UST yield climbs above the "red line" that exists at around 0.84%, CTAs would likely be drawn into exiting their long positions in TY to cut their losses.

Moments ago, in what may be one giant CTA stop hunt to force CTAs to puke, we got as far as 0.82%: should yields rise another 2bps, the chaos in the bond market may observed in early and mid-March may make a triumphal reappearance.

Mish: Speculators Dumping Gold May Be Bullish Tyler Durden Thu, 06/04/2020 - 09:50

Authored by Mike Shedlock via MishTalk,

Speculators are dumping gold, which may actually be bullish. This judging from futures and alleged jewelry demand, the price of gold ought to be falling. But it isn’t. Let’s explore what’s happening with the price of gold and why.

The above chart is courtesy of Barchart. The anecdotes are mine.

In the futures world, for every long there is a short. Contracts net to zero.

The commercials are producers who sell their gold and the broker-dealers who are hedged.

COT Report Categories

Speculators Dump Gold But Price Goes Up Anyway

Note that commercials are down 111,290 contracts since February. This is not “covering shorts” as often claimed. Rather it reflects speculators dumping contracts. 

Managed money dumped 125,456 contracts. Yet, the price of gold rose from $1,644.60 to $1,751.70.

Let’s go back further, to August 2010.

Gold August 2010

I picked that date because the open interest to today is quite similar. 284,561 contracts short in August 2010 vs 274,322 today. The price of gold was then $1,249.

The level of shorts has little to do with the price of gold except as a measure of short-term price fluctuations. 

Normally when gold speculators add contracts, the price of gold rises and when speculators are liquidating contracts, the price falls. But not even that is happening now.

What About Jewelry?

According to the World Gold Council, demand for Gold jewelry in 2019 fell 6 percent overall to 2,107 tons. How did the price of gold react?

Gold vs Jewelry Demand

The price of gold does not follow marginal jewelry usage either.

Marginal Utility?

The subject of marginal utility of gold and jewelry came up in a Twitter discussion this weekend.

Misunderstanding the Supply of Bitcoin and Gold Leads to Silly Projections 

I covered the topic recently in Misunderstanding the Supply of Bitcoin and Gold Leads to Silly Projections

People confuse jewelry buying with the demand for gold and bitcoin mining with supply of Bitcoin. 

Contrary to popular myth, the supply Bitcoin goes up every day. This is why halving the mining rate of Bitcoin did nothing for the price. 

Similarly, people confuse demand for new gold jewelry as the demand for gold. 

Charts like this perpetuate all kinds of silliness.

That chart does NOT represent the demand for gold.

It says, 52.44% of incremental usage was used in Jewelry. So what? Did that set the price of gold or affect it at all?

Misconceptions About Gold

The best explantionation of the demand for gold comes from Pater Tenebrarum at the Acting Man blog. He was my teacher in Austrian economics.

Tenebrarum wrote Misconceptions about Gold as a guest post on my blog in June of 2007 under the pseudonym Trotsky, a name he regrets. 

Gold was $650 at the time.

Gold Supply and Demand

If gold’s price were determined by fabrication demand alone (jewelry and industrial uses), it could not possibly trade at a price of $650 oz.

Many gold analysts, from the mainstream to fringe groups such as the Gold Anti-Trust Action Committee (GATA) claim that they can predict what the gold price will do by adding up annual fabrication and investment demand (as well as dehedging demand by miners) and contrasting the resulting total with annual supply (mine supply, central bank selling, disinvestment and scrap). In short, they analyze the gold market in the same manner as they would analyze the copper market.

It should be immediately obvious that this can’t be correct. After all, nearly the entire gold ever mined (approximately 150,000-160,000 tons) is still here. In short, the total potential supply of gold is some 97-98% greater than the gold produced every year (approximately 2,600 tons).

Jewelry Demand vs. Monetary Demand

One can further illustrate gold’s unique nature as money with a study of gold prices vs. jewelry demand. If record fabrication demand for gold (jewelry) must be good for the price of gold, then a historic high in jewelry demand should in theory coincide with a high gold price.

However, record high jewelry demand in 1999 – 2000 in actual fact coincided with a 20 year bear market low in the gold price – the exact opposite of what traditional commodity supply/demand analysis would suggest.

We can therefore conclude that there must be a source of gold demand that is of far greater importance than the jewelry and industrial demand components, and that demand constitutes the true driver of the price of gold in terms of fiat money.

Indeed, there is. This demand component is called ‘monetary demand’. Monetary demand and the supply of gold is actually best described as the ‘degree of reluctance of the current owners of gold to part with their gold at current prices’ since, as mentioned above, some 160,000 tons are owned by somebody already.

Jewelry Usage

Jewelry demand is about 500 tonnes or so out of a supply total now up to 190,000 tons or so, minus some percentage lost or tied up in priceless art.

Assume 20,000 tons of gold lost or in art, and we can calculate new jewelry demand as 500/170,000 = .0029. 

The idea that jewelry has a meaningful impact on the price of gold is thus ridiculous.

Unfortunately, the World Gold Council itself spreads jewelry nonsense as the “demand for gold”.

Bloomberg, the Wall Street Journal, and countless other also perpetuate the myth so it’s no wonder people are confused.

Gold vs Faith in Central Banks

Demand for gold is a actually a reflection on faith in central banks.

When people believe central banks have everything under control, the price of gold falls. 

The best example is Greenspan’s great moderation when he was consider the maestro. Gold fell from $850 to $250.  

Mario Draghi’s “Whatever it Takes” speech is another key example.

Alleged Gold Shortage

The second widely perpetuated myth is that there is a shortage of gold. 

That’s pretty funny given there is roughly 190,000 tons of supply. 

The myth stems from short-term demand fluctuations for certain forms of gold, typically coins, resulting in price spikes for that form, but not gold itself.

Shills then come out of the woodwork and profess buy gold while you still can. 

What If?

Another popular shortage argument pertains to futures. 

The futures battle cry is “If only everyone would take delivery, we would run out of gold” and the commercials would be ruined. 

The commercials would not be ruined or they would have been ruined long ago. They were short the entire run from $250 to now. The commercials are either hedged or they are the producers who sell their production via futures.

Moreover, futures speculators do not reflect a demand to own gold, they reflect a demand to rent gold with leverage. 

We would not run out of gold if everyone took delivery, but the price would indeed rise.

Gold is Not the New Unobtanium

Even the Wall Street Journal falls into the trap of perpetuating these myths. 

For discussion, please see No WSJ, Gold is Not the New Unobtanium: Where to Buy?

Robin Hood Traders Pile Into Carnival As Cruise Ship Operator Extends Suspension Tyler Durden Thu, 06/04/2020 - 09:30

A retail stampede of Robin Hood traders has been relentlessly buying the dip of Carnival Corp shares as coronavirus decimated the travel and tourism industry.

Shares of Carnival crashed 85% (51.94 to 7.97) from mid-January through early April. During the 51 session plunge, Robin Hood users piled into the stock in the sub 20 range, with the number of users holding shares increasing from 4,450 users (in mid-January) to 469,200 (June 3), a 105x increase. 

This ludicrous and relentless euphoria to BTFD has been spawned by central banks and ingrained into a generation of retail traders. Now betting the cruise ship industry will reopen this summer, and a V-shaped recovery would be seen in the near term. 

However, Morgan Stanley poured cold water on this with downgrades across the cruise ship industry on Wednesday. The industry is royally screwed for several years, and a lot must go right before sails revert to 2019 activity -- something that won't happen this year or next. 

While Robin Hood traders piled into Carnival (since April 1, shares have risen from 8.02 to 17.65, or +120%), thinking the worst is over for the industry and smooth sail from here, well, the cruise ship operator released disappointing news of extending the suspension of some of its lines: 

"Carnival Corp's Princess Cruises on Thursday extended the suspension of some of its voyages in Australia, Canada and Taiwan as cruise ports around the world remain shut due to the coronavirus crisis.

"The company said it has extended the delay of operations on all cruises sailing in and out of Australia through mid-September on the Sea Princess, Majestic Princess, Sun Princess and Sapphire Princess," reported Reuters. 

Trapping Robin Hood traders, news of the suspension has resulted in a 2% slide premarket. 

And it's not just cruise ship companies Robin Hood traders have piled into. We noted users have been buying HTZ, even though the company has sought bankruptcy protection. 

The insanity continued when President/CEO of Bianco Research Jim Bianco recently pointed out Robin Hood users panic bought airlines as Warren Buffet dumped. 

This week Buffett said he sold his airlines.

At Robinhood, retail piled into "JETS"

Held by Robinhood accounts

#5 AAL (American) 500,642 accts
#6 DAL (Delta) 463,007
#16 BA (Boeing) 252,883
#18 UAL (United) 248,559
#39 JBLU (Jet Blue) 142,272
#41 LUV (Southwest) 141,746 pic.twitter.com/XkNBZ5FdtF

— Jim Bianco (@biancoresearch) May 8, 2020

Robinhood millennial users day trading the pandemic and social unrest are buying everything under the sun, hoping that Powell will have their back. 

Rabobank: "Don't Ask What The Final Destination For This Flight Is. You Really Don't Want To Know" Tyler Durden Thu, 06/04/2020 - 09:16

Submitted by Michael Every of Rabobank

Come Fly With Me

Last night before turning in the US was threatening to cease all inbound Chinese airlines if China would not open up to US airlines going the other way. On waking up, China has now allowed some limited US airlines to enter, matching the ones going the other way. “Negotiations will be short,” as they say. Bilateral reciprocity achieved through threats; don’t think that message goes unnoticed in the US. Indeed, just as Hong Kong does not hold its annual 4 June commemoration of 1989’s Tiananmen Square, Secretary of State Pompeo tweeted an image of himself standing next to a wanted Chinese dissident. (Imagine if the Chinese Foreign Minister was tweeting images with Edward Snowden.) Moreover, the Wall Street Journal editorial yesterday by former World Bank head Paul Wolfowitz argued the US should instigate investigations into the foreign assets of senior members of the Chinese Communist Party to punish it for its moves on Hong Kong. Still, let’s ignore all that and allow markets to sing “Come fly with me”.

Indeed, Germany has agreed a major fiscal stimulus program. That Europe’s very own ‘Nikita Khrushchev’ (“Nobody touch anything! I like things exactly the way they are!”) Angela Merkel managed to shepherd through EUR130bn in tax cuts and spending, 30% higher than expected, through is a real achievement. There will even be new money for new things like a 5G roll-out…just as one German telco follows the lead of two in Canada and drops China’s Huawei. More money for European firms then. “Come fly with me, let's fly.”

Meanwhile, in the US we saw the ADP’s projection of US job losses at “only” 2.8m for May vs. 9m expected and 19.5m for April, meaning that things are moving from the we-can’t-even-begin-to-describe-it terrible to just the worse-of-the-Great-Depression-era bad. “Come fly with me, let's fly, let's fly away.”

We have also seen the criminal charges against the police officers in the George Floyd case in the US upgraded and widened to all four involved, which may go some way towards assuaging protestor anger. There also appears --from a great distance-- to be generally a more peaceful if defiant tone to the US protests, although things remain extremely tense. The market naturally has no idea how this whole situation can be resolved in a market-friendly way, but presumes it will be…”because markets”.

Lastly, we get to hear from the ECB today, who are likely to spray more liquidity into a marketplace that is so desperately short of it already.

Ironically, with so much going ‘right’ we still saw a fading of the recent rally in the Asian session. Still, some turbulence is to be expected, right? Just don’t ask what the Final Destination for this particular flight is. You really don’t want to know, trust me.

Come fly with me, come fly, let’s fly away;

If stocks just use some FOMO moves; A new high’s still in play;

Come fly with me, let's fly, let's fly away

Come fly with me, let's float down to the EU

In wurst-land there's a central bank; And it'll toot its flute for you

Come fly with me, let's take off in the blue

Once I get you up there; Where the stocks are rarefied;

We'll just glide; Starry-eyed

Once I get you up there; I'll be holding stocks so near

You may hear; Bloomberg cheer, 'cause this bull run’s forever

Market-wise, it's such a lovely day; Just say the words and we'll beat the birds

Down to Marina Bay; It is perfect for a flying honeymoon, they say

Come fly with me, let's fly, let's fly away

Once I get stocks way up there; Where the P-Es are rarefied; We'll just glide…;

Once I get you up there; Even if earnings are hard to find;

We'll just glide; Starry-eyed

Once liquidity’s up there; I'll be holding stocks so near

You may hear; Bloomberg cheer, 'cause we're all rich together

Market-wise, it's such a lovely day;

You just say the words and we'll beat the birds

Down to Marina Bay; and next SpaceX fly to the moon, they say

Come fly with me, let's fly let's fly; Pack up let's fly away!

Now please take off your headphones and fasten your seat belts. And prepare to brace.

Former MI6 Boss Says COVID-19 Manmade, Escaped From Chinese Lab Tyler Durden Thu, 06/04/2020 - 08:46

The former head of Britain's MI6 spy agency believes COVID-19 is a manmade virus that accidentally escaped from a Chinese laboratory, based on forthcoming research, according to The Telegraph.

Entitled "A Reconstructed Historical Aetiology of the SARS-CoV-2 Spike", the new study, seen by The Telegraph, suggests the virus is "remarkably well-adapted virus for human co-existence" and is likely to be the result of a Wuhan lab experiment to produce "chimeric viruses of high potency".

The paper concludes: "Henceforth, those who would maintain that the Covid-19 pandemic arose from zoonotic transfer need to explain precisely why this more parsimonious account is wrong before asserting that their evidence is persuasive, most especially when, as we also show, there are puzzling errors in their use of evidence." -The Telegraph

Perhaps most notable is that the former MI6 boss in question is Sir Richard Dearlove - who helped Obamagate operative Stefan Halper set up a smear campaign against Michael Flynn, and who made a name for himself nearly two decades ago peddling a bogus report that Saddam Hussein had WMDs - which Tony Blair used to justify the UK's involvement the Iraq war. Clearly Dearlove is trying to ruin our street cred.

Dearlove and Flynn shake hands

Indeed, while it was inevitable that the Western establishment would eventually gravitate towards the Wuhan lab theory Zero Hedge presented in late January, Dearlove's endorsement couldn't come from a more suspicious operative.

So, as the establishment continues to adopt the very obvious conclusion supported by a mountain of evidence that the bat-like coronavirus probably escaped from a Chinese laboratory known for modifying bat coronaviruses to infect humans, we suspect Dearlove and the 'perpetual war' crowd are most interested in using the accusation as a political cudgel to wield against China.

Here's the narrative

While we've told you about the Wuhan Institute of Virology and its infamous coronavirus-expert Shi Zhengli (a.k.a. 'bat woman'), we really triggered the muppets in early February when we reported on an Indian research team that found HIV-like "spike proteins" which allow the SARS-CoV-2 coronavirus to more easily enter human cells, making it extremely infectious. While the report was retracted, further studies from Nankai University found an "HIV-like mutation" in the virus.

Dearlove, through the Telegraph, is talking up a scientific paper set for imminent release which focuses on the HIV-like "spike proteins" - while separate research from one of the co-authors considers them to be "unique fingerprints" that cannot have evolved naturally. Instead, they are "indicative of purposive manipulation."

Entitled "A Reconstructed Historical Aetiology of the SARS-CoV-2 Spike", the new study, seen by The Telegraph, suggests the virus is "remarkably well-adapted virus for human co-existence" and is likely to be the result of a Wuhan lab experiment to produce "chimeric viruses of high potency".

The paper concludes: "Henceforth, those who would maintain that the Covid-19 pandemic arose from zoonotic transfer need to explain precisely why this more parsimonious account is wrong before asserting that their evidence is persuasive, most especially when, as we also show, there are puzzling errors in their use of evidence." -The Telegraph

The peer-reviewed research was a collaboration between Professor Angust Delgleish of St. George's Hospital at the University of London and Norwegian virologist Birger Sorensen. They claim to have identified "inserted sections placed on the SARS-CoV-2 Spike surface" which explain how it binds itself to human cells - and warns that efforts to develop a vaccine are doomed to fail because the virus is misunderstood. Sorensen, CEO of Norwegian pharmaceutical company Immunor AS, is developing his own vaccine.

Nobody would accept the research until they went easy on China...

Interestingly, the paper was widely circulated after being distributed for peer review - including by intelligence officials, however no legitimate publications would carry it until they toned down their language blaming China for the outbreak.

Correspondence seen by The Telegraph shows that, in April, the initial paper was rejected by leading academic journals including Nature and the Journal of Virology, which deemed the research "unsuitable for publication". 

Much of the paper was watered down to remove explicit accusations against China, and the rewritten study was then judged to be of sufficient scientific merit to be accepted for publication in the Quarterly Review of Biophysics Discovery, a journal chaired by leading scientists from Stanford University and the University of Dundee.  -The Telegraph

"This [the first] article was submitted to a… journal, which refused it within a week of receiving it, and in the same period accepted for publication two or three Chinese articles that relate to the virus, within 48 hours," Dearlove told The Telegraph. "So I mean, as this debate about the virus develops, I think all this material is going to be in print and is going to embarrass a number of people, I think. Let's suggest that the Chinese maybe have too much say in their journals, in what appears and what doesn't."

Dearlove suggests that Wuhan scientists may have been conducting genetic experiments on bat coronaviruses when COVID-19 accidentally escaped.

"It's a risky business if you make a mistake," said the 75-year-old spook. "Look at the stories... of the attempts by the leadership to lockdown any debate about the origins of the pandemic and the way that people have been arrested or silenced. I mean, we shouldn't really have any doubt any longer about what we're dealing with."

Sir Richard said he did not believe the Chinese had released the virus deliberately, but accused Beijing of subsequently covering up the scale of its spread.

"Of course, the Chinese must have felt, well, if they've got to suffer a pandemic maybe we shouldn't try too hard to stop, as it were, our competitors suffering the same disadvantages we've got," he said.

"Look, the Chinese understand us extremely well. They have made a study of us over the last decade or longer, particularly through attending our universities. We understand the Chinese very poorly. It's an imbalanced relationship in that respect."

Last month, the US Secretary of State, Mike Pompeo, claimed there was "enormous evidence" that the coronavirus outbreak originated in a Chinese laboratory, but did not provide any proof. However, the US National Intelligence Director's office later said it had determined that Covid-19 "was not manmade or genetically modified". -The Telegraph

"We are aware that these findings could have political significance and raise troubling questions," the authors originally wrote before they were forced to remove language critical of Beijing, who also referred to it in a previous draft as the "Wuhan virus," claiming that they had proven "beyond reasonable doubt that the Covid-19 virus is engineered."

 

ECB's Inflation Projections Crash: Now Sees Just 1.3% In 2022 Tyler Durden Thu, 06/04/2020 - 08:45

Moments after Christine Lagarde announced that in the ECB's latest economic projections, the central bank now expects a devastating drop in European GDP in 2020 (in its base case; it will publish an alternative, even more negative scenario after Lagarde's presser) following by modest rebounds in 2021 and 2022 as follows:

• 2020 GDP: -8.7% (vs +0.8% in March)
• 2021 GDP: +5.2% (vs +1.3% in March)
• 2022 GDP: +3.3% (vs +1.4% in March)

... which for those who can do simple math means that the Eurozone will still not recover all lost output by the end of 2022 even though Lagarde said that "activity is expected to rebound in QE", the ECB also revealed its latest inflation projections and these were a doozy, with 2020 now expected to be a borderline deflation yes, with just +0.3% HICP, followed by a moribund 0.8% before recovering somewhat to 1.3% in 2022.

Of course, everyone knows the forecasting accuracy of the ECB, and as such the latest inflation forecast is merely a carte blanche for the ECB to do even more QE when the ECB's latest massive QE expansion triggers even more deflation, because as we explained earlier this week, aggressive monetary policy is no longer inflationary but instead pushes yields - and inflation expectations - lower.

"Only" 1.87 Million Americans Started To Claim Unemployment Benefits Last Week Tyler Durden Thu, 06/04/2020 - 08:37

Despite yesterday's massive beat in ADP employment data, in the last week 1.877 million more Americans filed for unemployment benefits for the first time (slightly higher than the 1.83mm expected).

Source: Bloomberg

That brings the eleven-week total to 42.644 million, dramatically more than at any period in American history. However, as the chart above shows, the second derivative has turned the corner (even though the 1.877 million rise this last week is still higher than any other week in history outside of the pandemic)

But after continuing claims declined last week amid hope for reopenings, this week saw continuing claims rise once again...

Source: Bloomberg

And as we noted previously, what is most disturbing is that in the last eleven weeks, almost twice as many Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession... (22.13 million gained in a decade, 42.64 million lost in 11 weeks)

Worse still, the final numbers will likely be worsened due to the bailout itself: as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, could contribute to new records being reached in coming weeks as it increases eligibility for jobless claims to self-employed and gig workers, extends the maximum number of weeks that one can receive benefits, and provides an additional $600 per week until July 31. A recent WSJ article noted that this has created incentives for some businesses to temporarily furlough their employees, knowing that they will be covered financially as the economy is shutdown. Meanwhile, those making below $50k will generally be made whole and possibly be better off on unemployment benefits.

Additionally, families receiving food stamps can typically get a maximum benefit of $768, but through the increase in emergency benefits, the average five-person household can get an additional $240 monthly for buying food.

But, hey, there's good news... stocks are near record highs and Treasury Secretary Steven Mnuchin said he anticipates most of the economy will restart by the end of August.

Finally, it is notable, we have lost 380 jobs for every confirmed US death from COVID-19 (107,175).

Was it worth it?

 

Watch Christine Lagarde Explain Why Hundreds Of Billions More In QE Is Inflationary Tyler Durden Thu, 06/04/2020 - 08:37

Earlier this week we showed a stunning chart confirming what so many have known for long: that after a point, aggressive monetary policy, which includes massive QE and other liquidity injections, becomes deflationary, not inflationary.

So now it is up to ECB head Christine Lagarde to explain just why the ECB's latest announcement of a nearly 100% increase in its emergency QE, the PEPP, will be able to stimulate the European economy with benign inflation instead of unleashing even more deflation across the continent.

Watch below.

Schiff: All We've Got In This Market Is The Fed Tyler Durden Thu, 06/04/2020 - 08:25

Via SchiffGold.com,

Sometimes you need to look back at where we come from to understand where you’re going. Peter Schiff does just that in his May 27 podcast. He analyzes the stock market surge of last year and concludes the mainstream might be a little over-optimistic on where we’re heading. The recent surge in stocks isn’t based on economic reality. The economic reality is we’re an insolvent zombie nation. We’re just on a giant Fed-induced sugar high.

The US stock market came out of the Memorial Day weekend with back-to-back big gains, with the Dow closing over 500 points up both Tuesday and Wednesday.

Stocks are rallying on the expectation of a relatively quick economic recovery as states lift coronavirus restrictions. Markets are also already pricing in a coronavirus vaccine. Peter said the market is rallying on “hope and hype.”

As we look at this rally, it’s important to look back at where we came from. Last year was a great year for stocks. Why?

Remember the stock market tanked the fall of 2018. US stocks had the worst December since the Great Depression. Then the Federal Reserve rode to the rescue with the Powell Pause. Back in June 2019, Peter pointed out that when you look at the stock market gains to that point, you had to put them into context.

The only reason that the market has done so well this year is because it got destroyed in the fourth quarter of last year. Remember, we had the worst December since the Great Depression as well.”

The Fed followed up the Powell Pause with three rate cuts in 2019 (August, September and December). It also ended its balance sheet reduction program and launched a new round of quantitative easing, even though it refused to call it that. The market loved these moves by the central bank because they were spun as “preemptive.”

Not only were investors happy about the fact that there was no recession anywhere in sight, which would be great for corporate earnings, but now they knew that Donald Trump would get reelected so they wouldn’t have to worry about higher taxes on corporations, higher income taxes, or cap gains taxes; they could get more deregulation. And so investors were happy about that.”

Another reason for the 2019 rally was the trade deal with China. Trump kept goosing the market by talking about the great trade deal he was going to deliver. Instead, we got the Phase 1 Trade Deal. It was spun as just the opening act. At the time, Peter was saying Phase 1 was all we would get and there wasn’t going to be anything else.

So, you had the trade deal with China, you had the reversal in Fed policy, you had the fact that there was no recession anywhere in sight, and you had Trump being a shoo-in to get reelected – all of that was powering the market in 2019.

Here we are today. Everything has unraveled except the loose monetary policy.

Look at the stock market. We didn’t get anything. The only thing the market got was more easing. And of course, the market didn’t even expect that, because the market didn’t think the economy needed it, because the market was convinced there would be no recession. Well, not only was the market wrong; we have the worst recession ever. … The market was priced for no recession at all, and we didn’t just get a recession, we got the mother of reccessions. So, how much more wrong could the market have been?”

The trade deal is gone. The US and China aren’t negotiating. In fact, tensions with China are rising. The COVID-19 pandemic trumped the Trump trade deal.

On top of all that, the odds of Trump winning the 2020 election have diminished and there is a chance the Democrats could take the Senate.

With all of this – the markets are barely down. The major markets have regained much of the 2019 rally and the NASDAQ has actually added to it. How do you explain this?

The only reason that the market has gone up is because the Fed has been more aggressive than anybody believed. The Fed has printed more money than anybody thought possible. The monetary and fiscal stimulus is so huge that it trumped everything else. And that’s it. That’s the only reason the market is rallying.”

What the central bank and government are doing is not a good thing. The fiscal and monetary stimulus is worse than the recession in the long term.

Whatever happened to the economy because of the virus, what’s going to happen to the economy because of what the government has done to supposedly cure us from the disease, is going to be much worse. … The bottom line is all we’ve got in the market is the Fed. It’s 100% a Fed-induced sugar high.”

The stock market rally is convincing everybody that the worst is over. But people still don’t understand the position that the economy was in before the pandemic.

They think we can go back to where we were. We can’t. Because all we had was a bubble. The bubble has popped and it’s not going to be reflated.”

Peter said we will likely get an economic bounce in the third quarter. The economy will rebound to some degree once things open up. But he said he thinks it will crash again. People need to look at the actual numbers. Look at the debt – both government and corporate. Look at the number of insolvent companies. When you do the math, you find that the US is an insolvent zombie nation.