The Post-Roe World: A Reality Check On The Implications Of The Supreme Court Opinion

Many claims are now being made about the post-Roe world and the sweeping away of such rights as interracial marriage and the use of contraceptives. The "parade of horribles" seems to get longer by the hour.

Constitutional law professor Jonathan Turley took to Twitter to explain what exactly a post-Roe world looks like (and what it doesn't):

"Once again, those claiming that Dobbs will undo ruling on contraception or marriage are ignoring the express language of the ruling and that fact that these other rights are supported by other constitutional rights/arguments"

He went on to note that...

"Five of the six justices in the majority expressly and (repeatedly) stated  that the opinion is not explicable to those rights and is facially distinguishable from their rationale.

Only Thomas raised the broader application..."

"It is rare to see the level of repetition and clarity on this point of application to other areas. The majority stated that such comparisons are baseless since "abortion is fundamentally different, as both Roe and Casey acknowledged."

"The justices specifically chastise those who are pushing this claim as part of an effort "designed to stoke unfounded fear that our decision will imperil those other rights."

"Obviously, future courts can hold different views, but these justices could not be more clear that they view this opinion is inapplicable to these other rights.

Turley wrote a detailed brief on the various 'parade of horribles' when the leaked transcript first dropped:

The New Yorker magazine ran a cover in 1976 showing the view of the country from 9th Avenue. The map by Saul Steinberg showed civilization largely ending at the New Jersey border with a vast wasteland between New York and the Pacific Ocean.

It appears that, for some people, not much has changed with that view of America.

Recently the editors of the New York Times seriously warned that some states likely would outlaw interracial marriage if Roe v. Wade is overturned: “Imagine that every state were free to choose whether to allow Black people and white people to marry. Some states would permit such marriages; others probably wouldn’t.”

It is hard to imagine because it is utterly untrue. Nothing in the Supreme Court’s leaked draft opinion in Dobbs v. Jackson Women’s Health Organization supports such a dire prediction. To the contrary, the draft expressly states that “Nothing in this opinion should be understood to cast doubt on precedents that do not concern abortion.” Indeed, such a motive might come as something of a surprise to Justice Clarence Thomas, given his own interracial marriage, or to Justice Amy Coney Barrett, given her own interracial family.

The purpose of the Times’ commentary seems to be to inflame rather than inform readers. And that is consistent with the position of politicians and pundits who raised alarms, even before the leak, over the need to reignite anger among voters to avoid a disaster in the midterm election. On MSNBC, for example, Rep. Madeleine Dean (D-Pa.) agreed with John Heilemann that Democrats must “scare the crap out of [voters] and get them to come out.”

The Times editorial is part of a “parade of horribles” that is becoming increasingly grotesque in its exaggerated claims. MSNBC’s Andrea Mitchell and former Clinton Attorney General Eric Holder had a preposterous discussion of how if Roe goes down, Brown v. Board of Education could be next. MSNBC’s “The ReidOut” host Joy Reid falsely told her audience that the decision “could apply to almost anything” in not just prohibiting interracial marriage but overturning the Brown decision.

An apocalyptic post-Roe hellscape can be a motivating image, but only to the extent that it is credible. The problem is that the claims are detached from both legal and political realities. Consider three of these claims on interracial marriage, contraception and same-sex marriage:

Interracial marriage

With polls showing that 94 percent of Americans support interracial marriage, the Times editors do not bother to name the states that are largely composed of the remaining 6 percent.

The claim is even less credible legally than it is politically. The leading case on interracial marriage, Loving v. Virginia, was based on different constitutional grounds and would not be negated by this opinion. While the court did discuss the due process right to marriage, it was primarily handed down on equal protection grounds due to the inherent racial classification. Then-Chief Justice Earl Warren wrote: “The clear and central purpose of the Fourteenth Amendment was to eliminate all official state sources of invidious racial discrimination in the States … There can be no doubt that restricting the freedom to marry solely because of racial classifications violates the central meaning of the Equal Protection Clause.”

None of that, however, deters some pundits from keeping alive the fear that interracial marriages soon could be criminalized. As ABC’s late-night host Jimmy Kimmel declared, “They’ll come for same-sex marriage, they’ll come for interracial marriage, they’ll outlaw that peanut butter that comes with the jelly in the same jar.”

It might be a good comedic line — but this and similar claims make no constitutional sense. There is no reason to believe that interracial marriages would be banned in a post-Roe world.

Contraception

The cries of alarm include other areas expressly addressed in the draft opinion as not impacted by its analysis. For example, many critics claim that contraception could soon be outlawed even though the court’s draft specifically dismisses such claims: “Roe’s defenders characterize the abortion right as similar to the rights recognized in past decisions involving matters such as intimate sexual relations, contraception, and marriage, but abortion is fundamentally different, as both Roe and Casey acknowledged.”

It is true that some activists have sought to outlaw IUDs and Plan B prescriptions as “abortion-inducing.” However, putting aside that the draft opinion expressly distinguishes the contraception cases, there is no basis for suggesting that the court would eradicate any semblance of personal privacy and intimacy protections under the Constitution. Such sweeping transformation of the private lives of Americans would involve curtailing a host of other rights, including equal protection. Moreover, there would be considerable practical barriers to such bans in preventing interstate availability of contraceptives.

The polling on this issue is even more lopsided. While the public remains supportive of limits on abortion, some 83 percent support to the availability of contraceptives. Only 6 percent favor making contraception illegal.

Same-sex marriage

In 2015, the court voted 5-4 to strike down bans on same-sex marriage. The court’s specific foundation for this right has continued to be mired in controversy. Even some of us who had long supported same-sex marriage raised concerns at the time over the reliance of Justice Anthony Kennedy in his decision on a “right to dignity.”

Once again, however, the court in this draft opinion distinguishes abortion from other areas as involving claims of an “unborn human life.” Nothing in this opinion endorses a ban on same-sex unions.

However, even before this draft opinion was leaked, there were calls for a better-articulated foundation than the one laid out in Obergefell v. Hodges. As with interracial marriage, many of us have argued for an equal-protection foundation for the right.

Putting this aside, the politics on this issue has changed dramatically in the last decade. Polls show that 70 percent of Americans support same-sex marriage.

Roe is not the basis for all of these rights, and its basis has long been debated. Nevertheless, columnist Maureen Dowd has declared that the “antediluvian draft opinion is the Puritans’ greatest victory since they expelled Roger Williams from the Massachusetts Bay Colony.”

Such claims, however, ignore that the basis for the original decision was questioned even by liberals. Harvard Law Professor Laurence Tribe wrote that “one of the most curious things about Roe is that, behind its own verbal smokescreen, the substantive judgment on which it rests is nowhere to be found.” At least some of the court’s justices clearly hold many of the same doubts over the basis for Roe in the Constitution.

There is ample cause for pro-abortion advocates to organize over the loss of Roe. However, those claims are only undermined by a parade of horribles that leaves both the case law and credibility behind.

A cynic might wonder if Democratic leaders in Congress truly want to preserve the status quo of Roe. After all, their recent proposed codification of Roe went beyond the draft decision, which the leadership knew would lose critical votes in the Senate - but which may provide what they hope will be a powerful rallying cry for the midterm elections.

And finally, no, the justices didn't  commit perjury during their confirmation hearings:

Both Speaker Pelosi and Sen. Collins have suggested that justices like Kavanaugh lied about Roe during their confirmations. That is not true. The justices never pledged to vote to preserve Roe as opposed to generally respecting such precedent. https://t.co/h8ccGTjD0r

— Jonathan Turley (@JonathanTurley) June 24, 2022

Tyler Durden Fri, 06/24/2022 - 17:40

Goldman Raising $2 Billion To Buy Distressed Celsius Assets

Wall Street is officially entering the distressed crypto business.

One week after DeFi shadow bank Celsius halted redemptions in an attempt to prevent an all too TradFi bank run, in the process sparking a historic rout across cryptocurrencies sending bitcoin as low as $18,000 as cubic zirconium hand HODLers turned to FODLers, it now appears that Goldman is aggressively seeking to muscle its way into the crypto industry and according to CoinDesk, Goldman is raising $2 billion from investors to buy up distressed assets from the crypto lender.

The proposed deal would allow Goldman and its investors to buy Celsius assets at significant big discounts in the event of a bankruptcy filing, a bankruptcy which appears almost assured after Celsius hired restructuring advisory firm Alvarez & Marsal, the Wall Street Journal reported Friday afternoon.

According to the report, Goldman Sachs appears to be gauging interest and soliciting commitments from Web3 crypto funds, funds specializing in distressed assets and traditional financial institutions with ample cash on hand; and in light of the aggressive bail out by the like of cash-rich industry participants such as FTX, coupled with the recent stabilization in the price of cryptos, we anticipate Goldman won't have too much difficult

As a reminder, on June 12, Celsius, which had more than $8 billion loaned out to clients and $12 billion in assets under management as of May of this year, abruptly announced it would stop withdrawals from its platform, citing “extreme market conditions.” The disclosure exacerbated those conditions, briefly sending bitcoin’s price below $20,000 (it has since bounced 20% from its cycle lows).

In addition to hiring A&M, Celsius has tapped restructuring attorneys from law firm Akin Gump the Wall Street Journal reported earlier this month. Global investment bank Citigroup has also been enlisted by Celsius to advise on possible solutions, including an assessment of an offer from rival crypto lender Nexo, The Block reported.

According to CoinDesk, both Citigroup and Akin Gump have recommended that Celsius file for bankruptcy, which would make Goldman's potential stalking horse bid a reality. Then again, Goldman's involvement and effective takeover of Celsius may explain the recent surge in the Celsius token.

And yes, those saying that Wall Street's creeping penetration of the crypto space will further dilute its libertarian purity, are probably right although one can make that argument when virtually every VC decided to go all in on eth3. And yes, while Goldman becoming a major player in the DeFi space will anger some, the fact that the world's most powerful bank implicitly backstops the crypto space will be just what the bitcoin and ether dip buyers want.

Tyler Durden Fri, 06/24/2022 - 17:20

Choose Your White Paper Wisely: Bitcoin Versus Credit

Authored by Conor Chepenik via BitcoinMagazine.com,

There exists two monetary paradigms now, and everyone has the opportunity to inform themselves about both - Bitcoin and credit.

Humans are derivatives of other humans. Initially, we learn how to act based on our parents’ behavior and as we get older we develop critical thinking skills and parrot the talking points of others that resonate with us. That is why choosing what you fill your mind with has never been more important. As humanity continues down the information technology revolution we need people focused on building new systems that prioritize love, liberty, freedom and fairness. I worry that our current system is filled with people trying to impose top-down controls or figuring out how to go viral.

But blaming people for wanting to go viral is a lousy argument.

“Show me the incentives and I’ll show you the outcome.”

- Charlie Munger.

Some people with large online followings provide legitimate value, but the majority post half-truths in an effort to make their followers trust them. Not many influencers showcase their struggles because nobody wants to buy a product from someone who is miserable. Influencers need to sell the idea that you can have a life like theirs if you buy their course, product or whatever else they might be peddling. It takes a lot of curating to fill a social media feed with people who provide real value. If you don’t put in this time up front, your feed will be filled with products that are like altcoins: cheap knock-offs. Munger might be wrong about Bitcoin, but he was spot-on about incentives. Social media companies want to keep people scrolling on their platforms so they can monetize our attention. Thus, when you ask kids what they want to be when they grow up, the majority say a social media celebrity rather than a scientist, firefighter, astronaut, engineer or any other profession that benefits society.

So when did everything become so perverse that children are more eager to show off their life online rather than do a job that benefits society? It is impossible to pin this to an exact moment, but I’d argue it all started when the Bank of England decided to monopolize credit to fund their war efforts. This type of top-down control was the first form of quantitative easing and the inception of the credit-based fiat system, or “The Original Sin” as Saifedean Ammous calls it. Credit is never as good as gold, but when a bank acts like its credit is, the result is devastating. The incentives that came out of this have made the fiat system a truly sinister one. This quote from Ammous on The Lex Fridman Podcast is a perfect example of what happens when the entity with the biggest stick starts asking for value without returning the favor:

“I call it the fiat white paper — you know in Bitcoin we have the white paper — the fiat white paper was that the Bank of England announced to all of its banks and post offices: from now on, you should not make payment in gold, and you should take payment in gold, and you should encourage all of your customers to turn in all of their gold and give them paper instead.”

Unlike gold, credit doesn’t require proof of work. As Saifedean so elegantly points out in “The Fiat Standard,” one of the first bond sales for WWI issued by the Bank of England raised less than one-third of the bonds being subscribed. Rather than stopping the war the Bank of England gave their two top officials a line of credit and had them buy the remaining two-thirds of the bonds. Rather than provide actual value, the Bank used its monopoly on money to fund itself and continue fighting a war that its citizens clearly did not have an appetite for. This type of top-down control has had lasting impacts and has resulted in a lot of parasites gaining wealth without providing value.

As most people reading this publication know, another white paper was released in 2008 that cut out parasitic middlemen. A white paper that described a system not based on credit, but instead required providing value in the form of energy in order to obtain this new currency. This system required no third parties and allowed people to trade in a peer-to-peer fashion without a middleman butting in to take a cut. The incentives of this network called Bitcoin are so beautifully aligned that the longer the network exists, the more secure it becomes. It’s a truly incredible feat of engineering that has the power to completely undermine the current system of parasites and credit expansion. The fiat system has given rise to pointless wars and made saving and investing nearly inseparable. Satoshi Nakamoto gave the world inflation-proof money with some open-source software.

Under a Bitcoin standard, it would be very difficult to make money without providing real value. If you take away the incentives of aligning yourself next to powerful government officials, the world would be a better place. There will be no more backroom handshakes because no matter how much power or wealth one acquires one cannot change the rules of the Bitcoin network. Many will have to make a choice in the coming years about how they want to store their value. One system mines new currency via credit expansion while the other requires hardware and energy to do so. One system lets parasites thrive while the other just has rules that cannot be changed.

Even those who are lucky enough to reside in a wealthy nation still see their purchasing power destroyed in slow motion via inflation. If bitcoin is not adopted globally, humanity could end up in a never-ending cycle of war since the only foreseeable way to keep the fiat system propped up is through constant growth. Constant growth is not always attainable and fiscal stimulus is like crack: The first hit is fantastic, but then you need more to experience the same result. When everything starts to unwind and the system looks unstable the logical conclusion under a fiat standard seems to be to start a war. Fiat corrupts people over time. It’s not a gradual corruption, but it’s a slow and steady one, like the decline of the dollar. Fiat is so corrupting that House Majority Leader, Steny Hoyer, declared the United States is at war with Russia. There was no vote of Congress to declare war. It seems that when you have been in the fiat system for so long, you forget that other people expect you to play by the rules. I found this to be a perfect example of what a corrupt system does to those in it.

Bitcoin does the opposite to people. Recently, I found out my girlfriend was pregnant. The first thought that popped into my head upon hearing this was “Thank god for Bitcoin.” I know this sounds insane, but if there was no way to opt out of the rotting fiat system I would be horrified to bring life into this world. The second thought that popped into my head was “Wow I’m really going to be a Dad, I can’t wait to give my child a good life and raise them to be a good person.” Bitcoin taught me that low-time-preference activities are what lead to a fulfilling life. As far as I can tell there is nothing more low time preference than having children. There is a ton of uncertainty in the world and the only thing that seems to be guaranteed is Bitcoin adding blocks roughly every 10 minutes. Had it not been for bitcoin, I would not have felt comfortable in the decision to become a father. I’m not a math expert but I can tell that 30 trillion dollars of debt is so much money that even servicing the interest payment will be a massive challenge. Paying off the principal is starting to seem like a pipe dream as governments continue to run deficits and spend money they don’t have. When you really dig into the math it seems apparent why the House Majority leader is calling for war. They want a way to refinance their debt! Screw public opinion or the thousands of problems the United States has in its own country, politicians want war with Russia. War is not the answer to the United States' problems, and it is more important than ever to adopt a system that doesn’t always lead back to war.

The incentives to go to war under the fiat system are powerful right now. Rand Paul was ostracized for delaying a $40 billion package, money we don’t currently have without borrowing, to Ukraine. According to NBC News, “Paul, a libertarian who often opposes U.S. intervention abroad, said he wanted language inserted into the bill, without a vote, that would have an inspector general scrutinize the new spending.” The reader can decide why the U.S. government would be so against letting an inspector general monitor where the money goes. My guess is because it is a lot harder to launder money when someone is overseeing how it gets spent. The more our government pushes for war instead of diplomacy, the more it becomes clear the game is rigged. You don’t usually see Republicans and Democrats on the same page, but there was a big bipartisan push to give Ukraine $40 billion, and the bill got pushed through despite Paul’s effort to get some oversight into how the funds will be spent. Imagine playing a football game and right after your team scored the winning touchdown the referee decided to change the rules of the game, which results in your team losing. Now imagine doing the right thing your whole life — saving, paying taxes, helping out the local community — and right before retirement, the government prints trillions of dollars and changes the game. At first, this might seem great as your assets skyrocket. When reality sets in shortly thereafter and inflation decimates people’s purchasing power, things get ugly. I’ve personally witnessed fiat make people bitter, resentful and perilous. I’ve also witnessed myself and others become more patient, loving and happy as a result of bitcoin. Bitcoin is what made me comfortable in becoming a father, effectively saving the life of my unborn child — and I imagine it can save the lives of many others.

There is no pleasure in watching those who do the right things get upset because the system that promised them a better life ended up decimating their purchasing power. It’s not easy to tie the second- and third-order consequences of printing money back to quantitative easing but it is clear that as money is devalued everyone suffers in the long run.

Image source: FourWeekMBA

On the other hand, the borrower has to work his whole life to get enough money to back pay the loan plus interest. It makes no sense why the bank gets to lend money without an opportunity cost but the borrower has to face many opportunity costs in order to acquire the same type of money. The fiat white paper will have you leveraged up to the teeth trying to afford basic necessities like a home or a car. Keynesian economics has led us to the point that you can even finance a 15$ pizza now. It is a tragedy that inflation has decimated people’s purchasing power, but financing food is not the way to solve the problem. Luckily, there is another white paper that doesn’t lead to everything becoming financialized.

The Bitcoin white paper will help you sleep at night knowing new coins will only be given to those who followed the rules. One system can create an infinite amount of money while the other is capped at 21 million. Pick your white paper wisely: your life’s value depends on it. For those not living in a Western society, I imagine I don’t have to explain the unjustness of our current system. The U.S has been exporting our inflation globally for quite some time now and we are reaching a point where it has gotten so bad even people in the United States are starting to feel the inflation. Ignorance might be bliss in some situations but once you see how broken the fiat system has become it is clear that we need a new one. It is never too late to opt out. The masses hold the power; most just don’t realize it.

Ultimately, I have no problem with lending money. The problem is lending money when you don't have to sacrifice anything to get that money in the first place. It cannot be understated how the ability to issue money at will, without an opportunity cost for doing so, has caused tons of parasites to thrive and massive amounts of capital to be wasted. All people, organizations and governments are prone to human error. The free market does a good job correcting these errors, but when central banks step in and impose top-down controls that prevent the free market from doing its job, these human errors become worse. Under a Bitcoin standard, the world will be a better place because people will have to provide actual value in order to be lent money. Getting a line of credit from someone who has no opportunity cost makes the lender and borrower less concerned with the outcome. Under a Bitcoin standard, both the lender and borrower would have much more to lose and a larger incentive to be productive with the money rather than parasitic. Any decent person is more concerned about paying a loan to a friend or family member than a random bank that is lending out money that is not technically their own money. There has been a lot of manipulation and financial jargon to keep people ignorant of the problems within the fiat system.

Luckily, top-down controls only work when you can incentivize people to enforce your will. History has shown us that wars stop when the money either runs out or becomes worthless. Bitcoin is built from the bottom up because the incentives of the network get people to participate via their own free will. No one knows exactly how the future plays out, but if you follow the incentives it seems the outcome will be in favor of Bitcoin.

Tyler Durden Fri, 06/24/2022 - 17:00

How Far Will This Dead-Cat Rally Bounce: Goldman, JPMorgan Traders Duke It Out

While regular readers are well aware that among Goldman's flow traders (who actually are damn good at what they do unlike the bank's equity sellside research desk which is quite often atrocious and just follow the penguin echo-chamber parade) the likes of Scott Rubner (whose reports we cover in our professional subscriber section) are staunch permabulls and always see the light at the end of the tunnel, one name that always takes the contrarian, a growing bearish faction has been headed by Matt Fleury who has recently emerged as one of the biggest Goldman trading desk bears (see from March "Goldman Trader: "The Set Up For An Equity Market Crash Is As High As I Have Seen It" where Fleury was spot on). Which is why we found it notable that earlier this week, just as stocks were tumbling, that none other than Fleury turned strongly (if briefly, or rather 'tactically') bullish, saying "equities are very oversold here. I think the scope for a relief rally from here very good into early July."

Goldman's biggest desk bear, Matthew Fleury: "Locally, equities are very oversold here. I think the scope for a relief rally from here very good into early July."

— zerohedge (@zerohedge) June 22, 2022

Below we excerpt some of the key charts he highlighted in his note (available to pro subscribers):

1. Percent of SPX names 52 week highs vs lows:

2. The number of SPX names with a 9d RSI sub 30 is 345x.

This is where that will look like if that holds to 14d RSI middle of next week:

3. We are pricing in a large earnings downgrade now:

4. Percent of names in SPX500 trading above 50dma:

5. Percent of names at 52week lows:

6. The bid for FAAMG calls has evaporated

... and so forth. The full note is available to pro subscribers in the usual place.

We bring this up because Fleury was obviously right, and the tactical rally, dead cat bounce, whatever you want to call it is here, with spoos surging 200 points in just the past few days.

Of course, Fleury did not flip from bearish to  bullish - he merely timed, correctly, the latest dead cat bounce into what still remains a bear market, and will be a bear market until the Fed pivots (some time in September), and relents dovishly at which point all asset classes will explode higher.

But what about the duration of the current bear-market rally: how long can this dead cat continue to bounce?

For the answer we go to JPM index trader Jason Hunter (whose note is also available to professional subs) who writes this morning that the S&P 500 is trying to build upon the initial rebound from the extreme oversold conditions realized last week, and "needs to clear 3810-3900 resistance to confirm a short-term trend reversal."

Well, with spoos now trading at 3,890, it appears that the reversal is now here, even if heading into today's data the signals skewed bullish as Hunter adds, echoing Fleury: "the deep oversold conditions and bullish momentum divergence signals already in place imply an increased probability for additional upside into July."

How far does the JPM strategist see the move extending? According to Hunter, "the potential bullish momentum signal on the weekly time frame that can trigger this Friday would bolster that upside bias for the early weeks of summer. We believe the move will extend toward key resistance levels near 4100 over that period... A move through that area is required to bullishly shift the medium-term trend dynamics, something we think would coincide with shifting inflation and policy rate expectations."

But before everyone rushes to mortgage their newborn and pledge their left kidney to buy spoos, a less euphoric take comes from our friends at SpotGamma, who point out in their morning note that "rallies into June OPEX should be categorized as “short covering” and subject to failure." That said, the Gamma geeks add that they look for a “positive drift” into 6/30 expiration, with SPX 4000 their major upside level into 6/30. On the other side, the 3600 JPM 6/30 short put strike (3620) is their major downside support into June 30th (the June 30 expiry removes large put positions and may expose the market to further downside into July).

Some more observations from SG:

While volume & OI continues to build at 3800 in SPX, its 380 in SPY thats gained some decent size. If you check the data table below you will see that 4000 is the largest gamma level for SPX (aka “Absolute Gamma Strike”) while its 380 in SPY. This is looking like its setting up a pretty clean range of 3800-4000 into next Thursday (June quarterly OPEX).

We noted last week that the loss of June OPEX would bring a reduction in negative gamma due to puts expiring. This equates to a reduction in volatility (as dealers have smaller hedges), which generally produces upward drift in markets. You can see the lower vol thats been produced below. The bottom histogram shows us the distribution of S&P prices for the last 5 days (red) vs last 30 days (light blue).

Spotgamma also ends on a bullish tone, however, and notes that if equity vol is going to start coming in here (VIX now <28) that should be a key driver of higher equity prices into the June 30 expiration.

In short, the onus is now on the bears to push risk lower.

Tyler Durden Fri, 06/24/2022 - 16:45

Cost Of Insulin Driving 80% Of Diabetic Americans Into Debt: Survey

A new survey finds that the cost of insulin is driving many diabetic Americans to go into debt, forcing them to ration medication as they struggle to pay for other living expenses.

The survey, conducted by CharityRX, found that 79% of respondents said insulin costs had created financial difficulty for them personally, or for those in their care - both with and without health insurance, The Hill reports. 80% of those surveyed said they had to take on credit card debt to afford the drug.

What's more, on average, diabetic Americans take on $9,000 of debt to cover these costs.

That cost carries serious implications, as 83 percent of respondents indicated they’ve feared not being able to pay for living expenses — such as clothing, food and their rent or mortgage — due to high insulin costs. 

The pressure to afford insulin even drove 63 percent of people to consider selling prized personal possessions and 32 percent to consider selling prescriptions or illicit drugs to get the money needed to buy insulin.   

More than half of respondents, 62 percent, skipped and/or adjusted their insulin dosage to cut down on costs. -The Hill

"While the pandemic has made this situation worse, insulin rationing is a crisis that has been decades in the making. The price of insulin nearly tripled between 2002 and 2013, and the trend upward has made affording this life-saving medication even more challenging for millions of Americans living with diabetes," the American Diabetes Association said in a statement.

According to CharityRX, the new legislation would carry a potential cost savings of 91% by capping insulin costs at $35, or 25% of a health insurance plan's negotiated price - whichever is less.

The survey comes as a bipartisan group of Senators are working on legislation that would cap the cost of insulin, after President Biden reversed a Trump-era measure designed to lower out-of-pocket insulin costs for seniors on Medicare.

More via CharityRX;

The exorbitant pricing of insulin in the U.S. has forced many diabetics and their caregivers to make difficult decisions and compromises that put their health and/or livelihood at risk. Of the 4 in 5 who’ve struggled financially due to insulin pricing:

• 83% say they’ve feared not being able to pay for living expenses due to high insulin costs, cutting expenses such as clothing (55%), food costs (50%) and for some, even rent/mortgage (29%)
• 63% have felt pressure to sell prized, personal possessions (63%), put themselves in risky situations (50%) or to sell prescriptions or illicit drugs (32%) in order to obtain the money needed for insulin
• In an effort to lower costs, 62% have skipped and/or adjusted the dosage of insulin injections for themselves, or as a caregiver for someone else to cut down on costs
• Of those who’ve rationed their insulin, diabetics have experienced the following negative impacts on their day to day life:
  • Inability to do everyday activities (54%)
  • Inability to work (44%)
  • Admission to the hospital for one or more days (38%)
  • Inability to attend school (37%)
• Further, 38% have been admitted to the hospital for more than one day and 33% have become sick with an additional health issue as a result of insulin rationing

Tyler Durden Fri, 06/24/2022 - 16:40

Summer Preview: Rolling Blackouts, Higher Gas Prices, Natural Gas Rationing In Europe And A Historic Diesel Crisis

Authored by Michael Snyder via The Economic Collapse blog,

Almost everyone has heard about the rapidly growing global energy crisis by now, but most people assume that this crisis will eventually go away because they think that authorities have everything under control.  Unfortunately, that is not true at all.  This crisis has taken our leaders by surprise, and now many of them have shifted into panic mode because they realize that there will be no easy fixes.  Decades of neglect and foolish decisions have brought us to the precipice of a nightmare, and many of us are going to be absolutely astonished by some of the things that happen in the months ahead.

Here in the United States, we have neglected to properly invest in our power grids for a very long time, and now they are at a breaking point.

We are being warned that there could be widespread “rolling blackouts” this summer, and the situation is particularly dire in Midwest states such as Michigan…

The Lansing Board of Water and Light, or BWL, warned in a press release on Tuesday that the company is preparing for potential ‘rolling black-outs’ this summer.

The Mid-Continent Independent System Operator, or MISO, is Michigan’s power grid regulator. MISO will have to ‘load-shed’ if they see expected energy shortages during peak usage times due to hot weather. Load-shedding is purposefully shutting down electric power in some areas of a power-distribution system to prevent the entire system from failing when it is strained by high demand.

Meanwhile, the price of gasoline is likely to continue to go up.

For quite some time, the amount of oil that is being produced around the world each day has been lower than the amount of oil that is being used around the world each day, and as a result supplies have been getting tighter and tighter…

Fast forward to today, and where are we? Intrinsic demand is thought to be around 103 million barrels a day now, owing to 1% per year global population growth, plus increased wealth–and demand should keep growing at roughly that pace. But supplies aren’t nearly keeping up. We’re currently producing around 100.6 million barrels (reflecting the loss of about a million barrels from Russia), and the resulting spike in prices is already constraining demand to around 101 million barrels, according to Majcher.

When demand is greater than supply, either prices go up or eventually you have shortages.

And sometimes both things happen.

Bank of America is telling us that oil inventories have reached a “dangerously low point”, and until that changes prices are likely to continue to rise…

The result is a market that for the second straight year is under-supplied, and drawing down inventories as a result–on top of the drawdown in strategic reserves approved by political leaders to try and lower prices. Bank of America is already warning that global oil inventories have fallen to a “dangerously low point,” with certain gasoline and diesel supplies in particular at “precarious levels” as we head into peak U.S. driving season. U.S. oil inventories are already 14% below their five-year average, BofA notes, while distillates (like diesel) are 22% below.

I wish that I could tell you that there is hope that things will turn around eventually.

But at this point the CEO of Exxon is actually warning us to expect “up to five years of turbulent oil markets”…

Consumers must be prepared to endure up to five years of turbulent oil markets, the head of ExxonMobil said Tuesday, citing under-investment and the coronavirus pandemic.

Energy markets have been roiled by the Ukraine war as Russia has reduced some exports and faced sanctions while Europe has announced plans to wean itself off dependency on Russian fossil fuels in coming years.

If you think that things are bad now, just wait until you see what happens after a major war erupts in the Middle East.

Then things will really start getting crazy.

Speaking of war, over in Europe a looming natural gas shortage due to the war in Ukraine is likely to cause immense economic problems in the months ahead.

Now that Russia has significantly reduced the flow of natural gas to Germany, it looks like the Germans will soon be forced to ration it, and the Wall Street Journal is telling us that authorities expect “a gas shortage by December”…

The German government moved closer to rationing natural gas on Thursday after Russia cut deliveries to the country last week in an escalation of the economic war triggered by Moscow’s invasion of Ukraine.

Berlin triggered the second of its three-step plan to deal with gas shortages after the Kremlin-controlled energy giant Gazprom, the country’s biggest gas exporter, throttled delivery via the Nordstream pipeline by around 60% last week. Germany’s gas reserves are at 58% capacity, and the government now expects a gas shortage by December if supplies don’t pick up, Economy Minister Robert Habeck said.

It would be difficult for me to overstate the seriousness of this problem.  Energy prices have already gone completely nuts in Europe, and one German official is actually comparing this crisis to the collapse of Lehman Brothers…

With energy suppliers piling up losses by being forced to cover volumes at high prices, there’s a danger of a spillover effect for local utilities and their customers, including consumers and businesses, Economy Minister Robert Habeck said Thursday after raising the country’s gas risk level to the second-highest “alarm” phase.

“If this minus gets so big that they can’t carry it anymore, the whole market is in danger of collapsing at some point,” Habeck said at a news conference in Berlin, “so a Lehman effect in the energy system.”

Needless to say, it isn’t just Germany that is being affected…

The crisis has spilled far beyond Germany, with 12 European Union member states affected and 10 issuing an early warning under gas security regulation, Frans Timmermans, the European Union’s climate chief, said in a speech to the European Parliament.

“The risk of a full gas disruption is now more real than ever before,” he said. “All this is part of Russia’s strategy to undermine our unity.”

If the war in Ukraine could be brought to a peaceful resolution, that would greatly help matters.

But we all know that isn’t going to happen any time soon.

On top of everything else, global supplies of diesel fuel get squeezed a little bit more with each passing day.  The price of diesel fuel is 75 percent higher than it was a year ago, and here in the United States we have been warned that the Northeast “is quietly running out of diesel”…

The upward pressure on diesel and jet fuel prices in particular is getting attention in the White House, Amrita Sen of Energy Aspects told Squawk Box yesterday. Diesel prices are up a whopping 75% from a year ago, and the spread between diesel and gasoline prices has also widened considerably. The high cost is creating huge strains on truckers and the supply chain; the Northeast “is quietly running out of diesel,” FreightWaves warned two weeks ago.

Even though there could be a historic supply crunch, we won’t completely run out of diesel fuel.

However, as I detailed in an article that has gone extremely viral, we are potentially facing really severe shortages of both diesel exhaust fluid and diesel engine oil if solutions cannot be found.

Urea is required to produce diesel exhaust fluid, and the U.S. doesn’t produce enough.  We are normally one of the largest importers of urea in the entire world, and Russia and China are two of the largest exporters.  Our leaders have decided that we don’t want urea from Russia, and China has restricted exports.

So that puts us in a really tough position.  If you have a diesel vehicle, I would highly recommend stocking up on diesel exhaust fluid while you still can.

As for diesel engine oil, there are several key additives that are in short supply right now due to major problems at several manufacturers.  An article that Mike Adams just posted goes into the details.  This is a very serious situation that is not going to be resolved any time in the near future.

The bottom line is that supplies of diesel fuel are going to get very tight, and there may be times when diesel exhaust fluid and diesel engine oil are not available at all.

All three are required in order for diesel vehicles to operate, and as I explained yesterday, the U.S. economy runs on diesel.

If we were suddenly unable to use our diesel vehicles, all of our supply chains would collapse and we would no longer have a functioning economy.

So hopefully our leaders are working really hard to find some solutions.

Because it looks like this summer could be quite difficult, and the outlook for the months beyond is even less promising.

*  *  *

It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.

Tyler Durden Fri, 06/24/2022 - 16:20

Stocks Emerge From Bear Market As End Of Fed Rate Hikes Priced In With Recession Looming

There was an interesting headline earlier this afternoon in Bloomberg, which tried to explain today's furious rally which pushed e-minis right back out of bear market territory:

It's a good headline, unfortunately it's dead wrong, because while stocks did in fact snap a three week losing streak and also averted being down for a record 11 out of 12 weeks...

... with every single sector closing solidly green...

... the reason for said snapping was just the opposite of optimism because with a recession now assured...

... what prompted today's furious short squeeze, because that's what it was - a short squeeze of the most shorted names...

... was the market's realization - helped by our explanation yesterday - that a recession means the Fed will end its hiking cycle much sooner than previously expected, most likely some time around the mid-term election...

... with markets now pricing in just a 71% chance of a 75bps rate hike in July, and less than a 100% chance of 125bps in rate hikes through the September meeting (including the assumes 75bps next month)....

... while both Dec and Feb rate hike odds plunged...

... in a clear reversal in market sentiment, which now expects a major dovish U-turn by the Fed in just a few months.

The declining odds that the Fed will keep hiking until it sees "whites in the eyes" meant that the recent capitulation, which just saw the biggest equity outflows in 9 weeks, is rapidly being reversed...

... and together with this week's powerful short squeeze, we have gotten a sharp, violent move higher which sent the spoos to 3,900, the highest in more than 2 weeks...

...  just before the S&P slumped into a bear market. Which makes sense since today's 100 point emini ramp has pushed the market right out of bear market territory.

And while the market's realization that a recession is now the baseline certainly helped, it was the unexpected news from the final UMIch inflation expectation print for the next 5-10 years, which was revised down from 3.3% to 3.1%, meaning that the "unanchored" inflation expectations that Powell saw and was freaked out by (in his own words), never actually happened and was revised away before it even hit the history books!

Today's meltup was enough to almost undo this week's rout in oil, which after plunging 7.5% last week, and slumping earlier this week, staged a dramatic bounce on Friday, rising as much as 3%, and just barely closing red on the week. Needless to say, oil - and energy stocks - remain the best performing asset and sector of 2022, and the fact that this space is bouncing hard suggests that traders are already starting to price in the coming Fed easing which will slingshot commodities even higher.

There were less fireworks in the bond space today, where the 2Y yield drifted modestly higher, closing just over 3.04%, in a much more subdued session than yesterday's epic plunge in 2Y yields which saw a nearly 20bps move lower as the end of the Fed's rate hikes at the end of 2022 and the coming recession got priced in.

And yes, following the CPI shock yields have drifted sharply lower and are now just fractionally higher compared to where they were before the "blackout period" CPI prompted Powell to panic.

In retrospect, this will be just the latest Fed panic that turns out to be a dud.

Finally, after many left the space for dead following last Saturday's daisy-chained margin calls and liquidations, cryptos have moved sharply higher, with bitcoin +20% and eth +40% from last Saturday's lows... 

... which reminds us of what we said then, that "once the dust settles, Powell capitulates and the liquidity firehose goes into overdrive again, a few years from today everyone will again be asking why they did not take advantage of today's buying opportunity..."

Tyler Durden Fri, 06/24/2022 - 16:00

Biden Snubbed Oil Firms And Met With Offshore Wind Partnership

By Charles Kennedy of Oilprice.com

U.S. President Joe Biden met on Thursday with governors, labor leaders, and business leaders to discuss the implementation of more offshore wind capacity, snubbing oil company executives who were meeting with U.S. Energy Secretary Jennifer Granholm to discuss the soaring gasoline prices in America.

The White House is desperate to lower gasoline prices, which are the most important election issue for many Americans ahead of the mid-term elections in November. Ideas juggled by the Biden Administration range from invoking the Defense Production Act to boost refining capacity and output, to restrictions on oil exports. President Joe Biden also stepped up rhetoric toward oil companies, telling them in a letter sent last week to increase fuel production and noting that “refinery profit margins well above normal being passed directly onto American families are not acceptable.” 

While oil refiners were summoned to meet with Secretary Granholm, President Biden was meeting with officials and executives to discuss an offshore wind partnership. During the meeting, President Biden said the Administration had set a bold target of 30 gigawatts (GW) of offshore wind capacity by 2030.

“And this is a real boost for energy security. It really changes the creation of — and jobs, and it cuts consumer costs,” President Biden said.  

Meanwhile, Energy Secretary Granholm met with U.S. refiners, reminding them that “oil companies must deliver solutions to ensure secure, affordable supply.”

“The Secretary made clear that the Administration believes it is imperative that companies bring supply online to get more gas to the pump at lower prices. She reiterated that the President is prepared to act quickly and decisively, using the tools available to him as appropriate, on sensible recommendations,” the Department of Energy said in the readout of the meeting.

Secretary Granholm also “reiterated the President’s call for them to do more to ensure that their companies are passing savings on to their customers.”

Tyler Durden Fri, 06/24/2022 - 15:45

Miami Housing Rents Jump A Stunning 41% In April 

Nationally, single-family rent growth surged 14% year-over-year in April, according to real estate research firm CoreLogic. The supply-demand mismatch continues to drive rents higher, as many parts of the country print double-digit jumps in monthly rent prices. 

Among large cities, Miami recorded a stunning 41% increase in single-family rent growth for April. It was the most significant increase in April rent across all major metro areas CoreLogic tracks. The second was Orlando, with a 25.8% increase. 

It's crucial to note Miami and Orlando are both located in Florida and had the largest rental price gains out of all US cities. The reason is supply shortages due to a large influx of people piling into the Sunshine State from high taxed, violent metro areas in the Northeast. We pointed out last month that New Yorkers are still panic exiting the city for Florida. 

WSJ recently noted Miami locals are irritated by New Yorkers flooding their most desirable neighborhoods, like Brickell, Edgewater, and Downtown, and driving up rents. 

Molly Boesel, the principal economist at CoreLogic, was quoted by Bloomberg as saying, "single-family rent growth will continue to increase at a rapid pace throughout 2022." 

Rents increasing at the fastest pace in decades makes housing costlier than ever for Americans. Compound that with the highest consumer prices in four decades and today's souring economic environment has devastated the working poor. A recent Gallup poll found low wages and housing costs were on the top of the minds of Americans. 

Finally, those living paycheck to paycheck should avoid large metro areas with skyrocketing living costs to survive the inflationary storm. 

Tyler Durden Fri, 06/24/2022 - 15:25

Dallas Fed: Surging Costs Hamper US Shale Growth

Authored by Tsvetana Paraskova via OilPrice.com,

The business activity index in the energy firms operating in Texas, northern Louisiana, and southern New Mexico jumped in the second quarter to the highest level in six years, but costs continue to escalate and supply chain delays are worsening, the Dallas Fed Energy Survey showed on Thursday.  

Activity in the oil and gas sector in the most prolific U.S. shale basin, the Permian, expanded at a robust pace in the second quarter, with the business activity index—the survey’s broadest measure of conditions facing energy firms—up from 56.0 in the first quarter to 57.7, registering its highest reading in the survey’s six-year history, the Dallas Fed said.

For a sixth quarter in a row, costs have risen this quarter, according to the survey of oil and gas executives at 85 exploration and production firms and 52 oilfield services firms.

The index for input costs at the oilfield services companies jumped to a record high, and none of those firms responding in the survey reported lower costs. 

Delivery times for materials and equipment for the industry are rising, with many executives reporting significant delays.

Nearly half of the executives - 47 percent - said supply-chain issues have a “significantly negative” impact on their firms, and another 47 percent see slightly negative impact. Just 6 percent of executives said their firms are experiencing no supply-chain issues or impacts.

Moreover, most executives – or 66 percent – expect it will take more than a year to resolve supply-chain issues.

In comments to the survey, an E&P executive said:

“We are experiencing significant delays in obtaining materials and services, and costs are substantially increasing. We will shortly be ceasing investment in any new operations owing to the combination of rising costs, supply-chain slowness and our view that a recession is coming that will drop oil and natural gas prices significantly.”

“Huge service cost increases, regulatory uncertainty and mixed messages from Washington are keeping me on the sidelines,” another executive noted.

One executive at an oilfield service firm commented: “The supply chain seems stretched to the max in the Permian Basin. There really is not much ability to increase drilling activity.”

Tyler Durden Fri, 06/24/2022 - 15:05

Oracle's Larry Ellison Revealed As Buyer Of $173 Million Mansion, Setting Florida Record

Last week, billionaire internet entrepreneur (Netscape co-founder) Jim Clark broke the news to the WSJ that he sold his oceanfront estate near Palm Beach, Florida, for $173mln. At the time, Clark wouldn't reveal who the mystery buyer was. 

Bloomberg reports the buyer of the most expensive property ever sold in Florida is no other than billionaire Oracle Corp. co-founder Larry Ellison. 

Ellison's new estate includes a 62,000-square feet Mediterranean-style mansion and several other buildings on the property with more than 30 bedrooms. It was noted by Bloomberg 

The real estate transaction was off-market. Clark bought the estate in early 2021 for $94 million. Despite soaring interest rates and a souring economic backdrop in the US, Ellison still paid an 84% premium from when Clark purchased the estate. 

Last year, Ellison spent $80 billion on a North Palm Beach mansion that he intends to demolish. He owns homes in the San Francisco Bay Area and Malibu, as well as 98% of a Hawaiian island he purchased for $300 million in 2012. 

Billionaires have fled to South Florida since the virus pandemic, buying up as much land and mansions as possible to escape liberal-controlled metro areas quickly sliding into a violent mess. Also, Florida is pro-business and tax-friendly, unlike blue states. 

This week, billionaire Ken Griffin announced Citadel's headquarters are moving to Miami. Currently based in Chicago, Griffin said in May his "patience is wearing thin" as the metro descends into a summer of hell under the failed leadership of liberal Mayor Lightfoot. 

Other firms like Goldman Sachs have moved offices to South Florida as New York City is another cesspool. Some have referenced South Florida as "Wall Street South."  

Tyler Durden Fri, 06/24/2022 - 14:45

A "Great Purge" Is Pushing Small Truckers Out Of Business At An Unprecedented Rate

By Rachel Premack of FreightWaves

Chris Tucker needed to move some hot tubs. It seemed like a good gig for his network of small truckers.

The Winchester, Kentucky-based owner of Full Coverage Freight, a truck brokerage, recently advertised to truck drivers on a load board that it had a shipment of hot tubs headed from Seattle to a small town in the middle of Wisconsin. The rate came out to under $2 a mile, which Tucker thought was low. He expected drivers to haggle with his company to get paid at least $2.50 a mile, or about $1,000 more for the gig.

Instead, his office was slammed with dozens of phone calls and hundreds of texts clamoring for the hot tub job — exactly at the rate advertised.

It’s not an ideal situation for America’s 2 million truck drivers. Too many truck drivers for the amount of work available means lower and lower pay. During the last major trucking recession in 2019, hundreds of trucking companies declared bankruptcy, unable to cover the costs of running a trucking company with deflating rates.

The last few months have made Tucker believe trucking is about to enter the “Great Purge,” or another spate of major bankruptcies. He predicted in a June 10 Facebook post on the Rate Per Miles Masters group, which hosts about 33,000 trucking professionals, that the many truck drivers who flooded the industry amid unprecedented truck volumes would have to shut down their operations. Ill-prepared brokers would also face the same doom, he wrote. 

“I don’t think there’s enough freight out there to justify their existence anymore,” Tucker told FreightWaves this week. 

The Great Purge appears to be underway already. In May, net motor carrier revocations hit a record high, according to an analysis of federal data by FTR Transportation Intelligence. January and March of this year were the previous records. 

The Federal Motor Carrier Safety Administration reported in May that a record number of trucking companies saw their authorities revoked. This data lags by several months

As the above FTR graph shows, revocations of trucking authorities reached a record high in May, hitting nearly 9,300. The yellow bar represents some 4,000 revocations from entities that failed to file a required form and may be considered aberrations in the data. Even counting that out, though, the net revocations peaked. 

Small fleets as tiny as one driver comprise the bulk of these shuttering trucking companies. Avery Vise, who is the vice president of trucking at FTR, said many of these drivers will join larger fleets rather than get flushed out of the market completely.  

The following months will likely break May’s record, representing more fleets fleeing the market. The revocations represented above were likely filed before this spring’s diesel surge and spot rate decline, Vise said. 

It’s an about-face from just a few months ago, when small truckers were still bringing in major cash. Here’s what happened:

2020-2022: All the cool kids are becoming owner-operators

In March 2020, retailers and manufacturers expected a long-term economic meltdown to result from the coronavirus. Instead, consumers bought more and more. 

Retailers were caught flat-footed with empty warehouses and had to quickly scale up to meet consumer demand for exercise equipment, computer monitors and, yes, toilet paper. 

New trucking fleets poured into the market to profit from these sky-high rates. From July 2020 to now, almost 195,000 new carriers have entered the market, according to Vise of FTR. About 70% of these new carriers were just one truck. The previous record 23-month period saw just 86,000 new carriers. 

The flood of new carriers was felt around the industry. 

Tucker of Full Coverage Freight, which is an independent agency with GlobalTranz, confirmed that through his own experiences. His office was flooded with calls from small truckers who had set up their authority only a few days prior.

“We saw this developing 18 months ago,” Tucker said. “We could support this artificial introduction of all these carriers just because of all this activity going on.”

The unusual marker of the last two years isn’t just that rates and volumes skyrocketed but where they skyrocketed: the spot market.  

The spot market usually accounts for 10-20% of the overall trucking market. Vise said that share may have climbed to as high as 50% in the height of COVID-buying craziness. 

The rate to move a dry van on the spot market climbed through 2021. 

The rate to move a load on the spot market soared. Each month of 2021 seemed to break a new record in the rate to move a dry van, with the peak hitting in January 2022. It was a fantastic time to be a small trucker, who can pick up spot jobs easily.

Contract rates didn’t climb at the same pace. That’s best measured by the Outbound Tender Reject Index, which shows how much contract freight is getting rejected. 

Unlike, well, every other industry, you don’t need to honor your trucking contracts. If you’re a fleet that can make more money moving spot loads, you’re free to go do that. (Of course, keep in mind that your customer might not be so happy to give you a fair rate when spot rates inevitably crash again — and you’re struggling to make ends meet.)

Trucking companies rejected unusually high amounts of freight in 2021. 

Around 27% of all contract freight was getting rejected last spring. Even in late December 2021 and early January 2022, the rejection rate was more than 20%.

The spike in spot rates meant more capacity on the small trucker side. Trucking companies with more than 100 trucks didn’t grow at nearly the same pace as the part of the market with one-man bands. Vise estimated around 6-7% of capacity shifted from those fleets of 100-plus drivers to those under 100 in the past two years.

Spring 2022: A collapse in spot rates meets a surge in diesel

As you can safely expect in trucking, the good times ran out. In March, spot rates began a freefall at a stunning rate.

Mazen Danaf, who is the senior economist at Uber Freight, compared the month-over-month drop in spot rates excluding fuel. In March and April, rates dropped by 30 cents compared to the months prior. Rates dropped another 20 cents in May.

Those declines outpace the previous record decline: 15 cents.

Dry van spot rates have crumbled from record highs in 2021 and early 2022.

Meanwhile, the contract side of the market is regaining territory. The rejection rate for contract rate, which loomed at more than 20% earlier this year, is now sitting at 7.7%.

Danaf said freight contracts that were negotiated in early 2022 took into account high spot rates. That allowed big trucking companies, which aren’t as active in the spot market as smaller ones, to secure higher rates from their customers. The new, small truckers that flooded the market in the last few years were less likely to have those sort of long-term relationships with big retailers and manufacturers. They lost out on any bump in contract rates earlier this year. 

Now, Vise said spot accounts for about 30% of the market. Danaf estimated that number was 18%. Both indicate a trucking economy that’s shifting back from the volatile spot world to steadier contracts — even though it means that some smaller trucking companies will get shuttered in the process.

“What we’re seeing is a shift of the market back to a traditional split,” Vise said. “It could take a long time however.” 

Even more challenging to small trucking companies is the soaring cost of doing business. According to a report from loadboard Truckload.com, it’s now 51% more expensive to run a trucking company in 2022 than last year. Smaller carriers are more likely to shoulder than burden. 

The staggering cost of diesel is the most marked cost increase, with the smallest fleets struggling to keep up. Some truck drivers have shut down simply because they couldn’t afford diesel anymore. 

David Guzman of San Antonio is one of them. “The way the rates are, you have to run twice as hard to make ends meet,” he told FreightWaves in April. “I can’t help but feel for my fellow truck drivers.”

Equipment has also become more expensive. Truck drivers who bought their trucks in 2021 are paying off loans on trucks that might be two or three times higher than normal. The cost of repairs is also pricier — up nearly 9% in late 2021 from late 2020. Such expenses aren’t getting subsidized by ultra-high spot rates anymore. 

Others believe that this winnowing out of small truckers resembles something spookier than a mere shift from spot to contract. This week, FreightWaves CEO Craig Fuller wrote that the issues plaguing trucking may resemble a larger economic recession. Ocean volumes are beginning to collapse, reflecting record inflation and big-box retailers that are already full-up on inventory. What consumer spending is still growing is on the travel and entertainment side, which doesn’t move as much freight.

“What’s going to happen is going to be tough,” Tucker, the freight broker, said. “It’s going to be painful for a lot of people. Very few people will be left standing.”

There’s one way out for small truckers, but that opportunity is closing

Vise said many of the small truckers who gave up their authority rejoined a big fleet as company drivers. Others leased their truck back to one of those mega-carriers, where they can benefit from fuel surcharges to underwrite big diesel payments 

Those drivers might be the lucky ones. Those who already sold their trucks were still able to take advantage of high used truck prices, which are now quickly declining. 

What’s more, there may not be many more jobs available at big carriers. Nonsupervisory trucking employment hit a record high in April, the latest available data from the Bureau of Labor Statistics. Vise said he’s closely monitoring these numbers to see if trucking fleets decide themselves they have too many drivers.

Vise is still positive on the current market, saying that trucking is shifting from spot freight dominated by small truckers back to contract loads dominated by big carriers. Pointing to pent-up manufacturing demand and signs of resiliency on the consumer side, he said he’s “fairly optimistic we will muddle through this year without a recession.”

Not all are feeling so chipper. Thom Albrecht, chief financial officer of transportation insurance agency Reliance Partners, said current rates can’t match the new cost structure of running a trucking company. Fuel, equipment and labor have become too expensive — and these problems are matching a slowdown in job creation and the Federal Reserve’s struggle to tame inflation. 

“The party’s over,” Albrecht said. 

Tyler Durden Fri, 06/24/2022 - 14:25

Daily Briefing: Stocks Rally To Close a Strong Week

All three major U.S. equity indexes were up more than 2% heading into Friday’s close, even as the University of Michigan’s reading of consumer sentiment hit a record low in June. As its inflation-fighting efforts threaten growth, the Federal Reserve released results of its periodic “stress tests” showing that all subject banks passed. “Bear in mind,” tweeted Jim Bianco, “the Fed does NOT test for a massive policy error leading to soaring interest rates and huge losses. In other words, these tests, created and conducted by the Fed, assume the Fed never makes a mistake.” Bianco, the founder and president of Bianco Research, joins Real Vision’s Maggie Lake to talk about markets, the economy, inflation, and the Federal Reserve. We also hear from Eric Johnston about the market’s perception of the U.S. central bank and its ability to meet its own targets. Want to submit questions? Drop them right here on the Exchange: https://rvtv.io/3yirRmq. Watch the full conversation featuring Eric Johnston and Andreas Steno Larsen here: https://rvtv.io/3bpLTT0.

Tyler Durden Fri, 06/24/2022 - 14:23

Nio Vehicle Plunges From Third Story "Showroom" At Company Headquarters, Killing Two

Two people were killed when a Nio electric vehicle plunged out of the third floor of the company's headquarters in Shanghai this week.

A member of the company's staff and one staff member from a partner company were killed in the accident, which took place Wednesday at about 17:20 local time, according to a report by the BBC.

Both employees were in the car at the time it plunged out of the window. The third story of the building has been described as a showroom, the BBC report says. Nio has claimed it has "immediately" started an investigation with government officials into the incident. 

The company said this week: "Our company has collaborated with public security department to launch the investigation and analysis of the cause of the accident. Based on the analysis of the situation at the scene, we can initially confirm that this was an accident (not caused by the vehicle)."

It continued: "We feel very sad about this accident and would like to express our deepest condolences to our colleague and partner employee who lost their lives. A team has been set up to help the families."

Nio's claim that the accident was "not caused by the vehicle" stirred emotions on social media during the week, with one Weibo user saying the incident shows "shows the cold blood of capitalism". 

Another commented: "It should be public security bureau to confirm if it's an accident or not."

Video of authorities working on the wreck was posted on Twitter this week:

Terrible story of two test drivers at #China’s electrical vehicle manufacturer NIO being killed when a car somehow smashed out of a building and came crashing down from a great height. pic.twitter.com/4ZNI2t7LqZ

— Stephen McDonell (@StephenMcDonell) June 23, 2022

Tyler Durden Fri, 06/24/2022 - 14:05

"Slap In The Face To Women" - Biden Admin Proposes Title IX Overhaul, Conflates Biological Sex With Gender Identity

Authored by Bill Pan via The Epoch Times,

The U.S. Department of Education has proposed an overhaul of anti-sex-discrimination rules, reinterpreting the term “sex” as something that doesn’t have to have a biological basis.

The proposal is announced on the 50th anniversary of Title IX, the federal law that prohibits “sex-based discrimination” in federally funded educational settings. It broadens the definition of “sex” so that Title IX protections would cover sexual orientation and gender identity.

“Discrimination on the basis of sex includes discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation, and gender identity,” the proposal reads.

“The Department does not construe the term ‘sex’ to necessarily be limited to a single component of an individual’s anatomy or physiology.”

The proposal also seeks to establish that refusing to accommodate a preferred gender identity in school activities is substantially harmful enough to constitute a Title IX violation.

According to the new regulation, “adopting a policy or engaging in a practice that prevents a person from participating in an education program or activity consistent with the person’s gender identity subjects a person to more than de minimis harm on the basis of sex,” and is therefore punishable under Title IX.

Effectively, this could mean that schools and colleges would be stripped of federal funding if they maintain the segregation of sports and spaces such as restrooms and locker rooms based on biological sex.

Education Secretary Miguel Cardona said the changes are in accordance with President Joe Biden’s March 2021 executive order, which vowed to guarantee an educational environment “free from discrimination based on sex, including sexual orientation or gender identity.”

Other Changes

When it comes to how schools should handle sexual misconduct allegations, Cardona took the opposite approach to his predecessor, Betsy DeVos, who narrowed the scope of complaints that schools have to investigate and potentially punish.

Cardona seeks to widen schools’ responsibilities in addressing sexual misconduct. Under the new rules, schools must respond to complaints of “a hostile environment based on sex,” including those that occur outside their campuses, such as a school trip to another country.

Some due process protections introduced during the DeVos era have also been removed from the new rules. For example, the alleged perpetrators and victims of sexual harassment would no longer have the equal right to submit, cross-examine, and challenge evidence at a live hearing.

The proposal will enter a 60-day public comment period once it is published in the Federal Register.

A Fight Over Definition

The proposed regulation marks the latest move in a decade-long argument over what exactly “sex” means in Title IX. The Obama administration first tried to expand the definition, writing in an April 2011 “Dear Colleague” letter that Title IX protection “extends to claims of discrimination based on gender identity or failure to conform to stereotypical notions of masculinity or femininity.” The Trump administration tossed that guidance, saying that only Congress or the Supreme Court has the authority to redefine that term.

In January 2021, the Education Department issued a memorandum stating that the term “sex” in Title IX unequivocally means “biological sex, male or female.” The memo (pdf), issued the day after DeVos resigned as education secretary and just days before Biden entered the White House, says that schools don’t violate the law when they ban transgender students from using restrooms matching their claimed gender identities.

Reed Rubinstein, then-principal deputy general counsel for the department, argued that the term “sex” must be interpreted based on what it meant when Title IX became law.

“Based on controlling authorities, we must give effect to the ordinary public meaning at the time of enactment and construe the term ‘sex’ in Title IX to mean biological sex, male or female,” Rubinstein wrote in the memo.

“Congress has the authority to rewrite Title IX and redefine its terms at any time. To date, however, Congress has chosen not to do so.”

The Rubinstein memo is written as a discussion of whether the enforcement of Title IX was affected by the U.S. Supreme Court’s June 2020 decision in Bostock v. Clayton County. In that case, a 6–3 majority ruled that employment discrimination based on one’s sexual orientation is a violation of Title VII, the federal law prohibiting discrimination in the workplace on the basis of sex.

“The court decided the case narrowly, specifically refusing to extend its holding to Title IX and other differently drafted statutes,” Rubinstein noted.

Progress or Setback?

While the Biden administration promises that proposed changes will “continue that progress” in protecting girls’ and women’s equal access to opportunities in schools, many argue that this is actually a setback for what Title IX has accomplished.

“On this 50th anniversary of Title IX, when we are proud to celebrate the accomplishment of millions of women across the country, the Biden Administration outrageously offers new regulations that would redefine sex, equating gender identity with biological reality,” said Penny Nance, CEO and president of Concerned Women for America.

“What a slap in the face to women who have achieved so much,” she said. “Biden has just erased you.”

Tyler Durden Fri, 06/24/2022 - 13:45

Will $30BN In Month-End Pension Buying Send The S&P Above 4,000: Kolanovic Thinks So

Earlier today we laid out two traders views, one bull and one bear, both of which agreed that the next leg in stocks will be higher, and laid out their reasons. Now a third potential catalyst for a major month-end rally has emerged: according to Goldman trading desk estimates, there is a net $30 billion of US equities to buy from US pensions given the moves in equities and bonds over the month and quarter.

How does this stack up vs history?  This ranks in the 72nd percentile amongst all buy and sell estimates in absolute dollar value over the past three years and in the 92nd percentile going back to Jan 2000. Additionally, the buying imbalance also ranks in the 94th percentile amongst all estimates on a net basis (-$70bn to +$150bn scale) over the past three years and in the 96th percentile going back to Jan 2000.

JPMorgan's Marko Kolanovic - Wall Street's biggest permabull bar none and nothing: he has told clients to the dip every single week this year, prompting many to ask just how much money to lose do JPM's clients have - naturally agreed with this bullish take and in a Friday note co-written with Bram Kaplan writes that the month- and quarter-end rebalance could push stocks 7% higher, driving the S&P well above 4,000 in the process. Some excerpts from the note:

This year the impact of rebalances have been significant due to large market moves and low liquidity. For instance, near the end of the first quarter, the market was down ~10%, and experienced a significant ~7% rally in the last week going into quarter-end. On the most recent monthly rebalance, near the end of May, the market was down 10%, and experienced a significant rally of ~7% going into month end.

Let’s look at the current rebalance setup. Broad equities are down 21% for the year (9% vs bonds), 16% for the quarter (11% vs bonds), and 9% for the month (7% vs bonds).

In summary, Kolanovic finds that "rebalances across all 3 lookback windows would reinforce and, based on historical regression, would imply a ~7% move up  in equities next week"  Of course, having been wrong in 2022 with his relentless calls to BTFD, Kolanovic hedges somewhat and says that this assessment "takes into account the current market liquidity, as measured by futures market depth, which is ~5 times lower than the historical average."

The Croat also hedges that rebalances are not the only drivers and the estimated move is assuming ‘all else equal’ (which of course never is). At the same time, bonds would feel moderate downward pressure from rebalances and the increase of yields could further result in rotation towards cyclical equities (and away from defensives). Or it could just lead to another bout of broad-based selling.

Naturally, pension buying of stocks means pension selling of bonds, and a note from Deutsche Bank's Steve Zeng (also available to pro subs) predicts just that. 

Writing  that given a current snapshot of a 19% dive in the S&P 500 and mere 6% “slide” in the aggregate bond index, DB's static-weight model estimates $85bn of selling in fixed income by public and private pensions this quarter.

How accurate is DB's pension reallocation model? Pretty accurate, as it turns out: as Zeng explains, "In Q1, our model had estimated $88bn of fixed income buying by the pension community. Actual inflows were $53bn, with $47bn of those coming from public pensions. (Private pensions met $6.5bn of the $38bn predicted for them.)"

The DB strategist also notes that pension rebalancing flows could contribute further weakness to long-end rates, which has already been battered by bad inflation reports and a hawkish Fed. As such "a short-term tactical steepener in 5s/30s could make sense, especially if one holds the view that data over the next two weeks might land on the soft side. Fed officials may also try to sound a more dovish tone after this week's hawkish central bank surprises. 5s/30s (and 10s/30s) generally move in the opposite direction of rates."

Bottom line: pensions are clearly set to lift stock offers into month-end (and beyond), and odds are that we will see further technical and positional bullish moves in the coming days.

More in the full notes available to pro subs.

Tyler Durden Fri, 06/24/2022 - 13:24

New York Times Worries That Big Tech Won't Censor Hard Enough During Midterm Elections

Authored by Paul Joseph Watson via Summit News,

The New York Times has published an article expressing its concerns that Big Tech platforms like Facebook and Twitter aren’t doing enough to censor “misinformation” in the run-up to the midterm elections.

The article complains that Meta (Facebook) has slashed its ‘election misinformation’ team from 300 people during 2020 to just 60 people and that Mark Zuckerberg no longer meets with the team directly.

Civil rights groups are also apparently upset that Zuckerberg is less interested in communicating with them about efforts to stop ‘election misinformation’.

According to the piece, Twitter is also likely to be less censorious towards election information due to the likelihood that it is about to be purchased by Elon Musk.

“I’m concerned,” President of the NAACP Derrick Johnson told the newspaper. “It appears to be out of sight, out of mind.”

Noting that there are numerous political candidates running for office in 2022 who agree with Donald Trump that the 2020 presidential election was stolen, the Times laments that Meta’s reduction in censorship “could have far-reaching consequences as faith in the U.S. electoral system reaches a brittle point.”

The article also whines about the viral success of Dinesh D’Souza’s documentary ‘2000 Mules’, which received over a million views on alternative video hosting platform Rumble and also received 430,000 “interactions” on Facebook, proof according to the newspaper that election misinformation is “rampant” online.

Representatives from both Facebook and Twitter responded by assuring the Times that they are still keenly focused on censoring election “misinformation.”

“Before the 2020 US presidential election, Big Tech platforms deployed unprecedented levels of censorship by censoring then-President Donald Trump numerous times, banning popular pro-Trump groups, and more,” writes Reclaim the Net.

“Post-election, this mass censorship continued with President Trump being permanently banned by all the major tech platforms, discussions of “widespread fraud or errors” changing the 2020 US presidential election outcome being banned, free speech platform Parler (which many users had flocked to in an attempt to escape Big Tech’s censorship) being deplatformed by the tech giants, and more.”

“The mainstream media and Big Tech used the vague, subjective term “election misinformation” to justify this silencing of a sitting US President and the mass censorship of election-related speech.

The legacy media is once again likely to weaponize hyper-partisan ‘fact checkers’ to ensure that information which isn’t completely censored is at least shadow banned and relegated by algorithms so fewer Americans will see it.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Get early access, exclusive content and behinds the scenes stuff by following me on Locals.

Tyler Durden Fri, 06/24/2022 - 11:46

4 Million Americans Priced-Out As Home Rents Rise Significantly, Home Loan Qualifications 'Skyrocket'

Authored by Naveen Anthrapully via The Epoch Times,

As costs of home ownership rise, millions of Americans have been pushed out of the housing market, according to Harvard University’s annual State of the Nation’s Housing Report released Wednesday.

At today’s home prices, a first-time buyer would have had to shell out $27,400 (7 percent of the sales price) as a down-payment in April on a median-priced home, said the report. This rules out 92 percent of renters, who only have a median of $1,500 in savings. If the downpayment is halved to 3.5 percent, the monthly mortgage payment on a median-priced home would be $2,020.

“In combination with rising prices, the recent interest rate hikes raised the minimum income needed to afford these payments from $79,600 in April 2021 to $107,600 in April 2022 - effectively pricing out some 4 million renter households with incomes in this range,” the report said.

Between December 2021 and mid-April 2022, mortgage interest rates rose by 2 percent, which is equivalent to a 27 percent jump in home prices. As prices increased along with interest rates, the income and savings required to qualify for a home loan “skyrocketed.” This presents a financial burden on middle-income and first-time buyers.

In April 2021, the interest rate was at 3.06 percent, growing to 4.98 percent by April 2022. During this period, the value of a median-priced home jumped from $340,700 to $391,200.

The down-payment and closing costs, which came in at $22,100 in April last year, rose to $25,400 this April. Monthly mortgage payments rose from $1,400 to $2,020 while total monthly owner costs jumped from $2,060 to $2,780.

Persistently Soaring Prices

Home price appreciation across the United States hit 20.6 percent in March 2022, eclipsing the previous high of 20 percent in August 2021. This was also the largest jump in three decades.

“The runup has been widespread, with 67 of the top 100 housing markets experiencing record-high appreciation rates at some point over the past year. And even in the other 33 major markets, home prices increased by at least 9 percent,” the report states.

A recent Goldman Sachs note says the company expects houses to become much less affordable for average Americans despite home price growth slowing down sharply, according to Business Insider. An average American is now much less likely to be able to afford a home when compared to just a few months ago.

“In the US, our latest model update pointed to substantial slowing in home price growth to the low single digits over the next year,” Goldman analysts wrote. Since the COVID-19 pandemic began, U.S. home prices have risen by around 38 percent according to the Case-Shiller Home Price Index.

Tyler Durden Fri, 06/24/2022 - 11:05

DHS Communicates Specific Threats Facing Pro-Life Orgs, Churches As They Brace For "Night Of Rage"

With the Supreme Court on Friday officially publishing its historic ruling overturning Roe vs. Wade, crisis pregnancy centers, Catholic churches, and pro-life institutions across the country are bracing for a coming "Night of Rage".

According to Newsweek and others, the Department of Homeland Security (DHS) has communicated specific threats to pro-life groups and Catholic leaders, after suspicious individuals and groups have in some instances been found "casing" the offices and buildings of pro-life organizations:

An internal document obtained by Newsweek outlines intelligence shared by the Department of Homeland Security with the Catholic Church of a planned "Night of Rage," targeting churches and pregnancy centers over their opposition to abortion rights. The document sheds light on how law enforcement and the church are bracing for backlash after a leaked opinion showed the Supreme Court preparing to rescind federal abortion rights.

Antifa march in Washington DC, file image: AFP/Getty

Two days ago, we detailed an initiative by the pro-abortion group "Jane's Revenge" to widely distribute flyers in the D.C. are after recently declaring "open season" on pro-life groups and crisis pregnancy centers.

It appears there's similar "planning" across various cities and states, particularly California, according to Newsweek, which details more from the DHS memo:

Labeled an "urgent memo," the document is from the Diocese of Stockton, California, and is directed to all clergy, as well as parish and pastoral staff. The memo states that Jesse Rangel, a DHS agent, told the diocese that federal law enforcement has discovered a manifesto from an "extremist group" calling for attacks on churches beginning at 8 p.m. the evening the court issues its opinion.

The memo instructs churches which have active services during the eve and days following the Supreme Court decision to "Make sure you have ushers and or security available during your services and perhaps identify who among your volunteers and parishioners are law enforcement."

Some national pro-life organizations have reported this week that they have been contacted by federal government officials, warning them to take steps amid threats of "extreme violence"...

BREAKING: The Department of Homeland Security is communicating with Catholic Churches and pregnancy centers, telling them to be prepared for a "Night of Rage" by pro-abortion groups pledging "extreme violence" the night of the Dobbs decision.

— Lila Rose (@LilaGraceRose) June 23, 2022

The memo adds: "Suspicious activity would include someone asking out of place questions (Largest Mass times? Doors always open? Do you have security?), looking around church property, protestors, and general disturbances."

Over the past several days and weeks since the draft ruling on Roe v. Wade was leaked to Politico, Catholic churches have reported a spike in targeted vandalism across the country, which has often included pro-abortion graffiti and threats. 

Message from “Ruth Sent Us”, and other activists:

“Night of Rage” in response to Dobbs Decision—Attack Catholic Churches and crisis pregnancy centres.@PressSec asked to comment on these threats.@DHSgov eyes on. pic.twitter.com/7clb07jSly

— Bree A Dail (@breeadail) June 23, 2022

These messages showed up on sidewalks and corners of D.C. this week...

"Night Of Rage" Flyers Spotted In DC Ahead Of Roe v. Wade Decision https://t.co/hvry49UCfF

— zerohedge (@zerohedge) June 21, 2022

An ominous sign of what's about to come going into Friday night and the weekend? Like the summer of 2020, is CNN about to treat us to live coverage of what some pundits dubbed "peaceful riots"?

Tyler Durden Fri, 06/24/2022 - 10:45

"HODL" Finds Its Inevitable Flaw

Authored by Lance Roberts via RealInvestmentAdvice.com,

“HODL,” an original misspelling taken on as a badge of courage by cryptocurrency investors, spread to “Meme stocks” during the runup in 2020 and 2021.

The term “HODL” originated from user GameKyubbi, who posted a drunk, semi-coherent, typo-laden rant about his poor trading skills.

“‘I AM HODLING.’ I type d that tyitle twice because I knew it was wrong the first time. Still wrong. WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah, you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro.

You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.” – BitcoinTalk fourm

Within an hour of that post, “HODL” had become a meme. Initially, the memes referenced the movies “300″ and “Braveheart,” but there are now countless HODL memes floating around the internet. 

Of course, there seemed to be no risk to a “HODL” strategy at the time, as the Federal Reserve and Government pushed trillions of dollars in liquidity into the financial markets and economy. With the economy shut down due to the pandemic, sports gamblers turned their attention to the stock market to get their “fix.” As asset prices surged and with the assistance of the Robinhood app, investing became so easy you could draw letters out of a Scrabble bag.

$RTX comes out of the scrabble bag. Smush letters and buy it. Give it a try Ron, you might not bankrupt your clients. #DDTG pic.twitter.com/semLRi6yBF

— Dave Portnoy (@stoolpresidente) June 19, 2020

Unfortunately, when it comes to buying and “HODLing,” the outcome from periods of excess speculation is always the same.

The “HODL” Fallacy

I recently wrote about the problems with “armchair” investment strategies.To wit:

“As shown in the chart below, the advice given is not entirely wrong. Since 1900, the markets have averaged roughly 10% annually (including dividends). However, that figure falls to 8.08% when adjusting for inflation.

By looking at the chart, it’s pretty evident that you should invest heavily in the market and “fughetta’ bout’ it.”

If it was only that simple.”

While the average rate of return may have been 10% over the long term, the markets do not deliver 10% yearly. Let’s assume an investor wants to compound their returns by 10% a year over five years. We can do some basic math.

After three years of 10% returns, a drawdown of just 10% cuts the average annual compound growth rate by 50%. Furthermore, it then requires a 30% return to regain the average rate of return required. 

While an investor can “HODL” for the long term, there is a significant difference between the AVERAGE and  ACTUAL returns received. As I showed previously, the impact of losses destroys the annualized “compounding” effect of money. (The purple shaded area shows the “average” return of 7% annually. However, the differential between the promised and “actual return” is the return gap.)

The differential between what investors were promised and actual returns is substantial over the long term. Furthermore, you DIED long before realizing the long-term average return rate.

Amid a “bull market,” the impact of losses during the second half of the market cycle becomes obscured. The stronger the bull market advance, the more mistakes investors make by assuming the current cycle will not end as they take on more speculative risk.

Unfortunately, all cycles end.

HODL – Another Word For Speculation

One of the more disappointing developments in the financial markets over the last 12 years has been the rise of “performance chasing” by investors. But such is not surprising given the repeated interventions by the Federal Reserve. As Larry McDonald of the Bear Traps Report noted:

“Inflation is forcing central bankers to allow price discovery. There was always price discovery before Lehman, but for much of the last 12 years markets have been in a Fed zombie trance.“

Such isn’t “investing,” it’s “speculation.” But who could blame young, inexperienced individuals with a “stimmy” check and promises of quick riches in Bitcoin as it surged daily?

But it wasn’t just cryptocurrencies. Wall Street supplied traders with SPACs like Lucid Motors when IPOs could not get pushed out fast enough.

And “Meme” stocks like AMC Movie Theatres got touted on websites like WallStreetBets.

Of course, the “MoMo” craze got represented best by Cathie Wood and the Arkk ETFs.

While “HODLing” worked during the rising bull market, individuals have now discovered holding during a “bear market” can be devastating.

Ultimately, investing is about managing the risks that will substantially reduce your ability to “stay in the game long enough” to “win.”

“The distinction between investment and speculation is a useful one and its disappearance is a cause for concern. We’ve often said Wall Street should reinstate this distinction and emphasize it in its dealings with the public. Otherwise, stock exchanges may some day be blamed for heavy speculative losses which those who suffered them had not been properly warned against.” – Benjamin Graham – The Intelligent Investor:

The current bear market is no exception and is the logical outcome of what follows the last advance.

Time To Let Go Of “HODL”

There is a huge market for “get rich quick” investment schemes and programs as individuals keep hoping to find the secret trick to amassing riches from the market. There isn’t one. 

In the 1990s, investors plowed money into speculative investments. Ultimately, they lost most of it at the turn of the century. Then, they turned their focus to real estate, only to get wiped out in 2008. The runup and crash in the cryptocurrencies, disrupter technologies, SPACs, and “Meme” stocks have all met a similar end.

Many believe that investing in the financial markets is their only option for retiring. Unfortunately, they fell into the same trap as most pension funds hoping market performance will make up for a “savings” shortfall. The chart below shows a 6% annual “average” return rate and what stocks historically should return. Starting when returns are high has invariably poor outcomes.

The damage market declines inflict on investors hoping to garner annualized 8% returns to make up for the lack of savings is all too real and virtually impossible to recover from. When investors lose money in the market it is possible to regain the lost principal given enough time, however, what can never be recovered is the lost “time” between today and retirement. “Time” is finite and the most precious commodity that investors have.

Navigating The Next Cycle

We have previously detailed the basic guidelines for navigating market cycles.

• Investing is not a competition.

• Emotions have no place in investing.

• The ONLY investments you can “buy and hold” are those providing an income stream and return of principal.

• Market valuations are very poor market timing devices.

• Fundamentals and Economics drive long-term investment decisions – “Greed and Fear” drive short-term trading.

• “Market timing” is impossible– managing exposure to risk is both logical and possible.

• Investment is about discipline and patience. 

• There is no value in daily media commentary– turn off the television and save yourself the mental capital.

• Investing is no different than gambling– both are “guesses” about future outcomes based on probabilities.

• No investment strategy works all the time. 

Before sticking your head in the sand and ignoring market risk based on an article touting “long-term investing always wins, just ‘HODL'” ask yourself who benefits?

Emotions and investment decisions are very poor bedfellows. Unfortunately, most investors make emotional decisions because FEW follow a well-thought-out investment plan. Retail investors generally buy an off-the-shelf portfolio allocation model heavily weighted in equities. The illusion is that stocks will somehow make money over a long enough period. 

Unfortunately, history has been a brutal teacher about the value of risk management. 

Tyler Durden Fri, 06/24/2022 - 10:34