Month: March 2021

Submitted by Christophe Barraud

U.S. personal incomes soared in January as Americans received another batch of pandemic-relief checks, resulting in a spike of total excess personal savings.

According to the Commerce Department report, incomes increased by 10% MoM, the largest gain in nine months. The January jump came after the $900 billion pandemic aid package passed in December. As a reminder, the bill included $600 stimulus checks per American, including adults and children. However, the size of the payment decreased for people who earned more than $75,000 in the 2019 tax year. The check disappeared altogether for those who earned more than $99,000. In addition, the legislation supplemented jobless benefits with an extra $300 a week payment.

Meanwhile, purchases increased 2.4% MoM, pushing personal saving rate up to 20.5%, the highest since May 2020. In this context, U.S. personal savings as a share of nominal GDP will rise again in 1Q21, after reaching a post-war high at the end of 2020 on a 4-quarter moving average basis.

In the meantime, the level of total excess personal savings accumulated since the beginning of the Covid-19 crisis (March 2020) kept skyrocketing. According to my estimates, it reached $1.681 trillion in January (7.8% of nominal GDP).

This huge amount will grow again in the coming months and could even top the $2 trillion mark (9.3% of nominal GDP) as soon as March (if the next Federal stimulus is disbursed in time, otherwise it will be in April). The fact is that, this week, California legislators approved a $7.6-billion COVID-19 package, including $600 stimulus checks. An estimated 5.7 million checks will go to low-income Californians, including families with children enrolled in CalWORKS, as well as elderly, blind and disabled recipients of Supplemental Security Income or the state’s Cash Assistance Program for Immigrants.

Lastly, another federal stimulus is likely to be passed before March 14, when key programs buoying millions of jobless Americans expire. Among other details, the plan contains:

• A $400 per week unemployment insurance supplement and an extension of programs expanding jobless benefits to millions more Americans through Aug. 29
• $1,400 direct payments to most Americans and the same sum for dependents
• Payments to families of up to $3,600 per child over a year

In my opinion, a part of this total excess personal savings will probably flood the economy from 2Q21 as economic confidence returns. As I already noted, the health situation has improved significantly since mid-January. Moreover, latest data and the recent approval of Johnson & Johnson’s vaccine suggests that the U.S. will be able to vaccinate all of its over-65s and health workers by the end of May (at the latest). Therefore, it is very likely that most of states will ease restrictions supporting economic activity and labour market confidence. Note that hiring intentions of companies in the most affected sectors have already improved.

Job postings on @indeed 5% above the pre-pandemic baseline in US, as of 2/19. Another week of solid gains.

One bright spot: job postings up in arts & entertainment, which was hit hard in the pandemic. Now just 6% below baseline.

(No blogpost this week.) pic.twitter.com/8XOt7nkpFS

— Jed Kolko (@JedKolko) February 22, 2021

To conclude, a part of total excess personal savings will probably flood the economy from 2Q21 as economic confidence returns progressively to normal. In addition, most of economists underprice the “consumer revenge” effect which reinforces my forecast that U.S. growth will exceed expectations in 2021 (recently revised upward to +4.9% according to the Bloomberg consensus).

The last few weeks have seen the short-end of the yield curve panic, pricing in more than 4 rate-hikes from Dec 2022 to Dec 2024…

Source: Bloomberg

And Bond yields have screamed higher in recent days as fears of rampant inflation and a Fed on the sidelines prompts selling…

Source: Bloomberg

And as bond yields rose so growthy big-tech was monkey-hammered lower…

So, are market participants calling The Fed’s bluff and demanding they step in with even more dovish easing to rescue rates (and thus big tech)? How else will the government afford the $1.9 trillion ‘stimmy’ absent low rates and a will Fed buyer.

As Nomura’s Charlie McElligott notes, a reversal “squeeze” in USTs could come FAST – especially in-light of the magnitude of the aggregate “Short” position in Global Fixed-Income across CTA Trend universe, with the Nomura QIS CTA model showing the largest “Short” position in both TY and Global DM Bonds in our model history, dating-back to 2010…

This “big short” from CTAs in Global DM Bonds dynamic then has created the kindling for a blast of “mechanical” buy-to-cover flow into a potential Rates rally on Fed jawboning on Financial Conditions (which have tightened recently)…

…or say, SLR clarity…

The potential for a policy announcement from the Fed regarding Banks supplementary leverage ratio (SLR) rule—the window is shrinking for the Fed to address very seriously market “plumbing” concerns about the complete opacity surrounding the forward-path of the SLR exemption for Banks—meaning the Fed need to clarify to the market whether the SLR relief is going to be extended, while at the same time state whether Treasuries, Reserves or both (!) will be exempted again; this shocking lack of “market feel” from the Fed (as seen last week in Chairman Powell’s complete avoidance of the issue in testimony to Congress)  is contributing to the Treasury selloff, as Banks lack visibility whether they can continue to expand their balance sheets with purchases of USTs…or conversely, need to shed balance-sheet, deposits and USTs

…and if Bonds rip higher and Rate vol collapses, legacy long-term “Momentum” longs in bond-proxy Nasdaq and Mega-Cap Tech would likely see explosive moves higher again too.

For now however, Rates / USTs path of least resistance continues WEAKER until we hear from the Fed as we await this week’s potential Rates “inflection catalysts”; but here are today’s estimated “buy-to-cover” levels for CTAs in said current Global DM Bond “shorts” of note:

What could get bonds up there? Feb jawboning…

Perhaps that is why there is a SIGNIFICANT amount of Fed-speak this week, coming ahead the blackout kicking-off this Saturday (Brainard today, tomorrow), Evans (Wednesday), Powell (Thursday at noon EST) along with Williams, Bostic, Kaskari, Mester, Daly and Harker sprinkled throughout as well. As Nomura’s Rob Dent notes, this obviously comes at a critical time for the Rates space, with timing which would allow them to push-back against the Rates move with enhanced “forward guidance,” under the guise of “tightening in financial conditions” – perhaps even “Operation Twist” trial balloons?

Update (1525ET): The WSJ was incorrect in claiming Abramowitz was representing Cuomo’s office for his sexual harassment scandal, telling Bloomberg that he’s only representing the nursing home scandal.

“My firm and I are representing the Executive Chamber on the Nursing Home matter. We have not been retained on the sexual harassment matter,” he said in an email.

*  *  *

New York Governor Andrew Cuomo’s administration has retained a prominent white-collar defense attorney following allegations of sexual harassment and Justice Department inquiries over COVID-19 nursing home deaths, according to the Wall Street Journal.

Attorney Elkan Abramowitz – a former federal prosecutor – confirmed with the Journal that he is now representing Cuomo’s ‘executive chamber’, which includes the governor and his closes aides. Abramowitz is dealing with both scandals as New York Attorney General Letitia James joins the DOJ in investigating the embattled New York bigwig.

The Democratic governor faces an investigation overseen by State Attorney General Letitia James into whether he sexually harassed women who previously worked in his administration. Mr. Cuomo acknowledged he had sometimes been overly personal while interacting with staff and said he was sorry if anyone mistook it for unwanted flirtation.

Cuomo’s apology strategy is going well…. pic.twitter.com/lJ8OY3ORee

— Jim Roberts (@nycjim) March 1, 2021

Two women have accused Cuomo of sexual harassment ranging from inappropriate questions, to touching, to forcibly kissing. One accuser says Cuomo clearly wanted to sleep with her.

Over the weekend, Cuomo denied forcibly kissing former aide Lindsey Boylan, who said the governor would also go out of his way to touch her “on my lower back, arms and legs.” He did, however, seemingly admit to using inappropriate language.

Cuomo also said last week that the state is cooperating with three inquiries from the US Attorney’s Office in the Eastern District of New York located in Brooklyn, as well as the DOJ’s Civil Rights and Civil divisions based in Washington. Brooklyn prosecutors have requested data on the number of people who died in New York nursing homes during the pandemic.

Meanwhile, the governor has stepped out of the public spotlight – last making a televised pandemic briefing on Feb. 19, while his public schedule remains empty according to Bloomberg.

Cuomo’s uncharacteristic silence comes a day after he agreed to an independent probe by a special investigator after a second former aide accused him of sexual harassment. Cuomo stopped short of having New York Attorney General Letitia James lead the probe, a move championed by dozens of other lawmakers.

…

On Monday, state Senator Todd Kaminsky introduced a bill that would allow the attorney general to conduct a criminal investigation without a referral from the governor, a move he said would strengthen independent oversight of the governor and other state officials.

“Clearly where the governor is involved there is a conflict,” said Kaminsky.

Veteran Democratic consultant Hank Sheinkopf told Bloomberg: “The problem is he’s being squeezed on the left and the right, and if there are more accusations of sexual harassment or governmental incompetence or corruption, he’s going to have a very difficult time surviving,” adding “He has very few friends.“

Authored by Isabel von Brugen via The Epoch Times,

Four people were arrested in Texas last month on 150 counts of voter fraud dating back to the 2018 Medina County Primary Election, according to reports.

The Texas attorney general’s Election Fraud Unit on Feb. 11 arrested Medina County Justice of the Peace Tomas Ramirez, and earlier detained Leonor Rivas Garza, Eva Ann Martinez and Mary Balderrama on election fraud allegations, News4SA reported.

According to a release from Texas Attorney General Ken Paxton’s office, the case involved allegations of vote harvesting at assisted living centers in Medina County in the 2018 Medina County Primary Election.

Ramirez faces one count of organized election fraud, one count of assisting voter voting ballot by mail, and 17 counts of unlawful possession of a ballot or ballot envelope, according to the news outlet.

Balderrama is charged with one count of organized election fraud, nine counts of illegal voting, two counts of unlawful possession of ballot or ballot envelope, one count of mail ballot application, two counts of unlawfully assisting voter voting by mail, two counts of tampering with government record, and eight counts of election fraud.

Garza faces a single count of organized election fraud, two counts of illegal voting, eight counts of unlawful possession of a ballot or ballot envelope, two counts of election fraud and four counts of fraudulent use of an absentee ballot by mail.

Martinez is charged with a single count of organized election fraud, nine counts of illegal voting, 28 counts of unlawful possession of ballot or ballot envelope, three counts of purportedly acting as an agent, five counts of tampering with government record, 14 counts of election fraud, and four counts of fraudulent mail ballot application, according to News4SA.

The Texas attorney general’s office didn’t immediately respond to a request for comment by The Epoch Times.

In a separate incident, Raquel Rodriguez, a Texas woman who bragged about being able to deliver thousands of votes for tens of thousands in cash was arrested in January on charges including election fraud and illegal voting.

Rodriguez was filmed during an undercover project by Project Veritas, an investigative journalism nonprofit. She was recorded in footage released last year that she could deliver “at least 5,000” votes “county-wide” for $55,000 in cash and that it would hire her “entire team.” She acknowledged what she was discussing could land her prison time.

Based on the footage, Paxton, a Republican, opened an investigation. That probe led to the arrest, Paxton announced on Jan. 13.

Rodriguez faces a prison sentence of up to 20 years if convicted.

Back in September 2015, Bloomberg first discovered a little known JPM quant named Marko Kolanovic, and wrote that “You know you’re a straight-up baller when Zero Hedge writes in a non-ironic way about your prediction.” After that, it didn’t take a long time for Marko – whose market analysis at the time was indeed second to none – to become a household name, and in some cases, a Tolkienesque name, with some TV channels fawning at the quant they dubbed “Gandalf”, while others went all out, calling the eastern european “half man, half god.”

Since then – as we have extensively profiled – Marko’s predictive and analytical track record got somewhat spotty, which was to be expected when coupled with several high level promotions the Croat was tasked with not just providing objective, impartial analysis but more importantly, toeing the perpetually bullish line promoted by JPMorgan thus eroding some of his hard-earned “street cred”, but it didn’t matter: by now everyone on Wall Street knew his name.

And so, one thing led to another, and with Marko making increasingly more frequent TV appearances and capitalizing on the rampant inflation hitting all assets and commodities, this morning we witnessed some title inflation as well, because as Bloomberg reports, the largest US commercial bank promoted Marko “Gandalf” Kolanovic to a new role as chief global markets strategist and named several executives to the bank’s global research leadership team under new head Jeremy Barnum.

Kolanovic, previously global head of macro quantitative and derivatives strategy, will now oversee research for cross-asset, equity strategy and quantitative and derivatives strategy, according to a memo sent to staffers Monday and seen by Bloomberg. He’ll continue to sit on the bank’s global research leadership team and will report to Barnum, who was appointed to a new role as global head of research in a reshuffle a month ago.

Marko’s promotion appears to be necessitated by a sudden burst of the departures within JPM’s top research ranks. The bank’s two former global heads of research, both equity and fixed income, are out: Nicole Grainger, global equity research head, and Matt Jozoff, co-head of FICC research – who were both on the bank’s research leadership team – have decided to pursue other opportunities, according to the memo. It wasn’t clear which firm they are going to. Sunil Garg, who ran international equity research, is also pursuing “new opportunities” but will stay on for a transitional period and join Barnum’s research leadership team on an interim basis, according to the memo.

In addition to Kolanovic, the bank named several new leaders to its global research leadership team, all of whom will report to Barnum:

• Steve Dulake, global head of credit research
• Gloria Kim, global head of index research
• Pedro Martins, head of Latin America equity research
• Nick Rosato, who runs North America equity research

Bloomberg also notes that Bruce Kasman, global head of economic and policy research, and Luis Oganes, global head of emerging markets, currencies and commodities research, will remain on the research leadership team, as will Hussein Malik, global head of rates, securitized products and public finance research.

In 2020, the global research “team showed exceptional thought leadership, helping clients navigate the most complex and dynamic market environment in recent memory,” Barnum wrote in the memo. “I believe these individuals, in partnership with Joyce Chang, will enable us to bring the best of our expertise to clients and deliver the JPMorgan platform with maximum impact.” Chang is chair of global research.

Via SchiffGold.com,

Last week, Peter Schiff appeared on NDT News to talk about the Federal Reserve’s increasing dovishness. He said despite all of the assurances from Jerome Powell that the central bank’s monetary policy isn’t stoking inflation, the economy and the dollar are both at risk for collapse. The Fed is the only thing standing in the way and it can’t stand there forever.

During this interview, Peter also touched on his recent Twitter debate with Elon Musk about bitcoin.

Jerome Powell claims that the Federal Reserve is not blowing up bubbles, there is no inflation threat, and that its easy money policy will continue for years. Peter said Powell gets more and more dovish every time he talks.

I think it’s a necessity because the US economy is in need of more artificial support every time he speaks because the only thing the economy has got going for it is the Fed. Because it’s a phony economy. It’s not real. And it’s completely dependent on increasing levels of inflation. So, the Fed keeps on printing money while pretending it has no effect on interest rates, no effect on asset prices, and claiming that the market doesn’t even need its help.”

During his testimony on Capitol Hill, Powell even claimed the Fed’s bond-buying programs weren’t having any impact on interest rates. He thinks there is plenty of demand for US Treasuries without the central bank’s intervention into the market. Never mind that the Fed now holds a record percentage of US debt.

If that were true, why is the Fed buying all these bonds in the first place? The truth is that’s the only thing standing between us and complete economic collapse – is the Fed. But the only thing standing between the Fed and collapse is the value of the dollar.”

The Fed has also expanded the money supply by a record amount. Powell says that doesn’t really matter either and claimed that there is no longer any relationship between the supply of dollars and the value of those dollars.

Well, the laws of supply and demand are still in effect. And if Powell keeps printing dollars, eventually there’ll be no demand, and the value, the price, is going to collapse. And that’s when it all hits the fan.”

Peter also addressed his Twitter battle with Elon Musk about bitcoin. Musk purchased about $1.5 billion of bitcoin through Tesla.

Once you own bitcoin, you’re really obligated to talk your book because the only way to prop up the price is to con other people into buying it.”

In one tweet, Musk said, “Money is just data that allows us to avoid the inconvenience of barter. That data, like all data, is subject to latency and error. The system will evolve to that which minimizes both.” Peter said Musk doesn’t seem to understand money.

He said to me that money is just data and it’s not. That’s not what money is. Data can represent money, but money is a commodity like gold and silver. That’s money. What we use today, Federal Reserve notes, or people that use euros, or Japanese yen, those are what you call money substitutes. They’re not actual money. In fact, when the Federal Reserve issued notes backed by gold and silver, the gold and silver was the money. The notes were currency. And what gave the currency value was the money, the gold, that backed it up. So, currency is also a money substitute. But what we have now is a substitute for legitimate currency and that’s fiat currency. The difference between real currency and fiat currency is real currency is backed by actual money whereas fiat currency is backed by nothing. The dollar is fiat currency. Bitcoin is fiat digital currency. But the problem is it doesn’t even function as a currency. So, it’s really nothing. What bitcoin really is is a digital token. And you have people who are collecting bitcoin and you have people who are trading bitcoin. So, it has a price, but that price is a function of all the speculation. But at the end of the day, these bitcoin collections are going to have no value because there’s nothing unique or scarce about bitcoin and the price is going to collapse.”

Less than two weeks ago, we reported on the fact that The Bill & Melinda Gates Foundation is bankrolling an activist educational group that believes math is racist and that arriving at an objective answer is an example of “white supremacy.”

Yes, really.

Specifically, as Summit News noted at the time, a conglomerate of 25 educational organizations called A Pathway to Equitable Math Instruction asserts that asking students to find the correct answer is an “inherently racist practice.”

The organization’s website lists the Bill & Melinda Gates Foundation as its only donor.

“In fact, over the past decade, the Bill & Melinda Gates Foundation has awarded over of $140 million to a variety of groups associated with Pathway. Their “antiracist resources” are at the epicenter of a new training course for teachers offered by the Oregon Department of Education throughout the state,” reports National File.

“Three of the most prominent organizations receiving grant money from the Gates’ are The Education Trust, Teach Plus, and WestEd, all non-profit 501c organizations.”

A guidebook for teachers produced by Pathway called ‘Dismantling Racism in Mathematics Instruction’ ludicrously claims that mathematics “is used to uphold capitalist, imperialist, and racist views.”

Teachers are instructed to blame non-white students getting answers wrong on “white supremacist practices,” which are truly to blame for the “underachievement” of minorities.

This liberal, progressive insanity appears to have triggered Michael “Big Short” Burry who unleashed his usual acerbic, and entirely accurate, wit on Gates and the entire concept of math being racist…

“Math is a form of #whitesupremacy? Where I’m from, whites are the dummies in math. South and East Asians apparently didn’t get the message whites use math to #suppress them. Would be a #LOL moment at the local high school, at whites’ expense. “

Burry went on:

“Apparently an old rich white man is behind this. I’m really starting to think old white people are out of touch. Wait, I already knew that…”

The outspoken market savant concluded:

“I am of a generation that I know junior people who worked with Gates. Brilliant, exacting, and intimidating. Could and would pick apart and embarrass anyone in the room who was not prepared. Open conflict was his weapon. The right answer was never wrong.“

Ending with the all too telling hashtag: #formenotforthee