#MeToo, #TheyLied, and Sealing

From Friday’s article at Science.org (Meredith Wadman):

The Whitehead Institute for Biomedical Research asked a Massachusetts judge today for an emergency stay of a defamation lawsuit filed against it last week by its former biologist David Sabatini.

The Whitehead and its director, Ruth Lehmann, jointly filed the motion in Middlesex County Superior Court. A lawyer for the third defendant in the Sabatini suit, a woman who told Whitehead investigators that Sabatini had sexually harassed her, filed an affidavit in support of the motion. It alleges that Sabatini filed the lawsuit to intimidate the defendant from cooperating with an ongoing probe by the Massachusetts Institute of Technology (MIT), where Sabatini is a biology professor. That process could lead to revocation of his tenure at MIT.

Sabatini resigned from the Whitehead Institute in August after an outside law firm hired by the institute to investigate found “that Dr. Sabatini violated the Institute’s policies on sexual harassment among other policies unrelated to research misconduct,” according to an email Lehmann sent staff there at the time.  He was also fired from the Howard Hughes Medical Institute, which supported his lab at the Whitehead, and placed on administrative leave by MIT while it launched its own probe.

In the lawsuit, which seeks unspecified damages, Sabatini alleges that after he ended a consensual affair with the defendant, she “became determined to destroy” him and fabricated the harassment allegations….

In its motion, however, the Whitehead argues that the lawsuit’s “purpose is clear: to chill this young woman’s participation in the ongoing investigation and send a message to anyone else who might otherwise come forward.”

From the Complaint (Sabatini v. Knouse, No. 21CV02828, Mass. Super. Ct. Middlesex County), which alleges libel, tortious interference with economic relationships, and intentional and negligent infliction of emotional distress:

[1.] This case involves the manipulation and abuse of laws and policies designed to ensure workplace equality to instead punish an ex-lover. The result has been to inflict substantial and potentially irreparable damage to the career of Dr. David M. Sabatini, a brilliant  scientist.

[2.] Beginning in April 2018, Dr. Sabatini had a consensual sexual relationship with a friend,  colleague and peer, Defendant Dr. Kristin A. Knouse. At this time, Dr. Sabatini was a world renowned medical and scientific researcher and a tenured professor at MIT with a stellar reputation who conducted groundbreaking research into the pathways that regulate growth and metabolism and how they are deregulated in diseases like cancer and diabetes. Dr. Sabatini was then, and for many years had been, a principal investigator who had his own laboratory at the Whitehead Institute for Biomedical Research (“the Whitehead”) where Dr. Knouse worked as well as the principal investigator of her own lab. Dr. Sabatini’s sexual relationship with Dr. Knouse was effectively over by July 2019. Starting then and through the rest of 2019 and early 2020, Dr. Sabatini made clear to Dr. Knouse on multiple occasions that he did not want a long term relationship with her. After Dr. Sabatini ended the relationship, Dr. Knouse continued to attempt to engage with him sexually and emotionally despite his repeated requests that she stop.

[3.] In March 2021, the Whitehead commenced an ‘investigation’ into the ‘culture’ in Dr. Sabatini’s laboratory. At that time, almost 40 individuals, including post-doctoral fellows, Ph.D. students, researchers, and others, worked in Dr. Sabatini’s laboratory (the “Sabatini lab”). Dr. Sabatini had a well-deserved reputation for mentoring young scientists that attracted applicants from the best schools in the world. The ‘investigation’ was conducted at the behest of Dr. Ruth Lehmann, who took over as the Whitehead’s Director in July 2020, after Dr. Sabatini made it clear that he did not have an interest in being Director as he wanted to continue focusing on his research.

[4.] The Whitehead’s ‘investigation’ was a sham. Although ostensibly triggered by a diversity survey distributed to those working at Dr. Sabatini’s lab, less than a half-dozen members of Dr. Sabatini’s lab completed the survey. Instead, the centerpiece of the ‘investigation’ became Dr. Knouse’s fabricated claims that Dr. Sabatini had sexually harassed her (when in fact the exact opposite was the case) and had subsequently threatened to retaliate against her if she reported him.

[5.] For months, the Whitehead’s attorneys conducted extended interviews, often on multiple occasions, with the members of Dr. Sabatini’s lab. Interviewees reported that the attorneys conducting the supposed impartial investigation spent literally hours attempting to elicit unflattering information about Dr. Sabatini while their descriptions of what lab culture was really like were ignored. Several interviewees complained directly to Dr. Lehmann about the lawyers’ bias and their intransigent refusal to listen to the truth, to no effect whatsoever.

And here’s an excerpt from the motion to stay and impound:

Sabatini’s action involves an independent workplace investigation commissioned by the Whitehead Institute for Biomedical Research (“Whitehead”). The “extensive investigation and report” identified “multiple violations of Whitehead’s policies, including a policy prohibiting sexual harassment.” See Exhibit 1, Statement of L. Rafael Reif, President of the Massachusetts Institute of Technology (“MIT”), August 21, 2021. As a result, Sabatini’s employment was terminated as an investigator by Howard Hughes Medical Institute (“HHMI”), and he resigned from Whitehead. MIT placed Sabatini on leave and is now undergoing its own investigative process, “with consequences that could extend to revocation of tenure.” Id. Thus, this lawsuit is about what happened in the context of the Whitehead’s workplace investigation – and what is happening at MIT – as a result.

That process, which must be informed by MIT’s own policies and the requirements of both Title IX of the Education Amendments of 1972 and M.G.L. c. 151B, requires confidentiality and bars retaliation against participants in the process.

Notwithstanding, Sabatini decided – with MIT’s processes ongoing – to file this action before this Court. He named as a defendant a young woman scientist who had responded when asked to participate in the Whitehead investigation and who had raised concerns about Sabatini’s conduct. While she did not stand alone, as several men and women spoke to investigators about troubling conduct in the Sabatini Lab, Sabatini focuses on her. His purpose is clear: to chill this young woman’s participation in the ongoing investigation and send a message to anyone else who might otherwise come forward.

As set forth in greater detail below, the Defendants believe that Sabatini’s lawsuit – its timing, contents, and public distribution – represents a direct attack on the pending proceedings at MIT and undermines all the law’s protections against retaliation and the protection of potential witnesses to participate in them.

Thus, in the interests of justice, the Defendants come before this Court and seek an emergency order, staying all proceedings to permit the investigative and deliberative process at MIT to proceed to the extent possible without the retaliatory reminder of the consequences of participation. They further ask that this Court impound the Complaint and order the Plaintiff not to further disseminate it or otherwise retaliate directly or indirectly against any party1 or participant in the MIT process.

I can’t speak about the motion to stay, but the attempt to seal the case strikes me as hard to justify; cf. Bernstein v. Bernstein Litowitz Berger & Grossman (2d Cir. 2016), which held that both the First Amendment and the common-law right of access generally preclude sealing Complaints in civil cases, even in cases that are dropped weeks after the case is filed. In any case, I suppose we’ll see soon enough what the court says about that.

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Elon Musk Calls UN Crisis Agents Bluff On “Solving” World Hunger

Elon Musk Calls UN Crisis Agents Bluff On “Solving” World Hunger

The world’s richest man, Elon Musk, who now has a net worth of nearly $300 billion, has said he will donate $6 billion to fight world hunger…if the UN can prove that much money would save tens of millions of lives.

Musk was responding to director of the UN’s World Food Programme, who told CNN last week that $6 billion from people like Musk and Jeff Bezos could “help 42 million people” who he said “were literally going to die if we don’t reach them”. 

In a Tweet out this weekend, Musk challenged the UN’s statement, saying that if the World Food Programme could provide him “open sourced accounting” on how the $6 billion would be used, he would sell Tesla stock “right now and do it”.

Because we all know how important open sourced accounting is to Musk…

Musk demanded that the public “see precisely how the money is spent”, he wrote on Twitter.

The WFP’s David Beasley responded to Musk, according to Insider, by saying:

“I can assure you that we have the systems in place for transparency and open source accounting. Your team can review and work with us to be totally confident of such.”

He clarified that $6 billion wouldn’t “solve world hunger”, as Musk wrote on his Twitter, but would rather be a “one-time donation to save 42 million lives during this unprecedented hunger crisis.”

Beasley has been spending much of his time on Twitter making the case that billionaires should chime in and help world hunger. 

He said on CNN last week: “It’s not complicated. I’m not asking them to do this every day, every week, every year. The top 400 billionaires in the United States, the net-worth increase was $1.8 trillion in the past year. All I’m asking for is .36% of your net-worth increase. I’m for people making money, but God knows I’m all for you helping people who are in great need right now. The world is in trouble.”

Tyler Durden
Mon, 11/01/2021 – 08:25

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Market “Melts Up” As Economic Growth Weakens

Market “Melts Up” As Economic Growth Weakens

Authored by Lance Roberts via RealInvestmentAdvice.com,

Market Back To Extreme Overbought

With earnings season in full swing, stocks continued to push higher this week. Even disappointing earnings from Starbucks, Apple, and Amazon couldn’t keep the bulls down much. So far, the earnings season has pretty much aligned with expectations. As noted by FactSet:

Overall, 56% of the companies in the S&P 500 have reported actual results for Q3 2021 to date. Of these companies, 82% have reported actual EPS above estimates, which is above the five-year average of 76%. If 82% is the final percentage for the quarter, it will mark with the fourth highest percentage of S&P 500 companies reporting a positive earnings surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting earnings that are 10.3% above estimates, which is also above the five-year average of 8.4%.”

Earnings have indeed been very impressive, but as we will discuss, this quarter will likely mark the peak of growth for a while.

The more significant concern, however, remains the underlying technical condition of the market. While the rally has been impressive, rising almost 6% from the recent lows, the market is now back to more extreme overbought levels, trading 2-standard deviations above the 50-dma, and breadth remains troubling.

Chart updated through Friday.

As noted last week, our “money flow buy signal” is near a peak and is close to triggering a “sell signal.” With the MACD still positive, the signal suggests more consolidation than correction. However, a confirming MACD often aligns with short-term corrections at a minimum. Also, as shown, this entire rally from the recent lows has been on very weak volume, which suggests a lack of commitment.

At the moment, the bulls control the market, and downside risk is somewhat limited. However, that positioning is getting very aggressive.

Aggressive Positioning

As noted, the current spat of economic weakness, combined with rising inflationary pressures, doesn’t bode well historically for asset markets. However, the recent 5% correction did little to reverse more aggressive positioning. As shown below, the NAAIM Index (Fund manager positioning) has surged back levels that have previously aligned with short-term corrections or worse.

Such is not surprising given the massive inflows of capital into the market this year alone which have now exceeded $1 trillion. (Chart courtesy of Zerohedge)

Furthermore, with the window for corporate share buybacks opening in November, the primary buyer of equities will return to the market. Share buybacks are already at a record and could add as much as $90 billion to the total by year-end.

While capital flows certainly support the bullish narrative in the short-term, such can get easily reversed with a change in sentiment. As noted, with economic growth weakening and inflation increasing, the risk of a reversal is increasing. Moreover, the chart shows that previous spikes in inflation have not been kind to equity returns.

Of course, inflation also hurts economic growth which impacts profit margins.

Economic Growth Weakens

In March of this year, I penned an article entitled “Sugar Rush,”wherein we discussed the economy would run “hot” and then “crash.” At the time, I received a lot of “pushback” on my “dire predictions” of economic growth later in the year. Furthermore, I followed that analysis asking if Q2 was the “Peak Of Economic Growth?” To wit:

Was the second quarter the peak of economic growth and earnings? If estimates are correct and the year-over-year ‘base effect’ fades, such suggests risk to current earnings estimates. The chart from a “Grossly Defective Product,” utilizes the Atlanta Fed’s current estimates for Q2-2021 GDP. The full-year estimates are from JP Morgan. Notably, the economy quickly slows to 2% heading into 2022.”

At that time, we estimated less than a 4% growth rate for the economy, with the Atlanta Fed well above 6%. On Thursday, the initial release of Q3 GDP came in well below even our lowered expectations of just 2%.

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the third quarter of 2021 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 6.7 percent.” – BEA

Notably, the “advance estimate” is derived from a sampling of economists’ estimates. As actual data gets factored into the GDP calculation during the next two months, the growth estimates will get revised. As discussed in “The Bullish/Bearish Case,” the weakness in the economic data suggests those GDP revisions will be lower.

The implications of weak economic growth are broad. Consumer sentiment will remain weak as inflationary pressures undermine consumption. Furthermore, the negative impact on earnings seems to elude investors currently.

Earnings Expectations Way Ahead Of Reality

Despite economic growth weakening as inflation increases, liquidity reducing, and profit margins under pressure, analysts continue to increase their earnings estimates. Currently, estimates for the Q4-2022 are $207/share according to S&P. As shown, that level will exceed the historical 6% exponential growth trend that contained earnings growth since 1950.

Currently, earnings expectations exceed the annual exponential growth trend by one of the most significant deviations on record. The only other two periods with similar deviations are the “Financial Crisis” and the “Dot.com” bubble.

With analysts extremely exuberant, there seems to be little concern for investors. However, I would caution against such complacency.

The chart below is the Economic Output Composite Index. The index comprises the CFNAI, Chicago PMI, ISM Composite, the Fed surveys, Markit Economic Index, Markit PMI, NFIB, TIPP Confidence, and the LEI. In other words, this indicator is the broadest indicator of the U.S. economy there is.

The last complete set of data is through September. Notably, the index peaked at the second-highest level on record. When October gets fully accounted for, the index will decline further.

There are two critical takeaways from the EOCI index: 1) the stock market tends to either correct or fall into a bear market during reversals, and 2) there is a high correlation between the index and the annual change in earnings.

As we have noted previously, with the Fed beginning to “taper” bond purchases, the risk to investors continues to rise as earnings peak and profit margins contract.

Tyler Durden
Mon, 11/01/2021 – 08:11

via ZeroHedge News https://ift.tt/3EAHTZb Tyler Durden

#MeToo, #TheyLied, and Sealing

From Friday’s article at Science.org (Meredith Wadman):

The Whitehead Institute for Biomedical Research asked a Massachusetts judge today for an emergency stay of a defamation lawsuit filed against it last week by its former biologist David Sabatini.

The Whitehead and its director, Ruth Lehmann, jointly filed the motion in Middlesex County Superior Court. A lawyer for the third defendant in the Sabatini suit, a woman who told Whitehead investigators that Sabatini had sexually harassed her, filed an affidavit in support of the motion. It alleges that Sabatini filed the lawsuit to intimidate the defendant from cooperating with an ongoing probe by the Massachusetts Institute of Technology (MIT), where Sabatini is a biology professor. That process could lead to revocation of his tenure at MIT.

Sabatini resigned from the Whitehead Institute in August after an outside law firm hired by the institute to investigate found “that Dr. Sabatini violated the Institute’s policies on sexual harassment among other policies unrelated to research misconduct,” according to an email Lehmann sent staff there at the time.  He was also fired from the Howard Hughes Medical Institute, which supported his lab at the Whitehead, and placed on administrative leave by MIT while it launched its own probe.

In the lawsuit, which seeks unspecified damages, Sabatini alleges that after he ended a consensual affair with the defendant, she “became determined to destroy” him and fabricated the harassment allegations….

In its motion, however, the Whitehead argues that the lawsuit’s “purpose is clear: to chill this young woman’s participation in the ongoing investigation and send a message to anyone else who might otherwise come forward.”

From the Complaint (Sabatini v. Knouse, No. 21CV02828, Mass. Super. Ct. Middlesex County), which alleges libel, tortious interference with economic relationships, and intentional and negligent infliction of emotional distress:

[1.] This case involves the manipulation and abuse of laws and policies designed to ensure workplace equality to instead punish an ex-lover. The result has been to inflict substantial and potentially irreparable damage to the career of Dr. David M. Sabatini, a brilliant  scientist.

[2.] Beginning in April 2018, Dr. Sabatini had a consensual sexual relationship with a friend,  colleague and peer, Defendant Dr. Kristin A. Knouse. At this time, Dr. Sabatini was a world renowned medical and scientific researcher and a tenured professor at MIT with a stellar reputation who conducted groundbreaking research into the pathways that regulate growth and metabolism and how they are deregulated in diseases like cancer and diabetes. Dr. Sabatini was then, and for many years had been, a principal investigator who had his own laboratory at the Whitehead Institute for Biomedical Research (“the Whitehead”) where Dr. Knouse worked as well as the principal investigator of her own lab. Dr. Sabatini’s sexual relationship with Dr. Knouse was effectively over by July 2019. Starting then and through the rest of 2019 and early 2020, Dr. Sabatini made clear to Dr. Knouse on multiple occasions that he did not want a long term relationship with her. After Dr. Sabatini ended the relationship, Dr. Knouse continued to attempt to engage with him sexually and emotionally despite his repeated requests that she stop.

[3.] In March 2021, the Whitehead commenced an ‘investigation’ into the ‘culture’ in Dr. Sabatini’s laboratory. At that time, almost 40 individuals, including post-doctoral fellows, Ph.D. students, researchers, and others, worked in Dr. Sabatini’s laboratory (the “Sabatini lab”). Dr. Sabatini had a well-deserved reputation for mentoring young scientists that attracted applicants from the best schools in the world. The ‘investigation’ was conducted at the behest of Dr. Ruth Lehmann, who took over as the Whitehead’s Director in July 2020, after Dr. Sabatini made it clear that he did not have an interest in being Director as he wanted to continue focusing on his research.

[4.] The Whitehead’s ‘investigation’ was a sham. Although ostensibly triggered by a diversity survey distributed to those working at Dr. Sabatini’s lab, less than a half-dozen members of Dr. Sabatini’s lab completed the survey. Instead, the centerpiece of the ‘investigation’ became Dr. Knouse’s fabricated claims that Dr. Sabatini had sexually harassed her (when in fact the exact opposite was the case) and had subsequently threatened to retaliate against her if she reported him.

[5.] For months, the Whitehead’s attorneys conducted extended interviews, often on multiple occasions, with the members of Dr. Sabatini’s lab. Interviewees reported that the attorneys conducting the supposed impartial investigation spent literally hours attempting to elicit unflattering information about Dr. Sabatini while their descriptions of what lab culture was really like were ignored. Several interviewees complained directly to Dr. Lehmann about the lawyers’ bias and their intransigent refusal to listen to the truth, to no effect whatsoever.

And here’s an excerpt from the motion to stay and impound:

Sabatini’s action involves an independent workplace investigation commissioned by the Whitehead Institute for Biomedical Research (“Whitehead”). The “extensive investigation and report” identified “multiple violations of Whitehead’s policies, including a policy prohibiting sexual harassment.” See Exhibit 1, Statement of L. Rafael Reif, President of the Massachusetts Institute of Technology (“MIT”), August 21, 2021. As a result, Sabatini’s employment was terminated as an investigator by Howard Hughes Medical Institute (“HHMI”), and he resigned from Whitehead. MIT placed Sabatini on leave and is now undergoing its own investigative process, “with consequences that could extend to revocation of tenure.” Id. Thus, this lawsuit is about what happened in the context of the Whitehead’s workplace investigation – and what is happening at MIT – as a result.

That process, which must be informed by MIT’s own policies and the requirements of both Title IX of the Education Amendments of 1972 and M.G.L. c. 151B, requires confidentiality and bars retaliation against participants in the process.

Notwithstanding, Sabatini decided – with MIT’s processes ongoing – to file this action before this Court. He named as a defendant a young woman scientist who had responded when asked to participate in the Whitehead investigation and who had raised concerns about Sabatini’s conduct. While she did not stand alone, as several men and women spoke to investigators about troubling conduct in the Sabatini Lab, Sabatini focuses on her. His purpose is clear: to chill this young woman’s participation in the ongoing investigation and send a message to anyone else who might otherwise come forward.

As set forth in greater detail below, the Defendants believe that Sabatini’s lawsuit – its timing, contents, and public distribution – represents a direct attack on the pending proceedings at MIT and undermines all the law’s protections against retaliation and the protection of potential witnesses to participate in them.

Thus, in the interests of justice, the Defendants come before this Court and seek an emergency order, staying all proceedings to permit the investigative and deliberative process at MIT to proceed to the extent possible without the retaliatory reminder of the consequences of participation. They further ask that this Court impound the Complaint and order the Plaintiff not to further disseminate it or otherwise retaliate directly or indirectly against any party1 or participant in the MIT process.

I can’t speak about the motion to stay, but the attempt to seal the case strikes me as hard to justify; cf. Bernstein v. Bernstein Litowitz Berger & Grossman (2d Cir. 2016), which held that both the First Amendment and the common-law right of access generally preclude sealing Complaints in civil cases, even in cases that are dropped weeks after the case is filed. In any case, I suppose we’ll see soon enough what the court says about that.

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Futures Meltup To New All Time High As November Begins With A Bang

Futures Meltup To New All Time High As November Begins With A Bang

US futures and European stocks rose to a new record high to start the historically stellar month of November…

… and Asian markets jumped amid positive earnings surprises and as concerns of a global stagflation and central bank policy error faded for a few hours (they will return shortly). TSLA melted up by another $35BN in market cap “because gamma.” S&P 500 futures climbed 0.4% after the cash index posted the biggest monthly gain since last November. Treasury Secretary Janet Yellen expressed confidence in the continuing recovery from the pandemic, helping spur gains in equity markets. Health-care shares rallied in Europe. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting to announce the start of tapering (which will then lead to rate hikes next July according to Goldman). Oil rebounded on fresh supply concerns.

In addition to the now absolutely batshit insane meltup in Tesla, which won’t end until the SEC cracks down on gamma squeeze manipulation, other mega-cap technology stocks such as Google, Meta, Microsoft, Amazon.and Apple, aka oddly enough GAMMA, traded mixed. Exxon and Chevron added about 0.7% each as JP Morgan raised its price target on the oil majors following their strong quarterly results last week. Major Wall Street banks gained between 0.2% and 0.8%. The broader S&P 500 financials sector slipped last week, breaking a three-week winning streak. Lucid Group Inc. rose 4.8% in premarket, extending its advance from last week, after the new U.S. tax plan included a proposal to make EV tax credits more widely available. Harley-Davidson Inc jumped 8.2% after the European Union removed retaliatory tariffs on U.S. products including whiskey, power boats and company’s motorcycles. Here are the most notable pre-market movers:

  • Tesla shares rise 2.3% in U.S. premarket trading after their biggest monthly gain in almost a year in October
  • ABVC BioPharma jumps more than 700% as thelittle known biotechnology company garners attention from retail traders on social media
  • Ocugen and Zosano (ZSAN US) are some other top gainers among retail trader stocks in premarket

A largely upbeat earnings season has helped investors look past a mixed-macro economic picture, with the benchmark S&P 500 and the tech-heavy Nasdaq recording their best monthly performance since November 2020 in October. Of the 279 S&P 500 companies that have reported quarterly results, 87% have met or exceeded estimates. Among members of Europe’s Stoxx 600 index, 68% surpassed expectations. On the economic data front, readings on October factory activity data from IHS Markit and ISM are due after market open, followed by non-farm payrolls on Friday.

Focus is now on the Fed’s two-day policy meeting which concludes at 2pm on Nov 3, where the central bank will announce the tapering of its $120 billion monthly bond buying program by $15 billion. With recent U.S. data showing inflation pressures building, the market has also started pricing in rate hikes next year. November and December tend to be among the strongest months for stocks and any hawkish tilt in the Fed’s message could catch equities by surprise.  Meanwhile, Biden’s economic agenda seemed to be on track as Democratic lawmakers worked to overcome their differences on a $1.75 trillion social-spending plan.

“Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalization.”

European stocks hit the afterburner out of the gate with the Euro Stoxx 50 adding as much as 1% before drifting off best levels. FTSE MIB and IBEX outperform, FTSE 100 lags slightly. Banks, construction and travel are the strongest sectors; tech the sole Stoxx 600 sector in the red. Barclays Plc fell 1.5%. Chief Executive Officer Jes Staley stepped down amid a U.K. regulatory probe into how he characterized his ties to the financier and sex offender Jeffrey Epstein.

Asian stocks were poised to snap a three-day decline thanks to a rally in Japanese equities, which got a boost from an election victory for the country’s ruling party and Prime Minister Fumio Kishida.  The MSCI Asia Pacific Index advanced as much as 0.6%, while Japan’s benchmark Topix and the blue-chip Nikkei 225 Stock Average each added more than 2%. Sony Group, Toyota Motor and Tokyo Electron were among the single-largest contributors to the regional measure’s rise. By sector, industrials and information-technology companies provided the biggest boosts.  Japan’s ruling Liberal Democratic Party defied worst-case scenarios to secure a majority by itself in a closely-watched election Sunday. Analysts said the outcome signals political stability, paving the way for economic stimulus to be executed as anticipated (see Street Wrap).  “Indicators of market activity show that there will be a positive market impact to the election, as although it was not greatly different than expectations, the LDP clearly surpassed some of the more dire polls of last week and there will not likely be any party shake-up in the intermediate-term,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management wrote in a note.  The market is also “reacting positively” to Friday’s share-price gains in the U.S., Vail said. Futures on the S&P 500 rose during Asian trading hours after the underlying gauge added 0.2%.  Asia’s regional benchmark capped a weekly drop of 1.5%, its worst such performance since early October, as disappointing results weighed on big technology stocks. More than half of the companies on the MSCI Asia Pacific Index have reported results for the latest quarter with about 37% posting a positive surprise, according to data compiled by Bloomberg.

Australia’s S&P/ASX 200 index rose 0.6% to 7,370.80, recouping some losses after Friday’s 1.4% plunge. Health and consumer discretionary stocks contributed the most to the benchmark’s gain. WiseTech was among the top performers, snapping a four-day losing streak. Westpac was the worst performer after the bank delivered a smaller share buyback than some had expected. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,030.31.

In rates, fixed income trades heavy with gilts leading the long end weakness. Treasuries were slightly cheaper on the long-end of the curve as S&P 500 futures exceed last week’s record highs. Yields are cheaper by 2bp to 2.5bp from belly out to long-end, with front-end slightly outperforming and steepening 2s10s spread by 1.7bp; 10-year yields around 1.58% with gilts underperforming by 1.1bp, Italian bonds by 3.5bp. Gilts and Italian bonds lag, with Bank of England rate decision due Thursday. In the U.S., weekly highlights include refunding announcement and FOMC Wednesday and Friday’s October jobs report. Bund and gilt curves bear steepen with gilts ~1bps cheaper to bunds. Peripheral spreads swing an early tightening to a broad widening to core with Italy the weakest performer. Overnight futures and options flows included block seller in 5-year note futures (3,900 at 3:09am ET) and a buyer of TY Week 1 129.00 puts at 3 on 10,000, says London trader.

In FX, the Bloomberg dollar index held a narrow range. SEK and CHF top the G-10 score board, GBP lags with cable snapping below 1.3650. TRY outperforms EMFX peers.

  • The BBDXY inched up and the greenback traded mixed against its Group-of-10 peers, with many of the risk-sensitive currencies leading gains
  • The pound retraced some losses against the dollar, after dipping earlier in the European session. The yield on 2-year gilts hit the highest since May 2019. Financial markets are almost fully pricing in a 15-basis point increase in the Bank of England’s benchmark lending rate on Nov. 4, while economists increasingly share that view, even as they see the decision as a far closer call. A record share of U.K. businesses are expecting to increase prices, adding to the inflationary pressures confronting Bank of England policy makers ahead of their meeting on Thursday
  • Australian bonds extended opening gains as traders positioned for the Reserve Bank’s policy decision Tuesday. The Aussie fell, tracking losses in iron ore prices following a weak China PMI, which showed signs of further weakness in October
  • The yen fell for a second day after the ruling Liberal Democratic Party retained its outright majority in a lower-house election, reinforcing bets for fiscal stimulus and reforms. Hedge funds boosted net short positions on the yen to the most since January 2019, raising the risk of a squeeze should risk appetite deteriorate suddenly and demand for havens rise
  • The Turkish lira edged higher after Turkish President Recep Tayyip Erdogan said he had “positive” talks with U.S. President Joe Biden

In commodities, crude futures drift higher. WTI adds 40c to trade near $84; Brent rises ~1% near $84.50. Spot gold is quiet near $1,786/oz. Base metals are mixed: LME nickel and tin outperform, zinc lags.

Looking at today’s calendar, earnings continue on Monday with PG&E and ON Semiconductor reporting pre-market, and NXP Semiconductors post-market. We also get the latest Mfg PMI print and the October Mfg ISM print.

Market Snapshot

  • S&P 500 futures up 0.3% to 4,612.25
  • STOXX Europe 600 up 0.8% to 479.40
  • MXAP up 0.4% to 198.04
  • MXAPJ down 0.3% to 645.49
  • Nikkei up 2.6% to 29,647.08
  • Topix up 2.2% to 2,044.72
  • Hang Seng Index down 0.9% to 25,154.32
  • Shanghai Composite little changed at 3,544.48
  • Sensex up 1.3% to 60,079.40
  • Australia S&P/ASX 200 up 0.6% to 7,370.78
  • Kospi up 0.3% to 2,978.94
  • Brent Futures up 0.3% to $83.95/bbl
  • Gold spot down 0.0% to $1,783.20
  • U.S. Dollar Index little changed at 94.14
  • German 10Y yield little changed at -0.091%
  • Euro up 0.1% to $1.1571

Top Overnight News from Bloomberg

  • House Democratic leaders are pushing hard to get Biden’s package finalized, with votes on both that bill and a smaller infrastructure plan this week — the latest in a string of self- imposed deadlines. The Senate, which already approved the public-works bill, is likely to vote on the larger package later in the month
  • Leaders of the Group of 20 countries agreed on a climate deal that fell well short of what some nations were pushing for, leaving it to negotiators at the COP26 summit in Glasgow this week to try to achieve a breakthrough
  • The U.K. said it will trigger legal action against France within 48 hours unless a dispute over post-Brexit fishing rights is resolved, as the growing spat threatens to overshadow the United Nations’ climate summit
  • Treasury Secretary Janet Yellen said she believes Federal Reserve Chair Jerome Powell has taken “significant action” in the wake of revelations over the personal investments of U.S. central-bank policy makers; Yellen dismissed recent moves in the bond market that have signaled concern about monetary policy makers squelching economic growth, and expressed confidence in the continuing recovery from the Covid-19 pandemic
  • The U.S. and the European Union have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year

Asia-Pac bourses traded mostly higher amid tailwinds from last Friday’s fresh record highs in the US where Wall St. topped off its best monthly performance YTD, but with some of the advances in the region capped as participants digested mixed Chinese PMI data and ahead of this week’s slew of key risk events including crucial central bank policy announcements from the RBA, BOE and FOMC, as well as the latest NFP jobs data. ASX 200 (+0.8%) was led higher by the consumer-related sectors amid a reopening play after Australia permitted fully vaccinated citizens to travel internationally again and with several M&A related headlines adding to the optimism including the Brookfield-led consortium acquisition of AusNet Services and Seven West Media’s takeover of Prime Media. Conversely, the largest weighted financials sector failed to join in on the spoils with Westpac shares heavily pressured following its FY results which fell short of analyst estimates despite more than doubling on its cash earnings. Nikkei 225 (+2.5%) was the biggest gainer with the index underpinned by favourable currency flows and following the general election in which the ruling LDP maintained a majority in the lower house although won fewer seats than previously for its slimmest majority since 2012, while the KOSPI (+0.4%) was kept afloat but with upside limited by slightly softer than expected trade data. Hang Seng (-1.5%) and Shanghai Comp. (+0.1%) were subdued amid a slew of earnings releases and following mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts with the former at a second consecutive contraction, although Caixin Manufacturing PMI was more encouraging and topped market consensus. Finally, 10yr JGBs initially declined amid gains in stocks and recent pressure in T-notes due to rate hike bets with analysts at Goldman Sachs bringing forward their Fed rate hike calls to July 2022 from summer 2023 citing inflation concerns, although 10yr JGBS then recovered despite the mixed results from the 10yr JGB auction which showed a higher b/c amid lower accepted prices and wider tail in price.

Top Asian News

  • Japan’s Kishida Mulls Motegi for LDP Secretary General: Kyodo
  • Home Sales Slump; Another Bond Deadline Looms: Evergrande Update
  • Two Thirds of China’s Top Developers Breach a ‘Red Line’ on Debt
  • Hedge Fund Quad Sells Memory Stocks Citing Demand Uncertainty

European equities (Stoxx 600 +0.6%) have kicked the week off on the front-foot with the Stoxx 600 printing a fresh all-time-high. The handover from the APAC session was a largely constructive one with the Nikkei 225 (+2.6%) the best in class for the region amid favourable currency flows and the fallout from the Japanese general election which saw the ruling LDP party maintain a majority in the lower house. Elsewhere, performance for the Shanghai Composite (-0.1%) and Hang Seng (-0.9%) was less impressive amid a slew of earnings releases and mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts. US equity index futures are trading on a firmer footing (ES +0.5%) ahead of Wednesday’s FOMC announcement and Friday’s NFP data. The latest reports from Washington suggest that House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. Back to Europe, a recent note from JPM stated that Q3 European earnings “are coming in well ahead of expectations in aggregate”, adding that results are healthy when considering the “trickier operating backdrop”. Sectors in the region are higher across the board with Auto names top of the leaderboard. Renault (+3.3%) sits at the top of the CAC 40 with the name potentially gaining some reprieve from agreement to resolve the US-EU steel and aluminium trade dispute (something which the Co. has previously noted as a negative). Also following the resolution, Thyssenkrupp (+2.8%) and Salzgitter (+4.5%) are both trading notably higher. Barclays (-2.0%) shares are seen lower after news that CEO Staley is to step down with immediate effect following the investigation into his relationship with sex offender Jeffrey Epstein; Barclays’ Global Head of Markets, Venkatakrishnan is to take over. UK homebuilders (Persimmon -2.1%, Taylor Wimpey -1.9%, Barratt Developments -1.9%, Berkeley Group -1.7%) are softer on the session amid concerns that the sector could fall victim to higher mortgage rates given the shape of the UK yield curve. Ryanair (+1%) shares are higher post-earnings which saw the Co. continue its recovery from the pandemic, albeit still expects a loss for the year. Furthermore, the board is considering the merits of retaining its standard listing on the LSE. Finally, BT (+4.2%) is the best performer in the Stoxx 600 ahead of earnings on Thursday with press reports suggesting that the Co. could announce that its GBP 1bln cost savings target will be met a year earlier than the guided March 2023.

Top European News

  • SIG Proposed Offering for EU300m Senior Secured Notes Due 2026
  • Delivery Hero’s Turkey Unit CEO Nevzat Aydin to Step Down
  • Goldman Sachs Says ‘Lost Decade’ Is Looming for 60/40 Portfolios
  • URW Sells Stake in Paris Triangle Tower Project to AXA IM Alts

In FX, the Greenback is holding above 94.000 in index terms and gradually ground higher after pausing for breath and taking some time out following its rapid resurgence last Friday to eclipse the 94.302 month end best at 94.313 before waning again. Hawkish vibes going into the FOMC are underpinning the Dollar and helping to offset external factors that are less supportive, including ongoing strength in global stock markets on solid if not stellar Q3 earnings and economic recovery from COVID-19 lockdown or restricted levels. Hence, the DXY is keeping its head above the round number and outperforming most major peers within and beyond the basket, awaiting Markit’s final manufacturing PMI, the equivalent ISM and construction spending ahead of the Fed on Wednesday and NFP on Friday.

  • JPY/AUD – Little sign of relief for the Yen from victory by Japan’s ruling LDP part at the weekend elections as the 261 seat majority secured is down from the previous 276 and the tightest winning margin since 2012. Moreover, Security General Amari lost his constituency and new PM Kishida concedes that this reflects the public’s adverse feelings towards the Government over the last 4 years. Usd/Jpy is eyeing 114.50 as a result and the Aussie is looking precarious around 0.7500 against the backdrop of weakness in commodity prices even though perceptions for the upcoming RBA have turned markedly towards the potential for YCT to be withdrawn following firm core inflation readings and no defence of the 0.1% April 2024 bond target.
  • NZD/EUR/CHF/CAD/GBP – All narrowly mixed vs their US counterpart, and with the Kiwi also taking advantage of the aforementioned apprehension in the Aud via the cross, while the Euro has pared declines from just under 1.1550, but still looks top-heavy into 1.1600. Elsewhere, the Franc is pivoting 0.9160 and 1.0600 against the Euro with more attention on a rise in Swiss sight deposits at domestic banks as evidence of intervention than a fractionally softer than expected manufacturing PMI, the Loonie is keeping afloat of 1.2400 ahead of Markit’s Canadian manufacturing PMI and Sterling is striving to stay above 1.3600, but underperforming vs the Euro circa 0.8470 amidst the ongoing tiff between the UK and France over fishing rights.
  • SCANDI/EM – Robust Swedish and Norwegian manufacturing PMIs plus broad risk appetite is underpinning the Sek and Nok, in contrast to the Cnh and Cny following disappointing official Chinese PMIs vs a more respectable Caixin print, but the EM laggard is the Zar in knock-on reaction to Gold’s fall from grace on Friday, increasingly bearish technical impulses and SA energy supply issues compounded by Eskom’s load-shedding. Conversely, the Try has pared some declines irrespective of a slowdown in Turkey’s manufacturing PMI as the CBRT conducted a second repo op for Lira 27 bn funds maturing on November 11 at 16%.

In commodities, WTI and Brent are firmer this morning with gains of between USD 0.50-1.00/bbl, this upside is in-spite of a lack of fundamental newsflow explicitly for the complex and is seemingly derived from broader risk sentiment, as mentioned above. Nonetheless, Energy Ministers are beginning to give commentary ahead of Thursday’s OPEC+ event and so far Angola, Kuwait and Iraq officials have voiced their support for the planned 400k BPD hike to production in December. This reiteration of existing plans is in opposition from calls from non-OPEC members such as the US and Japan that the group should look to increase production quicker than planned, in a bid to quell rising prices. Separately, Saudi Aramco reported Q3 earnings over the weekend in which its net profit doubled given strong crude prices and sales volumes improving by 12% QQ; subsequently, some analysts have highlighted the possibility for a end-2021 special dividend. Elsewhere, base metals are mixed and fairly contained in-spite of the EU and US announcing an agreement to resolve the ongoing aluminium and steel trade dispute. While spot gold and silver are modestly firmer this morning as the yellow metal remains contained after its slip from the USD 1800/oz mark in the tail-end of last week. Currently, spot gold is pivoting its 100-DMA at USD 1786 with the 50- and 200-DMAs residing either side at USD 1780/oz and USD 1791/oz respectively.

US Event Calendar

  • 9:45am: Oct. Markit US Manufacturing PMI, est. 59.2, prior 59.2
  • 10am: Oct. ISM Manufacturing, est. 60.5, prior 61.1
  • 10am: Sept. Construction Spending MoM, est. 0.4%, prior 0%

DB’s Jim Reid concludes the overnight wrap

Welcome to November. I had three halloween parties over the weekend which is probably more than the entire number I went to before I had kids. I still have some spooky make up on this morning that I just couldn’t get off from last night. So there’s a reason alone to zoom into the call at 3pm today.

As it’s the 1st of November Henry is about to publish our monthly performance review. It was a hectic month of higher inflation expectations and commodities, and also the best S&P 500 month of the year. Bonds underperformed across the board but these small negatives masked great volatility and stress under the surface, especially in the last week. See the report that should be out in the next 30-60mins.

With all due respect to our readers in Australia, I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes the most important event of the week could be the RBA meeting tomorrow. 2 year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond. I’ve absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I’ve always disliked the forward guidance era as it encourages markets to pile on to much riskier, one way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change. It’s unclear if the full implications of last week’s carnage at the global front end has yet been cleared out. There is lots of speculation about large unwinds, big stop losses etc. Liquidity was also awful last week. Much might depend on central banks this week. Make no mistake though there is considerable pain out there.

The latest this morning in Aussie rates is that the 2y yield is down around -7bps while the 10y yield is down -19.0bps. So we wait with baited breath for tomorrow. Elsewhere in Asia, the Nikkei 225 (+2.42%) is charging ahead this morning as Japan’s Liberal Democratic Party kept its majority after lower house elections, thus boosting optimism about a potential fiscal stimulus. Elsewhere, the KOSPI (+0.43%) and the Shanghai composite (+0.07%) are outperforming the Hang Seng (-1.10%). In terms of data, China’s official manufacturing PMI fell from 49.6 to 49.2 (49.7 expected), not helped by commodities price rises and electricity shortages. The non-manufacturing PMI also fell to 52.4 from 53.2 (consensus 53). The Caixin manufacturing PMI did beat at 50.6 this morning (consensus 50). In terms of virus developments in the region, Shanghai Disneyland is closed amid recent COVID outbreaks, while Singapore is adding ICU beds in response to high levels of serious cases. The S&P 500 mini futures is up +0.23% this morning, the US 10y Treasury is at 1.56% (+1.2bps).

It’s strange to have a likely Fed taper announcement on Wednesday be third billing for the week but the BoE on Thursday might be the next most important meeting as it’s still a finely judged call as to whether they hike this week or not. DB (preview here) think they will raise rates by 15bps with two 25bps hikes in February and May. They’ll also end QE a month earlier than planned.

So over to the third billing, namely the Fed. They will announce a well flagged taper on Wednesday. In line with recent guidance, DB expect that the Fed will announce monthly reductions of $10bn and $5bn of Treasury and MBS purchases, respectively. With the first cut to purchases coming mid-November, this will bring the latest round of QE to a conclusion in June 2022.

The Fed has some flexibility with this timetable but it will be interesting to hear how much Powell pushes back on markets that price in two hikes in 2022, including one almost fully priced for before the taper ends. If markets attacked the Fed in the same way they have the RBA the global financial system would have a lot of issues so it’s a fine balance for the Fed. They won’t want to push back too aggressively on market pricing given the uncertainty but they won’t want an outright attack on forward guidance.

Moving on, a lowly fourth billing will be reserved for US payrolls on Friday. DB expect the headline gain (+400k forecast, consensus +425k vs. +194k previously) to modestly outperform that of private payrolls (+350k vs. +317k) and for the unemployment rate to fall by a tenth to 4.7% and average hourly earnings to post another strong gain (+0.4% vs. +0.6%) amidst still-elevated hours worked (34.8hrs vs. 34.8hrs).

Outside of all this excitement, we have the COP26 which will dominate all your news outlets. The other main data highlight are the global PMIs (today and Wednesday mostly) which will give insight into how the economic recovery has progressed in the first month of Q4 with the surveys shedding light onto how inflation is affecting suppliers. There is lots more in store for us this week but see the day by day calendar at the end for the full run down

The market also enters the second half of the 3Q earnings season. There are 168 S&P 500 and 85 Stoxx 600 companies reporting this week with 52% of the S&P 500 and 48% of the STOXX 600 having already reported.

DB’s Binky Chadha published an update on earnings season over the weekend (link here). In the US, the size of the earnings beat has declined over the course of the season and is on track to hit 7%, well below the record 14-20% range post pandemic. Excluding the lumpy loan-loss reserve releases by banks, the beat is even lower at 5%, bringing it back in line with the historical norm. Quarterly earnings are on track to be down sequentially from Q2 to Q3 by -1.1% (qoq seasonally adjusted), the first drop since Q2 2020. The flat to down read of earnings is broad based across sector groups. Forward consensus estimates have fallen outside of the Energy sector. The S&P 500 nevertheless has seen one of the strongest earning season rallies on record. See much more in Binky’s piece.

This week’s highlights include NXP Semiconductors, Zoom, and Tata Motors today before Pfizer, T-Mobile, Estee Lauder, BP, Mondelez, Activision Blizzard, and AP Moller-Maersk tomorrow. Then on Wednesday we’ll hear from Novo Nordisk, Qualcomm, CVS, Marriott, Albemarle, and MGM resorts. Thursday sees reports from Toyota, Moderna, Square, Airbnb, Uber, and Deutsche Post and then a busy Friday with Alibaba Group, Dominion Energy, Honda, and Mitsubishi.

Looking back now and reviewing last week in numbers, it was a week of heightened intraday volatility within rates, as markets brought forward the expected timing of central bank policy actions across advanced economies while revising down growth expectations. Position stop outs almost certainly played a role as the magnitude of the moves were out of sync with macro developments while FX and equity markets were not nearly as volatile.

Global front end rates started moving in earnest on Wednesday, following the Bank of Canada’s surprise decision to end net asset purchases, while bringing forward the timing of liftoff, which sent 2yr Canadian bonds more than +20bps higher. In the following days, the RBA opted not to defend their yield curve control target, and ECB President Lagarde did not use her press conference to provide much of a forceful pushback on recent repricing.

All told, almost every DM economy saw their 2 yr bond selloff, including the US (+4.4 bps, +0.8 bps Friday), UK (+4.9 bps, +5.9 bps Friday), Germany (+5.2 bps, +3.2 bps Friday), Canada (+23bps) and Australia (+65bps). The long end went the other direction in the core countries, with many curves twist flattening over the week as negative growth sentiment weighed on the back end. Nominal 10yr yields declined -6.2 bps (-2.8 bps Friday) in the US, -11.1 bps (+2.5 bps Friday) in the UK, and were flat in Germany (+3.0 bps Friday). Unlike the rest of October, the decline in nominal yields coincided with declining inflation breakevens (albeit from historically high levels), with 10yr breakevens declining -5.2 bps (-0.6 bps Friday) in the US, -25.4 bps (-8.5 bps Friday) in the UK, and -16.3 bps (-11.5 bps Friday) in Germany. Note that outside the core there were some bond markets that moved higher in yield with 10yr bonds in Canada (+7bps), Australia (+30bps) and Italy (+19bps) all higher for different reasons. Some of the bond moves above don’t do the intra-day volatility any justice though.

Elsewhere Crude oil prices dipped to close out what was otherwise another very good month, with Brent and WTI -1.34% (+0.07% Friday) and -0.23% (+0.92% Friday) lower.

Meanwhile, equity markets marched to the beat of a different drum. The S&P 500 (+1.33%, +0.19% Friday), Nasdaq (+2.71%, +0.33% Friday), and DJIA (+0.40%, +.25% Friday) all set new all-time highs, while the STOXX 600 increased +0.77% (+0.07% Friday), cents below the all-time high set in August. Generally strong earnings relative to a worried market prior to the season again supported equity markets. Calls were replete with mentions of supply chain woes and labour shortages though, but companies sounded an optimistic note on end-user demand. Many big tech stocks reported, to more mixed results than the broader index. Alphabet and Microsoft beat on both revenue and earnings, Facebook and Apple missed analyst revenue estimates, while Amazon and Twitter missed revenue and earnings estimates. Ford and Caterpillar, two bellwethers particularly exposed to current supply chain and labour maladies, fared especially well. So far this season 279 companies have reported, with 206 beating on revenue and 237 beating on earnings

Out of D.C., after prolonged negotiations within the Democratic Party, US President Biden unveiled a new social and climate spending framework, containing $1.75 trillion in spending measures as well as revenue-raising offsets. Once the text is finalized, it should enable a vote on the social spending package as well as the separately-negotiated bi-partisan infrastructure bill. More is likely to come this week.

Tyler Durden
Mon, 11/01/2021 – 07:59

via ZeroHedge News https://ift.tt/3GEg97U Tyler Durden

Epstein’s Latest Casualty: Barclays CEO Jes Staley Resigns Over Ties To Suicided Pedophile

Epstein’s Latest Casualty: Barclays CEO Jes Staley Resigns Over Ties To Suicided Pedophile

Yet another finance titan has just been forced out of their CEO job due to unsavory ties to Jeffrey Epstein. Months after Apollo co-founder and former CEO Leon Black abruptly left private equity giant Apollo following an internal uprising over his ties to the now-deceased Epstein, Staley, – who had been tasked with transforming Barclays’ into one of Europe’s top banks with a focus on its credit card business – has been forced out after a regulatory investigation that found Staley’s ties to Epstein were closer than he had let on.

In a statement on Monday, Barclays said it was only made aware of the results of the probe by the Financial Conduct Authority and Prudential Regulation Authority on Friday.

“In view of those conclusions, and Mr Staley’s intention to contest them, the board and Mr Staley have agreed that he will step down from his role as group CEO and as a director of Barclays.”

The statement added: “It should be noted that the investigation makes no findings that Mr Staley saw, or was aware of, any of Mr Epstein’s alleged crimes, which was the central question underpinning Barclays’ support for Mr Staley following the arrest of Mr Epstein in the summer of 2019.”

Per the FT, the bank was blindsided by the findings. Previously, it had planned to send Staley to the COP26 climate talks in Glasgow this week.

Instead, Staley will be replaced by his longtime lieutenant, CS Venkatakrishnan – known as Venkat – head of the global markets trading unit at the bank as well as its former chief risk officer, will attend in Staley’s stead.

Tyler Durden
Mon, 11/01/2021 – 07:11

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Today in Supreme Court History: November 1, 1961

11/1/1961: Planned Parenthood League of Connecticut opens center in New Haven, CT.

“Specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them life and substance.” An ”emanation” refers to a ray of light. During a lunar eclipse, the ”umbra” refers to the darkest part of the shadow formed when the Earth orbits between the sun and the moon. The ”penumbra” refers to the lighter part of the shadow, where some of the ”emanations” from the sun are visible.

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Today in Supreme Court History: November 1, 1961

11/1/1961: Planned Parenthood League of Connecticut opens center in New Haven, CT.

“Specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them life and substance.” An ”emanation” refers to a ray of light. During a lunar eclipse, the ”umbra” refers to the darkest part of the shadow formed when the Earth orbits between the sun and the moon. The ”penumbra” refers to the lighter part of the shadow, where some of the ”emanations” from the sun are visible.

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All Fed Meetings Are Equal, But Some Are More Equal Than Others

All Fed Meetings Are Equal, But Some Are More Equal Than Others

Authored by Peter Tchir via AcademySecurities.com,

I cannot remember the last time I was this excited about an FOMC meeting. Yes, there is always some risk of a surprise that roils markets, but the reality is that the last few meetings had fairly obvious “base cases” and Powell and the FOMC didn’t stray far from those base cases. This meeting has the potential to be market moving. So much so, that we started to address it in last weekend’s Clear as Mud.

Given the price action early in the week, we were compelled to further explain what we’ve been calling the  Bond Market “Paradox”. We are seeing “pivot” flattening and steepening, rather than traditional bull/bear flatteners/steepeners (the moves at the front end and long end of the bond market have been centered around the relatively stable 5-year part of the curve. The gyrations and strange trading patterns continued and we attempted to further address outright levels and curves (including the 20s vs 30s inversion) in Policy Mistake or Fund Positioning Mistake?. While not the focus of the last piece, we’ve been getting a lot of interesting feedback on the “Fed Profit Machine” section of that report.

Why Is This Meeting So Different?

Coming into this meeting I want to highlight, or re-emphasize several points that are crucial for markets and have created a very different backdrop than we’ve seen ahead of other recent meetings:

  • The market is more bearish than even the extreme dots. Whenever I look at the Fed’s “dot plot” I largely ignore the outliers. Especially those that are very high or very low. I suspect that those dots are submitted to make a point rather than in a real belief that Fed Funds will be there. The market (based on Fed Fund futures) is now pricing in more hikes than even the most wildish hawkish dots for 2022. Will the dots move to catch up to markets, or will they be stable?

  • Central Banks have hiked rates and cut bond purchases. The Fed did not hike rates (or initiate taper) on September 22nd, but the Norwegian central bank did hike rates the following day. Central banks, ranging from Australia, to Canada, to the Bank of England and even the ECB have all sounded or even acted hawkish since that last FOMC meeting.

  • The death of “transitory”. I’ve been on the side of higher inflation (2% to 3%) for longer (2 to 3 years) than consensus. Consensus seems to be catching up and is something the Federal reserve has to face. Bill Ackman tweeted (@BillAckman) his thoughts on what the Fed should do, and also a link to the presentation he gave to parts of the  Fed on October 20th (presentation). I highlight the presentation because at the end he lists five risk factors, a few of which are right up Academy Securities’ alley – China, supply chains, geopolitical risk and cybersecurity risk. If you haven’t read Academy’s latest Around the World, I highly recommend it, more and more people are listing geopolitical risk as a major concern. The geopolitical and cybersecurity, cyberwarfare and crypto webinars from our inaugural Geopolitical and Macro risk summit in Annapolis are also worth a watch.

  • Bond Market Volatility. So far, the increased volatility in global bond markets, has remained relatively isolated to the bond markets (Friday saw the MOVE index, a measure of bond market implied volatility move higher, while VIX finished the day marginally lower). Can that continue? Can you have value at risk calculations in the bond market rising, forcing unwinds, without impacting stocks? (there is a real possibility that it is already affecting stocks as it is possible some funds that got the bond market wrong and are being forced to liquidate, were also caught short stocks, but I have not confirmation of that).

Tapering, Hiking, and the Eye of the Needle

My base case for this meeting is:

  • Tapering is announced. It is either ironic, or par for the course, that it would be difficult to avoid tapering, just when it might be more useful than I think it has been for the past year or so (I view that bond purchases should be far more fluid, than they are). They should be there to react to market dislocations, which they were, during the heights of the pandemic panic. They don’t seem to have been that necessary for some time, at least not in regards to their stated role of helping market liquidity. In any case, expect a gradual tapering, which is largely priced in.

    • If the pace of tapering announced is aggressive, then it could hit markets, causing yields to rise and risk assets to fall.

    • If no tapering is announced, the initial reaction should be for risk assets to rally. That seems obvious, but I can’t help but wonder if not tapering would cause many to lose faith in the credibility of the Fed? I almost hate to say this, but if the Fed doesn’t taper, bitcoin should surge! There is already a pattern developing where, at least in the short-term, bitcoin rallies when central banks seem dovish and sells off when hawkish headlines hit (which makes sense, at least for those following the irresponsible central bank line of reasoning for wanting crypto rather than fiat).

  • Just like the country has codified the “Separation of Church and State,” the Fed will separate the taper decision from the hiking decision. At one level, the last meeting was all about Powell laying out that distinction. He wanted to eliminate any confusion that hiking, and tapering are linked. He pounded home the concept that hiking has a much higher bar, than tapering.

    • Transitory sounds feeble. If the main line of defense for not becoming more aggressive on hikes is that there are risks to the economy or that inflation and supply chain issues are transitory, it will not go over well. The transitory argument can be part of the rationale for remaining dovish, but if that is the only reason to remain dovish, it may underwhelm markets. I think the market would price in a policy mistake if Powell goes down this path, with more pivot flattening. Equities, likely rally along with the long-bond, largely since algos seem to have that correlation working, but there seems a risk that someone might decide a policy mistake on interest rates is not good for stocks.

    • Not Done on Jobs. The Fed can also use jobs as a reason to hold off on hiking. They can talk about overall levels of employment and then drill down to subsets that are lagging. This remains a powerful argument, despite the sagging labor participation rate and the still record number of unfilled jobs. Lots of weird things going on in the job market, but it is difficult for the Fed to go wrong by pounding the table that there is more to be done on the jobs front. I’m not sure if low rates is helping on the employment front, or just making it easier for companies to automate away the jobs they can’t fill, but it is an effective argument. Not hiking because of jobs seems neutral for markets, with maybe a bias to steepen.

Long Term Averages.

The Fed will have to rely on longer term averages. As can be seen in the chart below, it wasn’t uncommon to get PCE above 2% for extended periods and it averaged 2.2% for the 4 years from June 2004 to June 2008. We are currently at a 5-year average of 1.9%, which is getting close to 2%, but the Fed could run hot for months or quarters without getting above 2% (depending on how hot we run). That average benefits from the fact that as we move forward in time, we drop off some higher historical averages. The 10-year average is 1.75%. If we want to think about the 10-year average then we could run hot for years to come. While 10 years might be a bit on the long side for you and I, a 10 year time horizon for a central bank doesn’t seem too unrealistic, especially if it suits their agenda. 

This could scare markets that if the Fed is going to make a mistake, it will be too let inflation get out of control, and I’d expect a big steepener to be the result with longer dated bond yields heading back to the highs of earlier this year, especially when combined with tapering.

Bottom Line

This will be a challenging meeting for the Fed and Powell to navigate.

A gradual taper is announced and Powell bends over backwards to soothe fears of a rate hike – 80% likely. We get a significant steepening of the yield curve, with long dated bond yields leading the way as they surge higher. Growth stocks, may react negatively at first, due to higher long bond yields, but cyclicals and small caps should immediately surge on growth and inflation. That growth should ultimately help all stocks, even with higher yields.

The explanation of why they won’t be hiking, will influence market reaction, as much or more than the decision itself.

Hiking on the table – 2% chance. If the Fed confirms hikes (as well as tapers) then this could get a bit ugly. Hikes are far worse for markets and the economy than tapering. I do not see this as being a likely scenario (I couldn’t even bring myself to say 5%, but it would be ugly).

No taper – 18% chance. I guess stocks surge, at least initially. Then everyone can figure out how to buy crypto as I think far too many large asset managers, in control of far too much AUM, believe the Fed is already behind on tapering and this would not be a boost of confidence.

It isn’t exactly Super Bowl Sunday, but this FOMC meeting and press confidence should be fun to watch!

Tyler Durden
Mon, 11/01/2021 – 06:30

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Yes, It Was An ‘Evil Empire’


cathey1

Reason‘s December special issue marks the 30th anniversary of the collapse of the Soviet Union. This story is part of our exploration of the global legacy of that evil empire, and our effort to be certain that the dire consequences of communism are not forgotten.

It was the summer of 1983, and I, a Soviet émigré and an American in the making, was chatting with the pleasant middle-aged woman sitting next to me on a bus from Asbury Park, New Jersey, to Cherry Hill. Eventually our conversation got to the fact that I was from the Soviet Union, having arrived in the U.S. with my family three years earlier at age 17. “Oh, really?” said my seatmate. “You must have been pretty offended when our president called the Soviet Union an ‘evil empire’! Wasn’t that ridiculous?” But her merriment at the supposed absurdity of President Ronald Reagan’s recent speech was cut short when I somewhat sheepishly informed her that I thought he was entirely on point.

In 1983, the 61-year-old empire looked like it would be eternal. My next memorable conversation about the Soviet Union with a fellow passenger, in December 1991, proved otherwise. I was aboard a flight from Moscow to Newark, New Jersey, after a two-week visit, waiting for takeoff. “Do you know that the Soviet Union doesn’t exist anymore?” the man next to me said. I stared. He showed me that day’s International Herald Tribune with a headline about the Belovezha Accords, an agreement by which the leaders of Russia, Ukraine, and Belarus agreed to dissolve the USSR.

The evil empire was over.

The Gulag Empire

The woman on the bus in 1983 did not surprise me. By then, I had already met many Americans for whom “anti-Soviet” was almost as much of a pejorative as it had been in the pages of Pravda, the official newspaper of the Soviet Communist Party. My favorite was a man in the café at the Rutgers Student Center who shrugged off the victims of the gulag camps by pointing out that capitalism kills people too—with cigarettes, for example. When I recovered from shock, I told him that smoking was far more ubiquitous in the Soviet Union, and anti-smoking campaigns far less developed. That momentarily stumped him.

My mother was also at Rutgers at the time as a piano instructor. She once got into a heated argument over lunch with a colleague and friend after he lamented America’s appalling treatment of the old and the sick. She ventured that, from her ex-Soviet vantage point, it didn’t seem that bad. “Are you telling me that it’s just as bad in the Soviet Union?” her colleague retorted, only to be dumbstruck when my mother clarified that, actually, she meant it was much worse. She tried to illustrate her point by telling him about my grandmother’s sojourn in an overcrowded Soviet hospital ward: More than once, when the woman in the next bed rolled over in her sleep, her arm flopped across my grandma’s body. Half-decent care required bribing a nurse, and half-decent food had to be brought from home. My mother’s normally warm and gracious colleague shocked her by replying, “I’m sorry, but I don’t believe you.” Her perceptions, he told her, were obviously colored by antipathy toward the Soviet regime. Eventually, he relented enough to allow that perhaps my grandmother did have a very bad experience in a Soviet hospital—but surely projecting it onto all of Soviet medicine was uncalled for.

It wasn’t just the campus lefties. The Twitter generation may believe that mainstream American culture at the time was in the grip of Reaganite anti-communism, but some of us remember differently. Media coverage of Soviet human rights abuses, for instance, was frequently accompanied by reminders that the United States and the Soviet Union simply had “fundamentally different perceptions of human rights,” as U.S. News & World Report put it in 1985: “To the Kremlin, human rights are associated primarily with the conditions of physical survival.” A 1982 guide for high school study of human rights issued by the National Council for Social Studies even suggested that it was “ethnocentric” to regard “our” definition of human rights as superior to “theirs.”

As Soviet society began to open up under Mikhail Gorbachev’s policy of glasnost (a term that means something like “openness and transparency,” and that one Soviet dissident defined as “a tortoise crawling towards freedom of speech”), more information began to come out in the Soviet press that cast serious doubt on the Soviet Union’s supposed gains on the social welfare side of “human rights.” There were stories about the dismal state of Soviet medicine, about crime, about millions condemned to appalling living conditions, about Dickensian orphanages sheltering abused and malnourished children, and about homeless people who suddenly turned out to exist, despite prior reports to the contrary. (The weekly newspaper Argumenty i Fakty reported that 174,000 vagrants were picked up in 1984 alone.) Meanwhile, the regime was crumbling; as satirist Victor Shenderovich put it later, “the country still had Soviet power but the food had already run out.”

In just a few years, Soviet communism was relegated, just as Reagan had predicted to much ridicule, to “the ash heap of history.” The leaders of the new Russia that emerged in its place themselves echoed the language of “evil empire” when they spoke of the Soviet past: During the 1996 elections, President Boris Yeltsin told supporters at a campaign rally they had to win “so that Russia can never be called an evil empire again.”

For leftists who still saw communism as a noble dream, this was a devastating defeat. In 1999, at the close of what was, in a very real sense, the Soviet century, the Polish-American socialist journalist Daniel Singer—himself the son of a gulag survivor—wrote in The Nation that a reckoning with communist atrocities was necessary; but he also rejected the “corpse-counting” of The Black Book of Communism, a collection of historical essays that sought to chronicle those atrocities. Singer took the authors to task for reducing communism’s record to “crimes, terror and repression.”

“The Soviet Union did not rest on the gulag alone. There was also enthusiasm, construction, the spread of education and social advancement for millions,” Singer asserted, lamenting that the Black Book approach made it impossible to “comprehend why millions of the best and brightest rallied behind the red flag or…turned a blind eye to the crimes committed in its name.” (It was apparently not satisfying to answer with the pithy phrase coined by statistician and essayist Nassim Nicholas Taleb: Because they were “intellectuals-yet-idiots.”)

As the new century rolled onward, the Soviet Union was still dead, but it turned out to be an unquiet ghost. The new man at Russia’s helm, career KGB officer Vladimir Putin, brought back the Soviet anthem (albeit with new lyrics about God and Russian greatness) and the red flag as the Russian Armed Forces banner, working to make Soviet nostalgia respectable—albeit in a weird blend with Russian nationalism, Orthodox Christianity, and reverence for the czars. An idealized image of Soviet communism also bubbled back up among progressives in the West, especially after the reputation of democratic capitalism was left tarnished by the war in Iraq and the Great Recession. “Neoliberalism” was out; “socialism” was in: From 2010 onward, 49 percent or larger portions of Democrats and Democratic-leaning independents and of adults under 30 have said they have a positive view of socialism. By the end of the decade, even communism was surging in popularity: It was viewed favorably by 36 percent of millennials (up from 28 percent in 2018) and 28 percent of Generation Z.

Soviet-style communism is also getting favorable press in progressive venues—from the trollish Chapo Trap House podcast to Salon (“Why you’re wrong about Communism”) to radical chic playpen Teen Vogue, which hailed Karl Marx for his 200th birthday in 2018 as a thinker who “inspired social movements in Soviet Russia, China, Cuba.” On the opinion pages of The New York Times, Kristen Ghodsee, a professor of Russian and East European studies at the University of Pennsylvania, dubiously declared that women had better sex under Soviet-style socialism, a thesis she then expanded into a slim book lauding communist strides toward gender equality. Even The New Republic, once a bastion of liberal anti-communism, jumped on the bandwagon in 2016 with “Who’s Afraid of Communism?” by former Occupy Wall Street activist Malcolm Harris, who zinged Hillary Clinton for her old-fashioned Cold Warrior mentality and argued that communism was getting a bum rap, given the Soviet Union’s heroic role in the victory over Nazism and the key contributions of communists to “liberation” struggles all over the world.

On social media today, “tankies” with hammer-and-sickle emojis in their usernames and Marx or Lenin profile headers are a loud and proud faction of lefty Twitter. These are overwhelmingly young people, in their 20s and sometimes late teens, steeped in the racial and sexual identity politics of their generation of activists, often sporting gender pronouns and rainbow flags in their bios along with the communist symbology. Many seem convinced that actual Soviet-style communism—not just the “hasn’t been tried” utopian ideal—was an admirable vision. “The more I read about the Soviet Union the more obvious it becomes why the west had to demonize it,” writes a “queer,” “anti-imperialist” Twitter user with the colorful moniker “hezbolleninism.” “The USSR’s ideology was not only a threat to capitalism, it was a threat to white supremacy.”

A Picture of Prejudice

Not surprisingly, like the 20th century “political pilgrims” (as author Paul Hollander called them) who traveled to the Soviet Union or Cuba and came back with glowing reports, the 21st century communist nostalgics often have a tenuous connection with reality.

Hezbolleninism’s tweet, for example, featured a screenshot from the 2018 book Politics and Pedagogy in the ‘Post-Truth’ Era: Insurgent Philosophy and Praxis (Bloomsbury Academic) by Derek R. Ford, a professor of education studies at DePauw University in Indiana, discussing anti-racism in the Soviet Union. Ford describes a 1930 incident involving “Robert Robertson, a Jamaican native and U.S. citizen” who came to work at a tractor factory in Stalingrad alongside a few hundred white American technicians. (The Soviets were strenuously recruiting foreign and especially American specialists, since Lenin’s prediction that the new regime would quickly train its own cadre with proletarian backgrounds and impeccable Bolshevik convictions had proved a tad overconfident.) On his first day, the black worker was roughed up by two white Americans when he tried to eat in the American dining hall. The assault was widely publicized and denounced at factory meetings around the Soviet Union; the attackers were convicted of “white chauvinism” at a show trial and sentenced to two years of imprisonment (commuted to 10 years banishment from the Soviet Union). “Robertson remained in the Soviet Union, where he eventually gained citizenship,” reports Ford, for whom this episode demonstrates “the seriousness with which the Soviet Union—its people and its state—took racism.”

But Ford left out the end of the story. After becoming a Soviet citizen, Robinson (yes, Ford got the name wrong) spent decades trying to get out of the supposed anti-racist paradise. He finally managed it in 1974, when he obtained permission to travel to Uganda as a tourist and never returned. He eventually made it to the U.S., regained his citizenship in 1986, and wrote a scathingly anti-Soviet 1988 memoir titled Black on Red. Robinson conceded that the Soviet Union gave him professional opportunities he probably would not have had as a black American in that era. But he also described the ordeal of the Great Terror, when his friends and colleagues were disappearing one after another, as well as casual and not-so-casual encounters with racism.

Robinson’s Soviet saga is richly illustrative of Soviet “anti-racism,” deployed almost exclusively as a weapon with which to bludgeon the Americans (and more generally the West). Black people were useful insofar as they advanced the communist cause, but they were treated more as white-savior projects than as human beings in their own right.

Likewise, the African students who began to attend Soviet universities in the 1960s as part of the USSR’s outreach to newly decolonized African countries tended to be viewed by their hosts as backward, needy, and often ungrateful recipients of Soviet largesse. In a fascinating 2014 article in the journal Diplomatic History, Russian studies scholar and podcaster Sean Guillory writes that the Africans were given insultingly easy entrance exams with elementary school–level math problems, while their complaints of racist harassment were generally shrugged off as hypersensitivity bred by colonialist oppression. Meanwhile, grassroots Soviet humor generated its share of extremely nasty jokes (which circulated freely at my school in the 1970s) depicting the Soviet Union’s African guests as simple-minded savages, perpetually horny for white women and literally related to monkeys.

Anti-black racism was just part of a bigger picture of prejudice. As early as 1926, the Soviet regime began to plan the removal of ethnic Koreans living in the Soviet Far East, who were seen as a threat who might work with the Japanese to undermine the Soviet Union. Deportations began slowly, until 170,000 people were forcibly moved to Central Asia in 1937. While parallels to the internment of Japanese Americans in the United States are obvious, the Soviet version was far deadlier: estimates of the death toll from malnutrition, illness, and exposure (with the deportees transported in unheated cargo cars in cold weather and resettled in hastily constructed barracks or huts) range from 16,500 to 50,000. This ethnic cleansing was followed by others in the 1940s: Kalmyks, Crimean Tatars, Chechens, and other ethnicities were collectively branded as Nazi collaborators and brutally relocated. Some were allowed to return after Josef Stalin’s death; others, such as the Crimean Tatars, were not.

Anti-Asian prejudice soared after the Sino-Soviet split, with rabid propaganda depicting the Chinese as the ultimate enemy and generating genuine paranoia about a Chinese invasion. As often happens, anyone who looked Chinese was fair game. My mother once heard a shopper at a Moscow farmers market shout to a vendor, “You! Chinaman! How much for your apples?” When the vendor defensively replied that he was Kazakh, the woman retorted, “Yeah, I know you’re not a Chinaman. If I thought you were, I’d bash your head in.”

And that’s not to mention the anti-Semitism that culminated in the campaign against “cosmopolitans” and Zionists in Stalin’s final years, but continued in more low-key ways for decades after that. Discrimination against Jews in college admissions was so common that it was reflected in numerous jokes (e.g., one in which an ethnic Russian taking a college entrance history exam is asked for the year of the sinking of the Titanic while a Jewish applicant is told to list all the casualties by name). The brother of one of my mother’s piano students got a failing grade on the entrance exams despite a brilliant academic record; after his father got an influential professor to intervene, it turned out that the examiner thought he looked Jewish. In deference to the professor, the examiner agreed to change the failing grade but irritably remarked, “Just don’t tell me he’s not a Jew—I’m not stupid!”

On a more basic level, Soviet anti-Zionist propaganda trickled down into a casual anti-Semitism that regularly manifested itself in harassment and even violence. Thankfully, my own bad experiences were very minor (a boy in my building shouting “You miserable Jew-girl!” during a playground conflict; a drunk at a bus stop ranting about Jews). But my parents endured several years of abuse by a Jew-hating neighbor in a communal apartment before they were finally able to move out. Other people had harrowing stories of children being tormented at school by anti-Semitic bullies who acted with impunity. A fellow émigré I met in the U.S. told me her decision to leave was solidified when she learned that her teenaged son had started carrying a knife to school for self-defense.

Ironically for American leftists, the dominant Soviet attitude toward race and ethnicity was precisely the sort of see-no-evil faux colorblindness that progressives love to denounce in the U.S. context. In nine and a half years of Soviet schooling, I sat through numerous lectures on proper Soviet values and only ever heard racial or ethnic prejudice mentioned as an example of Bad Things Over There In America.

Even the enemy’s racism could be downplayed if convenient: Witness the Soviet authorities’ systematic erasure of the Jewish Holocaust in discussing Nazi atrocities. This adds an ironic asterisk to the praise often heaped on the Soviet Union for its role in defeating the Nazis. Yes, Soviet forces liberated Auschwitz, but the official Soviet report on its horrors described the victims as “citizens of the Soviet Union, Poland, France,” and others, with just one specific mention of Jews—a passing reference to “a Jewish woman named Bella” in an excerpt from a survivor’s statement. In 1961, the poet Yevgeny Yevtushenko was briefly “canceled,” as we would say nowadays, for “fomenting ethnic division” by explicitly focusing on a Nazi massacre of Jews in the famous poem “Babi Yar,” and the Literary Gazette editor who greenlit the poem was sacked.

Some Were More Equal Than Others

Class equality in the Soviet Union was just as phony as anti-racism. In Politics and Pedagogy in the ‘Post-Truth’ Era, Ford admiringly mentions that “wage disparities were relatively minor,” with top officials of the economic ministries earning only three to four times as much as skilled workers. He adds that the earnings gap between the highest- and lowest-paid groups shrank in the 1960s and 1970s.

This comical analysis (“post-truth,” indeed!) leaves out the fact, known to anyone with the remotest familiarity with Soviet life, that living standards in the Soviet Union were not determined primarily by official earnings. Party bosses and high-level government officials received almost everything for free, from palatial apartments and dachas (vacation homes) to chauffeured limousines and consumer goods. There was also a secret hierarchy of “special distribution shops” where even lower-rank members of the party and state bureaucracy could buy groceries—with variety and quality that ordinary citizens could not even dream of, no lines, and lower prices than in regular stores. (My father once got smuggled into such a place by a savvy friend who conned his way past the security guard by insinuating that he knew someone important on the staff, but no purchase could be made without a membership pass.) Shenderovich, the Russian satirist, recalled that at a conference in Irkutsk in the late 1980s, he and his colleagues subsisted on sparse, barely edible meals at a cafe near their hotel—until they learned that they had a pass for the cafeteria of the regional party committee, which offered a cheap five-course dinner featuring such elusive delicacies as tomato salad, venison soup, and baked whitefish.

And then there was the separate shadow economy of blat (favors) based on connections and access. (“It’s not what you know, it’s who you know” was never as true as in the Soviet Union.) For instance, if you could arrange a bed at an elite hospital or admission to a prestigious university—either through your own job or through someone you knew—that could be a ticket to a steady supply of quality food, coveted theater seats, a washing machine, or imported footwear. There was also real money to be made on the black market. If you worked for a store or a warehouse, you pretty much had it made—unless you got greedy and reckless enough to get arrested. People with nothing to steal (engineers, for example) were out of luck.

This fundamental lack of understanding of how the Soviet system of privilege worked is also evident in a hilarious 2018 article in Jacobin, summed up in a tweet that got a well-deserved drubbing: “For all the Soviet Union’s many faults, by traversing its vast architectural landscape, we can get a glimpse of what a built environment for the many, not the few, could look like.” The prime example of architecture “for the many” invoked by author Marianela D’Aprile, an activist with the Democratic Socialists of America, is an elegant writers union resort on Lake Sevan in Armenia that radiated a “quiet luxury.” That is D’Aprile’s “glimpse of [a] possible better world.” Under capitalism, she writes, such a building would be owned by profit seekers and “reserved for those who can pay large sums”—but imagine “if unions could send their members to their lakeside resort.”

One can only wonder whether D’Aprile is genuinely unaware that a writers union resort in the Soviet Union would have been reserved for the cream of the elite, or just willfully blind to facts that might get in the way of her fantasy. To be sure, union-run resorts for ordinary people did exist. In the Soviet Union’s early decades, they provided heavily regimented vacations that stressed physical fitness and were spent with one’s “labor collective,” not with family; later, they became more relaxed and family-oriented. But the accommodations definitely did not exude “quiet luxury”: they generally ranged from atrocious to decent-but-accessible-only-with-connections.

Another major aspect of how privilege operated in the Soviet Union could be summed up in the famous maxim about real estate: location, location, location. My family was immensely privileged simply by virtue of having been born in the capital. A Moscow propiska (the residency permit that each Soviet citizen was required to have) was one of the most coveted things in the country, an incentive to sham marriages, ingenious schemes, and elaborate deceptions. The city enjoyed a special status when it came to snabzheniye (supply of food and consumer goods), quality of services, housing, medicine, and so on. Leningrad (now St. Petersburg) was only a notch below. Other large cities were in the second tier, and it was a downward slope from there until you got to small towns mired in squalor, deprivation, and crime (especially drunken violence). There, you would find decrepit housing, grungy food stores with bare shelves, dismal transit, and worse roads. A bus trip could easily expand from one hour to three in bad weather.

My parents and I saw some of this firsthand in 1979 when, already waiting for an exit visa, we decided to visit Yaroslavl and Rostov, two towns notable for their medieval Russian architecture. The architecture was not in great shape, but everything else was truly grim. There was nothing but stacks of canned fish at one store, boxes of fudge candy at another. Want food? Be prepared to line up outside a couple of hours before opening, a saleswoman explained. The shelves emptied quickly.

On weekends, hordes of people from towns as far as a four- or five-hour ride away from Moscow would scramble aboard trains to go to the capital in search of food, braving not only the long trip but frequent open hostility from Muscovites. Once, when my mother was standing in line at a grocery store, some of her fellow shoppers turned viciously on a shabbily dressed old woman they felt was buying too much—and all the more when she explained it was for her grandson in some godforsaken Soviet Hicksville. An angry chorus erupted, blaming out-of-town interlopers for the food shortages (“You people come here and pick everything clean!”). When my mother tried to intervene, they turned their ire on her, saying she was no doubt an out-of-towner herself or she wouldn’t be sticking up for the old woman.

All Soviet citizens were equal, of course. But there were so many ways in which some were very much more equal than others.

The Patriarchy Strikes Back

The most mystifying of resurgent left-wing myths about the Soviet Union, though, is that of Soviet sexual liberality and gender progressivism. I always wonder if the Twitter tankies with rainbow flags or “queer” and “pansexual” labels in their profiles are aware that sexual relations between men were a criminal offense in the Soviet Union for most of its existence. One could point out that the first criminal code of the Russian Soviet Republic in 1923 did not, in contrast to czarist Russia, criminalize sex between two males. But in a 1995 article in The Journal of Homosexuality, historian Laura Engelstein argues that the 1934 restoration of criminal penalties was not “a clear reversal of the seemingly enlightened legal practice of the 1920s”; in fact, “Soviet courts tried to repress sexual variation even when homosexuality was not a crime,” as early as 1922.

At best, the early Bolshevik revolutionaries regarded homosexuality as a sickness and a perverted manifestation of bourgeois decadence. In later years, all it could take to send a man to prison was a neighbor’s testimony that he often had male overnight visitors but no visible girlfriends. Unlike most American sodomy laws, the Soviet version required no evidence of specific sexual acts. Meanwhile, Soviet culture ruthlessly censored anything gay: Thus, the Soviet edition of the letters and diaries of Peter Tchaikovsky scrubbed numerous passages in which the composer discussed his same-sex attraction as well as encounters and relationships with young men.

Women’s liberation fared only slightly better. True, the early days of the revolution saw an upsurge in female activism, and the Bolsheviks strongly advocated equality of the sexes. In a 1918 speech to a congress of female workers, Lenin declared that the Soviet republic must make it a top priority to ensure equal rights for women. But ultimately, women’s rights were only a means to an end: As Lenin said in the same speech, equality was essential because “the experience of all liberation movements shows that the success of a revolution depends on the extent to which women participate in it.”

The revolution won; women, not so much. While they joined the workforce en masse, aided by universally available (if poor quality) day care, Lenin’s promise of liberation from “petty and mind-numbing” domestic drudgery didn’t quite pan out. The Soviet woman’s “second shift” was made much worse by scarcity, lack of conveniences, and a consumer sector in which the customer was always screwed. Shopping alone was practically a full-time job, between standing in line and going from store to store to find different items; once the shopping was done, you had to factor in some extra time for scraping dirt off the vegetables and throwing out the rotten ones, trying to find the edible parts of what the store laughingly called a steak, or salvaging the milk from a leaky carton. Add to this the fact that the scarcity of decent clothes often made sewing and knitting a necessity rather than a hobby.

Plenty of women could be found in nontraditional jobs, from road repair and other hard physical labor to medicine and engineering (both low-paid and relatively low-prestige), but they were virtually absent from high-level leadership posts. Especially in the post–World War II period, official Soviet culture vigorously reinforced traditional gender norms. Women were celebrated as mothers, men as warriors; in schools, girls had mandatory classes in housekeeping (mainly sewing and cooking) and boys in craft skills. Meanwhile, attempts to start a conversation on feminism in the early 1980s were treated as a subversive bourgeois activity—after all, according to official declarations, the “woman question” in the Soviet Union had been solved by 1930. When a group of women led by Leningrad writer Tatyana Mamonova published an underground feminist almanac in 1980, they were targeted by the KGB; Mamonova and two other contributors were expelled from the Soviet Union, while several others were imprisoned.

Tear Down This Empire

My own personal experience of the Soviet Union was far from the worst of it. My family lived well by Soviet standards. By the time I was growing up, Soviet totalitarianism had gone relatively soft; ideological diktat wasn’t nearly as rigid or omnipresent as some Westerners imagine. Some of the most popular Soviet films and TV movies made in the 1970s were not particularly communist, for example: They were either period pieces (such as a four-part musical miniseries based on The Three Musketeers) or romantic comedies of the “boy meets girl,” not “boy meets tractor,” kind.

And yet it was still a totalitarian system—a system in which I knew at the age of 10 that if I told anyone at school about the things my parents said at home (for instance, that Lenin was not the greatest genius and humanist of all time and that Soviet children were not the happiest in all the world), “Papa will go to jail.” It was a system in which closet dissidents like my parents had to “live by the lie” and regularly demonstrate feigned allegiance to the regime.

It was a system in which “they,” the powers that be, could do anything and the individual could do nothing. When I was in ninth grade, about a year before my family’s departure, word went around my school that everyone graduating at the end of 10th grade would have to spend a year in Siberia “volunteering” on the construction of the Baikal-Amur Mainline railroad. The rumor, generated by the hype in the Soviet press around the project and its enthusiasts in the Young Communist League, turned out to be false. But it was entirely believable, given that college students, some high schoolers, and young adults who already had jobs were routinely dispatched as “volunteers” to collective farms for a month to help with the fall harvest.

It was a system in which any manifestation of personal autonomy or unorthodox interests could make you an enemy of the state. Jazz fans who circulated clandestine copies of Western records were persecuted in the late 1950s. Karate, which became hugely popular in the Soviet Union in the 1970s, was abruptly banned in 1981, reportedly because the authorities were concerned that it was channeling attention away from more important Olympic sports and that it might enable people to fight back against the police in mass protests. Suddenly, teaching karate could earn you a five-year stint in the prison camps.

The Soviet Union’s first few decades were the stuff of nightmares, from the Red Terror, which is believed to have killed over a million people after the Revolution, to the “Terror-Famine” in Ukraine (as well as Kazakhstan and parts of Southern Russia), whose death toll is estimated at 7 million, to Stalin’s Great Terror, in which hundreds of thousands were shot and many more worked to death in the Siberian gulag camps. Among my parents’ friends and coworkers, few did not have a story (if they were candid about it) of a family member or relative imprisoned in the Stalin era for some absurd reason: Someone’s aunt was branded a subversive because a neighbor heard her playing a funeral march on the piano the day a notorious “enemy of the people” was executed; someone’s father was charged with fomenting “defeatist attitudes” during the war for remarking that Stalin “sounded sad” in his radio address to the people.

By the end of its existence, the Soviet Union was an exhausted totalitarian regime trying to maintain its grip on a society that laughed at official pieties, craved consumer goods, was thrilled by the forbidden, and idolized the West. The woman on the bus who had thought it was ridiculous to call the Soviet Union an “evil empire” came to mind, seven or eight years later, when I saw a photo of a rally in Moscow. A sign was being held by someone who, like me, had lived under the reality of communism. It said: “THE USSR: YES, IT IS THE EVIL EMPIRE!”

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