Month: May 2024

Authored by Gabriella Hoffman & Christian Palich via RealClearEnergy,

Coal and natural gas plants provide 60% of the U.S.’ affordable, reliable, and baseload power. In a time of increased electricity demand, America needs to double down on harnessing these sources—not abandon them.

The Environmental Protection Agency (EPA)’s recently finalized Clean Power Plan 2.0 (CPP) rule, however, takes the country in the wrong direction. Under this regulation, one that is arguably illegal, existing coal and new natural gas power plants will be mandated to install emissions control technologies that aren’t yet commercially viable. Plants that don’t comply risk permanent closure. This unrealistic mandate is advanced under the guise of reducing greenhouse gas emissions 90% by 2032.

The Biden administration should nix this rule altogether given its many drawbacks to the American economy, all of which come with no environmental gain and are based on dubious authority. If it doesn’t reverse course, a forthcoming Congressional resolution of disapproval and newly-filed lawsuits could stop overreach here.

The EPA’s limited authority over-regulating greenhouse gas emissions was affirmed in the landmark June 2022 West Virginia vs. EPA decision. That case challenged the original Obama-era Clean Power Plan, and the Supreme Court ruled the EPA lacked the statutory authority to regulate greenhouse gas emissions. No change has been made to grant the EPA more authority over greenhouse gasses.

Moreover, the Clean Air Act says the EPA must craft achievable emission limitations standards that have been “adequately demonstrated.” Yet, the Carbon Capture technology that would be relied upon under this rule has never been “adequately demonstrated” on the scale that EPA is attempting to require.

The EPA rule would lead to grid instability because operators will be forced to adopt intermittent, unreliable, and costly sources like wind and solar. According to the Department of Energy, wind is only reliable 33.5% of the year while solar is dependable for just 24.9% of the time. Wind energy generation decreased for the first time last year. The federal government reports wind generation hit maturity with slower recorded wind speeds, despite adding 6.2 gigawatts of new wind capacity. Solar energy also had a bad 2023 with over 100 companies going bankrupt and expensive electricity rates. Many planned solar plants, including those receiving Inflation Reduction Act subsidies, are predicted to be canceled this year due to price collapse and waning demand.

The North American Electric Reliability Corporation (NERC) warned in its December 2023 Long-Term Assessment report that rigid policies like CPP 2.0 “have the potential to influence generators” to close down their plants. The risk of massive electric reliability issues across the country is by no means a political talking point. In 2023, FERC Commissioner Danly stated in a hearing to the Senate Energy and Natural Resources Committee that “there is a looming reliability crisis in our electricity markets.” In that same hearing, Commissioner Christie said “The United States is heading for a very catastrophic situation in terms of reliability.” These are the experts sounding the alarm that we need more grid capacity from baseload sources, not intermittent ones, or we could face not just loss of commerce but a loss of human life.

CPP 2.0 promises to reduce greenhouse gas emissions by 90% by 2032 by mandating coal and natural gas plants install carbon capture and storage (CCS) or face closure. But the EPA is downplaying the nascent technology’s shortcomings.

CCS, as it stands, is expensive and will diminish coal and natural gas plant efficiency by at least 14%. Moreover, natural gas and coal plants retrofitted with first-generation carbon capture technology reportedly can expect a 50% and 70 to 80% increase in electricity costs, respectively.

In the U.S., we already have highly effective emissions technology that enables coal plants to run in an incredibly environmental way. For example, just look at how states that rely heavily on coal have almost none of the air quality issues of China or India. That’s because of our emissions control technologies.

Let’s call this rule out for what it really is: It’s a vehicle to punish coal country which has left the president’s party in droves over the last 20 years, in favor of radical environmental non-governmental organization (NGO) donors who are a major constituency of this administration.

The finalized Clean Power Plan 2.0 rule is a bad deal for American energy producers and consumers. Congress should immediately pull the plug on this rule.

Gabriella Hoffman is director of Independent Women’s Forum’s Center for Energy and Conservation (iwf.org/CEC) and host of the District of Conservation podcast.

Christian Palich is Vice President of Government & External Affairs at Eagle Forge Services Company, one of the nation’s largest coal producers and a board advisory member for IWF’s Center for Energy and Conservation.

Back in March, when reading the mammoth, 1050-page bill that was meant to avert government shutdown, but was yet another pork filled free-for-all bonanza authorizing $1.7 trillion in in discretionary spending, we stumbled upon something that was truly shocking: after Biden singlehandedly drained half of the US strategic petroleum reserve to avoid obliteration for Democrats in the 2022 midterm elections, Congress has snuck in a provision that would sell off and shutter the Northeast Gasoline Supply Reserve, a move that while perhaps keeps gas prices lower for a day or two, would also leave the entire continental northeast defenseless to any true environmental catastrophe or shock. We were so dismayed by the inclusion of this particular text, we wondered if it hadn’t been put there solely for the benefit of America’s enemies…

The entire US 1 million barrel Northeast Gasoline Supply Reserve will be required to be sold and closed in fiscal 2024, according to bill text of government funding legislation unveiled Sunday

Did China write this bill? https://t.co/d8qLXZ5Gi6 pic.twitter.com/8B2flG0CZw

— zerohedge (@zerohedge) March 3, 2024

… because surely nobody in their right mind, not even the illegitimate senile occupant of the White House, would ever pursue such short-term gains at the expense of potentially disastrous long-term consequences to the entire nation.

We were wrong: earlier today, just two months after the bill was signed by Biden into law, the panicking administration announced that it would sell the nearly 1 million barrels of gasoline in the US managed stockpile in northeastern states, the Department of Energy said, effectively closing the reserve.

The department created the Northeast Gasoline Supply Reserve (NGSR) in 2014 after Superstorm Sandy left motorists scrambling for fuel. But, according to some megabrains hoping to justify the dumping of gas so its price drops for a few weeks ahead of the summer and avoid even more anger aimed at the president, storing refined fuel is costlier than storing crude oil, so closing the reserve was included in U.S funding legislation signed by President Joe Biden in March.

Bids to buy the gasoline located at the two NGSR storage sites in Port Reading, NJ (900,000 bbl) and South Portland, ME (98,824 bbl), are due on May 28 and the Treasury Department’s general funds gets proceeds from the sale. Incidentally, the proceeds from the reserve liquidation – which will amount to roughly $125 million gross (and far less net) – is roughly how much the government spends every 15 minutes!

So is it better to have a gasoline reserve for unexpected events, or to fund a quarter hour of US government’s spending? Don’t answer that. Of course, the answer is neither – the whole point of selling the gasoline is to depress prices at the pump if only for a few days to help Americans forget about the great inflationary nightmare they have been in for the past 3 years.

The volumes will be allocated in quantities of 100,000 barrels with each barrel containing 42 gallons, the department said and said it would require that fuel is transferred or delivered no later than June 30. That will ensure the gasoline can flow into local retailers ahead of the Fourth of July holiday and that it will be sold at competitive prices. Translation: Biden just drained the Northeast strategic gasoline reserve to push gas lower by a few cents on July 4.

For context, gas prices at the pump this Memorial Day will be the second most expensive in a decade – dramatically above the ten-year average of $2.91…

“By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the … northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said in a release.

“The Biden-Harris administration is laser-focused on lowering prices at the pump for American families, especially as drivers hit the road for summer driving season,″ Energy Secretary Jennifer Granholm said in the statement. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state (area) and Northeast at a time hardworking Americans need it the most.”

White House Press Secretary Karine Jean-Pierre said release of gas from the Northeast reserve builds on actions by President Joe Biden, a Democrat, “to lower gas and energy costs — including historic releases from the Strategic Petroleum Reserve and the largest-ever investment in clean energy.″

Biden significantly drained the Strategic Petroleum Reserve in 2022 following Russia’s invasion of Ukraine, dropping the stockpile to its lowest level since the 1980s after selling about 280 million barrels to keep prices low. The election year move helped stabilize gasoline prices that had been rising in the wake of the war in Europe but drew complaints from Republicans, and frankly anyone with half a brain, that the Democratic president was playing politics with a reserve meant for national emergencies.

The Biden administration has since very theatrically begun refilling the oil reserve, which had more than 364 million barrels of crude oil as of last month, by purchasing a couple million barrels every other month or so, setting it on pace for refilling some time in the 2100s.

“While congressional Republicans fight to preserve tax breaks for Big Oil at the expense of hardworking families, President Biden is advancing a more secure, affordable, and clean energy future to lower utility bills while record American energy production helps meet our immediate needs,” Jean-Pierre said.

As for the real reason behind the latest myopic decision by the Biden admin, today we learned that Trump’s lead over Biden has widened to 13pp in the betting market, the largest difference since mid-March. Meanwhile, political event prediction website PredictIt places higher betting odds on Trump than Biden for the first time since March.

Trump is also leading in the latest polls of all swing states.

Trump is leading by 2% in the latest polls in Pennsylvania. If Biden loses Pennsylvania but wins Wisconsin and Michigan, he then at least needs to win one state from Georgia and North Carolina in addition to one state from Arizona and Nevada to secure a second term.

Meanwhile, closing arguments in Trump’s “hush money” case in New York are set to being on May 28. If the jury finds Trump guilty, it is possible for the former president to receive prison time, and judging by how weaponized the “legal system” of the current fascist regime has become, we would not be surprised if Biden goes there.

Authored by Mike Shedlock via MishTalk.com,

Prepare to pay another $1 per gallon in California with higher prices in Nevada and Arizona too.

The War on Gasoline a Gift to Trump

The Wall Street Journal says Gavin Newsom’s War on Gasoline Is a Gift to Donald Trump.

California’s prices are the highest in the country—$5.21 a gallon on average vs. $3.59 nationwide—owing to hefty taxes and burdensome regulations, such as its cap-and-trade program and low-carbon fuel standard. Here’s the rub: California refineries supply nearly 90% of Nevada’s gasoline and half of Arizona’s.

Mr. Newsom is escalating his war on the industry. The California Energy Commission is planning to impose a tax on refineries’ “gross margins”—i.e., the difference between wholesale gasoline and crude prices plus certain regulatory costs. The gross margin notably doesn’t include refiners’ operating costs, which include employee pay.

Mr. Newsom conflates profits and gross margins. According to the commission’s data, refiners lost between 10 and 38 cents on each gallon they produced from October 2023 through February 2024, while their gross margins ranged from 56 to 79 cents a gallon. In December, California refineries lost 31 cents a gallon while the state imposed $1.15 a gallon in taxes and regulatory fees.

The price gougers in Sacramento now want to penalize drivers even more. Mr. Newsom is pushing the commission to finalize the refinery tax at the same time as the California Air Resources Board, or CARB, prepares to tighten its low-carbon fuel standard and greenhouse-gas emissions cap. These regulations add about 54 cents to the price of each gallon of gasoline. CARB’s rules will increase the cost by an estimated 88 cents a gallon in 2026 and $1.01 by 2031.

Nevada Gov. Joe Lombardo last week sent Mr. Newsom a letter expressing concern that the new tax and regulations will “lead to limited supplies and higher fuel costs for consumers in both of our states.” Mr. Newsom’s response? Another deflection. He accused Mr. Lombardo of parroting the “talking points” of “Big Oil donors.”

Arizona and Nevada are increasingly trending in Mr. Trump’s direction as working-class Hispanics bear the brunt of the Biden administration’s policies. Many migrated from California—and like America’s émigrés from socialist countries, they don’t want to relive the misery from their former lands.

Gasoline Top Six

• California: $5.21

• Washington: $4.60

• Oregon: $4.38

• Nevada: $4.38

• Alaska: $4.35

• Arizona: $3.90

California pays $1.62 more than the national average and $0.61 more than Washington, the second highest state.

Despite refiners losing money, Newsom seeks new taxes causing a complaint from Nevada.

If I was a refiner, I would leave that hell hole and let California fend for itself.

The EU Is Spending Billions on Hydrogen-Ready

Across the Atlantic ocean, The EU Is Spending Billions on Hydrogen-Ready, But Where’s the Hydrogen?

I’m all in favor of hydrogen-powered plants to produce electricity if only we had cheap hydrogen. But we don’t and likely won’t.

The Greek Navy has established a temporary obstacle in the Laconian Gulf, approximately 110 miles southwest of Athens, to disrupt a ‘floating oil base’ used by Russian tankers for ship-to-ship transfers of crude oil and related products. These products are then loaded onto other tankers and transported to Asia. This action is part of the West’s strategy to curtail Moscow’s ability to supply energy to customers evading Western sanctions, thereby limiting funding for the special operation in Ukraine. 

Bloomberg reported that the Greek Navy has “re-issued a notice that it would carry out exercises” in the Laconian Gulf area. These previously announced exercises have been extended through June 3. Each notice forces vessels in the region to exit under maritime law. 

This month though, the Greek Navy started carrying out exercises in the area in a bid to halt an activity that helps Moscow’s export machine to keep functioning. -BBG

Here’s a map of where the military exercises will be held. 

“There is a gap between the Laconian Gulf and the newly-added area where a lot of the tankers are now clustered,” Bloomberg noted. 

Greek officials have not publicly stated they are using military exercises against Russia’s commercial tanker fleet to deter STS transfers of crude and related products in the sheltered Laconian Gulf area. 

We reported earlier this month that the website TankerTrackers reported tankers conducting STS transferred abruptly left the Laconian Gulf for “reasons that were unknown.”

STS Russian transfers from the Laconian Gulf have ended up thousands of miles away in Asia. However, according to the Black Sea Group, some of it ended up at European ports because of Brussels’ poor sanction management: 

“68% of the oil was brought to the Laconian Gulf in Greece for transshipment, while the rest was directly exported to the EU ports amid poor sanctions management,” researcher Bohdan Ben wrote in a note. 

In a separate Bloomberg report, they noted STS transfers of Russian crude could shift to the Red Sea:

“There are other signs of change in how Russian oil is moving. One tanker also flipped a cargo of crude onto another vessel in the Red Sea last month. The Panta Rei 1 transfered its cargo onto the Odysseus, which then transported its consignment to India. That’s the first ever switch observed in that location in ship tracking data compiled by Bloomberg.” 

This is a new development in how the West fights Moscow. What could possibly go wrong? 

By Michael Every of Rabobank

Karim Khan, chief prosecutor of the International Criminal Court (ICC), has announced he is applying for arrest warrants for Israeli Prime Minister Netanyahu and Defence Minister Gallant, the first time leaders of a Western democracy have been accused. Sadly, however, this does not signal a new era of global adherence to the rule of law, but rather the ICC’s likely self-evisceration.

Khan wants to arrest Netanyahu and Gallant, as a start, for “causing extermination, starvation as a method of war, including the denial of humanitarian relief supplies, [and] deliberately targeting civilians in conflict” within “the territory of the state of Palestine” (which is not a state), and perhaps even for before October 7. Balancing this, though not his CNN speech or media headlines, Khan is also applying for arrest warrants for Hamas leaders Sinwar, Deif, and Haniyeh –two hiding in Gaza, one lounging in Qatar– for extermination, murder, hostage taking, rape, and sexual assault in detention. Even so, Khan is equating an elected Western leader –albeit one Gallant himself last year implied is demagogic, and last week accused of dragging the war out because he can’t make a political decision on what happens next– to terrorists.

So, some celebrate. Others despair and argue the evidence against Israel is clearly biased while that against Hamas is from its own bodycams; the ‘controversial’ phrase Netanyahu used, “Remember what Amalek did to you,” is written on the wall at Yad Vashem and in The Hague Holocaust memorial; the allegation Israel closed all crossings into Gaza includes Rafah, which it did not control until very recently; Hamas steals most incoming aid and resells it at vastly inflated prices; Hamas just hugely reduced the casualty figures Western media, politicians, and the ICC repeat; Israel’s judiciary hold its leaders to account; and testimony from Western military experts on the exemplary way Israel carries out the (awful) business of urban combat was ignored. As such, Israelis across its political spectrum are calling this a “blood libel”, as from Europe’s past and today’s US campuses; Hamas complains it should be allowed to do anything as “resistance”; and others point out the ICC hasn’t dived in against clear-cut abuses in many other locales. In short, this is all controversial and divisive rather than lining us up behind the rule of law.

Indeed, the ICC decision can be seen as neutering the right to self-defence it professes to support: what Israeli military action would the Court allow vs. tens of thousands of heavily armed terrorists in a crowded urban area if Israel was, as it strongly claims, simply obeying the existing laws of war? (Which, to be clear, are like calorie-free double chocolate fudge cake: more about psychological than physical comfort or health.) If nothing effective, Israel’s and the West’s enemies will take note and heart. “They knew exactly where to hit us,” says Spock in Star Trek II.

Israel is not a signatory to the ICC so can simply ignore any arrest warrants like Russia’s President Putin, though he travels in the BRICS when Israel is part of the West, even if parts of the West no longer seem to want it. Indeed, it’s within the West where rifts will be felt most. Non-signatory US senators had lobbied the Court to back off, but Khan publicly told them to – no repeat of his dropping investigations into war crimes committed by the US in Afghanistan, and secret CIA prisons, “because of the limited financial means of the ICC.” However, that means defunding the ICC is likely back on the US agenda for Republicans: revenge is a dish best served cold in 2025. And while progressive Democrats cheer, President Biden has called the arrest warrant requests “outrageous.”

Even Europe won’t be spared this polarization: Belgium has backed the ICC, Czechia has already called its action “appalling”, Austria “non-comprehensible”, the UK government which appointed Khan, “unhelpful”, and how will Wilders or Meloni react? So, does the West back the Court or not?

More specifically, can the West still send arms to Israel? If so, what does the ICC step really mean? If not, even with a shift to self-reliance and/or non-ICC India, where does this leave Israel vs. Iranian proxies and Iran close to a nuke? And as Hal Brands notes in ‘Ukraine Is Now a World War. And Putin Is Gaining Friends’, where does this leave Western economies vs. the joint threat of Russia, China, Iran, and North Korea?

The Court therefore stirs the pot in a troubled Middle East already seeing unrest in Israel, where unpopular PM Netanyahu is if anything strengthened by the ICC move, as Trump has been with his court cases; the current Israel-Hamas war, which can still grow to encompass Hezbollah more fully, and where any ceasefires now look more difficult to achieve; an ongoing Houthi blockade maybe to expand to the Mediterranean; Sudanese starving because of it, when not fleeing a civil war led by Islamists; the Saudi King gravely ill; Kuwait cancelling its experiment with democracy because people vote for parties like Hamas; the sudden death of Iran’s President Raisi in a helicopter crash; and the US still trying to achieve Israel-Saudi normalisation under a US (and Israeli) defence umbrella.

What might the Saudis — not charged by the ICC for the war they carried out vs. the Houthis in Yemen — think of that proposed defence guarantee when it knows US and Israeli hands are tied against the kind of foes it faces? Or maybe the US will just push even harder for the deal to be done now as a result: we shall soon see.

Meanwhile, showing how far we are from a world of justice, or even basic truth, Iran’s Raisi was known as ‘The Butcher of Tehran’ because of his responsibility for many thousands of deaths in the 1980s, and he also helped with multiple human rights abuses since, with no charges leveled by the ICC for either. Instead, while some Iranian youth openly celebrated his death, Raisi got a minute’s silence at the UN Security Council and official condolences from NATO, the EU, and the US State Department, even as Iran arms Russia vs. Ukraine, the Houthis vs. EU shipping, and the proxies which kill US soldiers. It’s as bad a joke as the Israeli social media quip that Raisi was killed by a Mossad agent named Eli Kopter, which some in Hamas thought was real for a while.

To summarise, some may think The Wrath of Khan is the genesis of a new ideal world of the rule of law. Sadly, we can’t be Reliant on such utopianism in a realpolitik world where Western Enterprise is being struck violently, including from within its own team.

As Spock says, the needs of the many outweigh the needs of the few, or the one. But which few, or one, will it be?

I suspect the ICC. If so, another pillar of the international liberal order’s architecture joins those already seen as impotent (i.e., the WTO and UN), irrelevant (i.e., the IMF and World Bank), or completely incompetent (i.e., The Ivy League, but also pick your acronym).

That backdrop may not vex overexcited markets much. However, it’s another sign of what The Economist just bewailed, echoing my warning from January 2016: that the international liberal order is at risk of collapse, or at least fragmentation.

At some point the lack of a global rule of law, or clashing global rules of law, matters mightily.

Russia on Tuesday confirmed that its forces have kicked off tactical nuclear weapons drills in its southern military district, which is near the Ukrainian border, in what the Kremlin has described as a response to “threats” by the West.

The defense ministry (MoD) announced that the exercises aim to test the “readiness” of its “non-strategic nuclear weapons … to ensure the territorial integrity and sovereignty of the Russian state.”

The MoD specified that this is in “response to provocative statements and threats by certain Western officials.”

“Under the order of the commander-in-chief, a military exercise involving practice of preparation and use of tactical nuclear weapons started in the Southern military district under the supervision of the General Staff,” the ministry said.

First unveiled in early May, the date and location of the exercises at that early preview phase were unknown. The Foreign Ministry had warned at the time that NATO’s own “Steadfast Defender” drills are possible preparations for war with Russia.

And more recently some US and UK officials have been pressing for more Ukrainian attacks directly on Russian soil, with Washington officials now openly debating whether to allow pro-Kiev forces to utilize US-supplied missiles to attack inside Russian territory. Zelensky has meanwhile launched a new aggressive lobbying campaign to push deepened Western involvement: 

Western allies are taking too long to make key decisions on military support for Ukraine, President Volodymyr Zelenskiy told Reuters in an exclusive interview in Kyiv on Monday.

He also said he was pushing partners to get more directly involved in the war by helping to intercept Russian missiles over Ukraine and allowing Kyiv to use Western weapons against enemy military equipment amassing near the border.

Russia’s Defense Ministry has finally released a video showing the tactical nuke drills it announced a couple of weeks back. And they’ve blurred out the warheads.

But just the tips. pic.twitter.com/FroQg76qUY

— Mack Tubridy (@macktubs) May 21, 2024

Another among the ‘threats’ emanating from the West is the possibility of deploying NATO troops in Ukraine. The idea has gained steam ever since Frances Emmanuel Macron first proposed it months ago a security conference in Paris. Lithuania is the latest to recently back the idea.

According to more details of Tuesday’s non-strategic nuclear forces drills via state media:

“As part of this stage, the personnel of the missile formations of the Southern Military District are completing combat training tasks for obtaining special ammunition for the Iskander operational and tactical missile system, equipping them with launch vehicles and covertly advancing to the designated positional area to prepare for missile launches,” the ministry explained, adding that the Russian aviation is training with the equipment of special combat units of aircraft destruction, including Kinzhal hypersonic missiles.

Russia’s military has issued several videos and images of the drills in progress, which will also be monitored closely from Western capitals and the Pentagon. The situation is ominous to say the least…

Authored by Paul Joseph Watson via Modernity.news,

During an appearance on Fox News, liberal broadcaster Bill Maher asserted that in some cases, transgenderism is just a “TikTok challenge that got out of hand.”

Maher asserted that the United States was now an “outlier” when compared to other western nations given that European countries are now ditching things like puberty blockers for children.

“Liberalism is not the same thing as woke, woke they would like to think they’re an extension of liberalism, they’re not, I’m an old school liberal, it’s very often the opposite,” said Maher.

“And they think they’re going so far in the right direction and it actually turns out that they’re in the wrong direction and they’ve actually reversed it,” he added.

Bill Maher makes an excellent distinction between the true definition of “liberalism” and the new era of the modern Left, otherwise known as “woke”.

You might not like Maher, but this kind of rhetoric coming from him does significantly more damage than a conservative voice.

But… pic.twitter.com/e6agqMsuuw

— Clandestine (@WarClandestine) May 21, 2024

Maher noted how America was “doubling down” on woke despite it becoming increasingly unpopular in other developed countries.

“Is there such a thing as trans? Of course, there are sometimes people who are, let’s just say there’s a mix up at the factory and you don’t feel in your head the way you do in your body, but some of this is also jsut a TikTok challenge that got out of hand,” claimed Maher.

Some would question the Real Time host’s assertion that woke progressivism is contradictory to liberalism and argue that it merely represents liberalism taken to its (illogical) end goal.

In 2022, it was revealed that one in five Gen Z adults now identified as LGBTQ, while the number of total Americans doing the same has doubled in a decade.

The Gallup poll illustrated how many young people claiming to be LGBTQ are purely doing so in order to appear unique and trendy.

As a whole, the poll showed Americans identifying as LGBTQ represent 7.1 per cent of the population, compared to 5.6 per cent in 2021.

In 2012, 3.5 per cent of Americans identified as LGBTQ.

If the “born this way” narrative was correct, that number wouldn’t have literally doubled in the space of a decade without the influence of social engineering.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

The release of OpenAI’s ChatGPT in late 2022 sparked a generative artificial intelligence bubble, and now investors are watching for any signs of its bursting. Nvidia reports earnings results and guidance on Wednesday evening, as the company is arguably the market’s AI bellwether, which will be a crucial test for bulls. Meanwhile, troubling signs are emerging from China, where AI demand appears to be stagnating. This could be an ominous sign for the overhyped AI sector and its lofty valuations.

Bloomberg first reported that Alibaba Group Holding Ltd. slashed its AI service prices by up to 97%, igniting a price war among major Chinese tech companies that also cut prices. This price war is evidence of the demand struggles facing the AI sector in China. 

Baidu Cloud said it would offer free services based on its Ernie AI models on Tuesday, hours after Alibaba offered deals on nine products built atop its own Tongyi Qianwen. ByteDance Ltd. last week announced pricing for AI services that it said were 99% lower than Chinese industry norms, using Ernie and Alibaba’s Qwen as benchmarks.

Alibaba’s reduced pricing for Language Models (LLM) by up to 97% was posted on the company’s WeChat account.

Bloomberg Intelligence’s Robert Lea explained that Alibaba’s AI price war is in response to ByteDance’s recently launched Doubao LLMs, which are offered at a steep discount to customers. He also expects Baidu, Tencent, and JD.com to respond, worsening the AI price war. 

Meanwhile, mentions of AI on first-quarter earnings calls in the US continue soaring. 

Companies mentioning AI on earnings calls pic.twitter.com/bWlVZCO3ON

— zerohedge (@zerohedge) May 16, 2024

Everyone on Wall Street is jumping into “The Next AI Trade.” 

Tomorrow’s earnings and guidance for Nvidia is a make-or-break for the AI-fueled equity bubble. 

AI demand woes in China are undoubtedly an ominous sign that should be monitored. 

Authored by Lance Roberts via RealInvestmentdvice.com,

During ripping bull markets, investors often start benchmarking. That is comparing their portfolio’s performance against a major index—most often, the S&P 500 index. While that activity is heavily encouraged by Wall Street and the media, funded by Wall Street, is benchmarking the right for you?

Let’s begin with why Wall Street wants you to compare your performance to a benchmark index.

Comparison-created unhappiness and insecurity are pervasive, judging from the amount of spam touting everything from weight loss to plastic surgery. The basic principle seems to be that whatever we have is enough until we see someone else who has more. Whatever the reason, comparison in financial markets can lead to terrible decisions.

This ongoing measurement against some random benchmark index remains the key reason investors have trouble patiently sitting on their hands and letting whatever process they are comfortable with work for them. They get waylaid by some comparison along the way and lose their focus.

Clients are pleased if you tell them they made 12% on their account. Subsequently, if you inform them that “everyone else” made 14%, you’ve upset them. As it is constructed now, the financial services industry is predicated on upsetting people so they will move their money around in a frenzy.

Therein lies the dirty little secret. Money in motion creates revenue. Creating more benchmarks, indexes, and style boxes is nothing more than creating more things to compare against, allowing clients to stay in a perpetual state of outrage.

This also explains why “indexing” has become a new mantra for financial advisors. Since most fund managers fail to outperform their relative benchmark index from one year to the next, advisors suggest buying the index. This is particularly true as the increasing market share of indexing (and passive, or systematic, investing in general) has made markets less liquid.

However, the rise in indexing has resulted in a concentration of dollars into a decreasing number of assets. The combined market capitalization of the top seven companies in the S&P 500 index is around $12.3 trillion. That is more than four times the size of the nearly $3 trillion market capitalization of the Russell 2000 Index, which consists of 2,000 small-cap stocks.

While that statistic may be shocking, it also represents the most significant risk in benchmarking your portfolio.

Market Cap Weighting Your Portfolio

When most investors or financial advisors build portfolios, they invest in companies they like. They then compare the portfolio’s performance to an index. This benchmarking process is where the risk lies, more so today than previously. The reason is in an article we wrote previously:

“In other words, out of roughly 1750 ETF’s, the top-10 stocks in the index comprise approximately 25% of all issued ETFs. Such makes sense, given that for an ETF issuer to ‘sell’ you a product, they need good performance. Moreover, in a late-stage market cycle driven by momentum, it is not uncommon to find the same ‘best performing’ stocks proliferating many ETFs.”

The issue of asset consolidation is exacerbated as investors buy shares of an indexed ETF or mutual fund. Each purchase of a passive index requires the purchase of the shares of all the underlying companies. Therefore, the rise in the overall index is unsurprising. The massive inflows into passive indexes force-fed the top-10 market capitalization-weighted companies.

Here is how it works. When $1 is invested in the S&P 500 index, $0.35 flows directly into the top 10 stocks. The remaining $0.65 is divided between the remaining 490 stocks.

Investors who benchmark their index risk failing unless 35% of the portfolio is invested in those 10 stocks. With the market capitalization weighting of the largest companies nearing a record, taking on a 35% stake in those companies increases the portfolio’s risk profile significantly more than many investors think.

Notably, we are discussing only the risk involved in “matching” the index.

Trying to beat the index consistently from one year to the next is a far more challenging process.

A perfect example is Bill Miller from Legg Mason, who achieved 15 consecutive years of beating the S&P. That put him on the cover of magazines. Investors poured billions into the Legg Mason Value Fund in 2005 and 2006. Unfortunately, that was just before his strategy ran into headwinds and stopped working. The same occurred with Peter Lynch at Fidelity.

Here is the point. The probability of beating the S&P for 15 consecutive years is 1 in 2.3 million.

A Well Managed Portfolio Can Beat The Index Over The Long Term

The problem with mainstream benchmarking analysis is that it always focuses on the trailing one-year performance. The reality is that even if you buy an index, you will still underperform it over time. Over the last 30 years, the S&P 500 Index has risen by 1987% versus the ETF’s gain of 1916%. The difference is due to the ETF’s operating fees, which the index does not have.

However, while a fund manager may NOT beat the index from one year to the next, it doesn’t mean that a sound investment strategy won’t outperform significantly, with lower risk, over the long term. Finding funds with long-term track records is difficult because many mutual funds didn’t launch until the late “go-go 90s” and early 2000s. However, I quickly looked up some of the largest mutual funds with long-term track records. The chart below compares Fidelity Magellan and Contrafund, Pioneer Fund, Sequoia Fund, Dodge & Cox Stock Fund, and Growth Fund of America to the S&P 500 Index.

I don’t know about you, but investing in quality, actively managed funds over the long term seems a better bet. Crucially, they did it without heavily concentrated positions in just a handful of stocks.

Financial Resource Corporation summed it up best; 

“For those who are not satisfied with simply beating the average over any given period, consider this: if an investor can consistently achieve slightly better than average returns each year over a 10-15 year period, then cumulatively over the full period they are likely to do better than roughly 80% or more of their peers. They may never have discovered a fund that ranked #1 over a subsequent one or three-year period. That ‘failure,’ however, is more than offset by their having avoided options that dramatically underperformed.

For those that are looking to find a new method of discerning the top ten funds for the next year, this study will prove frustrating. There are no magic short-cut solutions, and we urge our readers to abandon the illusive and ultimately counterproductive search for them.

For those who are willing to restrain their short-term passions, embrace the virtue of being only slightly better than average, and wait for the benefits of this approach to compound into something much better.”

The Only Thing That Matters

There are many reasons why you shouldn’t chase an index over time and why you see statistics such as “80% of all funds underperform the S&P 500” in any given year. The impact of share buybacks, substitutions, lack of taxes, no trading costs, and replacement all contribute to the index’s outperformance over those investing real dollars who do not receive the same advantages. 

More importantly, any portfolio allocated differently than the benchmark to provide for lower volatility, income, or long-term financial planning and capital preservation will also underperform the index. Therefore, comparing your portfolio to the S&P 500 is inherently “apples to oranges” and will always lead to disappointing outcomes.

“But it gets worse.  Often times, these comparisons are made without even considering the right way to quantify ‘risk’. That is, we don’t even see measurements of risk-adjusted returns in these ‘performance’ reviews. Of course, that misses the whole point of implementing a strategy that is different than a long only index.

It’s fine to compare things to a benchmark. In fact, it’s helpful in a lot of cases. But we need to careful about how we go about doing it.” – Cullen Roche

For all these reasons and more, comparing your portfolio to a “benchmark index” will ultimately lead you to take on too much risk and make emotionally based investment decisions.

But here is the only question that matters in the active/passive debate:

“What’s more important – matching an index during a bull cycle, or protecting capital during a bear cycle?”  

You can’t have both.

If you benchmark an index during the bull cycle, you will lose equally during the bear cycle. However, while an active manager focusing on “risk” may underperform during a bull market, preserving capital during a bear cycle will salvage your investment goals.

Investing is not a competition, and as history shows, treating it as such has horrid consequences. So, do yourself a favor and forget what the benchmark index does from one day to the next. Instead, match your portfolio to your personal goals, objectives, and time frames. 

In the long run, you may not beat the index, but you are likely to achieve your personal investment goals, which is why you invested in the first place.

By Frank Fang of Epoch Times

Taiwan’s new president has been sworn into office, calling on the Chinese regime to stop its military and political intimidations in a speech unlikely to deter the communist regime’s ambition to seize control of the self-ruling island.

In his 30-minute inaugural speech on May 20, Lai Ching-te, from the Democratic Progressive Party (DPP), said that Taiwan is a “sovereign and independent country,” and that the island nation and the communist regime in mainland China “are not subordinate to each other.”

“I also want to call on China to cease their political and military intimidations against Taiwan, and share with Taiwan the global responsibility of maintaining peace and stability across the Taiwan Strait, as well as the greater region, and to ensure the world is free from the fear of war,” Mr. Lai said.

Mr. Lai said his administration aims to “further entrench Taiwan’s democracy” and “maintain peace in the Indo-Pacific.”

“I have always believed that if the leader of a country puts people’s welfare above all, then peace in the Taiwan Strait, mutual benefits, and prosperous coexistence would be common goals,” he said. “I hope that China will face the reality of the Republic of China’s existence.”

Mr. Lai won January’s presidential election by a margin of about 7 percentage points over second-place Hou Yu-ih, a candidate of the Kuomintang Party (KMT). His victory gave the DPP an unprecedented third consecutive term, after eight years with Tsai Ing-wen at the helm.

The DPP’s win is considered a setback for the CCP, which has traditionally favored KMT political candidates because of their friendly view of the communist neighbor. In contrast, the Chinese regime has labeled Mr. Lai as a “troublemaker” and “separatist.”

The CCP often slaps the “separatist” label on any Taiwanese who defends the island’s sovereignty and rejects the communist regime’s territorial claim over the island. China’s communist regime is preparing its military to seize Taiwan, even though the island is a de facto independent nation with its own military, constitution, and currency.

Mr. Lai reminded the Taiwanese people that they shouldn’t harbor any delusions about China.

“So long as China refuses to renounce the use of force against Taiwan, all of us in Taiwan ought to understand that even if we accept the entirety of China’s position and give up our sovereignty, China’s ambition to annex Taiwan will not simply disappear,” he said.

Strengthening Democratic Resilience

As for international affairs, Mr. Lai said he will work with “other democratic nations to form a democratic community,” working together on issues such as combatting disinformation and strengthening democratic resilience.

China’s efforts to influence Taiwan’s elections have been well-documented, with tactics including promoting disinformation via social media platforms and using financial incentives to sway Taiwanese voters.

A declassified U.S. intelligence report has shown that China interfered in the U.S. 2022 midterm elections, and there are increasing concerns that the CCP will try to influence the outcome of the November elections.

Before his speech, Mr. Lai accepted congratulations from about 200 foreign politicians and delegates at Taiwan’s Presidential Office on May 20. The visiting dignitaries included those from the nations that currently maintain diplomatic ties with Taiwan, as well as those from Japan, Australia, Canada, the United States, and several European nations.

Former Deputy Secretary of State Richard Armitage and former top White House economic aide Brian Deese were among a U.S. bipartisan delegation that met with Mr. Lai on May 20. Former Secretary of State Mike Pompeo also made the trip to Taiwan to congratulate Mr. Lai.

Secretary of State Antony Blinken issued a statement congratulating Mr. Lai, while applauding Ms. Tsai for “strengthening ties between the United States and Taiwan over the past eight years.”

“We look forward to working with President Lai and across Taiwan’s political spectrum to advance our shared interests and values, deepen our longstanding unofficial relationship, and maintain peace and stability across the Taiwan Strait,” Mr. Blinken stated.

Sen. Ben Cardin (D-Md.), chairman of the Senate Foreign Relations Committee, said he looks forward to “working with the Lai Administration to continue strengthening the U.S.–Taiwan relationship through expanding our economic, security, and people-to-people ties,” according to a statement.

The Inter-Parliamentary Alliance on China, a global coalition of lawmakers, issued a statement on X, formerly known as Twitter, to congratulate Mr. Lai on his inauguration.

‘Trusted Industry Sectors’

Mr. Lai also spoke about the importance of Taiwan’s tech industries to the world.

“Taiwan has already mastered advanced semiconductor manufacturing, and we stand at the center of the AI revolution,” he said. “We are a key player in supply chains for global democracies.”

Taiwan produces about 90 percent of the world’s most advanced semiconductors, which are tiny chips that power everything from computers and smartphones to missile systems. As a result, China’s ambition to seize Taiwan is also driven in part by the goal of taking control of the island’s semiconductor sector.

Under his administration, Mr. Lai said he aims to develop “five trusted industry sectors”: semiconductors, artificial intelligence (AI), military, security and surveillance, and next-generation communications.

Before the May 20 inauguration, China was already taking steps to put pressure on Mr. Lai.

Continue reading at Epoch Times