Month: August 2024

Brent crude’s price trajectory hangs in the balance as OPEC+ ministers discuss output policy on Thursday. Insiders tell Reuters that the cartel will likely stick to its current production cuts, though a partial rollback is slated this fall. Meanwhile, geopolitical tensions continued to soar as Iran ordered a retaliatory strike on Israel following the assassination of a political Hamas leader in Tehran. 

Top ministers from OPEC+ will discuss crude output policy during an online joint ministerial monitoring committee meeting on Thursday morning. Sources tell Reuters there will be no changes to the current cutting policy that has slashed 5.86 million barrels per day (bpd), or about 5.7% of global demand since late 2022.

In June, the Organization of the Petroleum Exporting Countries and allies led by Russia agreed to extend cuts of 3.66 million bpd through the end of 2025. OPEC+ also extended the most recent round of cuts –  a 2.2 million bpd cut by eight members – to the end of September. 

In addition to traders monitoring OPEC+ headlines, many are on edge, awaiting the next batch of headlines from the Middle East as war risks broaden. 

On Wednesday, Brent soared through the $81/bbl handle, while West Texas Intermediate traded above $78/bbl after posting the largest single daily gain since October. This comes after Iran’s Ayatollah Ali Khamenei called for a direct strike on Israel, the New York Times reported. This followed an Israeli assassination operation of a political leader of Hamas in Tehran and a senior Hezbollah member in Beirut.

Here’s the latest reporting:

• A ‘Watershed Event’: Five Takeaways From Israel’s Assassination Of Hamas’ Political Leader In Tehran

• US Will ‘Certainly’ Defend Israel If Attacked By Iran In Wake Of Haniyeh Killing

• Eight Other Times Israel Likely Behind Covert Assassinations In Iran

• Ayatollah Says ‘Severe’ Revenge Coming For Israel Killing Hamas Leader On Iranian Soil

• US Will ‘Certainly’ Defend Israel If Attacked By Iran In Wake Of Haniyeh Killing

Meanwhile, rising Middle East tensions unleashed a flurry of Brent call options, with as many as 300k calls trading Wednesday. This was the highest number of call options that traded on Brent since the brief Israel and Iran turmoil in April.

More than 300,000 Brent call option contracts traded on Wednesday, the largest one-day amount since the last round of elevated regional tensions in April. The volume was dominated by large call spreads, which offer cheaper ways to profit from a rally, including $87 and $90 spreads for October, as well as $110 and $130 spreads for November. Brent was last near $81. -BBG

Call options on Brent crude spiked Wednesday to the highest level since mid-April.  

Option market now suggests traders are concerned about geopolitics.

“The biggest determinant of where prices might go is a combination of geopolitics, but critically OPEC’s decision in the coming weeks around the pace at which it unwinds its cuts, and of course the Chinese demand,” Wael Sawan, Chief Executive Officer of Shell Plc said in a Bloomberg TV interview. He added, “At the moment we see that the physical markets are well balanced, if anything slightly tight.”

Authored by Jill McLaughlin via The Epoch Times,

A massive fire in Northern California grew again July 30 to nearly 610 square miles—bigger than the city of Los Angeles—making it the fifth-largest fire in state history.

The Park fire, which started July 24 after a man allegedly pushed a burning car into a park ravine, had destroyed 361 structures by Wednesday afternoon, 209 of which were single-family homes, according to Incident Commander Billy See, an assistant fire chief for Fresno County Fire Protection District.

“We still have a lot of work to do ahead of us,” See said during an afternoon press briefing.

Nearly 6,000 fire personnel were battling the expansive blaze, aided by 41 helicopters, 521 fire engines, and nearly 200 bulldozers. The fire was 18 percent contained by Wednesday, according to See.

Crews were able to close 50 miles of fire line so far, See said.

Garrett Sjolund, Butte County Fire Chief, said some people have been able to return home after being evacuated for the past few days. There still could be hot spots around the homes, and residents were cautioned to look for any fire dangers, he said.

About 8,310 people were under evacuation warnings or orders in Butte County and about 1,160 in Tehama County on Wednesday.

Evacuation orders in north Chico and south Cohasset, a city about 18 miles northeast of Chico, were reduced to evacuation warnings as the fire moved away from some residential areas.

“I’m pleased to say that things are continuing to improve,” Butte County Sheriff Kory Honea said.

Arrests

The Butte County Sheriff’s Office arrested two women after entering Sycamore Valley Road in Chico on Monday. The area was under an evacuation order, according to the sheriff’s office.

Delmara Apel, 41, of Cohasset and Amy Jackson, 43, of Chico were arrested by deputies responding to a report of possible looters in the area.

When deputies arrived, they found a truck with three people inside parked at a roadblock near the intersection of Sycamore Valley and Cohasset Road, the sheriff’s office said in a press release Wednesday.

An investigation revealed that two women allegedly left the truck and ran into the area while it was under evacuation. The women were found about a half-mile away from the truck.

Jackson was found at the bottom of a hill and allegedly did not follow deputies’ directions when they asked her to walk up the hill, according to the report.

Both women were taken to the county jail and booked on one count each of entering an area under an evacuation order. Apel was also booked on a felony count of smuggling methamphetamine into the jail after the illegal substance was allegedly found in her possession.

The Sheriff’s Department also arrested Joseph Patrick Gilbert Jr., 39, on July 25, in Palermo, about 30 miles south of Chico.

Cal Fire investigators responded to the report of a person setting fire to the grass on Lincoln Boulevard. The fire burned less than an acre before it was contained.

Gilbert was charged with arson and taken to the county jail.

Fire retardant coats a vehicle as the Nixon fire burns near the Riverside County community of Aguanga on July 29, 2024. (Mario Tama/Getty Images)

Nixon fire

A wildfire outside Temecula in Riverside County had grown to nearly 8 square miles Wednesday, according to the California Department of Forestry and Fire Management.

Nearly 750 fire personnel were working to control the blaze, which was threatening at least 900 homes and buildings, according to Cal Fire.

“The Nixon fire displayed moderate fire activity and continued to burn to the south and east, adjacent to the San Diego County line and the Beauty Mountain Wilderness in steep and rugged terrain,” Cal Fire said in an update Wednesday.

Several neighborhoods were evacuated. The county opened a center at Temecula Valley High School for displaced residents.

Lake fire

Numerous air tankers and more than 2,000 firefighters were also battling the Lake Fire in Santa Barbara County, which neared 92 percent containment by Wednesday.

The fire had grown to nearly 60.5 square miles in an area favored by celebrities and wealthy residents.

One house was destroyed by the fire and four other buildings were damaged. Seven fire personnel and civilians have been injured in the fire, Cal Fire reported.

The Lufthansa Group is the latest major airline to cancel all passenger and cargo flights to and from Tel Aviv with immediate effect, following a string of others including United Airlines, Delta, and British Airways, along with Fly Dubai and Brussels Airlines and more.

They are citing security concerns related to Israel’s ratcheting war with Hezbollah, as well as soaring tensions resulting from the Wednesday Israel assassination of Ismail Haniyeh in Tehran, which threatens to kick off a broader regional war. The Israeli population remains on edge given that Tehran could launch another direct ballistic missile and drone attack.

A media statement from United explained, “Beginning with this evening’s flight from Newark Liberty to Tel Aviv, we are suspending for security reasons our daily Tel Aviv service as we evaluate our next steps.”

“We continue to closely monitor the situation and will make decisions on resuming service with a focus on the safety of our customers and crews,” a written statement to media outlets underscored.

Most of the airlines are suspending service tentatively for at least two days or more, with Delta canceling flights between New York’s JFK and Tel Aviv through at least Aug.2. However Lufthansa is canceling all the way through August 8. The German airline said, “The reason for this is the current development in the region,” according to a spokesperson.

The announcement was issued synonymous with reports of a Lufthansa pilot refusing to land in Israel while still in mid-flight, according to regional sources:

A Lufthansa flight captain refused to land in Israel on Thursday amid rising tensions between Israel and Lebanese group, Hezbollah, according to Israeli media, Anadolu Agency reports.

The flight was scheduled to land at Ben Gurion Airport near Tel Aviv from Munich, Germany, but the captain refused, citing that his crew were not prepared to fly to Israel, the Israeli public broadcaster, KAN, said.

Instead, the flight landed at Larnaca Airport in the Greek Cypriot Administration.

The airline initially informed passengers that the plane would land in the Greek Cypriot Administration for “technical reasons” and then it would be decided whether the flight would continue to Tel Aviv.

Broadly, a number of governments have issued their highest security alerts possible for travel to Lebanon, declaring the country as well as the Palestinian territories a ‘do not travel’ zone.

United, Delta Airlines, and British Airways cancel all flights to Israel, citing fear of wider conflict.

Major American and British airlines have told passengers that flights to Ben Gurion International Airport (TLV) are canceled, amid spiraling tensions with Hamas, Hezbollah… pic.twitter.com/PvD6UUddoP

— FL360aero (@fl360aero) July 31, 2024

A US Embassy-Beirut statement has urged, “Do Not Travel to Lebanon due to rising tensions between Hezbollah and Israel. If you are in Lebanon, be prepared to shelter in place should the situation deteriorate.”

The Biden administration has been warning that a major Israel-Lebanon war could break out at any moment, centered on paramilitary group Hezbollah in the south. But at this point, an evacuation of citizens has not yet commenced.

By Michael Every of Rabobank

As widely expected, as our Fed watcher Philip Marey covers here, the Fed left rates unchanged at 5.50% and will continue reducing its holdings of Treasury securities, agency debt and agency MBS by $60bn a month. There was no update of its economic projections, and only marginal changes to its statement, which was therefore more hawkish than expected. However, Powell very clearly put a September rate cut on display in the press conference.

Overall, recent developments in inflation and unemployment seem to warrant a rate cut ahead. However, inflation could still prove sticky, and Philip continues to think the Fed cuts based on worse ‘stag’ not better ‘flation’ data. He also strongly disagrees with the Fed’s projection of 4 rate cuts a year in both 2025 and 2026, which he thinks will be derailed by politics. Philip still assumes Trump wins in 2024 –as polls few read the methodology of show him far ahead and far behind Harris, and “no tax on tips” is joined by “no tax on social security” as a carrot for more voters than “no student loans” from the Democrats– and imposes a universal tariff, making a rebound in inflation unavoidable. On that basis, we expect only two rate cuts in 2025, all in the first half, and nothing in 2026.

“Challenging days are ahead… We are ready for every scenario.” While this is appropriate wording for the US election and the global outlook if the Fed is only able to cut rates 100bp, it wasn’t said by Real Clear Politics or Powell, but by the Israeli prime minister last night. In a dramatic 24 hours, Hezbollah’s #2 was assassinated in Beirut, then Hamas’s #1 Ismail Haniyeh *in Tehran*. All see Israel’s hand behind it, and Iran’s humiliated Ayatollah Khamenei has pledged revenge, the New York Times reporting this will be a direct, coordinated ‘Axis of Resistance’ attack on Israel, as in April. Iran just closed its airspace for Haniyeh’s funeral in Tehran Friday, while Hezbollah’s #2 will be buried in Lebanon, followed by a public speech by leader Nasrallah. The recent pattern suggests any attack on Israel would follow within days, so could again fall on the weekend. How will you sit for this Friday’s close?

April’s Iranian attack on Israel was seen by some as geopolitical ‘theatre’, but as I pointed out, they were serious rehearsals for more to come, while the precision Israeli response was an indication of the strike capability perhaps just used in Tehran: regardless, there appears no play-acting now. US Defense Secretary Austin has stated the US will again defend Israel if it’s attacked. The Israeli press talk of swarms of explosive drones and ballistic and cruise missiles from multiple directions aimed at military bases in Haifa or Tel Aviv; and/or major cyber attacks to take down banks and utilities; and/or attempted assassinations of Israeli or Jewish targets internationally.

Crucially, Israel has reportedly used diplomatic backchannels to inform Iran that any major damage or casualties on its end means full-scale war. In short, Iran (and Hezbollah) will either have to back down and lose face, or finesse an attack that looks significant but damages little – where any misfire will trigger the regional war so many have been concerned about, or just start that war regardless, even if this was not the timing they would have chosen. There is a scenario where nothing much now happens – but it looks ever less probable than the far worse alternatives. As a result, markets are starting to move.

The first stage of the market reaction to geopolitics like this is risk off. US Treasuries were already bid post-Fed, but could get more of a lift. Gold is likely to go higher. The Swiss Franc, the Japanese Yen (already on a roll post-BOJ), and the US dollar benefit from this kind of backdrop, but Powell leaned against the latter so it will be interesting to see which sentiment prevails.

The second stage of the market reaction is energy. Oil prices moved slightly higher on the first assassination in Beirut, and again on the second in Tehran. Headlines of war risk suggest more of the same – and much more if missiles start flying. The question then is how bad things could get.

Note the recent Israeli destruction of the Houthi port and oil storage at Hodeida, a more significant blow to the group than anything the West has achieved via Operation Prosperity Guardian and airstrikes. This implies Israeli willingness and means to destroy Iranian oil facilities. That could reduce Iran’s oil exports from current estimates of 1.0 – 1.5m barrels a day to zero.

However, the global demand backdrop is hardly bullish for oil at the moment, and OPEC+ is still holding to production cuts to try to prop prices up. They could, if needed, surely fill any supply gap quite easily. That would suggest immediate headline-related oil price spikes might not be sustained for long. Unless it isn’t only Iranian energy targeted.

Hezbollah would certainly try to hit Israel’s offshore natural gas fields, which would have a moderate knock-on effect on European gas prices given what we have seen recently. Far more significant would be if Iran or its proxies targeted Gulf or Saudi oil facilities or shipping, as in the past. This is less likely initially given recent rapprochement between Saudi Arabia and Iran. However, any US or Saudi/Gulf assistance to Israel during an Axis attack on it, as in April, and especially if the US actually then *attacks* Iran back alongside Israel, might open that door.

So might an Iranian reaction to any more military blows if they mark a devastating setback to a geostrategy it has been successfully employing for years. There might be compelling strategic logic for Tehran to act in a destructive manner to force the US and Europe to back away from Israel and push for a ceasefire on better terms for Iran than it could otherwise achieve. That’s not an immediate risk, but it’s not one to dismiss if things escalate.

Iran could also accelerate its rush towards a nuclear weapon, which despite the naïve hopes of those who backed the 2015 JCPOA, and those who backed Trump sanctions, is reportedly very much on track. Were US or Israeli intelligence to flag that this breakthrough is close to occurring, or a public demonstration of such is somehow made, albeit long before such a device could be fitted to a warhead, it would force a massive global escalation, or an equally massive global capitulation. In which case, others would be taking notes and making plans.

So, yes, challenging days lie ahead, and you should be ready for every scenario.

Even one where rates don’t get cut that much, or where central banks don’t get the financial press headline.

“The Administration’s cowardice in the face of terror is a national disgrace.”

Republican Kentucky Senate Minority Leader Mitch McConnell condemned the Biden-Harris Administration for what he described as weakness in the face of America’s enemies.

“The plea deal with terrorists – including Khalid Sheik Mohammed, the mastermind of the 9/11 attacks that killed thousands of Americans – is a revolting abdication of the government’s responsibility to defend America and provide justice,” McConnell said, New York Post reported.

McConnell was not alone in his bitterness that three defendants allegedly involved in the Sept. 11 terrorist attacks have entered into a plea deal with the United States Department of Defense (DOD) after years of incarceration at Guantanamo Bay.

Nearly 3,000 people were killed, and many thousands more injured in the coordinated Islamist suicide attacks carried out by al-Qaeda on U.S. soil in 2001.

As Stephen Katte reports via The Epoch Times, according to a July 31 statement from the DOD, Susan Escallier, who is the Convening Authority for Military Commissions, has entered into pretrial agreements with Khalid Shaikh (Sheikh) Mohammad, Walid Muhammad Salih Mubarak Bin’ Attash, and Mustafa Ahmed Adam al Hawsawi.

Mohammad, a Kuwaiti-Pakistani mechanical engineer, was the former head of al-Qaeda’s propaganda department and is accused of being the 911 mastermind. He allegedly presented the idea of hijacking planes and flying them into U.S. buildings to Osama bin Laden around 1996, and later helped train some of the hijackers.

Hawsawi has been accused of helping with financial and travel arrangements for the hijackers. Attash is accused of assisting with combat training for the terrorists.

Specific terms and conditions of the pretrial agreements have not been made publicly available by the DOD.

The three defendants, along with two others, Ali Abdul Aziz Ali and Ramzi Bin al Shibh, were first jointly charged and arraigned in June 2008. They were charged and prosecuted again in May 2012.

Aziz Ali and al Shibh did not enter into the plea deal. Last September, a military judge ruled that al Shibh was too mentally incompetent to stand trial.

An image of a courtroom shows Khalid Sheikh Mohammed (C) and co-defendant Walid Bin Attash (L) attending a pre-trial session in Guantanamo Bay, Cuba, on Dec. 8, 2008. (Sketch by Janet Hamlin-Pool/Getty Images)

ACLU Says Death Penalty Off the Table

The American Civil Liberties Union (ACLU), a non-profit civil rights advocacy group, says Mohammed is their client, and the deal involved the defendants agreeing to plead guilty in exchange for life imprisonment instead of the death penalty.

Anthony D. Romero, executive director of the ACLU, said in a July 31 statement that this deal was the “right call” for everybody involved, especially after “nearly two decades of litigation.”

“This plea agreement further underscores the fact that the death penalty is out of step with the fundamental values of our democratic system. It is inhumane, inequitable, and unjust,” he said.

“We urge the U.S. government to also quickly relocate the men cleared for transfer, and finally end all indefinite detentions and unfair trials at Guantánamo.”

According to Romero, “closing the chapter on these cases with a plea agreement will also provide a measure of transparency and justice for 9/11 family members.”

That’s not how the families of the victims see this plea deal…

In a media statement about the plea agreement, Brett Eagleson, president of 9/11 Justice, a grassroots movement made up of survivors of the terrorist attacks and family members of those lost, said the group was “deeply troubled by these plea deals.”

“These plea deals should not perpetuate a system of closed-door agreements, where crucial information is hidden without giving the families of the victims the chance to learn the full truth,” he said.

Eagleson said the 9/11 Justice group wants more access “to these individuals for information” to provide closure for all those affected by the terrorist attacks.

Republican New York Rep. Mike Lawler described the plea deals as a slap in the face to the families and survivors of 9/11.

“Disgusting that these terrorist scumbags are being let off without a trial. 9/11 victims, their families, and our heroic first responders deserve true justice!” he posted on Twitter.

The White House clarified President Joe Biden was informed of the plea agreement only on Wednesday and had no role in the process, which is being handled through the military justice system, according to the New York Post.

Former President Donald Trump’s administration previously rejected any plea bargains with the suspected terrorists held at Guantanamo.

The start of the third quarter saw a deterioration in business conditions at US manufacturers as new orders declined for the first time in three months, according to S&P Global.

This makes sense as we have seen ‘hard’ US macro data serially disappoint for three months.

• S&P Global US Manufacturing PMI falls to 49.6 in July, dropping into contraction for the first time since Dec 2023.

• ISM Manufacturing PMI plunged to 46.8 (48.8 exp) – weakest since Nov 2023 (near post-COVID lockdown lows)

Source: Bloomberg

Rubbing some salt in the wounds was the fact that Prices Paid rose while New Orders tumbled and Employment puked (to the lowest since COVID lockdowns)…

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“The manufacturing recovery moved into reverse in July, though the gloomier growth picture was accompanied by a marked cooling of inflation in the goods-producing sector.

“Business conditions worsened in July as the first fall in new orders since April caused a near-stalling of production. Purchasing activity is falling and hiring has slowed amid concerns over weaker-than-anticipated sales.”

But William son has an excuse for this downturn…

“Many firms are expecting the weakness to be temporary, linked to paused spending and investment ahead of the Presidential Election. However, firms’ expectations for output in one year’s time remain subdued by historical standards, reflecting additional concerns over the impact of higher interest rates and persistent inflation. While orders for investment goods such as plant and machinery fell especially sharply in July, underscoring the recent pull-back in capital spending, producers of consumer goods also reported a modest fall in demand.

“There was better news on the inflation front. Input cost inflation cooled for a second month after having risen to a 13-month high in May. This welcome lowering of cost pressures helped take further heat out of selling price inflation, which moderated sharply in July to the lowest for a year to signal only a marginal increase in prices during the month. This near-abeyance of producer price inflation should feed through to lower consumer price inflation in the coming months.”

The question is – if the Democrats win, will this downturn accelerate?

By American Military News

Gov. Maura Healey’s administration expects to spend more money than originally anticipated over the next fiscal year on the emergency shelter system housing migrants and local families, according to revised estimates released this month.

Shelter-related costs are now projected to top $1 billion in fiscal year 2025 if caseloads remain the same, an increase from the $915 million state budget writers first said they expected to spend and a sign that officials do not forecast a slowdown in demand.

The numbers were included in a Monday report released only hours after Healey signed into law a state budget that includes $325 million for the shelter system and relies on $175 million in one-time dollars from the pandemic to pay down costs.

Spending is not expected to slow down after fiscal 2025 and top Democrats on Beacon Hill have previously acknowledged a likely need to allocate more taxpayer dollars to the shelter network.

In a presentation this month to a state commission, officials with the Healey administration said Massachusetts taxpayers will most likely need to shell out more than $1 billion in fiscal years 2026 and 2027 if the number of people seeking state-funded shelter services does not subside.

Sen. Ryan Fattman, a Sutton Republican who sits on the commission, said Massachusetts lawmakers and the commission should consider making permanent changes to the shelter system to keep it viable for residents.

“We can’t be seen as a state where, whether you’re from South Dakota or South America or anywhere in between, you just get to come and we’re going to take care of you,” he told the Herald in an interview Tuesday.

“A society can’t work that way. There has to be rules of the road and we’ve had very few in this program, which has become an albatross financially.”

The projections for fiscal year 2025 were revised in mid-July based on the assumption that the shelter system will remain at its 7,500-family cap moving forward, four overflow shelters stay open, and the “same level and supports from FY24” continue.

The original estimate of $915 million did not fully account for the operation of the four overflow sites, according to the Executive Office of Administration and Finance.

A spokesperson for the budget-writing office said the Healey administration “has been clear that the current size of the emergency assistance shelter system is unsustainable – both in terms of physical space and financially.”

“This is why the administration recently introduced a new prioritization policy and a five-day stay limit at temporary respite centers, in addition to implementing the nine-month length-of-stay limit in EA shelters,” the spokesperson said in a statement to the Herald.

The lion’s share of spending this fiscal year is expected to come in the “shelter and associated services” category, with more than $775 million likely to be shuttled to providers, according to the presentation.

Healey’s administration anticipates spending another $76 million on overflow shelters, $48 million on school and municipal supports, $44 million on intake and clinical assessment sites, and $25 million on work authorization and workforce initiatives, the presentation said.

But officials said legislators have not appropriated enough money to cover costs in fiscal year 2025 and dollars are expected to dry up on Jan. 1, 2025, if a $470 million spending gap is not closed, according to the presentation.

About half of the dollars necessary to cover spending in fiscal year 2025 have already been appropriated but administration officials said they will need to tap the rest of an account filled with leftover pandemic-era dollars that can only be used once.

“Our proposal to use (pandemic-era) funding to cover the remaining FY25 costs is a responsible strategy to address the needs of the system without impacting other critical programs,” the spokesperson for Healey’s budget-writing office said.

A push to allow Healey to access more pandemic-era funds could come later this year, but would likely face Republican resistance during a time in the legislative calendar when formal sessions are no longer held and any one lawmaker can block an advancing bill.

If pandemic-era dollars are not made available, Healey officials warned they will need to implement a “structured caseload reduction in direct shelter,” reduce or end overflow shelters, and curtail or end additional services, according to the presentation.

The governor has already put in place a range of measures intended to curb shelter demand.

Families with children and pregnant women, including migrants, can only stay at overflow shelters for five days before they are kicked out — a sharp change from the month-long time limit they were previously offered — and must wait six months before accessing the larger system.

State officials are also now prioritizing Massachusetts families who are homeless because of a no-fault eviction or because of a “sudden or unusual circumstances” beyond their control like a flood or fire, or if they have at least one family member who is a veteran.

The move came after Healey limited stays in the shelter system to nine months with several options for extensions.

Updated estimates from the state come as the Massachusetts Fiscal Alliance, a conservative group, warned that shelter costs could become a “fiscal time bomb” once temporary pandemic-era dollars run out.

“Massachusetts cannot continue to fund the world’s illegal and inadmissible migrants. We simply do not have the capability or the funds,” the group’s spokesman, Paul Craney, said in a statement. “Healey needs to pass into law that the state’s right to shelter law gives preference to Massachusetts residents first. She recently took steps to add this policy but it needs to become the law going forward.”

Spending on emergency shelters ballooned starting last year when a system that has historically housed around 4,000 families soon came to care for 7,500, according to official statistics.

Massachusetts’ housing and health agencies turned to a sprawling network of hotels, private organizations, National Guardsmen, resettlement agencies, and state buildings to house and provide services to local families and migrants.

Healey’s administration spent $793 million on the shelter network as of mid-June and the number is expected to grow as budget writers process invoices for the rest of fiscal year 2024. Officials estimate spending in the last fiscal year could reach $932 million.

Rep. Paul Frost, an Auburn Republican who is a part of the shelter commission, said he was not surprised to learn that costs are expected to exceed $1 billion this fiscal year.

“It’s not shocking. I mean, when they wouldn’t address the issue of the influx into the system from out-of-state applicants back in the fall, you have to expect this was going to happen,” he said.

Shares of Moderna tumbled in premarket trading in New York after the biotech slashed its full-year sales guidance. The company cited lower sales in Europe, potential revenue deferrals for certain international sales into 2025, and an “increasingly competitive environment” for respiratory vaccines in the US.  

Moderna posted second-quarter earnings that were narrower-than-expected losses and revenue that exceeded the average analyst estimate tracked by Bloomberg. It also posted a loss of $1.28 billion, or $3.33 per share, for the quarter, compared to a net loss of $1.38 billion, or $3.62 per share for the same period one year ago. 

Snapshot of second quarter results (courtesy of Bloomberg): 

• Loss per share $3.33

• Revenue $241 million, -30% y/y, estimate $131 million

• Covid-19 vaccine revenue $184 million, estimate $106 million

• Total operating expenses $1.60 billion, -27% y/y, estimate $1.63 billion

• Cost of goods sold $115 million, -84% y/y, estimate $72.2 million

• R&D expenses $1.22 billion, estimate $1.1 billion

• SG&A expense $268 million, -19% y/y, estimate $307.7 million

Moderna noted that revenue slumps were primarily due to a transition of the seasonal Covid vaccine market. This is where Covid vaccine demand is lower in spring and generally rises in the fall and winter periods. However, CEO Stephane Bancel said that the demand for vaccines was a “good spring season” for the elderly population in the US.

The focus on earnings was Moderna’s downshift in the full-year product sales guidance from $4 billion to $3 billion to $3.5 billion. 

“The update in product sales is driven by three primary factors: very low EU sales in 2024, potential revenue deferrals for certain international sales into 2025, and an increasingly competitive environment for respiratory vaccines in the US,” the company said.

CEO Bancel added, “During the second quarter, we marked the approval of our second mRNA product and signicantly lowered our operating costs. We remain focused on execution for the 2024-25 COVID season and the launch of our RSV vaccine in the US.” 

Shares of Moderna plunged as much as 12% in premarket trading. 

Goldman anylsts have been keeping an eye on Modern’s selloff… 

About a month ago, the Biomedical Advanced Research and Development Authority (BARDA) granted Moderna $176 million to develop bird flu vaccines. Now, Moderna is banking on a spike in human-to-human bird flu cases. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

History suggests being wary of the “strong buys” at $45 when the eventual bottom is $4.

In response to my chart-fest post The Rollercoaster Ride Ahead: 15 Years of Extreme Distortions Will Be Unwound, readers asked: OK, so what can I do in response? That’s the right question, for passively awaiting the wave to wash over us and then scrambling for higher ground is a high-risk strategy.

Let’s start with three stipulations: 1) this is not investment advice; everything here is an observation based on history or my personal experiences after previous bubbles have popped; 2) there are no easy answers–none, and 3) my last three books can be viewed as a trilogy describing macro and individual responses to the Great Unwinding. I’ll post links to the free chapters at the end of this post. The point being that I’ve pondered this question for many years.

Do I have all the answers? No. Nobody does. All we can assemble is a coherent response based on the lessons of history and system dynamics: what’s fragile, risky and undependable and what’s lower risk and more resilient.

Since no response is easy, we’re talking about degrees of difficulty and what’s within reach for each of us. We all have limits of experience, location, skills, capital, networks and so on. Therefore there is no “one size fits all” template that’s going to work for everyone. The whole point of my book on Self-Reliance is that we each have to plan our own responses; we can’t just follow somebody else’s plan.

There’s a great divide between what Americans want / expect and what’s realistic. The average American feels they need to earn over $180,000 to live comfortably, survey shows The survey also found that only 6% of US adults make $186,000 or more, while the median family income is between $51,500 and $86,000. In other words, everyone feels they’d be OK if they joined the top 6%, meanwhile those households earning $180,000 are feeling that they need to earn $300,000 to be comfortable.

If you and your spouse / partner can skim off $300,000 or more annually, go for it. In terms of risk management, it might be prudent to assume one of you loses your job at some point, so figuring out how to live on $100,000 now rather than later makes sense.

Many readers report that they’ve already fashioned a low-cost, resilient lifestyle, generally by living in a lower cost rural locale with cheaper housing, paying off debt, doing their own repairs and maintenance on homes and vehicles, growing some of their own food and finding like-minded people in the community to share/work with.

Living Well on Less Than $30,000 a Year–One American Family’s Story.

Establishing a low-cost lifestyle demands sacrifices, many of which are “impossible” or out of reach in the current zeitgeist: the jobs and excitement are in cities and suburbs that are unaffordable: Starter Homes Cost At Least $1 Million In 117 California Cities.

Learning how to repair, maintain, grow, cook, bake and build also takes time, effort and sacrifice. The transition from consumer to producer is not easy.

It’s been a long time since Americans experienced a “real recession”: the last “real recession” was in 1981-82, over 40 years ago. Since then, recessions have been brief due to unprecedented bailouts and stimulus. The returns on bailouts and stimulus have diminished, and expecting the same tricks to work like magic again is, well, magical thinking. Things have changed, and as I’ve outlined, it may be less like 2000 or 2009 and more like 1973: nine years of turmoil and inflation that refuses to return to zero.

The biblical seven abundant years, seven lean years comes to mind. Humans predictably respond to abundance by gleefully squandering what’s plentiful in the good times, and then frugally hoarding whatever is left when the lean times kick in. Frugality is common-sense: waste nothing, need less, get serious about your Plan B and Plan C.

Readers ask: are there safe havens for my capital? There are certainly many claims made about safe havens, and I can only speak from my experience of bubbles popping over the past 50 years. The current bubble is unique in being an Everything Bubble, in which traditional safe-haven asset classes have already been front-run by the smart money.

In my experience, every asset goes down when massive credit-asset bubbles pop as the “good” assets get sold to cover margin calls as “bad” assets plummet and debts have to be serviced / paid down. That’s the downside of a financial system that is completely dependent on debt and leverage for its survival: the asset valuations can collapse but the debts remain and can only be cleared by bankruptcy / liquidation / insolvency.

Assets drop to levels that are considered “impossible” at the top of the bubble. This is the mindset of bubbles: the current valuations are entirely rational, and history says they’ll only move higher over time. This is how stocks that fell from $60 to $45 got recommended as a “strong buy” and then eventually bottomed at $4. Skyscrapers were sold for the value of their elevators in the Great Depression.

Earning 4% on cash looks pretty good when others playing “catch the falling knife” have lost 40% of their capital. Patience tends to pay off as bubbles pop and furious counter-rallies tempt bottom-fishers and buy-the-dippers. If history is any guide, bubbles take a few years to completely deflate, as the speculative frenzy takes a long time to dissipate as gamblers’ capital and desire to bet are whittled away.

The cliche is cash is king in asset-bubble deflations, and there’s a reason for this. Cash may lose some purchasing power due to inflation, but it’s earning some income to offset inflation. Every other asset that soared in the bubble is exposed to the selling that comes from having to pay down debt, unwind leverage and get out now before I lose even more money.

The risks of patiently waiting for the bubble to completely deflate are low compared to the risks of trying to rotate in and out of deflating assets ahead of the bots and smart money, who are masters of juicing manic counter-rallies to suck in the impatient and speculators who are overly anxious to “buy the dip.”

Note that Wall Street never recommends frugally piling up cash for a few years, as that generates no income for Wall Street, which thrives off the herd busily churning away capital chasing the latest hot rotation into bat guano futures, cobalt mines in Lower Slobovia, the Hydrogen economy, AI-powered robot pets, and so on. Maybe fortunes will be minted, maybe not, but staying out of the casino and waiting for the bottom, when everyone has given up, is never going to be touted by anyone in the casino.

Recall that it doesn’t matter what the “market” deems as the “fair price” for productive real-world assets. If my house is “worth” $1,000 or $1 million, it still provides shelter. If a homestead produces 1,000 pounds of nutritious food a year, it doesn’t matter whether the “market value” of the land is $1,000 or $1 million. That only matters if we’re speculating or leveraging debt. If we’re only interested in the use value, then the “market” gyrations are of zero interest.

What’s the “real value” of anything? That depends. My wife just bought a pair of almost-new Merrell brand shoes that retail for $100 for $2 at a thrift store. For somebody, the shoes were worth $100. Now they’re worth a few dollars.

Keep in mind health is the only real wealth. Once health is lost, even $100 million can’t restore it.

Everyone’s a genius in a bubble, but over time, few survive even five years of volatility. It may look easy to have caught the highs and lows of the 1970s, but few managed to do so.

History suggests being wary of the “strong buys” at $45 when the eventual bottom is $4. This is of course “impossible.” Everyone thought that in 2000 and 2008, too, and it’s the dominant mindset once again.

The opportunities lie ahead–far ahead. There is much to be said for this simple strategy: get lean, get frugal, pay off debt, save cash, get your Plans B and C in order, learn as much as you can to increase what you can do in the real world for yourself and your household, lower your exposure to non-linear disruptions and systemic risks beyond your control, turn a deaf ear to the touts and stay out of the casino.

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