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One month after Russia’s Gamelei Institute finished the first experimental vaccine trials on clinical subjects at Moscow’s state medical college, Russia has set an international precedent by becoming the first country to register a COVID-19 vaccine with international medical authorities.

Russia declared the vaccine “ready for use” despite “international skepticism,” the Associated Press reported. Putin made the announcement during a “government meeting”, where he also revealed that one of his own daughters had participated in the experimental trials.

“I would like to repeat that it has passed all the necessary tests,” he said. “The most important thing is to ensure full safety of using the vaccine and its efficiency.”

The trials established that a single course of the Russian vaccine is enough to establish immunity to COVID-19, while side-effects were minimal, with slight fevers appearing in Putin’s daughter, and other subjecst.

“As far as I know, a vaccine against the coronavirus infection has been registered this morning (in Russia) for the first time in the world,” the President told members of the government. “I thank everyone who worked on the vaccine – it’s a very important moment for the whole world.”

Of course, it’s worth noting that Russia-linked hackers were accused of spying on and possibly stealing vaccine-related “medical secrets” gleaned form research conducted in the UK.

Putin insisted that vaccination in Russia should only be carried out on a voluntary basis.

“I know that it works rather effectively, forms a stable immunity, and, I repeat, it passed all the necessary inspections,” the President added.

While the west raised alarms about potential safety issues caused by Russian “recklessness”, Vadim Tarasov, a top scientist at Moscow’s Sechenov University, where the trials took place, said Russia the country had a “head start” as it has spent the last 2 decades dedicating significant resources to the virus. The technology behind the Russian vaccine is based upon adenovirus, otherwise known as the common cold, he added. Created artificially, the vaccine proteins replicate those of COVID-19 and trigger “an immune response similar to that caused by the coronavirus itself,” Tarasov revealed.

Nikolay Briko, the Russian Health Ministry’s chief non-resident epidemiologist, echoed these sentiments.”This vaccine wasn’t developed from scratch, the Gamelei Research Center had a serious, significant research base on vaccines,” he was quoted as saying. “The technology of developing such a vaccine was perfected. So perhaps, the process was sped up due to the fact that the vaccine was not created from scratch. It is important that all stages (of vaccine research) are followed and that international requirements are adhered to.”

To try and reassure the Russian public, Putin declared his daughter, who participated in the “experiment” suffered only a mild fever that quickly went away.

“One of my daughters got the vaccine. In this sense, she took part in the experiment. After the first vaccination, she had a temperature of 38, the next day – 37 and that was all.”

The news that Putin administered the vaccine to his own daughter elicited some snickers on Twitter.

Nothing says ‘we have a great vaccine’ than also saying ‘No, you can’t see our scientific data on the vaccine testing’

— Darth Putin (@DarthPutinKGB) August 11, 2020

Did Putin’s daughter know she was getting the vaccine?

— Ivan the K™ (@IvanTheK) August 11, 2020

But believe it or not (clearly, the reporters at the AP are still skeptical), news of the world’s first registered vaccine sent futures higher in premarket trading.

Of course, Russia’s playing fast and loose with the “rules” allowed the experimental vaccine to be tested on Russian “elites” as early as April.

The first doses of the vaccine will be reserved for health-care workers and other vulnerable parties, Putin said. Russia says it hopes the vaccine will be available for mass innoculation early next year.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Currently, there is much bullish commentary suggesting stocks can only go higher from here. Is the bullishness in the markets justifiable, or is it willful blindness?

John Stoltzfus, CIO of Oppenheimer, is clearly in the bullish camp:

“We remain very bullish on this market. You’re going to see money beginning to further move out of the bond market, and it makes all the sense in the world to be positioned in equities.”

This seems a little optimistic given the amount of money that has already flooded into the 5-largest “mega-cap” stocks which have accounted for a bulk of this years market returns.

Nonetheless, it is an interesting question.

From the bulls viewpoint the focus has been the ability for these companies to grow earnings.

The bearish view is the problem with valuations.

As noted in “COT Positioning – Back To Extremes,” the Nasdaq set repeated new highs in 2020, which is astonishing given the depth of the economic recession. To wit:

“While the S&P 500 is primarily driven higher by the largest 5-market capitalization companies, it is the Nasdaq that has now reached a more extreme deviation from its longer-term moving average.”

“Moving averages, especially longer-term ones, are like gravity. The further prices become deviated from long-term averages, the greater the “gravitational pull” becomes. An “average” requires prices to trade above and below the “average” level. The risk of a reversion grows with the size of the deviation.

The Nasdaq currently trades more than 23% above its 200-dma. The last time such a deviation existed was in February of this year. The Nasdaq also trades 3-standard deviations above the 200-dma, which is another extreme indication.” 

It’s The Fed Stupid

The immediate conclusion is the drive higher in the markets is a function of massive amounts of liquidity being injected into the financial markets by the Federal Reserve. As shown below that was certainly the case during March and April.

However, since then the tapering of the liquidity injections by the Fed has been marked as the slowing uptake of the various programs reduced demand.

While there is indeed truth to the Fed’s impact on the market, it is not solely responsible for the dislocation of prices from the underlying fundamentals.

As shown, the decline in fundamentals didn’t start during the pandemic. The decline in earnings started in early 2019 as economic growth slowed, and accelerated during the pandemic. However, during that same period stock prices rose, which is almost entirely attributable to “valuation expansion.”

Dumb Money All In

E*Trade recently released survey data which showed that despite the market plunge in March, bullish sentiment has returned:

• Bullish sentiment returns. Half of surveyed investors (51%) are bullish, rising 13 percentage points since last quarter.

• Investors are more likely to believe the market will rise. Over half of investors (51%) believe the market will rise, skyrocketing 20 percentage points this quarter.

• But volatility will persist. More than half of investors (56%) believe volatility will continue, gaining nine percentage points since last quarter.

• And investors expect a long road to recovery. More than half (54%) believe it will take more than one year to recover from the pandemic, and just one out of five investors (23%) would give the economy an “A” or “B” grade.

You get the idea. Just one quarter after panic selling lows, investors are once again “back in the pool.” Despite the economy just printing a nearly 40% decline in Q2, and earnings having dropped by nearly 40% from their peak, the “dumb money” is back to chasing stocks.

In particular, not only are “retail investors” chasing stocks, they are doing it with increased leverage by using options. As noted by CNBC recently:

“Investors have reentered the market at a record rate following the coronavirus-induced sell-off in March, and as traders look to profit, options volume has soared to an all-time high.

The average daily value of options traded has exceeded shares for the first time, with July single stock options volumes currently tracking 114% of shares volumes.

In other words, the options market is now larger than the shares market.”

We have seen record lows in the Put/Call ratio three times in 2020. All three lead to corrections.

Willful Blindness

Willful blindness, also known as willful ignorance or contrived ignorance, is a term used in law. Being “willfully blind” describes a situation in which a person seeks to avoid civil or criminal liability for a wrongful act by keeping themselves unaware of the facts that would render them liable or implicated.

Although the term was originally used in legal contexts, the phrase “willful blindness” has come to mean any situation in which people avoid facts to absolve themselves of their liability. 

“‘Willful blindness’ is most prevalent in the financial markets. Investors regularly dismiss the ‘facts’ which run contrary to their current opinion. In behavioral investing terms this is also known as ‘confirmation bias.’” 

As markets rise, investors take on exceedingly more risk with the full knowledge that such actions will have a negative consequence. However, that “negative consequence” is dismissed by the “fear of missing out,” or rather F.O.M.O.

As “greed” overtakes “fear,” investors become more emboldened as rising markets reinforce the conviction that “this time is different.” Ultimately, when the negative consequence eventually occurs, instead of taking responsibility for their actions, they blame the media, Wall Street, or their advisor.

This currently where we are in the markets today.

Value Proves It

Investors know there is a rising risk of loss, but, they are willfully ignoring the facts and and piling into risk because the narrative has simply become “fundamentals don’t matter.”  In 2020, investors are again chasing “growth at any price” and rationalizing overpaying for growth. 

“Such makes the mantra of using 24-month estimates to justify paying exceedingly high valuations today, even riskier.”

This is also where there is the greatest disparity between growth and value on record.

There are two critical takeaways from the graph above:

• Over the last 90 years, value stocks have outperformed growth stocks by an average of 4.44% per year (orange line).

• There have only been eight ten-year periods over the last 90 years (total of 90 ten-year periods) when value stocks underperformed growth stocks. Two of these occurred during the Great Depression and one spanned the 1990s leading into the Tech bust of 2001. The other five are recent, representing the years 2014 through 2019.

In other words, there is high probability that investors chasing “growth” are going to pay a heavy price in the future..

It’s The Economy

The problem, as discussed in “Insanely Stupid,” the ability for stocks to continue to grow earnings at a rate to support high valuations will be problematic. Such is due to rising debts and deficits which will retard economic growth in the future. To wit:

“Before the ‘Financial Crisis,’ the economy had a linear growth trend of real GDP of 3.2%. Following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Instead of reducing the debt problems, unproductive debt, and leverage increased.

The ‘COVID-19’ crisis led to a debt surge to new highs. Such will result in a retardation of economic growth to 1.5% or less.” 

Slower economic growth, combined with a potential for higher taxes, increases the probability that  “risk” may well outweigh “reward” at this juncture.

Such doesn’t mean that stocks can’t go higher in the near term, and despite some wiggles along the way, it is quite likely they will simply because of momentum and lot’s of “bullish bias.” 

“We’ve often noted that during times of unhealthy market environments, when fewer than 60% of stocks can hold above their 200-day averages, that periods of high optimism tend to lead to below-average forward returns.

We’re seeing that now, to a historic degree. Since we’ve been tracking this data, just over 20 years, there has never been a day when Dumb Money Confidence was at or above 80% while fewer than 60% of stocks in the S&P 500 were trading above their 200-day averages. Until now.” – Sentiment Trader

The Problem Of Eternal Bullishness

The problem of “eternal bullishness” is it leads to the “willful blindness” of risks, rather than having a healthy respect for, and recognition of, those risks. This leads to the unfortunate problem of being “all-in” on every hand which has a devastating consequence when a mean reverting event occurs.

Our job as investors is to navigate the waters within which we currently sail, not the waters we think we will sail in later. Higher returns come from the management of “risks” rather than the attempt to create returns by chasing markets.

I recently quoted Robert Rubin, former Secretary of the Treasury, in “This Is Nuts,” as it defined our philosophy on risk.

‘As I think back over the years, I have been guided by four principles for decision making. The only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty, we must decide and we must act. And lastly, we need to judge decisions not only on the results but also on how we made them.

Most people are in denial about uncertainty. They assume they’re lucky, and that the unpredictable can be reliably forecasted. Such keeps business brisk for palm readers, psychics, and stockbrokers, but it’s a terrible way to deal with uncertainty. If there are no absolutes, all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision.’” – Robert Rubin

Focus On Risk

It should be evident that an honest assessment of uncertainty leads to better decisions.

The problem with “Eternal Bullishness” and “Willful Blindness” is that the failure to embrace uncertainty increases risk, and ultimately loss.

We must be able to recognize and be responsive to changes in underlying market dynamics. If they change for the worse, we must be aware of the inherent risks in portfolio allocation models. The reality is that we can’t control outcomes. The most we can do is influence the probability of specific outcomes.

Focusing on risk not only removes “willful blindness” from the process, it is essential to capital preservation and investment success over time.

Preliminary data for July shows that Class 8 commercial truck sales may have finally started to rebound.

Stung by both the pandemic and a legacy backlog dating back almost two years that has acted as a constant drag on new orders for the last 18 months, preliminary Class 8 orders were 20,300 units for July, up 27% sequentially and up 98% from 2019’s numbers. 

Despite the numbers being nowhere near 2017 and 2018 peak levels, July looks to mark the strongest month of the year for Class 8 orders so far, possibly telegraphing an optimistic second half of the year.

In an August 4 release reported by The Trucker, ACT Research’s Kenny Vieth, president and senior analyst, said: “Preliminary data show that July orders for medium- and heavy-duty vehicles jumped to a six-month high.”

He continued: “The context of rising rates and improving carrier profits adds perspective to what is now occurring in Class 8 orders: Supply matters. With many drivers (and trucks) sidelined, there is now insufficient available capacity for rebounding freight volumes. There is a strong relationship historically between carrier profits and equipment demand.”

He also noted that the positive shift in numbers came despite the additional headwind of a slowing economy during the end of the month:

Vieth noted that during the last week of July, reports showed the U.S. economy for the second quarter of 2020 had dropped 9.5% from the first quarter and was 10.6% below the ending level for 2019. 

Jonathan Starks, chief intelligence officer for FTR, says that despite the good month, he is still forecasting a slow recovery: “As we hit the height of summer demand, the freight markets showed strength and resilience and that led to additional orders for trucks. The order activity for both June and July was more robust than expected and is good news for the equipment producers. However, despite the increasing orders, FTR still expects the Class 8 market to maintain a slow, steady recovery.”

He continued: “The freight markets sustained a traumatic decline of volumes at the start of the pandemic and consumer demand, on an absolute basis, will remain weaker as we deal with high levels of unemployment and a Congress that has been unable to foster a bi-partisan solution to stimulate demand. The OEMs received a needed boost from July orders, activity that will help keep the industry moving in an upward direction.”

We will update this article when finalized July data becomes available, which should be in several days.

Authored by Paul Joseph Watson via Summit News,

The impact of the global coronavirus lockdown is set to plunge 100 million people into extreme poverty, warns a new report by the Pulitzer Center on Crisis Reporting.

The report appears to pin the blame on COVID-19 itself for the economic impact, yet the actual culprit is discovered to be the “restrictions” put in place by governments in response to the pandemic.

From the report;

“With the virus and its restrictions, up to 100 million more people globally could fall into the bitter existence of living on just $1.90 a day, according to the World Bank. That’s “well below any reasonable conception of a life with dignity,” the United Nations special rapporteur on extreme poverty wrote this year. And it comes on top of the 736 million people already there, half of them in just five countries: Ethiopia, India, Nigeria, Congo and Bangladesh.”

The report notes that the impact of the lockdown on the poor in countries like India was “so abrupt and punishing” that their Prime Minister, Narendra Modi, begged for forgiveness.

The report will stir up further debate as to whether the global lockdown will prove more deadly than COVID-19 itself, with extreme poverty being directly linked to death and shortened life spans. According to research published by Imperial College London and Johns Hopkins University, around 1.4 million people are expected to die from untreated TB infections due to the coronavirus lockdown.

Experts have also warned that hundreds of thousands or even millions of people could die in the longer term as a result of the lockdown preventing them from receiving treatment for cancer and other serious illnesses.

Given that many of those sunk into extreme poverty as a result of the lockdown live in sub-Saharan Africa, this could also exacerbate mass immigration from that region into Europe.

“It’s a timely reminder that the the main cost of the lockdowns favoured by liberal policy-makers across the world will not be people in the West, but those hovering just above the poverty line in the developing world,” writes Toby Young.

“Thanks to the misguided enthusiasm of Western governments for imprisoning entire populations in their homes, thereby triggering a global recession, tens of millions of people will die of starvation in low-income countries.”

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If there’s one thing the pandemic has done globally, it has been forcing countries to look inward and reassess both their infrastructure and their reliance of products and services on China. The U.S. has already vowed to start making drug components domestically and President Trump has long been proposing infrastructure upgrades. 

And in keeping with the trend of upgrading infrastructure – which hasn’t quite been Italy’s expertise anytime over the last few decades – Italian Prime Minister Giuseppe Conte has now said he is considering an underwater tunnel that links Sicily to mainland Italy. 

Conte mulled the plans during a speech he gave on Sunday evening in which he announced several plans that appear to be focused on the country maintaining its infrastructure independence. Before building such a tunnel, Conte said that the country would need to improve its internal routes first. 

As of today, Sicily is still the only region of Italy which cannot be serviced by the country’s “Eurostar” trains.

The Strait of Messina Bridge has been proposed between the mainland and Silicy for years, but was cancelled in both 2006 and 2013 due to budget constraints. Now that the entire world has collectively decided to ignore budget constraints and allow Central Banks to do whatever they want, it’s no surprise that a project connecting the 576 km between Calabria and the mainland may actually move forward. 

At the same speech, Conte also said he wanted to focus on rolling out broadband across the country before reviewing whether or not China should be allowed to supply the country with 5G technology, Bloomberg reported. 

“Italy needs a single grid and recent talks will be wrapped up with a clear path by the end of this month,” he said. Given the recent controversy surrounding Tik-Tok and ongoing questions about Chinese hardware and maintaining privacy, our guess is that Huawei may not be leading the list of infrastructure providers to help implement such a network. 

But when it comes to the tunnel, there’s one “genius” we can recommend…

Authored by Wolf Richter via WolfStreet.com,

Tesla’s share of the EV market plunged to 8.7% year-to-date, from 18.4% last year. Competition is now huge and across the spectrum. Tesla faces the same situation globally.

It has been a very ugly year in Germany for auto sales, except for EVs. The overall new vehicle market in Germany has plunged by 30% in the first seven months of 2019 to 1.526 million units. But EV sales have skyrocket by 65% over the first seven months, after having already skyrocketed by 88% in the same period in 2019, according to KBA, the German agency that handles nationwide new-vehicle registrations. Year-to-date, 61,105 EVs were sold, giving EVs a share of 4% of total new vehicle sales, up from less than 1% in 2018.

But Tesla got crushed. Its sales over the seven-month period fell from 6,816 in 2019 through July to 5,306 over the same period this year, and its share in the EV market plunged from 18.4% to 8.7%.

There are now three automakers that blew past it in Germany – Volkswagen Group, Renault, and Hyundai Group – while Daimler Group came in even with Tesla, and BMW group wasn’t far behind. This chart shows market share of each automaker, with all their EV brands and models combined:

By Automaker: The table shows registrations by automaker, each with all their EV makes and models combined, in July and year-to-date through July, in order of their share of the total EV market (right column).

By major brand: The table below splits out the major brands of each automaker that offer EVs. So, Volkswagen Group has five brands with EVs on this list: VW, Audi, Skoda, Porsche, and Seat. BMW Group has two brands on the list: BMW and Mini. Daimler Group also has two brands on it, Mercedes and Smart, as has Hyundai Group, Hyundai and Kia. In this lineup, Tesla is in third place, behind the brands VW and Renault. There are still a bunch of major brands that do not offer EVs in Germany, including Toyota, and those are not on the list:

Tesla is now in the process of building an assembly plant in Germany. But by the time it is up and running, more of the other major automakers that currently don’t offer EVs in Germany will offer them. And the giants with their numerous brands are gearing up to offer a whole spectrum of vehicles, across all categories and price classes.

To Tesla’s credit, it shook up the German automotive industry that for years had pooh-poohed EVs in favor of internal combustion engines, particularly diesels. Volkswagen Group was so focused on diesels that it couldn’t even see EVs.

But the fallout from the diesel-emissions-fraud scandal, which continues to fester in the German court system, has changed that. Consumers are turning away from diesels. And for automakers, EVs are the only major segment that is red hot, even during the pandemic. It’s where growth is. What Tesla accomplished was that it woke up the giants. And now they’re going after this market with all their might.

Tesla is facing the same situation globally: The giants have woken up and many of them are now offering or will soon be offering models across the spectrum, and Tesla has to get down in the trenches with them and compete on price, service, quality, reliability, and all the other mundane factors that regular consumers – not true believers – demand. And it’s going to get very tough.

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Greece’s military is once again said to be in a state of high alert with all troops prevented from leaving their duty stations or going on temporary leave. Not only has Turkey’s Energy Minister Fatih Donmez announced Monday that the Oruc Reis seismic exploration ship has been dispatched to the Mediterranean, but Bloomberg reports Turkey has launched naval exercises in the same region.

“Turkey launched naval exercises off two Greek islands and announced energy exploration research in the same area, projecting its military might amid heightened territorial tussles in the eastern Mediterranean,” according to the report.

The naval drills are described as east and to the south of Rhodes and Kastellorizo, both which are among Greece’s easternmost islands, and not far from Turkey’s coast. The drills are expected to go multiple days running through this week.

Greece’s defense ministry says it’s prepared to “counter” any Turkish military maneuvers in a worsening situation which appears ripe for conflict, also given Turkey’s oil and gas exploration plans have been source of intense controversy for the past year, resulting in threatened EU sanctions for violations of Greek and Cypriot waters. This as an urgent Greek Government Council for National Security meeting is expected to kick off Monday in Athens.

“Turkey doesn’t recognize Greece’s claim that its territorial waters start immediately south of Kastellorizo, the most distant Greek outpost,” Bloomberg continues. “The gunnery exercises that will run through Tuesday, according to a Turkish navy website, are a message that Ankara won’t accept any agreement or move that would limit its own maritime interests in the Mediterranean.”

Though as of a week ago it appeared a cooling of tensions could be on the horizon, with Athens and Ankara said to be in negotiations, Turkey abruptly halted its diplomacy after the announcement of a Greece and Egyptian deal defining their exclusive economic zones in contradiction to Ankara’s interpretation.

Turkey denied the agreement as “null and void” — which means Turkey’s expansionist claims are being contested by pretty much every Mediterranean country, also including Israel. The exception of course, is the Tripoli-based Libyan Government of National Accord (GNA), which lately inked its own agreement with Turkey defining broad swathes of the Mediterranean as within Turkey’s rights.

Erdogan’s office has since said that the Greece-Egypt deal effectively cut Turkey out of crucial dialogue, so it is forced to resume its energy exploration. “We were engaged in talks with Greece for the last two-and-a-half months in Berlin and had even agreed on a joint statement but Greece announced its deal with Egypt just a day before it,” the Turkish presidency spokesman Ibrahim Kalin told CNN-Turk television on Sunday.

Turkey has sought to argue that the so-called Turkish Republic of Cyprus, which remains unrecognized internationally, gives it expansive rights encompassing the whole of Cyprus, including areas that cut into Greece’s waters. The EU, with France’s Macron lately leading the way, has consistently sided with Greece and Turkey, condemning Turkey’s maritime violations of EU member states’ Exclusive Economic Zones.

Seattle Police Chief Carmen Best has announced her resignation, effective September 2nd, after the City Council voted to slash spending on the Seattle Police Department by roughly $4 million out of the department’s $400 million annual budget – or around 1%.

While the cuts may be largely symbolic – aside from the 100 or so of the city’s 1,400 police officers ,who will be laid off or not replaced through attrition – the move, which also reduced Best’s $285,000 annual salary, was enough to make her leave the force after 28 years with SPD.

Best, who in addition to trying to maintain order during the BLM protests while operating under a ban on tear gas, pepper spray and flash bangs, has been dealing with protesters showing up to her Snohomish County house. She also says she hasn’t been included in any city council discussions regarding budget cuts, according to KING5.

In a Monday night letter, Best wrote:

“To the Women and Men of the Seattle Police Department –    

I wanted to notify you that I will be retiring from the Seattle Police Department, effective September 2nd, 2020. I wanted you to hear this from me, but some media have reached this conclusion on their own.   

This was a difficult decision for me, but when it’s time, it’s time.”

Responding to Best’s resignation, Seattle Mayor Jenny Durkan said in a statement:

“Know that while I understand the Chief’s reasons, I accepted her decision with a very heavy heart. I have had the privilege to be with Chief Carmen Best in so many situations: with her family, at roll calls, in community meetings, and in nearly weekly meetings addressing public safety in Seattle. Her grit, grace and integrity have inspired me and made our city better. These last months, I knew Chief Best was the person to lead our city through this challenging time, to reimagine policing and community safety. Her leadership is unmatched nationwide, which is why it is a sad day for our City to lose her.

Carmen Best is still devoted to this department and our city. I regret deeply that she concluded that the best way to serve the city and help the department was a change in leadership, in the hope that would change the dynamics to move forward with the City Council.”

A press conference is scheduled for 11 a.m. Tuesday with Durkan and Best.

The approved cuts to SPD fall far short of the 50% cut demanded by Black Lives Matter protesters, while several council members said on Monday that the changes were a starting point in what will be a lengthy process to reshape policing and public safety, according to AP.