Author: admin

Last week, Wall Street was shocked following a report that Uber was seeking to acquire its biggest competitor in the food delivery space, Grubhub, in hopes of creating a food-delivery giant. The news was good enough to send the stock price surging however as it suggested Uber saw a light at the end of the coronavirus pandemic tunnel. Maybe not, because moments ago, the Journal reported that Uber was cutting another several thousand jobs, and closing 45 offices as part of its re-evaluation of “big bets in areas ranging from freight to self-driving technology as Chief Executive Dara Khosrowshahi attempts to steer the ride-hailing giant through the coronavirus pandemic.”

According to the report, the CEO announced the plans in an email to staff Monday, less than two weeks after the company said it would eliminate about 3,700 jobs and planned to save more than $1 billion in fixed costs. Monday’s decision to close 45 offices and lay off some additional 3,000 people means Uber – whose core rides business was down 80% year-over-year in April – is shedding roughly a quarter of its workforce in under a month. Drivers aren’t classified as employees, so they aren’t included.

Stay-at-home orders have ravaged Uber’s core ride-hailing business, which accounted for three-quarters of the company’s revenue before the pandemic struck.

Employees in the U.S. will be the hardest hit by the cuts. Uber is closing one of its offices in downtown San Francisco, which had more than 500 employees. It is also considering moving its Asia headquarters from Singapore to a different market.

As part of the new changes, Uber will also scale back on noncore businesses, with the company winding down its product incubator and artificial-intelligence lab, and exploring “strategic alternatives” for Uber Works, which pairs prospective employers with gig workers. The company is also re-evaluating cash-burning businesses such as freight and autonomous driving. Uber has spent hundreds of millions of dollars to advance self-driving research in recent years.

Employees in the U.S. will be the hardest hit by the cuts. Uber is closing one of its offices in downtown San Francisco, which had more than 500 employees. It is also considering moving its Asia headquarters from Singapore to a different market.

Does that mean the “recovery” is put on hold? Here’s what Khosrowshahi said in his note to employees:

“We’re seeing some signs of a recovery, but it comes off of a deep hole, with limited visibility as to its speed and shape.”

And while the company’s food-delivery arm, Uber Eats, has been a bright spot during the crisis, but “the business today doesn’t come close to covering our expenses”, something we pointed out two weeks ago when Uber reported earnings and showed that depsite a surge in Uber Eats, the EBITDA actually declined.

In an attempt to deflect investor attention from woes in its core business, Uber recently entered talks to buy rival Grubhub, a deal that would help stem losses from the cost-intensive business of building out delivery operations and give it an edge in competing with industry leader DoorDash. Khosrowshahi didn’t reference the potential deal in his memo.

As the journal notes, the pandemic hit “when Uber was pivoting from growth at all costs to a profitable future” and the company was trimming costs even before the outbreak, in an effort to propel Uber toward a path to profitability by the end of the year. He recently pushed that timeline to next year.

“I will not make any claims with absolute certainty regarding our future,” Mr. Khosrowshahi wrote in his note. “I will tell you, however, that we are making really, really hard choices now, so that we can say our goodbyes, have as much clarity as we can, move forward, and start to build again with confidence.”

And since nothing makes sense any more, Uber’s admission that it continues to be surprised by the severity of the coronavirus slowdown was enough to spike its stock to session highs, sending it up as much as 10% on the session.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Any economy that concentrates its wealth and income in the top tier is a fragile economy.

There are two structural reasons why consumer spending will not rebound, no matter how “open” the economy may be. Virtually everyone who glances at headlines knows the global economy is lurching into either a deep recession or a full-blown depression, depending on the definitions one is using. Everyone also knows the stock market has roared back as if nothing has happened.

While most financial pundits have accepted that a V-shaped recovery is not possible, few (if any) observers have discussed two factors that will cause consumer spending to crash harder than generally expected:

1. The top 10% of households account for about half of all consumer spending, and these are the households that will be most affected by the sharp drop in assets, small business income and the shrinking of heretofore “safe” white-collar jobs in higher education, healthcare, finance, etc.

In other words, since the top 10% own roughly 85% of all non-family-home assets (i.e. stocks, bonds, business equity, rental real estate), the decline in the value of these assets and the decline in the income generated by these assets will hit the top 10%, not the bottom 90% who own a tiny sliver of these assets.

Companies are slashing dividends, tenants are not paying rent and family-owned businesses will experience declines in revenues and profits–even those which have yet to feel the consequences.

All of these income streams and assets are owned by the top 10%, and so all these declines in wealth and income will be concentrated in the top 10%.

2. The majority of the wealth owned by top 10% households is held by people 50 years of age or older, and this older cohort that owns most of the wealth and the income streams generated by the wealth are more at risk of Covid-19 than younger people. Surveys have found that people who feel more at risk are much less inclined to start going back to restaurants, musical events, etc., or going on cruises or airline flights.

It’s important to note that risk is an internal assessment. Thus the economy can be completely open again but people who feel cautious won’t resume their old spending habits, and there is no way to force them to do so.

The data strongly suggests elderly people and those with metabolic issues–obesity, high levels of sugar or cholesterol, and high blood pressure–are at greater risk than healthier people. (Vitamin D and zinc deficiencies may also play a role, as well as general immune response.) I recently saw a statistic that only 15% of the American populace is metabolically healthy. The point here is that a sense of heightened risk is sensible for a great many people, and since the owners of most of the wealth are older, this caution will have outsized impacts on consumer spending.

Combine this with the shrinking wealth and income of the top 10%, and you get a double-whammy reduction in consumption.

It’s also instructive to gauge the enormous asymmetry in what the top 10% spend on services compared to the bottom 90%. The bottom 90% may get their hair or nails done and have the oil changed in their car, but they typically can’t afford (or don’t need) all the services routinely engaged by the top 10%: dog walkers, CPAs, tax accountants, attendants for elderly parents, piano lessons and other tutoring for children, fitness trainers, career counselors, landscape designers and so on–the list is practically endless.

Once the top 10% are forced to tighten their belts, it won’t be Wal-Mart sales that are hit–it will be millions of service providers who depended solely on the top 10% (or top 5%) for virtually all their income.

All the professions that only served the top 10% will be decimated, as they are all inessential. Virtually every one of these tasks can be cancelled, put off into the future, or performed by the household if push comes to shove financially.

The arts and performing arts that depend almost entirely on costly ticket sales to the wealthy and donations from top 5% households will also be decimated. If you attend the symphony, ballet or opera, you know 90%+ of the audience is over 60–the very cohort that will now hesitate to spend lavishly or attend crowded performances.

Based on my admittedly informal observations, I think it’s a fair assessment to say that a great many top 10% households are in denial about the financial tsunami that’s about to hit them. Since they weren’t furloughed like lower-income workers, they have a delusional faith that their incomes, business and wealth will survive the depression intact.

They are looking at the water receding from the bay, leaving all the fish flopping in the seabed, and reckoning that’s the worst that will happen. They don’t yet understand that the tsunami that’s about to roar ashore is not yet visible. The financial wave has yet to hit them, but when it does, they will find:

1. Their unearned/investment income will drop.

2. Tax hikes will be aimed exclusively at the top 10%, further eroding their income.

3. Their services weren’t as essential or in demand as they assumed, because they assumed the top 10% that make up the bulk of their customers would resume spending freely.

4. Their assets will decline in value, as the only buyers are other top 10% households, and these declines in wealth and income will create a self-reinforcing downward spiral.

If assets will lose $10 trillion in value, virtually all of this will come out of the accounts of the top 10%. If investment and business income declines by $1 trillion, virtually all of this will come out of the incomes of the top 10%.

In summary: the vast majority of spending by the bottom 90% isn’t discretionary: it’s mostly servicing debt (student loans, mortgages, auto/truck loans, credit cards, etc) and essentials (rent, food, utilities, etc.), with modest discretionary spending on fast food and cheap goods.

In contrast, the top 10% spending–almost half of all consumer spending– has supported a vast number of service businesses, jobs, arts organizations, etc.–entities that receive very little of their revenues from the bottom 90%. As the top 10%’s income crashes, so will their discretionary spending. The older the wealthy household, the more likely they will hesitate to spend as their nestegg is crushed and their caution about crowds endures.

These dynamics are under-appreciated in my view, and so the majority of media commentators and the top 10% themselves are unprepared for the asymmetric impacts on their own wealth, income and livelihood that will sweep ashore later this year.

This trend reversal in top 10% spending has been building for some time: Early warning sign of recession? High-wage workers are spending less (11/29/19) “The trend is noteworthy because the top 10% of households by income make up nearly half of all consumption.”

Any economy that concentrates its wealth and income in the top tier is a fragile economy.

*  *  *

My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

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Atlantic Council senior fellow, Congressional candidate, and Russia conspiracy theorist Evelyn Farkas is desperately trying to salvage her reputation after recently released transcripts from her closed-door 2017 testimony to the House Intelligence Committee revealed she totally lied on national TV.

In March of 2017, Farkas confidently told MSNBC‘s Mika Brzezinski: “The Trump folks, if they found out how we knew what we knew about the Trump staff dealing with Russians, that they would try to compromise those sources and methods, meaning we would not longer have access to that intelligence.”

Except, during testimony to the House, Farkas admitted she lied. When pressed by former Rep. Trey Gowdy (R-SC) on why she said ‘we’ – referring to the US government, Farkas said she “didn’t know anything.”

In short, she was either illegally discussing US intelligence matters with her “former colleagues,” or she made the whole thing up.

Now, Farkas is in damage control mode – writing in the Washington Post that her testimony demonstrated “that I had not leaked intelligence and that my early intuition about Trump-Kremlin cooperation was valid.’ She also claims that her comments to MSNBC were based on “media reports and statements by Obama administration officials and the intelligence community,” which had “began unearthing connections between Trump’s campaign and Russia.”

Farkas is now blaming a ‘disconcerting nexus between Russia and the reactionary right,’ for making her look bad (apparently Trey Gowdy is part of the “reactionary right” for asking her who she meant by “we”).

With US equity futures soaring to start the week on the combination of Powell’s 60 Minutes affirmation that the Fed’s money printer go BRRRRR to 11 (as Nomura’s Charlie McElligott poetically puts it) coupled with favorable news of a coronavirus vaccine trial by Moderna (which saw favorable results in a group of 8 “young and healthy” volunteers), the bulk of Wall Street institutions is once again positioned on the wrong side of today’s rally.

As we showed on Friday using the latest Deutsche Bank flow data…

… both consolidated and systematic positioning was just off decade lows, while discretionary positioning – namely hedge funds and various other levered investors – have continued to take down exposure, selling to retail investors all the way on the way up, assuming of course that Robin Hood is up on any given day.

Yet while institutions may yet have the final laugh, for now it is retail investors that are smiling all the way to the bank as they continue to buy everything that the pros are selling.

And, as Nomura’s Charlie McElligott writes this morning, futures are “un-clenching higher”, as the abovementioned institutions scramble to chase the market with “both Asset Managers- (cumulative -$10.5B of US Equities futs sold across the May-to-date numbers so far) and the Leveraged Funds- (sold -$3.4B of US Eq futs in May so far) have continued to sell or be short / very hedged into the Equities move MTD.”

Here’s are the details why Wall Street is once again chasing stocks (and retail) on the way higher, via McElligott:

• TFF Leveraged Fund data shows that the “net” position in SPX is -$47.1B (short), only a 2.8%ile outcome since 2006, while also net Nasdaq position is short  -$3.5B, similarly prolific at just 6.1%ile since 2006.

CFTC Non-Comm investor-type data shows the net position in SPX futures at just 2.2%ile since 1999 (only occurred 6x’s previously), while the cumulative 3m “sale” by Non-Comms is just 1.5%ile (only been this “net short” 5x’s since ’99)

Not surprisingly then, Long-Short Fund “performance beta to S&P” at just 3.1%ile since ’04

Meanwhile, Asset Manager data shows “the 3 month cumulative selling was massive, a monstrously negative outcome at -$119B, just 3.3%ile since 2006 (only happened 5x’s).”

As McElligott concludes, “this off-side positioning serves as a source of the “Squeeze Pivot” observed over the past 1 week reporting period, when Asset Managers bought +$6.4B of US Equities futures (+$4.0B SPX, +$1.6B NDX, +$800mm RTY), which is a 96th %ile 1w outcome since 2006.”

Taken collectively then and thematically within U.S. Equities today, we should see a very “pro-cyclical” risk-rally, with the “Value / High Beta over Growth / Defensives” ANTI-MOMENTUM trade—especially as this re-risk comes in conjunction with the aforementioned bear-steepening in US Rates

This would of course be a profound reversal of the YTD and MTD trend within US Equities, as my tactically-favored “1Y Price Momentum” factor +13.9% MTD and now +14.5% YTD, which of course is consistent with the very popular “long Secular Growth / Min Vol” vs “short Cyclicals” positioning—meaning that today’s trade will likely drive significant underperformance for many

Bottom line: Wall Street pros continue to fight the Fed – and are getting steamrolled- even as retail is more than happy to go with the money flow (which is now in the trillions), oblivious to the dire fundamental picture and putting all of its faith in the Fed.

Great news America – 8 healthy, young people did not show any adverse effects from being injected with a potential vaccine for COVID-19…

“All eight initial participants” in the Moderna trial developed neutralizing antibodies to the virus at levels reaching or exceeding those seen in people who have naturally recovered from Covid-19, according to the press release.  

Problem solved!? (But, one quick question – isn’t that the whole premise of immune response? How about when someone is injected with this ‘vaccine’ who has any number of the comorbidities that have killed 10s of 1000s… or has the coronavirus.)

But, never mind that! Buy all the stock market things…

And sell bonds…

Sell the dollar…

Sell silver…

And Sell gold…

Sparking a jump in the collapse of the Gold/Silver ratio…

It would appear Benoit is in the house today…

How long can they make this last? One thing is for sure, they better get Robinhood back up and running soon – who are we are all going to sell to otherwise?

Authored by Jonathan Turley,

The contradictions revealed in recent disclosures, including the list of officials seeking to “unmask” the identity of former National Security Adviser Michael Flynn, are shocking.  There seems a virtual news blackout on these disclosures, including the fact that both former President Barack Obama and former Vice President Joe Biden followed the investigation.  Indeed, Biden’s name is on the unmasking list.

The declassification of material from the Michael Flynn case has exposed more chilling details of an effort by prosecutors to come up with a crime to use against the former national security adviser. This week, however, a letter revealed another unsettling detail. Among over three dozen Obama administration officials seeking to “unmask” Flynn in the investigation was former Vice President Joe Biden. This revelation came less than a day after Biden denied any involvement in the investigation of Flynn. It also follows a disclosure that President Obama was aware of that investigation.

For three years, many in the media have expressed horror at the notion of the Trump campaign colluding with Russia to influence the 2016 election. We know there was never credible evidence of such collusion. In recently released transcripts, a long list of Obama administration officials admitted they never saw any evidence of such Russian collusion. That included the testimony of Evelyn Farkas, a former White House adviser who was widely quoted by the media with her public plea for Congress to gather all of the evidence that she learned of as part of the Obama administration.

The media covered her concern that this evidence would be lost “if they found out how we knew what we knew” about Trump campaign officials “dealing with Russians.” Yet in her classified testimony under oath, she said she did not know anything. Farkas is now running for Congress in New York and highlighting her role in raising “alarm” over collusion. As much of the media blindly pushed this story, a worrying story unfolded over the use of federal power to investigate political opponents.

There is very little question that the response by the media to such a story would have been overwhelming if George Bush and his administration had targeted the Obama campaign figures with secret surveillance.

That story would have been encompassing if it was learned that there was no direct evidence to justify the investigation and that the underlying allegation of Russian collusion was ultimately found to lack a credible basis.

But the motives of Obama administration officials are apparently not to be questioned. Indeed, back when candidate Donald Trump said the Obama administration placed his campaign officials under surveillance, the media universally mocked him. That statement was later proven to be true. The Obama administration used the secret Foreign Intelligence Surveillance Act court to conduct surveillance of Trump campaign officials.

Yet none of this matters as the media remains fully invested in the original false allegations of collusion. If Obama administration officials were to be questioned now, the coverage and judgment of the media may be placed into question, as even this latest disclosure from the investigation of the unmasking request of Biden will not alter the media narrative.

Unmasking occurs when an official asks an intelligence agency to remove anonymous designations hiding the identity of an individual. This masking is a very important protection of the privacy of American citizens who are caught up in national security surveillance. The importance of this privacy protection is being dismissed by media figures, like Andrea Mitchell, who declared the Biden story to be nothing more than gaslighting.

While unmasking is more routinely requested by intelligence officials, with a reported 10,000 such requests by the National Security Agency last year alone, it is presumably less common for figures like Biden or White House chief of staff Denis McDonough. Seeking unmasking information that was likely to reveal the name of a political opponent and possibly damage the Trump administration raises a concern. More importantly, it adds a detail of the scope of interest and involvement in an investigation that targeted Flynn without any compelling evidence of a crime or collusion.

The media portrayed both Obama and Biden as uninvolved. But now we know they both actively followed the investigation.

According to former acting attorney general Sally Yates, she was surprised that Obama knew about the investigation and knew more than she did at the time. Obama called upon former FBI director James Comey to stay after a meeting to discuss the investigation. Comey had mentioned using the Logan Act to charge Flynn, even though the unconstitutional law has never been used successfully in a prosecution since the country was founded.

Biden has repeatedly denied knowledge of the investigation. Just a day before the latest disclosure, George Stephanopoulos asked Biden in an interview what he knew of the Flynn investigation. Biden was adamant that he knew nothing about “those moves” and he called it a diversion. But that is not true if he took the relatively uncommon action for a vice president of demanding the unmasking of Flynn information.

Yet none of this matters. A Democratic administration using a secret court to investigate the opposing political campaign does not matter to many in Congress or in the media anyway. An investigation continuing despite the lack of credible information supporting collusion does not matter to them either. A president and a vice president who take personal interest in the surveillance of their political opponents also does not matter.

There was a time, however, when all of this did matter. There was once a time when this would be viewed as the story of the century, including the unmasking of Biden himself in this investigation. But these are not those times, and this cannot be the story. Russian collusion is the story and, as Biden stressed, the rest is just a diversion. It is up to the public to decide who has been ultimately unmasked by the Flynn investigation.

This is a major problem for the bulls…

“I felt a great disturbance in the farce, as if millions of bullish Millennials cried out in terror and were suddenly silenced. I fear something terrible may happen…”

Robinhood is down…

Source: DownDetector

And the outages are nationwide…

Source: DownDetector

The problem is spreading – E*trade is down too…

Source: DownDetector

And here is why this could be a major problem…

It’s the Robinhood traders that have been buying…

As hedgies are selling…

While Moderna sparked the squeeze, we’re gonna need Millennials back in this market to lift it out of its one-month funk… even if Powell goes back on ’60 Minutes’ this weekend.

Submitted by Michael Every of Rabobank

Who? None other than Fed Chair Powell – saying on ’60 minutes’ for a mainstream audience that “Assuming there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily in the second half of this year.” However, he then added “For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine,” and that a full recovery could take until the end of 2021. So while no Great Depression in his eyes, no V-shape either, and no return to normality until medicine or nature step up to the plate. That looks a timely call as Friday saw retail sales collapsed the most on record in April.

Powell also reiterated that he was not of the view that negative rates will be useful in the US, but that there is a lot more the government can do, perhaps via direct support to states and municipalities. Moreover, he stressed there is a lot more the Fed can do too – so yield curve control and more QE? At least that’s what he’s most likely to explain to the Senate when he testifies tomorrow. In which case, then Fed will be hoovering up more of the safe (and not so safe!) US assets out there that markets would otherwise be able to get hold of. And failing to do so will see a further USD liquidity squeeze as the rest of the market steps up to buy those safe assets instead.

Meanwhile, the ‘WHO’ is in focus today as geopolitics comes (even more obviously) to the World Health Organisation. We are going to see a motion (with the final vote apparently Wednesday) to push for an international investigation into the origins of COVID-19. The one that the sudden problems exporting Australian beef and barley to China have nothing to do with. (And – who?! The Aussie Trade Minister is now warning about the risks of doing business with China and that firms may want to look at diversification!)

So far at least 62 countries including Russia(!), and perhaps as high as 116 together with a block of African states, are co-sponsoring a motion for a virus investigation. China and its supporters are not. The event has all the makings of a contemporary Khrushchev-bashing-his-shoe-on-the-table-at-the-UN moment.

More so as on Friday the US Commerce Department tightened its limitations on the export of key technology to Huawei, this time with what look like real teeth, to target third parties and third countries; and China’s Global Times immediately reported that Beijing is considering striking back with measures at key US firms, including Boeing. Plus US Secretary of State Pompeo has just warned Hong Kong that “any action to interfere and impinge on Hong Kong’s freedoms” in the form of steps against US journalists, who have already had to leave China in some cases, “would impact” the looming US assessment of Hong Kong’s autonomous status.

The latter will now come after this Friday’s National People’s Congress (NPC) in Beijing, which is expected to announce several key policy decisions with market impact. One will be if there is a GDP growth target for 2020 or not, and if so how high; another will be how to achieve it, with the same fiscal vs. monetary vs. outright monetization debates reportedly taking place in Beijing as in the West, and as debt soars regardless – the IIF now sees China’s total debt-to-GDP ratio at 314% and rising rapidly; a third may be China’s international stance, and whether to continue to with its “Wolf Warrior” diplomatic stance. Recall all these decisions will be taken as the BIS show that CNY only accounts for 4.3% of international currency transactions, up from 4.0% in 2016, vs. 88% for USD, which is also on the other side of 95% of CNY transactions. Indeed, the BIS conclude the Chinese currency has made “marginal progress” in its internationalisation in the past three years. That backdrop does not sit so well with either major monetization of debt or global feather-ruffling.

Can one say the same for the UK and GBP? PM Johnson, taking brickbats at home on several fronts, has said that the virus is going to linger in Britain, which does not suggest a return to full normality. Johnson also apparently refuses to embrace austerity, which is sensible,…but then places the responsibility on the BOE – who are already monetizing a small portion of the new UK debt, pretending that QE is not more of less the same thing in real terms, and are now openly talking about negative rates ahead. All that is happening as the UK and the EU are walking in opposite directions over a new trading relationship, with a non-negligible likelihood that Hard WTO Brexit will follow at the end of the year. Put that kind of major monetization and global feather-ruffling together and we have Cable at 1.2099 when we started at 1.32, so down 8.7%.

So this remains the trend we expect to see: more monetary easing; more fiscal easing; more de facto monetization behind acronym fig-leaves – or maybe without; and hence more downwards pressure on FX and upwards pressure on USD. Oh, and lots more geopolitical rumbling both as cause and effect. Look to Japan and see why.

It is now officially in recession, with GDP in Q1 sinking -3.4% annualised vs. -7.3% in Q4, and the outlook for Q2 is even uglier. The government is talking about a 20% of GDP fiscal stimulus package – and we have both BOJ JGB (and ETF) guzzling and yield curve control. Yet JPY is up 1.5% YTD vs. USD. This is due to the risk-off Yen function; and that is because it runs current-account surpluses.

Apart from the US, who can run a massive current-account deficit and still MMT away happily because of the global need for USD, it’s that magical current-account surplus that will dictate if a country can sustainably use MMT to prop up its post-Covid economy without markets then pricing for a Weimar or Zimbabwe endgame. BUT NOT EVERYONE CAN DO SO AS A SURPLUS IN ONE LOCATION IS A DEFICIT SOMEWHERE ELSE (and the US can’t and won’t be that for everyone. Certainly not for China.) That means more supply-chains shifting, and from a far broader interpretation of ‘national security’ than just who and can’t make masks.

It’s about who can and can’t make money.