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After SoftBank quadrupled-down on its investment in WeWork late last year while taking massive writedowns on its Vision Fund, we suspected the bank/telecom/venture investor/whatever was drifting ever-closer to its inevitable destiny: A contender for ‘short of the century’, and a poster-child of the Silicon Valley ‘unicorn’ bubble era.

Beyond WeWork, the massive Japanese conglomerate also invested in Theranos (via its stake in US-based PE/hedge fund Fortress) and dozens of lesser-known startups, many of which focused on moonshot AI technology as SoftBank sought to portray itself as the “conductor of the AI revolution,” BBG reports.

As we’ve noted, a version of the following slides was inevitably included during practically every SoftBank earnings presentation of the past few years…

…and last but not least.

When it reports earnings tomorrow, SoftBank will confront a vastly different financial reality from a year ago: following a string of portfolio company explosions, SB Chairman Masayoshi Son’s reputation as one of the world’s greatest momentum investors has been sullied. Son’s plans to launch a new massive investment vehicle every few years have been spoiled by the WeWork fiasco, which prompted Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co, which contributed the majority of the capital to the original VF, to walk away.

And in February, Son conceded that SoftBank will have to use its own capital for the time being.After claiming during a May earnings call last year that “our time has finally come”, 2019 went much differently than Masa probably expected. As the company acknowledged in a filing from last month, SoftBank expects to report a $12 billion+ operating loss for the fiscal year ended March 31. The company also expects to report a nearly $10 billion – ¥1 trillion – loss from investments. Of that, roughly $7 billion is linked to WeWork (SoftBank has said it invested roughly $18 billion in WeWork in total) while most of the rest is linked to satellite operator OneWeb.

In total, SoftBank spent more than $80 billion during its epic startup spending spree, according to BBG.

SoftBank expects to book a record 1.35 trillion yen ($12.5 billion) operating loss for the fiscal year ended March 31 when it reports results on Monday. The company’s Vision Fund business, technology investments that contributed more than half of the conglomerates profit a year ago, has swung to a record 1.8 trillion yen loss. The conglomerate’s overall net loss will reach 900 billion yen, SoftBank said last month in a preliminary earnings statement.

Son admitted in February that plans to raise money for a new Vision Fund had fallen apart, and that SoftBank would need to use its own capital (he also pledged more of his own personal fortune to secure more of the company’s debt).

During SoftBank’s most recent earnings report in February, Masa Son said Uber’s rising share price would help the company turn its fortunes around.

But as if 2019 wasn’t bad enough, the advent of the coronavirus has effectively sealed WeWork’s fate while also hammering ride-share services like Uber.

Instead, as the pandemic grounded potential riders, Uber was forced to cut costs to stem losses. The company instituted a hiring freeze in March, withdrew its financial forecast and wrote down some $2 billion worth of investments in April. Those investments include Uber’s stakes in Didi Chuxing and Grab—two other ride-hailing companies in which SoftBank has invested. Earlier this month, Uber announced plans to eliminate 3,700 jobs, permanently close 180 driver service centers and shutter food delivery operations in seven countries. Its shares are trading about 27% below its IPO price.

Son once compared ride sharing apps to a transportation “revolution” which he compared to the invention of the horse drawn buggy (of course, these delusions of ‘revolutionary disruptive grandeur’ are very on-brand for Silicon Valley). That view led SoftBank to write massive checks to ride-sharing companies around the world in recent years, including Grab and China’s Didi, a ride-share company with a once lofty valuation that outcompeted Uber in China (hardly surprising) with a little help from its friends in the Communist Party.

Another major SoftBank play: Oyo, and Indian hotel-booking site that has also obviously been hammered by the outbreak.

At stake is $18 billion of investments in all of the industry’s major players, including China’s Didi, Southeast Asia’s Grab and India’s Ola.

SoftBank has poured more than $10 billion into Didi, but after two horrendous years, China’s dominant ride-hailing provider is losing the confidence of at least some investors that it can live up to its once-lofty ambitions. In January, even before the virus hit, Didi’s shares were trading privately at as much as a 40% discount to its peak valuation, according to people familiar with matter. Ridership tumbled during the outbreak in China and Didi cut driver subsidies.

Grab’s Chief Executive Officer Anthony Tan late last month warned that the coronavirus is creating significant challenges for the Southeast Asian ride-hailing startup that will require “tough decisions” about cutting costs and managing capital. Grab has been trying to offset some of the shortfall in ridership with food delivery. SoftBank invested $3 billion into the company.

India’s Oyo, a hotel-booking service, is another prime example of how the virus is affecting Son’s portfolio companies. Less than a year ago, the billionaire publicly declared its founder Ritesh Agarwal one of the star entrepreneurs backed by SoftBank. Son poured about $1.5 billion into the company and encouraged the young founder to try to become the world’s largest hotel operator by room count.

The Indian company has been expanding rapidly by guaranteeing a certain amount of revenue to hotels if they sign on as franchisees. Today, Oyo is freezing operations around the world and furloughing thousands of employees as it struggles to survive the coronavirus pandemic. Travel has slammed to a halt, leaving hotel rooms empty and losses rising.

Compounding the company’s problems are the immense amounts of leverage it used to ramp up its investments, which magnify losses as well as profits. Additionally, about $40 billion of the shares in the Vision Fund are preferred stock that earn a 7% dividend payment every year whether the fund earns money or not. That added up to a nearly $900 million additional loss last year.

In the middle of all of this chaos, SoftBank has been spending money buying back shares at a rapid clip as activist investors bear down on the Japanese titan. Bloomberg reported that the company has spent $2.3 billion on buybacks since March, citing a Friday statement.

If it keeps going at this rate, the BoJ bailout that we have long joked about might just become a reality.

Authored by Chris Hamilton via Econimica blog,

In 2019, US population growth fell to +1.55m or +0.5%…this was due to a trifecta of declining births, lower immigration, and higher deaths than anticipated.  However, as with everything “2020”, all three trends are only intensifying to blow away 2019.  Births are falling faster and further, deaths moving higher with Corona-virus and drug related overdoses, and immigration nearly non-existent.  Thus, US population growth will likely dip to “just” 1 million or +0.3% this year.  And while I anticipate (or think it feasible) that immigration could return to 2019 levels eventually, births will almost surely continue falling and deaths rising more than anticipated.  The simple outcome of this is an ongoing collapse in US population growth which is far larger than in scope than the current Corona-virus pandemic.

Census Population Estimates…Wildly Overstating Growth

The chart below shows the 2008, 2014, and 2017 Census US total population projections through 2050.  Some quick math shows that in 9 years time from ’08 to ’17, the Census downgraded US population growth through 2050 by 50 million persons.  But due to the factors mentioned above, the 2020 Census projection through 2050 will need another massive downgrade…I’d suggest something on the order of another 29 million person downgrade.

The most significant contributor to decelerating population growth is declining births.  This is true among the native population and true among immigrants.  On average, they are all having significantly fewer children than anticipated.  As the Census estimates from ’00, ’08, ’12, ’14, and ’17 show…the Census models just can’t fathom the fast declining births taking place in the US.  But each Census estimate is still far too high, and perhaps in ’20 the Census will “fix” their models and portray reality (ok, not likely)…but I offer a more realistic picture below.

However, the downgrades in population are specifically among the younger populations.  Obviously, declining births and immigration means declining young.  The about face from ’08 to ’20 is stunning in the suggestion that the US truly is far more Japanese than immune to depopulation.

Supporting the decline of young is the flattening and eventual decline of the childbearing population.  Again, the ongoing declines in projections means that a flat childbearing population with declining fertility rate will continue having fewer children unless something intercedes.

One place that will not see significant downgrades in population growth are the elderly.  Despite Corona-virus, the elderly population is likely to continue swelling.

Below, the rising fertility and births amid “better” economic times and declining among “worse” economic times.  The clear insinuation is that the “recovery” since ’07 has been no recovery for those young adults of childbearing age as their willingness / capability to undertake childbearing has continued to wane.

Below, annual births again but including the cost of money (FFR%), marketable federal debt, and the Federal Reserve Balance sheet (QE).  Again, the US only eclipsed the ’57 peak in ’07 before births again began declining as interest rates went to zero and QE began in earnest.

Simply dividing declining annual births against rocketing marketable Treasury debt…and a very ugly reality emerges.  Take a gander at the marketable debt against those responsible (over their lifetimes) to repay (lol), service (not so much), but primarily endure the stagflationary QE/monetization.  These contradictory trends of declining births and surging debt mean ever fewer are responsible for bearing ever more.  Not a very nice shower gift.

US Employment Breakdown

Moving on to gauge population growth versus employment growth among the differing age age groups that make up nearly all the working age population.  First, the 25 to 54 year-old population ceased growing in 2007 with predictable results for employment among the 25 to 54 year-olds.  The core of US economic activity and growth has been in neutral for well over a decade.

Year over year change in 25 to 54 population growth and employment…the population growth is always an eventual restrictor for potential employment growth.  Periods of employment growth above and beyond population growth eventually result in peak employment and the absence of further potential growth…and then resultant recession.  No matter the interest rate cuts, stimulus, QE…demographics eventually overrule.

And taking a peek at the two charts below, breaking down employment between 25 to 54 males and females, the chart suggests male and female peak employment is a signal of impending slowing economic activity…and we had seen that clear signal in 2019…well before Corona-virus.

Declining participation among males and peak employment among females…pretty clear trends.  Also clear is that it was females entering the workforce that drove the economy through 2000, and the lack of further potential growth since should not be surprising (hello Federal Reserve interest rate led bubbles, QE, etc. since in lieu of further potential growth).

Looking at the youngest segment of adults, engaged in the culmination of high school, college, and/or initiating careers.  As for the population, it is emblematic of the lack of growth taking place among young presently at about 1980 quantities.  But due to increasingly higher quantities going on to community college and/or college and the declining quality/quantity of jobs available for this population…the total number of those among them employed has been in decline for 40 years.

Year over year change in population and employment, minimal population growth with ongoing net employment declines.

Importantly, 15 to 24 males and females are now essentially equal in the workforce though apparently significantly more females were laid off than males in the Corona-virus shut down?!?

25 to 54 year-old males realized peak participation back in 1979 and females in 1989, and since then both males and female participation continue to decline.  This segment of the population appears continually less apt to take part in the economy.

As for the OTA 55 to 64 year-olds in the work force, this has been the segment driving working age population growth and employment for over a decade.

But looking at the year over year, the decelerating 55 to 64 population growth and employment with it is really hard not to see.

55 to 64 male and female participation doing all the heavy economic lifting for decades.

The rising female participation and declining male participation seems to end around 2008…and since then, a relative cap of participation among 55 to 64 year-olds has been established.

Stacking all three employment segments together versus total population growth of the age group details simple governor to potential employment growth.

And so simply, once the employed portion of the 25 to 64 year old population hits the ceiling somewhere around 76% to 77%, little to no further employment or economic growth is possible.  Earlier periods had lower ceilings due to the lower participation of females.

The shifting importance of the 55 to 64 year-old segment and demotion of the 15 to 24 year-old segment.  The ceiling in employment for the 25 to 54 year old segment (and signal of imminent deceleration/decline) is very clearly defined at anything above 80%.

Federal Funds Rate, GDP, Federal Debt, Federal Reserve Balance Sheet

Four decades of declining interest rate policy (FFR%), to incent higher debt utilization at lower cost, to artificially boost consumption (and asset prices), and once this was inadequate the introduction of wholesale QE via the Fed’s balance sheet.

Same as above but viewing the impact of the Federal Reserve set FFR in driving the quarterly (YoY) utilization of federal deficit spending, relatively low impact on GDP, but the increasingly higher QE substitution (to avoid market set interest rates on all that debt).

No red team/blue team debate here nor debating what Obama 1 or Trump 1 faced in GFC/Corona-virus, respectively…just the change in GDP, federal debt, and Federal Reserve balance sheet per presidency.  There appears to be a trend here.

Below, looking out through 2025…again the impact of declining (soon to be NIRP) federal funds rate on incenting Congress to spend beyond what they are willing to tax, and the rising role of using the Federal Reserve balance sheet to monetize all the new debt.  And yes, I’m quite confident negative interest rates are imminent.

Below, a guestimate of where things are heading through 2025…unless the system breaks earlier (probably 50-50 odds).

Federal Funds Rate – 1981 to Present

The Federal Reserve set FFR, so critical in benchmarking the cost of money.  For 40 years, interest rates moving lower for longer…and this time they will almost surely move negative.

How the Fed will achieve NIRP?

Consider that the Fed is now the buyer of last resort at anything near these interest rates.  Gander at the Fed’s Treasury holdings and impacts on relevant interest rates.

Fed held Treasuries less than one year in duration and the impact on the three month rate.

Fed held Treasuries one to five years in duration and the impact on the 3 year rate.

Fed held Treasuries five to ten years in duration and the impact on the 10 year rate.

Fed held Treasuries more than ten years in duration and the impact on the 30 year rate.

Market Implications of Federal Reserve Balance Sheet Expansion

As the Federal Reserve balance sheet explodes, and given the current and future 0.1% interest paid on excess reserves…banks, hedge funds, etc. will take the monetization and put it to work.  The Fed knows banks will follow the money, and the absence of IOER’s communicates that the Fed wants those freshly created dollars to move into the financial system (why else would the Fed only offer banks 0.1% annually to not lend money?).

So, the Federal Reserve creates money and subsequently buys assets, removing those assets from the market.  Those assets are thrown into a black hole as the Fed will maintain them on its balance sheet indefinitely.  On the flip side, the newly created dollars can either be held as excess reserves (for 0.1% interest on excess reserves annually) or become liquid.  Of the Fed’s nearly $7 trillion balance sheet, $3.2 trillion are currently held as excess reserves while $3.8 trillion have moved directly into the financial system.

Although I’ve nothing to do with investing, the simple act of “monetizing the debt” alongside 0.1% IOER’s is hugely inflationary for assets…and if the Federal Reserve continues removing assets from the market and replacing them with freshly created dollars…and the dollars primarily move into assets (with anywhere from 2x to 10x leverage)…a “bull market” can theoretically be sustained regardless the underlying economic conditions.  This is an inorganic, monetary short squeeze to infinity rewarding a shrinking class of asset holders and harming a growing class of young/poor with little to no assets.

Wrapping this up, an overview of declining federal funds rate, incenting rising annual federal debt (split between public marketable debt vs. intragovernmental buying (SS trust fund, etc.)), while the demographic reality of a surging elderly population suffocates the now declining under 60 year-old population.  This is only going to get significantly worse until something (everything?) breaks.

Sort of a grotesque finish…assuming the US runs a $7T 2020 deficit to finance the CARES and HEROES acts plus any and every other bailout they can think of, US debt to GDP will blast to an inconceivable record while annual population growth among the under 65 year-old population hugs the zero line.

Ever more debt to be repaid/serviced/monetized by ever fewer…what could go wrong?

On Friday there was a startling escalation in the trade and tech war between the US and China, when the Trump administration moved to block global chip supplies to blacklisted telecom equipment company Huawei Technologies, spurring fears of Chinese retaliation and hammering shares of U.S. producers of chipmaking equipment. The rule change was designed to be a major blow to Huawei, the world’s no. 2 smartphone maker, and to disintermediate the Chinese telecom conglomerate from global supply chains.

The escalation was preceded one day earlier by Trump warning that he could “cut off the whole relationship” with China as he blames Beijing for the global spread of the coronavirus, in what is now a clear pre-election gambit where Trump is aggressively adopting an anti-China stance: “There are many things we could do,” Trump told Fox Business’ Mornings With Maria on Thursday. “We could cut off the whole relationship. Now if you did, what would happen? You’d save $500 billion.”

There is a very simple reason for Trump’s anti-Chinaese posture: in a nation that seems impossibly divided on most issues and is ideologically polarized more than ever in history, on Friday we showed that China is the one thing that more than two-thirds of Americans can agree on, and they agree that they simply do not like China. Looking at the chart below, Goldman said that the upcoming US presidential election, “coupled with deteriorating sentiment towards China among Americans, will make it harder for US policymakers to strike a conciliatory tone on China.”

Of course, it will only get worse if and when China responds and retaliates, which it now appears set to do. On Sunday, China’s commerce ministry said it is firmly opposed to the latest rules by the United States against Huawei and “will take all necessary measures to safeguard Chinese firms’ rights and interests.” The ministry said in a statement that it urges the United States to immediately stop the wrong actions, referring to the lockout of Huawei, which went into effect on Friday but has a 120-day grace period.

On Friday, China’s state-run newspaper Global Times, citing an unidentified source, reported in response to the new limits on Huawei, Beijing was ready to put U.S. companies on an “unreliable entity list” as part of its countermeasures. Those countermeasures include launching investigations and imposing restrictions on U.S. companies such as Apple, Cisco Systems and Qualcomm.

“The U.S. has utilized national power and used the so-called national security concern as an excuse, and abused export controls to continue to suppress some particular companies in other countries,” China’s commerce ministry said in today’s statement.

The bitter tirades continued on Sunday, when the Global Times published an op-ed in which the author accused the US of “re-constructing the industrial chain of global semiconductors in a bid to fully control it from design to assembly and testing, which has been dubbed as semiconductor nationalism.”

Not that there is anything inherently wrong with that, of course, and is the most logical strategy in a trade war. China is just disappointed it failed to get there first, because as we have been writing since late 2018, when it comes to the technological arms race, one place where China is badly lagging the US, is in the production of semiconductors, which is also China’s biggest weakness in its ongoing scramble to catch up with the US technologically.

The Chinese media outlet admits as much, writing that “although the US had experienced a large-scale deindustrialization in the second half of the 20th century, it still maintains advantages in the semiconductor sector with companies such as Intel, which could complete the whole process of the chip design to producing. The country has held on to cutting-edge semiconductor manufacturing techniques over the past decade.”

It then adds that “against the backdrop of intensifying tech protectionism, countries and regions, including China, need to get ready to deal with the enhancing anti-globalization and switch development strategies from integration to independent development.

Countries such as the US and Japan, which are at the upstream of the global semiconductor industry chain, are showing increasingly stronger intention of anti-globalization now. The US government is in talks with chip manufacturing giants Intel and Taiwan-based TSMC, seeking to set up new chip factories in the US to realize self-sufficiency, according to the Wall Street Journal.

The Global Times then correctly notes that China’s semiconductor sector “has faced a crackdown by the US government since the trade war and companies in business with Western firms are seeing rising risks of cutting off technology cooperation.”

Under such circumstances, China should switch its strategy from integration with the international mainstream to independently develop own core technologies. While on the other hand, it should step up efforts to promote cooperation among different parts of its semiconductor industry and try to independently develop instead of pursuing advancement of a single technology.

This suggests that regardless the outcome of the coronavirus pandemic, globalization is doomed in its current iteration as China reels in any global supply chains while seeking to build out its own semiconductor industry, one which is on par with that of the US, Japan or Taiwan.

* * *

Rhetoric aside, it’s what China does that matters, and picking up on our observationsabout Trump’s motivations to escalate the feud with Beijing, Nordea’s Andreas Steno Larsen writes that the question is what happens to that most direct indicator of diplomatic tensions between the US and China, the yuan exchange rate, next.

But first, let’s remember that the catalyst that pushed the US stock market 30% higher in 2019 (as earnings were flat), namely the “Phase One” trade deal with China, is now officially over or as Larsen puts it, “the trade deal between US and China was stone dead from the outset, as e.g. the USD 32bn increase in agricultural purchases (from a base below USD 10bn) was almost practically impossible to implement due to low commodity prices. When Corona entered the lime-light (maybe China already knew about Corona by the time of the signing ceremony), it was essentially 100% certain that none of the thresholds in the trade deal would be met.“

As such, the FX strategist would be surprised “if the PBoC didn’t allow USD/CNY to slowly but surely pave its way higher towards November, given the crystal-clear risk of a re-escalation of the tariffs war and continued issues of re-booting credit growth in China.”

In short, “more PBoC easing and more exported disinflation coming up”, and that’s ignoring the war of words between Trump and Xi, which is getting more bitter by the day.

Finally, how is Nordea trading this coming battle in the US-China trade war: “We buy USD/CNH with a target of 7.3850, and a S/L at 6.9520.”

Authored by Pepe Escobar via The Strategic Culture Foundation,

Italian master thinker Giorgio Agamben has been on the – controversial – forefront examining what new paradigm may be emerging out of our current pandemic distress.

He recently called attention to an extraordinary book published seven years ago that already laid it all out.

In Tempetes Microbiennes, Patrick Zylberman, a professor of History of Health in Paris, detailed the complex process through which health security, so far at the margins of political strategies, was sneaking into center stage in the early 2000s. The WHO had already set the precedent in 2005, warning about “50 million deaths” around the world caused by the incoming swine flu. In the worst-case scenario projected for a pandemic, Zylberman predicted that “sanitary terror” would be used as an instrument of governance.

That worst-case scenario has been revamped as we speak. The notion of a generalized obligatory confinement is not warranted by any medical justification, or leading epidemiological research, when it comes to fighting a pandemic. Still, that was enshrined as the hegemonic policy – with the inevitable corollary of countless masses plunged into unemployment. All that based on failed, delirious mathematical models of the Imperial College kind, imposed by powerful pressure groups ranging from the World Economic Forum (WEF) to the Munich Security Conference.

Enter Dr. Richard Hatchett, a former member of the National Security Council during the first Bush Jr. administration, who was already recommending obligatory confinement of the whole population way back in 2001. Hatchett now directs the Coalition for Epidemic Preparedness Innovations (CEPI), a very powerful entity coordinating global vaccine investment, and very cozy with Big Pharma. CEPI happens to be a brainchild of the WEF in conjunction with the Bill and Melinda Gates Foundation.

Crucially, Hatchett regards the fight against Covid-19 as a “war”. The terminology – adopted by everyone from President Trump to President Macron – gives away the game. It harks back to – what else – the global war on terror (GWOT), as solemnly announced in September 2001 by Donald “Known Unknowns” Rumsfeld himself.

Rumsfeld, crucially, had been the chairman of biotech giant Gilead. After 9/11, at the Pentagon, he got busy aiming to blur the distinction between civilians and the military when it came to GWOT. That’s when “generalized obligatory confinement” was conceptualized, with Hatchett among the key players.

As much as this was a militarized Big Pharma spin-off concept, it had nothing to do with public health. What mattered was the militarization of American society to be adopted in response to bioterror – at the time automatically attributed to a squalid, tech-deprived al-Qaeda.

The current version of this project – we are at “war” and every civilian must stay at home – takes the form of what Alexander Dugin has defined as a medical-military dictatorship.

Hatchett is very much part of the group, alongside ubiquitous Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases (NIAID), very close to WHO, WEF and the Bill and Melinda Gates Foundation, and Robert Redfield, director of the U.S. chapter of the Center for Disease Control and Prevention (CDC).

Further applications inbuilt in the project will include all-around digital surveillance, sold as health monitoring. Already implemented in the current narrative is the non-stop demonization of China, “guilty” of all things Covid-19-related. That is inherited from another tried and tested war game – the Red Dawn scheme.

Show me your fragility

Agamben did square the circle: it’s not that citizens across the West have the right to health safety; now they are juridically forced (italics mine) to be healthy. That, in a nutshell, is what biosecurity is all about.

So no wonder biosecurity is an ultra-efficient governance paradigm. Citizens had it administered down their throats with no political debate whatsoever. And the enforcement, writes Agamben, kills “any political activity and any social relation as the maximum example of civic participation.”

What we are already experiencing is social distancing as a political model (italics mine) – with a digital matrix replacing human interaction, which by definition from now on will be regarded as fundamentally suspicious and politically “contagious”.

Agamben has to be appalled by this “concept for the destiny of human society that in many aspects seems to have borrowed from religions in decline the apocalyptic idea of the end of the world”. Economics had already replaced politics – as in everything subjected to the diktats of financial capitalism. Now the economy is being absorbed by “the new biosecurity paradigm to which every other imperative must be sacrificed.”

How to fight against it? Conceptual weaponry is available, such as the courses on biopolitics taught by Michel Foucault at the College de France between 1972 and 1984. They may now be consulted via a decentralized platform set up by a collective which delightfully describes itself as “the crayfish”, who “advance laterally”: a concept that does justice to great rhizomatic master Gilles Deleuze.

Nassim Taleb’s concept of Antifragile is also quite helpful. As he explains, “Antifragile is the antidote to Black Swans.” Well, Covid-19 was a Black Swan of sorts: after all deciding elites knew something like it was inevitably coming – even as lowly Western politicians, especially, were caught totally unprepared.

Antifragile contends that because of fear (very much in evidence now) or a “thirst for order” (natural to any political power) “some human systems, by disrupting the invisible or not so visible logic of things, tend to be exposed to harm from Black Swans and almost never get any benefit. You get pseudo-order when you seek order; you only get a measure of order and control when you embrace randomness.”

The conclusion is that “in the black swan world, optimization isn’t possible. The best you can achieve is a reduction in fragility and greater robustness.”

There’s no evidence, so far, that a “reduction in fragility” in the current world-system will necessarily lead towards “greater robustness.” The system has never proved to be so fragile. What we do have is plenty of indications that the system collapse is being refitted, at breakneck speed, as digital neo-feudalism.

Lost in a biopolitical quarantine

Byung-Chul Han, the South Korean philosopher who teaches in Berlin, has attempted to lay it all out. The problem is he’s too much of a hostage of an idealized vision of Western liberalism.

Byung-Chul Han is correct when he notes that Asia fought Covid-19 with rigor and discipline inconceivable in the West – something that I have followed closely. But then he evokes the Chinese social credit system to mount an attack on China’s society of digital discipline. The system unquestionably allows for biopolitical surveillance. But it’s all about nuance.

The social credit system is like the formula “socialism with Chinese characteristics”; a hybrid that is effective only when responding to China’s complex specificities.

The maze of facial recognition surveillance cameras; the absence of restriction to data exchanged between internet providers and the central power; the QR code that tells whether you’re “red” or “green” in terms of infection; all these instruments were applied – successfully – in China to the benefit of public health.

Byung-Chul Han is forced to admit that does not take place only in China; South Korea – a Western-style democracy – is even considering that people in quarantine should wear a digital bracelet. If we talk about the different Asian models used to fight Covid-19, nuance is the norm.

The Asian-wide collectivist spirit and discipline – especially in Confucianist-influenced societies – works irrespective of the political system. At least Byung-Chul Han admits, “all these Asian particularities are systemic advantages to contain the epidemic.”

The point is not that Asian disciplinary society should be seen as a model for the West. We already live in a digital global Panopticum (where’s Foucault when we need him?) Social network vigilance – and censorship – deployed by the Silicon Valley behemoths has already been internalized. All our data as citizens is trafficked and instantly marketized for private profit. So yes; digital neo-feudalism was already in effect even before Covid-19.

Call it surveillance turbo-neoliberalism. Where there’s no inbuilt “freedom”, and it’s all accomplished by voluntary servitude.

Biopolitical surveillance is just a further layer, the last frontier, because now, as Foucault taught us, this paradigm controls our own bodies. “Liberalism” has been reduced to road kill a long time ago. The point is not that China may be the model for the West. The point is we may have been set up for an endless biopolitical quarantine without even noticing it.

White House trade adviser Peter Navarro joked on Sunday that he’s glad former President Obama “has a new job as Joe Biden’s press secretary.”

During an interview with ABC‘s George Stephanopoulos, Navarro responded to comments Obama made during a virtual commencement address that things are “screwed up” because the Trump administration is doing “what feels good, what’s convenient, what’s easy.”

“I’m glad Mr. Obama has a new job as Joe Biden’s press secretary,” White House adviser Peter Navarro tells @GStephanopoulos, responding to former President Obama’s criticism of the Trump administration’s response to the coronavirus pandemic . https://t.co/vTqcX6SuVX pic.twitter.com/E88KjOP5XM

— This Week (@ThisWeekABC) May 17, 2020

What else would you expect from BFFs?

Happy 55th, Barack! A brother to me, a best friend forever. pic.twitter.com/uNsxouTKOO

— VP Biden (Archived) (@VP44) August 4, 2016

Navarro also slammed Obama for failing to mention the fact that his administration oversaw a massive outflow of US manufacturing to China, leaving the country vulnerable.

“As far as I’m concerned, his administration was a kumbaya of incompetence, in which we saw millions of manufacturing jobs go off to China,” said Navarro, who said that the Trump administration’s goal is to bring manufacturing back to US soil, according to The Hill.

Navarro also says he does “blame the Chinese” for the ongoing pandemic because the country “behind the shield of the World Health Organization — for two months — hid the virus from the world.”

“Yes, I do blame the Chinese,” White House adviser Peter Navarro says on economic challenges in U.S. due to COVID-19, claiming that China “behind the shield of the World Health Organization — for two months— hid the virus from the world.” https://t.co/vTqcX6SuVX pic.twitter.com/6wtvIDI84i

— This Week (@ThisWeekABC) May 17, 2020

In comments on NBC‘s “Meet the Press,” Navarro criticized the Centers for Disease Control (CDC) – saying it “really let the country down” over its handling of coronavirus testing.

“Early on in this crisis, the CDC which really had the most trusted brand around the world in this space, really let the country down with the testing. Because not only did they keep the testing within the bureaucracy, they had a bad test. And that did set us back,” said Navarro, who then said that an economic shutdown will cost more lives than slowing the spread of the virus.

WATCH: @chucktodd asks WH Adviser Peter Navarro: “Does the president have confidence in the CDC?” @PeterNavarro45: “You should ask the president that question, not me. … The CDC, which really had the most trusted brand … really let the country down with the testing.” pic.twitter.com/o2iUgUkV71

— Meet the Press (@MeetThePress) May 17, 2020

“The fact of the matter is, and what President Trump realized early on is that if you lock people down, you may save lives directly from the China virus. But you indirectly, you’re going to kill a lot more people,” said Navarro. “And why do I say that? We know statistically based on our experience with the China trade shock in the 2000s that unemployment creates more suicides, depression and drug abuse.”

Navarro also slammed unnamed “people in the medical community [who] just want to run and hide until the virus is extinguished,” suggesting that this strategy will be more deadly than the virus.

Authored by Sven Henrich via NorthmanTrader.com,

Straight Talk #2

First off a big thank you to everyone watching last week’s debut of our webinars. We didn’t know what to expect, but we felt the issues we highlighted deserved a deeper look, not only in last week’s episode but in future discussions as well.

From the overwhelming positive feedback we received we sense you agree, and hence we decided to bring you another episode this week.

So thank you again for your interest and engagement, we are glad you find this format useful. We’ll see how it develops and we may also bring in special guests in future episodes. From my perch I couldn’t be more pleased and honored to have these important discussions with Guy Adami and Dan Nathan, two market pros who I greatly respect. Please keep the feedback coming and let us know your thoughts. We are seeing your comments and they help us greatly in guiding the episodes.

In last week’s episode we raised the alarm bells about the sustainability of the rally, structural concerns, and valuation issues and promptly saw these issues come to the forefront as market declined this week.

This week saw the valuation concerns also raised by multiple well known billionaires who expressed concerns that markets had too far disconnected from economic reality. Tepper, Druckenmiller, Cuban, all well known industry names highlighting similar concerns and suggesting markets may be far overvalued and the disconnect between tech and the broader market ended up becoming headline news in financial media as well.

It is then perhaps with some irony that suddenly (after our recording yesterday and literally 1 minute after market close on a Friday no less) the Fed sheepishly came out with a warning that asset prices are at risk to significant declines.

First outlining that the Fed’s action is directly responsible for improving investor risk sentiment which as clear as an admission one would get from the Fed that their actions are driving asset prices:

“Since late March, however, investor risk sentiment has improved, and risky asset prices have partially retraced earlier declines . Some of this improvement is likely due to strong and rapid fiscal and monetary policy responses as well as the measures taken by the Federal Reserve and Treasury”.

But then admitting that asset prices are elevated and subject to steep price decline risk:

“Asset prices remain vulnerable to significant declines should the pandemic worsen, the economic fallout prove more adverse, or financial system strains reemerge. The improvement in asset markets since their troughs reflects expectations for a rebound in economic activity as well as the extraordinary policy actions taken. Uncertainty remains high and markets remain volatile relative to historical norms, suggesting the possibility of further price declines should developments prove more adverse than expected . Price declines could be especially pronounced in areas where valuations have remained high.”

Well, talk about covering your butt. My sense fwiw: The Fed knows the collateral damage of their intervention actions has resulted in market valuations incompatible with the economic risk profile that keeps revealing itself. Valuations are too high and they know it. And hence they don’t want to be seen not having been on the record highlighting it, even if it is on a Friday evening after market close. So bulled up investors, take note. The captain just got the lifeboat ready for himself. Why are you still partying on the deck above?

Economic data released this week has continued to show disastrous declines exceeding expectations. The Atlanta Fed yesterday dropped its Q2 GDP expectations to -42.8%. Jobless claims again exceeded expectations. Industrial Production has collapsed in never before seen ways.

So yes, asset valuations, especially in tech remain sky high, and hence the China issue Guy raises is an important one, especially considering we are in a politically charged election year.

And just in the week following us raising all these valuation concerns we saw a rejection of the April highs this week. This rejection was no accident, it was technically well founded and we are discussing it in this week’s episode and the prospect of an intermediate market top and prospect of new lows still to come.

We are also covering the escalating tensions between the US and China, the challenges of reopening the economy, $AAPL, $GOOGL, $FB, the tech sector, the lagging broader market, some causes for optimism, but also concern about the dreadful impact this crisis is having on vast segments of the population, the health of the US consumer, and the reality of what the economy will look like in a post criss environment.

And frankly the reality that is emerging should concern everybody:

Reality check:
By the time this is all over the poor will be poorer, the middle class smaller, the country horrifically in debt, unemployment much higher than before and the top 1% will be largely fine.

Do not underestimate the long term impacts of this ever increasing divide.

— Sven Henrich (@NorthmanTrader) May 15, 2020

Please join us for the latest episode of Straight Talk:

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Note to subscribers of Market Videos: The next edition will come out next weekend, for now note the technical framework discussed continues to apply including the general targets discussed.

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

A study led by Flinders University vaccine researcher Nikolai Petrovsky in Australia reveals that SARS-CoV-2, the virus which causes COVID-19, is optimized for penetration into human cells vs. animal cells – undermining the theory that it naturally evolved in animals before jumping to humans, according to LifeSiteNews‘ Matthew Cullinan Hoffman.

Petrovsky says that the results, which are not peer-reviewed, suggest “a remarkable coincidence or a sign of human intervention.”

The authors of the study, led by vaccine researcher Nikolai Petrovsky of Flinders University in Australia, used a version of the novel coronavirus collected in the earliest days of the outbreak and applied computer models to test its capacity to bind to certain cell receptor enzymes, called “ACE2,” that allow the virus to infect human and animal cells to varying degrees of efficacy.

They tested the propensity of the COVID-19 virus’s spike protein, which it uses to enter cells, to bind to the human type of ACE2 as well as to many different animal versions of ACE2, and found that the novel coronavirus most powerfully binds with human ACE2, and with variously lesser degrees of effectiveness with animal versions of the receptor.

According to the study’s authors, this implies that the virus that causes COVID-19 did not come from an animal intermediary, but became specialized for human cell penetration by living previously in human cells, quite possibly in a laboratory. –LifeSiteNews

Typically, “a virus would be expected to have highest affinity for the receptor in its original host species, e.g. bat, with a lower initial binding affinity for the receptor of any new host, e.g. humans. However, in this case, the affinity of SARS-CoV-2 is higher for humans than for the putative original host species, bats, or for any potential intermediary host species,” wrote the authors.

A “possibility which still cannot be excluded is that SARSCoV-2 was created by a recombination event that occurred inadvertently or consciously in a laboratory handling coronaviruses, with the new virus then accidentally released into the local human population,” they added.

Engineered, naturally…

In a separate statement about the research, Petrovsky suggested that SARS-CoV-2 may not have been ‘spliced’ – which would leave fingerprints of genetic manipulation – but was instead ‘cultured’ to evolve.

“Our and other analyses of the genomic sequence of the virus do not reveal any artificial gene inserts that would be the hallmark of a gene jockey, genetic engineers who manipulate or even create viruses by splicing in artificial inserts into their genome. These are generally easily recognisable and hence clear signatures of human intervention in the creation of a virus. The fact that these artificial inserts are not present has been interpreted by some to mean this virus is not the result of human manipulation.

However, this logic is incorrect as there are other ways in which humans can manipulate viruses and that is caused by natural selection. What do I mean? All viruses and bacteria mutate and adapt to their environment over time, with selection of the fittest individuals for survival in that particular environment.

Take a bat coronavirus that is not infectious to humans, and force its selection by culturing it with cells that express human ACE2 receptor, such cells having been created many years ago to culture SARS coronaviruses and you can force the bat virus to adapt to infect human cells via mutations in its spike protein, which would have the effect of increasing the strength of its binding to human ACE2, and inevitably reducing the strength of its binding to bat ACE2.

Viruses in prolonged culture will also develop other random mutations that do not affect its function. The result of these experiments is a virus that is highly virulent in humans but is sufficiently different that it no longer resembles the original bat virus. Because the mutations are acquired randomly by selection there is no signature of a human gene jockey, but this is clearly a virus still created by human intervention.” -Nikolai Petrovsky

Petrovsky finishes the thought by suggesting that the virus “could have escaped the facility either through accidental infection of a staff member who then visited the fish market several blocks away and there infected others, or by inappropriate disposal of waste from the facility that either infected humans outside the facility directly or via a susceptible vector such as a stray cat that then frequented the market and resulted in transmission there to humans.”

In an email to LifeSite, Petrovsky said that his study suggests that “there are some highly unusual features, including optimal human adaptation, that in the absence of identification of a close to identical virus in an animal population from which COVID19 could have arisen, would point in the direction of human intervention at some point in the evolution of COVID19.”

He also noted that researchers around the world have been unable to produce evidence of the novel coronavirus in animals, which would support their theory of natural development.

“If an animal vector and virus could be found then of course this would resolve the matter completely,” he told the outlet, adding “One would have thought that the Chinese would be intensively sampling all conceivable animals trying to find such a virus to exonerate their labs. If no such intense search is going on (which I don’t know one way or the other) then the inference could be that they are not looking because they already know what they might find.”

That said, Rutgers molecular biologist Richard Ebright urged caution over the conclusion – teling LifeSite that while Petrovsky’s results “are plausible,” they are “from computational modelling, not from experiments, and therefore must be considered provisional at best.”

Ebright noted that an earlier study on ACE2 receptor binding found that a bat coronavirus similar to the COVID-19 virus had strong binding power with the ACE2 of tree shrews and ferrets, making them possible animal intermediary candidates. However, the study did not compare the binding power of the virus’ animal species’ ACE2 receptors with the binding power with humans, as does Petrovsky’s study. Moreover, it did not use a gene sequence from an early version of the novel coronavirus itself, as does Petrovsky’s study, but rather used the gene sequence of a similar bat coronavirus reported by the Wuhan Institute of Virology, called RaTG13.

Ebright told LifeSite that he believes that multiple physical experiments that will ultimately determine if the novel coronavirus is optimized for binding with human cells are “probably underway in multiple locations,” although he did not cite any specific studies. –LifeSiteNews

According to Petrovsky, an international investigation into the real origins of COVID-19 is required – something the Chinese government has refused to collaborate over.

“Whilst the facts cannot be known at this time, the nature of this event and its proximity to a high-risk biosecurity facility at the epicentre of the outbreak demands a full and independent international enquiry to ascertain whether a virus of this kind of COVID-19 was being cultured in the facility and might have been accidentally released,” wrote Petrovsky.

Authored by Bruce Wilds via Advancing Time blog,

The National Debt Clock is flashing a major warning, Red Alert! this morning while working on another article I happened to glance at this indicator and recoiled in horror. While most people are aware the national debt has exploded, it brought my focus back to this subject. Many of us that watch the economy closely are still trying to get our heads around the rapidly unfolding covid-19 crises and the impact of trillions of dollars flowing into the financial system. America’s debt has soared past 25 trillion dollars and is now expected to leap by several more by the end of the year.

Click On Image To Activate

All this, of course, is in play even before it was announced that House Democrats have powered through the House another $3 trillion coronavirus relief bill. It is described as an election-year measure designed to brace a U.S. economy in free fall and a health care system struggling to contain the pandemic.

This debt surge would have been unimaginable just a year ago. The clock provided by US Debt Clock.org provides a great deal of insight and information. a seldom and underused feature appears on the right-side of the top line, it is labeled “Debt Clock Time Machine.” When you click on it you are provided with a view of where the debt and a slew of data for several periods in the past. It also provides a view of current expectations four years forward.

While it can be difficult to sort out much of this information, it is very helpful in identifying trends. With this in mind, it is important to note that the number of people living on government transfers of wealth has grown over the decades. Since the massive disruption in the economy resulting from the government’s response to covid-19 is likely to lead to a deep recession or depression marked by reduced dividends, an end to buybacks, and softer growth. The Trump administration’s decision to jump into the breach by signing the CARES Act, a $2.3 trillion relief package, is another indication that his answer to such an economic disaster is mega-spending on hand-outs and social projects.

Sadly, because of the political environment, we are experiencing, Congress rapidly gave near-unanimous approval casting aside concerns about the deficit or the unintended social consequences it might usher in. A theory exists that during a situation such as we are facing, the Government’s efforts to intervene are useless and may make things worse. Sometimes when the economy is melting down, it is best to do little or nothing because the free market will over time self-correct and return to a healthy balance. The problem at this time is two-fold, first, Trump doesn’t view deficit spending as a problem and second, he touts the stock market as an indicator of his ability to return America to its days of glory as promised when he ran for office. Unfortunately, much of his economy is generated using this old trick of deficit spending.

The chart above shows how the deficit has exploded over the last three years. This indicates the Trump economy is a mirage based on deficit spending. Expect this not only to continue but get substantially worse. In the past, this spending coupled with market manipulation fueled by changes in the tax laws has caused stock buybacks to explode. The bottom-line is that we entered this crisis in the midst of a “false economy” and it is only by the grace of this huge deficit spending that we are not languishing at the bottom of a deep economic pit. Deficit spending is not a silver bullet without consequences and is a poor substitute for the free market when allocating capital to where it is most effective. It is not economic growth but simply a method of borrowing from the future.

Trump has displayed a strong tendency to boost the stock market at every opportunity. He often accomplishes his goal of rocketing the market higher even if only temporarily by “tweeting” what he views as market positive blips or banging away at Federal Reserve chairman Powell. Many are centered around, the idea of “trickle-down economics” and how lower tax rates trickle down to benefit the overall economy. It appears that Trumps sees a higher stock market as proof he is on the proper track but he is blind to how distorted markets have become. I contend that while Trump touts a fondness and respect for hard-working Americans his policies will continue to create a great deal more inequality.

Low-interest rates, coupled with printing money and deficit spending has always come with huge hidden costs. They include increasing speculation, distorting prices, and allowing boondoggles to be built while reducing income to savers. This money flows to big business and Wall Street first and less so to small local merchants. In short, it reeks of crony capitalism and fuels a false economy full of boondoggles. As for the economic concept of  “trickle-down economics,” the problem is that those at the bottom share only a few drops of the benefits while those at the top swim in a pool.

Circling back to the crux of this article, America’s debt is soaring and small businesses and stores are closing in record numbers. Do not underestimate the importance of small businesses. Last year businesses with under twenty employees totaled some 30 million, employed over 54 million workers, and contributed 44 percent of all sales in the country. The economic scenarios before us include growing inequality, massive long-term unemployment, and propping up zombie companies. The Japanification of America is well on its way. Stagflation or run-away inflation is also a good possibility as history indicates that a soaring national deficit is never a free lunch. Trump may refer to the campaign against the coronavirus as a “war” but it is just a battle. The real war is still before us as we begin to deal with the carnage the politicians in Washington have unleashed upon us.

The President did not get us here on his own, he was assisted by a willing and complacent Federal Reserve and Congress. The combination of Nancy Pelosi and President Trump has been toxic to anyone interested in holding government spending at a reasonable level. It will be interesting how this plays out as the election draws closer. Trump’s salvation may be that he faces an even greater free-spending Democrat as he argues that things would have been far worse if he had not taken us down this path. It is incredibility ironic that after criticizing Obama and the Democrats for taking us down this road we find Trumponomics is little different. Please forgive me for pointing out the obvious, the next Presidential election is currently not set to bring about an answer to this ugly dilemma.