Category: zerohedge

After overnight sustained rocket fire from Gaza and at the same time Israeli airstrikes pounding the strip, the combined death toll reached to at least 50, with hundreds more injured, into Wednesday. International reports are citing over 50 Palestinians killed in Gaza alone, many among these children.

Middle East Eye cites the following numbers by late into the afternoon (local time): “At least 53 people have been killed in Gaza since Israel began its bombing campaign in the besieged territory on Sunday morning.”

“That number, accurate as of Wednesday afternoon, includes 14 children and three women, with a further 320 people wounded with injuries of varying degrees of severity, according to Gaza’s health ministry.”

And on the Israeli side, local reports cite that “three Israeli women were killed in rocket attacks, with more than 50 injured, including two women in serious condition: an 81-year-old as well as a 30-year-old who was hit by shrapnel in her upper body.”

This takes the death toll on the Israeli side to five since the start of fighting early this week.

The IDF announced that 16 among the Gaza dead were militants – some of them “senior commanders” – while also counting “hundreds” of Hamas and Islamic Jihad rockets fired into Israel, many reaching deep into central Israel and scoring direct hits on heavily populated residential areas. 

Israeli media is reporting that multiple members of Hamas’ “General Staff” were eliminated in airstrikes Wednesday:

The dead men were identified as Bassem Issa, the head of the Gaza City brigade since 2017 and head of the group’s cyber network and missile improvement project Jamaa Tahla. According to the Shin Bet, Tahla was the right-hand man of Muhammad Deif and the central leader of the group’s efforts to improve its military capabilities.

WARNING: GRAPHIC CONTENT – Israel carried out hundreds of air strikes in Gaza and Palestinian militants fired multiple rocket barrages at Tel Aviv and the southern city of Beersheba in the region’s most intense hostilities in years https://t.co/7EDcqm4iUM pic.twitter.com/vtizTWGCSV

— Reuters (@Reuters) May 12, 2021

Hamas’ rocket response grew in intensity especially after a 13-story apartment building was struck and completely collapsed in on itself. Israel is claiming that it gave the occupants multiple “warnings” to get out before the building was attacked.

Israeli Prime Minister Benjamin Netanyahu on Tuesday vowed that the militants would pay a “heavy price” – in a rapidly escalating scenario that many pundits say is closely resembling the devastating 2014 Gaza war.

“Literally Armageddon” – some Palestinian eyewitnesses are saying of the constant bombardment being unleashed on Hamas-controlled Gaza…

On last day of Ramadan

Gaza is being bombed by Israeli fighter jets 💔

ITS LITERALLY ARMAGEDDON 😭

FREE PALESTINE 🇵🇸
pic.twitter.com/g1W2KnCeMp

— StanceGrounded (@_SJPeace_) May 12, 2021

The United Nations is warning “full-scale war” is being realized amid the rapid escalation:  

“Stop the fire immediately. We’re escalating towards a full-scale war,” tweeted UN Special Coordinator for the Middle East Peace Process Tor Wennesland. “The cost of war in Gaza is devastating & is being paid by ordinary people. UN is working w/ all sides to restore calm. Stop the violence now.”

Israeli tanks have further been seen heading south toward the Gaza border, potentially mustering in case of further severe escalation that would lead to possible Israeli ground invasion.

ISRAELI TANKS MOVING TO GAZA BORDERpic.twitter.com/SYCDBEKe8T

— The_Real_Fly (@The_Real_Fly) May 12, 2021

Indeed a “ground war” seems to have already shown signs of beginning…

Hamas has published a video showing a Kornet ATGM hitting an Israeli jeep pic.twitter.com/UGqbYwHxWu

— Anna Ahronheim (@AAhronheim) May 12, 2021

The White House, meanwhile, is apparently attempting to strike a ‘middle ground’ of sorts “against extremism that has inflicted violence on both communities,” according to a statement by White House press secretary Jen Psaki on Tuesday, while administration officials further offer the usual vague statements that Israel has a “right” to defend itself, however while stopping short of saying the same of the Palestinian side. 

Video from EAPC Oil Tanks, #Ashkelon, struck by a rocket from #Gaza earlier today. pic.twitter.com/JCcV4vlyTi

— Aurora Intel (@AuroraIntel) May 11, 2021

Meanwhile both journalists and activists are urging more White House action in calming the fighting. It’s since been revealed that President Biden sent a letter to Palestinian President Abbas urging a de-escalation of the situation; however, as should be obvious Abbas has little to no control over Hamas operatives in Gaza. 

Shares of Domino’s Pizza surged nearly 4% Wednesday morning after celebrity investor Bill Ackman announced that his investment firm, Pershing Square Capital, had purchased a 6% stake in the pizza-delivery pioneer.

Speaking at the “Future of Everything” conference organized by WSJ, Ackman added that he has long been eying the firm, but that he only just recently found what he believed to be a compelling entry point to invest in the stock. Pershing sold some of its stake in Starbucks – which, along with Pershings bets on Chipotle, marked one of Ackman’s biggest turnaround successes – to finance its investment in Dominos.

Pershing started building its position in Dominoes at $330/share.

As CNBC’s Kate Rogers pointed out, Dominos rival Papa Johns also saw some news on the activist front Wednesday.

Pizza activism day:@WSJ reports Bill Ackman now owns about 6% of $DPZ, swapping @Starbucks for @Domino‘s

And @PapaJohns announces this am repurchase/conversion of all preferred shares of $PZZA owned by Starboard

— Kate Rogers (@katerogers) May 12, 2021

Ackman also revealed that he has been working on a single potential acquisition deal for the Pershing Square Tontine – Ackman’s SPAC –  since November of last year. “We’re deeply engaged” with an “iconic, phenomenal great business,” Ackman said. But it’s an “extremely complex” deal, and “I’m either going to get a transaction done” in the short term or move on to the next target.

Whatever happens, “It was worth devoting six months,” Ackman added, though he wouldn’t name the building.

Asked about bitcoin, Ackman bucked the trend of hedge fund icons buying into the crypto craze by responding that bitcoin isn’t a place he would invest. His rejection of crypto comes on the heels of his industry archrival Dan Loeb’s embrace of crypto via his firm, Third Point, which now holds cryptocurrency from five of its funds.

That’s notable, seeing

Investors can watch the rest of the conference below:

Oil prices are continuing their recent acceleration this morning, with WTI above $66.50, after the International Energy Agency said a record glut built up last year is gone. Last night’s surprise gasoline build from API did nothing to shake confidence in demand returning (crude stocks dropped as expected). It wasn’t all positive though as IEA cut its oil demand forecasts as COVID continues to crush India.

“The outlook for demand remains fragile,” Toril Bosoni, head of the IEA’s oil markets and industry division, said in a Bloomberg television interview.

But the agency is “expecting a very strong recovery in demand growth in the second half of the year.”

Bear in mind this week’s inventory data will not show the impact of the cyberattack on the pipeline.

API

• Crude -2.533mm (-2.1mm exp)

• Cushing -1.209mm

• Gasoline +5.64mm – biggest build since April 2020

• Distillates -872k

DOE

• Crude -426k (-2.1mm exp)

• Cushing -421k

• Gasoline +378k

• Distillates -1.734mm

Official EIA data is significantly different from API’s report with crude stocks only drawing down very modestly and gasoline inventories only building by a small amount…

Source: Bloomberg

Keep in mind all these changes happened before Colonial Pipeline went down. The picture is likely much altered right now, with East Coast stockpiles falling this week because of the pipeline hack. Some three-quarters of stations in a few cities are without gasoline today, according to Gas Buddy.

US crude production remains ‘disciplined’ despite soaring prices and rising rig counts…

Source: Bloomberg

Total US Crude Exports fell to their lowest since Sept 2018…

Source: Bloomberg

WTI hovered around $66.50 ahead of the print and faded on the weaker than expected data…

Traders are expecting “a gradual resolution to the Colonial Pipeline shutdown,” according to Louise Dickson, an analyst at consultant Rystad Energy. “The market is again looking to Asia, Covid-19 cases, and the next signals for oil demand outlook.”

A close friend of one of the men who died in a Houston area fatal Tesla wreck weeks ago says he believes the driver of the vehicle climbed into the back seat while “trying to save his own life”. 

Dr. William Varner – identified as one of two men who died in the accident – was in the vehicle after it caught fire shortly after hitting a tree. He was found by first responders to be in the back seat of the vehicle. The other occupant was found in the front passenger’s seat. 

Varner’s best friend, Bob Wortham, said: “I’ve been going weeks without being able to sleep because I can’t get it out of my mind. It’s just horrible.”

“The reason he was in the back seat, he was trying to save his life. It was such a painful experience for the whole family,” he continued, telling a local NBC affiliate. Wortham said he believed that Varner could not get out of the car and was burned alive.

“There was a neighbor that saw and came over to see what was going on and he said the damage on the front of the car was minor damage,” Wortham said. “This car was burned so bad that they couldn’t identify either of the people by their dental records. That’s how bad they were burned.” 

Recall, we noted two days ago that the NTSB issued their preliminary report on the wreck and noted that “all aspects” were still under investigation. 

The report noted that:

• Footage from the vehicle’s owner’s home security system showed “the owner entering the car’s driver’s seat and the passenger entering the front passenger seat”. It has been called into question whether or not there was anyone in the driver’s seat at the time of the crash, so it appears to be too early to judge whether or not this means anything.

• It was shortly thereafter that the “car leaves and travels about 550 feet before departing the road on a curve, driving over the curb, and hitting a drainage culvert, a raised manhole, and a tree,” the report notes. 

• The ensuing fire destroyed the car’s onboard data storage device. Yes, despite the fact that Elon Musk went “all in” in proclaiming that data logs “recovered so far” showed Autopilot was not enabled in the car last month, the NTSB is now reporting that they didn’t have access to stored data inside the vehicle The report reads: “The crash damaged the front of the car’s high-voltage lithium-ion battery case, where a fire started. The fire destroyed the car, including the onboard storage device inside the infotainment console.”

Then the report highlights one of the main points of contention around the investigation: whether or not Autopilot was engaged. The NTSB writes that a similar vehicle could have engaged Traffic Aware Cruise Control, but not Autosteer, at the point where the crash took place:

“The vehicle was equipped with Autopilot, Tesla’s advanced driver assistance system. Using Autopilot requires both the Traffic Aware Cruise Control and the Autosteer systems to be engaged. NTSB tests of an exemplar car at the crash location showed that Traffic Aware Cruise Control could be engaged but that Autosteer was not available on that part of the road.”

It is unclear whether or not Tesla can toggle the availability of these features, for certain roads, on the fly. 

The biggest MoM jump in core consumer prices since 1981 and record-breaking spikes in energy and used-car prices – all much hotter than expected – has sparked some turmoil across markets as traders attempt to discern if The Fed is right in its “guessing game” that this is all “transitory”.

Here’s what market participants are saying to Bloomberg:

Seema Shah, chief strategist at Principal Global Investors:

“What have we really learned today that we didn’t already know? Markets were already expecting a rise in inflation — the big question is how sticky that inflation is. That has not been answered today, nor will it be answered for several months. Nonetheless, risk markets will continue to be whipsawed by inflationary concerns over the coming months and investors would be wise to introduce some inflation protection into their portfolios.”

Sam Stovall, chief investment strategist at CFRA Research:

“Powell does need to come out and give a confidence boost to remind investors that ‘No, we still think this is transitory and we don’t think this is going to be the beginning of a new sharply higher trend,’” Stovall said. “Maybe the Fed also says that this is going to be the high point and all subsequent readings will be on the leeward side of this CPI mountain.”

Mike Loewengart, managing director of investment strategy at E*Trade Financial:

“The markets have been hovering around all-time highs with a lot of the reopening trade already priced in. So it’s not out of the question that the outsized inflation read could bring us back down to earth a bit. Keep in mind the Fed has made it clear that it won’t let inflation increases necessarily sway it from its easy-money policies, and further any jumps like this could be transitory. So is this a trend? That remains to be seen.”

Michael Mullaney, director of global markets research at Boston Partners:

“The question remains as to if it is transitory or not, the base effect, i.e. the rebound due solely to last year’s deflation is about 70% of the number printed today. If it is not transitory, then that high of a print breaches the 3.5% limit to where P/E multiples get hit (contract). It will be good for value and bad for growth, especially if it feeds into a higher interest-rate structure.”

Willem Sels, chief investment officer of private banking and wealth management at HSBC:

“Once we have seen the peak in the base effects, Treasuries should stabilize, and this should be a positive for equities, investment-grade and high-yield corporate bonds and emerging market assets. The peak of inflation should also coincide with the bottom for technology stocks.”

Fiona Cincotta, senior financial markets analyst at StoneX’s City Index:

“The fact that the U.S. dollar surged and tech looks set to take a hit suggests the market is pricing in a sooner move by the Fed to tighten policy. There is still another inflation print due before the Fed trade decision in June, and another jobs report. However, given surging inflation and commodity prices, the Fed may have to reconsider how transitory it believes inflation will be.”

Adam Crisafulli, the founder of Vital Knowledge, wrote in a note:

“The number, despite being VERY hot, really shouldn’t change anyone’s view of the world. Base effects and a few one-offs (like used autos) are accounting for a lot of the inflation firming. Meanwhile, investors are already expecting price increases to occur now –- the debate is whether they are still galivanting higher in Q4 once the denominator begins to firm. This CPI will make Biden’s life that much more challenging on the fiscal front (a big Build Back Better bill is increasingly unlikely) and will cause more Fed officials to at least acknowledge the potential for a Nov/Dec tapering.”

So take your pick – the dollar, like Fed’s Clarida, appears to be saying this is “transitory“; bonds, swaps, and money markets all suggest The Fed is wrong and hotter inflation is here to stay. As DoubleLine’s Jeff Gundlach warned recently, “it’s not clear to me that inflation is going to go back down to around 2 to 2.5%… we don’t know, nobody knows… but we’re most concerned with the fact that The Fed thinks they know.”

Authored by Jim Rickards via The Daily Reckoning,

Is the gold skid over? There are encouraging signs that the answer is yes. And, that’s great news for patient gold investors (especially those who bought the lows, as I recommended to my subscribers a few weeks ago).

First, some facts. Gold hit an all-time high of $2,069 per ounce on August 6, 2020. Since then, it has been on the skids, despite occasional rallies. The low in this cycle was $1,678 per ounce on March 8, 2021.

The reason for the skid was not hard to discern.

It’s often the case that gold prices get pushed around by a number of factors, including real rates, nominal rates, geopolitical concerns, inflation and simple supply and demand.

But, this decline had only one factor — rising nominal rates on the ten-year Treasury note.

Ten-year note rates hit an interim low of 0.508% on August 4, 2020, right around the same time gold peaked. From there, rates began a relentless march higher. The nominal yield on the ten-year note peaked at 1.745% on March 31, 2021.

The rate/gold inverse correlation was extremely high. As rates climbed from August to March, gold fell. Nothing else mattered, including the election, the Capitol Hill riots or Biden’s confiscatory tax plans.

Rates rose, gold fell, enough said. The question for analysts was, why were rates rising?

Gold Isn’t Supposed to Offer Yield

Again, the explanation was simple. Markets were watching the $900 billion Trump bailout in December, the $1.9 trillion Biden bailout in early March, and the announcement of plans for another $3 trillion bailout later this year.

The reasoning was, with that much money being pumped into the economy and with output capacity still limited by the pandemic shutdowns, inflation must be right around the corner. Rates rose in anticipation of inflation from all of the bailout spending.

When rates rise, gold often falls because Treasury securities and gold compete for investor dollars. As rates rose, the Treasury notes became more attractive, and gold less so because gold has no yield.

By the way, some people criticize gold because it doesn’t offer any yield. But gold is not supposed to have any yield because it’s money; you only get yield when you take risks on securities, money markets or bank deposits. But that’s a story for another day.

Still, there was a conundrum at the heart of this inverse correlation.

Sure, rising rates might make for competition for investor allocations that hurts the price of gold. But, if rates were rising because of inflationary expectations, wouldn’t gold rally because of the inflation?

Ah, the plot thickens…

Gold Sees Further Than Any Other Asset

To resolve the conundrum, we have to bear in mind that gold has a better track record of predicting economic developments than any other asset class. Gold looks so far ahead that investors often cannot see what the gold price is saying.

The point is that rates were rising on inflationary expectations, but there was no actual inflation. Hard data (as opposed to Wall Street analysis) showed that most of the bailout money was not being spent.

Over 76% of the bailout money was used either for savings or to pay down debt (which is economically the same thing as saving). Neither saving nor debt repayment constitutes new consumption. And, without consumption, there is no velocity and no upward pressure on prices.

In short, interest rates were predicting inflation, but gold prices were saying: Not so fast!

This wasn’t our first interest rate fake-out. The 10-year note hit 3.96% on April 2, 2010. It then fell to 2.41% by October 2, 2010. It spiked again to 3.75% on February 8, 2011, before falling sharply to 1.49% on July 24, 2012.

It spiked again, hitting 3.22% on November 2, 2018, before plummeting to 0.56% on August 3, 2020, one of the greatest rallies in note prices ever.

There’s a pattern in this time series called “lower highs and lower lows.” The highs were 3.96%, 3.75% and 3.22%. The lows were 2.41%, 1.49% and 0.56%.

The point is that the note market does back up from time to time. And when it does, it cannot hold the prior rate highs and eventually sinks to new rate lows.

So Much for One Million New Jobs

Starting several months ago, my forecast predicted that eventually, markets would see that inflation was not emerging, interest rates would beat a retreat and gold prices would regain their former shine.

That appears to be happening. Recent data shows the core PCE deflator (the Fed’s preferred inflation measure) was only 1.6%, well short of the Fed’s 2% goal (which they’ve failed to hit on a sustained basis for 13 years).

The 1.6% showing was well within the range that core PCE has exhibited for years. In other words, no inflation.

Other economic signs have been disturbing, including a fourth wave of coronavirus cases and rising initial claims for unemployment insurance.

The April 15 measure showed improvement, but today’s jobs report was a huge miss. Economists expected the economy would add at least one million jobs in April. The numbers out today only showed a gain of 266,000.

Interest rates dropped from 1.745% on March 31 to 1.579% today. That’s an almost 17 basis point drop in just over two weeks, an earthquake in bond land.

Gold responded right on cue, rallying from $1,686 per ounce on March 30 to $1,832 per ounce today. That’s a solid 5.5% gain in the same two-week span.

Heads, Gold Wins; Tails, Gold Doesn’t Lose

The rate/gold inverse correlation continues, except now it’s working in reverse with rates down and gold prices up. I expect this trend to continue because there are still no signs of inflation on the horizon.

Inflation will come, but not right away. Looking further ahead, gold is poised for major gains in response to the rise of inflation expected in 2022 and later.

This inflation will not be caused by so-called money printing. An expansion of the money supply without accompanying changes in saver psychology that affect velocity or other exogenous catalysts has little impact on consumer prices.

The driver of inflation is velocity, the turnover of money caused by lending and spending, which has been plunging for over ten years.

Still, an external catalyst of velocity will arrive soon and last for decades in the form of higher wages needed to offset declining working-age populations in China, Japan, Europe, Russia and the U.S. This wage increase will be driven in part by the diversion of workers to healthcare for seniors, which is needed work but not amenable to productivity increases.

Once this demographic wave hits, saver psychology will shift quickly, and cost-push inflation will feed on itself. Inflation combined with decreased confidence in central bank command money will move gold to $10,000 per ounce or higher. That is the implied non-deflationary price of gold needed to act as a backstop for command money.

As a reality check, I always ask myself what would happen if I’m wrong? In the event that inflation does roll in, gold would go up as it always does in inflation.

The worst position was rising rates on inflation expectations with no actual inflation. That’s over. Now it appears we have declining rates and no inflation. That’s good for gold. If inflation shows up, that’s good for gold too.

It’s heads we win, tails we don’t lose. It doesn’t get any better for gold investors.

House Republicans voted to oust Rep. Liz Cheney (R-WY) as conference chair in a Wednesday morning vote, following months of brewing friction over her constant criticisms of former President Trump, according to Axios, citing two sources in the room. The decision was made by voice vote – which means there will be no accounting for who voted her out, or who wanted her to stay. According to The Hill‘s sources, “it was an overwhelming vote against Cheney.”

The move to remove the #3 House Republican over her anti-Trump views “reflects the influence the former president still retains over the GOP,” per the report, which adds that it’s the most significant turning point in an internal party feud which essentially cements Trump as leader of the party – for now.

In response, Cheney said she vows to “do everything I can” to block Trump’s re-election.

“I have tremendous affection and admiration for many of you in this room. I know we all came to Washington to do important work for the nation,” Cheney said at the beginning of Wednesday’s conference meeting, according to a source familiar with the remarks. “We cannot let the former president drag us backward and make us complicit in his efforts to unravel our democracy. Down that path lies our destruction, and potentially the destruction of our country.”

“If you want leaders who will enable and spread his destructive lies, I’m not your person, you have plenty of others to choose from. That will be their legacy,” Cheney added.

More via Axios:

How we got here: Republicans have been unhappy with Cheney ever since she sided against Trump in his baseless claims of election fraud. She was one of 10 House Republicans who voted to impeach the former president for inciting the Jan. 6 Capitol insurrection.

• In February, the GOP conference voted 145-61 in a secret ballot to fend off the first bid to oust Cheney from leadership.
• House GOP Leader Kevin McCarthy supported Cheney at the time and said she “got a resounding shot in the arm” with the vote, insisting that it showed the party was “united.”
• Since then, Cheney has continued to criticize Trump, who has re-emerged publicly after his election loss and tightened his grip over the Republican Party.

Earlier this month, House Minority Whip Steve Scalise (R-La.) came out publicly in favor of replacing Cheney with Rep. Elise Stefanik (R-N.Y.). Trump soon followed his suit with his own endorsement.

• Though McCarthy said publicly the House GOP had “no concern” about Cheney’s vote to impeach Trump, he was caught on a hot mic saying he’s “lost confidence” in her and “she’s got real problems.”
• On Sunday, McCarthy made his position public and officially endorsed Stefanik to replace Cheney, telling Fox News that the GOP needs to be “united” with a conference chair who will consistently deliver the party’s message.

What they’re saying: In her last public speech as conference chair, Cheney tore into the Republican Party’s slide toward authoritarianism and said Trump’s baseless claims of election fraud pose a threat that “America has never seen before.”

• “Remaining silent and ignoring the lie emboldens the liar. I will not participate in that.”
• “I will not sit back and watch in silence while others lead our party down a path that abandons the rule of law and joins the former president’s crusade to undermine our democracy.”

What’s next: Cheney has told associates she plans to run for re-election and has no intention of abandoning her fight for the direction of the Republican Party.

• “I promise you this, after today, I will be leading the fight to restore our party and our nation to conservative principles, to defeating socialism, to defending our republic, to making the GOP worthy again of being the party of Lincoln,” Cheney told members before the vote.
• “I will do everything I can to ensure that the former president never again gets anywhere near the Oval Office,” she told reporters after the conference meeting.

While we, like everyone else, were shocked by the strongest core CPI print since 1981 when as a reminder, the Volcker Fed was engaged in a nightmarish fight with “non-transitory” inflation, pushing the Fed Funds rate as high as 20%, we were quick to note that the Fed is focused on jobs, not inflation which is “transitory”, and today’s blistering inflation print – where used car prices accounted for a third of the jump – “does not change delayed tapering.” At least when viewed from the Fed’s skewed perspective.

Remember, Fed is focused on jobs, not inflation which is “transitory”

This does not change delayed tapering

— zerohedge (@zerohedge) May 12, 2021

Well, moments later, the Fed’s Vice Chair – and former managing director at bond giant PIMCO Richard Clarida, said that while he was “surprised” by the strong CPI print, he said it was due largely to transitory forces, downplaying the significance of soaring “transitory” inflation.

“Readings on inflation on a year-over-year basis have recently increased and are likely to rise somewhat further before moderating later this year,” he said in the text of remarks to be delivered to the National Association for Business Economics on Wednesday. However, “I expect inflation to return to — or perhaps run somewhat above — our 2% longer-run goal in 2022 and 2023.”

While Clarida said inflation was being boosted by base effects – i.e., current price levels are elevated compared to depressed readings a year ago, when the economy was virtually shut down – and by some supply bottlenecks, that did not explain why core CPI soared by a whopping 0.9% from March of this year.

And while we doubt Clarida would answer that question, what is more important he suggested that the Fed is still some ways away from scaling back the massive stimulus it is providing to the economy.

“The economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved,” he said.

While 5Y breakevens exploded higher in kneejerk reaction to the blistering CPI, rising as high as 2.82% the highest since 2005, Clarida’s comments eased some of the market panic and they have since retraced some 3bps of the move higher.

Gas stations from Florida to Virginia ran dry, and prices at the pump skyrocketed late Tuesday, as the hack attack on the biggest U.S. fuel pipeline extends into the fifth day. 

On Tuesday evening, 17 states and Washington, DC declared emergency declarations to address fuel shortages. 

The emergency declaration covers Alabama, Arkansas, D.C., Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, and Virginia. 

The Biden administration projected that the Colonial Pipeline would restart by the weekend and urged drivers not to panic hoard fuel. 

“We are asking people not to hoard,” U.S. Energy Secretary Jennifer Granholm told reporters at the White House. “Things will be back to normal soon.”

Colonial has said progress is being made and expects to restart a large portion of the pipeline later this week into the weekend. 

“Markets experiencing supply constraints and/or not serviced by other fuel delivery systems are being prioritized,” Colonial said in a statement.

Colonial Pipeline

A ransomware attack on Colonial last Friday underscores the vulnerability of critical U.S. infrastructure to cyberattacks, which has already resulted in people across the Southeast panic hoarding fuel. 

Tracking firm GasBuddy reported widespread shortages of fuel at gas stations across southeastern states. For instance, it said 40% of filling stations across the Atlanta metro area without fuel. 

GasBuddy shares fuel shortage data of other metros:  

• 71% of stations in metro Charlotte are without gasoline.
• Over 61% of Wilmington, NC gas stations are without gasoline.
• 72% of gas stations in metro Raleigh are without gasoline.
• 37% of Myrtle Beach gas stations are without gasoline.
• Nearly 60% of stations in Norfolk are without gasoline.
• Nearly 60% of gas stations in metro Atlanta are without gasoline, but that number has held steady since 1am or so.
• Amongst AL, GA, FL, SC, NC, MD and VA, nearly 1,800 stations are currently out of gasoline.

As of midnight, GasBuddy shows the percentage of filling stations in each state without gasoline.

• GA 15.4%
• AL 1.8%
• TN 2.8%
• SC 13.4%
• NC 24.8%
• FL 4.2%
• VA 15.0%
• MD 3.5%

To mitigate even more shortages, the Biden administration said Tuesday it has started mulling over the idea of a temporary waiver of the Jones Act, a U.S. shipping law, to offset shortages. 

The Environmental Protection Agency also issued an emergency fuel waiver on Tuesday for refiners to reformulate gasoline in the Mid-Atlantic area. The waiver extends through May 18 for fuel sold in Virginia, Washington, D.C., Maryland, and Pennsylvania. 

The attack on Colonial “is potentially the most substantial and damaging attack on U.S. critical infrastructure ever,” Ohio Senator Rob Portman told a Senate hearing on cybersecurity threats on Tuesday.

The FBI accused hack group DarkSide of the ransomware attack. The narrative already being spun is that the group is Russian or Eastern Europe. Besides Colonial, the hackers launched attacks on 24 other companies in various industries. 

Colonial Pipeline told federal officials it would have a better idea when it will restart gasoline and diesel flows by late Wednesday. Let’s hope it’s by the end of this week or, at the latest, this weekend – because if shortages continue – people will get angry. Remember what happened when stores ran out of toilet paper during the pandemic?

US equity markets just got monkeyhammered, with Small Caps and Big-Tech hit the hardest and unable to hold the bounce…

Inflation breakevens ripped up near their 2004 highs…

And money markets are increasingly pricing in a rate-hike by Dec 2022…

Today’s CPI erases the ‘dovishness’ of the weak jobs print…

Of course, this is all transitory and the fact that the dollar has already erased its ‘hawkish’ spike suggests the market doesn’t see this shifting The Fed’s dovish stance…

However, as Vijay Patel notes, today’s print may kickstart tapering talk more broadly within FOMC ahead of 2H21 decision… and raise the possibility of the Jackson Hole policy-pivot.