Category: zerohedge

The Duterte government is continuing its standoff and accompanying ratcheting rhetoric with China over maritime claims in the South China Sea. The Philippine coastguard and fisheries bureau has been engaged since Saturday in major exercises aimed at countering the “threatening” presence of Chinese vessels. 

The Philippine drills are focused primarily near a Philippine-held island in the disputed Spratly archipelago as well as the contested Scarborough Shoal, thus Manilla is said to be asserting rights within its 200-mile Exclusive Economic Zone (EEZ), while at the same time China claims the whole area.

China has protested outside claims to Spratly – or that it’s even international waters – by sending hundreds of fishing vessels to essentially permanently occupy the area. The Philippine operation seeks to dislodge them over “illegal fishing”, and reportedly many have dispersed as a result of the drills.

Earlier this week coast guard spokesman Commodore Armando Balilo said, “We are supporting the whole-of-nation approach in securing our maritime jurisdiction,” which includes additional naval patrols and beefed-up surveillance of the region.

The latest statement from Manila’s defense ministry on Wednesday was heated:

“China has no business telling the Philippines what it can or cannot do within its waters,” it said after Beijing rejected the legitimacy of the coast guard drills.

The statement said further that China has “no authority or legal basis to prevent us from conducting these exercises” in the South China Sea as “their claims… have no basis.”

Manilla believes China is using a massive presence of over 200 vessels to effectively establish total control over the area as we previously described last month.

The strategy appears to be that the sheer vast numbers of Chinese vessels make any outside claims over the waters impossible to enforce on any practical level.

China’s fishing fleet – also a key element of its “grey zone” needling. See also East/South China Seas.

‘It’s terrifying’: can anyone stop China’s vast armada of fishing boats? | Fishing industry | The Guardian https://t.co/5PHlKP9K8Y

— Robert Ward (@RobertAlanWard) August 26, 2020

China’s armada of fishing vessels that routinely gather at contested reefs and islands are widely viewed as part of government organized efforts at asserting and expanding maritime claims connected also with China’s artificial island build-up, the latter which are typically turned into remote military bases.

On the back of disappointing earnings from Netflix and Microsoft, offset by strong reports from Google and Facebook, traders were keeping a close eye on AAPL results this afternoon for a FAAMNG tiebreaker with Amazon still set to report tomorrow. And much to the delight of bulls, one quarter after Tim Cook’s company reported blockbuster earnings including its first ever $100BN quarter on the back of the iPhone 12 release, moments ago AAPL reported earnings that once again blew away expectations on the top and bottom line, coupled with the announcement that its buyback is being increased to $90BN!

Here are the details:

• Q2 Rev. $89.58BN, up a whopping 54% Y/Y and smashing estimates of $77.30BN
• Q2 EPS $1.40, beating estimates of 99c
• Q2 iPhone Revenue $47.94BN, up 66% Y/Y from $28.9BN, and also smashing estimates of $41.49B
• Q2 Products revenue $72.68BN, +62% y/y, and almost $10BN above the estimate $63.13 billion
• Q2 Net Income more than doubled to $23.6 billion from $11.25 billion a year ago

Some more details from the quarter:

• Mac revenue $9.10 billion, +70% y/y, estimate $6.80 billion
• IPad revenue $7.81 billion, +79% y/y, estimate $5.65 billion
• Wearables, home and accessories $7.84 billion, +25% y/y, estimate $7.52 billion
• Service revenue $16.90 billion, +27% y/y, estimate $15.65 billion
• Greater China rev. $17.73 billion, +87% y/y

While Mac revenue soared 70% to $9.1 billion, compared to $5.35 billion a year earlier (and above the $6.8 billion estimate) and iPad sales also surged by 79% to $7.81 billion, the highlight was iPhone sales which exploded by a whopping 66% to $47.9BN, up from $28.9BN, and blowing away expectations of $41.5BN.

As Bloomberg notes, this is a sign of significant demand for the iPhone after years of concerns that Apple buyers weren’t keen to upgrade their devices. The iPad has also seen a marked rise in demand that coincided with the Covid-19 pandemic, which left people stuck at home, with a need to educate and entertain their children and themselves.

The geographic breakdown was striking, and shows the base effect in its full glory, with all regions posting double-digit growth, and Rest of Asia close to triple digits.

And in dollar terms:

The closely watched Services soared to $16.901BN, beating expectations of $15.65BN.

And in case the impressive sales were not enough, the company also boosted its existing buyback authorization to $90BN while also increasing its dividend by 7% to 22 cents from 20.5 cents previously.

Apple said that it saw no material issue with supply chain constraints, while CEO Tim Cook said that “this quarter reflects both the enduring ways our products have helped our users meet this moment in their own lives, as well as the optimism consumers seem to feel about better days ahead for all of us. Apple is in a period of sweeping innovation across our product lineup, and we’re keeping focus on how we can help our teams and the communities where we work emerge from this pandemic into a better world.”

Commenting on the quarter, Apple’s CFO Luca Maestri said that “these results allowed us to generate operating cash flow of $24 billion and return nearly $23 billion to shareholders during the quarter. We are confident in our future and continue to make significant investments to support our long-term plans and enrich our customers’ lives.”

“We are proud of our March quarter performance, which included revenue records in each of our geographic segments and strong double-digit growth in each of our product categories, driving our installed base of active devices to an all-time high” he added.

* * *

Following the stellar quarter, some key U.S.-listed Apple suppliers also rose in postmarket trading: Skyworks Solutions +3.4%, Cirrus Logic +1.7%, Broadcom +1.2%, Micron Technology +0.5%, Taiwan Semiconductor Manufacturing Co. +0.4%. It’s also worth noting that Qualcomm, the world’s largest smartphone chipmaker, gave a bullish forecast for the current quarter also after the market close. Those shares were up more than 5% in extended trading.

As for AAPL itself, the company soared in kneejerk response rising 3% to $138 after hitting $139.50 earlier.

In case you don’t have time to read this, the summary from Ford is as follows: The chip shortage is a shitshow, way worse than anyone expected.

Despite a first quarter print that was far better than expected…

• *FORD 1Q ADJ EPS 89C, EST. 20C

• *FORD 1Q AUTOMOTIVE REV. $33.6B, EST. $31.3B

But that was not the story, as it seems the impact of the global semi shortage has been dumped into Q2…

• The automaker projected it would generate between $5.5 billion and $6.5 billion in adjusted earnings before interest and taxes, down from a previous forecast for $8 billion to $9 billion.

• Adjusted free cash flow for the full year is projected to be $500 million to $1.5 billion, below the earlier projection for $3.5 billion to $4.5 billion.

and it’s far uglier than expected…

Ford said it anticipates a 50% reduction in its planned second-quarter production due to the semiconductor shortage. That’s far worse than the 17% reduction in planned production in the first quarter.

Ford sees a $2.5 billion cost from the semiconductor shortage (at the high end of what CEO Jim Farley had said), but it hopefully expects Q2 “to be the trough of the” impact.

Ford CFO John Lawler on the chip shortage:

“Semiconductor availability, which was exacerbated by a fire at a supplier plant in Japan in March, will get worse before it gets better. Currently, the company believes that the issue will bottom out during the second quarter, with improvement through the remainder of the year.”

There was another ugly data-point to worry about also:

Ford’s market share was down to 5.3% in the first quarter, from 6% at the end of 2020.

Ford lost share in the U.S. and South America, and made very slight gains in Europe and China. Overall, it was down 0.6%.

And that combination has sent the supercharged stock down around 4% after hours…

Former President Donald Trump is preparing to resume MAGA rallies as early as May, according to CNN, and told podcast host Dan Bongino on Wednesday that he would wait until after the 2022 midterm races to announce whether he’ll run for president again.

According to CNN, Trump and his advisers have been in discussions to restart Make America Great Again (MAGA) rallies – where he’ll lambast his political enemies, including Alaska RHINO Lisa Murkowski (whom he’s vowed to travel to Alaska to campaign against), and presumably Maryland Gov. Larry Hogan – his ostensible GOP primary rival should he choose to run in 2024.

During the Bongino taping, Trump called Hogan a “total loser,” and said he’s giving the idea of running again “very serious consideration. “

“This guy, I’ve been watching him, he’s a total loser. He hasn’t been a good governor,” said Trump, adding “I think he wants to run. I think I would give him less than a zero per cent chance, OK?”

As far as timing, Trump continued: “I think probably the most appropriate time would be right after the ’22 election, that’s my opinion. Could do it sooner, but I think right after the election would be good, especially if you have a good election.”

Bongino asked Trump how he’s enjoying life as a private citizen again, to which Trump pivoted back to politics – saying “It’s a different kind of life, but still very political because of the endorsements. Everyone comes and they all want the endorsement, more than they’ve ever wanted an endorsement. It’s never been an endorsement that’s meant so much, which is an honor to me.”

“It means victory,” he added.

During the interview with Bongino, Trump repeatedly claimed he won the 2020 election. When asked if ‘good vaccine news’ might have swayed the election in his favor, Trump replied: “no, I won the election anyway. I ran two elections I won them both, as far as I’m concerned, and we’ll see about a third.”

“One thing I will say” Trump added. “I believe that if the vaccine came out before the election the press would have made a very small deal about it … When it came out two days after the election the press made it like the biggest story ever.”

Trump has spent most of his first nearly 100 days out of office golfing at his West Palm Beach golf course just down the street from his residence at Mar-a-Lago. On Mondays and Tuesdays, he discusses the week ahead with aides – including which GOP candidates he’ll meet with and consider endorsing.

Hard to see many cracks in Zuckerbergs’s armor in Q1 earnings data.

Facebook crushed Q1 EPS expectations and saw the biggest Q1 revenues ever…

• *FACEBOOK 1Q EPS $3.30, EST. $2.34

• *FACEBOOK 1Q REV. $26.17B, EST. $23.72B

Advertising revenue rose 46% YoY to $25.44 billion (well above the $23.27 billion estimate)

Facebook’s CFO Outlook:

Ad business was “driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered.”

So ads were more expensive, and more of those expensive ads were delivered.

More beats…

• Operating margin 43%, estimate 34.3%, but did slow…

• Other revenue $732 million, estimate $454.0 million

User Growth was pretty much in line with expectations:

• *FACEBOOK 1Q DAILY ACTIVE USERS 1.88B, EST. 1.87B

• *FACEBOOK 1Q MONTHLY ACTIVE USERS 2.85B, EST. 2.83B

We do note that US & Canada has basically stagnated for a full year now…

Facebook also reported 2.85 billion total users on its core social network. Estimates were 2.83 billion. So a beat there as well.

• Average Family service users per day 2.72 billion, +4.6% q/q, estimate 2.63 billion

• Average Family service users per month 3.45 billion, +4.5% q/q, estimate 3.35 billion

Of course, looking forward, all eyes are on the battle with Apple…

We expect second quarter 2021 year-over-year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020. In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to significantly decelerate sequentially as we lap periods of increasingly strong growth. We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently-launched iOS 14.5 update, which we expect to begin having an impact in the second quarter. This is factored into our outlook.

There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like companies across a wide range of industries, we are closely monitoring the potential impact on our European operations as these developments progress.

And FB shares are up 7% after hours to a new record high…

Full slide deck below:

FB Earnings Presentation Q1 2021 by Zerohedge on Scribd

It’s “not time yet to think about tapering”… was the simple confirmation of what everyone already knew and yet that sent the dollar lower, yields lower, stocks higher, gold higher, and crypto higher…

The Dollar made the biggest headlines, dumping to two-month lows…

Source: Bloomberg

Remember, don’t “meddle with the primary forces of nature” Mr.Powell…

Inflation expectations (10Y Breakevens) have exploded…

Source: Bloomberg

(but that’s transitory)… And so is the surge in Ethereum to new record highs?

Source: Bloomberg

Ethereum overtook Platinum’s market cap today for the first time ever…

Source

Late-day ugliness (extending the losses from the “froth” warning by Powell) took the shine off any positives for stocks today with Dow and Nasdaq worst (Dow hit by AMGN, MSFT, and BA), S&P ended around

Big sell program hit around 1510ET on that Powell comment…

Source: Bloomberg

Nasdaq was very noisy intraday, spiking to overnight highs at the cash open (only to get dumped back down) and spiking to overnight highs on The Fed statement (only to get dumped back on Powell’s “froth” comments)…

Bonds were bid after The Fed, pushing yields lower on the day…

Source: Bloomberg

The market shifted hawkishly to basically price in a rate-hike by the end of 2022, far different from The Fed’s 2024 forecast..

Source: Bloomberg

On the day, the dollar double-dumped…

Source: Bloomberg

Bitcoin was flat around $55k while Ether rallied, pushing ETH/BTC up near 0.05x…

Source: Bloomberg

Commodities and bonds are in strong disagreement…

Source: Bloomberg

Gold whipsawed on the day but ended green…

WTI pushed back above $64 intraday as gasoline demand moved back to pre-pandemic levels, but lost that level by the close…

Finally, we wonder just how “transitory” this spike in Price-to-Sales (to a record above 3x) will be?

Source: Bloomberg

Despite Elon Musk’s insistence last week that “data logs recovered so far show Autopilot was not enabled” during the fatal April 17 wreck that killed two men in a Tesla, the company admitted on Monday that “one of Autopilot’s features was active” during the crash, according to CNN.

On Monday’s conference call, Lars Moravy, the company’s Vice President of Vehicle Engineering, responded to a question about the wreck, noting that while Autosteer was not active, the car’s adaptive cruise control was: 

“In that vein, we did a study with them over the past week to understand what happened in that particular crash and what we have learned from that effort was that Autosteer did not and could not engage on the road condition that as it was designed.

Our adaptive cruise control only engaged when the driver was buckled and above 5 miles per hour, and it only accelerated to 30 miles per hour with the distance before the car crashed. As well, adaptive cruise control disengaged the car fully to complete to a stop when the driver’s seat belt was unbuckled.

Through further investigation of the vehicle and the accident remains, we instructed the car with NTSB and we saw in the local police and were able to find that the steering wheel was indeed deformed, so it was leading to a likelihood that someone was in the driver’s seat at the time of the crash and all seat belts post-crash were found to be unbuckled.”

Both traffic-aware cruise control and Autosteer are part of Autopilot’s suite of assistance features, the report said. “Traffic-aware cruise control matches the speed of the car to surrounding traffic, while Autosteer assists in steering in clearly marked lanes,” CNN reported.

Bryan Reimer, the associate director of the New England University Transportation Center at MIT, said: “The general understanding of Autopilot is that it’s one feature, but in reality it is two things bolted together.”

On the same call, Musk accused the media of “massive and deceptive clickbait headline campaigns on safety of Autopilot.”

Recall, days ago we noted that federal investigators were still in the midst of gathering new “information” in an ongoing probe of the fatal wreck that left two men dead, Reuters reported late last week. 

U.S. Transportation Secretary Pete Buttigieg said last week: “We are following this very closely,” before telling reporters that the National Highway Traffic Safety Administration (NHTSA) special crash investigation team “is still gathering facts and information” and is in touch with Tesla and police.

Police, NHTSA and the National Transportation Safety Board are investigating the crash, the report noted.

Also last week, we noted that Consumer Reports dropped a bombshell, independently corroborating the notion that Tesla Model Ys can drive themselves with no one in the drivers seat.

Consumer Reports said it could “easily get the car to drive even with no one in the driver’s seat,” according to CNBC. The auto reviewer said it was able to trick the system by putting a weighted chain on the steering wheel and keeping the seatbelt buckled. 

Consumer Reports’ senior director of auto testing, Jake Fisher, told CNBC: “In our test, the system not only failed to make sure the driver was paying attention — it couldn’t even tell if there was a driver there at all.”

Consumer Reports also said that Tesla’s Autopilot can operate where there is no lane lines, which was the case in the Houston wreck. 

“Any system that looks at lane lines can be tricked. They may see something as a lane line that is not, like a car strip, a curb may be interpreted as landline and so on.” Fisher continued: “Tesla is falling behind other automakers like GM and Ford that use technology to make sure the driver is looking at the road on models with advanced driver assist systems.”

Additionally last week, several Senators “raised questions about Tesla safety” in a new letter to the NHTSA. Senators Blumenthal and Markey expressed concerns about a “possible emerging pattern” of safety concerns – to which we reply: where have you been the last 2 years?

We also noted last week that one of the men who died in the fiery Houston Tesla wreck that we had been reporting on had been identified as 59-year-old Dr. William Varner. Varner was a doctor at the local Memorial Hermann Health System.

Mark Herman, Harris County Constable Precinct 4, told Reuters last week that the police were serving search warrants on Tesla to secure data from the wreck.

He was responding to a tweet by Tesla CEO Elon Musk, who said, “Data logs recovered so far show Autopilot was not enabled.”

Herman appeared quite skeptical at the time: “If he is tweeting that out, if he has already pulled the data, he hasn’t told us that” Herman told Reuters. “We will eagerly wait for that data.”

“We have witness statements from people that said they left to test drive the vehicle without a driver and to show the friend how it can drive itself,” Herman said according to the Reuters report.

And now, of course, we know what we knew then: Elon Musk was apparently just doing emergency PR. No wonder China has called the company “arrogant”. 

A few lucky students at Tulane University are in for a world-class lesson on elite hypocrisy.

As Hunter Biden trudges ahead in his father-directed campaign to rehabilitate his image – a campaign that began with marriage and a baby, and continued with a new book and now a sudden career 180 – the political scion and notorious trans-national influence peddler has signed on as a guest speaker for a course on media relations – specifically, the course is called “Media Polarization and Public Policy Impacts”.

The course, which will be offered in the upcoming fall semester, promises to “explore the current state of the media landscape in the United States and how media polarization, fake news and the economics of the news business impact public policy-making in Washington DC,” according to a course summary obtained by the Daily Mail.

To our knowledge, the younger Biden has no experience running a media business, and his experience in strategic press relations extends to being a tabloid punching bag. But that hasn’t stopped the young Biden in the past. Outside of his business career, Biden signed a deal for a solo art exhibit at Manhattan’s upscale Georges Berges Gallery in SoHo for sometime later this year despite having no background as an artist (unless you classify some of those drug-fueled nudes “art”).

“Hunter Biden has no background in media,” conservative filmmaker Phelim McAleer said. “He has never worked for a newspaper or a media outlet. Hunter Biden lecturing a class on fake news is like Harvey Weinstein teaching a course to prevent sexual harassment. It shouldn’t be happening. Period.”

But Biden won’t be the only high-profile speaker to appear before what we imagine will be a highly in-demand course. Here’s a list of other guests.

• Dr. Deborah Birx, White House Coronavirus Response Coordinator under President Donald Trump
• Juan Williams, political analyst for Fox News Channel
• Susan Glasser, columnist for The New Yorker
• Margaret Sullivan, Washington Post columnist; Kylie Atwood, national security correspondent for CNN
• Margaret Brennan, Face the Nation moderator
• Bret Stephens, New York Times columnist
• Dr. Michael Fauntroy, a professor in the Political Science Department at Howard University

Tulane is really justifying its $70K-a-year tuition-and-board with that list of A-list names.

Interestingly enough, the university declined to say whether Biden would be paid, but we imagine – considering that he has a lifestyle to maintain and child support payments to make – he will be receiving some form of compensation.

Of course, it’s understandable why the university is keeping quiet about the money angle – President Biden has promised that none of his family members would profit off the name during his time as president. It’s worth noting that Tulane receives millions and millions of dollars a year in funding for its research.

The course is being led by visiting professor Dr. Mitchel Sellers and Andrew Schwartz, a comms guy from the Center for Strategic and International Studies.

Most on the list are journalists, but there is also a former White House COVID coordinator, a political science professor, and Hunter Biden, the President’s son who has not been a stranger to controversy. Biden tops the list of guest speakers but has no job title listed, unlike the others on the list.

This isn’t the first time Biden will appear in front of a classroom: He previously taught a course at Georgetown, where he received his undergraduate degree in History and attended his first year of law school before transferring to Yale where he obtained his JD.

Authored by Jonathan Turley,

A book by a Barnard College English instructor named Ben Philippe has caused a firestorm due to his depiction of a fantasy of gassing white people.  The book passage has led some to demand review from the college for possible discipline or termination.

As will come as no surprise to many on this blog, I believe such writing should be protected as a matter of free speech and academic freedom.  The incident does however raise another case highlighting the uncertain or conflicting treatment given such writings by universities.

It is doubtful that a book discussing the gassing of minorities would have resulted in anything other than a rapid suspension and ultimate termination in many universities. That conflicting standard should also be a concern for free speech and academic freedom.

Philippe writes in his book “Sure, I’ll be your Black Friend” about “detonating” white people as nearby air vents spew out noxious gas:

“When this race war hits its crescendo, I’ll gather you all into a beautifully decorated room under the pretense of unity,. I’ll give a speech to civility and all the good times we share; I’ll smile as we raise glasses to your good, white health, while the detonator blinks under the table, knowing the exits are locked and the air vents filled with gas.”

So Philippe is describing the genocidal murder against white people. According to a couple conservative sites, he was interviewed about his book on the CBC show “q” by guest host Talia Schlanger who noted that, as a Jewish person whose “grandparents survived the Holocaust,” she was disturbed by the passage.  However, after Philippe said that “it was disturbing to write, too” and that he is not a violent person, Schlanger actually apologized to Philippe: “I wanted to say to you that I’m so sorry that your experience of the world made you feel that way.”

There are those will have suggested that declaring a desire or fantasy to explode and gas white people cannot be tolerated in an academic who must be able to teach students of all races.  Moreover, such comments can be cited as creating a sense of a safe environment at Barnard. However, there is no indication that Philippe has engaged in such racist and violent speech in classes or on campuses. Such passages are expressing deep-seated anger from his own experience and perspectives in our society. I find them disturbing and offensive but authors have often used such shocking passages to challenge readers.

My concern is the biased or conflicting handling of such cases.  I have defended faculty who have made similarly disturbing comments denouncing police, calling for Republicans to suffer,  strangling police officers, celebrating the death of conservatives, calling for the killing of Trump supporters, supporting the murder of conservative protesters and other outrageous statements. These comments were not protested as creating an “unsafe environment” and were largely ignored by universities. However, professors and students are routinely investigated, suspended, and sanctioned for countervailing views.There were also controversies at the University of California and Boston University, where there have been criticism of such a double standard, even in the face of criminal conduct. There were also such an incident at the University of London involving Bahar Mustafa as well as one involving a University of Pennsylvania professor. Some intolerant statements against students are deemed free speech while others are deemed hate speech or the basis for university action. There is a lack of consistency or uniformity in these actions which turn on the specific groups left aggrieved by out-of-school comments.  There is also a tolerance of faculty and students tearing down fliers and stopping the speech of conservatives.  Indeed, even faculty who assaulted pro-life advocates was supported by faculty and lionized for her activism.

As we have previously discussed (with an Oregon professor and a Rutgers professor), there remains an uncertain line in what language is protected for teachers in their private lives. A conservative North Carolina professor  faced calls for termination over controversial tweets and was pushed to retire. Dr. Mike Adams, a professor of sociology and criminology, had long been a lightning rod of controversy. In 2014, we discussed his prevailing in a lawsuit that alleged discrimination due to his conservative views.  He was then targeted again after an inflammatory tweet calling North Carolina a “slave state.”  That led to his being pressured to resign with a settlement. He then committed suicide

The efforts to fire professors who voice dissenting views on various issues including an effort to oust a leading economist from the University of Chicago as well as a leading linguistics professor at Harvard and a literature professor at Penn. Sites like Lawyers, Guns, and Money feature writers like Colorado Law Professor Paul Campus who call for the firing of those with opposing views (including myself).  Such campaigns have targeted teachers and students who contest the evidence of systemic racism in the use of lethal force by police or offer other opposing views in current debates over the pandemic, reparations, electoral fraud, or other issues.

The issue raised by Philippe is not whether he should be sanctioned but how these other professors have faced investigations, compelled retraining, or other measures for writings that simply disagree on public policy issues or express opposing political viewpoints — far short of discussing the gassing of white people.

University administrators often yield to protests and seek investigations and suspensions as a matter of course for targeted academics.

However, when controversies arise on the left, they tend to quickly (and correctly) cite free speech and academic values. The sharp contrast in how controversial speech is handled in these cases raises serious concerns over free speech and academic freedom.

Fed Chair Powell managed to briefly spook stocks when he warned that “some things in equities do reflect froth in markets…”

You never, ever drop the ‘f’ word during a press conference!

What Froth?