Category: zerohedge

Authored by Jesse Felder via The Felder Report,

Last summer I suggested that the fireworks show underway in the gold price at the time wouldn’t last forever and that a “a more tactical and discerning approach” might be warranted due to the increasing popularity of the precious metal. Since then, gold has fallen about $250 (13%) and sentiment has shifted significantly once again. Inflows into gold ETFs have turned to outflows and it is becoming common to question gold’s utility in an overall asset allocation model.

So it probably feels natural to ask if the gold trade is over and if it’s time to throw in the towel. The way I see it, there are two major factors to pay attention to in trying to answer this question.

First, gold has a very tight relationship with real rates (interest rates adjusted for inflation).

When real rates rise, gold does poorly. But when they fall, gold really shines.

Recently, nominal interest rates have been rising faster than inflation creating a headwind for the gold price. However, there is good reason to believe that this trend could soon shift and become a strong tailwind for the gold price again. The rise in rates has already been dramatic and there is reason to believe it may be nearer to its end than its beginning. At the same time, inflation appears to be on the verge of picking up once again. If so, real rates will fall and gold will likely resume its uptrend.

The second major factor to pay attention to is the direction and size of the U.S. government’s fiscal deficit. Currently, the CBO estimates that the 2021 deficit will be $2.3 trillion, slightly less than last year’s total. However, this does not include the $1.9 trillion stimulus package recently passed by congress. Nor does it include the possibility of a new $3 trillion infrastructure package which is currently being planned by the administration.

If deficits were in the process of peaking today, as they did coming out of the recession roughly a decade ago, then it may be the case that the gold trade was in its final innings. However, as the chart above shows, there is a case to be made that gold hasn’t even fully priced in last year’s deficit yet, let alone this year’s which will inevitably be even larger. Furthermore, there is also reason to believe that a paradigm shift in attitudes toward deficit spending represents secular support for the precious metal going forward.

Either way, neither gold’s utility as an inflation hedge nor as fiat currency insurance has actually been tarnished at all. It is only perceptions that have changed as a result of what appears, as yet, to be nothing more than a healthy correction in a bull market, perceptions that will shift yet again when gold finds its second wind.

Two years after Hunter Biden left a crack pipe in a Prescott, Arizona rental car, the secret service intervened in an incident in which Hallie Biden – his brother’s widow – threw Hunter’s .38 revolver into a trash can behind a grocery store, only to return later to find it gone.

Hallie, who was dating Hunter at the time, had searched Hunter’s pickup truck while it was parked at her Wilmington, Delaware home, because of “suspicions she had,” and decided to wrap the gun in a black plastic bag and toss it in the trash behind Janssen’s Market – a high-end grocery store where the Bidens are longtime regular customers, according to Politico.

Later that day, Hallie informed Hunter of what she had done, and he instructed her to retrieve the gun, according to the police report. When Hallie returned to the grocery store, she found that the gun was missing from the garbage bin and reported the issue to the store. Police received calls from the store’s general manager, Paula Janssen, and from another person, according to the report.

The missing gun caused heightened concern, according to the police report, because the grocery store sits across the street from Alexis I. du Pont High School. -Politico

Delaware police launched an investigation – worried that the trash can was across from a high school and that someone could have used it in a crime, according to a copy of the police report obtained by Politico. The FBI, meanwhile, also responded to the scene – as they had been monitoring Hunter Biden as part of an investigation which remains ongoing and which focuses on his taxes.

Hunter was called to the scene by police, where he told them outside the store’s loading dock area that he used the gun for target practice.

When a police officer asked Hunter whether the gun had been used in a crime, the officer reported that Hunter “became very agitated with me and asked me if I was intentionally trying to make him mad,” according to the report.

When the officer asked Hunter whether he had been doing drugs or drinking heavily, he responded, “Listen, it isn’t like that. I think she believes I was gonna kill myself,” according to the report.

At the same time, Secret Service agents approached the owner of the gun store where Hunter had bought the gun earlier that month, and demanded they be allowed to remove the paperwork involving the sale, according to the report, which cites two people with separate knowledge of the incident.

The gun store owner, Ron Palmieri, refused to comply, suspecting that the Secret Service might want to “hide Hunter’s ownership of the missing gun in case it were to be involved in a crime.” Palmieri eventually turned the paperwork over to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).

A copy of Hunter’s Firearms Transaction Record, he responded “no to a question which asks “Are you an unlawful user of, or addicted to, marijuana or any depressant, stimulant, narcotic drug, or any other controlled substance?” – five years after he had been discharged from the Navy Reserve after testing positive for cocaine, and two years before he that crack pipe in an Arizona rental car. He and his family have also spoken openly about his cocaine addiction.

The Secret Service says they have no record of their agents approaching the gun store owner, while Joe Biden claimed through a spokesperson that he had no knowledge of any Secret Service involvement.

He also kicked a bunch of people out of the White House for smoking WEED. https://t.co/zeih8CZFLD

— I got your #Unity right here (@jtLOL) March 25, 2021

Days after the incident, the gun was returned “by an older man who regularly rummages through the grocery store’s trash to collect recyclable items,” according to the report.

The incident did not result in charges or arrests.

But the alleged involvement of the Secret Service remains a mystery. One law enforcement official said that at the time of the incident, individual Secret Service agents at the agency’s offices in Wilmington, Del., and Philadelphia kept an informal hand in maintaining the former vice president’s security. The person cited an instance in 2019 when the Wilmington office of the Secret Service called the Delaware State Police to arrange security for a public appearance by Biden.

The Secret Service declined to answer a question about whether it had informal involvement in Biden’s security during this period.

Asked whether the Secret Service requested state police security for Biden during the period when he was not under the agency’s protection, a Delaware State Police spokesman said, “I have reached out to our sergeant who oversees the Executive Protection Unit with the Delaware State Police. He is unaware of any such requests or services provided.” –Politico

According to law enforcement officials, any involvement by the Secret Service on behalf of the Bidens would inappropriate interference with a Delaware State Police investigation and the FBI, according to law enforcement officials.

While Hunter was being questioned at the scene, he told a police officer that two “Mexican males” employed by Janssen’s looked suspicious, and were “Prolly illegal,” according to the report.

By Hot Air

I’d been idly hoping that the sticker shock of what Biden wants, upwards of $3 trillion, would scare Manchin away or at least lead him to give the infrastructure bill a serious haircut. (A shaved head, really.) He bid his party down a bit, although only a bit, on elements of the COVID relief bill so one would think that a new package that would spend a trillion dollars more than that bill did might freak him out.

Not so. It sounds like he’s ready for a blockbuster, and for the tax hikes that’ll pay for it.

Which leads to two assumptions. One: There’ll be a lot of candy for West Virginia in this infrastructure bill. And two: Manchin’s probably going to disappoint the left on H.R. 1 and gun control and may be calculating that this is a way to make it up to them. If he can’t give them what they want culturally because his red state’s majority won’t tolerate it, he can at least give them what they want economically.

“I’m sure of one thing: It’s going to be enormous,” the West Virginia Democrat, who is seen as a swing vote in a chamber divided 50-50, told reporters at the Capitol.

While he didn’t predict a price tag, Manchin said Congress should do “everything we possibly can” to pay for it. He said there should be “tax adjustments” to former President Donald Trump’s 2017 tax law to boost revenues, including by raising the corporate rate from the current 21 percent to at least 25 percent.

Some of the tax benefits in the Republican law were “weighted in one direction” and could be reversed, Manchin said. He also suggested an “infrastructure bank” paid for with revenues, potentially a value-added tax, that would be used for “rebuilding America.”…

“Where do they think it’s going to come from?” he asked. “How are you going to fix America?”

We’re going to get a VAT on top of our federal income tax? What happened to letting the rich pay for all of this?

Why, it’s enough to make me wonder if progressive assurances that the rich can foot the entire bill for their agenda aren’t true after all.

The fact that he’s demanding tax increases to help pay for the bill is ominous not just on the merits but as a “tell” that he must be open to passing this bill via reconciliation. If there was even a faint chance of getting 10 Republican votes for spending this gigantic, there won’t be once it’s official that new taxes are part of the mix. That’s another way in which Manchin is looking to appease the left — he’s under heavy pressure from progressives right now to jettison the filibuster so that they can pass the non-fiscal parts of their program. Rachel Maddow laid him out last night on MSNBC for roadblocking gun control:

Sen. Joe Manchin gets torn apart by Rachel Maddow for blocking filibuster reform and gun legislation, even after failing when he tried to do his way. #Maddow pic.twitter.com/cALLYQ82Nd

— Sarah Reese Jones (@PoliticusSarah) March 24, 2021

Lefty groups are running donation drives at ActBlue asking for money to hold Manchin and Kyrsten Sinema accountable for not relenting on the filibuster. “The filibuster is a mechanism of white supremacy and one of the many systemic footprints of the Jim Crow era,” asks one plea for cash. “As long as Sens Manchin (WV) and Sinema (AZ) refuse to reform or abolish it, Mitch McConnell has ultimate veto power.” Unless and until Manchin figures out a way to use 50 votes to pass H.R. 1 — a bill he’s not currently sponsoring and probably can’t support given the intense pushback from officials in his state — or the House’s gun-control legislation, he’ll be viewed as an enemy by the left.

Unless, that is, he can buy some goodwill from them by cutting them a $3 trillion check instead. And by showing them in the process that he’s willing to use reconciliation repeatedly to pass important economic legislation.

Unfortunately for him, Chuck Schumer’s facing his own electoral pressures in New York and will try to impress progressives there by at least forcing a vote on the House’s gun-control bills. That will further concentrate lefty ire on Manchin, not just because he’s prepared to let Republicans block those bills but because he’s against them himself:

.@LACaldwellDC reports that Sen. Schumer will bring gun reform bills passed by the House up for a vote in the Senate.

“It’s an exercise in getting people on the record. That’s also a big signal that … Democrats think that the public is on their side.”https://t.co/vwjnVqLPwb

— MSNBC (@MSNBC) March 24, 2021

In lieu of an exit question, read Philip Klein on how Biden’s team has given up any pretense of caring about the growing national debt. Obama at least made noises to that effect. Biden can’t be bothered. Partly that’s because the left has gained in influence over the past 10 years and partly it’s due to Democratic disgruntlement at the fact that Republicans gave up caring about deficits once they were back in power. If the GOP’s concerns about debt are in bad faith, why should Dems take them into consideration in shaping their bills? Even the reddest red-state Dem, Joe Manchin, won’t blink at $3 trillion in new spending on top of $2 trillion now. God help us all.

Last summer when US equity markets had already recovered more than 90% of the pandemic slump, DB’s chief credit strategist Jim Reid says that it “instinctively felt” to him that the S&P 500 being within 5-10% of its all-time highs was “madness while the pandemic was raging on in Southern States and with the global economy still on financial life support.” However, he then concedes that he “became far more relaxed” when he saw the latest equity positioning data from DB’s derivatives team which showed that even with the huge recovery, consolidated institutional positioning in the US equity market was in the lowest 6th percentile over the last decade.

Not anymore, because fast forward to today and institutional positioning is now at around the 92nd percentile, Reid warns in his latest Chart of the Day note, a sign that a rollover is likely as almost all institutional investors are now “in”.

So now what?

Well, in the near term, Reid, who cites the bank’s equity team, thinks that equity positioning is likely to remain well supported, as growth picks up even further. However, he – like BofA’s CIO Michael Hartnett – thinks growth should peak some time in Q2, potentially coinciding with a broader re-opening, warmer weather and an increased return to work at the office, arguably shifting retail investor attention away from markets as they find something else to do.

That’s the point where Deutsche Bank expects a “likely 5-10% pullback in the S&P 500” before it reverses on the way to ending the year at 4100. 

Authored by Rory Hopcraft, Kevin Jones, and Kimberley Tam via TheConversation.com,

It’s estimated that 90% of the world’s trade is transported by sea. As consumers, we rarely give much thought to how the things we buy make their way across the planet and into our homes.

That is, until an incident like the recent grounding of a huge container ship, the Ever Given, in the Suez Canal exposes the weaknesses in this global system.

The container ship ran aground in the Suez Canal on March 23, blocking the passage of other ships and causing a traffic jam for cargo vessels. EPA-EFE/Media Suez Canal Head Office

High winds have been blamed for the container ship blocking the narrow strait, which serves as a trade artery that connects the Mediterranean and the Red Sea. But with shipping so heavily reliant on such narrow channels, the potential for these incidents is ever-present.

As researchers of maritime security, we often simulate incidents like the Ever Given grounding to understand the probable long and short-term consequences. In fact, the recent event is near identical to something we have been discussing for the last month, as it represents an almost worst-case scenario for the Suez Canal and for knock-on effects on global trade.

The Suez Canal is the gateway for the movement of goods between Europe and Asia, and it was responsible for the transit of over 19,000 ships in 2019, equating to nearly 1.25 billion tonnes of cargo. This is thought to represent around 13% of world trade so any blockage is likely to have a significant impact.

You will find more infographics at Statista

The Suez Canal Authority started expanding the strait in 2014 to raise its daily capacity from 49 vessels at present to 97 by 2023. This gives an indication of how many ships are likely to be affected by the current situation. There are reports that the incident has already halted the passage of ten crude tankers carrying 13 million barrels of oil, and that any ships rerouted will have 15 days added to their voyage.

Egypt’s Suez Canal is a pinch point for global shipping. Gotravel/Alamy Stock Photo

The severity of the incident is because of the dimensions of the vessels using the canal. The Ever Given is 400 metres long, 59 metres at its widest point and 16 metres deep below the waterline. This makes it one of the largest container ships in the world, capable of carrying over 18,000 containers. Depending on the severity of the grounding, the salvage and re-floating of this type of ship is a complex operation, requiring specialist equipment and potentially a lot of time.

While the exact number of container ships of this size transiting the canal is unknown, container vessels account for almost a third of all canal traffic. Their depth and girth make for difficult navigation within the canal. When operating within such tight margins, ships of this size have to maintain a certain speed to keep their steering effective.

With the capacity to carry over 150,000 tonnes of cargo, these ships cannot stop suddenly. If something does go wrong, crews have very little time to react before the ship runs aground.

The Suez Canal was completed in 1869 – long before modern container ships existed. Mr_Karesuando/Shutterstock

This makes a blockage of this type almost inevitable, especially considering that the length of these ships far exceeds the width of the canal. But what makes this incident particularly disruptive is the location of the grounding. Since the canal was expanded, the Mediterranean end of the Canal now has two channels for ships to take, allowing seamless transiting even if one channel is blocked.

But, in its current location at the Suez end of the Canal, the Ever Given is blocking the only channel for ships to pass through. As ships travel through the 193km of canal in convoys with tightly scheduled slots, vessels leading these groups can block the channel like this, creating a backlog of ships or even collisions. It’s unclear if the goods being delayed are time-sensitive (for example: medicine or food), but understanding what effects these incidents have on trade can help us pre-empt effective solutions.

Could it have been worse?

We’re also interested in what other factors can influence an event like this. One element is the time of year. Traditionally, in the build-up to Christmas, October and November are busy times for maritime trade. A disruption in the global supply chain during this period would have a far greater impact, and could coincide with difficult weather conditions which would exacerbate things, like visibility-reducing fog.

Suez Canal Authority Lt. Gen. Ossama Rabei (second from the right) inspects the blockage. EPA-EFE/Media Suez Canal Head Office

Another element is the unevenness of the canal’s banks. If the incident had occurred only a few kilometres down towards the seaport of Suez where the strait ends, the ship would have run aground on banks composed of rock, not sand. An impact here might have caused serious damage to the hull, making salvage operations harder.

While not identical to our team’s table-top scenario, the latest incident does highlight that as ships get larger and more complicated, their reliance on narrow shipping routes constructed in an earlier age looks increasingly risky. Today’s blockage will have limited long-term implications, but incidents like it could be triggered maliciously, causing targeted or widespread impacts on global and local trade. We need to be more aware of these weaknesses as our world becomes more connected.

*  *  *

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It wasn’t nearly last month’s catastrophic 7Y auction but it wasn’t all that much better either.

Moments ago the Treasury sold $62BN in a closely watched 7Y auction (previewed here), which matched the record size for the tenor.

And while sentiment was far more positive heading into the 1pm deadline, traders were surprised to learn that the high yield on the auction was a rather dismal 1.30%, which tailed the When Issued 1.275% by a sizable 2.5bps and was the highest yield since Jan 2020.

Besides the unexpectedly large tail, the metrics were also ugly, if not nearly as bad as last month, with the bit to cover rebounding from last month’s disastrous 2.045 to 2.23, which nonetheless was rather low and well below the six-auction average of 2.28. Indeed, besides last month’s outlier BTC, this would have been the lowest print since August 2019.

The internals were also better than February, but not nearly good enough. The Indirects took down 57.3%, up from last month’s record low 38.1% and in line with the recent average of 58.6%. And with Directs dipping to 18.0% from 22.1%, Dealers were left holding 24.7%, high but not nearly as high as last month’s 39.8%

Big picture: the market was expecting a poor auction but one that was an improvement to February. It got just that, yet judging by the immediate back up in yields, the market was clearly disappointed by what it got, although now that the kneejerk move has stabilized, the 7Y is now just 1bp wider on the day so it appears that the early nervous jitters will be digested efficiently.

 

Canadian Prime Minister Justin Trudeau, who has long been criticized by progressives (who hold the political scion in contempt as a poser and “faux-feminist”) for his quiet support for Canadian Big Oil, can clearly see where the political winds in increasingly liberal Canada are blowing. And as the youthful prime minister (who is rumored to have inherited his famous good looks from Cuban revolutionary Fidel Castro) tries to foster a reputation as one of the western world’s foremost climate warriors, Canadian courts have handed him a major victory.

As the world waits for a ruling on a major climate change case from the US Supreme Court, and President Biden prepares to unveil his sweeping infrastructure/climate program, the Supreme Court of Canada ruled on Thursday that Prime Minister Justin Trudeau’s national carbon price, the cornerstone of his climate policy, is entirely constitutional.

The API, an influential organization representing energy firms, announced Tuesday that it supports a carbon-pricing scheme, the first time the US energy industry has nominally supported a carbon tax. However, the organization specified that the tax should be used to encourage green energy use, not pad government coffers.

Trudeau declared that a carbon tax would be a key policy goal back in 2016, but it wasn’t until 2019, after he was reelected, that the Canadian federal government set a minimum price on carbon emissions in provinces which don’t have an equivalent provincial price. The controversial program applies a price to fuel purchases by individuals and businesses with lower emissions, and on part of the actual emissions produced by companies that are responsible for large emissions, such as pipelines, manufacturing plants and coal-fired power plants.

The law was quickly challenged by the oil-rich province of Alberta as well as conservative governments in Saskatchewan and Ontario. In his ruling, the federal judge who decided the case said companies should pay a price for pollution, the AP reports.

Chief Justice Richard Wagner said in the written ruling that climate change is a real and existential threat to Canada and the entire world, and evidence shows a price on pollution is a critical element to addressing it.

“The undisputed existence of a threat to the future of humanity cannot be ignored,” he wrote.

Wagner also said the Canadian provinces can’t set minimum national prices on their own and if even one province fails to reduce their emissions it could have an inordinate impact on the rest of the country. It is a split decision with six judges entirely in favor, one partial dissent and two entirely in disagreement with the majority.

Almost immediately after the ruling was handed down, Federal Environment Minister Jonathan Wilkinson issued a statement lauding the decision as “a win for the millions of Canadians who believe we must build a prosperous economy that fights climate change.”

Bloomberg pointed out that the ruling is key to Canada’s goal of reaching net-zero emissions by 2050. It’s also a victory for Trudeau, who came to power in 2015 pledging to tackle climate change, but has faced strong opposition from the fossil-fuel sector and oil-rich western provinces like Alberta. Canada produces more greenhouse gas per capita than almost all the world’s top emitters.

Now, considering the timing of this decision, will we hear Joe Biden point to Canada as an example for the US to follow during his briefing Thursday afternoon?

Today the Treasury will auction $62BN in 7-year notes at 1pm. It will be a closely watched auction because one month ago the same 7Y February auction was “catastrophic” and sparked a rout in bonds which then quickly morphed into a marketwide dump hitting tech, momentum and growth stocks the hardest.

As a reminder, last month’s 7Y tailed 4.4bps, the largest tail on record with dismal end-user demand declining to 60.2%, 20.2%-pts below the previous auction and the lowest level since September 2014, while the bid-to-cover ratio declined to 2.04, the lowest since the Treasury reintroduced the 7-year in early 2009

At the investor class level, the investment manager share declined 14.3%-pts to 49.1%, the lowest level since May 2020, and the foreign share of demand declined to 8.1%, the lowest level on record.

To be sure, it wasn’t just fear of inflation that was the culprit last month: technicals played a prominent role in last month’s weak results, as intermediate yields rose as much as 25bp on the day of the auction, and Treasury market depth declined significantly to levels not seen since the early spring of 2020

In fact, the deterioration in depth was particularly severe around the auction as volumes surged and the most rapid sequence of the sell-off took place.

Some more thoughts from JPM:

Looking ahead, though intermediate and long-end yields have declined 5-15bp from their recent highs last week, once we get through the 7-year auction, we think portfolio rebalancing could also drive yields lower. Equities have once again significantly outperformed fixed income: the S&P 500 has risen 3.5% QTD while the GABI-US (our aggregate fixed income index) has declined 3.4%. This sort of performance differential has typically led to rebalancing around quarter-end, and our colleagues estimate this could total $200bn rebalancing out of equities. Empirically, we have observed these sort of rebalancing flows have been supportive of lower Treasury yields: Exhibit 1 shows the cumulative change in 10-year yields around quarter-ends in which equities have outperformed the GABI-US by more than 5%-pts. Ten-year yields tend to decline by an average of 4bp in the weeks leading up to quarter-end and then reverse higher as the calendar turns to the new quarter, and this has occurred in 7 of 10 instances. Thus, cyclicals indicate risks are skewed toward a decline in yields in the coming days.

Market depth has recovered in the intermediate sectors, retracing back in line with average levels over the past year, but remains lower than prior to the 7-year auction, and depth remains relatively depressed in intermediates compared to the long end. Additionally, even though seven-year yields are 7bp higher since the last auction, yields have declined 10bp this week alone. The 7-year sector appears modestly cheap versus the wings after adjusting for the level of rates and the shape of the curve. The WI 7-year roll opened at +1.75bp, in line with our fair value estimate, and is still trading, underperforming the erosion of carry. Lastly, though end-user demand at intermediate auctions have generally remained above historical averages—last month’s auction notwithstanding, dealers have had to absorb significantly more duration supply, which has likely driven more variable auction results recently. That said, the quarter-end rebalancing flows mentioned above could be supportive on the margin.

Overall, despite relatively cheap valuations, given the recent decline in yields, and technicals that have not yet fully recovered, JPM thinks today’s auction will require above-average end-user demand to be digested smoothly, which following the two most recent auctions this week where we saw a solid 2Y and 5Y auction, this shouldn’t prove to be too difficult.

At the start of February, when the dual short squeezes of option gamma and WallStreetBets meme stocks were all the rage, a chart from Goldman indexing non-profitable tech companies was making the rounds across Wall Street desk; it showed the sector’s tremendous ascent since the Fed’s panicked response to the covid crisis, which more than quadrupled the return of this index.

Well, in the past month, things have gotten uglier, and at one point this morning, the index had plunged more than 30% from its February peak (now down 28.8%) after tumbling a whopping 7% yesterday.

Commenting on this furious reversal and the chart above, this morning Rabobank’s Michael Every – who evoked Jaws in his daily post for several other reasons – said “do you know what the graph of that particular market segment is starting to look like to me? A shark’s fin: and if that is indeed the case, we would soon see happy young traders suddenly pulled underwater and tossed around like rag dolls.”

Of course, this won’t be the first time “happy young traders are pulled underwater”, nor the first time that unprofitable companies explode higher only to crash immediately after. While many current traders won’t remember, and many may not even have been alive, an almost identical pattern presented itself in the run up to the bursting of the dot com bubble.

There are other reasons why the current market is “evoking memories of the dot-com crash” as Bloomberg notes this morning. One among them is the growing revulsion to the sector that in many ways defined 2020 – the FAANG names, which at one point last year account for a quarter of all market cap.

As Bloomberg’s Elena Popina writes in the daily Taking Stock colimn, “when the hegemony of the FAANG stocks cracked in September, it was a welcome reprieve for investors who watched a handful of names rule the market all year. Now it’s March, and the streak of under-performance by stocks with megacap bias is becoming historic.”

She refers to an equal-weight version of the S&P 500, which has outperformed its cap-weighted peer for seven months. That’s notable because it has now topped the streak after the financial crisis to become the longest stretch since the dot-com bust, indicating the buildup of a huge anti-megacap bias within the market. Said otherwise, a gauge of mega-cap stocks from Alphabet to Facebook and Netflix has trailed the S&P 500 Index for five out of seven months, as the value reversal kicked in and growth stocks have been left in the dust.

“Mega-cap tech, which dominates the market-cap-weighted index, is not looking as rosy in a post-pandemic world as we shift our consumption from screens to services,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

While it’s true that things have changed dramatically for tech stocks since the popping of the Internet bubble some 20 years ago, one thing stays the same: the group’s sensitivity to rising rates which has gotten even bigger. We have repeatedly shown this with a chart demonstrating the “duration” of the growth sector, and just how exposed the hedge fund community is to risk from higher interest rates (i.e. duration).

So going back to the bursting of the dot com bubble, Bloomberg reminds us that in the seven months from late 2001 through April 2002, the under-performance of the cap-weighted S&P 500 Index coincided with rising 10-year yields, which traded north of the 5% mark in the spring of 2002. A similar pattern happened in late 2009-early 2010, when a cap-weighted S&P 500 Index trailed its equal-weighted peer as yields went up.

“The difference this time around is that rates are likely to continue to climb over the long term,” said Matt Maley, chief strategist at Miller Tabak + Co. “In 2002 & 2009, they rolled back over after a couple of months.”

Actually no, Matt, the difference this time is that unlike 2002 and 2009, the Fed is now openly protecting stocks and defending even the dumbest equity investors, which is why Powell’s job (and that of his replacement in 2022) will be fascinating: how does the Fed achieve its two true mandates of runaway inflation (remember: no rate hikes until 2024) while avoiding a full blown crash in the tech sector.

Authored by Dave DeCamp via AntiWar.com,

Rep. Adam Smith (D-WA), the chairman of the House Armed Services Committee, said that the Biden administration plans to keep troops in Afghanistan beyond the May 1st deadline set by the US-Taliban peace deal that was signed last year.

“It’s a general feeling that May 1 is too soon, just logistically,” Smith said at a panel on Wednesday, according to Responsible Statecraft. Smith cited conversations he had with administration officials. “You cannot pull out ten thousand plus troops in any sort of reasonable way in just six weeks,” he said.

Smith said the Biden administration wants to “negotiate past May 1” with the Taliban. “Job one is to try to get back in to talk to the Taliban about at least giving us more time,” he said. Smith said the argument for staying is “purely logistical.”

While Smith claims May 1st is “too soon,” the Pentagon said on Tuesday that they are ready to meet the deadline if President Biden orders the withdrawal.

When asked by reporters on Tuesday if it is “logistically” possible to meet the May 1st deadline, Pentagon spokesman John Kirby said Secretary of Defense Lloyd Austin is confident that General Scott Miller, the commander of US and NATO forces in Afghanistan, and General Kenneth McKenzie, the head of US Central Command, could get it done.

“I would point you back to what Secretary Austin said when we were in Kabul, which is that — that he’s confident that Generals McKenzie and General Miller, if a decision is made, to completely withdraw US troops from Afghanistan, that they will get it done in a safe, orderly, and effective way,” Kirby said.

February 8th marked the first full year since the war started in 2001 that no US troops died in combat in Afghanistan. 

However, the Taliban are expected to start targeting US soldiers again if President Biden chooses to stay beyond May 1st.