Category: zerohedge

Pretty soon, Italy will be leaded toward its its 132nd federal government in roughly 160 years as PM Mario Conte, who led Europe’s third biggest economy through its most recent debt crisis, while also setting Italy on the path toward closer cooperation with China.

But despite barely surviving a handful of confidence votes, it appears the writing is now on the wall for Conte, and his time as premier and leader of Italy’s council of ministers is coming to a close.

Italian Prime Minister Giuseppe Conte will resign on Tuesday morning to avoid a damaging defeat in the Senate, as he maneuvers to try and return for another round of leadership, combating Italians who are maneuvering against him.

Conte

Conte will preside over a cabinet meeting at 0900 in Rome and then head to President Sergio Mattarella’s office where he will formally step down, according to a government statement.

The idea is that by preemptively offering his resignation to Mattarella, who oversees the formation of ruling coalitions, Conte will then likely be asked to take another shot at assembling another government, according to officials who asked not to be named discussing confidential deliberations.

The Five Star Movement, the biggest force in the current parliament, and lawmakers of the cenin favor of a trigger vote in the Italian Senate later this week.

However, the parliamentary math does not add up. The latest gambit for Conte’s political maneuvering stands to benefit from the fact that Five Star will plunge in the polls, and the party stands to lose the most if the government collapses and Mattarella decides early elections are unavoidable. Read More: Italian Deficit May Reach 9.2% This Year as Covid Costs Pile Up The twists and turns of the country’s latest Byzantine politicking have left even the most cynical Italians shaking their heads at a time when the pandemic-battered economy faces huge challenges, including how to spend the EU’s recovery package money and speed up the pace of vaccinations.

Conte stepped down after losing his governing majority in Italy’s Senate earlier this month, following a fight with a small coalition ally over how to spend massive funds offered by the European Union to help Italy recover from the impact of the pandemic. His resignation has triggered a search for a new governing majority, but if none can be found, then the EU’s third-biggest economy is likely to hold elections in coming months.

The breakdown of Italy’s left-leaning government shows that Europe’s political challenges of recent years, including the fragmentation of the political landscape and the rise of anti-establishment parties haven’t gone away, despite the pressure that the pandemic is putting on European politicians to work together across party lines.

Analysts who spoke with Bloomberg insisted that Conte’s push for a “unity government” is his best option, officials said. Yet, it has long been said that Renzi and Conte have a long-festering dislike of each other and have been ill at ease in a coalition of mutual convenience.

On the other hand, Conte could seek to forge a new coalition centrists – really, center-right politicians including unaffiliated lawmakers and former PM Silvio Berlusconi, who leads the center-right Forza Italia.

Here’s the full list of Italian leaders dating back to the Italian revolution back in the 1860s.

If Conte pulls off this maneuver on Monday and Tuesday, he will kick off his third government as PM. And just like that, the non-career politician pressed into service by a group of ideologically opposed anti-establishment parties will cement his reputation as the only man who could lead Italy, because he’s the only man who doesn’t want the job.

With dozens of heavily shorted (by hedge funds) stocks exploding higher in recent days, it was only a matter of time before the first casualty of said bull raid emerged, and thanks to the WSJ we now have the first name.

Melvin Capital, which we learned last week had suffered massive losses on its shorts, is set to receive a $2.75 billion capital injection from hedge fund giants Citadel and Point72 and investors (in what appears to be a bailout so Mevlin Capital founder Gabe Plotkin, a former star portfolio manager for Steven Cohen, could pay his margin call).

According to the WSJ, the influx of cash is expected to help stabilize Melvin, which lost a staggering 30% in just the first three weeks of 2021. While Melvin started the year with $12.5 billion, and had been one of the best performing hedge funds on Wall Street in recent years, it saw huge losses (and margin calls) as a result of numerous short bets against companies and have stunned clients and other traders.

In other words, 16-year-old Robinhood traders 1 – “star” hedge fund portfolio manager 0. In yet other words, hedge funds are now bailing out other hedge funds (in which they have invested money), who have been steamrolled by the Robinhood Gen-Z “buy everything” juggernaut.

The $2.75 bailout is effectively a rights offering for Citadel and SAC, as they had more than $1 billion invested in Melvin as of 2019. The bailout loan investments are for non-controlling revenue shares in the hedge fund. Melvin founder Gabe Plotkin was a top portfolio manager at Point72’s predecessor firm, SAC Capital Management, before he left to start Melvin.

As the WSJ reported last week, “Melvin is known for running an expansive and aggressive short book that has sometimes made up the bulk of the fund’s gains, an uncommon dynamic in the industry. The firm has returned an average 30% a year since it started in 2014, despite charging performance fees that range up to 30% on investment gains.”

The gains came to a jarring end once teenage traders realized that with the Fed at their back, they could steamroll any bearish hedge fund in their way.

Not surprisingly, one stock that crushed Melvin is GameStop. We all know what happened there. Some of the recent Reddit posts on Gamespot specifically call out Melvin, which disclosed in its most recent quarterly regulatory filing that it held put options on GameStop. Put options are contracts that give investors the right to sell stock at a specific price by a certain date and limit an investor’s potential losses (the WSJ cites a person familiar with Melvin who said its GameStop puts expired last week).

In recent days, Plotkin had been calling clients with chief operating officer David Kurd to inform them of and explain the losses thus far. One client said Melvin’s message was that the fund still liked its portfolio and that it had rebounded from past losses.

We wonder if he feels the same way just days later, and if he will boldly go back to shorting the same stocks that nearly put it out of business.

Finally, since this is merely the start, we remind readers of the post we published in November, when we laid out the Top 50 shorts by the hedge fund community…

… when we said that “our advice is to go long the most hated names and short the most popular ones – a strategy that has generated alpha without fail for the past 7 years, ever since we first recommended it back in 2013.”

In more news that would have been impossible before January 20, New York Governor Andrew Cuomo (D) is now planning to ease coronavirus restrictions in some parts of the state after the ‘holiday spike’ in COVID-19 cases, and will announce changes to the state’s pandemic cluster zones soon, according to Syracuse.com

Cuomo’s anticipated announcement follows the Democratic strongholds of California and Illinois, which announcing similar measures over the last several days.

“I think we’re at a new place now,” said Cuomo. “And we can start to adjust that valve and start to open up more economic activity and reduce some of the restrictions.”

For example, elective surgeries will be able to resume in Erie County. “But, don’t get cocky with Covid,” Cuomo warned.

Hospitalizations, new cases and the statewide percentage of people testing positive for the coronavirus are all improving, Cuomo said during a press conference in Buffalo. The state did indeed see spike during the holiday season, but the surge appears to be slowing.

Cuomo didn’t give further details on what type of restrictions he might loosen or what cluster zones might be eliminated or changed. The state Health Department is reviewing data on the zones now and Cuomo said expects to have announcements in the coming days. –Syracuse.com

New York launched their ‘cluster zone’ strategy in the fall, which mandates lockdown restrictions based on a color-coded guide; yellow, orange and red – much like other ridiculed government  threat indicators.

Most New York suburbs have been living under yellow and orange zone restrictions, the latter of which banned gyms, hair salons and barbers from operating. Schools which fell in orange zones were initially required to employ remote learning, while restaurants were barred from indoor dining.

Those rules were predictably written in sand, however, as the state began to allow schools to resume in-person instruction with extra testing – followed by gyms, barbers and salons. Just weeks ago, orange zone restaurants across the state were allowed to resume indoor dining on a temporary basis, while yellow zone restaurants are limited to four people per table.

Authored by Pavlos Papadopoulos via eKathimerini.com,

Victor Davis Hanson is a rare breed of American intellectual: The professor of classics and military history at the California State University and senior fellow in classics and military history at Stanford University’s Hoover Institute has supported Donald Trump in a number of books and articles.

In an email interview with Kathimerini, Hanson offered his opinion on recent developments in Washington, shedding light from a conservative angle on a number of issues that define modern America.

Do you think that Trump went too far in inciting violence, ignoring the fact that in the previous two months all legislatures in disputed states and all judges had already decided that the claims of a “stolen election” were baseless, proving that there was no election fraud?

Trump had a right to lodge legitimate inquiries about election irregularities given 100 million voted by mail or through “early voting” before Election Day – 61 percent of the voting electorate. Traditional authentication was impossible under those Covid-19 rules. All agree that in many key states voting laws were wrongly changed by local magistrates and judges.

But whether these and other egregious laxities in voting would have given Trump the strategically located ca. 42,000 votes (out of 165 million cast) necessary to win the key states for an Electoral College victory was uncertain. After the second week in December, when the state electors were chosen, there was almost no chance of changing the election. And at the point it should have been in Trump’s interest to concede, galvanize conservatives to save the Republican senate by winning the two seats in the runoff election in Georgia, and then to play the loyal opposition as the country from 2021-22 might well tire of what will likely be the most radically left-wing agenda enacted since 1964 or 1932. Instead, he persisted, alienated swing voters, appeared a sore loser and gave the impression to his supporters that the election results would be overturned – again an impossibility. The storming of the Capitol by splinter groups from the massive protests [on January 6] – rightly condemned by conservatives in a way the summer Antifa and BLM nightly rioting and looting was not by the Left – essentially made him politically inert.

Trump’s recent but belated concession, and calls for unity and calm may be too little too late to save his legacy – but then in second-chance America maybe not.

Will political conflict persist in the US or have we witnessed the end of the Trump era of division and hatred?

Trump was a symptom not a catalyst of the hatred. Radical changes due to globalization, enormous concentrations of wealth on the coasts, 50 million non-native-born residents, and a hollowed out manufacturing and assembly industry all created a new volatility. His sin was replying back in kind to the attacks of the Left crudely and in a way Bush, McCain and Romney did not.

He also sought not to stop but to roll back the entire left-wing agenda, and by February 2020, in the pre-Covid months, might well have been re-elected given a booming economy, secure borders, a calmer world abroad and his victory over the special prosecutor, the impeachment conviction effort, and the media’s nonstop assaults. Almost all of the so-called administrative state, the rich, and the permanent bureaucracy, academia, the media, and entertainment despised him for both cultural and political reasons.

After March 2020, the pandemic, the recession, the lockdown, the George Floyd death, the months of looting, arson, and protest and radical changes in voting laws all empowered the Left and finally undid Trump – as did his own constant tweets and fiery feuding that estranged moderate and swing suburban voters. The Left will not try to unite the country; its aim is instead to transform the country into something like a European democratic socialist state, if not more leftward still.

This is not the Democratic Party of old, but a progressive movement that seeks an “equality-of-result” society and demands the power to enforce its ideological aims.

Could we say that the core of the political energy that sustains the Trump movement might have something to do with the politics of race and the fact that a core white constituency cannot accept that the blacks can have equal access to the democratic electoral process?

That was the complaint the Left made against Trump. But Trump’s critics were bewildered by his ability to increase black support to 15% and Latino support to 35%, largely by redefining the once-elite establishment Republican Party as a populist workers party, in which class commonalities replaced racial solidarity. You may have an antiquated sense of binaries. The US is not a 90-10 white/black society, but rather a 67% white / 33% Latino, Asian, black country in which increasingly the largest growing group is of those of so-called mixed race. Intermarriage between ethnic and racial groups is now normative and insidiously replacing these rigid racial categories of the past, and with decreased illegal immigration, assimilation and integration accelerate. It is actually the Democratic Party that in anachronistic fashion seeks to cling to identity politics and a salad-bowl separatism rather than the melting pot. There have been tremendous changes in American political parties in the last 20 years. The Democratic Party outspends Republicans 2-1 in political races, and is fueled by the staggering bicoastal wealth of Wall Street and Silicon Valley; it is a party of the very rich and subsidized poor and does not like the culture or values of the middle classes, which now overwhelmingly vote Republican. Trump’s fiercest critics were both rich, never-Trump corporate Republicans and woke bicoastal liberal elites.

Would you say that moves by Democrats for Trump’s second impeachment and the locking of his social media accounts serve to control or further embolden the so-called “Trump movement” that questions the very legitimacy of the elections and the credibility of the government and the judiciary?

The efforts of “Big Tech” to ban Trump and many of his supporters, while Apple, Google etc in concert made it almost impossible for a conservative site like Parler to exist, are reflections of a Salem Witch trial madness sparked by the trifecta of Trump’s loss, the Capitol violence, and the Republican loss of the Senate. Hysteria reigns as books by conservatives are now canceled, thousands kicked off social media, radio hosts fired etc. We are in a sort of left-wing version of the Corleone “Godfather” cinema family “taking care of business” all at once. Yet this new McCarthyism will prove an Orwellian mistake, and constitute one of the greatest political blunders in modern US history. Think of the Ayatollah Khamenei calling for the destruction of Israel on Twitter with impunity or Antifa announcing planning sessions for their next riot, on Facebook with impunity – juxtaposed to social media banning those who merely showed up in Washington at a peaceful rally and did not join the violent splinter group who stormed the halls of Congress.

In contrast, again, the current Vice President Harris earlier had called for the more protests this summer. Many were violent and occasionally lethal, resulting in mass looting, death and arson by Antifa and BLM. She worked to bail out those arrested for street violence. The public is tiring of such asymmetries. US publishers all the time publish books like “In Defense of Looting” – a manifesto supporting the mass theft from stores this summer. So there is no consistency in the current violations of free speech. And the effort to remove Trump before his tenure not only failed, but showed his opponents as small-minded and vindictive and further divided a 50/50 divided country. The attempt to coordinate Big Tech to destroy the conservative opposition’s means of communicating with the public came by design on the eve of the most revolutionary moments in modern history to come: Very soon the Left’s plans to end the 180-year Senate filibuster, the 234-year Electoral College, the 60-year 50-state union (by adding Puerto Rico and Washington DC), and the 150-year-old nine-person Supreme Court – and now will have its critics de-platformed from social media or afraid to express objections in fear of being banned.

The 5-trillion-dollar Silicon Valley monopolies – who gave directly over $200 million to the Biden campaign and $500 million to particular voting precincts and registrars deemed valuable in encouraging turnout vital to their agendas – use the public airways, and are supposedly forbidden by anti-trust laws from conspiring to destroy competition. So I think when the madness ceases, there will be calls to apply anti-trusts laws to these modern octopuses. They in so many ways use their cartels and fortunes in the manner the railroads, and the oil companies did in the 19th century – before they were broken up and regulated. That is a long answer, yes, the hysterical giddiness at the Trump loss and the unfortunate Capitol violence, coupled with overreach by Leftists who now control the government, will in time lead to a reaction itself.

This is America, where free speech and expression cannot be wiped out in a preplanned hit by Silicon Valley to aid a political agenda, whose radicalism will turn off the public.

Two weeks ago, we first pointed out something which we thought was remarkable: a whopping 144% of the company’s float was short…

is this right pic.twitter.com/mVfitVff5b

— zerohedge (@zerohedge) January 14, 2021

… as short had piled on to never before seen levels in recent weeks.

It was some variant of this observation that prompted retail daytraders to ramp up the stock and force a massive short squeeze, and judging by today’s $159.18 record stock price, which briefly pushed the market cap of the video game retailer above $10 billion, they succeeded. Since then, however, the price slumped, and at one point turned red sliding $100 from its intraday highs, as the furious ramp fizzled, perhaps on the expectation that most of the shorts had covered and there was little forced buying left.

But is that true?

According to financial analytics firm S3 Partners, despite the punishing two weeks and historic ramp that forced countless margin calls, GameStop haters are showing no signs of surrender which is perhaps to be expected since every surge higher invites a new round of shorts to bet on the move lower (and who are forced to cover when that does not happen).

According to Bloomberg, which quotes S3, the latest data shows that shorts equal to 139% of its float has been borrowed and sold short. Shockingly, that figure is little changed since last Thursday’s 141% short-interest reading, even though GameStop shares have surged roughly 130% in the past two days alone.

The still-high level of bearishness indicates that even though shorts are being squeezed out of their positions, new traders looking to bet against GameStop are rushing in, according to Ihor Dusaniwsky, S3’s managing director of predictive analytics. That’s occurring even as the cost-to-borrow shares for the purpose of selling them short spikes — the stock borrow fee is currently 23.6%, S3 data show.

“We are seeing a short-squeeze on older shorts who have incurred massive mark-to-market losses on their positions, but are seeing new shorts coming in and using any stock borrows that become available to initiate new short positions in hopes of an eventual pullback from this stratospheric stock price move,” Dusaniwsky wrote in an email.

It means that as countless legacy GME shorts covered, almost all of them were replaced by new shorts, who in addition to the risk of another bull raid, are forced to pay exorbitant borrow fees of 23.6%, which means that unless the stock plunges – and fast – all those millions on shorts will lose money even if the stock goes nowhere.

Meanwhile, the pile up into the most shorted name continues. A Goldman Sachs basket of the most heavily shorted stocks rose as much as 11% in New York Monday. That brought its month-to-date return above 38%, the most since at least 2008, as far back as data for the index goes. Of course, regular readers handsomely profited from the move. As we said last November when presenting the most heavily shorted hedge fund names “as usual, our advice is to go long the most hated names and short the most popular ones – a strategy that has generated alpha without fail for the past 7 years, ever since we first recommended it back in 2013.” 

Meanwhile, our basket of the most shorted Russell 3000 stocks (those whose Short Interest is more than 50% of float) is up more than 100% today alone.

There was some good news for battered shorts: Bloomberg notes that according to Susquehanna International, the pace of bearish put-contract buying outpaced that of call purchases on Monday, with roughly 500,000 puts purchases versus 275,000 calls. That follows a similar dynamic on Friday, after six consecutive weeks of call volume clocking in higher than put buying.

“The GME rally is unlikely to last forever, and investors looking for a sign we are closer to the end could look at the 6 week streak of call volume outpacing put volume finally being broken,” wrote Susquehanna co-head of derivatives strategy Chris Murphy in a note Monday.

Perhaps, but once daytraders realize that after the tremendous move higher in the stock, it still has the same number of shorts as it did a few weeks ago, the next ramp is sure to follow and test just how stubborn the new “generation” of shorts will be.

On Monday, Twitter debuted a new feature that will allow users to add notes to other people’s tweets. It’s a user-generated fact-checking system, and it’s called Birdwatch. As Reason’s Robby Soave details, In the pilot phase, these notes will be available on a separate website rather than Twitter itself—though the tentative plan is to eventually add the feature to the main platform.

Nick Pickles, director of public policy strategy and development at Twitter, told Reason the goal is to “move the policy debate about content moderation beyond a framing of deciding whether things are true or false or not.”

“People on Twitter desire to be part of the conversation,” he said.

Twitter gave Soave a preview and demonstration of Birdwatch prior to its launch and solicited my feedback: Notes will be written by Twitter users who have signed up for Birdwatch. The idea is to provide clarification; in the pilot program, participants could use a note to explain why a tweet is inaccurate, for instance. If another user thinks a note is wrong, they can add a note of their own. Participants will rate the helpfulness of other Birdwatchers’ notes, and eventually, Twitter will be able to prioritize the visibility of notes that were written by users who are highly rated.

“These notes are being intentionally kept separate from Twitter for now, while we build Birdwatch and gain confidence that it produces context people find helpful and appropriate,” said Keith Coleman, vice president of products at Twitter. “Additionally, notes will not have an effect on the way people see Tweets or our system recommendations.”

The strategy Twitter settled on was manually adding warning labels to these tweets. The issue there is that it positions the platform to play the role of fact-checker, and people might reasonably see evidence of political bias in which tweets generate warning labels. Users might also assume—wrongly—that if a tweet does not contain a warning label, it has been deemed accurate by the platform.

The beauty of Birdwatch is that the fact-checking is provided by other users, rather than by Twitter itself. Under this system, there should be no complaints that Twitter has fact-checked X tweet but not Y tweet—that’s up to the users, and anyone who doesn’t like a note is free to object to it.

These notes don’t have to be mere true/false statements, either. Birdwatchers will be encouraged to provide clarity and nuance, and link to articles that support their argument. Again, the accountability comes via this system itself: Users can rate the helpfulness of notes, or add their own.

Here’s a video that explains how it works:

Fact-checking users’ obviously joke statements about whale conspiracies would probably not be the best use of Birdwatch, though as the video makes clear, the system will prompt note-adders to consider whether a tweet is satirical. (And at least in theory, habitually adding pointless notes to joke tweets would perhaps earn a user an “unhelpful” rating.)

As Soave explains, in his conversations with Twitter personnel, “they freely admitted that they couldn’t predict exactly how this will all work out. But they are optimistic that the Twitter community in the aggregate is capable of accurately adjudicating the veracity of tweets. At best, this could outmode the more obnoxious fact-checking done by Twitter itself. At worst—well, it’s an interesting science experiment.”

In the pilot phase, signups are limited to Twitter users who have not recently violated the terms of service. Those eligible can apply here.

By Market Crumbs

Last week Aurora and trucking giant PACCAR signed a global strategic partnership to bring a self-driving truck powered by the Aurora Driver to market in the coming years.

The partnership is notable because PACCAR, which is one of the largest manufacturers of medium- and heavy-duty trucks in the world, was drawn to startup Aurora. Aurora’s co-founder and CEO Chris Urmson headed Google’s self-driving division for nearly eight years and is one of the most widely regarded names in the self-driving vehicle space.

While it was inevitable the progress made towards electric and autonomous vehicles would make it from passenger automobiles to commercial trucks, Tesla still has yet to deliver the Semi truck it unveiled back in 2017. Saying it would be delivered in about two years to a customer list that already includes the likes of Anheuser-Busch, FedEx, UPS and Walmart, Tesla announced production delays during its earnings calls in 2019 and 2020, at one point saying low-volume production would begin by the end of 2020.

In June, Tesla co-founder and CEO Elon Musk emailed employees “It’s time to go all out and bring the Tesla Semi to volume production,” but by late 2020, Tesla’s quarterly report only mentioned the Semi Truck twice, saying it was “in development.”

As others rush into the space, Tesla appears to be preparing to get the Semi into production. To close out 2020, Tesla posted a manufacturing process engineer job at its Gigafactory in Nevada for the Tesla Semi, according to Elektrek.

With Elektrek noting that Tesla may be preparing a pilot production line in Nevada before moving production to Texas, the posting seeks a candidate that “will help define how Semis are manufactured in Tesla.”

Two other job postings related to the Semi also appeared on Tesla’s jobs page—a Process Engineering Technician and a Quality Engineering Manager to provide leadership for engineers for the Semi production line.

Other recent rumors regarding the Semi include that Tesla is building four new test vehicles in Nevada to be used for road, durability, and cold-weather testing.

With Tesla slated to report earnings on Wednesday, Musk may finally offer more details about the state of the long-awaited Semi.

On a day when all the attention has been on the berserk moves in stocks, we were at least (mercifully) spared more fireworks out of the bond market today, when the Treasury sold a record $60 billion in 2Y notes …

… at a record low yield of 0.125%.

The stop was 1.2bps below December 0.137% high yield, and was 0.2bps through the When Issued 0.127%.

The Bid to Cover was solid, rising from 2.453 last month to 2.668, and also well above the 6-month average of 2.52.

The internals were especially impressive, with Indirects taking down 56.5%, up from 49.2% last month, and solidly above the 50.6% recent average. And with Directs taking down 15.65% – in line with recent months – Dealers were left holding on to 27.9% of the auction, the lowest since April 2020.

Overall, a stellar auction to start a new week of coupon issuance, which sees 5Y and 7Y sales ahead of the Fed’s Wednesday announcement on Wednesday.

The Justice Department’s inspector general, Michael Horowitz – a Democrat donor whose wife helped run campaigns for Democrats before joining CNN‘s Washington bureau – is investigating whether DOJ officials “engaged in an improper attempt” to overturn President Biden’s victory in the 2020 election, according to the Wall Street Journal.

“The investigation will encompass all relevant allegations that may arise that are within the scope of the OIG’s jurisdiction,” said Horowitz, who was accused of pulling punches to give special treatment to establishment darlings during his investigation of the FBI’s conduct surrounding the 2016 US election.

Horowitz said that his office would not comment any further on the investigation until it’s completed.

His announcement comes days after the New York Times reported that a top DOJ official and President Trump had conspired in the final days of his presidency to removing the acting attorney general and install a loyalist who could somehow change the results of the election in key battleground states.

Trump was allegedly considering replacing acting Attorney General Jeffrey Rosen with Jeffrey Clark, acting head of the DOJ’s civil division.

When it came to his investigation of the FBI, Horowitz notably never interviewed Carter Page – who the agency targeted by fabricating evidence to defraud the Foreign Intelligence Surveillance Act Court (FISC).

Although Horowitz says he conducted more than 100 interviews of witnesses, including Christopher Steele, who wrote the salacious and unverified anti-Trump dossier the FBI relied on to obtain the wiretap warrant, he failed to interview Page, the  target — and alleged victim — of the controversial warrant. Page confirmed to RealClearInvestigations that no investigator from Horowitz’s office asked him questions. 

That is not the first time Horowitz has failed to interview key subjects. With the help of seasoned federal investigators, RealClearInvestigations deconstructed previous probes by his office, combing through the footnotes and appendices of his reports. RCI found numerous instances in which Horowitz stopped short of pursuing evidence and was content to take high-level officials at their word, even in the face of conflicting evidence. –RealClear Investigations

Meanwhile, Horowitz gave former FBI Deputy Director Andrew McCabe special treatment – accepting his explanation for why he failed to recuse himself from the Clinton email case until November 2016, while also accepting McCabe’s claim that he had nothing to do with his wife’s Senate campaign, even though he: 

• personally met with her sponsor and fundraiser McAuliffe;
• drove her to campaign stops;
• attended one of her candidate debates;
• discussed the campaign with her on FBI equipment;
• appeared in a family photo used in a campaign mailer; and,
• posed with her wearing her official campaign T-shirt for a photo distributed on social media to promote her candidacy.

As Paul Sperry of RealClear Investigations noted in late 2019, “Were such actions violations of the Hatch Act, a federal law that prohibits federal employees from engaging “in political activity in an official capacity at any time”? If so, the topic didn’t interest Horowitz, who accepted on face value the FBI’s argument in a letter to the Senate that he played no formal role in his wife’s campaign and that his activities were permissible under the law.”

Sperry wrote this at the time:

While acknowledging that Horowitz is widely respected, these critics say his work has long been hampered by biases, conflicts and a tendency to play favorites, as in past probes of former FBI Director James Comey, whom Horowitz worked under in New York.

Their main complaint is that he pulls his punches.

Horowitz’s investigation of the FBI’s handling of the Hillary Clinton email case, for example, concluded that many of Comey’s explanations for his dubious actions were “unconvincing,” while stopping short of saying that Comey lied to investigators. Comey asserted implausibly that he delayed acting on a mountain of new Clinton email evidence discovered on a laptop in New York because he was never briefed about it until nearly a month after his top aides found out about it in September 2016.

In probing whether Comey illegally leaked classified information to the New York Times, Horowitz in the end accepted his argument that the memo of a conversation with President Trump was sensitive but “not classified” – even though the memo contained information about the FBI’s ongoing counterintelligence investigation of the president’s national security adviser. –RealClear Investigations

“I see a pattern of him pulling up short and trying to be a bit of a statesman instead of making the hard calls,” 24-year FBI veteran Chris Swecker – who served as assistant director of its criminal investigative division, told Sperry.

Also notable, during his 17-month probe into the FBI’s investigation of Hillary Clinton’s emails, which he touted as “thorough” and “comprehensive,” Horowitz repeatedly declined to use his subpoena power – allowing key players to provide their own evidence.

He also allowed two lead FBI officials, Peter Strzok and Lisa Page, to sort through which of their electronic communications were “personal” vs. “work related” according to the report. 

Horowitz subsequently learned through interviews that Strzok drafted classified investigative documents and communicated with Page about them on their private email in violation of department rules, which require officials to communicate through government channels — the same basis for the Clinton email probe. Yet neither was compelled to turn over the emails.

“The inspector general and I arranged an agreement where I would go through my personal accounts and identify any material that was relevant to FBI business and turn it over,” Strzok said in testifying before Congress. “It was reviewed. There was none. My understanding is the inspector general was satisfied with that action.”

Horowitz never referred Strzok for criminal sanctions for maintaining court-sealed documents on an unsecure computer. Strzok was nonetheless fired last year by the bureau for misconduct. He is now suing the department for unlawful termination.

The IG also failed to demand access to Comey’s private Gmail account, even though he, too, used it for official FBI business. –RealClear Investigations

And while Horowitz is widely credited with having uncovered anti-Trump / pro-Clinton text messages between Strzok and Page while they were in the middle of investigating Trump and Clinton, he only ‘found’ them after pressure from congressional Republicans – and has apparently given up trying to find still-missing text messages blamed on a tech error.

In short, we expect Horowitz to find something…

Between the insane rollercoaster action in the most shorted names, which exploded out of the gate only to get hammered the moment the broader market suddenly plunged 60 points in just a few minutes (one wonders which dealer(s) was so short gamma in the most shorted names, they had no choice but to hammer the entire market to break the upward momentum wave and avoid getting crushed), one word describes today’s market action so far: surreal.

And while it would probably be unwise to try to make any sense of this idiocy, there likely is some fact/fundamental based reason for today’s market action besides merely a reaction to the berserk technicals and market action.

So courtesy of Bear Traps report Larry McDonald, here is one attempt at explaining why stocks are suddenly looking quite a bit gappy, and it has to do with the Fed finally pulling some of the punch bowl away::

Our 21 Lehman Systemic Indicators are screaming higher. The inmates are running the asylum and the probability of the Federal Reserve breaking out their creative “macro prudential” tool box is the highest in years. U.S. central bankers are no longer Trump constrained, the banking system is strong but the equity market has far more in common with Steve Wynn (Vegas) than Warren Buffett (Omaha).

We think the Fed sends a shot over the bow very soon. Our social justice, inequality embarrassed Fed is not happy. The will not taper but they can make serious threats to risk takers. We have an explosion of SPAC / IPO issuance, $850B of margin debt or 75% above 2015 levels, the most shorted equities up 75% vs. 16% for the S&P 500 since October (bulls running over bears), record high call vs. put volume with the little guy leading the charge SELL Mortimer Sell. The risk reward is atrocious from a long perspective in U.S. equities.

Impeachment Threat to Reflation: Moves to the Senate floor next week. Impact; 1 . Pushes out the Fiscal timeline.  2 . Similar to the GOP immediately trying to take down Obamacare, the signature achievement of the previous administration , on day one of the Trump administration. The move was Unwise and Not helpful to the fiscal policy path.

Remember, the tax cuts were sold to us as a certainty in Q1 2017, they didn’t arrive until late Q4 that year. In our view, this speaks to a potential rally in bonds / USD for the next few weeks.

Best case scenario, we have a $1.9T fiscal plan coming in late February early March with the current the bid / offer at $800B to $1.9T. However, any additional variant / mutations Covid risk increase will game the spread in the direction of the offer side if the  mpeachment doesn’t blow up the deal altogether.