Category: zerohedge

Global stocks and US equity futures are sharply lower to start the otherwise very quiet holiday week, dragged lower by Manchin’s shock decision to kill Biden’s economic agenda (which Goldman said would cut US Q1 GDP from 3% to 2%), accelerating government measures to counter the fast-spreading omicron variant and fears over the growth outlook amid a tightening Fed. US equity futures tumbled almost 100 points from their Friday close (and more than 200 points from Thursday’s all time high before paring some losses buoyed by optimism from news that Moderna’s booster vaccine increases antibodies 37-fold against omicron. Treasury yields also pared a sharp drop as low as 1.35% and the dollar held a jump from Friday, while crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. As of 730am S&P 500 futures were down down 1.1%, Nasdaq 100 -1.3%, and Dow -1.0%.

In the weekend’s biggest news, senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s $1.75 trillion tax-and-spending package, prompting a sharply critical statement from the White House which called Manchin’s decision a “sudden and inexplicable reversal.”  Biden and top Democrats must now regroup to see if a scaled-back version remains possible with little more than 10 months before midterm elections that will decide control of Congress. As noted late last night, Goldman Sachs Group Inc. cut its forecast for U.S. economic growth for next year after Manchin’s move (more below). On Monday, Chuck Schumer said the Senate will still vote “very early” in 2022 on Biden’s economic agenda, although it was unclear just what the new plan will look like now that Build Back Better is dead.

Not helping matters were the latest development in the Omicron front where the biggest European countries are introducing more curbs, with U.K. officials keeping open the possiblity of stronger measures before Christmas and the Netherlands returning to lockdown, even as Biden’s chief medical advisor said further U.S. lockdowns are unlikely. In some “good” news, said a third dose of its Covid-19 vaccine saw a 37-fold increase in neutralizing antibodies against omicron. Ironically. While investors remain on edge over the outlook for economic activity, there remains little evidence that the new variant causes illness as severe as the delta variant, especially among those already vaccinated.

“The main reason behind the market sell off today is the rejection of Biden’s $2 trillion tax-and-spending package, which will lead to a reduction in U.S. economic growth forecasts,” said Michel Keusch, a portfolio manager at Bellevue Asset Management. “With trading volumes getting thinner and thinner into the year end, this is the catalyst creating some short-term nervousness.” 

Then there are tightening concerns: the Federal Reserve’s decision to increase the pace of tapering last week is also adding to investor nerves about the outlook for 2022. And now, without either fiscal or monetary support, economists see a policy-induced slowdown in the economy where Goldman on Sunday cut its real GDP forecast for 2022: 2% in Q1 (vs. 3% prior), 3% in Q2 (vs. 3.5% prior), and 2.75% in Q3 (vs. 3% prior).

One place which is convinced the Fed will not meet its targets it the bond market where traders of eurodollar futures price rates much lower than FOMC targets for the end of 2023 and 2024.

Finally, as Bloomberg notes, there is also the issue of divergent global monetary policy to contend with, as the People’s Bank of China stepped up easing overnight with the first rate cut in 20 months.

Looking at the premarket, travel stocks fell the most with United Airlines down 3.4% leading declines among major U.S. carriers, while a 4% slide in Royal Caribbean Cruises led the fall among cruise operators. Energy and industrial bellwethers also declined, with Chevron, 3M and Caterpillar falling over 2% each. Major U.S. tech and internet stocks slumped hitting shares in most highly valued names, as well as in cyclicals. Apple fell as much as 2.1% premarket while fellow large- cap tech names also drop, with Facebook-owner Meta Platforms down 1.9%, Alphabet -1.2%, Amazon.com -1.7%, Twitter -2.1%, Microsoft -1.6%. Here are some of the other big U.S. movers today:

• Major U.S. tech and internet stocks drop in premarket trading as risk appetite sours globally amid worries over further pandemic- related restrictions, hitting shares in most highly valued names, as well as in cyclicals.
• Shares in U.S. renewables firms drop in premarket after U.S. Senator Joe Manchin’s surprise rejection of President Joe Biden’s $2 trillion package.
• Moderna (MRNA US) rises 6% in U.S. premarket after the company said that a booster dose of its Covid-19 vaccine increased antibody levels against the omicron variant.
• Society Pass (SOPA US) surges 22% in premarket after the loyalty platform operator said in a statement it has been added to the Russell 2000 Index.
• Boston Beer (SAM US) upgraded to hold at Jefferies following pullback of more than 60% in the shares related to “massive” reset in expectations for hard seltzers, removing the only negative rating on the stock. Shares up 0.3% on low volume in premarket.

“After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode,” Russ Mould, investment director at AJ Bell, wrote in a client note.

Europe’s Stoxx 600 also stumbled, now down about 1.4% after falling as much as 2.6%, weighed down the most by travel and insurance. All sectors are in red. FTSE 100 recovers slightly as energy gets a leg up, but is still off by 1.2%. Dax -2%.

Earlier in the session, Asian stocks were set for the biggest drop since March, as the spread of the omicron variant and a surprising setback to U.S. President Joe Biden’s economic agenda forced traders to take bets off the table. The MSCI Asia Pacific Index sank as much as 2%, headed for its lowest close since November 2020, with tech and consumer shares the biggest drags.

Relatively thin trading ahead of the year-end exacerbated declines in the region, as investors grapple with fresh outbreaks of Covid-19 and monetary policy tightening globally. The MSCI Asia Pacific Index is down about 15% from a peak in February, compared with an 18% gain in the S&P 500. “Omicron’s spread over the festive holidays and Manchin” are driving the risk-off mood, said Wai Ho Leong, strategist at Modular Asset Management (Singapore). “But most of all, it is the lack of liquidity in all markets.” India was the worst performer around the region, with its benchmark index poised to enter a correction amid the spread of the omicron variant. Chinese stocks also dropped despite a cut to bank borrowing costs for the first time in 20 months

In FX, the dollar reversed gains and was little changed. The pound fell in line with other risk- sensitive currencies as global market sentiment soured; gilts advanced. Hedging the major currencies over the next month comes at a similar cost, yet the pound turns expensive further out as it holds a higher beta on monetary policy divergence. The Australian and New Zealand dollars followed a broader move lower in commodity FX amid a slide in oil and stocks. The yen advanced with Japanese government bonds. The lira tumbled to another record low after Turkish President Recep Tayyip Erdogan pledged to continue cutting interest rates.

In rates, Treasury yields fell by ~3bp in 5-year sector, steepening 5s30s spread by 3bp on the day as long-end yields were little changed; 10-year yields 1bp lower around 1.39%, outperforming bunds and gilts. Treasuries drifted higher Monday as global stocks extended losses. Gains were led by front- and belly of the curve, while eurodollars advanced and the amount of Federal Reserve rate-hike premium for 2024 and 2024 eased. Long-end lagged the move ahead of a 20-year bond auction Tuesday.  Bund and gilt curves are mixed. Italy lags in the peripheral complex, widening ~2bps to Germany.

In commodities, Brent crude extends dropped to trade down as much as 5.3%, trading as low as $69.60/bbl before paring some losses, with Brent down 3% to $71 per barrel, and WTI -4% to around the $68-handle. Spot gold drifts below the $1,800-handle. Base metals complex under pressure; LME aluminum and nickel decline the most. 

There is nothing on the economic calendar today except that Nov. Leading Index, which is estimated to print at  0.9%.

Market Snapshot

• S&P 500 futures down 1.6% to 4,535.75
• MXAP down 1.8% to 187.95
• MXAPJ down 1.8% to 607.98
• Nikkei down 2.1% to 27,937.81
• Topix down 2.2% to 1,941.33
• Hang Seng Index down 1.9% to 22,744.86
• Shanghai Composite down 1.1% to 3,593.60
• Sensex down 2.0% to 55,848.23
• Australia S&P/ASX 200 down 0.2% to 7,292.16
• Kospi down 1.8% to 2,963.00
• STOXX Europe 600 down 2.2% to 463.29
• German 10Y yield little changed at -0.40%
• Euro up 0.2% to $1.1259
• Brent Futures down 3.9% to $70.67/bbl
• Gold spot up 0.1% to $1,800.19
• U.S. Dollar Index little changed at 96.61

Top Overnight News from Bloomberg

• President Joe Biden faces the unexpected task of quickly rewriting his policy agenda in a crucial election year after a key Senate Democrat abruptly rejected his signature $1.75 trillion economic plan
• Germany’s new coalition government picked Joachim Nagel, a former Bundesbank senior official, as the central bank’s next chief, according to a person with knowledge of the matter
• The ECB will not raise interest rates in 2022 if inflation behaves as expected, governing council member Pablo Hernandez de Cos told Expansion newspaper in an interview
• Europe’s biggest countries are introducing more curbs to fight a surge in Covid-19 infections, from another lockdown in the Netherlands to stricter travel restrictions at the height of the holiday period
• Chinese property stocks tumbled close to a fresh five-year low after a series of asset sales underscored concern that equity investors will bear the brunt of losses as developers offload projects to repay debt
• Chinese banks lowered borrowing costs for the first time in 20 months, foreshadowing more monetary support to an economy showing strain from a property slump, weak private consumption and sporadic virus outbreaks

A more detail look at global markets courtesy of Newsquawk

Asia-Pac equities traded mostly lower following the volatile session on Wall Street on Friday, which saw the Dow Jones, S&P 500 and the Nasdaq all posting varying degrees of losses, whilst the Russell 2000 outperformed with decent gains. Overnight, US equity futures opened with a mild upside bias, albeit the optimism faded in early trade as risk aversion materialised, with the ES Mar 2022 contract falling below its 50 DMA (4,596) whilst the NQ and RTY saw losses of over 1% apiece. Sentiment was hit by the slew of concerning COVID headlines over the weekend, whilst Friday saw further hawkish rhetoric from Fed officials – with Fed’s Waller suggesting the whole point of accelerating the bond taper was to make the March Fed meeting a live meeting for the first hike, and under his base case March is very likely for lift-off, although it could be pushed back to May. The ASX 200 (-0.3%) was pressured by some large-cap miners and banks, whilst the Nikkei 225 (-2.1%) and KOSPI (-1.8%) conformed to the downbeat tone, with upside in the former also capped by recent JPY strength. The Hang Seng (-1.9%) and Shanghai Comp (-1.1%) initially saw shallower losses after the PBoC opted to cut the 1yr Loan Prime Rate by 5bps, whilst the 5yr rate was maintained, although the property sector faced more woes after S&P downgraded Evergrande to Selective Default, whilst Kaisa shares slumped after trade resumed following a two-week hiatus, with the Co. in discussions regarding a debt restructuring plan. The Hang Seng dipped below 23,000 for the first time since May 2020. Elsewhere, US 10yr futures continued edging higher as APAC risk aversion supported the haven, whilst Goldman Sachs also cut its US real GDP Growth forecasts on the Build Back Better blockade.

Top Asian News

• Coal India Defends Quality Level of Shipments After Complaints
• Hong Kong Eyes New Security Law After Electing Loyalist Council
• Asian Stocks Drop to Lowest in 13 Months on Virus Woes, Manchin
• Best Way for China to Lower Market Rates is to Sell Yuan: Nomura

European bourses commenced the week on the backfoot, continuing the broad pressure seen in APAC trade, as focus is firmly fixed on the Omicron variant. The downside in APAC hours was also a feature of the choppy trade in the US on Friday, and amid non-COVID catalysts such as US Senator Manchin presenting a stumbling block to BBB which effectively ends the chances it can be passed this year, while hawkish central banks is also a theme traders are cognizant of for next year. Euro Stoxx 50 -1.4%, benchmarks are lower across the board as further COVID-19 restrictions are imposed/touted; thus far, the most stringent has seen the Netherlands return to lockdowns, while the likes of the UK and Germany are mulling measures. Vaccine producer Moderna (+5.5% in premarket trade) released preliminary booster data vs Omicron, which saw a modest paring of the risk-off conditions; the vaccine boosts neutralising antibody levels by 37-fold vs pre-boost levels. All sectors remain in the red however, with underperformance in those most exposed to COVID restrictions, such as Travel & Leisure, Oil & Gas and Autos. Individual movers were predominantly dictated by the broader price action; however, THG (+12.5%) is the morning’s outperformer following reports that a notable short on the name has removed its position. Meanwhile, US futures are softer across the board (ES -1.3%) ahead of a very sparse docket where focus will, as it is in European hours, centre around the fiscal narrative and COVID. On the latter, President Biden is due to speak on the situation on Tuesday, calling for individuals to get vaccinated.

Top European News

• Johnson Appoints Truss to Key Brexit Role After Torrid Week
• Germany Picks Bundesbank Veteran Nagel as Central Bank Chief
• Czech Billionaire Family Faces Final Showdown Over Bank Merger
• Flashpoints That May Heal or Deepen the Lira’s Pain in 2022

In FX, the Dollar is mixed across the board, but retaining an upward bias overall amidst greater gains vs high beta, activity and cyclical currencies compared to losses against safer havens as broad risk sentiment sours on a number of factors, but mainly COVID-19. Hence, the index is holding quite firmly above 96.500 within a 96.504-680 range even though US Treasury yields are soft and the curve is marginally flatter, with traction or the Greenback coming via hawkish comments in wake of last week’s FOMC from Fed’s Waller who would not object to lifting rates as soon as tapering is done next March. Ahead, a very sparse Monday agenda only comprises November’s leading index.

• JPY/EUR/CHF/XAU – As noted above, risk-off positioning due to the ongoing spread of Omicron has prompted demand for the Yen, the Euro, with added momentum from bullish Eur/Gbp cross flows, plus the Franc and Gold to lesser extents. Usd/Jpy is tethered around 113.50 in response, though unhindered by imposing option expiries in contrast to last Friday and the headline pair capped by technical resistance in the form of 21 and 50 DMAs that come in at 113.77 and 113.83 respectively today. Meanwhile, Eur/Usd is back above 1.1250 amidst mixed ECB vibes as de Cos underscores guidance for no hikes in 2022, but sources say that GC hawks wanted explicit recognition of upside inflation risks and were shouted down by chief economist Lane. However, Eur/Gbp has bounced even more firmly from sub-0.8500 lows on what looks like a combination of early year end demand or RHS orders and Pound underperformance on pandemic, political and Brexit-related factors. Elsewhere, Usd/Chf is hovering mostly sub-0.9250 and Eur/Chf is pivoting 1.0400 with latest weekly Swiss sight deposits showing no sign of intervention and Gold is rotating around Usd 1800/oz after a false upside breach of Usd 1810, but not quite enough follow-through buying to scale another upside target circa Usd 1815.
• GBP/AUD/NZD/CAD – The major fall guys, as Sterling loses 1.3200+ status yet again on all the aforementioned negatives, and also feels some contagion from weakness in Brent, while the Aussie is straddling 0.7100, the Kiwi is trying to keep its head above 0.6700 and the Loonie contain declines through 1.2900 alongside the latest retracement in WTI.

In commodities, WTI and Brent are also risk-off, moving in tandem with the equity action, on the COVID-19 narrative and implementation/prospect of further restrictions hitting the demand-side of the equation. WTI relinquishes USD 67.00/bbl and Brent gave up the USD 70.00/bbl level. In fitting the broader market move, some easing of the initial downside was seen post-Moderna’s update. Elsewhere, in crude specifics, Libya’s NOC confirmed reports that the Petroleum Facilities Guard was blocking several fields in the region; some suggest production of oil has dropped to 950k BPD due to losses of production at El Sharara field (estimated at 280k BPD). Elsewhere, OPEC+ compliance has reportedly increased marginally in November, in-fitting with the assessments in earlier sourced reports. In metals, spot gold and silver are contained on the session with little evidence of risk-off making its self-known at this point in time, with the yellow metal pivoting USD 1800/oz. Elsewhere, copper is impacted on the risk tone but offset somewhat by Chile’s President-elect Boric saying he will oppose the Dominga copper-iron mine project.

US Event Calendar

• 10am: Nov. Leading Index, est. 0.9%, prior 0.9%

DB’s Jim Reid concludes the overnight wrap

As we arrive at the final week before Christmas, there’s plenty of newsflow from the weekend for markets to digest this morning. In particular, there was the announcement from the US that Senator Joe Manchin of West Virginia wouldn’t be able to support the Build Back Better Bill, which has been the subject of intense negotiations over recent weeks and marks a significant blow for President Biden’s economic agenda. Meanwhile on the Covid front, there was a further ratcheting up of concerns about the Omicron variant, with the Netherlands becoming the latest European country to go back into lockdown as of yesterday, as cases continue to spread elsewhere. But otherwise, the events calendar is looking fairly quiet for now in this holiday-shortened week, with just a few lower-tier data releases and the occasional central bank speaker.

We’ll start with Omicron, since that remains one of the biggest issues for markets right now and has significantly clouded the outlook moving into year-end. In a nutshell, the news over the weekend from Europe has only pointed in the direction of further restrictions across multiple countries, with the Netherlands being the most severe as a full lockdown was announced by the Prime Minister on Saturday that leaves just supermarkets and essential shops open, with even schools shut. When it comes to socialising, people will not be allowed to receive more than 2 visitors aged 13 and over per day, although over 24-26 December, New Year’s Eve and New Year’s Day, this will be raised to 4 people.

Elsewhere in Europe there was a similar pattern towards tougher measures, with the Irish PM announcing on Friday evening that there would be an 8pm closing time for bars, restaurants and theatres, among others, which would last from today until January 30. Over in Spain, Prime Minister Sánchez said in a televised address yesterday that he’d be meeting with regional leaders virtually on Wednesday to look at measures for the weeks ahead. In Italy, it’s been widely reported that the government is looking at further measures to contain the spread as well, and they’re set to meet on Thursday to discuss these, whilst here in the UK, Health Secretary Javid was not ruling out further restrictions this side of Christmas. Separately in the US, President Biden is set to deliver a speech tomorrow about Covid and the steps that the administration will be taking, with Press Secretary Jen Psaki tweeting that Biden would also be “issuing a stark warning of what the winter will look like for Americans that choose to remain unvaccinated.”

For those after a bit more optimism ahead of Christmas, then a couple of DB research notes out on Friday about the new variant will definitely be of interest. The first by FX Strategist Shreyas Gopal (link here) looks at London, which is the epicentre of Omicron infections in the UK, and tracks cases there against those in the South African province of Gauteng a couple of weeks back. The good news is that if the relationship is similar, then that does suggest a peak in cases soon. The other note comes from our head of rates research Francis Yared (link here) who shows that although deaths are starting to increase in South Africa, they’re currently on a much lower trajectory relative to cases compared to previous waves. An important question for markets is whether these patterns from South Africa can be extrapolated over to the advanced economies, which have much higher vaccination rates on the one hand, but also much older populations on the other, so there are factors that could push in either direction. Keep an eye out on these leading indicators from South Africa, as well as London, since they’ll have implications for what could occur in the coming weeks elsewhere.

Away from Covid, the other main piece of news over the weekend came from the US, where the moderate Democratic senator Joe Manchin said that he couldn’t support the Build Back Better package that forms a key part of President Biden’s economic agenda, with much of his proposals on social programs and climate change. The news broke in an interview from Manchin on Fox News Sunday, when Manchin said “I can’t get there” when it comes to supporting the package, and follows direct negotiations that he’d been having with the president. Manchin’s support is crucial for the bill’s passage, since the Senate is split 50-50 between the Democrats and Republicans, with the Democrats having control only by virtue of Vice President Harris’ casting vote. So with zero Republican support for the package, that required every single Democratic senator on board with the proposals, giving Manchin enormous influence.

A statement from White House Press Secretary Jen Psaki in response to Manchin did not sound impressed, saying that his comments “are at odds with his discussions this week with the President, with White House staff, and with his own public utterances.” It went on to say that “we will continue to press him to see if he will reverse his position yet again, to honor his prior commitments and be true to his word.” Nevertheless, Manchin’s own written statement wasn’t using the language of compromise, saying that his “Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face.” So the implication from Manchin is that Build Back Better won’t be happening this side of the mid-terms in its current form, and would require a fundamental rethink and meaningful slimming down were it to have any chance of passing.

Those twin factors of further Omicron restrictions and Manchin’s announcement have weighed heavily on Asian equities overnight, with the Nikkei (-2.17%), KOSPI (-1.66%), Hang Seng (-1.44%), CSI (-0.98%) and Shanghai Composite (-0.75%) all moving lower. In India, the benchmark NIFTY is also down 10% from its peak in October, putting the index in correction territory. However, we did get a policy easing in China, with banks lowering the 1yr prime rate by -5bps to 3.8%. That move came alongside separate remarks from Bank of Japan Governor Kuroda, who said it was too early to think about policy normalisation, and that discussion should take place once inflation is closer to the 2% target. European and US equities are set to follow Asia lower later on, with futures on both the S&P 500 (-0.97%) and the DAX (-1.63%) both pointing lower this morning. And oil prices been struggling overnight as well in light of the recent virus news, with Brent Crude down -3.02% to $71.30/bbl at time of writing.

Recapping last week now, and the main events were the array of central bank meetings ahead of the holidays. In the US, the Fed doubled the pace of their tapering as expected, which would bring net asset purchases to an end in mid-March, and the median dot now expects three rate hikes in 2022. By the close on Friday, Fed funds futures were pricing in a 55% chance of an initial hike by the March meeting, and an 87% chance of one by the May meeting. The ECB was then up next, and started a wind down of net PEPP purchases that are also set to finish in March next year. The ECB is cushioning the landing though, having moved to increase APP purchases until October next year after PEPP ends, following which they’ll maintain a pace of €20bn a month until shortly before liftoff. The ECB maintained some policy optionality through flexibility on PEPP reinvestments, which our Europe economists read as a commitment to smoothing the transmission of monetary policy.

In the UK, the BoE hiked Bank Rate by +15bps to 0.25%. The MPC noted the decision was finely balanced due to Covid uncertainty, but the vote was still 8-1 in favour of a hike. Over in Japan, the BoJ rounded out the major DM central bank meetings, keeping rates unchanged and announcing a slow reduction in corporate debt holdings. At the same time, they extended a special covid loans program targeted at small and medium-sized firms to September 2022.

When all was said and done, many sovereign bond yields actually ended the week lower, even with the hawkish pivot from the various central banks. 10yr yields on Treasuries (-8.2bps) and bunds (-3.1bps) both declined, although those on gilts did post a small +1.7bps gain over the week. Meanwhile growing Covid pessimism served to dampen risk appetite and send global equity indices lower last week. By Friday the S&P 500 (-1.94%) had fallen for the 3rd week out of the last 4, hampered by an underperformance from tech stocks that saw the NASDAQ (-2.95%) and the FANG+ index (-4.53%) both lose significant ground. Over in Europe the moves were smaller, albeit still lower, and the STOXX 600 ended the week -0.35%.

 

Members of the global business elite will no doubt be disappointed to learn that the World Economic Forum in Davos has been cancelled for the second year running due to the concerns tied to the global COVID pandemic (and not – it’s worth pointing out – because of all the emissions created by the private air force of PJs that travel to the remote Alpine skiing village for the annual event).

The event, which had been scheduled to take place between Jan. 17 and 21 of 2022, will instead be “postponed”, according to a statement released Monday morning by the WEF.

Due to “continued uncertainty” over the omicron variant, the WEF has been forced to rethink its plans and it’s now planned to host the meeting in early summer.

“Current pandemic conditions make it extremely difficult to deliver a global in-person meeting,” it said. “Despite the meeting’s stringent health protocols, the transmissibility of omicron and its impact on travel and mobility have made deferral necessary.”

Instead, the global thought leaders, political leaders, and business leaders will gather for a scaled back all-online version of the speeches, talks and forums that make up the bulk of the event (which is better known for its influential parties and backroom dealings).

Last year’s brouhaha was cancelled because of the pandemic, then tentatively rescheduled to take place in Singapore over the summer, before ultimately being cancelled because of the global pandemic.

The most recent annual meeting netted the Swiss economy around CHF80 million ($87 million) in 2020, with businesses and hotels taking in some CHF63 million in revenues.

Read the full statement below:

The World Economic Forum will defer its Annual Meeting in Davos, Switzerland, in the light of continued uncertainty over the Omicron outbreak.

The Annual Meeting was scheduled to take place in Davos-Klosters, Switzerland between 17-21 January, 2022. It is now planned for early summer.
Participants will instead join a headline series of State of the World sessions bringing together global leaders online to focus on shaping solutions to the world’s most pressing challenges.

Current pandemic conditions make it extremely difficult to deliver a global in-person meeting. Preparations have been guided by expert advice and have benefited from the close collaboration of the Swiss government at all levels.

Despite the meeting’s stringent health protocols, the transmissibility of Omicron and its impact on travel and mobility have made deferral necessary.

The health and safety of everyone involved in physical meetings – participants, collaborators and the host community – have always been the Forum’s priority.

“The deferral of the Annual Meeting will not prevent progress through continued digital convening of leaders from business, government and civil society,” said Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “Public-private cooperation has moved forward throughout the pandemic and that will continue apace. We look forward to bringing global leaders together in person soon.”

* * *

Source: WEF

If there’s one skill Pfizer, Moderna and their vaccine-producing big pharma rivals have mastered over the last two years since SARS-CoV-2 first stormed out of Wuhan and infected the world, it’s moving the goalposts – and not just with their rhetoric, with their research as well.

First it was two shots. Then it was two shots and a booster dose. Now, as COVID cases and hospitalizations surge in what’s shaping up to be another seasonal wave, Moderna has published new research purporting to show that a third full dose of its vaccine specifically increases antibody levels that are useful against the omicron variant.

A 50 microgram booster dose, which is half the dose used for primary immunization, created a 37x increase in neutralizing antibodies, the company said in a statement Monday. Moderna also tested a 100 microgram dose, which increased antibody levels 83x compared with the primary two-dose course.

Moderna CEO Stephane Bancel, who, like his chief rival, Pfizer CEO Albert Bourla, has spent much of the past month doing non-stop media interviews with TV and digital media outlets, praised the data as “reassuring” and a sign that the vaccine will help protect people who have already received it from the omicron variant (which, as many readers probably know by now, is only responsible for a tiny fraction of newly diagnosed cases in this wave). 

“To respond to this highly transmissible variant, Moderna will continue to rapidly advance an omicron-specific booster candidate into clinical testing in case it becomes necessary in the future.”

The news helped create some lift for Moderna shares, which were trading more than 6% higher in premarket.

But as one Bloomberg analyst pointed out, while the findings are certainly encouraging, they will only be meaningful if they last.

“The actual fold increase is only valuable if it’s compared with other vaccines,” said Sam Fazeli, a Bloomberg Intelligence analyst. ”These levels should increase protection against infection but the key question is how long do they last.”

Moderna’s data are based on lab tests using blood serum from 20 booster recipients with each dose, with antibody levels measured on day 29 after the booster dose has been received.

Moderna said it also plans to submit the results for online publication. The company is testing different booster candidates against a range of variants in mid and late-stage trials. The biotech said it plans to start testing its omicron-specific vaccine in humans early next year.

Authored by David Stockman via InternationalMan.com,

The fundamental consequence of 30 years of Fed fueled financial asset inflation is that the prices of stocks and bonds have way overshot the mark.

That’s why what lies ahead is a long stretch of losses and investor disappointment as the fat years give way to the lean.

These will hit hard the bullish investor herd and aggressive buyers of calls who can’t imagine any other state of play. They will be shocked to learn — but only after it is way too late — that the only money to be made during the decades ahead is on the short side of the market by buying puts on any of the big averages: the FANGMAN, S&P 500, NASDAQ 100, the DOW and any number of broad-based ETFs.

The reason is straightforward. The sluggish, debt-ridden Main Street economy has been over-capitalized, and it will take years for company profits and incomes being generated to catch up to currently bloated asset values. Accordingly, even as operating profits struggle to grow, valuation multiples will contract for years to come, owing to steadily rising and normalizing interest rates.

We can benchmark this impending grand reversal on Wall Street by reaching back to a cycle that began in mid-1987. That’s when Alan Greenspan took the helm at the Fed and promptly inaugurated the present era of financial repression and stock market coddling that he was pleased to call the “wealth effects” policy.

At the time, the trailing P/E multiple on the S&P 500 was about 12X earnings — a valuation level that reflected a Main Street economy and Wall Street financial markets that were each reasonably healthy.

The US GDP in Q2 1987 stood at $4.8 trillion and the total stock market was valued at $3.0 trillion, as measured by the Wilshire 5000. Back then, Wall Street stocks were stably capitalized at 62% of Main Street GDP.

Over the next 34 years, a vast unsustainable gulf opened up between the Main Street economy and the Wall Street capitalization of publicly traded stocks.

During that three-decade period the Wilshire 5000 market cap rose by 1,440% to $46.3 trillion. That’s nearly four times the 375% gain in nominal GDP to $22.7 trillion.

Accordingly, the stock market, which was barely three-fifths of GDP on Greenspan’s arrival at the Fed, now stands at an off-the-charts 204% of GDP.

If we assume for the moment that the 1987 stock market capitalization rate against national income (GDP) was roughly correct, that would mean that the Wilshire 5000 should be worth $14 trillion today, not $46 trillion. Hence, the $32 trillion of excess stock market valuation hangs over the financial system like a Sword of Damocles.

In fact, we believe that the gulf between GDP and market cap has been growing wider and more dangerous since the Fed sped up money printing after the Lehman meltdown. To wit, since the pre-crisis peak in October 2007, the market cap of the Wilshire 5000 is up by nearly $32 trillion, while the national income to support it (GDP) is higher by only $8 trillion.

The stock market’s capitalization should be falling, not soaring into the nose-bleed section of history. After all, since the financial crisis and Great Recession, the capacity of the US economy to generate growth and rising profits has been sharply diminished. The real GDP growth rate since the pre-crisis peak in Q4 2007, for instance, is just 1.5% per annum, which is less than half its historical trend rate of growth.

Back in October 2007, the stock market’s capitalization was 106% of GDP and in just 14 years it has soared to the aforementioned 204%. So even as the growth rate of the US economy has been cut in half, stock market capitalization has doubled.

Given that the stock market has gotten way, way ahead of the economy, the longer-range implication is a long spell during which financial asset prices will stagnate or even fall until they eventually recover the healthy relationship to national income.

Looking at this from a different angle, the current $46 trillion market cap of the Wilshire 5000 would not return to 62% of GDP until US GDP reaches $75 trillion. At an average of 3.3% per annum increase in nominal GDP since Q4 2007, it would take 38 years to get there!

That’s right. The massively over-valued stock market is currently capitalizing an economy that might exist by the year 2060… if all goes well.

*  *  *

Did you know that that United States government has unleashed the most dangerous experiment in its entire history? In fact, what’s been unleashed is trillions of dollars of stimulus with no end in sight. When any government goes on an uncontrollable money printing spree it impacts everyone. That’s precisely why, NY Times best selling author Doug Casey just released this urgent new video on the biggest imminent threat and what you can do about it. Click here to watch it now.

The fate of embattled former Theranos CEO Elizabeth Holmes now sits with 12 jurors.

Closing arguments were made in Holmes’ criminal trial on Friday and the jury received its final instruction from the presiding judge before beginning deliberations, Bloomberg reported.

The jury deciding her fate consists of eight men and four women. They will be tasked with trying to decide whether or not Holmes is guilty of both fraud and conspiracy charges that were leveled against her in 2018.

If convicted, she faces up to 20 years in prison. 

As we have noted in previous writeups, Holmes’ defense has been that her company failed and she made a series of business mistakes. Prosecutors portray Holmes as “exaggerating the capabilities and reliability of Theranos testing machines she pitched as revolutionary,” Bloomberg reported.

Throughout the trial, jurors heard from lab partners, former employees and patients. 

Holmes also took the stand in her own defense for seven days. She spent her time “deflecting blame”, “failing to remember” things and “accepting responsibility” for some mistakes, the report says.

The defense has claimed that Holmes never intended to deceive anyone.

Assistant U.S. Attorney Jeff Schenk said during closing arguments that she “made the decision to defraud her investors and then to defraud patients.” 

“She chose fraud over business failure,” Schenk continued.

Holmes’ attorneys have claimed there is a “fundamental disconnect” between allegations of intentionally deceiving investors and making honest mistakes. 

“She believed she was building a technology that would change the world,” Holmes’ attorney, Kevin Downey, said. He claimed Holmes “sacrificed her youth, friends and family relationships,” to make Theranos work. “She stayed. Why? Because she believed in this technology,” Downey told the jury. “She stayed the whole time. She went down with this ship.”

Downey also took footage of Holmes describing contracts Theranos had received and claimed she wasn’t deceptive about how she presented them. “They are being told, I think accurately, what the state of the business is. This was not a fiction that Ms. Holmes was making up in her conversation…her words track the contract language,” Downey said.

The government, however, claimed Holmes was aware of “a thousand crimes hidden under the rocks of this company,” Bloomberg reported. 

Holmes also claimed that she suffered years of verbal and sexual abuse from Theranos President Ramesh “Sunny” Balwani. 

The prosecution told jurors that those claims weren’t relevant: “You do not need to decide whether that abuse happened in order to reach a verdict. The case is about false statements made to investors and false statements made to patients.” 

Submitted by QTR’s Fringe Finance

Two weeks ago, I wrote about why I was nibbling shares of a name that I thought was a potential buyout candidate in the future and how I planned on adding more shares if the price of the company’s stock fell lower. Last week, I’ve found a semi-similar situation.

In addition to last week’s writeup, there’s now a second name that I am entertaining as a potential buyout candidate, should it fall much more.

As one of my readers was quick to point out at the bottom of my recent writeup pitching it as a potential buyout candidate, it wasn’t a “Benjamin Graham-style” pitch for a buyout that was based on earnings. It was based on synergies, top line growth and competitive forces in what is still a mutating industry (retail and e-commerce).

It wasn’t a name I was looking at FCF and earnings for to justify my reasoning. I was looking at comparative P/S ratios for other names in its industry and was realizing that:

1. The industry is likely going to continue to consolidate

2. Nobody really focuses on what this company did specifically and that it would make for a good option for any other type of name in its industry that wants to expand their foothold

Today’s idea, Robinhood Markets (HOOD) is obviously also not a “Benjamin Graham-style” idea. Its financials are ugly, but it’s in an industry that is aggressively consolidating and is led by investment banks that are much larger than it is and companies like the $150 billion Charles Schwab.

Consolidation in the industry has been plentiful. Ameritrade, which had about 11 million users at the time, was recently bought out for $22 billion by Schwab. eTrade, which had about 22 million users at the middle of this year, was recently bought out for $13 billion by Morgan Stanley.

If you think that Robinhood is at the forefront of a “new generation” of investing, its $16 billion market cap:

…with its more than 22 million total funded accounts and 18.9 million MAUs, starts to potentially look interesting to bigger players in the industry.

Remember, I was harshly critical of Robinhood just 3 months ago in October, calling the name a short while it was near $40 and while ARK’s Cathie Wood was still “buying the dip” that wasn’t really even a dip. I wrote:

Robinhood had trouble finding a bid at its $37/share valuation when it went public and, since then, has done nothing but reported Q2 earnings that included a warning about a slowdown in trading activity, either setting the stage for a rougher Q3 or sandbagging.

Between the valuation skyrocketing in the midst of poor earnings and the outstanding risks, Robinhood makes for what I believe to be an obvious short leg of this pair trade.

But today’s price for Robinhood – in the teens – is an actual dip. The stock is trading at almost a 50% “discount” to its IPO price and more than 50% off its highs back in August.

In October, I explained that despite the fact that Cathie Wood was “buying the dip” in Robinhood that the stock was still vastly overpriced and that I felt it belonged in the high $20 range:

In this case, I believe Robinhood belongs trading closer to a high $20/low $30 handle (again, its overvalued IPO was $37, there’s a huge retail bid in the company and it’s been nothing but bad news since).

It has overshot that mark by an order of magnitude, now trading under $20 per share.

Don’t get me wrong, however – the risks to owning Robinhood are serious:

1. The company does not make money and looks like it may not any time soon. Despite revenues increasing 35%, in Q3 2021, its net loss was a monstrous $1.32 billion compared to $11 million the year prior. In other words, this is in many ways a risky bet that someone is going to swoop in and “save” Robinhood by buying them out because owning their client base and software is more important than waiting to try and deal with some type of bidding war as the stock goes materially lower.

2. Most of Robinhood’s trading volume lately has come from crypto, which has been extremely volatile and may even wind up simply being a multi-trillion dollar air pocket. Crypto activity declined from record highs in the prior quarter, the company announced during its Q3 2021 report, which was another reason the stock sold off so aggressively.

But at a $16 billion market cap, I’ve re-evaluated the name. I definitely don’t want to be short here anymore, and the long thesis is starting to look like a not totally out of whack risk/reward.

Some of you may point out that a lot of the criticisms I had about the name in October – that the payment for order flow model is risky and that a lot of its business relies on crypto while its financial results have been ugly – still apply. You are 100% right and these concepts should be taken into account when considering a long position in the name.

This is a cash losing business run by a kid that I don’t particularly like with a somewhat questionable business model that can’t seem to elude controversy. Not generally an ideal long candidate…

Having said that, let’s talk about potential upside.

You may have noticed over the last year or two the only thing the brokerage industry has done is consolidate. Robinhood forced a lot of this change with its zero dollar commission model and names like Ameritrade and  eTrade were both bought out.

This type of ongoing race for clients and hunger for consolidation in a extremely competitive industry leads me to believe that appetites for acquisitions must still be high and there have to be some people looking at Robinhood as a potential acquisition at a certain price.

Normally if the climate in the industry wasn’t as aggressive, I’d suggest that people may let it fall further and buy it out on the cheap, or maybe even in bankruptcy. But, I think that the climate for consolidation and acquisitions in the industry is too robust for people to let it plunge that far. I could be wrong, and that is worth taking into account.

By acquiring Robinhood, not only do you get access to arguably the most popular mobile app for trading, but you get the company’s clients and  you get the “industry standard” when it comes to the no commission model. This means that if you ran a brokerage and wanted to theoretically start to try and re-introduce a commission model, starting with Robinhood would be a good place to “set the standard”.

Even without an acquisition, I think if Robinhood brought in a banker as CEO and kicked Tenev to the curb, investors would celebrate and take the company a bit more seriously. The company has yet to do this, but it remains one of the few arrows it has in its quiver.

Look, I don’t really care for management, nor do I care for the company‘s financials that much. This isn’t a Benjamin Graham style buyout situation where the company looks cheap on an earnings basis at all. This is an extremely speculative idea for a buyout that carries with it risk of the company stock moving significantly lower, due to there not being any type of floor of free cash flow or earnings.

But for right now,  it actually might look appealing to a traditional brokerage that wants to expand its mobile footprint, expand its reach to retail clients and expand its crypto offerings.

That is why, as the price of Robinhood moves lower, I’m going to look at it more and more seriously. I am no longer short the name as I was around $40 per share. I remain long Virtu (VIRT), the other leg of my previous pair trade. I still think this stock should be valued between $30 and $40. I also started a small long position in Robinhood  over the last couple of days and will look to add more aggressively proportionate with how much further the stock moves lower. As HOOD’s market cap approaches $10 billion, I think it becomes “cheap” to own its brand equity, software, crypto trading and its client base – even with its dogshit financials.

The bottom line is the company doesn’t make money and carries with it a lot of risk. These aren’t usually the types of names that I like – I am more often than not concerning myself with value. But, in this case, I think if the company gets much cheaper it’s going to look like an opportunity for a competitor with a much larger market cap to just come in and scoop them up.

—

This has been a free preview of paid subscriber content. If you enjoy, as always, Zerohedge readers get a 20% discount to my blog at any time, that lasts forever, by clicking here: Get 20% off forever

My Disclaimer: I bought a small long position in HOOD over the last week or two and will continue to add if it moves lower, perhaps using LEAPS. I also own some short dated calls. I may add any name mentioned in this article and sell any name mentioned in this piece at any time. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. 

Bloomberg’s Chief Energy Correspondent Javier Blas tweeted a disturbing map of European day-ahead electricity prices that will hit record highs on Monday. 

“EUROPEAN ENERGY CRISIS: Wow, wow, wow… I’m running out of words to describe the European short-term electricity market,” Blas said. 

He continued, “Multiple records breached for Monday. With the exception of Poland and Scandinavia, all Europe is above €300 per MWh (France and Switzerland near €400).”

The continuation of surging power prices, as Blas explained, is due to “Lots of nuclear reactors are down, demand is high (electricity used for heating), so it’s burning gas to bridge the gap.” 

Days ago, we told readers multiple nuclear power plants in France were taken offline due to routine safety inspections that found cracks at one power plant. 

European daily power demand continues to soar as colder-than-normal temperatures are present across the continent.

Benchmark natural gas prices surged to a new high last week, up more than 650% on the year, on concerns of declining gas flows via the Yamal-Europe pipeline that runs across Belarus and Poland to Mallnow, Germany; low storage on the continent, and geopolitical risk. 

European natural gas prices hit a new record high. 

The amount of gas entering Germany at the Mallnow compressor station collapsed. The pipeline only booked for 4% of space for Dec. 20. 

The latest geopolitical flare-up occurred last week when Germany’s federal network agency, Bundesnetzagentur, said Russia’s Nord Stream 2 pipeline won’t be cleared until July. On Sunday, Germany said they could entirely block the Nord Stream 2 if a possible conflict between Russia and Ukraine erupts. 

Europe’s energy crisis worsens and risks sparking discontent among many Europeans. How long until politicians order utilities to implement price caps on power rates? If politicians want to stay in power, they might also have to subsidize people’s power bills as energy inflation runs wild. 

Authored by Frank Shostak via The Mises Institute,

The price of the euro in terms of the US dollar closed at 1.135 in November, against 1.156 in October and 1.193 in November last year. The yearly growth rate of the price of the euro in US dollar terms fell to –4.8 percent in November from –0.7 percent in October. Some commentators are of the view that the US dollar is likely to weaken against the euro (i.e., the price of the euro in US dollar terms is likely to increase). The reason for this is the massive US trade balance deficit.

In September 2021 the US trade balance stood at a deficit of $80.9 billion, against a deficit of $62.6 billion in September last year (see chart). Again, some commentators regard a widening in the trade deficit as an ominous sign for the exchange rate of the US dollar against major currencies in the times ahead.

For most economic commentators, a key factor in determining the currency rate of exchange is the trade account balance. In this way of thinking, a trade deficit weakens the price of the domestic money in terms of foreign money while the trade surplus works toward the strengthening of the price.

By this logic, if a country exports more than it imports, there is a strengthening in the relative demand for its goods, and thus for its currency, so the price of the local money in terms of foreign money is likely to increase. Conversely, when there are more imports than exports, there is relatively less demand for a country’s currency, so the price of domestic money in terms of foreign monies should decline.

Similarly, following this way of thinking, all other things being equal, if for some reason there is a sudden increase in foreigners’ demand for a country’s currency, this is going to strengthen the currency rate of exchange versus other currencies. If, however there is a sudden decline in foreigners’ demand for a country’s currency, this is going to weaken the currency rate of exchange against other currencies. Notwithstanding, this way of thinking is questionable. Here is why.

The Purchasing Power of Money and the Supply and Demand for Money

The subject matter of the currency rate of exchange is the price of one money in terms of another money. The rate of exchange of a given money with respect to something is the amount of money paid per unit of something. Alternatively, we can say that the price of something is the amount of money paid for it. The amount of money paid for something is the money’s purchasing power with respect to something.

If the supply of money increases, the purchasing power of money with respect to the given stock of goods is going to weaken, since now there is more money per good.

Conversely, for a given stock of money, an increase in the production of goods implies that there are now more goods per unit of money. This means that, all other things being equal, the purchasing power of money with respect to goods is going to strengthen.

For example, let us say we observe that a given basket of goods is exchanged in the US for one dollar and the same basket of goods is exchanged for two euros in Europe. This means that the purchasing power of one dollar is this basket of goods in the US. It also means that the purchasing power of two euros is this basket of goods in Europe.

We can infer from this that, all other things being equal, the rate of exchange between the US dollar and the euro is going to be one dollar for two euros. Any deviation of the exchange rate from the level dictated by the purchasing power of the currencies will set corrective forces in motion.

Suppose that because of a US trade surplus and the consequent relative increase in the demand for US dollars the rate of exchange was set in the market at one dollar for three euros. In this case, the dollar is now overvalued in terms of its purchasing power versus the purchasing power of the euro.

Because of the strengthening of the dollar due to the trade balance surplus, it will pay to sell baskets of goods for dollars, exchange the dollars for euros, and then buy baskets of goods with euros—thus making a clear arbitrage gain.

For example, individuals are going to sell a basket of goods for one dollar, exchange the dollar for three euros, and then exchange the three euros for 1.5 basket of goods, gaining an extra half basket of goods.

The fact that the holders of dollars are going to increase their demand for euros in order to profit from the arbitrage is going to make euros more expensive in terms of dollars and this in turn is going to push the exchange rate back in the direction of one dollar to two euros.

Why the Trade Balance Is not the Fundamental Cause of Exchange Rate Determination

In order to establish that the trade balance determines the currency rate of exchange, we need to show that the trade balance determines the purchasing power of money.

Only central bank monetary policies and fractional reserve banking can determine the supply of money. Similarly, the balance of trade does not determine the amount of goods produced, which determines the demand for money. The balance of trade only records the value of given goods bought and sold by an individual or a group of individuals. Since the trade balance as such has nothing to do with either the supply of money or the demand for money, we can conclude that trade balances do not determine the purchasing power of a country’s money.

This is not to say that relative changes in exports or imports as mirrored by the trade balance do not influence the currency rate of exchange, but rather that these changes are not the fundamental causes of the exchange rate determination. Consequently, the influence of these changes is likely to vanish over time as the currency rate of exchange converges toward its fundamental value as dictated by the relative purchasing power of money.

Changes in the Relative Money Supply Growth and Currency Exchange Rate

Again, what matters for the determination of the currency exchange rate is a currency’s purchasing power relative to a basket of goods. With all other things being equal, a major factor behind the change in the purchasing power of money is changes in the supply of money.

Thus, an increase in the supply of dollars implies a greater amount of dollars on offer for the basket of goods. This means a decline in the purchasing power of dollars with respect to the basket of goods. Likewise, a decline in the supply of euros for the same basket of goods implies a smaller amount of euros for the basket of goods. This means an increase in the purchasing power of the euro with respect to the basket of goods.

Hence, over time, if the growth rate of the US money supply exceeds the growth rate of the eurozone money supply, with all other things being equal, the US dollar is going to depreciate against the euro. The lagged money growth differential between the US money supply and the eurozone money supply suggests that the momentum of the price of the euro in terms of the US dollar is likely to strengthen sharply during 2022 (see chart below). This could mean that the US dollar is likely to visibly weaken against the euro.

Fundamental versus Nonfundamental Causes

Often various nonfundamental factors are perceived to be important in determining a currency’s rate of exchange because “it feels right.” A sharp widening in the trade deficit is regarded as a sign of a likely deterioration in economic fundamentals ahead. This provides the rationale for the selling of the currency of concern.

Alternatively, let us say that an analyst forms a view that the growing US government debt at some stage will likely cause foreigners to stop buying US Treasurys. Consequently, with all other things being equal, this is going to lower the demand for dollars and result in the dollar’s collapse. It would appear that various factors such as the government debt, the interest rate differential, the state of the economy, and the balance of trade could be employed to illustrate a scenario of a collapsing dollar. But all this amounts to curve fitting.

What matters for currency exchange rate determination is the relative changes in the purchasing power of the respective currencies. All other things being equal, one can infer that a major driving factor in exchange rate determination is the relative change in currencies’ respective money supplies. Again, various nonfundamental factors are likely to influence currencies’ rate of exchange as well; however, arbitrage will push the exchange rates back toward their fundamental values as dictated by the relative growth rates in money supplies.

At a moment Moscow is pressing for legal guarantees from NATO to halt all military expansion eastward, Romania is pursuing plans to acquire 32 more F-16 fighter jets in a proposed half-billion dollar deal with Norway.

Days ago Russia sent a formal list of security guarantees it’s seeking from Brussels and Washington, in a document which calls for formal pledges from NATO not to build any bases or use military infrastructure in former Soviet states that are not NATO members. The proposal also urges negotiations toward an agreement wherein both the US and Russia would “refrain from flying heavy bombers equipped for nuclear or non-nuclear armaments or deploying surface warships of any type,” according to the document.

NATO member Romania is further seeking to modernize is air force with US help. According to a recent report in Defense Post, “Of the $514 million proposed for the additional combat jets, around $400 million will be used to purchase the planes. The rest will be allocated for logistical support and modernization in the US.”

The defense report added, “Aside from Norway, the Romanian defense ministry discussed purchasing used F-16s from various NATO members, including Denmark, Belgium, Portugal, Greece, and the Netherlands.”

In recent years, US missiles positioned in Romania have caused considerable alarm for the Kremlin, especially the recent activation of the Naval Strike Missile Coastal Defense System. 

Meanwhile, the rhetoric surrounding the Ukraine crisis 2.0 has continued unabated, with on Sunday Germany’s defense minister, Christine Lambrecht, visiting Lithuania where a new muscular message was aimed at Moscow. The top official vowed that Russia will not “dictate” NATO’s affairs.

Lambrecht said, “We have to talk to each other, which means discussing the proposals that Russia has put forward, but it cannot be that Russia dictates to NATO partners how they position themselves.”

German defense minister Christine Lambrecht says #Russia can’t “dictate” #NATO on security, as she visits #Lithuania in her first foreign trip. pic.twitter.com/bq9oGO86t2

— BNS Lithuania (@BNSLithuania) December 19, 2021

The German defense minister added, “We need to solve the current tensions on the diplomatic level but just as well by putting up a credible deterrence.”

And continuing on this theme, and adding a call for significant escalation, Lithuania’s Defense Minister Arvydas Anusauskas laid out, “We need to support Ukraine with all means, which includes the delivery of lethal weapons.” Without doubt Russia would see this challenge as a severe violation of its “red lines” on Ukraine, in the event NATO countries began ramping up large-scale military deliveries to Kiev.

Authored by Matthew Ehret via The Startegic Culture Foundation,

Unfortunately for the Davos Guardians, the reality of the New Great Narrative is a world devoid of those very principles that humanity requires to survive and thrive within our creative, reasonable universe…

In case you were beginning to feel like your world was becoming a cliché dystopian movie script, don’t feel bad. It appears that at least some of the villains agree with you.

Not happy with unsatisfying stories, scripts and narratives that shape our disorganized zeitgeist, Klaus Schwab and other creepy dungeon masters trying to manage the post-covid world have called for a ‘New Narrative’ to shape our 21st century and beyond. Schwab described the World Economic Forum’s Great Narrative Initiative announced on November 11 as a “collaborative effort of the world’s leading thinkers to fashion longer-term perspectives and co-create a narrative that can help guide the creation of a more resilient, inclusive and sustainable vision for our collective future.”

It is no question that this new project is bone chilling, but can it work? Does it have any basis in reality or is the oligarchical high priesthood stage managing this shit show intoxicated by their own self-induced narratives and completely incapable of seeing the seeds of self-destruction they have created for themselves?

Let’s examine this question in a bit of detail.

As far back as we look, recorded history demonstrates myths and stories that shape each culture’s subjective experience trying to make sense of the objective world and the many tenuous challenges that are tossed into our path.

Deep Structure Narratives

An ice age comes to an end and sea levels rise hundreds of feet drowning millions while wiping out coastal cities. As a consequence, flood myths appear across various cultures of the world.

Fires from the sky reflect terrible asteroids striking the earth wrecking havoc on ecosystems and perhaps even inducing volcanism and vast weather anomalies. As a consequence, more myths are created featuring heroes, villains, angels and Gods punishing sinners and rewarding those with virtue.

Throughout history, countless stories have been created by shamans, priests, and poets which have attempted to infuse meaning onto traumatic events induced by either nature or geopolitical strategies. Some classical stories may have even exposed geopolitical evils under the safer terrain of fiction when literal truths were impossible. One instance of this latter case can be found in the Olympian Gods of Homer’s stories who were in all likelihood representative of actual oligarchical families who manipulated never ending wars and exploited the folly and corruption of their chosen chess pieces on the Great Game of ancient Greece.

These stories are a part of the human condition and for the most part, perfectly natural.

However, in our supposedly enlightened secular era, these forms of myths are discarded as the foolish practices of simpler unscientific times.

Science has taught us to believe in logic. Not faith in God or the health of our immaterial souls.

The medieval myths of sea monsters and flat earths beyond which unsuspecting voyagers would meet a terrible fate were superseded for a new set of narratives during the enlightenment period. During this period, pure logic and empiricism were placed upon the new altars where religion once stood and we were told to worship new godheads by the names such as Kant, Locke, Hegel, Bacon and Newton. When Nietzsche proclaimed God to be dead, this was the current of thinkers that supposedly killed him.

The Indian poet Rabindranath Tagore referred to those suffering from this disease of metastasized logic saying: “A mind all logic is like a knife all blade. It makes the hand bleed that uses it.”

When the foundation of enlightenment logic began to break down under the pressure of reality over a century ago, new narratives taking the form of the Standard Model quantum mechanics began teaching modern man that what appears to be living is in truth, just made up of non living atoms and chemical interactions… and what appears to be ordered form operating with purpose is merely the stochastic motion of atoms devoid of purpose, beauty or even objective truth. We were told that all of this was held together only by a mix of luck (statistical probability) and four fundamental forces created 13.7 billion years ago. All behavior in human life or in nature thus explained away by Darwinian models of survival of the fittest and random mutations. The rise of modern monstrosities like eugenics, and neo-Malthusianism were the sick children of these ghoulish assumptions.

The more we probe behind the impressive veneer of these popular narratives, the more we discover that myths spun by modern day high priests on behalf of political interests has not only continued into our present age, but have continuously adopted new costumes to adapt to our changing world. Those brilliant minds whose discoveries actually overturned old narratives by leaping beyond the domains of inductive/deductive thinking are carefully obscured under mathematical formulas devoid of the spirit and personality of these exceptional individuals (1).

The Political Consequences of False Macro-Narratives

Some political expressions of today’s secular narratives were seen as neocons trotted out in front of cameras broadcasting the message that the two hijacked planes which destroyed three towers on 9/11 was orchestrated by angry Muslims in caves who hated our freedom.

We were told that covid-19 arose from a badly cooked mammal that kissed a bat requiring a total abolition of our constitutional freedoms.

We were told that the protests of January 6, 2021 in Washington D.C. was an insurrection worse than anything the U.S.A had seen since the Civil War when 500,000 Americans slaughtered each other for four years.

We are continuously told that Russia has ambitions to undermine democratic elections across the entire free world while China is aiming to subvert western values and impose a global communist government through its imperial New Silk Road.

I could obviously go on for quite some time here, but needless to say, political myth making is an ugly part of life. But while each lie certainly does grave damage, our susceptibility to falling for these falsities is in no way disconnected from our acceptance of those higher meta narratives embedded in those scientific myths that shape HOW our minds move. Every high priest knows that controlling HOW people think is always infinitely more powerful than controlling WHAT they think about any particular thing. This is how the neocon rot grew in the U.S.A over a few generations leading us to today’s multifaceted systemic breakdown crisis.

One of the fathers of the mutant that became neoconservatism was a narrative-building master named Leo Strauss.

Leo Strauss’ Neocon Monstrosity

Working closely with Fabian Society and Frankfurt School agents throughout his career as a teacher in Columbia, New School and the University of Chicago, Strauss preached a perverse interpretation of Plato’s Republic to tens of thousands of devoted students spread across several decades.

Among the highest lessons contained in Strauss’s teachings (at least for a select few among his students) was the idea of the Noble Lie developed by Plato in Book 3 of the Republic. Strauss taught his students that this Noble Lie was the greatest weapon and rightful tool of anyone who found themselves in a position of power to rule over the weak at any time in history.

In true Nietzschean fashion, the narrow definition of “power” as the subordination of the weak to the strong was the only definition permitted by Strauss who taught his students that while Plato preached love of wisdom to the masses, he secretly held a different teaching for those elite among his Academy who would control political power. To these elite few, he gave the name ‘gentlemen’ and ‘Guardians’.

Strauss taught that Plato’s Guardians would control the shadows cast on the cave wall which the plebs shackled to their senses, would believe were the only reality possible. The mandate of these perverse neo-Platonists was to live the ideal not of Socrates, but rather of Thrasymachus whose immoral doctrine Socrates annihilated in the first book of the Republic. Those young neocons learning from their master were taught that the true ‘secret Socrates’ believed, like Thrasymachus, or Callicles (student of Gorgias), was that the highest purpose in life is to attain power, satisfy our lusts and control the shadows in the cave.

As many of Strauss’ own students (like Shadia Drury) came to realize over the years, the old master was himself guilty of projecting his own perverse penchant for fascism onto Plato as he himself maintained secret teachings for his chosen elite students as all good oligarchical head-hunters must.

Cleansing Plato of Strauss

While I adore Plato, I would never deny that he was a myth maker.

The stories showcased in his dialogues from the Timaeus, Critias, Theaetetus, Sophist, Statesman, Meno, Laws, Phaedo, Apology, Gorgias, Republic etc… have shaped the minds of some of the greatest historic figures across 2400 years of world history. Renaissance figures like St. Augustine, Ibn Sina, Erasmus, Shakespeare, Benjamin Franklin, Lincoln, Moses Mendelsohn, Pushkin, Martin Luther King Jr., and countless other brilliant souls had their wits sharpened on the stories and lessons contained in Plato’s writings.

But was Plato truly the tyrannical double-speaker portrayed by Strauss and his followers who preached morality for the weak and vice for those who would control the shadows?

To be a true Guardian in Plato’s world meant more than simply getting out of the cave to see with the light of the sun (symbolic for creative reason) and then lord over the masses.

While Nietzscheans like Strauss stop reading at this moment and choose to dominate the slaves using a higher power of thinking reserved only for a select few of the golden collar elite… Plato made it very clear in his Republic and other writings, that the TRUE philosopher (and implicitly true guardian) was obliged to return back into the cave at risk of his or her life in order to help liberate their fellow captives.

Narratives for Freedom or Slavery?

“Every artist, every scientist, every writer must decide now where he stands. The artist must take sides. He must elect to fight for freedom or for slavery. I have made my choice”

-Paul Robeson, 1937

The question can now be posed: how do we know which narratives are designed to enslave us, which empower us, and which are benign (like a child’s belief in the tooth fairy or the toy-bearing fat guy who trades gifts for good behavior)?

Since each person’s internal universe interfaces with the external reality through the filter of both logic, senses, imagination, and free will, is it possible that some narratives can uplift and inspire us to be more than we are in the face of impossible odds? Can certain stories sharpen our wisdom and free us from the shackles of sense perception as we are taught to see ever more through the eye of reason and a developed imagination?

When George Washington led a small force of farmers against the world’s largest mercenary force in 1776, was it purely logic that guided them in this statistically impossible fight, or were stories of Christ’s passion animating this seeming irrational drive for freedom? When Syria was beset with foreign sponsored Jihadists and teetered on the brink of the abyss, did stories of the Prophet Mohammed animate their hearts to do the impossible when an easier albeit more slavish road awaited their surrender?

Certainly, history has proven time and again, that a certain type of poetic story can empower us to leap beyond our limitations and gain insights into the deeper truths of the human condition and universal reality itself. Even Shakespeare’s “fictional” stories offer the sensitive soul great universal lessons into humanity and real politic which has served great statesmen for centuries.

A Last Look at Today’s Oligarchical Narrative Builders

Although we can affirm with certainty that narratives can be good and others evil, is it possible that the oligarchs managing today’s Great Narrative project wish humanity no harm?

Perhaps Lynn Forrester de Rothschild is completely genuine when she launched the Council for Inclusive Capitalism alongside Prince Charles, Mark Carney and a handful of Davos Billionaires representing tens of trillions of dollars of capital in 2014. Helping to transform capitalism into a green, eco friendly, more inclusive system that treats everyone equally is a good thing isn’t it?

When this Council merged with the Vatican in December 2020, Lynn de Rothschild described the event as “a historic new partnership between some of the world’s largest investment and business leaders and the Vatican… joining moral and market imperatives to reform capitalism into a powerful force for the good of humanity.”

This council is even led by “a core group of world leaders” who even call themselves “Guardians” following the title used by Plato 2400 years ago.

These guardians include the CEOs of powerful organizations as State Street, Bank of America, Johnson and Johnson, Rockefeller Foundation, Ford Foundation, Merck, British Petroleum, and the Rothschild banking houses. Not exactly the most morally advanced coterie of political heavy weights one could imagine, but still maybe the evil that they have been a part for decades has all been arranged for the sake of a higher good that only the elite may be permitted to know…

Unfortunately for the Davos Guardians, the reality of the New Great Narrative is a world devoid of those very principles that humanity requires to survive and thrive within our creative, reasonable universe. Wielding the power to control a shadow land of dumbed down slaves within a cave might seem impressive for some, but when juxtaposed with the active, creative multipolar paradigm now rising to become a global force for scientific and technological progress, controlling cave dwellers becomes little more than a bleak and pitiful ambition.

And like any parasite which can do naught but kill the very host it needs to suckle on for its very survival, those Davos guardians are likely to meet the same fate as that encountered by Edgar Poe’s impotent, nihilistic oligarch Roderick Usher as his castle crumbled into an abyss.

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The author can be reached at matthewehret.substack.com