BofA: “It Is Unrealistic To Have Widespread Vaccine Availability In Q1 2021”

BofA: “It Is Unrealistic To Have Widespread Vaccine Availability In Q1 2021”

Tyler Durden

Sun, 08/23/2020 – 13:55

As Deutsche Bank wrote at the start of August, whereas vaccines normally require years of testing and additional time to produce at scale, amidst the covid pandemic scientists are hoping to develop a coronavirus vaccine within an extremely truncated timeframe of only 12 to 18 months. The reason for that while normally a vaccine takes years to develop using a traditional process, with covid things are far more accelerated…

… with BofA showing how what is typically a 10 year process could – in theory – be compressed to just 12 months:

… and furthermore, there are already no less than 160 covid vaccine candidates currently in process as the following table shows…

… with the top 6 listed below.

Here is what the top vaccine makers have said publicly about the state of affairs courtesy of Deutsche Bank.

Still, there are caveats and there is a distinct possibility a vaccine – which many sellside analysts view as a “magic bullet” to rebooting the economy and renormalizing pre-covid growth rates – may not emerge any time soon as various roadblocks remain. That however did not stop Goldman from boosting its economic outlook and raising its GDP forecast for 2021 for one simple reason: as we reported two weeks ago, the bank now believes that “at least one vaccine will be approved this fall with widespread distribution and positive growth effects felt in the first half of 2021“.

As a result, Goldman now expects GDP growth of +10% in Q1 2021, +8% in Q2 2021, +4% in Q3 2021, and +3% in Q4 2021 (an upgrade vs. +8%, +6.5%, +5%, +4% previously). This raises 2021 growth to +6.2% on an annual average basis (vs. +5.6% previously) and +6.2% on a Q4/Q4 basis (vs. +5.9%).

This renewed economic optimism also prompted the bank’s chief equity strategist David Kostin to raise both his EPS forceast and his S&P price target to 3,600 last weekend (the real reason of course is that the S&P had run far away from Goldman’s prior S&P price target of only 3,000, and the bank had to goalseek a reason to become more optimistic).

Not everyone is that optimistic however.

Countering Goldman’s cheerful outlook, Bank of America last week wrote that it does “not think that it will be realistic to have widespread vaccine availability (hundreds of millions of doses) in the US and Europe sometime in 1Q21. We think that there are considerable vaccine process development and manufacturing risks, which could compromise sufficient and timely vaccine supply, including potential setbacks in process validation, scale up, technology transfer, raw material shortages (e.g., glass vials), etc. Outside of the US and the main countries in Europe, COVID-19 vaccine supply could also be compromised by “vaccine nationalism” (that is, the rich countries of the world prioritizing and hoarding vaccine supply domestically before making vaccine(s) available elsewhere).”

Elaborating on this skeptical timeline view, in a note from Bank of America last week titled “The economics of a vaccine“, the bank’s chief global economist Ethan Harris wrote that it will take a significant amount of time from proving a vaccine is effective to distributing it broadly to the population. The lags include:

  1. Production time (unless it is one of the candidates doing production in advance),
  2. Distribution (requires setting up drive-throughs and other broad distribution systems),
  3. Second shot (a few weeks after the first),
  4. Time to determine efficacy (roughly a month) and
  5. Time to uncover longer-term side effects and durability (a year perhaps).

Harris then writes that in listening to the experts, including our healthcare analysts, there are a number of potential pitfalls in developing, producing and distributing a vaccine. Three stand out to Bank of America.

1. Partial success. Talking to healthcare analysts, success in finding a vaccine is not a binary outcome. Vaccines can be approved even if they only provide protection for half of the people taking them, they may prevent serious illness rather than prevent infection altogether, immunity may not last long, particularly if the virus mutates frequently, and side effect may be prohibitive for some vulnerable groups. Distributing a vaccine that either doesn’t work or ends up with serious side effects could damage the economy more than having a long delay in finding a vaccine.

2. Vaccine nationalism. There is already a scramble to be first in line for the vaccine, with a number of countries lining up supplies for one or several of the candidate vaccines. Here, BofA worries about history repeating itself. Early in the crisis there was a similar scramble for masks and other supplies, with a variety of efforts to hoard supplies. Will this compromise the efficiency of production and distribution across global supply chains?

3. Vaccine phobia. Even in the best of times, many people refuse to get a flu shot. Americans seem particularly skeptical about public health policy. If masks are unacceptable, what about shots of a brand new drug? A RIWI survey in June and July found big differences across countries (Chart 1). This would suggest that if anything, the initial take-will be very slow. After all, there have been a lot of confusing public health messages, particularly in the US. Yet even BofA admits that “such caution is to some degree warranted, with the vaccines being rushed to market without knowledge of the long-term side effects.”

Why all the focus on vaccine timing? As Harris continues, reading the commentary in the press, he gets the sense that many investors see a vaccine breakthrough as a game changer, quickly pushing the global economy back to full employment.

In Harris’ view, while that may have been the case had there been a miracle cure or vaccine in the Spring, as it would have shortened the shutdown and avoided deep damage to the economy, however, over time the story has shifted and is continuing to shift. Economies have all reopened to some degree. People have learned to function with the virus and have restructured activities accordingly. We can see this in the way countries that have not contained the virus—like the US—can “bend the case curve” with relatively modest changes in behavior. Still, we must also contend with headwinds to growth from second-round  effects: the damage to confidence and balance sheets, businesses slowly (and not so slowly) going under and investment plans canceled.

It is worth hammering home this point. Every recession starts with one or several shocks and yet continues even when the shock abates. Consider two factors that are important in many recessions: central bank tightening to fight inflation and surges in oil prices. Both generally reverse over the course of the recession and yet the downturn continues. A classic example is the recession of 1982.

It is also important to note that rolling out a vaccine will not immediately end all social distancing behavior. Some people will respond quickly as pent-up demand is released, taking that long-delayed vacation, for example. However, the majority of people will re-engage slowly as they become more comfortable that the health risk is indeed gone. Some activities could take very long to fully recover. One final headwind: after pouring stimulus into the economy, developed-market monetary authorities are almost out of ammunition and fiscal authorities will likely pull back a bit, letting the economy wobble along on its own.

So putting it all together, BofA’s baseline remains unchanged (and not in pursuit of goalseeking a narrative driven by the S&P500’s relentless ascent, unlike Goldman), namely that a vaccine is widely disseminated in the developed world in 3Q 2021, but rolls out much more slowly in parts of the developing world. Under a “realistically optimistic scenario” BofA simply assumes the process is accelerated by two quarters so that the roll-out is in 1Q rather than 3Q.

BofA’s “realistically optimistic scenario” for growth,which incidentally coincides with Goldman’s new baseline, is shown below .

Globally, in the event of a vaccine, BofA expects the addition of 70bp to growth in 2021. The stimulus varies across countries. In general, countries that have had the most trouble containing the virus will tend to respond more to a vaccine — hence the US benefits more than Europe, which in turn benefits more than China. As Chart 3 and Chart 4 show, an early vaccine would allow US GDP to return to 4Q 2019 levels by 4Q 2021, although the output gap remains as growth lags potential; Euro area GDP would not quite return to 4Q 2019 levels even with an early vaccine, largely because fiscal stimulus has been too small and too delayed.

China is expected to surge even in the base case as the virus is already largely under control. But GDP should still remain below potential through the end of next year in both scenarios. Similarly, there is limited upside from an early vaccine in most of emerging Asia because so much progress has already been made in staving off the virus. Other emerging markets should benefit more than EM Asia, but less than DM, because broad inoculation will probably happen a little later.

via ZeroHedge News https://ift.tt/2QkKjEk Tyler Durden

Avoid The Trap The System Is Setting To Ensnare You

Avoid The Trap The System Is Setting To Ensnare You

Tyler Durden

Sun, 08/23/2020 – 13:30

Authored by Chris Martenson via PeakProsperity.com,

One Step Removed

Millions of people are about to enter a financial purgatory, becoming little more than modern-day slaves.

While they’ll be reported by the media as those “evicted” or “foreclosed on”, if we define a slave as someone forced to work for another by existing legal circumstances or approved cultural norms, then that’s exactly what these people should actually be called: slaves.

Too harsh?

Allow me to make my case.

Being ‘One Step Removed’ Is All Evil Needs

Slavery can exist when there’s a system that allows it.  It’s a combination of morals (or, rather, lack thereof) and laws that allow one human to control the daily actions of another.  Neither a slave’s time nor personal freedom belong to them.

I learned a long time ago that most humans, at best, have what we might call ‘shallow’ morals. There are chemical engineers who would never dump a toxin directly into a child’s cereal bowl, because that would be immoral; but they’ll casually and routinely inject toxins into groundwater tables (which may eventually end up in the local milk supply) because they have an EPA permit to do so.

If questioned, these same engineers know that there’s a chance, maybe even a very good chance, that the injected chemicals could end up somewhere unintended.  But because their actions today are one step removed from the consequences of tomorrow, that’s enough to get them off of a moral hook.

In other words, their morals don’t extend past that first action — they stop right there.  They are therefore ‘shallow’ morals.

‘Deeper’ morals would include a sense of responsibility for the entire lifespan of the chemicals in question.

Similarly, mortgage companies are staffed to the gills with people who could never themselves forcibly eject an elderly person and all of their possessions onto the curb outside the home they’d lived in for 50 years.  It would be morally upsetting.

But they routinely submit the paperwork that causes these things to happen nonetheless.

Luckily for the mortgage company workers it’s the sheriffs deputies who actually handle the evictions.  Luckily for the sheriffs involved, somebody else’s decision was responsible for the eviction.  Both the sheriffs and the mortgage company employees are similarly insulated from any moral qualms because neither was directly responsible for Granny or Grampa’s plight. They’re just “following orders”.

One step removed.  That’s all it takes.

The point here is that as long as people have just one degree of separation from their actions, that’s sufficient to dodge any moral qualms that may arise.  What we cannot stomach to do ourselves can be more easily overlooked if someone else is performing the deed.

The Immoral Fed

The largest and most obvious one step removed ‘dodge’ in play right now is the US Federal Reserve’s evasion of moral responsibility for making the wealth gap explode wider, destroying the financial futures of tens of millions of American households.

After printing up a bubble that ruined many in the 1990’s, eventually bursting in the year 2000, the Fed set about blowing an even larger bubble. That burst in 2008. And now they are back at it again.

Every step of the way, the Fed policies resulted in the rich getting richer, the middle classes and the poor being financially eviscerated, and future generations getting hosed.

How do the Fed’s staffers sleep at night?

By delusional thinking like this:

(Source)

The necessary one degree of separation for Jay “pants on fire” Powell to say such obviously flawed things is provided by “the markets”, which is where the trillions of dollars freshly printed by the Fed quickly end up.

That goosed markets then benefit the already-rich is simple to deduce. Those who own lots of stocks and bonds as well as those who operate the most intimate details of the financial machinery are rewarded instantly by higher prices.  They become instantly richer.  Which means they can afford to buy more ‘real’ things like land, buildings, businesses, factories, gold, fine art — you name it.

Well-connected entities like BlackRock are actually in bed with the Fed, getting richly rewarded merely for helping it spend its vast gobs of newly-created currency :

BlackRock Is Bailing Out Its ETFs with Fed Money and Taxpayers Eating Losses; It’s Also the Sole Manager for $335 Billion of Federal Employees’ Retirement Funds

June 4, 2020

Today [June 4, 2020], BlackRock has been selected in more no-bid contracts to be the sole buyer of corporate bonds and corporate bond ETFs for the Fed’s unprecedented $750 billion corporate bond buying program which will include both investment grade and junk-rated bonds. (The Fed has said it may add more investment managers to the program eventually.)

BlackRock is being allowed by the Fed to buy its own corporate bond ETFs as part of the Fed program to prop up the corporate bond market. According to a report in Institutional Investor on Monday, BlackRock, on behalf of the Fed, “bought $1.58 billion in investment-grade and high-yield ETFs from May 12 to May 19, with BlackRock’s iShares funds representing 48 percent of the $1.307 billion market value at the end of that period, ETFGI said in a May 30 report.”

No bid contracts and buying up your own products, what could possibly be wrong with that? To make matters even more egregious, the stimulus bill known as the CARES Act set aside $454 billion of taxpayers’ money to eat the losses in the bail out programs set up by the Fed. A total of $75 billion has been allocated to eat losses in the corporate bond-buying programs being managed by BlackRock. Since BlackRock is allowed to buy up its own ETFs, this means that taxpayers will be eating losses that might otherwise accrue to billionaire Larry Fink’s company and investors.

(Source)

On the one hand, BlackRock is busy buying all sorts of things to stuff on the Fed’s balance sheet.

On the other hand, BlackRock has access to unlimited capital at the most favorable terms/prices in the world.

On a third hand, BlackRock is busy buying up distressed properties from recently foreclosed Americans who couldn’t manage to stretch a $1,200 stimulus check across 8 months of being out of work.

Add it all up and these recently dispossessed Americans will find themselves no longer owning a home. Instead, they’ll rent one from the no-bid contract winners like BlackRock, who were literally hand-picked by the Fed.

When there’s no money to be found to help working-class families, you can be certain there are still unlimited billions available to keep outfits like BlackRock supremely well incentivized to… uh, keep doing what they already were doing anyways: Getting obscenely rich.

Now, instead of working for themselves to pay off their own homes, these newly dispossessed Americans will still have to live somewhere. Many of them will end up renting from Wall Street entities like BlackRock.

How do I know this?  Because that playbook page already exists.  It’s an observed reality.  It’s been done before and it will happen again.

We saw this in the aftermath of the housing crash/Great Financial Crisis:

When Wall Street Is Your Landlord

Feb 2019

[T[he government incentivized Wall Street to step in. In early 2012, it launched a pilot program that allowed private investors to easily purchase foreclosed homes by the hundreds from the government agency Fannie Mae. These new owners would then rent out the homes, creating more housing in areas heavily hit by foreclosures.

Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country. In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012; today, institutional investors own at least one in five single-family rentals in some parts of the metro area.

I talked with tenants from 24 households who lived or still live in homes owned by single-family rental companies. I also reviewed 21 lawsuits against three such companies in Gwinnett County, a suburb of Atlanta devastated by the housing crash. The tenants claim that, far from bringing efficiency and ease to the rental market, their corporate landlords are focusing on short-term profits in order to please shareholders, at the expense of tenant happiness and even safety. Many of the families I spoke with feel stuck in homes they don’t own, while pleading with faraway companies to complete much-needed repairs—and wondering how they once again ended up on the losing end of a Wall Street real estate gamble. 

(Source)

In today’s reality, the Federal Reserve is deciding, unilaterally and without any effective oversight or requiring a single vote from a single American, who should be the winners and who should be the losers.

Should we be surprised that the big institutions are the winners and ‘we the people’ the losers?

To be fair, this isn’t BlackRock’s fault, right?  It’s simply how the system is currently set up.  It’s just the prevailing legal and moral framework, right?

What do they say on Wall Street to point out the one step removed angle: “Don’t hate the player, hate the game”?  Well, maybe that works in pro basketball. But in finance, where the players have a strong say in writing the rules, I don’t think that saying provides much air cover.

Here in August 2020 after the coronavirus (combined with a desperately poor series of managerial decisions by politicians and career health ‘authorities’) laid waste to the economy, it’s perfectly clear that much actually was learned from the 2008 crisis.

The wealthy learned that you can pretty much get away with anything you want. And so they’re at it again.

Corporations learned to hoover up the free money as fast as possible.

Speculators learned that the Fed would always cover their losses and to ‘buy the dip.’

Nowhere along the way did anybody seem to learn the importance of community, watching out for your fellow citizens, having integrity, or caring about the future.  Savers and the prudent alike have been literally punished for being responsible.

Finding The Way Out

Once you see through the ‘one step removed’ lens, you’ll begin to see it everywhere.

Too many people do things that aren’t even remotely justifiable (let alone moral) once the totality of the actions are taken into account.

A corollary to this is that the measure of a person can be observed in their actions when nobody is looking.

Far more impressive than the thousands YouTube clips showing a supposed samaritan help an unfortunate soul (while a camera just happens to be recording from a perfect angle followed by a quick upload to 8 different social media channels) is the person who helps another when no one else is there to watch.

“The system” is providing the necessary legal and moral cover for BlackRock and other similarly fabulously wealthy parties to sweep in and take advantage of current circumstances to make a few billion extra bucks.

When the dust settles after the pandemic subsides, we’ll find that another large fraction of the assets of our nation – it’s houses, soil and productive enterprises – will have been transferred (again!) to the tiny minority already at the top of the wealth pyramid.

The process used will continue to be simply this: the Fed prints new currency out of thin air, hands it to Wall Street, which in turn buys up the productive assets of the country. If challenged, each party has its own ‘one step removed’ cover story ready to go.

Once upon a time, our cultural and legal principles sadly allowed the productive output of people called slaves to belong to people we called slave owners.

Today ,there’s a codified system of financial rules and a supporting legal framework that assigns the productive output of the poor and middle classes to corporate owners.

The former process was direct.  The latter process has the same outcome; it’s just simply one step removed.

So how do we free ourselves from the shackles the system is trying so hard to place us in?

In Part 2: The Way Out, I share the strategies I’m implementing in my personal life/homestead/community to build wealth that can’t be easily stolen by the printing press or over-reaching authorities.

The truth is we live in an exceptionally challenging time: for our wealth, our civil liberties, and our ability to pursue happiness.

There are no guarantees except this: to do nothing is to walk willingly into the trap being set for you.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

 

via ZeroHedge News https://ift.tt/3j4gEvi Tyler Durden

Portland BLM ‘Revolutionaries’ Bring Guillotine Into Suburbs Where They Burn American Flags, Fling Poo And Demand Shelter

Portland BLM ‘Revolutionaries’ Bring Guillotine Into Suburbs Where They Burn American Flags, Fling Poo And Demand Shelter

Tyler Durden

Sun, 08/23/2020 – 13:05

BLM protesters in Portland took to the streets once again Saturday night, dragging a mock guillotine through a suburban neighborhood, where they burned American flags and ‘executed’ a stuffed bear.

Then, protesters took to the streets with a bullhorn, with one woman shouting to residents “What are you doing to protect your neighbors, people in their houses?,” while a man shouted “Get in the fucking streets!”

The woman then made a convincing argument that homeowners should open their doors to the protesters, shouting over the bullhorn: “We protect you every night by being out here. Please come and protect us. Make sure you are offering us refuge. We are tired and yet we are still out here. We are simply asking for one night, one hour.”

According to the Portland PD, the rioters moved on to the Penumbra Kelly Building, where they assaulted police with rocks, bottles, paintballs and lasers, according to the Daily Wire.

At 11:45p.m., officers began to push the crowd to the west. Rocks, bottles, and other hard objects were thrown at officers. One lieutenant was struck in back of head with a glass bottle. His helmet prevented him from being injured. A Portland Fire and Rescue Medic embedded with one of the squads was hit in the shin with a large rock. He suffered a minor laceration to the leg.

At 11:59p.m., due to the life safety danger, a riot was declared. More warnings were issued from the PPB sound truck. The sound truck was struck and damaged by rocks and eggs. The rear window of a vehicle used to transport a Rapid Response Team squad was shattered by a rock. Numerous officers reported seeing individuals bearing “press” insignia throwing rocks at them. …

Officers initiated another push, attempting to convince the group to leave. This time, they went south on Southeast 47th Avenue to Southeast Stark Street. Officers disengaged again. Protesters lit traffic barricades, mattresses, a door, and other debris on fire in the intersection.

Between 45 and 50 officers had to be pulled from precincts to assist in the protest response. For most of the duration of this event, there were between 120 and 140 calls holding in the City of Portland. Calls included shots fired, assaults, alarms, threats, and suspicious circumstances.

Earlier in the day, a brawl broke out between antifa and the the right-wing Proud Boys.

And, as promised in the headline, poo was flung.

via ZeroHedge News https://ift.tt/31k0TdK Tyler Durden

Will Skilled Hands-On Labor Finally Become More Valuable?

Will Skilled Hands-On Labor Finally Become More Valuable?

Tyler Durden

Sun, 08/23/2020 – 12:40

Authored by Charles Hugh Smith via OfTwoMinds blog,

The sands beneath what’s scarce and what’s over-abundant are shifting.

On a recent visit to the welding shop where my niece’s husband works, I asked him if they had enough welders for their workload. His answer surprised me: “If you asked every welding shop in the country if they have enough welders, the answer would be no.”

The reasons for this disparity between the economic need and the workforce’s skills aren’t that complicated. Many of the skilled welders are Baby Boomers who are retiring or nearing retirement, and there aren’t enough younger trained welders to meet the need.

Though there appears to be an uptick in the number of young people interested in apprenticing to construction trades, the cultural zeitgeist has largely disdained hands-on, real-world skills in favor of making videos, becoming social-media influencers, joining an investment bank to make bank, working for a tech startup to score a quick million or two in stock options or if no creative way to make it big presents itself, join the cushiest bureaucracy available with lifetime security, or seek out a non-profit doing some virtue-signaling projects to pad your resume.

As for hands-on skills, becoming a chef certainly topped becoming a crane operator, as attaining semi-celebrity has become a core ladder of social mobility. The desirable livelihoods are creative, virtue-signaling, semi-celebrity and perhaps most importantly, clean white-collar (mostly digital) work.

On top of this cultural disdain we can overlay the general surplus of labor globally and the relative scarcity of profitable homes for capital. As I have often mentioned, the twin drivers of wealth for the past 30 years (arguably even longer) have been financialization and globalization, both of which heavily favor capital over labor, with the exception of tech-managerial skills needed to maximize profits in financialized, globalized ventures.

Could all these trends reverse? All trends eventually reverse (the way of the Tao is reversal), and so the question can be phrased: are we reaching the tipping point?

I have argued that we’ve reached Peak Financialization and Globalization, and these trends are now reversing.

As for the cultural zeitgeist, historian Peter Turchin has noted that national-imperial declines are characterized by a surplus of entitled elites (what Turchin calls “overproduction of parasitic elites”), stagnation of wages and a decay in public finances.

All three are clearly visible: there simply aren’t enough elite slots offering high pay, full security, cultural recognition and status, etc. for the millions of aspirants with advanced degrees, family connections, etc.– conditions that would have guaranteed an elite slot a generation or two ago.

Conventional wages have been stagnating or decades. Adjusted for inflation (which is understated), wages have stagnated since the 1970s, and even in the top tiers of employment, since 2000.

Public finances were precariously dependent on soaring debt before the pandemic, and now the explosion of debt is rapidly increasing the fragility of public finances globally.

Central banks can create money out of thin air, but they can’t create skilled, experienced workers out of thin air. That takes years of training, experience, effort and dedication.

Longtime readers know that I focus considerable attention on scarcity as the source of value and on the difference between tradable and untradable labor. Digital editing of a video can be done anywhere on the planet, so it’s tradable. Welding a boat trailer or installing a roof vent must be done locally, so it’s untradable.

What’s tradable is unlikely to be scarce (and thus valuable) while what’s untradable could well be scarce (and thus valuable)–for example, high-level welding skills.

History offers a number of examples of labor gaining value while capital lost its footing.

The Black Death killed so much of the workforce (40% or more) that the survivors were able to command a premium for their labor and also break free of feudal constraints by moving to so-called “free cities” in the Netherlands and elsewhere to set up shop as independent craftspeople / entrepreneurs. This fueled the rise of the middle class and what we might call classical capitalism, as opposed to the distorted, parasitic, predatory finance capitalism that dominates the global economy today.

Another example is the hyper-inflation in pre-Nazi Germany, when owners of capital (financial wealth) complained bitterly about the soaring wages demanded by skilled craftspeople.

Think about it: a rich person needs some welding, plumbing, etc. done as a necessity, not as a luxury. The skilled worker refuses payment in increasingly worthless “money” (currency) and demands payment in gold or silver. What can the (formerly rich) person do but pony up the gold?

The sands beneath what’s scarce and what’s over-abundant are shifting, and those skills that are untradable are increasingly likely to become more valuable than either tradable labor or conventional capital, which faces rapid depreciation as the wheels fall off financialization and dependence on debt to fuel over-consumption.

*  *  *

My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

via ZeroHedge News https://ift.tt/34qgpqn Tyler Durden

Lukashenko Orders Military To React “Without Warning” If NATO Forces Violate Western Border

Lukashenko Orders Military To React “Without Warning” If NATO Forces Violate Western Border

Tyler Durden

Sun, 08/23/2020 – 12:15

A huge rally of tens of thousands draped in red-and-white opposition flags brought the center of Minsk to a standstill on Sunday, in what’s become a near daily occurrence for weeks since the Aug.9 reelection of 26-year ruler of Belarus, President Alexander Lukashenko.

Local unrest and clashes with police, however, could easily give way to a major event along Belarus’ border, given Lukashenko on Saturday gave his boldest and most provocative order yet. Convinced that “NATO is at the gates” threatening his removal by force, he’s told his defense minister to “react without warning” to any potential border violations.

Issuing what’s essentially a “shoot to kill” order, Lukashenko said on Saturday, “There won’t be a warning. We warned them. If they violate the state border, we react without warning.

Reacting to Lukashenko’s prior assertions of a US-NATO backed ‘color revolution’ in progress, during which there’s growing momentum within Belarus for him to step down or at least hold new and “fair” elections (amid accusations his reelection to a sixth term), early last week Secretary-General Jens Stoltenberg responded with, “NATO does not pose a threat to Belarus and has no military buildup in the region,” according to an official statement.

Belarus’ top brass has since claimed that NATO troops, particularly in neighboring Lithuania, are indeed headed toward the border as part of the alleged externally-driven pressure campaign

The Defense Minister reported to the President that NATO troops in Lithuania “are approaching the border, turning around and leaving.” “But we see them. If on Sunday it is [the movement of forces] in our direction if this happens, then we will act in accordance with the situation,” Khrenin said.

Major General Viktor Khrenin suggested further, consistent with President Lukashenko’s claims this past week, that the crisis is being coordinated by Washington and it’s anti-Russia European allies.

File image: Belarusian President Alexander Lukashenko, left, speaks to high rank officers, via Belarus’ national BelTA.

Defense Minister Khrenin said in Saturday statements: “it is possible that destructive forces, supervised by the special services of Western countries, enter the territory of the western regions of Belarus, both by legal and illegal means to increase efforts to destabilize the situation.”

NATO has vehemently denied any build-up of forces near Belarus’ Western border.

Map via The Sun’

“At the same time, various provocations are possible to violate the airspace and the state border,” Khrenin added.

As we’ve underscored before there seems to be growing consensus that the Kremlin is not wedded to Lukashenko and may be through with him, yet wants a transition in a way that does not create “another anti-Russian, NATO leaning bulwark on its borders”.

But certainly any real level of NATO military threat or intervention, which at this point remains highly unlikely (aside from the possibility of “covert support” to the political opposition and people in the streets), would be met with Russia in turn getting more involved militarily along the lines of another Ukraine crisis scenario. The embattled Belarusian leader has already long hinted that Moscow has vowed as much.

via ZeroHedge News https://ift.tt/3j6velX Tyler Durden

Tending The Portfolio “Garden” As Winter Approaches

Tending The Portfolio “Garden” As Winter Approaches

Tyler Durden

Sun, 08/23/2020 – 11:50

Authored by Lance Roberts via RealInvestmentAdvice.com,

Shortest Bear Market In History

The bulls accomplished their task this week of pushing the S&P 500 index back to “all-time” highs.

“The S&P 500 set a new record high this week for the first time since Feb. 19, surging an eye-popping 51% from its March 23 closing low of 2,237 to a closing high of 3,389 on Tuesday. This represents the shortest bear market and third fastest bear-market recovery ever.” – Yahoo

As we discuss in more detail in this week’s #MacroView, the claim is a bit of faulty as March was not a bear market, but only a correction in the ongoing bull trend.

Nonetheless, in “Close, But No Cigar,” we suspected “new highs” were likely:

“With options expiring next week, the bulls are going to attempt to push markets up. A breakout to all-time highs is entirely possible. However, the question is whether they will be able to maintain it?”

The question of maintaining record highs is going to be the challenge over the next few weeks. Historically, the months prior to an election tend to be volatile, but with the market very overbought there is a risk of a normal correction.

“With the markets overbought on several measures, there is a downside risk heading into the end of the month. These risks come from several fronts we will discuss momentarily. However, from a technical perspective, the downside risk is about 5.6% to the 50-dma and 9.4% to the 200-dma. 

Importantly, earnings season is now behind us and economic data is showing signs of deterioration along with the internals of the market. As we will discuss momentarily, after having been long-biased over the last couple of months, it is now likely time to “tend to the garden”

But first, let’s review some of the factors suggesting the “season may be changing.” 

The Market Has “Bad Breadth”

One of our primary concerns relating to the current elevation in the market has been extremely narrow participation. As Bob Farrell once quipped:

“Markets are strongest when broad, and weakest when narrow.” 

There is little doubt that markets reek of “bad breadth.”  As shown below, the market has achieved new highs with only a small percentage of the S&P 500 index participating.

This “narrowness” is a result of the “passive indexing” effect on the markets which I explained in “Bulls Chant Into A Megaphone:”

“Currently, the top-5 S&P stocks by market capitalization (AAPL, AMZN, GOOG, FB, and MSFT) make up the same amount of the S&P 500 as the bottom 394 stocks. Those same five also comprise 26% of the index alone.” 

“What investors are missing is that the top-5 stocks are distorting the movements in the overall index.

For each $1 put into each of those top-5 stocks, the impact on the index is the same as putting $1 into each of the bottom 394 stocks. Such is clearly not a true representation of either the market or the economy.” 

The two charts below show the problem a bit more clearly. Currently, the “Top-5” and “Top-10” stocks by market capitalization, are now near the largest percentage share since 1980. This far eclipses the “Dot.com” era. 

Furthermore, the “Top-50” stocks owned by hedge funds (which include all of the Top-10 largest), are trading at astronomical values based on 2-YEAR forward estimates. This is occurring at a time where the advance-decline breadth on the Nasdaq stock market is deteriorating sharply. 

These are just some of the participation concerns. Investor exuberance has also reached extremes.

Signs Of Excessive Exuberance

The RIAPro sentiment gauge, which is based on actual investor positioning, is back to more extreme levels. This gauge is different from the CNN gaugeThe RIAPro gauge is based on how investors are “positioning” themselves in the market. In other words, rather than it being based on how investors “feel,” it is what they are “doing” in the market.

However, it isn’t just positioning that is at extremes. The RIAPro Technical Gauge (a weekly composite of technical measures) is also back to extreme levels. Such levels are historically coincident with short-term market corrections. 

I also pulled a few charts from Sentiment Trader which are showing more extreme levels of optimism.

(Click to enlarge. Clockwise from top left: 1) Medium-term risk indicators, 2) Dumb money confidence, 3) Large call-option buyers, and 4) Small call-option buyers.

Historically, each of these indicators tends to align with short-term market corrections, or worse.

Given a large number of confirming indicators, this is why we have decided its time to “harvest” before “winter” approaches.  

Why Investing Is Like Gardening

The biggest mistake that investors make over time is failing to manage investment risk. I have found over the years, the concept of “gardening” tends to resonate with individuals when it comes to portfolios management.

Investing has a lot of similarities to gardening. In the “Spring,” it is time to till the soil and plant your seeds for your summer crops. Of course, the ground must be watered and fertilized, and weeds pulled, otherwise the garden won’t grow. As the “Spring turns into Summer”  it’s time to harvest the bounty the garden has produced and begin to rotate crops for the “Fall” cycle. Eventually, even those crops need to be harvested before the “Winter” snows set in. 

Therefore, in order to have a successful and bountiful garden we must:

  1. Prepare the soil (accumulate enough cash to build a properly diversified allocation)

  2. Plant according to the season (build the allocation based on cycles)

  3. Water and fertilize (add cash regularly to the portfolio for buying opportunities)

  4. Weed (sell loser and laggards, weeds will eventually “choke” off the other plants)

  5. Harvest (take profits regularly otherwise “the bounty rots on the vine”)

  6. Plant again according to the season (add new investments at the right time)

Just like all things in life, everything has a “season” and a “cycle.” When it comes to the markets, the seasons are dictated by the “technical constructs” and the “cycles” are dictated by “valuations.”

Currently, as noted above, the “technical constructs” are warning us we are late into the “Fall” and “Winter” is approaching. This is why we are taking actions to “tend to our garden” now so that we will be prepared for the first “cold snap” of winter.

Tending The Portfolio Garden

Step 1) Clean Up Your Portfolio

  1. Tighten up stop-loss levels to current support levels for each position.

  2. Hedge portfolios against major market declines.

  3. Take profits in positions that have been big winners

  4. Sell laggards and losers

  5. Raise cash and rebalance portfolios to target weightings.

Step 2) Compare Your Portfolio Allocation To The Model Allocation.

  1. Determine areas requiring new or increased exposure.

  2. Calculate how many shares need to be purchased to fill allocation requirements.

  3. Determine cash requirements to make purchases.

  4. Re-examine portfolio to rebalance and raise sufficient cash for requirements.

  5. Determine entry price levels for each new position.

  6. Evaluate “stop-loss” levels for each position.

  7. Establish “sell/profit taking” levels for each position.

(Note: the primary rule of investing that should NEVER be broken is: “Never invest money without knowing where you are going to sell if you are wrong, and if you are right.”)

Step 3) Have positions ready to execute accordingly given the proper market set up. In this case, we are looking for positions that have either a “value” tilt or have pulled back to support and provide a lower-risk entry opportunity.  

The Benefits Of A Healthy Garden

Taking these actions has TWO specific benefits depending on what happens in the market next.

  1. If the market corrects, these actions clear out the “weeds” and allow for protection of capital against a subsequent decline.

  2. If the market continues to rally, then the portfolio has been cleaned up and new positions can be added to participate in the next leg of the advance.

No one knows for sure where markets are headed in the next week, much less the next month, quarter, year, or five years. What we do know is not managing “risk” to hedge against a decline is more detrimental to the achievement of long-term investment goals.

via ZeroHedge News https://ift.tt/3jcI1nb Tyler Durden

South Korea Confirms Most New COVID-19 Cases Since March; US Deaths Drop Below 1,000: Live Updates

South Korea Confirms Most New COVID-19 Cases Since March; US Deaths Drop Below 1,000: Live Updates

Tyler Durden

Sun, 08/23/2020 – 11:25

Summary:

  • US deaths below 1k
  • Cases in line with average
  • India passes 3 million
  • Global cases hit 23.1 million
  • South Korea suffers most new cases since March
  • Australia sees new cases as Victoria outbreak slows
  • Beijing reports no new domestic transmission cases for 7th day

* * *

Once again, the US reported fewer than 1,000 deaths on Saturday (998 to be exact), the latest sign that projections calling for another virus-linked surge in US mortality were way off base. The US also confirmed 45,855 new cases on Saturday, matching the 0.8% daily average increase over the previous week.

All of these data show that CDC Director Dr. Robert Redfield’s announcement late last week that the outbreak in the south was slowing, and that the American outbreak was solidly on a downward trajectory, was correct.

But while the debate over mail-in voting and in-classroom education continues to rage (several colleges have already reverted to all-digital learning, and many of the nation’s largest districts are doing all- or mostly- remote learning despite Trump’s demands for in-person education).

As expected, India’s outbreak crossed the three million mark as the disease tears through the world’s second-most populous country.

Infections increased by more than 69,000, and now stand at 3,044,940. The country’s epidemic is one of the world’s fastest-growing, with more than 65,000 new infections reported every day.

Globally, more than 23.1 million people have been diagnosed with COVID-19 around the world, and more than 14.91 million have recovered, while at least 804,400 people have died, according to Johns Hopkins data.

South Korea is back in focus on Sunday as it continues to battle another wave of the virus, reporting 397 new infections on Sunday, its biggest tally since March, and the latest sign that these new clusters are indeed growing.

The latest numbers brings the country’s total to 17,399. And SK has recorded just over 300 deaths.

Meanwhile, Mexico reported 6,482 new infections, bringing the hard-hit country’s total to 556,216, while officials also reported 644 more deaths.

The WHO said this week that Mexico’s limited testing meant the pandemic was “clearly under-recognized,” in the country, and that many more tests should be conducted per day to better capture the scope of the country’s outbreak. Mexico isn’t alone: it’s a problem that’s also affecting a broad swath of Latin America.

Ireland’s parliament is to be recalled from its recess early as public anger grows over a scandal that’s become known as ‘#golfgate’.

Source: Al Jazeera

Moving on to Australia, the country’s Queensland state had two new virus cases the day after tightening restrictions due to an outbreak at a Brisbane youth detention center. Queensland’s case total stands at 1,105. Gatherings at homes and outdoors across the southeast of the state have been limited to 10 people, and 30 people across the rest of Queensland.

Meanwhile, New South Wales reported another 4 cases.

Australia’s biggest hot spot Victoria reported 208 new infections as a lockdown in Melbourne remained in effect. The state also reported 17 more deaths, according to Victoria’s department of health and human.

The 200+ number came after Victoria reported 182 new cases on Saturday, marking two straight days with new cases under 200.

As China declares one of its vaccine candidates ready to be used under ’emergency use’ guidelines, Russia said Sunday that it expects to produce between 1.5 million and two million doses per month of its COVID-19 vaccine by the year’s end. Eventually it will gradually ramp up production to six million doses a month, according to the RIA news agency, which cited industry minister Denis Manturov.

Meanwhile, last night, Beijing health officials reported 12 new ‘imported’ cases on Sunday, China’s 7th straight day without any local transmission.

Large-scale testing of the vaccine, developed by Moscow’s Gamaleya institute, is due to start in Russia next week, and will also be carried out with partner countries around the world.

The Philippines recorded 2,378 new coronavirus infections, its smallest daily spike in nearly four weeks, but the nationwide tally rose to 189,601, still the highest in Southeast Asia.

In a bulletin, the department of health also reported another 32 deaths, bringing the Philippines’ death toll to 2,998.

via ZeroHedge News https://ift.tt/34pbgPp Tyler Durden

The Tyranny Of Groupthink

The Tyranny Of Groupthink

Tyler Durden

Sun, 08/23/2020 – 11:00

Authored by David Stockman of Contra Corner blog, via LewRockwell.com,

The broad market (S&P 500) is trading at the highest forward PE multiples since November 1999, but the financial press is rife with mendacious piffle claiming there is no bubble. For example, in celebration of Tuesday’s all-time high on the S&P 500, one James Mackintosh of the Wall Street Journal minced no words:

Except, the Everything Bubble is in the imagination of the many investors complaining about it. First, it isn’t everything. Second, it isn’t a bubble….

Right. Supposedly, the above statement is true because energy sector stock prices are in the tank, but the market is being rationally led by the tech giants where allegedly solid prospects for earnings growth are being rewarded with higher PE multiples owing to ultra-low interest rates.

…Lower rates mean profits further in the future matter more to the share price, so companies with steady earnings no matter what the economy does are worth more. Those that are sensitive to the economy are worth less, because future earnings are expected to be hit. Growth stocks do incredibly well, because their future earnings are expected to be higher and, at least for those thought immune to economic weakness, worth more as well thanks to lower rates.

Apply this framework and there’s no bubble. U.S. stocks are more highly valued than in the past because they are dominated by big growth stocks, themselves justifiably more highly valued thanks to low rates.

The sheer laziness and conformism of today’s so-called financial journalists is a wonder to behold. When the leader of the tech growth stocks, Apple, crossed the $2 trillion market cap barrier for the first time today, thereby embodying more market cap than the entire Russell 2000 of small cap US companies, Mackintosh’s colleague at the Wall Street Journal spewed the same groupthink:

The stock has more than doubled from its March 23 low, boosted by steady demand for the company’s devices and better-than-feared results in its core iPhone business as millions of Americans work from home.

Steady sales growth is driving the string of achievements. Apple’s sales rose to $260 billion in the fiscal year ended in September from $216 billion three years prior. The company has even grown sales during the pandemic: For the quarter ended in June, they rose 11% from a year earlier to nearly $60 billion, exceeding Wall Street expectations. Earnings surged to $11.25 billion.

Apple is not a growth stock. Period.

The three-year sales gain cited by the WSJ amounted to only 6.4% per annum, but also reflects what amounts to journalistic malpractice.

That’s because the starting figure of $216 billion for Apple’s FY 2016 sales actually reflected a 7.8% decline from sales of $234 billion in FY 2015. So the four-years growth rate of sales through FY 2019 was, well, a mere 2.67% per annum.

Likewise, the 11% sales gain during the June 2020 quarter versus prior year is completely misleading. During the past four quarters, the year-over-year sales gains have been all over the lot, posting at 10.9%, 1.0%, 8.8% and 1.8% respectively. Accordingly, for the LTM period ended in June, the sales gain was just 5.7% – hardly a barn-burning growth figure.

Likewise, the purported June quarter earnings “surge” to $11.25 billion was nothing of the kind. During the 2018 June quarter, for instance, net income posted higher at $11.52 billion. The surging at issue, therefore, was one of backward motion.

In fact, the only thing about Apple which has been in a growth mode during the last five years is the company’s PE multiple, which has essentially doubled from 14X to 35X at today’s record share price.

As to the actual 5-year trend of sales and earnings growth, not so much.

Back in June 2015 Apple was valued at $715 billion on the strength of its unparalleled tech product franchise, which was reflected in $224 billion of annual sales and $50.7 billion of LTM profits.

Still, there was a reason for the modest implied PE multiple of 14.1X: Namely, the tech behemoth’s growth rate was rapidly slowing – freighted down by the inherent limits embedded in its enormous scale and the then modest expectations for earnings expansion in the immediate years ahead.

Those modest expectations were accurate. Five years later, the LTM figures for June 2020 came in at $273.9 billion of sales and $58.4 billion of net income.

Yes, the latter figure represents a lot of profits, but it embodies hardly a modicum of growth. In fact, Apple’s five-year sales growth rate was just 4.1%, while its net income growth rate clocked in at only 2.9% per annum.

Moreover, there has been no recent growth spurt to accelerate these five-year trend rates of growth. The two-year growth rates are even slower, with sales posting at 3.6% per annum and net income rising by just 2.03% per year.Wiser: Getting Beyond …Hastie, ReidBest Price: $1.07Buy New $14.14(as of 04:01 EDT – Details)

Needless to say, the doubling of Apple’s PE multiple has nothing to do with its punk five-year net income growth rate of 2.9% per annum; it’s about the Fed’s radical repression of interest rate and the resulting diversion of trillions of borrowed capital into the inflation of risk asset capitalization rates.

Nor is Apple some kind of outlier, albeit it is the monster of the tech midway. Overall, the so-called Fab Five (Amazon, Apple, Microsoft, Facebook and Google) reflect the same multiple inflation story; and they are obviously the pile driver that is pushing the heavily ETF and indexer-driven stock market up into the nosebleed section of history.

Thus, back in June 2014, the Fab Five’s combined market cap weighed-in at $1.63 trillion and accounted for 9.5% of the overall S&P 500’s market cap of about $17.0 trillion.

Fast forward six years, and the Fab Five were valued at today’s close at $7.1 trillion, which accounts for 26% of the $27.7 trillion total market cap of the S&P 500.

So, yes, the term “pile-driver” is probably an understatement. Fully 50% of the S&P 500’s $10.7 trillion market cap gain since June 2014 is attributable to the Fab Five.

At the same time, the combined net income of the Fab Five has risen from $76.3 billion to $170.7 billion, meaning that the already frisky PE multiple of 21.4X for the group as a whole in June 2014 has now stands at 42.0X.

Obviously, averages can be misleading, but they do not lie. The composite net income growth rate of the Fab Five “growth stocks” has been just 14.4% over the past six years.

In a world which is literally unwinding at the seams owing to the Covid pandemic and a $260 trillion burden of debt, a valuation multiple equal to 42X or nearly three times the trailing growth rate makes no sense whatsoever.

That’s because the James Mackintosh groupthink cited above is marred with a mighty flaw. To wit, you can’t value earnings into the indefinite future owing to today’s ultra-low interest rates that are definitely not sustainable.

The Fed’s policy of radical interest rate repression simply defies the laws of finance and common sense because real yields are negative, and in the long-run negative real yields are an oxymoron.

The chart below is the smoking gun. Once upon a time there was meaningful daylight between the brown line (nominal yield on the benchmark 10-year UST) and the purple line (running inflation rate measured by the 16% trimmed mean CPI).

That is, even so-called risk-free US Treasury debt had a real yield of 200-400 basis points to account for taxes and a real return on investment.

But after the final leap into monetary madness commencing with the financial crisis of 2008-2009, the real yield had virtually disappeared; and then after the massive $3 trillion Fed bond-buying spree commencing in mid-March, the benchmark security of the entire global fixed income market went deeply negative in real terms.

As of the latest month, the running inflation rate clocked-in at 2.27% (June LTM) compared to an all-time low yield on the 10-year UST of 52 basis points a few weeks back.

Needless to say, when the real cost of risk-free benchmark debt is negative 175 basis points, you are not in an indefinitely sustainable steady state. You are actually courting financial disaster.

That’s especially because fiscal policy in the US and elsewhere around the world has become completely unhinged.

So unless the Fed and other central banks continue their massive bond purchases in response to this tsunami of public debt, the bond pits are heading for a train-wreck some time soon; and if the central banks continue to print at current lunatic rates, the monetary system itself will go into meltdown.

Still, the misbegotten idea that the stock market isn’t overvalued because bond prices have been massively inflated by central bank money-pumping is just one instance of the present tyranny of groupthink – called to attention by Apple’s crossing the $2 trillion market cap barrier.

In fact, groupthink is omnipresent in the the mainstream narrative and so-called news. The nearly universal belief that the Covid-lockdowns were necessary and effective and that the coronavirus can be stopped by brute-force economic and social regimentation is another case in point – underscored by a new analysis of the Swedish outcome.

The mainstream narrative, of course, is that Sweden’s no lockdown policy – the schools, restaurants, movies, gyms, malls etc. remained open – was a disastrous failure, thereby vindicating the universal quarantine approach of Dr. Fauci, Governor Cuomo and the rest of the Blue State Virus Patrol.

But that’s based on the irrelevant observation that Sweden’s overall WITH-Covid mortality rate of 56 per 100,000 is far higher than that of Norway, Finland and Denmark.

The truth is, Sweden’s mortality rate happened in the long-term care facilities, where 75% of the country’s 5,800 WITH-Covid deaths to date (August 18) have occurred, and which is neither here nor there when it comes to lockdowns of the non-elderly population.

Fortunately, a breakdown of Sweden’s WITH-covid deaths by detailed age brackets is readily available and it puts the kibosh on Dr. Fauci’s Lockdown Nation folly.

Number of WITH-Covid deaths/ Population/Rate per 100,000 by age cohort:

  • 0-9 years: 1/1.22 million/ 0.08 per 100,000;

  • 10-19 years: 0/1.19 million/ 0.0 per 100,000;

  • 20-29: 10/1.31 million/ 0.77 per 100,000;

  • 30-39 years: 16/1.37 million/ 1.16 per 100,000;

  • 40-49 years: 45/1.31 million/ 3.42 per 100,000;

  • 50-59 years: 162/1.27 million/ 12.8 per 100,000;

  • 60-69 years: 398/1.14 million/ 34.8 per 100,000;

  • 70-79 years: 1,250/.917 million/ 128.7 per 100,000;

  • 80-90 years: 2,408/.425 million/ 567.0 per 100,000;

  • 90 years plus: 1,512/.119 million/ 1,271.0 per 100,000.

So, yes, Sweden has a WITH-Covid mortality rate of 56 per 100,000 for the entire country. But 26% of those deaths occurred among the population 90 years and older, which accounts for just 1.1% of Sweden’s population.

Similarly, 67% of the deaths were among the population 80 years and older and 93% were among those aged 65 or more. By contrast, persons 65 and older account for just 19% of Sweden’s population, and the preponderant share of the latter, who have suffered serious illness or death from the Covid, were already in long-term care facilities and programs.Nudge: Improving Decis…Richard H. Thaler, Cas…Best Price: $5.26Buy New $9.75(as of 09:25 EST – Details)

Needless to say, locking down the schools, gyms, restaurants and malls does nothing for the institutionalized population of the vulnerable elderly and co-morbid. Sheltering and treating the latter in place, rather than quarantining the younger, healthier populations, is the self-evident answer.

Indeed, the virtue of Sweden’s anti-lockdown strategy virtually screams out from the schedule above. Sweden did not close its schools, yet there has been just one WITH-Covid death among its 2.4 million school age children under 20 years.

Likewise, there have been just 71 deaths among its 4.0 million prime working and consuming age population (age 20-49). That’s a rounding error mortality rate of 1.77 per 100,000. Who in their right mind would want to shutdown the economy based on such infinitesimal risks?

Stated differently, the risk of death from Covid in Sweden has been 720X higher for the largely institutionalized 90 and over population compared to the prime working age group (20-49 years); and has also been 157X higher for the entire population 65 and over than for prime workers and the population that is the preponderant patron of the social congregation sectors of the economy.

Fortunately, Sweden also has readily available data on normal, year-in-and-year-out mortality, which rate is about 862 per 100,000 for the total population. But when you breakdown these normal mortality rates by age cohort and cause of death, the insanity of Lockdown Nation become all the more apparent.

Specifically, there are about 3,429 deaths per year in Sweden from auto crashes, falls, drownings, electrocutions, poisonings and other accidents, and these account for about 4% of Sweden’s 2019 death total from all causes of 89,000.

However, when you look at mortality rates per 100,000 from accidents alone, the starling result is that the existing risk of death from accidents is far higher than from the Covid for the entire 8.4 million population under 65 years of age, and for the young and middle-aged decidedly so.

Mortality rates per 100,000 for accidents versus Covid and ratio of accident/Covid risk:

  • 0-14 years; 1.38 versus 0.06=25X;

  • 15-44 years: 12.3 versus 1.2=10X;

  • 45-64 years: 20.6 versus 15.4=1.34X;

  • 65 years & older: 115 versus 257=0.45X.

In short, when the ordinary risk of death is 10-25X greater for accidents than from the Covid for the young and working population, you don’t shutdown the economy and the main avenues of social congregation.

Due to enlightened leadership by Sweden’s health professionals and leading epidemiologists, they got it right, and now both new cases and WITH-Covid deaths have virtually disappeared.

And that’s to say nothing of the fact, that Sweden’s Q2 GDP decline of just 8.6% was far better than the double digit declines in the US and most European countries, which imposed far more draconian lockdowns.

In America, by contrast, the tyranny of groupthink on the matter has become so great that college football and in-person college classes are being closed from coast-to-coast when the risk of serious illness or death among the college age population here, like in Sweden, is virtually nil.

via ZeroHedge News https://ift.tt/2Ew3Qi9 Tyler Durden

“Horrendous” Market Breadth “Stinks To High Heaven”, Screams Imminent Risk-Off

“Horrendous” Market Breadth “Stinks To High Heaven”, Screams Imminent Risk-Off

Tyler Durden

Sun, 08/23/2020 – 10:35

With the S&P500 closing at a new all time high just shy of 3,400 on Friday, one may be tempted to think that there is a raging bull market (if one sparked by trillions in Fed liquidity, and certainly not due to economic fundamentals). Alas, one couldn’t be further from the truth. In fact, the series of consecutive record highs last week have been entirely on the back of just a handful of stocks as market breadth has collapsed to levels that typically precede major downward market crashes.

While we previously discussed the unprecedented market cap concentration of just a handful of companies (spoiler alert: it’s the FAAMGs with AAPL surpassing the $2 trillion barrier last week, and then adding a quick $100 billion in market cap on Friday on no news and merely due to a surge in call buying ahead of Monday’s stock split record date, which pushed the stock within inches of $500/share) consider that all of last week’s record highs in the S&P were set on negative breadth, meaning that there were more decliners than advancers.

It gets better: as the traditionally bullish and cheerful Bloomberg commentator Andrew Cinko writes, “Friday was even more outlandish in terms of narrowness” as it wasn’t a market of stocks on Friday, but just one single stock that moved the market (guess which one):

  • 87% of DJIA point gain came from Apple: (index +191pts vs AAPL’s contribution 167pts)
  • 103% of S&P 500 increase (11.7 vs 12.0)
  • 148% of Nasdaq Composite (46.9 vs 69.7)
  • 105% of Nasdaq 100 (78.1 vs 81.8)

As Cinko explains, extending an analogy we first made last week…

… it’s really the S&P1 and the reason for Friday’s dismal move “is simply math with Apple’s market cap so immense it is slowly but surely becoming the American stock market.”

That realization may prompt the index’s managers to make some sort of capitalization-weighted adjustment to give the little guys a chance, though such mathematical manipulations don’t change the fact that Apple and its mega-cap tech peers are eating the world.

Meanwhile, as we first discussed in “This Is What The S&P Would Look Like Without The 5 Megacap Tech Stocks“, Cinko notes that “we already have a solution in the equal-weighted S&P 500, which sank 1.54% last week versus a 0.72% rise for the cap-weighted version” which alone makes more sense given the negative breadth and the impact of just one stock.

As an aside, while it’s beyond the scope of this article to discuss last week’s berserk move in AAPL stock, we will note that the put-call skew in AAPL has absolutely imploded in recent days as a result of an unprecedented surge in call buying which due to positive gamma, is single-handedly pushing AAPL stock to daily record highs, which in turn leads to more call buying, pushing the stock even higher, and so on.

As a reminder, as we described first one month ago in “Goldman spot a historic inversion in the market“, “Negative skew is a relatively rare statistic for large cap names such as AMZN (where three month skew is currently at all-time lows), implying crowding in long AMZN calls.” Just replace AMZN with AAPL and you know all there is to know about what is pushing not just AAPL but the entire market higher.

But wait, there’s more.

As Larry McDonald writes in his latest Bear Traps report, “just 44, or 1.4% of the 3,068 NYSE issues traded hit new 52-week highs; on the Nasdaq, it was 137, or 4.0% of 3,450 issues traded. The indexes don’t have much company at these rarefied levels. The minuscule number of equities at 52-week highs with the index right at the highs is unprecedented and shows just how weak current breadth is.”

It gets worse: as McDonald further notes, the number of stocks trading above their 200DMA has also collapsed, from a relatively healthy 67% in February (just before the market crashed), to just 47% currently.

And while we observed above that all the upside in the market on Friday was entirely due to Apple, which helped the Nasdaq notch a 0.4% gain to a new all time high, here is just how bad it was away from Apple, where only 29% of stocks on the Nasdaq managed to close up on Friday (and 31% on Thursday), which according to McDonald “was the lowest in history, by far with 805 up and 1878 stocks down.”

Said otherwise, the Nasdaq closed not only green but at an all time high even as 70% of issues closed in the red. This was the 5th worst Advance/Decline day in the last 30 years.

What about the S&P? Here, Bloomberg’s Andrew Cinko again provides some perspective, writing that when “looking back for a five-day S&P 500 gain of 0.72% or more with median five-day breadth of 34% or less shows 24 other periods. But they do cluster, and the chart below shows only those occurrences for 1999/2000, 2003, 2008, 2010, 2014/2015 and this year.”

One can bucket the occurrences like this:

  • Post-bear market rallies that stalled: 2003, 2010
  • Bubble trouble: 1999/2000, 2008
  • Economic growth scares after a long run: 2014/2015

The problem, as Cinko notes, is that 2020’s pandemic-induced economic crash and the fastest recovery ever from a bear market might not fit into any one of the above buckets (especially with the Fed now explicitly egging on the market). It also means that, according to the Bloomberg strategist, “history is of no guide as to what to expect next in our current situation. Though I suppose one thing is clear from the chart, especially since 2010 onward: The easy ride higher is over for the time being, and churning price action is likely in store for investors until the next direction (up or down) becomes clearer.

There is less confusion when looking at the next chart courtesy of the BearTrapsReport, which highlights the top 10 large net-decliner days when the S&P 500 still closed positive: “This shows that market leadership is not only fleeting, but the index is being completely carried by a few names. Historically this points to an imminent risk-off phase in the market.”

Some more detail on the worst A/D days when the S&P closed positive (chart above):

  • #1, or the worst day since 1995, was July 17th, 2015. The S&P peaked the day after before pulling back -12.5% into the Yuan devaluation.  
  • #2 was February 23rd, 2000, a month before the dot-com peak.
  • #3 was this Thursday.
  • #4 was May 11th, 2020, market pulled back -5% in the next 3 days.
  • #5 was March 17th, 2000, a week before dot-com peak.

What does the chart above mean:

This week we had 3 days where the S&P 500 closed positive and the advance-decline line was negative. Since 1995, there was only 1 other week where this occurred in June 1997. However, this week is not comparable in our view, as the negative a/d numbers were pretty close to zero (-6, -37, -35) that’s vs. (-161, -193, -61) this week. This week’s a/d numbers were very significant in terms of size relative to history. Since 1995 there has been 287 days when SPX closed positive and the a/d was negative. However, Thursday’s -193 was the 3rd lowest ever. Tuesday’s was #7 on the list.

In short, while on every previous occasion when stocks inched higher led by just a handful of stocks, the market tumbles shortly thereafter, what is especially notable is that the last time we had a cluster of such negative A/D days with the S&P closing at all time highs was just days before the dot-com bubble burst.

via ZeroHedge News https://ift.tt/3gmrX0d Tyler Durden

At Least 13 Killed In Peru Nightclub Stampede Triggered By Police ‘Social Distancing’ Raid

At Least 13 Killed In Peru Nightclub Stampede Triggered By Police ‘Social Distancing’ Raid

Tyler Durden

Sun, 08/23/2020 – 10:10

In an example of COVID-19-related law enforcement gone horribly awry, 13 people were killed in a deadly stampede, as patrons tried to flee a surprise police raid on a crowded Lima, Peru nightclub on Saturday night.

At least 6 people were seriously injured, including 3 cops.

Orlando Velasco Mujica, general of the Peruvian National Police Police, told CNN that police were summoned to the Thomas Restobar in the Los Olivos district of Lima, Peru’s capital city, on Saturday evening. They were ordered to shut down an illegal party, where officials believed more than 120 people were in attendance.

Peru is struggling with one of Latin America’s deadliest and most devastating outbreaks. Strict docial distancing measures have been mandated nationwide, along with a 10 pm curfew in an effort to slow the virus’s spread.

Despite taking strict preventative measures early on, Peru has racked up more than 576,000 cases, and more than 27,000 deaths, according to JHU. The country has Latin America’s second-highest infection rate.

Peru ordered the closure of nightclubs and bars back in March, and banned extended family gatherings on Aug. 12.

According to an official statement delivered to CNN, the Ministry of the Interior reported that the police did not use “any type of weapon or tear gas to clear the premises.” When people began to flee the 2nd floor venue, they were crushed on the steep stairs.

Already, 23 people have been arrested, and officials are looking to hold the owners of the nightclub responsible.

via ZeroHedge News https://ift.tt/2YpS4gH Tyler Durden