Category: zerohedge

Hypersonic weapon development is among the highest priorities of global superpowers as a great-power competition rages between the US and China. 

China is rapidly developing hypersonic weapon systems and has fielded some of these superfast weapons to its southeast coast and or militarized islands in the South China Sea – challenging the US’ air dominance in the Indo-Pacific region. 

The problem is that for decades the US has been lightyears ahead of other countries in developing and fielding anti-ship cruise and ballistic missiles but, for some reason, is having difficulty fielding hypersonic weapons. 

On Monday, at the annual Air Force Association Air, Space & Cyber conference, USAF Secretary Frank Kendall told reporters that he is reassessing the USAF’s hypersonic program, according to Breaking Defense. “I’m not satisfied with the pace,” he said. “We’re making some progress on the technology; I would like to see it be better.”

Kendall said he is “not satisfied with the degree to which we have figured out what we need for hypersonics — of what type, for what missions.”

“The target set that we would want to address, and why hypersonics are the most cost-effective weapons for the US, I think it’s still, to me, somewhat of a question mark,” he said. “I haven’t seen all the analysis that’s been done to justify the current program.”

Gen. Arnold Bunch, the head of Air Force Materiel Command, told reporters on Tuesday that “there are certain aspects, attributes that [have] not performed the way we need to,” while acknowledging the hypersonic program has hit obstacles. 

“We are going to have to continue to put our focus there, and we will continue to take what are called educated risks as we move forward so that we can get a capability out in the field as quickly as possible,” Bunch said.

While China and Russia have fielded hypersonic weapons, the US has not and recently experienced a failed air-launch test of a missile that can travel at Mach 5, or about 3,836 mph. 

In terms of funding, the push for hypersonic weapon development occurred under the Trump administration and has continued under Biden. 

America is trying to reassert its air dominance worldwide, but it’s having trouble developing hypersonic weapons as other superpowers soar ahead. 

Authored by Katabella Roberts via The Epoch Times (emphasis ours),

The “black swan” event of a solar superstorm directed at earth could prompt an “internet apocalypse” across the entire globe that could last for several months, new research (pdf) has warned.

University of California Irvine assistant professor Sangeetha Abdu Jyothi presented the new research, titled “Solar Superstorms: Planning for an Internet Apocalypse,” last month during the Association for Computing Machinery’s annual conference for their Special Interest Group on Data Communication (SIGCOMM).

“One of the greatest dangers facing the internet with the potential for global impact is a powerful solar superstorm,” Jyothi wrote in the new research paper.

“Although humans are protected from these storms by the earth’s magnetic field and atmosphere, they can cause significant damage to man-made infrastructure. The scientific community is generally aware of this threat with modeling efforts and precautionary measures being taken, particularly in the context of power grids. However, the networking community has largely overlooked this risk during the design of the network topology and geo-distributed systems such as DNS and data centers,” he continued.

A solar storm, also known as a Coronal Mass Ejection (CME), occurs when a large mass of plasma and highly magnetized particles violently eject from the sun. Large CME’s can contain up to a billion tons of matter and can get accelerated to large fractions of the speed of light.

When the earth is in the direct path of a CME, these magnetized and charged solar particles interact with the earth’s magnetic field, producing geomagnetically induced currents (GIC) that can potentially disrupt communication satellites and long-distance cables that provide the world with the internet.

According to Jyothi’s research, power grids, oil and gas pipelines, and networking cables are the most vulnerable to the impacts of GIC’s, while submarine cables, which span hundreds or thousands of kilometres, are even more vulnerable than land cables, due to their larger lengths.

Owing to a lack of real world data on the impacts of GIC’s on these submarine cables, scientists still don’t know how long it would take to repair them if such an event were to occur, and—just like natural disasters such as earthquakes—CME’s are extremely difficult for scientists to predict.

The research noted that the “distribution of internet infrastructure is skewed when compared to the distribution of internet users,” and high-latitude climates are more at risk if a solar storm were to occur.

“The U.S. is one of the most vulnerable locations with a high risk of disconnection from Europe during extreme solar events. Intra-continental connections in Europe are at a lower risk due to the presence of a large number of shorter land and submarine cables interconnecting the continent,” the report notes.

Meanwhile, if a severe solar superstorm were to occur, Singapore would maintain good connectivity to neighboring countries, while cities in China would be more likely to lose connectivity than India because China connects to much longer cables.

Australia, New Zealand, and other island countries in the region would be at high risk of losing most of their long-distance connections.

The research warns that a collapse of the internet—even one lasting a few minutes—could cause devastating losses to service providers and damage cyber-physical systems. The economic impact of an internet disruption for a day in the United States is estimated to be over $7 billion.

While the likelihood of a solar superstorm hitting earth is rare—with astrophysicists noting that the probability of extreme space weather events that directly impact earth occurring are between 1.6 percent to 12 percent per decade—they can still happen.

In 1921, a solar storm, driven by a series of coronal mass ejections, triggered extensive power outages and caused damage to telephone and telegraph systems associated with railroad systems in New York City and across the state.

Years later, in 1989, a solar storm bought an electrical power blackout to the entire province of Quebec, Canada.

“Although we have sentinel spacecraft that can issue early warnings of CMEs providing at least 13 hours of lead time, our defenses against GIC are limited. Hence, we need to prepare the infrastructure for an eventual catastrophe to facilitate efficient disaster management,” Jyothi said.

The research pointed to “increasing capacity in lower latitudes for improved resiliency during solar storms,” and having “mechanisms for electrically isolating cables connecting to higher latitudes from the rest” at submarine cable landing points to prevent large-scale failures.

The paper has yet to appear in a peer-reviewed journal.

Katabella Roberts is a reporter currently based in Turkey. She covers news and business for The Epoch Times, focusing primarily on the United States.

Iran is calling out a double standard when it comes to application of International Atomic Energy Agency (IAEA) restrictions and monitoring of countries’ nuclear development and activity, joining China in condemning the US-UK-Australia defense pact recently unveiled.

Iran’s ambassador to the IAEA said this week amid all the headlines and controversy over the AUKUS deal which will see the US transfer nuclear submarine technology to Australia that the IAEA must have access to all nuclear fuel to be used for Australia’s future submarines when the terms of the AUKUS are put in motion. 

Iran’s ambassador to the IAEA, Kazem Gharibabadi told the international body this this must happen in a timely manner, according to Iranian state media.

“For Australia, reaching safeguards arrangement with the Agency is of essence. The Agency should have access to the HEU [highly-enriched uranium] there at agreed and reasonable time and no excuse is accepted in this regard,” Gharibabadi stated. “The Agency should keep the BoG [Board of Governors] informed on this important [issue] regularly.”

He reminded the monitoring body that nuclear-powered submarines require fuel to be enriched to above 90% purity, which is far above Iran’s current enrichment of up to 60%, which Gharibabadi claimed is only “for humanitarian and peaceful purposes.”

The official further slammed the US, UK and Australia for what he called the “vulgar facade of double standard and hypocrisy”. This after Chinese officials have been charging Australia with violating its policy of having a nuclear free zone according to it’s decades ago signing on to the Non-Proliferation of Nuclear Weapons (NPT).

The Iranians are now echoing these charges, saying Washington will transfer the nuclear technology “under the pretext of the fabricated so-called strategic concerns.”

Tehran has of late been in a war of words with the IAEA over monitoring nuclear sites inside the Islamic Republic. Earlier this month an agreement was belatedly reached to keep cameras on which remotely monitor sensitive sites to ensure Iran doesn’t ramp up uranium enrichment or other activities further.

Authored by Li Hai via The Epoch Times,

Some Democrats in Congress are trying to abolish the Space Force at a time when China and Russia have been doubling down on expanding their military capabilities in space.

On Wednesday, Rep. Jared Huffman (D-Calif.) introduced a bill named No Militarization of Space Act, trying to abolish the Space Force, a new military service branch created under former President Donald Trump.

“The long-standing neutrality of space has fostered a competitive, non-militarized age of exploration every nation and generation has valued since the first days of space travel,” Huffman said in a statement.

“But since its creation under the former Trump administration, the Space Force has threatened longstanding peace and flagrantly wasted billions of taxpayer dollars.”

The Space Force was established in December 2019 and has been deemed by some to be one of Trump’s signature achievements. But its origin can be traced back to the beginning of the Cold War.

“Our mission must be to support the American people, not spend billions on the militarization of space,” Huffman added.

Huffman’s bill was co-sponsored by Reps. Mark Pocan (D-Wis.), Jesús García (D-Ill.), Rashida Tlaib (D-Mich.), and Maxine Waters (D-Calif.).

The bill comes as Congress moves to pass the National Defense Authorization Act, the annual bill that authorizes funding for the military.

Huffman’s bill is unlikely to succeed because the new military branch was established upon the National Defense Authorization Act (FY 2020), which received bipartisan support at the time. To cancel the Space Force, new legislation would need to be enacted.

China and Russia have been trying to advance their military capabilities in space for years.

China’s communist regime “has devoted significant resources to growing all aspects of its space program, from military space applications to civil applications,” reads the Pentagon’s latest annual report to Congress.

In May, China placed a rover on Mars, becoming the second nation after the United States to do so, the state-run Xinhua News Agency reported. China has continued to develop its space station and explore the moon.

According to the Center for Strategic and International Studies and the Secure World Foundation reports, Russia performed multiple anti-satellite weapons tests in 2020. China and India have tested their own military capabilities in orbit in past years, too, Axios reported.

On Monday at the Air Force Association’s Air, Space & Cyber Conference, U.S. Air Force Secretary Frank Kendall said that the threats presented by China continue to grow, including those from space.

On Tuesday, Gen. John “Jay” Raymon, chief of Space Operations, talked about the anti-satellite weapons China and Russia have owned.

China has deployed satellites with a robotic arm that could be used to “grab” other satellites. Russia has a co-orbital, anti-satellite weapon that “is specifically designed to kill U.S. satellites,” Raymon said during the same conference.

President Joe Biden hasn’t publicly shared his views on the future of the Space Force. His press secretary Jen Psaki dodged such a question in February, weeks after Biden took office.

However, she took to Twitter to say that “we look forward to the continuing work of Space Force,” signaling that Biden had no intention to change Space Force’s status at the time.

“We look forward to the continuing work of Space Force and invite the members of the team to come visit us in the briefing room anytime to share an update on their important work,” Psaki wrote.

The Epoch Times has contacted the White House and the Space Force for comment.

Two weeks ago, JPMorgan’s prime desk wrote about 2 main themes among the hedge fund community: elevated leverage levels and low exposure to cyclicals/value that tend to do better when rates are rising. However, over the past week, both of these things have come into sharper focus as US equities suffered one of their larger pullbacks in a while and rates globally jumped higher towards the end of this week. 

So what has the largest bank’s prime brokerage desk seen in the past week? 

According to the latest weekly Positioning Intelligence report published by the bank, at a high level, it seems that HFs are not that concerned about the broader market (nor is anyone else for that matter) with the bank finding that over the past few months, there’s been limited willingness to sell dips.  In line with this, the bank saw neutral flows globally over the past week with small buying on Monday, alongside retail BTFDers, even as professional sentiment tracked by AAII turned the most bearish since last October…

… followed by small selling on Thursday.  But more generally, net flows globally have remained neutral to skewed towards buying in the past 2 weeks with Asia the only region to see some selling.

Furthermore, as has been the case for much of 2011, net leverage remains near highs with little change in the past few weeks—net at 98th percentile (of all time) across All Strategies. While gross leverage has come down a little to the 76th percentile, that appears to be more derivatives related and there could be an element of Quadruple Witching that might be impacting this as the largest gross leverage reductions were among Multi-Strat funds. According to JPM, one reason why leverage and flows among HFs might be more neutral this month is that performance has held in relatively well MTD: long-short spreads have been improving over the past few months.  Looking at this month, longs are holding up well, while shorts are down in line with the market. This leaves HFs up slightly MTD, according to JPM estimates.

Back to the topic of leverage, FINRA just came out with its latest statistics on Margin Debt which showed them at a new ATH. Given it is up almost 60% since the start of 2020, it begs the question Bank of America asked one month ago: should we be concerned? Not surprisingly, JPM dismisses this indicator and thinks “this alone is not something that is concerning when one breaks down the changes and behavior to account for how the market has been performing.” Furthermore the JPM prime desk notes that “this appears to be very different from the peaks in 2000 and 2007 when Margin Debt rose about 50% faster than the S&P 500 over a 12-month period.” Instead, to JPM the recent moves seem more reminiscent to what happened in the early 90s.

At a more micro level, cyclicals / value / inflation / travel related stocks have all been doing better recently as COVID are falling once more, some travel restrictions are getting lifted, and rates are rising globally. 

In line with this, JPM continued to see buying of NA Financials, something that has been noted over the past few weeks, but this week JPM saw Banks getting bought (vs. more Insurance and Div. Fins in prior weeks).  COVID recovery stocks have also been bought but there’s room for more to go as positioning and valuations remain low in many cases (especially among the US COVID – Domestic Recovery basket, JPAMCRDB).  EMEA Travel & Leisure stocks saw strong buying in the past week as the US prepares to drop its ban for transatlantic travel, and net positioning is getting a bit elevated vs. history; however, EMEA Airlines still has low positioning.  Finally, not everything cyclical is getting bought—HFs have continued to sell Energy into strength – despite the recent surge in oil and all other commodities – and have also sold Materials. 

Below we share some more details on each of these core themes

Main theme #1: Global Flows and Leverage: HFs Don’t Seem Too Concerned

While markets have been volatile over the past week, due to the myriad concerns, HF flows remained quite calm.  The reason is that hedge funds have been reluctant to sell dips and that appeared to be the case again last Fri/this Mon as global flows were quite neutral.  However, at the same time, HFs are also not chase the rally as the JPM Prime net flows were fairly neutral on Wed and skewed towards selling on Thurs when markets rallied back.

A notable observation is that there appears to be some strategy differences in the past 2 weeks as Equity L/S and Quant funds have been buyers while Multi-Strats have been net sellers across JPM prime.  The selling among Multi-Strats comes as gross and net leverage have started to pull back from peak levels. 

The gross reductions among some Multi-Strat funds have been the main driver of the broader “All Strategies” gross leverage figure lower WoW.  However, net leverage was basically unchanged. Furthermore, it appears derivative positions might be driving some of the changes as notional LMV and SMV increased WoW while delta adjusted LMV and SMV fell.  

Among Equity L/S funds, who have been moderate net buyers of equities most days MTD, net leverage actually rose slightly WoW and it’s now at the 93rd %-tile since Mar 2017.  

#2:  US Margin Debt: New ATHs at End of Aug…Should We Be Concerned?

FINRA just released the latest monthly stats on “Margin Debt” which showed a fairly large increase, following a decrease in July.  As Margin Debt is at new All-Time-Highs and is now up almost 60% since the start of 2020, it’s worth asking -as BofA did one month ago –  if this is something we should be concerned about.  

In order to answer this, we’ve looked at the relationship between Margin Debt and the markets over time, augmenting the data FINRA has on it’s website with NYSE Margin Debt data that goes back to 1959.  What this shows is that while there is a very big increase recently, it is 1) in line with the markets and 2) seems to be following the general pattern of the past 60+ years.  

Similar to discussions of rate-driven VaR shocks, JPM argues that it’s not so much the level of Margin Debt that one should be focused on, but rather the rate of change. On this point, the bank measured the 12M change in Margin Debt and the S&P 500 over the past ~60 years and what this shows is that there is typically a fairly strong correlation over time. In particular, this correlation has been very strong since the GFC, but there were a couple notable divergences in 2000 and 2007 when Margin Debt rose much faster than the market.

In its attempt to mitigate concerns about record margin debt, JPM then notes that increases in Margin Debt (i.e. investors taking on more leverage) that exceed the market returns by a wide margin could indicate greater potential for future stress because it might suggest that investors are adding leverage at market highs, but not actually making much money while doing so. Thus, when markets start to pull back, the recent investments start to lose money more quickly than if they had been added when the markets weren’t at highs.

Addressing this point, JPM notes that when looking at what’s happened in the past 2 years, we have seen Margin Debt increase faster than the markets on a 12M rolling basis with the difference reaching +28% at its recent high.  However, the recent high in the 12M difference metric was reached in January of this year (perhaps due to the fact that HFs had performed very well in 2020 and had been adding risk throughout 2H20 in particular). Thus, this difference has been falling for much of the past 7 months.  Furthermore, the recent rise follows a period when Margin Debt had generally lagged the market increases; since the start of 2018, margin debt is only up ~40% vs. the S&P up ~70% in price terms.

When it looks back even further, JPM notes that there were periods in the 70s-80s when large increases in Margin debt were followed by market weakness, suggesting this isn’t only a 2000 and 2007 phenomenon (left chart below).  Furthermore, one could reasonably ask why the relatively large increase in the early 90s didn’t result in a market pullback.  While there are likely other contributing factors as well, one thing to note about Margin Debt was that it had gone through a period of relatively slower growth in the late 80s, so the rise in the early 90s was somewhat of a “catch-up” period for it.  Similarly, JPM argues that the rise into Jan of this year could also be considered a bit of a “catch-up” period, which appears to be different from 2000 and 2007 when Margin Debt was reaching new highs, even when measuring it relative to the S&P changes.  

In light of the above it’s hardly a surprise that JPM thinks that while there are many potential reasons one could cite for market caution, “the level and changes in Margin Debt do not appear to be setting us up for extreme market drawdowns like we saw in 2000 and 2007.”

#3:  Reopening/Recovery Trades Back in Focus?

With COVID cases appeared to be on the decline globally, and travel restrictions getting lifted in some places, reopening/recovery themes have been more topical as they’ve started to perform better. On the HF side, JPM Prime has seen net buying over the past 2-3 weeks in both the Domestic Recovery basket (JPAMCRDB) and the International Recovery Basket (JPAMCRIB).  Positioning in both groups remains low on a YTD basis and very low on a multi-year basis for the Domestic basket.  In addition, JPM’s U.S. Equity Research Strategist, Dubravko, recently wrote about this in a recent note where he showed that the COVID Recovery – Domestic basket had seen relative valuations fall back to multi-year lows while COVID Beneficiaries were back near highs.

In a similar vein, Travel & Leisure stocks have seen strong performance this week in both N. America and EMEA, along with HF buying as the US said it would remove its ban on EU travel for vaccinated passengers starting in November. The recovery in performance, relative to the market, still has more to go before getting back to  where we were earlier this year. In terms of where the recent buying and outperformance leaves HF positioning, net exposures are nearing average levels among US Travel & Leisure stocks, but are a bit closer to highs in EMEA.

Where there appears to be more potential upside for positioning in EMEA is among the Airlines stocks where net exposures is still about 1z below average and JPM has yet to see shorts covered in the group, after persistent additions for the past 6 months.

Among US stocks, the rise in rates was accompanied by further buying of Inflation Winners and Rising Bond Yield Winners. Despite the recent buying, net exposure to the Inflation winners remains quite low with net exposures about 1 std dev below average and for the Rising Bond Yield Winners, the net exposure is still slightly below average.  

Similarly, a couple weeks ago JPM wrote about how positioning and flows in Value vs. Growth had done a “180” in the past few months as Value had underperformed. Perhaps not surprisingly, US Value seems to be getting a revival recently as the Value factor has been bought in the past 2 weeks. This is coming from both Value Longs getting bought and Value Shorts being sold/shorted.  In line with this, Growth stocks have seen some selling.

#4:  Performance – HFs Holding Well in Sep

With a risk-on backdrop of cyclicals outperforming defensives, small caps rallying, and rising rates this week (Rising Bond Yield Winners up +5% WTD), Hedge Funds find themselves in the rare position of outperforming broader equity market indices MTD. And with WSB’s short squeeze hunts fading, shorts are not detracting from performance as they are generally down in-line with the market; whereas, longs have fared better and protected to the downside. 

Among Global Equity L/S funds, net returns continue to track positively with gains of +60-70bps MTD, outperforming MSCI ACWI (which is down -1.2%). The long-short spread has continued to improve since mid-August, driven more recently by shorts selling off faster in September than the market (down -1.3% on wgtd avg basis) and longs holding up relatively well (only down -15bps MTD).

Non-Equity L/S funds are also up MTD and outperforming global equity indices, up between +30-85bps. In terms of alpha, longs have outperformed shorts throughout most of September (some reversion over the past 2 days).

At a regional level, N. America L/S funds are flat to slightly up MTD, up around +0-30bps and are thus outpacing the SPX. The long-short spread has continued to improve steadily since mid-August but slowed yesterday as shorts outperformed. In EMEA, net returns among L/S funds are positive MTD, gaining around +0.5-1.3% and outperforming the headline European index.

Authored by Dave DeCamp via AntiWar.com,

Texas has added Ben & Jerry’s and its parent company Unilever to a list of companies that are “boycotting Israel” over the ice cream company’s decision to stop selling its product in Israeli settlements in the West Bank.

The firms have 90 days from being notified that they’re on the list to reverse the settlement ban, or Texas will remove about $100 million in pension funds that are invested in Unilever.

While Ben & Jerry’s is accused of boycotting Israel, their policy only applies to illegal settlements in occupied West Bank and East Jerusalem, and the ice cream will still be sold in Israel. But Texas has a broad definition of what it considers to be boycotting the Jewish State.

Texas law defines boycotting Israel as “refusing to deal with, terminating business activities with, or otherwise taking any action that is intended to penalize, inflict economic harm on or limit commercial relations specifically with Israel or with a person or entity doing business in Israel or in an Israeli-controlled territory.”

Other states have taken action against Unilver over the settlement ban. Florida and New Jersey have added Unilever to a similar list, and Arizona has already begun to pull millions out of Unilever.

There are over 30 US states with laws against the Boycott Divestment and Sanctions (BDS) movement that calls for international boycotts to put pressure on Israel over its crimes against the Palestinians. The laws prohibit states from doing business with companies and individuals that are determined to be boycotting Israel. Contractors wishing to do business with these states have to sign a pledge not to boycott Israel.

After Ben & Jerry’s announced its move to stop selling ice cream in the occupied territories in July, Israel launched a “maximum pressure” campaign to influence the US and urged states with anti-BDS laws on the books to take action.

Disclosure: Antiwar.com has received donations in the past from Ben Cohen, the co-founder of Ben & Jerry’s

Last week, New York’s New Gov. Kathy Hochul threatened to fire all unvaccinated health-care workers and replace them with vaccinated foreign workers (‘we’re in talks with the State Department’, she said, perhaps not realizing how low vaccination rates are outside the US and Europe) as she tries to make her mark on the Empire State.

While Hochul might have a little trouble ousting 20% of the state’s hospital and nursing-home workers, she’ll probably have a much easier time purging the last Cuomo loyalists still drawing a paycheck in Albany.

The New York Post reports that Gov. Hochul has officially launched a purge of agency heads and other officials appointed by her disgraced predecessor. At least nine of these ‘Cuomo-crats’ – agency heads and other high-ranking officials – will either be resigning or told that they’ll be out of a job within the next few weeks according to the Post’s sources.

At the top of the list of potential departures is Michael Hein, the former Ulster County Executive who was tapped by Cuomo in 2019 to oversee the Office of Temporary and Disability Assistance.

At the start of the pandemic, Hein was put in charge of the regional control room for the Hudson Valley. In that role, he monitored key health risks as the state tenatively reopened in the summer of 2020.

More recently, Hein was supposed to oversee the distribution of $2.6 billion in federal money to at-risk tenants who needed help paying back rent and utilities. He was criticized for failing to hand out the money fast enough.

Other officials who are about to be handed their walking papers include:

• Dr. Theodore Kastner, commissioner of the state Office for People With Developmental Disabilities
• Arlene González-Sánchez, head of the Office of Alcoholism and Substance Abuse Services
• Kenneth Theobalds, chair of the New York State Insurance Fund
• Human Rights Division Commissioner Licha Nyiendo
• Deputy Secretary for General Government and Technology Molly Reilly
• Deputy Secretary for Civil Rights and Workforce Debra Alligood White
• Director of Cannabis Program Norman Birenbaum
• Deputy Secretary for Public Safety Jeremy Shockett

But the purge truly began in earnest when Gov. Hochul sacked Health Commissioner Howard Zucker, whose handling of the pandemic in the state has been widely criticized. Zucker has also been accused of helping Cuomo minimize the death toll at nursing homes across the state (Zucker issued the infamous March 2020 order that all nursing homes must accept COVID-positive residents returning from hospitals. Amazing, Zucker also barred nursing homes from testing the returning residents for the virus.

Per the NYP, Amit Singh Bagga, who has been appointed Hochul’s deputy secretary for intergovernmental affairs, will be charged with supervising the purge.

Now it’s time for New Yorkers to sit back and watch the heads roll.

Authored by Mimi Nguyen Ly via The Epoch Times,

A Massachusetts judge has denied a bid by the state police union to delay mandatory vaccinations for all state employees.

The State Police Association of Massachusetts, a union representing about 1,800 state police officers, filed a lawsuit (pdf) last week asking the judge to put the mandate on hold to give the union time to “negotiate the terms and conditions of their employment” before a deadline of Oct. 17.

“The public interest is, unquestionably, best served by stopping the spread of the virus, in order to protect people from becoming ill, ensure adequate supply of medical services, and curtail the emergence of new, deadlier variants of the virus,” Judge Jackie Cowin said in the decision, reported The Associated Press.

Massachusetts Gov. Charlie Baker, a Republican, issued an executive order last month that would require proof of COVID-19 vaccination for all executive department employees by Oct. 17.

“Executive Department employees who are not vaccinated or approved for an exemption as of October 17, 2021 will be subject to disciplinary action, up to and including termination … Management employees not in compliance as of October 17, 2021 will also be subject to disciplinary action up to and including termination.” Baker’s office said in a statement.

His office also stated, “The Administration will continue to work with its union partners regarding this policy, and specific ramifications of non-compliance for staff represented by unions will be discussed well in advance of October 17 with each employee union.”

The union had asked that troopers who don’t get the vaccine be allowed to wear a mask and undergo weekly COVID-19 testing instead.

“We are disappointed in the judge’s ruling; however, we respect her decision,” Michael Cherven, the union’s president, said in a statement.

“It is unfortunate that the Governor and his team have chosen to mandate one of the most stringent vaccine mandates in the country with no reasonable alternatives.”

“Throughout COVID, we have been on the front lines protecting the citizens of Massachusetts and beyond. Simply put, all we are asking for are the same basic accommodations that countless other departments have provided to their first responders, and to treat a COVID related illness as a line of duty injury.

“To date, dozens of troopers have already submitted their resignation paperwork, some of whom plan to return to other departments offering reasonable alternatives such as mask wearing and regular testing,” he added.

“The State Police are already critically short staffed and acknowledged this by the unprecedented moves which took troopers from specialty units that investigate homicides, terrorism, computer crimes, arsons, gangs, narcotics, and human trafficking, and returned them to uniformed patrol.”

Last week’s remarkable bounce in stocks from Monday’s lows which, as a reminder, prompted the first outflow from equities in 2021…

… has sparked many questions among Wall Street’s elite where even some of the biggest bulls are puzzled by the market’s violent reversal (which, however, was predicted correctly by flow-tracking quants like Nomura’s Charlie McElligott).

And it’s not just the market’s relentless ability to internalize any adverse market action and come out on top as a wave of BTFDers rushes in: as Goldman’s strategist Chris Hussey wrote late on Friday, “one thing that is increasingly drawing our attention and was ‘front and center’ this week is how the economy, policy, and earnings growth appear to be rapidly transitioning away from the initial post-pandemic explosion of accommodation and activity and towards a slower pace as the brakes are pressed on a variety of key parts of the growth machine.”

As Hussey further notes, growth is fine for now and even robust, with Goldman’s economists forecasting over 4.5% GDP growth forecast to extend into 2022, but as he cautions “a developed economy like the US cannot grow at a 9% pace for very long –even as it catches up out of a pandemic.”

Meanwhile, as he delineates below, a series of pieces may be falling into place to ‘tap the brakes’ on some of the torrid growth we have been seeing since vaccines were distributed earlier this year. Among these Goldman focuses on the impact of fading stimulus, supply chains, the virus, China, and even stock valuations which are “coalescing to create a more difficult backdrop for earnings growth and multiple expansion in the months, or at least years ahead.”

Here are a few observations on all 5 of these potentially “braking” factors:

1. Stimulus. The FOMC indicated that tapering ‘may soon be warranted’ at this week’s meeting and on the back of the statement, yields on 10-year Treasuries have risen 15 bp to 1.45% while front-end rates have reset notably higher as shown in the chart below.

Interestingly, stocks also rose on the back of the Fed statement, consolidating the rebound from Monday’s sell-off. And while the Fed has not done anything yet — only suggested it is about to — the wheels do seem to now be in place to wind down the central bank’s latest QE program and to eventually start raising rates — as soon as one year from now. Adding to this point, BofA’s Michael Hartnett notes that global tapering has begun (ECB, BoE, BoC, RBA, Fed) which will see a sharp drop in global central liquidity which was $8.5 trillion in 2020, shrinks to $2.1trillion in 2021, and will be just $0.1 in 2022 (putting this in context, since the COVID outbreak central banks have bought $800MM of assets every hour, a number which shrinks to <$100MM in the second half of 2022).

And at the same time monetary policy appears to be shifting from the gas pedal to the brakes, fiscal policy may be as well. As we noted last week, Goldman’s political economist wrote this week about the growing risks around the next US federal spending program and the debt limit extension in “Collision Course?” and “More Downside Risks from Washington.”

2. Supply Chains. The inability of companies to source parts, people, and commodities has been a major reason why we have warned about the slowing growth momentum we have observed in recent week. While Goldman is confidence that supply chain constraints are mainly a function of too rapid a recovery in demand, and so see it as a temporary problem, but for homebuilders, automobile manufacturers, and truckers it is all a supply problem today that is putting upward pressure on pricing and potentially downward pressure on margins (although margins have held up quite well so far). Case in point, on August 30 we warned that a slew of profit warnings are coming in the coming weeks, and between FedEx, Nike, PPG, and many others that’s just what has happened.

If MS and BofA are right on slumping consumer demand and margin contraction we should start seeing Q3 earnings warnings in the next 2 weeks.

— zerohedge (@zerohedge) August 30, 2021

• Looking at the Homebuilders, Goldman highlights how DRI lowered its November quarter guidance due to an inability to get enough materials and labor while fellow builder LEN is also started fewer communities in the current environment.
• In Autos, the bank writes that September car sales are tracking about 25% below year-ago levels – that’s versus September 2020 and the heart of the pandemic – as dealer inventories are at historically low levels. The good news for car makers: prices are strong — although this may not be so good for inflation and Fed policy (see #1 above).
• And finally in Transports, FDX missed earnings this week as it is facing a shortage of truckers and shippers .

3. The virus. In addition to supply chain disruptions, Goldman previously cited the Delta variant as a reason for why they were seeing slower 3Q21 GDP growth when they lowered the bank’s economic forecast back on Sep 6. Fast forward two weeks, and the summer wave of the virus does appear to have peaked…

… even in the US South — as the chart below clearly shows.

Commenting on the chart above, Goldman said that “what we might have learned this summer is that the virus still has the ability to disrupt the pace of growth even among populations with high rates of vaccination. Growth does not appear to have been derailed this summer, but it does appear to be trending slower than most thought it would back on Memorial Day.”

4. China. We entered this week with a lot being written about how issues surrounding China’s property market are driving a global ‘risk-off’ sentiment shift. And we exit this week with no resolution to China’s property market issues, yet the S&P 500 is UP on the week. But while it turned out that China did not derail the bull market this week, China’s property market is still very big (see “The Housing Market Is Almost Frozen” – An Even Bigger Problem Emerges For China“). And uncertainties persist. Perhaps what we continue to discover is that China is no longer the sustained tailwind to global growth that it was back in the years following the Great Financial Crisis when the country was pushing double digit GDP growth rates (see “China Is Responsible For More Than A Third Of World GDP Growth – This Is A Problem“.)

5. Valuation. According to Goldman’s Hussey, “stock market valuations rarely break under their own weight” and it typically takes some other more fundamental catalyst to cause earnings to decline and investors to pay less for earnings. But as Goldman’s Peter Oppenheimer highlighted in a fresh global strategy note this week, stock market returns are likely to be muted going forward relative to past cycles. Why? We are entering the current cycle with high valuations, ultra-low rates, and corporate margin headwinds from rising wages and regulation and the headwinds from de-globalization. And as the bank’s chart of the week below illustrates, historically forward 10-year returns for equities have trended lower when they have started at our current elevated valuation.

Goldman’s chart of the week: Valuation is not typically the cause of a bubble bursting and stocks can stay ‘expensive’ for a long time. But over a long time, the returns that you might expect to get from investing in equities tend to be far smaller when you buy stocks at high  aluations than when you buy them when they are ‘cheap’.

While the media has spent more than a year ridiculing the widely-prescribed drug Ivermectin to treat Covid-19 – branding it a ‘horse dewormer for idiots,’ they’ve kept oddly silent about another widely prescribed drug that’s also used in horses, which is being pushed by official bodies worldwide to treat the disease.

The NIH, CDC, WHO and FDA have all recommended dexamethasone – a corticosteroid which has shown efficacy in the treatment of severe covid. It’s also a commonly used drug to treat allergies in horses.

The difference? One can be used to treat billions of mild-moderate cases – or as a prophylactic, while the other has a much more narrow use – those suffering from severe Covid.

As Twitter user @DoRtChristians notes: “The FDA recently told the public not to take life-saving Ivermectin because “you’re not a horse”“

Yet;

Per Google (via Wedgewood pharmacy): “Dexamethasone commonly is used in horses to treat allergic reactions such as respiratory allergies, chronic obstructive pulmonary disease (heaves), hives, itching and inflammatory diseases including arthritis.“

But, but…

You are not a horse. You are not a cow. Seriously, y’all. Stop it. https://t.co/TWb75xYEY4

— U.S. FDA (@US_FDA) August 21, 2021

We can only assume that because official bodies are recommending dexamethasone – and because it’s used in severe covid – a much smaller fraction of those looking at ivermectin as a prophylactic and early-stage treatment, the transitive properties of media outrage over people taking a ‘horse medication’ don’t apply.

Ivermectin

This widely prescribed anti-parasitic which is also used in horses has shown massive efficacy worldwide in the treatment of mild and moderate cases of Covid-19, plus as a prophylactic. India’s Uttar Pradesh province, with a population of over 200 million, says that widespread early use of Ivermectin ‘helped keep positivity [and] deaths low.’

Separately, there have been several studies funded by the Indian government, primarily conducted through their largest govt. public medical university (AIIMS).

Meanwhile, There are currently 76 ongoing or completed clinical trials on Ivermectin around the world. Below are the results of 32 which have been completed. One can visit ivermeta.com and dig down on any of these / read the entire study. The site recommends Ivermectin in conjunction with vaccines to confer the best protection against Covid-19, however we’ll leave that to you and your doctor to discuss.

Why does Ivermectin, a ‘horse dewormer’ work? For starters, it’s a protease inhibitor. Interestingly, Pfizer’s 2x/day Covid-19 prophylactic they’re trialing right now is also a protease inhibitor.

Yet doctors who advocate for Ivermectin are ridiculed by the media (more here and here and here).

The MSM swarmed over ‘horse paste overdoses’  for weeks after a handful cases nationwide (and no deaths) – including an outright lie by Rolling Stone which they were forced to correct after the hospital in question denied the claim.

Meanwhile, the likes of Maddow, Don Lemon and Chris Hayes jumped right on the propaganda bandwagon – with Maddow promoting the debunked ER story in a tweet she refuses to delete – and Twitter refuses to censor for misinformation.

Why would any doctor put their career on the line to publicly advocate for ivermectin when this is the result?