Category: zerohedge

Not for the first time, major US and global brands have been caught in the middle of soaring US-China tensions and ratcheting tit-for-tat actions and rhetoric.

This also as the anti-mainland Hong Kong protests seek to gain the same level of attention and momentum of support that global George Floyd protests have of the past weeks.

And now the NBA’s biggest superstar has once again been thrust into the middle: “Hong Kong democracy activist Joshua Wong accused LeBron James of hypocrisy after the NBA superstar moved to form a group supporting black voting rights in the U.S.,” Bloomberg reports. 

Hong Kong’s most visible activist who is backed by the US and UK has called out LeBron for putting Black Lives Matter protests front and center, lately with a new black voting rights awareness initiative, while staying silent on China-backed police brutality in Hong Kong.

And then there’s the obvious fact of Hong Kong citizens not getting “the vote” regarding the recent deeply controversial China-imposed “national security law”.

Defending democracy is vital, but @KingJames only talks loud in the US. On China, not only is he silent, he actively shuts others up. He called @dmorey “misinformed” and “not really educated” for supporting #HongKong. All he cares about is money, not human rights. Hypocritical. https://t.co/vxVMWIjsjY

— Joshua Wong 黃之鋒 😷 (@joshuawongcf) June 11, 2020

Recall too that the NBA generally has remained in a financially vulnerable spot vis-a-vis the China issue after the Darl Morey tweet last year expressing support for HK street protests, leading Beijing to react by canceling lucrative broadcasts of NBA games in the country

Crucially James had turned against Morey’s comments, calling the controversial tweet “misinformed” — and in doing so the Hong Kong activists saw it as essentially a total betrayal of their anti-Beijing democracy movement. 

But especially given the current Black Lives Matter and George Floyd death related protests, Hong Kong activists have sought to both latch onto the movement while at the same time seeking mutual recognition from BLM leaders. 

When it comes to pro-BLM NBA players, it doesn’t appear that “support” will be coming anytime soon, also given the huge financial hit the NBA and other professional sports took amid the coronavirus shutdowns, and given the delicate future of the NBA in China.

Interestingly Wong is seen as close to both Western activists and even State Department officials, given also he’s recently testified before Congress.

It’s likely other major American brands will face the same dilemma.

“Believe in something, unless you are criticizing China.”

pic.twitter.com/YJ3fbBnteM

— Joshua Wong 黃之鋒 😷 (@joshuawongcf) June 11, 2020

Do citizens of Hong Kong get a vote?…

Everyone talking about “how do we fix this?” They say “go out and vote?” What about asking if how we vote is also structurally racist? https://t.co/GFtq12eKKt

— LeBron James (@KingJames) June 9, 2020

Amid a trend of corporations rushing to jump on popular protest band wagons of the day, in the case of Hong Kong they’re likely to consult the check book first, with high notions of freedom, democracy, and equality a far second. 

Authored by Ian Lyngen of BMO Capital Markets

The second wave has arrived; or at least that is the impression one would get by glancing at the selloff in risk assets and the outperformance of 10- and 30-year Treasuries. Increasing incidence of Covid-19 cases have been reported in several states; the drop in domestic equities speaks to the reality that the pandemic is the most powerful influence on the global outlook. This observation can almost go without saying – had it not been for the Fed’s caution against extraction of too much optimism from the May employment report and the growing sense that the market had ‘moved-on’ following the recent refocus on social unrest.

With the coronavirus once again front and center, attention will undoubtedly return to the daily stats – with the emphasis on south/southwest. Needless to say, it’s a non-ideal situation for the market, the economy, and the population as a whole – even if general expectations are for a less intense return of Covid-19. In addition to the case count, the prospects for re-lockdowns will be closely scrutinized; the economic ramifications of which would likely echo the initial round, but on a smaller scale. Our base case scenario is that the unfortunate directional change in the pandemic was not unexpected; although the drop in stocks might offer a different interpretation.

Our take on the reversal of risk assets is that the optimism got ahead of itself and domestic equities came into this week vulnerable to a less than satisfactory Fed showing. The Fed wasn’t in a position to do much more in terms of deliverables (i.e. YCC, forward guidance, etc.), therefore a disappointment risk was a ‘known’ – what’s impressive is the magnitude of the downtrade in stocks. To be fair, overbought momentum has been in place since the beginning of June; heightening the odds of a correction or consolidation. We’d erred on the side of assuming an in-range correction was more probable; much to our chagrin. The 200-day moving-average at 3013 marks an important support level and is shortly followed by the handle-change <3000. The weekly close will be key from a technical perspective, as well as any dip-buying interest during the overnight session.

The rates market has benefited from an impressive flight-to-quality bid that brought 10-year yields down to 65 bp to flirt with the lowest since mid-May. A breach of 62 bp would put rates back near the lows of 54 bp and as the initial economic optimism fades, investors may once again face the question of whether or not fresh record low 10-year yields are warranted during the second wave. For the time being, we expect anything <60 bp will prove to be a selling opportunity; or if nothing else a compelling level from which to reset steepeners. Overall, the price action has the tone of a technical correction rather than a paradigm shift of the macro narrative – the next few sessions will provide greater clarity.

Thursday’s Treasury rally was backed by strong volumes as cash traded at 188% of the 10-day moving average. 5s and 10s split the designation of most active issue each taking a 30% marketshare. The front-end garnered 17% with 2s and 3s taking 9% and 8%, respectively. 7s claimed a solid 9%, 20s 2% and the long-bond was elevated going into its reopening with a 12% marketshare.

A union representing New York City Police detectives has vowed to sue rioters who attacks its members.

“If you assault a New York City Detective and there are no consequences from the criminal justice system, we have to have other means to protect our detectives,” declared Paul DiGiacomo – president of the 19,000 member Detectives’ Endowment Association, adding that he will sue any ‘protester, rioter or looter who does violence against NYPD detectives, according to Fox News.

According to the NYPD, over 350 of its officers have suffered injuries during the protests.

“It’s heart-wrenching because they are out there doing a job under very difficult circumstances, trying to protect the innocent people that are protesting while the criminal element is within that group, assaulting, looting and victimizing not only police officers and detectives out there, but also the people of the city,” he said.

The first lawsuit has been filed against a looting suspect accused of stealing items from a pharmacy in Manhattan and who allegedly attacked Detective Joseph Nicolosi. The detective claimed he was injured in the struggle when the 19-year-old suspect resisted arrest. –Fox News

“They’ve had urine thrown at them, rocks thrown at them, shot at, assaulted. I don’t know how much more they could take a day of putting up with a lot out there. And, you know, they are the finest in the world and they are doing a fabulous job, but they are being demonized by the elected officials,” said DiGiacomo.

Civil rights attorney Ron Kuby characterizes the lawsuits as unfair given that police enjoy legal protections, such as qualified immunity, which prevents them from being sued.

“If the police want to use the civil law as a tool in their policing, those of us who pay their salaries have the opportunity now to engage in some real reform, which is, stop the indemnification of cops, stop the free lawyers for the police, stop the qualified immunity for the police — and we’ll see how that works out for them,” said Kuby, who added that “This is not a new tactic by the police. This was tried back in the 1990s in New York City, at another time when there was a great deal of unrest and ultimately, it didn’t work.”

Congressional Democrats and some state legislatures have moved to strip the police of qualified immunity, while Kuby notes that officers participating in lawsuits will give up their privacy.

“The cops freak out about their privacy concerns and don’t want their personal history handed over to the very people that they are suing,” he said. “That is another powerful reason not to go through with these lawsuits.”

DiGiacomo, meanwhile, said: “We will be behind our detectives and pursue these cases civilly and send a message to the criminal element, that you are not going to get away with this. If we can’t get you one way, we will get you another.”

Authored by Lacey Kestecher via CampusReform.org,

Professors, researchers, and students in the Science, Technology, Engineering, and Mathematics field from around the country are taking part Wednesday in the #ShutDownSTEM movement to combat what they say is systemic racism in academia. They argue that the STEM field itself creates technology that is “weaponized against black people.”

One scholar and self-proclaimed “leading expert on wokeness,” James Lindsay, who is best known for his participation in a project that exposed the faulty review process of academic journals by submitting hoax papers that were ultimately published by such publications, tweeted, that “one point of #ShutDownSTEM is to find out who doesn’t do it (maybe they’re working on a Covid-19 vaccine?) and to use that against them later, just like happened at Evergreen State College with its Day of Absence.” 

Members of the science academic community are “call[ing]on people who are not Black to spend a day undertaking discussion and action that furthers this work, while providing Black scientists with a day of rest.”

It will be a day where they “#ShutDownAcademia, #ShutDownSTEM, and #Strike4BlackLives.”

Scientists and researchers subscribing to the movement will not do any work for the entire day, and any class or research group meetings “should be cancelled [sic] or replaced with discussions with colleagues about anti-Black bias in the world and in academia.” Researchers, professors, and other academics participating are encouraged to use the hashtags #STRIKE4BLACKLIVES, #STRIKEFORBLACKLIVES, and #SHUTDOWNSTEM.

Members of the academic community want to #ShutDownSTEM in an effort to “create a just, equitable and inclusive STEM field,” and plan to use their day off to dismantle racism by creating “an actionable goal” with “metrics/indicators” to measure success. 

“Your racism is unique to you and your narrative. You need to do the work to get out of it. You were not born with the ability to code. You learned it,” reads the movement’s website.

It is noted that “the strike is not a ‘day off for non-Black scientists,” but rather one during which non-Black students should commit to certain actions, including researching the “history of anti-Black violence, police brutality, and racism,”  protesting, advocating for “reforming campus security procedures that target Black students” and donating “at least a day’s worth of salary if you are in a position to do so” to a variety of causes, including posting bail for those arrested while protesting or rioting. 

Founders of the movement write that STEM is problematic because research papers often “reinforce anti-Black narratives,” and because scientists have made technological advancements that “are routinely weaponized against Black people.” They say that if scientists do not “engage directly with eliminating racism, you are perpetuating it.”

Looking forward to #ShutDownSTEM and having conversations with my students tomorrow about racism in academia. As folks who hold any power in academia, it is our responsibility to disrupt the system, and take responsibility for our ongoing contributions to systemic oppression. https://t.co/LK14q4Ra2E

— Ascher Munion (They/Them) (@akmunion) June 9, 2020

Particles for Justice is a group of physicists participating in the movement who claim that “Black students often feel unwelcome, unsupported, and even unsafe in their physics departments and predominantly white campuses.” They assert that there are “institutional barriers” and “systemic racism” that “exclude Black people from physics and other academic disciplines.” 

Through taking part in this movement, these scientists believe they can help bring about an end to “the white supremacy that not only snuffs out Black physicist dreams but destroys whole Black lives.” 

More than 5,500 professors, researchers, and STEM students had signed the pledge to participate in the strike as of noon Eastern Daylight Time on Wednesday.

Buffalo, NY Mayor Byron Brown (D) has banned a riot unit involved in the injury of a 75-year-old protester he called a ‘major instigator‘ and ‘agitator’ last week – resulting in felony assault charges against two officers from the Buffalo Emergency Response Team (ERT).

According to Reuters, Brown instead ordered a new police unit to handle ‘peaceful demonstrations’ without riot gear and ‘trained in civil rights.’

Mayor Byron Brown said the Public Protection Detail would receive training in freedom of speech and other rights and would “work with leaders and participants of future protests and demonstrations to ensure the safety and security of all people.”

Two Buffalo tactical unit officers face felony assault charges for pushing Martin Gugino on Thursday when he approached them during a march against racism and police brutality amid nationwide demonstrations over the death in Minneapolis of a black man in police custody. –Reuters

On Tuesday, President Trump tweeted that the injured protester, 75-year-old Martin Gugino, “fell harder than was pushed,” and was “aiming scanner” at the police, in a viral video which showed him approaching police trying to clear an area for curfew, only to be pushed back by the two officers and land on the pavement, splitting his head.

Buffalo protester shoved by Police could be an ANTIFA provocateur. 75 year old Martin Gugino was pushed away after appearing to scan police communications in order to black out the equipment. @OANN I watched, he fell harder than was pushed. Was aiming scanner. Could be a set up?

— Donald J. Trump (@realDonaldTrump) June 9, 2020

According to a former member of the Buffalo ERT, the officers were simply following their training.

“From my opinion and the training that I went through the officers did exactly as they were instructed,” said retired lieutenant Mark, who only gave his first name to WGRZ, adding that he was trained by the Federal Emergency Management Agency (FEMA).

“Whatever supervisor it was gave orders for the ERT team members to form a line and clear that area and through the training that we got with ERT one of the things you do is you move people back. If they don’t move willingly, you move them back with force,” Mark added.

On Tuesday, Gugino told USA Today that he was out of intensive care and will be just fine.

Authored by Charles Hugh Smith via OfTwoMinds blog,

We are entering The Greatest Depression because there is no exit.

I’ve endeavored to explain why The Greatest Depression is unstoppable in recent posts:

The Covid-19 Dominoes Fall: The World Is Insolvent March 16, 2020

Pandemic Pandemonium: The Tides of Globalization and Financialization Reverse March 31, 2020

Here’s Why the Economy Won’t Recover–and No, It’s Not Covid-19 or the Lockdown April 23, 2020

What’s Collapsing Can’t Be Saved: Our Fraudulent Economy April 22, 2020

Why Assets Will Crash May 4, 2020

Our Inevitable Collapse: We Can’t Save a Fragile Economy With Bailouts That Increase Fragility May 1, 2020

Globalization and Financialization Are Dead, and so Is Everything That Depended on Them May 15, 2020

Our Fate Is Sealed, Vaccines Won’t Matter: Four Long Cycles Align May 19, 2020

Consumer Spending Will Not Rebound–Here’s Why May 18, 2020

This Is How Systems Collapse May 30, 2020

I’ll try to summarize all this as simply as possible:

1. The global economy’s cost structure has been fatally distorted by central bank policies of inflating asset bubbles and reducing interest rates to near-zero.

2. Earnings from labor have stagnated or eroded since the era of globalization / financialization took off around 2000.

3. Everything costs too much, i.e. is no longer affordable from earnings alone, so the only way to maintain the current costly lifestyle is to borrow money and use it to pay current expenses. This is true for every sector: household, corporate and government.

4. As a result, everyone now needs every dollar of income just to pay their expenses, including interest and principal on their rising debts. There is no slack (buffers) in the system at all.

5. This can be visualized as a row of dominoes. Once the first domino falls, every domino will be toppled.

For example: a worker is laid off and can no longer afford to go to a favorite restaurant. The restaurant’s expenses are so high it can’t survive on reduced customer traffic, so it closes. The commercial landlord’s expenses are so high that he can’t afford to lower rents, but since no business can afford high rents, the space is empty and the landlord goes bust. The bank holding the mortgage then has to absorb a staggering loss because the property is no longer worth much because a building without tenants is just a money-pit of expenses and no income.

The once-valuable restaurant business is now worth zero. The once-valuable commercial property is also worth zero because the owner must continue to pay property taxes, local fees and maintenance even if there are no tenants.

The dominoes falling trigger a reverse wealth effect, a topic Gordon Long and I discuss in a new podcast A Reverse Wealth Effect? (41:52). This is important because the wealth effect–the psychological state of euphoria created when one’s assets steadily rise in value– has been a core driver of consumption since the Federal Reserve transformed the economy into a Bubble-Based Economy in the late 1990s.

When we feel wealthier because our assets are rising, we’re increasingly likely to tap that newfound wealth by borrowing money to fulfill our desires for inessential goods and services. Since the Fed has suppressed interest rates, the cost of borrowing against one’s house or buying a new car seemed remarkably affordable, especially compared to the big increases in wealth generated by rising assets.

Unfortunately, while the wealth effect can reverse, debts have to be paid regardless. Debt payments are forever while the wealth effect is fleeting.

The current mass delusion is that the Fed can bail everyone out with cost-free cash. But we have to keep in mind what the Fed can’t do:

1. It can’t reverse the unprecedented wealth inequality its policies have pushed to the point of civil breakdown.

2. It can’t make people take on the risks and heartaches of starting new businesses.

3. It can’t force employers to hire more employees.

4. It can’t make unprofitable businesses profitable.

5. It can’t force people to buy assets at prices that no longer make financial sense.

6. It can’t make insolvent businesses and local governments solvent.

7. It can’t force people who now realize their priority is to save money to spend their cash, even if the Fed forces negative interest rates so it costs money to have savings.

8. It can’t lower the unaffordable cost structure of the entire economy.

9. It can’t de-link all the financial dependencies in the financial system that make it so vulnerable to the first domino falling.

10. It can’t stop people from selling their assets.

In summary, it can’t stop the reverse wealth effect.

We are entering The Greatest Depression because there is no exit. Either the phantom wealth of asset bubbles completely vanishes, or the phantom purchasing power of fiat currency vanishes. Both paths lead to the same destination: systemic collapse.

*  *  *

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.

Both across the United States and Britain, Antifa and other far left groups are taking it upon themselves to deface and topple statues and memorials they don’t like, seeking to “purge” the culture of anything they deem “offensive” — such as lately a spate of attacks on Christopher Columbus statues. 

When on late Tuesday Columbus statues were destroyed in Richmond and Boston, we wondered if police are now resigned to just sit back and let the groups of mostly young white people trash the county’s monuments, as it appeared to be the case in Richmond, where a crowd set fire to a Columbus monument, and dragged it some 200 yards before chunking it into a lake — all within plain sight of police and the media. 

But if nothing else will get police to intervene to stop what in normal times would be a felony offense, perhaps the danger of serious injury to persons will, as during the latest overnight monument toppling a man was critically injured when a some 600-pound Confederate statue came crashing down on top of him.

Graphic video: Watch the moment a toppled Confederate soldier statue falls on a rioter, injuring him severely. This happened tonight in Portsmouth, Va. All the statues around the monument were beheaded before this accident. #BlackLivesMatter pic.twitter.com/yv5j45Fd7j

— Andy Ngô (@MrAndyNgo) June 11, 2020

It was all captured in video: the crowd begins to cheer the moment one of the statues on the monument crashes down, but horror ensues as soon as it’s realized a man is underneath.

The shocking video shows a man – apparently unaware the large, likely many hundreds of pounds statue was going to be pulled down in that moment – get struck squarely on the head by the massive falling object. The chaos of the scene also makes it clear there was zero coordination or organization obviously given the mob frenzy, and highly dangerous setting.

Notice too how the “defund the police” mob quickly allows police assistance in clearing the scene and getting the critically injured man to a hospital. One young white woman who was previously waving around a sledge hammer atop the monument drops it and later is seen making a swift exit.

SWAT moving in with a barrier to shield the victim. pic.twitter.com/vcrgi4cLtZ

— Matt Jones (@jones_mattryan) June 11, 2020

NBC describes that what appears in the video to be a black male victim of the accident is in serious condition at a nearby hospital after the grizzly scene:

A witness identified as a Black Lives Matter activist told NBC affiliate WAVY that the injured man had been at the front of the “statue” when he was struck as it was pulled down.

“It came and fully hit him in the head, and we could see that his skull was actually showing,” he said. “He was convulsing on the ground.”

“He lost a great amount of blood,” the witness said. “And we ask that everybody pray for that man right now.”

Here’s a close-up video of the statue incident in Portsmouth, VA. Protesters gather around him with their phones to film
and take photos of the carnage, blocking EMTs from rescuing him until the police clear the way. pic.twitter.com/dWVu3VgMtI

— Ian Miles Cheong (@stillgray) June 11, 2020

Just after 10pm as emergency response units rushed to the scene, the Portsmouth police department tweeted out that citizens should stay away from the area of area of Court Street at High Street, where the incident took place. 

Violent protesters in Portsmouth, Va. behead a statue of a Confederate soldier and parade it around in celebration. Photo: @BrettHNews. pic.twitter.com/NWBfM9A2hW

— Andy Ngô (@MrAndyNgo) June 11, 2020

The local police also admitted they were told by civic authorities to essentially stand down and let the Confederate monument be destroyed. 

According to CBS 3 WTKR News:

Chief Greene says an elected official gave her the order to not enforce vandalism and says there was a lot of miscommunication. She also says after what happened Wednesday night, something has to be done sooner when it comes to the monument.

A trombone and a burning monument. This is the scene in @cityofPortsVA @WTKR3 pic.twitter.com/mXN8idDXTX

— Nana-Séntuo Bonsu (@NSBonsu_) June 11, 2020

But notice that immediately when the man is injured how fast the crowd screams out for emergency authorities to come to their aid, also as the group parts to allow police onto the scene. 

Local police have said that no arrests have been made related to the incident, while many on social media have called for charges against those orchestrating the haphazard and very dangerous statue toppling which may have proved fatal. 

Re-Open Rally Routed

As one newly-minted “expert” in trading expressed to us: “it’s a f**king rout! … and this after the most dovish Fed statement ever!”

Today saw the heaviest selling-pressure in stocks since record began as TICK collapsed to -2058 intraday

Source: Bloomberg

Cramer called it…

Too much transparency from Powell (on the economic shitshow) perhaps, COVID-19 second-wave concerns maybe, or just too far, too fast, and quant models reversing (more likely), but one thing is sure… Robinhood’rs were routed amid a big-tech bloodbath but Small Caps were the worst – down 10% this week!…

This is the biggest daily drop in stocks since mid-March at the height of the collapse.

And this collapse comes as the market has abandoned hedges…

Source: Bloomberg

The median price of US stocks is down 12.5% in the last few days…

Source: Bloomberg

Since The Fed statement and Powell presser, bonds & bullion are bid as stocks sink…

From the moment Jay Powell began his press conference, things “escalated very quickly”…

For many freshly minted day-traders, this is inconceivable… but to veterans, we’ve seen this malarkey before…

Looks like those rampant “Re-Open Rally” runs into value were entirely wrong…

Source: Bloomberg

Virus-impacted sectors are reversing all their insane gains…

Source: Bloomberg

Boeing, Boeing, Gone!

The overnight session remains a big winner but June has seen day session and overnight session syncing up…

Small Caps tumbled back to their 100DMA…

S&P dumped back to its 200DMA…

Dow dumped back to its 100DMA…

The S&P 500 appears to have tagged unchanged on the year (3230.78) and given up…

Banks bloodbath’d further today…

Source: Bloomberg

…extending the reversal from the perfect tag of the 200DAM…

Source: Bloomberg

VIX soared back above 35 today (not call-buying this time) as its curve inverted once again for the first time since April….

Source: Bloomberg

Bitcoin was also battered today (after tagging $10k yesterday)…

Source: Bloomberg

But, on the positive side, bonds were bid…

Source: Bloomberg

As the coiling yield dismisses the false upside breakout of the reopen rally…

Source: Bloomberg

Treasuries have erased all their losses for June with the long-end yields actually now lower this month…

Source: Bloomberg

Despite everyone’s excitement about The Fed’s apparent HY backstop, it led the drop…

Source: Bloomberg

And precious metals surged (though we did see some liquidation that was reminiscent of the ‘sell everything’ trend we saw in March)…

Source: Bloomberg

As black gold was battered (WTI was down over 10% at its worst, back to a $35 handle, but bounced)…

Source: Bloomberg

The dollar screamed higher today (biggest jump in 3 months), bucking its recent trend dramatically…

Source: Bloomberg

Notice where the dollar bounced…

Source: Bloomberg

Finally, is it catch-down time?

Source: Bloomberg

Robinhood’rs favorite stock routed…

And yesterday’s big winner…

“These are the days I live for… it was too easy”…

You wanna get nuts? Let’s get FUCKING NUTS. How low can we go? Do the suits think I’m gonna flinch? #DDTG pic.twitter.com/3vsBWvMpCO

— Dave Portnoy (@stoolpresidente) June 11, 2020

And one wonders if this is the real reason why stocks suddenly puked the last two days…

Source: Bloomberg

PredictIt (notoriously illiquid admittedly) is pricing in a sweep of White House, Congress, and The Senate for Democrats.

Former VP Joe Biden might have trouble stringing sentences together, but he’s still likely to beat President Trump in November, while Congressional Democrats will retake the Senate and keep the House, according to the latest numbers from oddsmaker PredictIt.

According to PredictIt: “At a minimum, Democratic National Convention (DNC) insiders are extremely confident they can prevail against Republicans in Senate races in Arizona, Colorado, Maine and North Carolina. All four races are rated as “toss up” by the nonpartisan Cook Political Report, which currently lists no races with a sitting Democrat in the same column.

That said, Democrats also largely expect Sen. Doug Jones (D-AL), who won in a special election in 2017 against Roy Moore, to lose his seat. “

With traders currently expecting a net change in Senate seats to hit “3 seats,” here are seven Senate races worth keeping an eye on over the next five months:

• Alabama: Democrats 14¢ — Republicans 86¢
• Arizona: Democrats 83¢ — Republicans 17¢
• Colorado: Democrats 88¢ — Republicans 12¢
• Kentucky: Democrats 24¢ — Republicans 78¢
• Maine: Democrats 67¢ — Republicans 33¢
• Montana: Democrats 51¢ — Republicans 48¢
• North Carolina: Democrats 61¢ — Republicans 39¢

And as we noted over the weekend, – Goldman predicts this scenario would knock $20 per share off of S&P 500 earnings estimates for 2021, from $170 to $150.

We wrote: The problem for shareholders is that if Trump loses, much if not all of this would be reversed, as Joe Biden has proposed partially reversing the 2017 TCJA. In fact, according to the Tax Foundation the former Vice President’s plan would raise the statutory federal tax rate on domestic income from 21% to 28%, reversing half of the cut from 35% to 21% instituted by the TCJA.

In addition, the plan would double the GILTI tax rate on certain foreign income, impose a minimum tax rate of 15%, and add an additional payroll tax on high earners.

These changes would be complemented by a variety of changes to the personal tax code, including an increase in the tax rate applied to capital gains and dividends for the highest income individuals, as well as potential changes in non-tax regulatory policy that could also affect corporate earnings and equity valuations.

Long story short, if Biden’s tax proposals are enacted, this tax reform would reduce Goldman’s S&P 500 earnings estimate for 2021 by roughly $20 per share, from $170 to $150.

* * *

That said, it should be noted that PredictIt can be illiquid at times – and a few thousand dollars can easily shift sentiment, resulting in a total change in narrative.

Authored by Joseph Calhoun via Alhambra Investments,

Have we entered a new bull market? Was the 35% pullback in the S&P 500 in March the fastest bear market in history? Or is this just a continuation of the bull market that started in 2009, interrupted by a rather large correction? Bull markets and bear markets are about behavior, about the human emotions of fear and greed. While we got a brief bout of fear in March, greed has since overwhelmed all sense, common and otherwise. What we’re seeing in the casino…er, market….today is not beginning of a bull market behavior.

What has been going on in markets over the last two months is the most glorious episode of human greed I’ve seen since 1999. I know there will be plenty who pooh-pooh that comparison but the speculative trading and the ignorance of those doing it is exactly the same. There are silly things going on, new “traders” doing stupid things and getting away with it because that’s what happens in the end stages of a bull market that has been going on for a decade.

Hertz, the rental car giant, filed for bankruptcy on May 22 and its stock hit a low of $0.40 a few days later. Earlier this week it traded as high as $6.25. That’s a gain of over 15 times your money if you bought at the low. In 12 days. Did Hertz cancel its bankruptcy? Did Hertz get a last-minute rescue from the Trump administration? No and no. Hertz is still bankrupt. And my quick math says they have $19 billion in debt and maybe $15 billion in assets. The stock is almost certainly worth zero. And yet hundreds of millions of shares are changing hands every day. This is not investing.

And Hertz isn’t the only stock fools are buying in hopes of finding a bigger fool to take it off their hands at a higher price. Chesapeake Energy was a penny stock and on the verge of delisting from the NYSE earlier this year before executing a 1 for 200 reverse split. Its unsecured bonds trade for less than 10 cents on the dollar. The stock tripled one day this week and at its peak had a market cap of $750 million. The stock is, like Hertz, likely worthless. This isn’t investing either.

The IPO market is also heating up with 8 deals priced last week, two of which were SPACs, Special Purpose Acquisition vehicles or what we used to call blank check companies. SPACs have no business, offering investors a chance to participate in an acquisition of some operating company sometime in the future. SPACs used to be things hawked by penny stock firms but after a decade long bull market, they have become respectable, I guess. You might get lucky like the people who bought VectolQ, a SPAC run by the former Vice Chairman of GM. VectolQ merged recently with Nikola, a company that plans to sell pickup trucks powered by fuel cells. The stock has run up from $12 in late April to $90 before backing off a bit. The company has a market cap of about $25 billion – about the same as Ford – and – supposedly – $10 billion in pre-orders for its truck. What it doesn’t have is any revenue which it hopes to start generating sometime next year. Nikola stock is, to be generous, speculative.

Among the other new offerings, last week was Zoom Info which priced at $21 and proceeded to double on day one. It’s now up 138% in 4 days. Zoom at least has an actual operating business with revenue of $350 million last year –  on which they managed to lose $51 million. Market cap? $19 billion because, you know, they’re “building for the long term”. Growing into that market cap may redefine “long term”.

To get a real handle on the speculative activity you need to wander over to the options market. Option traders bought a stunning 35.6 million new call option positions last week with over half of that coming from small traders buying fewer than 10 contracts. According to Jason Goepfert of Sentimentrader, the last time that happened was in 2000. For those of you too young to remember, that was the top of the dot com bubble. With everyone buying calls, the equity-only put/call ratio has fallen below 0.4. Who needs downside protection when the market goes up every day?

Particularly galling – at least to me – is that some portion of this speculation was funded by taxpayers. Some of those stimulus checks Congress sent out – $290 billion of them – ended up in Robinhood or ETrade accounts. A recent WSJ article quoted an out of work 22-year-old woman who put a portion of her stimulus check into her Robinhood account:

It was basically free money, so, you know, I decided to play around with it,” she said. “You might lose some, you might win some. It’s like a gambling game.

She doubled her money trading stocks so now she’s shifting to options because “you can make a pretty good amount of money in one day”.

“It was basically free money” pretty much says it all I think. For a lot of people, those stimulus checks were just “free money”, a windfall which they treat differently than money they actually had to work for. Why not take a shot on a lottery ticket like Hertz or Chesapeake? What have you got to lose? You’ve got a stimulus check funded brokerage account and your enhanced unemployment benefits last until the end of July. How much do you want to bet those benefits get extended? Anyone believe there won’t be another round of checks? In an election year?

These young “investors” are just as cocky as the dot com day traders back in the day. In the comments section of the same WSJ article I cited above, a 35-year-old said of veteran investors:

Maybe they just lost touch with the general public or don’t know enough about technology to properly invest in this new digital economy. Either way, stop making excuses.

I heard that in 1999 too, that anyone who wasn’t buying into the madness that was the dot com boom just didn’t understand. They were old fogies who didn’t understand the “new economy”. Only it turned out that the new economy was a lot like the old one where revenue, profits, and solid balance sheets turned out to be fairly important.

This is the silly phase of the bull market. It will end eventually and all these new “investors” will discover that it isn’t easy and stocks don’t just go up. But until it does, it’s free money. Enjoy it while it lasts kids.