Category: zerohedge

Shortly after headlines hit that President Trump and the First Lady had tested positive for COVID-19, US equity futures plunged…

Dow futures are down around 500 points but Small Caps are worst for now…

Gold spiked on the news…

Treasuries are bid with yields reversing all of the week’s rise…

Somebody wake up Steve!!

The war between Armenia and Azerbaijan over the disputed Nagorno-Karabakh border region appears to be spinning out into a broader conflict as footage of increasingly heavy and advanced military hardware is appearing.

As of late Thursday there are reports that Armenia’s Russia-supplied S-300 systems are active near the capital of Yerevan. New viral video circulating on military channels purports to show S-300 missiles intercepting a possible enemy drone or inbound rocket in the vicinity of Yerevan. 

Video confirmation over Yerevan of S-300 shooting down Missiles. #Azerbaijan #Armenia #Artsakh
[Knish] pic.twitter.com/Q4JbS50xPT

— Aurora Intel (@AuroraIntel) October 1, 2020

Specifically, the event is being widely said to have occurred over Abovyan, which lies about 16 kilometers northeast of Yerevan in the Kotayk Province.

Within an hour of the footage appearing online, Armenia’s Ministry of Defense seems to have confirmed the dramatic escalation.

An enemy drone was downed by the air defence forces in the air space of #Armenia, Kotayk region.

— MoD of Armenia 🇦🇲 (@ArmeniaMODTeam) October 1, 2020

“An enemy drone was downed by the air defense forces in the air space of Armenia, Kotayk region,” the Armenian MoD wrote on Twitter.

Another angle of air defenses intercepting over Abovyan.

#Azerbaijan #Armenia #Artsakh
[Knish] pic.twitter.com/kIjxi4MbcR

— Aurora Intel (@AuroraIntel) October 1, 2020

Earlier in the day a separate Azerbaijan drone intercept video closer to the center of fighting in Karabakh was posted via official Armenian military channels.

Destruction of an #Azerbaijan‘i drone. pic.twitter.com/7R0xMnaUiS

— MoD of Armenia 🇦🇲 (@ArmeniaMODTeam) October 1, 2020

Azerbaijan has a significant and advanced drone program, having been supplied for years by Israeli defense firms, including so-called Kamikaze drones.

These ‘suicide drones’ appear to be in use by Azerbaijan’s army:

Footage from Armenian soldiers shows the moment an Azerbaijani IAI Harop loitering munition (suicide drone) targeted what is claimed to be a troop transport bus in Vardenis, Armenia. pic.twitter.com/OzTgF5bHyg

— Kyle Glen (@KyleJGlen) October 1, 2020

Though Azerbaijan’s security and arms relationship with Israel has been documented over the past few years, it’s unclear the degree to which Israeli intelligence or military advisors are still present in Azerbaijan, potentially still assisting with the deadly drone program.

However, it’s unclear what type of drone was intercepted near the vicinity of Yerevan on Thursday.

There are also emerging reports that two or more projectiles may have been intercepted near the Armenian capital. 

Authored by Brandon Smith via Alt-Market.us,

There’s been a lot of debate lately on what generation of Americans is the most to blame for the current failures of the US as a society.

• Baby Boomers blame millennials for being weak, lazy and entitled;

• millennials blame boomers for ruining the system before they were ever born while enjoying the fruits of a more prosperous economy.

The real answer is that it’s partially the fault of BOTH generations, but not for the reasons often argued.

The boomer vs. snowflake conflict is a controlled narrative that deliberately avoids the greater issues at hand. Yes, the newest generations of Americans have been utterly pussified, but I believe this is part of a larger agenda, and baby boomer parents unwittingly and stupidly played a supporting role.

In 4th Generation warfare the concept is to destroy a nation or civilization without using direct military confrontation, at least, not right away. Instead, the goal is to destabilize the target society from within and let the citizenry self destruct. Then, once the population is in sufficient chaos, you move in with your military forces and take over, meeting minimal resistance along the way.

The strategy can also be used to undermine and control a population by it’s own government or by elites within that government as a means to stop potential rebellion against the establishment power structure. In other words, use controlled chaos to create panic and weakness, and then snatch up more power while the citizenry is distracted and disorganized.

In order to create chaos and panic in a population, that population must be completely unprepared to deal with crisis events. They must be mentally soft and lack resolve, otherwise they might become self reliant and defiant rather than fearful and easy to control.

I was recently studying psychological conditioning methods used to prepare people for combat and crisis scenarios. The phrase “stress inoculation” comes up often. In certain branches and units of the US military there is an increased emphasis on stress inoculation (beyond basic training) as a means to strengthen soldiers and their fortitude so that when they do eventually find themselves in a combat situation where they might die, they don’t panic and allow adrenaline to take over their motor and thought processes.

Department of Defense think-tanks like DARPA have published extensive white papers on the subject, and stress inoculation is also used to some extent to treat people with Post Traumatic Stress Disorder.

The ability to perform calmly under stress is the key to combat readiness. The most effective warriors, and the most successful people in life, usually have the ability to manage stress and perform at a high level while other people flounder in terror.

Historically, many civilizations have been very careful in how they choose and train warriors for defense. Native American tribes, for example, would carefully vet their warriors and make sure they chose men that would NOT run away at the first sign of trouble; rather, they picked men they knew would confront trouble directly. A small force of psychologically prepared men was considered far superior to a vast army of potential bed wetters and hysterics.

Mentally vetting people for stress management skills has been a common human practice for thousands of years.

Some people are simply born with a greater capacity for it, but many others can be trained for stress inoculation using basic methods. The key is for people to start learning stress management when they are children. This requires them to go through experiences which cause short term acute stress, rather than long term chronic stress.

Short term acute stress strengthens mental response time and increases confidence and psychological stability by acclimating a person to surprise and shock. Long term chronic stress does the opposite, never allowing the person to acclimate and causing them to revert to a constant state of fear.

Acute stress events include physical exercise, competitive play, being placed in unfamiliar surroundings and being forced to adapt, regularly undertaking new and useful skill sets, sticking with a skill set until it is mastered, and even interactions with larger groups of unfamiliar people, such as public speaking.

One could also apply the ancient philosophical concept of Zen to stress inoculation, particularly the practice of mastering a skill so completely that a person becomes “one” with that talent, and thus “one” with themselves and their place in the world. If you have ever met a person that is a true master of a useful skill, you know that they tend to be extremely calm and confident people that do not panic easily regardless of the situation.

While researching stress inoculation methods, it struck me – What if a society was to do the exact OPPOSITE of this? What if an entire generation of children were deliberately sheltered from all forms of short term acute stress? What if they were encouraged to never work hard at anything? What if they were not given any incentive to accomplish any goals? What if competition was discouraged and children were taught to despise it as “barbaric” and “debilitating”? What if accomplishment was dismissed and the idea of “winning” was eliminated in the name of “fairness and equality”?

What if a generation of kids were so thin skinned and untrained in stress management that they panic and run to the nearest authority figure for help at the first sign of trouble? What if they were so spoiled that they had never learned to take care of themselves? What if all of their life experiences were in the form of a safe, insulated digital fantasy world where there is no real risk?

Now imagine you then take this highly coddled and sheltered generation and you suddenly expose them to a massive crisis event; such as an economic crash, or even the threat of a global pandemic? How would this group of children, now moving into adulthood without any practical skills or emotional toughness, respond to the situation?

All of their actions would be reactionary and rooted in panic and terror. Because they have never trained to deal with acute stress events they are now a walking time bomb of fear. They might respond by running and hiding, or they might respond by lashing out violently, but in either case they will have no self-control and will be ruled by emotion and adrenaline rather than logic and reason.

Wouldn’t this be the most effective way to destroy or dominate a nation over the span of a couple decades?

In America today there is the more obvious trend of social justice warriors among younger generations and their complete inability to function in normal adult society without constant protection.

What is the purpose of concepts like “safe spaces”, trigger warnings, forced diversity, intersectionality, critical race theory, micro-aggressions, implicit bias, etc., other than to artificially swaddle people so they never have to deal with negative experiences?

The only reason for the existence of so-called “victim groups” is for people who have no stress management skills to continue to avoid any and all acute stress events for the rest of their lives by making it socially or legally unacceptable to criticize them, discriminate against them as individuals, or place practical demands on them. They become a protected class with special privileges.

They deny the need to compete based on merit in the working world because they claim competition is “racist” and creates inequality. Anything that causes them stress is immediately deemed an “aggression” against them personally, and all stressors are treated as equally offensive; meaning, an insult or criticism becomes the same as a physical attack, and they react with the same level of emotional panic to both.

I believe this is a major contributor in the rush by some young people to join the “trans movement”, as it represents an easy outlet to gain victim group status and thus attain protection from stress.

Did this movement of perpetual childhood develop out of this air? The evidence says no. The social justice movement with all its Marxist underpinnings was funded and managed directly by elitist organizations like the Rockefeller Foundation and the Ford Foundation, it becomes clear that the pussification of America’s youth is not a natural progression but an engineered program.

This is openly admitted in Alison R. Bernstein’s book ‘Funding The Future: Philanthropy’s Influence On Americas Higher Education’. Bernstein is the vice president of Education at the Ford Foundation and the former Associate Dean of Faculty at Princeton.

It’s not just the SJW lunatics that are the problem, though. A vast number of young people are finding themselves completely unprepared for adult life and they blame boomers indirectly for their failings. Contrary to popular belief, boomers had nothing whatsoever to do with the decline of the US economy; if you want to find the culprits behind your financial pain, I suggest learning about the history of the Federal Reserve and how that institution has systematically destroyed our currency’s buying power and our economy over time.

Where boomers are culpable is in their terrible parenting model. They raised a generation of weaklings and rarely questioned the establishment and media propaganda that told them that helicopter parenting and the “self esteem model” was the best way to raise their children. While perhaps done out of love, boomers spoiled their own kids so completely and shielded them from all acute stress that as young adults they now have no capacity to succeed in a world where survival instincts might be required.

Consider the most common complaint among next-gen adults – That boomers all enjoy home ownership while they will never be able to afford the privilege because boomers ruined the economy. This, they claim, is the reason why boomers should not be allowed to criticize the inactivity and laziness of millennials. Yet, the majority of boomers had to leave home and become adults at age 18 (some of them even sooner), while a large number of millennials live with mom and dad well into their 30s, feeding off of them like parasites rather than working and saving. Gen Z appears ready to do the same. Boomers started their adult lives sooner, and thus they accumulated assets and wealth faster.

Of course, boomers share the blame. Helicopter parents have helped to ruin American culture, even though numerous psychological studies indicate that sheltering children from short term stress destroys their ability to cope as adults.

At bottom, though, boomers were encouraged at every moment to continue this style of parenting by the media and elitist foundations. The Ford Foundation in particular was a primary force behind the modern parenting and public education methodology of stress avoidance. The foundation was key in the development of such programs as Head Start and has spent hundreds of millions on the training of public school teachers in social justice methodologies.

Ford was also the primary engine behind the creation of the National Education Television Center, which later became PBS, and funded such prominent children’s shows as Sesame Street and Mister Rogers. This is not to say the people that produced these shows had any nefarious agenda in mind, only that both shows often promoted stress avoidance rather than stress confrontation and management. To this day, stress inoculation training is becoming more and more rare among America’s youth, and it is quickly being erased in public schools.

If history is any indicator, the weakest generations when faced with overwhelming crisis will demand protection, as they always have, whether it be physical protection or financial protection. And inevitably they will turn to government collectivism or the money elites for a feeling of safety in exchange for their liberties. They don’t value their freedoms because they have never enjoyed the feeling of independence anyway. The trade for comfort becomes easy for them.

Not all younger Americans suffer from this affliction. Many are strong willed, but those that are usually admit freely that they feel isolated among the majority of their peers. I find it hard to believe it’s mere coincidence that perhaps the weakest generation of Americans ever is now facing the worst series of crisis events in our history. The whole thing seems planned…

Stress inoculation is a lot like strengthening your own immune system – Sometimes you have to work through sickness when you are young in order to improve your immunity to sickness later in life. By the same token, you have to experience stress events when you are young so that you can better deal with crisis events later in life. Otherwise, you grow up as malleable as jello and just as easy to devour.

The good news is, even as adults stress inoculation can be learned. As our world grows more and more unstable and uncertain, being able to manage our own fears is becoming paramount to our continued liberty and livelihood.

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The number of empty rental apartments in Manhattan has tripled compared with last year, forcing some landlords to become increasingly desperate as they struggle to find tenants amid an urban exodus. 

Douglas Elliman and Miller Samuel’s August report showed the number of empty rental apartments in Manhattan surpassed 15,000 units in August, up from 5,600 a year ago. 

Facing a glut of inventory, with demand quickly collapsing, landlords are becoming desperate – consider this: 

“Don’t pay rent until 2021, select properties now offering up to three months complimentary rent,” read the message banner of a New York City apartment listing’s website, operated by Related Rentals Corporate. 

By the month, landlords are becoming more desperate to find tenants as an urban exodus, triggered by the virus pandemic, social unrest, and remote working has collapsed demand. There’s also a seasonal factor as colder weather blankets the region and makes it less likely that people would want to move. 

Referring to the developing inventory glut crisis, Gary Malin, chief operating officer of brokerage Corcoran Group, which represents landlords, told Bloomberg, “You can’t hide it anymore… Owners are saying to themselves, ‘I’d rather be honest from the beginning, rather than play a game back and forth, and otherwise lose a tenant.'”

Malin said the glut gives renters incredible leverage over landlords, with the ability to find “the best possible deal.” 

“Tenants are filling out four to five applications at the same time and negotiating one offer against the other,” he said. “Owners want to lead with their best foot. If you sit and try to hold on for every last penny, for every last dollar, tenants are just going to go somewhere else.”

Other properties in New York’s downtown area are offering similar free rent schemes, including Brookfield Properties’ Gehry tower. There’s also Equity Residential, who has deals at some of its luxury buildings, including Prism at Park Avenue South. 

Ofer Yardeni, Chairman and CEO of Stonehenge NYC, said occupancy before the virus lockdown was about 99%. Shortly after, the figure fell to 85% as some tenants returned home to live with their parents, while others moved to the suburbs. He said remote working was also a significant factor in why people left the city. 

“I’ve been in the business for over 30 years and I’ve never seen the market this way,” Yardeni said. “It’s almost like a falling knife.”

We’ve focused on CMBS shorts from malls to hotels; maybe it’s time to start looking at apartment buildings… 

The next housing crisis is here, and this time, it’s about rentals. 

Authored by John Vibes via TheMindUnleashed.com,

A recent study suggests that binge drinking alcohol could seriously damage the brain in ways that increase the risk of cognitive-behavioral issues like anxiety.

The study, which was conducted by researchers at the University of Porto, found that just ten days of binge drinking cause immune cells in the brain to destroy connections between neurons, which leads to anxiety and other mental health issues.

It is important to note that these were not human studies, as the test subjects were mice, but these types of experiments typically give significant insight into how different substances affect the brains of humans.

Study co-author João Relvas, told Inverse that, “[We] don’t have any reason to believe that the same mechanisms will not be operating in the human brain. Even for a short period of time, excessive drinking is likely to affect the brain, increasing the level of anxiety, a relevant feature in alcohol abuse and addiction.”

“The dangers of alcohol drinking, especially amongst the younger population, have been widely underestimated and excessive alcohol drinking is socially relatively well tolerated. Increasing public awareness and education of the young can, together with other measures, change the way society looks at alcohol intake,” Relvas added.

In the study, the researchers broke the mice off into two groups. One group was given alcohol over a 10 day time period, while the other group was not. Half of the mice were given 1.5 grams per kilogram of ethyl alcohol each day, which is the equivalent of five drinks for an adult human that weighs 165 pounds.

After 10 days, the researchers looked at the mice’s brain tissue and found that the mice who consumed alcohol had significant damage to the area of the brain that controls complex cognition and decision making, which resulted in increased anxiety.

The researchers also determined the process that caused this damage in the brain. They believe that alcohol boosts the production of an inflammatory molecule called TNF.

In further experiments, they used a drug called pomalidomide to block TNF and found that it prevented anxiety and reduced the impact that the alcohol had on the brain.

The symptoms are “ultimately driven by increased secretion of TNF by microglia, as we show that reducing its production either pharmacologically or genetically can prevent synapse loss and anxiety,” Relvas says.

Relvas also said that this drug could potentially be used to treat alcohol addiction.

“This study suggests that regulating the levels of TNF might eventually be useful when treating alcohol addiction,” he said.

However, the team does not recommend that anyone use TNF inhibitors while binge drinking, because further studies need to be done to confirm the safety and efficacy of the drugs for the purpose.

Furthermore, TNF inhibitors would not prevent any of the other damage that alcohol can do to the rest of the body.

“Alcohol abuse is a leading cause of disease with a massive impact on human life and should be treated as so,” Relvas says.

His team’s findings were published earlier this month in the journal Science Signaling.

Policies promoted by the White House and the Federal Reserve to support small firms have been widely insufficient as bankruptcy filings are back to levels not seen since the dark days of the virus pandemic, according to Bloomberg, citing a new report via bankruptcy court data firm Epiq AACER.

At least 620 companies filed for Chapter 11 protection in the first 25 days of September, a 48% increase over the same period last year. Bankruptcy filings in June and July saw 609 and 644, respectively. 

Chris Kruse, senior vice president at Epiq, said, “we’re seeing a continued strong flow of Chapter 11 filings in September, consistent with what we saw in June and July,” adding that “they range from businesses with small footprints to high street retailers.”

Fed Chairman Jerome Powell has admitted the Fed’s lending program for smaller businesses has been challenging. 

 “Trying to underwrite the credit of hundreds of thousands of very small businesses would be very difficult,” Powell said.

As a result, most of the Fed’s liquidity flowed to mega-corporations while smaller ones were shut out, leaving them widely exposed to bankruptcy as a fiscal cliff, which started on July 31, has ravaged small firms and households for the last two months.

With Republicans and Democrats still far apart on agreeing on the next round of economic stimulus, downward pressure on small firms and households will continue. The failure to pass the next stimulus bill, in a timely fashion, could result in a double-dip recession. 

Deirdre O’Connor, managing director of corporate restructuring at Epiq, said, “we will continue to see filings for companies that had been the most disrupted by Covid and are operating in a zero revenue environment.” 

Data compiled by Bloomberg shows 193 bankruptcy filings year-to-date of companies with more than $50 million in liabilities were recorded for the first nine months of the year. If filings continue to accelerate into fall/winter, then this year could rival the 271 high, recorded in 2009.

For more color on small firm health nationwide via high-frequency data, we turn to Opportunity Insights’ Economic Tracker of the percentage change in the number of small businesses open as of Sept. 13, suggesting nothing but disaster for mom and pop shops ahead of the fourth quarter.

We noted in early September how seasonal shifts to colder temperatures would make it extremely challenging for restaurants, clubs, and entertainment venues to serve patrons in outdoor spaces.

With consumers spending less and steering clear of brick and mortar retail stores because of the virus pandemic, the second round of the economic crash could be dead ahead. Stimulus and reopenings of the economy have proven worthless as the small business bust could erupt further in the fall/winter. 

As a reminder, small firms are the lifeblood of the economy, without them, there can be no “V” shaped recovery. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

The best-case scenario is those who love their “great city” will accept the daunting reality that even greatness can go bankrupt.

Two recent essays pin each end of the “urban exodus” spectrum. 

1. James Altucher’s sensationalized NYC Is Dead Forever, Here’s Why focuses on the technological improvements in bandwidth that enable digital-economy types to work from anywhere, and the destabilizing threat of rising crime. In his telling, both will drive an accelerating urban exodus over the long-term,.

2. Jerry Seinfeld’s sharp rebuttal, So You Think New York Is ‘Dead’, focuses on the inherent greatness of NYC and other global metropolises based on their unique concentration of wealth, arts, creativity, entertainment, business, diversity, culture, signature neighborhoods, etc.

The core issue neither writer addresses is the financial viability of high-cost, high-tax urban centers.

It’s telling that Seinfeld’s residency in Manhattan began in the summer of 1976, shortly after the federal government provided loans to save the city from defaulting on its debts and declaring bankruptcy.

In other words, Seinfeld arrived at the very start of New York’s fiscal rebuilding, though its social decline would continue for another few years (the 1977 blackout and looting, etc.). Fiscal conservative Ed Koch was elected mayor in 1977 and by 1978, the city had paid off its short-term debt.

This return to solvency laid the foundation for the eventual revival that attracted capital, talent and hundreds of thousands of new residents, replacing the 1 million+ residents who had moved to the suburbs in the tumultuous 1960s and 70s.

This urban exodus had led to urban decay which had generated a self-reinforcing feedback: the greater the decline in livability, the more people who moved out, which then reduced commerce and taxes, further exacerbating urban decay, and so on.

As I explained in How Extremes Become More Extreme, these feedback loops are one way that Extremes Become More Extreme until a tipping point / phase change is reached and livability and solvency both collapse.

The other dynamic I discuss is the Pareto Distribution, the 80/20 rule which can be distilled to 64/4 (80% of 80% is 64%, 20% of 20% is 4%). Once the vital 4% act, they exert outsized influence on the 64%, far out of proportion to their numbers.

Thus the expanding criminality of the 4% criminal class can dramatically change perceptions of safety and security of the 64%.

Telling people who no longer feel safe in the city that crime only went up 10% will not change their minds.

If 20% of the businesses in a district close for good, the district might retain enough of a concentration of commerce to draw customers.

But once the number of businesses plummets below a critical threshold, the survival of the remaining enterprises becomes doubtful as the customer base drops below the level needed to sustain the remaining businesses.

As I have repeatedly stressed, the surviving businesses are burdened by high fixed costs, none of which have declined even as commerce collapsed.

Again, you cannot persuade people who no longer feel that shopping is safe and fun to get out there and spend, spend, spend like they did a year ago.

Neither Altucher nor Seinfeld mention the macro-issues of demographics and the broader economy.

Despite soaring inflation and a roller-coaster stock market, jobs were plentiful in the 1970s, partly because the Baby Boomers were entering the market for goods and services and partly due to low costs for employers.

As late as the mid-1980s, it only cost me $50/month (one day’s pay for a moderate-wage worker) to provide good healthcare insurance for a single, young worker. Try buying a month of good healthcare insurance today for one day’s moderate-wage pay.

Not only were rents much cheaper (measured by the number of hours of work needed to pay rent), there were “squats” where the rent was zero, and a variety of cheap “slum” dwelling options. These options have mostly disappeared from the housing inventory, so it now takes enormous sacrifices to live in a “great city”.

Compare these positive demographics and cost structure then to the present. Not only are jobs no longer plentiful, many of the Millennials who flocked to a “great city” for jobs and the amenities can no longer afford to live there.

Many found jobs in the dining-out and retail sectors that have been devastated, and they only survived financially by sharing flats with multiple roommates.

Costs such as healthcare insurance and housing are “sticky:” insurers, landlords, etc. are reluctant to cut prices for fear that cost reductions may become permanent, hurting their profitability.

These high costs are also endangering all the cultural institutions and commercial life that attracted people to the “great cities.” I doubt that every symphony, opera company, museum, music venue, etc. will survive the downturn, due to their incredibly high fixed costs of operation.

As I’ve noted before, the patrons who are financially able to support these costly institutions are older and wealthier, and have the most to lose if they feel their basic security is no longer assured. They’re the first to join the exodus to safer, less risky homes elsewhere. Yes, they’ll miss all the amenities, but not enough to make them stay.

I’ve also stressed the absolute necessity for any entity to be financially viable. If the entity isn’t viable in terms of income covering all expenses, it dissolves regardless of its greatness.

Seinfeld is on solid ground arguing that great cities will never go away, as their benefits are simply too compelling. On the other hand, goats were grazing in Rome’s Forum, a few decades after the Western Empire collapsed.

What collapsed wasn’t just Imperial authority; the city could no longer afford all the free bread and circuses which fed and amused much of its vast populace, not could it defend / maintain the long trade routes that fueled commerce or the political structure that secured the wealth of its nobility.

Cities are not cheap to operate, and they must continually attract workers and capital / wealth which can both be taxed at a high rate. They also need a high volume of commerce that can be taxed.

Most employers are facing a profound reset that will very likely require permanent cost-cutting to maintain profits, and remote work is very cost-effective, as commuting and office space are both unnecessary expenses that can be eliminated.

In terms of financial viability, much of the activity that generated taxes for “great cities” is gone for good: downtown concentrations of tens of thousands of workers that supported hundreds of small businesses, commercial landlords paying high property taxes, and so on.

The question nobody seems to be asking is: are cities no longer financially viable, given the enormous cost of living, the high taxes needed to run the city, and the strong economic and demographic headwinds?

What kind of city is possible if half the small businesses close and tax revenues fall by 50%? What effect will those massive changes have on the livability of the city and its most compelling attractions? How will the city provide services on half the revenues?

The worst-case scenario is only those who can’t afford to leave will be left. Unless great sacrifices are made by those remaining, that’s not a recipe for financial viability, it’s a recipe for goats grazing in the Forum.

The best-case scenario is those who love their “great city” will accept the daunting reality that even greatness can go bankrupt, and that the city will have to adapt in new and wrenching ways to remain financially viable as tax revenues decline and some percentage of the wealthiest taxpaying residents have left or will leave.

It’s not just the urban exodus that’s the challenge–it’s who’s in each successive wave of the exodus. If the wealthy, the entrepreneurs and the displaced small business owners leave in the first wave, the adaptation will have to be rapid and profound, as the modest, incremental reforms that typify the past 75 years will not be enough to be consequential.

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My recent books:

A Hacker’s Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook coming soon) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( 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).

*  *  *

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While few expect major surprises from tomorrow’s payrolls report, the fact that it will be the last jobs report before the Nov 3 election makes it especially important if only from a political standpoint: a blowout number will be hyped aggressively by Trump; the opposite will fall right into Biden’s hands as evidence the economy is cooling rapidly.

That said, the odds may be in Trump’s favor because as Goldman writes in its payrolls preview, high-frequency labor market information “indicates strong September job gains, and the second derivative improvement in the public-health situation suggests scope for a pickup in Sun Belt job growth.” On the negative side, there has been a spike in recent mass layoff announcements, while the start of the school year will lower education payrolls by 200-300k, as many janitors and support staff did not return to work. Goldman also expects a roughly 50k drag to government payrolls from the wind-down of the 2020 Census.

That said, here are the consensus expectations ahead of tomorrow’s number which will be released at 830am:

• Nonfarm Payrolls exp. 850k (range -100k to +1.800mln, prev. +1.371mln);
• Unemployment rate exp. 8.2% (range: 7.6-8.6%, prev. 8.4%);
• U6 unemployment (prev. 14.2%);
• Participation (prev. 61.7%);
• Private payrolls exp. 850k (prev. 1.027mln);
• Manufacturing payrolls exp. 35k (prev. 29k);
• Government payrolls (prev. 344k);
• Average earnings m/m exp. +0.2% (prev. +0.4%);
• Average earnings y/y exp. +4.8% (prev. +4.7%);
• Average workweek hours exp. 34.6hrs (prev. 34.6hrs).

Here are some big picture observations ahead of tomorrow’s payrolls courtesy of NewsSquawk:

• The rate of Initial Jobless Claims rose in the September survey week against expectations it would fall, while Continuing Claims fell less than hoped.
• ADP’s payrolls gauge was more encouraging, rising more than expected, although it remains to be seen if it will correlate to the BLS following recent divergences.
• The Manufacturing ISM came in slightly cooler than expected as the pace of the rebound begins to plateau, which was somewhat at odds with the strong regional prints; the employment sub-component rose but it still remains beneath the 50 mark.
• Challenger Job Cuts were little changed from the August print, although have come down considerately since the record print in April.
• There has been a slew of large job cuts announced this week but those will most likely be a matter for October’s report, somewhat balanced out by the pick-up in seasonal hiring.

And some more in-depth observations:

INITIAL JOBLESS CLAIMS: Weekly Initial Jobless Claims rose to 870k from the upwardly revised 866k level in the September employment survey reference week, against expectations for a decline to 850k. Continuing Claims fell to 12.580mln from the  pwardly revised 12.747mln. Pantheon Macroeconomics notes that the Initial Claims print has been flat lining now over the past four weeks following a one-time drop of 127k in the final week of August due to a change in the seasonal adjustment methodology, “Using the old seasonals, it looks as though the trend in claims has been unchanged since mid-August.” The consultancy affirms the labour market plateau against the daily small business employment data produced by Homebase, “pointing to flat payrolls in the sector in August and, more recently, a small outright decline.” The consumer-heavy US economy will struggle to continue recovering amid the roll-off of enhanced unemployment benefits, to which Pantheon doesn’t see the implementation of a “meaningful” relief bill until February given the divide in Congress; a pick-up of COVID cases only serves to cut output further. The consultancy warns, “Next week’s September payroll data likely will report a modest seasonally adjusted increase in private jobs, perhaps 500K or so, half the August gain, and October could easily see private payrolls fall.”

ADP: The September ADP report was encouraging as it continued to rise, the headline for private sector employment growth came in at 749k, topping the 650k estimate; the previous was also revised higher to 481k from 428k. The report bodes well for Friday’s BLS report. Although the relationship between the BLS and ADP release has been questionable in recent months, Pantheon highlights that ADP has substantially understated the official figures since the pandemic hit, but the error is much smaller since spring. “We can’t be sure it will narrow again in September, but that seems to be a reasonable assumption”, Pantheon posits. The consultancy looks for 950k in Friday’s September jobs report, adding the homebase employment data points to significantly weaker payrolls in October, and perhaps even the first decline since April.

MANUFACTURING SECTOR: The September ISM fell to 55.4 from 56.0, below the expected rise to 56.4. When comparing to the strong regional Fed surveys, the decline came in as somewhat of a surprise. Weighing the most was the fall in New Orders, which fell from the bumper 67.6 figure to 60.2, still a firm reading. The production component also fell to 61.0 from 63.3. Dampening the fall was the pick-up in the lagging indicators: Delivery Times, Inventories and Employment. The latter rose to 49.6 from 46.4, potentially boding well for the NFP print, although, noticeable, that figure still has not reclaimed the 50 figure. It’s also worth noting that we do not yet have the ISM Services survey to gauge the respective employment component; that is somewhat  unhelpful given the US economy is predominantly services-led.

JOB CUTS: Challenger reported 118,804 job cuts in September, which was little changed from August’s 115,762, but was up 185.9% vs September 2019. However, the figure has come down significantly from April’s record 671,129, and note that prior to COVID, the highest reading was 186,350 in February 2009, although this month’s reading still sits heavily above the c. 50k average reading seen in “normal times” during the last decade. Challenger says, “We are setting new records for job cuts even though things have improved since the earliest days of the pandemic.” The report showed the heavily hit sectors such as entertainment and leisure continuing to lead in announced cuts, although there were several sectors outside those industries with large cuts such as Aerospace & Defense, as well as transportation, “We are beginning to see cuts spread to sectors outside Entertainment and Retail. Especially if another relief package fails to pass, employers are going to enter the fourth quarter hesitant to invest or spend.” The silver lining to the release was the pick up in hiring intentions to 929,860, compared to August’s 160,411, however, do note that at least a third of that is related to seasonal hiring and that hiring is heavily skewed to retailers with a strong online presence, with traditional brick and mortar retailers remaining under immense pressure

Finally, some qualitative considerations from Goldman: factors arguing for a better than expected report:

Arguing for a better-than-expected report:

• Big Data. High frequency data on the labor market were generally strong in September (see Exhibit 1), with five of the six measures we track indicating significant job gains and four of the six consistent with a beat tomorrow of 500k or more. Additionally, the restarted Census Household Pulse survey is consistent with a 16mn decline in the level of unemployment from mid-May to mid-September (vs. -7.4mn in the official measure from mid-May to mid-August).
  
• Jobless claims. While still elevated, initial jobless claims declined significantly during the September payroll month (averaging 0.9mn per week vs. 1.2mn in August). Additionally, continuing claims declined by 1.9mn from survey week to survey week (after adjusting for biweekly filing schedules in Florida and California).
• Employer surveys. Business activity surveys improved on net in September, as did the employment components of our survey trackers (non-manufacturing +2.8pt to 49.1; manufacturing +2.4pt to 53.8).
• Job availability. The Conference Board labor differential—the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get—rose into expansionary territory (+2.9 in September from -2.2 in August and +2.2 in July).
• ADP. Private sector employment in the ADP report rose by 749k in September, somewhat above consensus. We viewed the ADP report as incrementally positive news but broadly similar to expectations.
• Census hiring. Census temporary workers are set to boost nonfarm job growth by 255k in August, as additional field staff were hired to conduct interviews.
• Employer surveys. Business activity surveys improved on net in August, as did the employment components of our survey trackers (non-manufacturing +3.0pt to 46.3; manufacturing +2.6pt to 51.4).
• Job cuts. Announced layoffs reported by Challenger, Gray & Christmas fell 65% in August to 116k after rising 68% in July and falling 43% in June (mom, sa by GS). They remain 114% above their August 2019 levels.

Arguing for a weaker-than-expected report:

• Education seasonality. We expect a seasonal drag in education categories related to the coronacrisis to lower September job growth by roughly 200-300k (public + private). Some of the janitors and other school staff who normally return to work in September did not this year due to virtual reopenings in much of the country. Reflecting this, we expect education payrolls to rise by less than the BLS seasonal factors anticipate, resulting in a sizeable drop in reported job growth in the sector. At the same time, the level of education employment is already considerably below its typical summer bottom (11.9mn vs. roughly 12.5mn in a normal year), which we expect to limit the drag to only a few hundred thousand. The inability to obtain childcare is also likely to weigh on job creation at the margin, though its effect may already be mostly reflected in the August payroll levels (given the cancellation of some in-person summer camps and an earlier reduction in childcare provider availability).
• September seasonality. We also note that payrolls have exhibited a tendency toward weak September first prints, with a miss versus consensus in 8 of the last 10 years. However, the magnitude of the potential bias is small (between -30k and -50k) relative to the underlying inflections in the data this year.
• Census hiring. Census temporary workers are set to lower nonfarm job growth by around 50k in September, as training and field operations began to wind down.
• Job cuts. Announced layoffs reported by Challenger, Gray & Christmas rose 5.6% in September to 127k after falling 61% in August and rising 56% in July (mom, sa by GS). They remain 191% above their September 2019 levels.

Neutral/mixed factors:

• Second wave. The US experienced a dramatic resurgence of coronavirus during the second half of June—particularly in the Sun Belt states—and by the July Fourth holiday, nearly two-thirds of the country had paused or reversed their reopening plans. However, job growth remained firm in July and August despite a pause in the Sun Belt leisure and hospitality recovery (see Exhibit 2). With restrictions generally stable or easing over the last month, we note scope for a pickup in job growth in some segments. Illustratively, a 50% reversal of the late-summer leisure deceleration in the Sun Belt would boost monthly job growth by 320k. On the other hand, weaker demand for back-to-school apparel may have limited hiring in the retail sector (relative to a normal September).

And speaking of Goldman, this is what the vampire squid expects tomorrow:

• 1.1mn nonfarm payrolls rose, above consensus of +0.875mn; private payrolls up 1.2mn vs consensus is +0.9mn.
• Unemployment rate declined by three tenths to 8.1%, vs 8.2% consensus, a forecast reflecting another strong rise in household employment partially offset by higher labor force participation.
• Average hourly earnings rose 0.1% month-over-month, boosting the year-on-year rate by a tenth to 4.8%

Source: NewsSquawk, Goldman Sachs

Authored by Michael Snyder via The End of The American Dream blog,

Most Americans assume that our system of government could never fail, but the truth is that it is failing right in front of our eyes.

In order for our system of government to work, people need to be able to believe that their votes will count and that the outcomes of our elections will be fair.  For over 200 years, most Americans did have faith in the system, but now things are rapidly changing.  Here in 2020, we appear to be heading for a hotly contested result in the presidential election, and many on the losing side are inevitably going to believe that the election was stolen from them. 

And day after day we just continue to see more examples that indicate the security of our elections is being compromised on a widespread basis.  Not too long ago, I wrote about the military ballots for Trump that had been discarded in a dumpster in Pennsylvania and the ballots that were discovered in a ditch in Wisconsin. 

And now today I came across a report about how memory sticks that are “used to program Philadelphia’s voting machines” were stolen from a warehouse…

A laptop and several memory sticks used to program Philadelphia’s voting machines were stolen from a city warehouse in East Falls, officials confirmed Wednesday, setting off a scramble to investigate and to ensure the machines had not been compromised.

Though it remains unclear when the equipment was stolen, sources briefed on the investigation said the items vanished this week. The laptop belonged to an on-site employee for the company that supplies the machines. It and the USB drives were the only items believed to have been taken.

We will want to watch the results coming out of Philadelphia very carefully, because the winner of Pennsylvania is probably going to win the presidency.

In 2012, 100 percent of the vote went to Barack Obama in precinct after precinct in Philly, and it will be very interesting to see if a similar pattern emerges during this election.

Elsewhere, James O’Keefe has just exposed an absolutely shocking “cash-for-ballots harvesting scheme” in Minnesota.  Apparently people were being paid lots of money to collect absentee ballots from elderly individuals and fill them out for preferred Democratic candidates.  The following comes from a Newsweek report…

“Just today we got 300 for Jamal Osman,” Mohamed says in the video. “I have 300 ballots in my car right now.”

“Numbers don’t lie. You can see my car is full. All these here are absentee ballots. Look, all these are for Jamal Osman.”

Mohamed can be seen showing white envelopes on his car’s dashboard in a video from July 1. Later in the Project Veritas video Mohamed says, “Money is the king in this world… and a campaign is driven by money.”

How can an election be legitimate when there is this sort of vote buying going on?

And now with tens of millions of ballots going through the mail in 2020, it is going to be easier to “harvest” ballots than ever before.

I just have such a bad feeling about what is going to happen in November.

For weeks, the mainstream media has been trying to convince us that President Trump will probably have a lead on election night but that Joe Biden will win once all of the mail-in ballots are finally counted.

Of course it could take a really long time for all of those ballots to be counted, and meanwhile all sorts of monkey business could be happening in the background that we don’t know anything about.

In the end, one side is going to end up bitterly disappointed and will feel like the election has been stolen.  If Trump wins many Biden supporters will believe it was because all of the votes were not fairly counted, and if Biden wins many Trump supporters will believe that there was widespread fraud involving mail-in ballots.

We could very easily end up with a scenario where both candidates are declaring victory, and that could set up a very ugly constitutional crisis. 

In one of his recent articles, James Howard Kunstler detailed one way that this could all play out…

• The complicit newspapers and cable news channels publish polls showing Joe Biden leading in several swing states, even if it’s not true.

• Facebook and Twitter amplify expectations of a Biden victory.

• This sets the stage for a furor when it turns out that he loses on election night.

• On cue, Antifa commences to riot all around the country. Meanwhile, a mighty harvest of mail-in votes pours into election districts utterly unequipped to validate them.

• Lawfare cadres agitate in the contested states’ legislatures to send rogue elector slates to the electoral college. The dispute ends up in congress, which awaits a seating of newly-elected representatives on January 4, hopefully for Lawfare, mostly Democrats. Whoops…!

• Turns out, the Dems lost their majority there too. Fighting in the streets ramps up and overwhelms hamstrung police forces in Democratic-run cities.

• January 20 — Inauguration Day — rolls around, and the Dems ask the military to drag Trump out of the White House “with great dispatch!” as Mr. Biden himself put it so nicely back in the summer.

I do believe that Trump will have a lead on election night.

In fact, it could be a very big lead.

Trump has been trashing voting by mail for months, and this is going to encourage most of his supporters to vote in person.  In fact, during the first presidential debate Trump once again talked about potential problems with mail-in votes…

In the final segment of the contentious debate between Trump and Democrat Joe Biden, Trump launched into an extended argument against mail voting, claiming without evidence that it is ripe for fraud and suggesting mail ballots may be “manipulated.”

“This is going to be a fraud like you’ve never seen,” the president said of the massive shift to mail voting prompted by the coronavirus pandemic.

And the Republican National Committee has also been making disparaging statements about voting by mail…

‘We always expected to be behind at this point as Democrats have made it their mission to push for an all-mail election that brings fraud and chaos into the system,’ said Republican National Committee spokesman Mike Reed. ‘You’ll see Democrats predominantly vote by mail, and our voters will come out in droves to vote in person, especially on Election Day.’

Those that follow my work on a regular basis already know how I feel about voting by mail.  I believe that Americans should be required to vote in person whenever possible, because voting by mail just opens up so many opportunities for things to go wrong.

And many on the left are starting to realize this too.  For example, the following comes from a recent article by Derek Thompson…

Mail votes require several steps, and different steps in different locations, including postmarking the ballots, signing in various places, and using the proper number of envelopes. For that reason, it can confuse first-time voters, and even experienced voters used to queuing at local high schools. Two studies of the 2018 midterm elections in Florida and Georgia found that young and minority voters are especially likely to have their mail ballots rejected.

For most of 2020, Democrats have been relentlessly promoting voting by mail, but now they are beginning to understand that could result in hundreds of thousands of their votes being thrown out.  In fact, it is being reported that more than half a million votes were “disqualified” during the 2020 primaries…

In the 2020 primaries, more than 550,000 mail and absentee ballots were disqualified, a much higher number than four years ago. The problem is especially severe in some swing states. More than 23,000 mailed ballots were rejected in the presidential primaries in Wisconsin—more than Donald Trump’s margin of victory in that state in 2016. Deep-blue districts have had the same problem: New York City alone threw out more than 84,000 ballots this primary season.

In the end, Democrats could be sabotaging their own efforts by pushing mail-in voting so much.  If Democrats vote by mail in much higher numbers than Republicans, they will also likely have their votes disqualified in much higher numbers too.

Right now, Democrats are requesting mail ballots at a much higher rate than Republicans are in quite a few key swing states…

Of the more than 9 million voters who requested mail ballots as of Monday in five critical states where the data is available – Florida, Pennsylvania, North Carolina, Maine and Iowa – 52 percent were Democrats, 28 percent were Republicans, and 20 percent were unaffiliated.

Additional internal Democratic and Republican Party data obtained by The Washington Post shows a similar trend in Ohio, Minnesota, New Hampshire and Wisconsin, the paper reported.

Many Republican operatives are deeply concerned about these numbers, but perhaps they shouldn’t be.

If Republicans show up in person at the polls in tremendous numbers, that could give Trump an enormous lead on election night.

Of course Joe Biden will definitely not concede no matter how large the lead looks, and that will set the stage for weeks of legal wrangling over the counting of votes in multiple states.

Ultimately, we will probably have to wait a long time to see if the Democrats can come up with enough “mail-in ballots” to overcome Trump’s lead.

But this process is not going to be good for our nation no matter who ends up winning.

In fact, it is likely that millions of Americans will be so turned off by what happens that they will lose faith in the system permanently.

And once faith in our system is gone, it will be nearly impossible to get back.

On Wednesday President Trump signed an executive order which declared a “national emergency” in the US mining industry, highlighting America’s dangerous overdependence on China for what’s known as rare-earth minerals.

China has been widely acknowledged as dominant in the rare-earth minerals market for decades, which includes a group of obscure minerals (typically 17 identified as such) often used in manufacturing anything from advanced electronics like flat screens to even weapons. For example, one of the most sought after – samarium cobalt – is used in precision guided missiles and fighter jets, and advanced communications systems.

The order says that  “our Nation’s undue reliance on critical minerals, in processed or unprocessed form, from foreign adversaries constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security, foreign policy, and economy of the United States. I hereby declare a national emergency to deal with that threat.”

China began cementing its global dominance in the 1980s after the Nuclear Regulatory Commission and the International Atomic Energy Agency moved to severely restrict rare-earth mineral mining related to environmental concerns.

They are deemed “rare” precisely because there are no known alternatives to them, and given they’ve been key in developing specific technologies preponderant among industrialized populations.

The order’s text specifically charges that Beijing has intentionally exploited its position in the market, especially regarding 35 minerals that are “essential to the economic and national security of the United States”:

Our dependence on one country, the People’s Republic of China (China), for multiple critical minerals is particularly concerning. The United States now imports 80 percent of its rare earth elements directly from China, with portions of the remainder indirectly sourced from China through other countries. In the 1980s, the United States produced more of these elements than any other country in the world, but China used aggressive economic practices to strategically flood the global market for rare earth elements and displace its competitors. 

As Reuters underscores, “While the United States used to be the leading producer of the minerals, China has used its heft in the industry to its advantage in the trade dispute between the two world leaders.”

No doubt this remains a crucial US vulnerability weakening Washington leverage amid Trump’s ongoing trade dispute, as well as select sanctions on the mainland related to the Hong Kong issue and other geopolitical pressure spots.

Just after Trump’s signing the order, Ellen Lord, the top acquisition official at the Pentagon, told a Senate hearing “We are on a trajectory to increase our national defense stockpile relative to rare earth minerals. The silver lining of COVID has been that I think most Americans now understand the importance of having domestic supplies.” 

“We could certainly, especially under the auspices of the [executive order] that just came out yesterday, work with the interagency, because there is already a lot of work going on to look at expanding the national defense stockpile to include more rare earths,” she said in her Thursday remarks.