Category: zerohedge

“Stimulus On, Stimulus Off”…

$SPX Today… pic.twitter.com/fr1rMIZm82

— Ed ☯️ (@DowdEdward) October 1, 2020

That was the tale of the tape today as markets shrugged off various disappointing economic data and the algos just pumped and dumped on whatever keyword was selected from Pelosi, Meadows, or Mnuchin…From yesterday afternoon’s stimulus optimism highs, The Dow is down and Nasdaq managing to hold some gains…

Personal Incomes unexpectedly tumbled, Manufacturing surveys disappointed, and over 830,000 Americans filed for first time jobless claims last week, and Challenger job cuts screamed higher – probably nothing!

Source: Bloomberg

So layoffs… and stocks… are soaring?

But copper, crude, cryptos, and credit all suffered…

Extreme positioning and growth fears combined to crush Dr.Copper’s economics PhD forecast…

This is the worst single-day drop in copper since March…

Source: Bloomberg

We suspect more than one of these extreme specs got a tap on the shoulder today…

Source: Bloomberg

Crude oil was clubbed like a baby seal, back below $40…

And as goes oil, so goes energy stocks – dumping to fresh six-month lows today…

Bitcoin and its crypto-cousins all plunged today after BitMEX charges…

Source: Bloomberg

Credit markets refused to play along with equity’s exuberance…

Source: Bloomberg

Bonds were bid today, erasing overnight weakness…

Source: Bloomberg

The dollar limped lower for the 4th straight day…

Source: Bloomberg

While crude and copper were clobbered, PMs rallied…

Source: Bloomberg

Gold futures back above $1900…

And Silver futs made it back to $24…

Finally, there’s this – Nasdaq bounced back up to the level of global central bank liquidity…

Source: Bloomberg

Barstool Sports’ Dave Portnoy, the stock market’s crazy genius, boarded a plane Thursday morning to Texas with only one piece of advice for his 1.8 million Twitter followers: “BUY EVERYTHING – STOCKS ONLY GO UP.” 

Portnoy is right: the market mania this year fueled by central bankers injecting trillions of dollars into the financial system has resulted in stocks only going up since mid-March. In fact, Portnoy’s Barstool Sports, which is 36% owned by Penn National Gaming, has seen its shares rally more than 800% from March’s lows. 

About a week after PENN announced a public stock offering, selling upwards of 14 million shares of its common stock, shares of PENN have been unable to break above the $76 handle for about ten sessions.

Meanwhile, Deutsche Bank’s analysts Carlo Santarelli and Steven Pizzella are out with an apocalyptic warning that shares could plunge 57% over the next 12 months, reported Business Insider. The bank also reiterated its “sell” rating for the casino and sports betting company. 

“We think PENN has largely benefited from the retail community turning the ticker into an internet meme of sorts, thereby creating momentum in the stock that has attracted institutional investors from verticals outside of the traditional gaming arena,” noted DB’s analysts. 

They said: “We believe the fundamental and valuation support under PENN is lacking… We would anticipate a considerable contraction in shares.”

The analysts expect the sports betting competition to heat up and would pressure PENN’s profit growth. They said the positive narrative around the sports betting market is set to “crack” – and investors should be aware that “very few states at present are even considering” online sports betting legislation. DB’s price target for PENN is $31, while Wall Street’s average is around $68 per share. PENN is ultra-popular with young retail traders using Robinhood. 

Portnoy responded to DB’s sobering report in a Thursday tweet, by saying: 

Dr . Wrong ….Carlo Santarelli is back at it Face with tears of joyFace with tears of joyFace with tears of joy.   For those keeping score at home his target prices since I’ve been involved has been $12, $22, and now 33.  He keeps raising his target by 50% while still being wrong by 100% Imagine being this bad at anything.

Portnoy continued: 

Just to clarify Carlo had $penn at 12 bucks in May.   He upgraded to 22 bucks after getting embarrassed.  Now he upgraded to 33 after being embarrassed again. He has upgraded us by almost 200% in 4 months while trashing us everytime.  Our biggest critic has 200% upgrade! Face with tears of joyFace with tears of joyFace with tears of joyMan shrugging

Portnoy then tweeted at CNBC’s Jim Cramer: 

Hey @jimcramer do analysts ever get fired for being catastrophically wrong?   Like how long can Carlo Santarelli be off by 200% and still get his work published or have a job?  It honestly seems criminal what he is doing to his clients.

The problem with PENN is supply and demand – who will soak up the 14 million shares from last week’s stock offering? 

Judging by Barstool Sports’ constant promotion of PENN – maybe Robinhood traders… 

Readers may recall Morgan Stanley downgraded PENN in late August, though Portnoy gave them no flak. 

Is a Portnoy versus DB rivalry in the making ?

Via SchiffGold.com,

In his latest podcast, Peter Schiff looked back at the third quarter and ahead to Q4. He said we may well see fireworks next quarter. Of course, a big factor will be the presidential election. Peter talked about the prospects for the economy in the wake of the election, and he also broke down what he called “a debate to forget.”

Stocks finished the month down modestly, but they were up on the quarter. In fact, virtually everything was up in Q3. As Peter said, it was purely a function of the Fed.

It was the Federal Reserve’s commitment to keep interest rates low and to continue to monetize debt that drove the gains in the equity markets.”

Despite the big selloff in September, gold ended Q3 up about 6%. Silver was hit the hardest last month, falling about 18%. But despite the big drop, it still gained 27% on the quarter and outperformed all of the major stock market indexes.

The dollar was the mirror image of precious metals and equities. It was up on the month in September, but down on the quarter. The dollar index gained nearly 2% in September but ended down just over 3.5% on the quarter.

So, pretty much September was a counter-trend move in every asset. Everything that was up on the quarter well, it was down on the month, and vice versa.”

Bonds were relatively flat. Peter said he still expects a big uptick in interest rates with a corresponding drop in bond prices.

That move continues to elude me, but I do believe it is coming. And I think the longer it takes to happen, the bigger it’s going to be when it does happen.”

Peter said looking ahead, there could be a lot of fireworks in the fourth quarter.

I think it can be a particularly negative quarter for the dollar — maybe even for the bond market as well, and the stock market.”

Peter referenced the op-ed by Yale economist Stephen Roach projecting the dollar could fall as much as 35% in 2021.

Thirty-five percent in the world of currencies is enormous, especially to happen in one year. And this is from a guy who’s maybe on the fringe of the mainstream, but still within the mainstream.”

A 35% decline in the dollar index would put it barely above 60. The all-time record low was just above 70 back in 2008. Peter said he doesn’t disagree with anything Roach wrote. We could see that kind of decline in 2021.

And if it doesn’t happen in 2021, well, then it may happen in 2022. But ultimately, I think the dollar index could go a lot lower than 60. I wouldn’t be surprised to see it down at 40. I think there is tremendous downside risk.”

One thing that could have a major impact on the fourth quarter is the election results – both for the presidency and Congress.

I think the dollar is going to go down regardless of who the next president is and which party controls Congress. I mean, that should be abundantly clear based on the debate. Anybody who harbors any kind of hope that Donald Trump is going to turn the situation around, I mean, you certainly had those hopes dashed as a result of the debate. … It’s clear to me that the policies that are going to be rammed through a Democratic Congress and signed by President Biden will put even more downward pressure than the downward pressure that would be applied from Trump and a Republican Congress.”

Peter said a Biden win would also be more negative for stocks given that the Democratic Party nominee is promising to raise corporate taxes.

The only positive for the stock market in a Biden administration will be that the economy is so bad that the Fed will be doing even more money printing to monetize the larger debts produced by Biden and the Democrats than the money they’re going to print to monetize the somewhat less enormous deficits produced by the Republicans. And so, it’s all that money printing that may make stock prices go up. But in real terms, stock prices will fall even further because those monetary policies will be more bullish for gold and silver than it will for US stocks. And of course, it will be far more bullish for global stocks than it will for domestic stocks. So, I think however the election ends up, I think you’re much better off being invested outside the US — foreign stocks, foreign markets, gold, silver, anything that unrelated to the US economy or the US dollar.”

In this podcast, Peter also talks about the big news story related to Donald Trump’s taxes, and he also analyzes the presidential debate, calling it, “A debate to forget.”

Boeing’s decades-long ties to Washington state could soon be numbered. 

In a massive blow to Seattle, labor unions and the liberal run state of Washington, Boeing is moving its 787 Dreamliner production to South Carolina in an effort to cut costs, Bloomberg revealed on Thursday. 

It is a move that is raising questions about how long Boeing may remain at its massive plant in Everett, where it has produced planes since the 1960s. 

Dreamliner production is being consolidated as demand for Boeing’s planes has dropped amidst the 737 MAX controversy and the ongoing pandemic which has decimated the travel industry. The easiest way for Boeing to cut costs is to move to non-union labor in South Carolina and trim its operations. 

It’s also the latest move in Boeing bolstering operations in Republican-governed South Carolina. Aerospace analyst Richard Aboulafi noted that 747 production would end by 2022 and that “the overhead costs will be increasingly borne by the surviving planes, the 767 and 777X, which don’t have a lot of pricing power right now.”

Washington Governor Jay Inslee stopped figuring out new ways to raise taxes and defund the police long enough to issue a statement critical of Boeing, stating that the state would need to take a “hard look” at Boeing’s tax treatment. He estimated 1,000 jobs could be at risk.

Meanwhile, Boeing has been in the midst of scrambling to shore up its financials after two fatal 737 MAX crashes and the subsequent grounding of its 737 MAX planes in the interim. Melius Research estimates Boeing could see $23.3 billion in cash burn this year as a result of those groundings, coupled with the Covid-19 pandemic. 

Boeing CFO Greg Smith said in July: “The goal is to improve cash-flow profile, restore our balance-sheet strength as quickly as possible. And these actions will help get us there.”

Governor Inslee said: “We have asked the Boeing Company multiple times what it needs to keep 787 production in Washington”. Inslee also claimed the move would “signal an allegiance to short-term profits and Wall Street…”

Yeah, comrade. Also known as “capitalism”.

For the first time since the Fed fired its liquidity nuke on March 23 and unleashed unlimited QE as well as corporate bond purchases for the first time ever, sparking a record market rally, stocks dropped last month as September brought an end to the post-Covid rebound in financial markets, with the majority of core non-currency assets losing ground over the month.

Nevertheless, as Deutsche Bank’s Jim Reid reports, in spite of the poor performance in September, Q3 overall was another decent quarter as economies continued to recover from their post-lockdown lows, and 28/38 core non-currency assets moved higher.

Metals were the place to be in Q3, with silver leading DB’s asset sample thanks to a +27.6% return over the last 3 months, supported by strong demand for precious metals amidst large quantities of central bank stimulus. That move also leaves it as the strongest performer on a YTD basis as well, with a +30.2% advance since the start of the year. That said, it’s worth noting that silver’s outperformance over the quarter came in spite of a -17.4% fall in the month of September, making it the worst performer on a monthly basis in spite of being the top performer on a quarterly and YTD one.

In terms of FX movements, the most notable story of Q3 has been the Euro’s appreciation, having strengthened by +4.3% against the dollar, the currency’s best performance since Q2 2017. This movement has attracted the attention of ECB policymakers recently, not least as the Euro Area CPI reading for August showed price growth in negative territory, at -0.2%.

Looking just at September rather than Q3 however, sovereign bonds were the top performer, making up the top 5 performing assets in the DB sample as investors moved into haven assets. BTPs were in first place (+2.0%), with gilts in second (+1.6%), while Treasuries (+0.2%) and bunds (+1.0%) similarly advanced. In FX, the big September movement has been with sterling, which is down -3.4% against the US dollar in its worst month for over a year, against the backdrop of heightened tensions with the EU and the publication of the UK’s Internal Market Bill.

Turning to equities, September has seen a pullback, with the exception of the Nikkei which has risen +0.7% in total return terms. European banks have been the worst equity performer this month, and are in fact the worst YTD performer overall in the DB sample, with the STOXX 600 Banks down -10.7% over the month, -12.1% over the quarter and -41.9% over the year. Even US equities lost ground in September, having been one of the stronger  performers this year, with the S&P 500 (-3.8%) and the NASDAQ (-5.1%) both losing ground.

Finally on other commodities, copper (+11.8%) was a top performer over the quarter, while gold (+5.9%) advanced strongly as well. Oil continued to struggle though, with a September slump that saw WTI (-5.6%) and Brent Crude (-9.6%) decline significantly over the month, which left their YTD performance at -34.1% and -38.0% respectively.

Finally, a look at asset performance YTD shows a bimodal distribution led by precious metals, tech stocks, China and govvies, while most commodities, EMs and financial continue to be crushed.

A truly bizarre and wild diplomatic kerfuffle is playing out between the Vatican and the Trump administration in the lead-up to the November US election, and of course taking center stage is the growing White House targeting of China.

“The Vatican said on Wednesday it had denied a request from Mike Pompeo for an audience with Pope Francis, and accused the Secretary of State of trying to drag the Catholic Church into the U.S. presidential election by denouncing its relations with China,” Reuters reports on Thursday.

This after the papacy was targeted in a series of recent tweets and statements by the Secretary of State who has strongly suggested the Vatican’s “moral authority” is at risk in its decision to allow the Chinese Communist government to give approval for the appointment of bishops in the country.

There’s long been an unofficial split within the local Chinese Catholic Church, with the “official” hierarchy under Rome including those bishops explicitly approved by Beijing, while a separate, parallel ‘underground’ church structure has existed outside of Beijing’s control going back through much of the 20th century.

Pompeo has called out this set-up ahead of the Vatican expecting to renew the status quo agreement with Chinese authorities. 

Apparently Pompeo this week sought a personal audience with the pope, however, Pope Francis appears to have rejected the ‘optics’ of it, suggesting it could be used to manipulate American voters ahead of the Trump-Biden election. Reuters details:

Pompeo, who was in Rome on Wednesday and due to meet Vatican officials on Thursday, repeated his denunciations of China’s record on religious freedom at an event hosted by the U.S. embassy to the Holy See.

The Vatican’s two top diplomats, Secretary of State Cardinal Pietro Parolin and Foreign Minister Archbishop Paul Gallagher, said Francis had declined a request from Pompeo for an audience, as the pope avoids meeting politicians ahead of elections.

Cardinal Parolin said this policy has already long been set, based in strictly observed Vatican protocol. “Yes, he asked. But the pope had already said clearly that political figures are not received in election periods. That is the reason,” Parolin said of Pompeo’s formal request.

Pompeo was expected to press Pope Francis on the China issue, but instead was left to press the case in public remarks in Rome:

Secretary of State Mike Pompeo attacked China’s record on religious freedom during a visit to Rome that has been overshadowed by his criticism of the Vatican for pursuing closer ties with Beijing https://t.co/IhYUNrfx6W pic.twitter.com/iaKY43v4Dn

— Reuters (@Reuters) September 30, 2020

And Vatican Foreign Minister Archbishop Gallagher offered a similar explanation:

“Normally when you’re preparing these visits between high-level officials, you negotiate the agenda for what you are going to talk about privately, confidentially. It’s one of the rules of diplomacy.” 

The spokesmen underscored that the delicate situation of the Catholic Church in China doesn’t have anything to do with US politics, and should remain completely outside of US political interference. 

Parolin underscored that it remains “a matter that has nothing to do with American politics. This is a matter between Churches and should not be used for this type of ends.”

In the aftermath of the rejected audience, Pompeo called the idea that the White House was “picking a fight” with the Vatican on the China issue “crazy”. 

While entry in to the US for refugees has been suspended this year due to the coronavirus, driving the tally from the 2020 fiscal year to just 9,000 refugees as of Aug. 31 (one month before the end of the fiscal year). With the new fiscal year starting Thursday, the administration’s Department of Homeland Security, along with Health and Human Services, submitted “the President’s Report to Congress on the Proposed Refugee Admissions for Fiscal Year 2021”, asking for just 15,000 refugees for the 2020-2021 fiscal year.

In the report, the administration acknowledges that it expects to receive more than 300,000 applications for refuge and asylum. Of these, the US will only accept 15,000 – max.

Trump suspended processing of refugees between March and July, and the pace hasn’t exactly rebounded.

As the chart above from the Washington Examiner shows, the number of refugees accepted in the US every year tumbled during the final years of the Soviet Union, before the collapse of Communism sent a wave of refugees to the US, causing the numbers to climb once again during the late 1980s and early 1990s. The number of refugees accepted into the US started to decline during the late 1990s, before plunging after Sept. 11.

Between 2000 and 2001, the number of refugees admitted to the US dropped from more than 60,000 to 27,000. During the Obama years, both the ceiling and the actual number of admissions climbed to the highest levels in nearly 20 years.

Obama raised the ceiling to 110,000 in 2017 on his way out the door, the highest cap in decades, which capped years of rising tallies.

Despite that, Trump admitted just 54,000 refugees that year after issuing his executive order “travel ban,” which barred refugees from a list of mostly Muslim countries while also calling for the suspension of the admission of all refugees for four months.

“The President’s proposal for refugee resettlement in Fiscal Year 2021 reflects the Administration’s continuing commitment to prioritize the safety and well-being of Americans, especially in light of the ongoing COVID-19 pandemic,” the 2021 statement reads. “It accounts for the massive backlog in asylum cases – now more than 1.1 million individuals – by prioritizing those who are already in the country seeking humanitarian protection. It also accounts for the arrival of refugees whose resettlement in the United States was delayed due to the COVID-19 pandemic.”

VP Joe Biden has called for raising the cap on refugees to 125,000, along with expanding access to work visas and creating more pathways to citizenship.

As we warned back in June in “‘Look Out Below’: Why The Economy Is About To Fly Off A Fiscal Cliff“, and again last week in “Failure To Launch New Fiscal Stimulus Would Have Catastrophic Consequences For The US Economy“, the US consumer – having grown accustomed to the $600 in weekly Federal Pandemic Unemployment Compensation (FPUC) which however expired at the end of July – is suddenly running on fumes, which will only get worse if there is no Fifth fiscal stimulus deal struck by Dec 31, when two more anchor stimulus pillars – the Pandemic Emergency Unemployment Compensation (PEUC) and Pandemic Unemployment Assistance (PUA) – also expire.

So far the US economy has not suffered a consumption hit in the two months following the fiscal cliff, with personal spending in September once again surprising to the upside, which in turn is likely preventing Congress from reaching a deal, especially with stocks not too far from all time highs.

Indeed, as we noted earlier, and as Morgan Stanley’s Ellen Zentner wrote subsequently, nominal personal income growth in August was reported just below consensus expectations, declining by 2.7% (vs. consensus at -2.5%), with July upwardly revised by 10bp to +0.5%M. Real disposable personal income fell 3.5%M in August as well. The decrease in income was largely due to the end of the $600/week supplemental unemployment insurance benefits, which we first warned about back in June. Partially offsetting this decline was further improvement in the labor market in August, lifting wage and salary income by 1.3%M for the second consecutive month.

Meanwhile, personal spending came in above consensus expectations, rising 1.0%M (vs. consensus at 0.8%M), with July downwardly revised by 40bp to 1.5%M. Spending was driven by a 1.4%M increase in services spending, while durable goods spending rose by 0.9%M and spending on nondurable goods declined by 0.1%M.

And here lies the problem: lower income coupled higher spending in a time when the vast majority of Americans were looking forward to more stimulus meant that US consumer rapidly burned through savings. According to the BEA, in August, the amount of annualized savings tumbled by $723 billion to $2.435 trillion, the lowest since March and far below the $6.4 trillion peak in annualized personal savings hit in April.

At the same time, the personal savings rate collapsed by 17.7% to 14.1%: this means that a whopping 60% of the personal savings built up in the aftermath of the covid fiscal stimulus tide have now been used up.

So as Congress continues to debate and pretend that a new fiscal stimulus bill is just over the corner, the massive savings buffer that was built up in the aftermath of the covid crisis, and which funded much of personal consumer spending in the past two months is now shrinking fast and at this rate personal savings will be back to pre-covid levels in 2-3 month at the most. At that point it is safe to say that unless a new fiscal deal is in place, US consumption will crater unless somehow the millions of unemployed workers who still desperately rely on government stimulus find a job (spoiler alert: they won’t).

Authored by Paul Joseph Watson via Summit News,

During an appearance on Chris Cuomo’s show, Senator Ted Cruz lambasted CNN for being obsessed with hating President Trump, telling the host, “Donald Trump broke you guys.”

Speaking about the fallout from Tuesday night’s debate, the Texas Senator said Americans were sick of the media’s wall to wall fixation with bashing the commander in chief.

“Chris, there was a time when CNN actually cared about being journalistic and talking about facts – Donald Trump broke you guys,” said Cruz.

“Your entire show, your entire network now is just how much you hate Trump,” he added.

Lol Cruz kept going off pic.twitter.com/G1CHet8NCV

— Comfortably Smug (@ComfortablySmug) October 1, 2020

He responded to Cuomo’s claim that Trump had nothing positive to say about America during the debate by contrasting his policy agenda with Joe Biden’s.

“Joe Biden’s policy agenda is shutting down the country, shutting down small businesses and shutting down schools,” compared to Trump’s goal of “opening up the economy, bringing jobs back, getting kids back in school, and that’s a very different policy agenda,” said Cruz.

The Senator went on to assert that Biden’s policy response to coronavirus was hurting a lot of Americans, before explaining how people back in Texas don’t understand how the only thing CNN hosts talk about is how much they hate the president.

Cuomo pulled a series of befuddled facial expressions throughout before shaking his head.

As we highlighted earlier, CNN is now pushing the narrative that coronavirus lockdown measures are never going to end and that Americans should just get used to it.

*  *  *

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Also, I urgently need your financial support here.

Confirming “no deal” today, headlines stating that a House vote on Democrats’ stimulus deal is expected today, US equities and bond yields tumbled as Pelosi claims the difference is ‘not dollars, but value’…

The Dow is red while Nasdaq holds some gains for now…

And 10Y Yields are down notably from overnight highs…

We do note that the House had delayed the vote by one day from yesterday already, although given US Treasury Secretary Mnuchin and House Speaker Pelosi have been speaking, it would indicate that an agreement has not been found in the talks, although we are still yet to hear officially from either sides on how the phone call went.