Category: zerohedge

Already Azerbaijan and Armenia are locked in their worst fighting in decades in the disputed Nagorno Karabakh region. Now only three days into fighting, at least 100 people have been killed, which includes soldiers and civilians on both sides, amid tank warfare and the deployment of infantry and artillery units. There’s also increasing signs of direct aerial combat.

Raising the likelihood of a full-blown regional war in the Caucuses, Turkish President Erdogan’s office shocked on Tuesday with a direct threat of intervention on its ally Azerbaijan’s behalf:

Turkey raised the spectre of full-blown war in the flashpoint Caucus region of Nagorno Karabakh on Tuesday after vowing to help its ally Azerbaijan seize the disputed territory back from Armenian control.

As fighting in the region raged for a third day, Turkey said it was “fully committed” to helping Azerbaijan take back its “occupied” lands, which Azeris were driven out of during the civil war of the early 1990s.

Azerbaijan fired artillery against Armenian forces on Wednesday in the biggest eruption of their decades-old conflict since the mid-1990s https://t.co/0DHlqLeZf7 pic.twitter.com/G22DxIxU6b

— Reuters (@Reuters) September 30, 2020

The spokesman for the Turkish president made the statements already as Azerbaijan is poised for a full-scale military incursion into Nagorno Karabakh, which would trigger a national Armenian armed forces response.

Yereven already on Sunday into Monday gave a nationwide ‘full troops mobilization’ order, and additional forces are flooding into the breakaway region which Armenia has for decades protected, despite the territory being officially within Azerbaijan’s borders.

Tensions ran high between Ankara and Yerevan after on Tuesday Armenia’s Defense Ministry claimed a Turkish F-16 shot down an Armenian SU-25. While Turkey immediately denied the claim, slamming it as “fake news” and “propaganda,” Armenia the following day published photographs of wreckage it says proves the aircraft downing over Armenian airspace. 

An official Government of Armenia run account issued the photo set:

On September 29, F-16 multifunctional fighter of the Turkish Air Forces downed SU-25 Fighter within the airspace of #Armenia. It was carrying out combat tasks to repel the attacks of #Azerbaijan on military and civilian objects. Pilot Major Valeri Danelin was killed pic.twitter.com/ew01OZujPc

— Armenian Unified Infocenter (@ArmenianUnified) September 30, 2020

The aircraft shootdown incident was widely reported yet has not been independently verified, with outside observers fearing the intense ‘fog of war’ environment makes information and claims hard to verify.

As for Turkish intervention, it’s widely believed this is already taking place covertly on the ground, especially via transfer of Turkish-backed Syrian jihadists who previously waged proxy war on Assad.

Today Azerbaijani armed forces launched attacks on military-civilian infrastructures of the internationally recognized territory of Armenia.This includes the civilian population, killing one civilian, a civilian bus was shelled, SU 26 was shot down#NKpeace#AzerbaijaniAgression pic.twitter.com/wwJZlInOx5

— Armenian Unified Infocenter (@ArmenianUnified) September 29, 2020

Though initially only reported in local and independent Mideast media, The Guardian and others have finally taken note:

Syrian rebel fighters have signed up to work for a private Turkish security company as border guards in Azerbaijan, several volunteers in Syria’s last rebel stronghold have said, at a time when the long-running conflict between Baku and neighbouring Armenia is showing dangerous signs of escalation.

The potential deployment is a sign of Turkey’s growing appetite for projecting power abroad, and opens a third theatre in its regional rivalry with Moscow.

Indeed Turkey and Russia are now on opposite sides of three different proxy wars: in Libya, Syria, and now the Armenia-Azerbaijan conflict.

These reports of Turkish supplied Syrian mercenaries began days ago, even shortly before the start of hostilities Sunday, in what regional analysts predicted would be a huge escalation in hostilities in the Caucuses. 

Armenian Prime Minister Nikol Pashinyan previously slammed Turkey’s meddling in the conflict. Ankara had called Armenia “an obstacle” to peace after the fresh hostilities broke out. Yerevan has now formally confirmed Turkey is supplying fighters.

Meanwhile, Moscow has a long-running defense pact with Armenia, including the presence of a large Russian military base in Armenia’s northwest, while Turkey is considered a “brother country” of Azerbaijan, also with a key pipeline that runs across Turkey into the EU originating there.

Should Erdogan actually follow through with this newest threat to intervene more forcefully on Baku’s behalf, there’s little doubt that Armenia will trigger its defense treaty with Russia, calling in support from the Kremlin.

Following a tense exchange during Tuesday night’s presidential debate in which former Vice President Joe Biden snapped at President Trump, the Biden campaign has started selling T-Shirts with the phrase “WILL YOU SHUT UP, MAN“.

The shirts are currently selling for $30 each on Biden’s Victory Fund website, in sizes up to 3XL for the “look, fat” demographic.

Biden uttered the phrase after Fox News debate moderator Chris Wallace asked Biden if he supported ending the filibuster and packing the Supreme Court if he’s elected, during which President Trump repeatedly interrupted – pressing Biden over whether he would in fact pack the court.

“Will you shut up, man?” replied Biden, adding “This is… this is so unpresidential.”

Joe Biden: “Will you shut up, man?” #Debates2020 https://t.co/oXZEIYMzl6 pic.twitter.com/Lm7gkXUPAC

— The Hill (@thehill) September 30, 2020

Later in the debate, Biden called Trump the “worst president America has ever had.”

 

Out of the ashes of the biggest dumpster fire debate in US history, one thing emerged: a contested election – something which JPMorgan two weeks ago called the “worst case scenario for markets into year end” – is now guaranteed, resulting in investor fears that a disputed ballot could lead to a messy transfer of power. The reason for that is that while confusion and chaos raged during last night’s debate, Trump made one thing clear: the president declined to commit outright to accepting the results, repeating a recurring complaint that mail-in ballots would lead to election fraud.

“The debate drew further attention to the potential for a contested election,” said Hani Redha, global multi-asset portfolio manager, at Pinebridge. “It is likely market participants will continue to price in this issue, heightening volatility all the way to election day and its immediate aftermath.”

Sure enough, the VIX curve steepened further on Wednesday bracing for volatility in November…

…and December and even January…

… because the use of mail-in ballots by voters – in some cases even those mailed after the election date – will mean delays of weeks or even months in announcing the winner; it also likely means that the Supreme Court may have to get involved at the conclusion of the process to declare the eventual winner and explains Trump’s eagerness to promptly appoint Amy Coney Barrett to SCOTUS.

Addressing the risk of a contested election, JPMorgan writes that contested Presidential elections are rare, having occurred only twice (1876 between Democrat Tilden and Republican Hayes, 2000 between Democrat Gore and Republican Bush). During the Gore-Bush saga which required a month to resolve, US Equities dropped about 7% from their pre-election level but never recovered meaningfully given that the US entered a recession in late 2000/early 2001. The trade-weighted dollar was firm given the early-stage recession, but Gold decoupled from FX markets and firmed during this period of uncertainty.

That said, JPM agrees that “a contested election has become the baseline” given

1. the long-term rise in alternative voting methods over past 30 years;
2. likely surge in postal voting this year due to COVID-19; and
3. Trump’s allegations that postal voting is more susceptible to fraud. Opinion polls indicate that Republicans are more mistrustful of postal voting than Democrats.

Assuming a contested election is the baseline, JPM then lays out a matrix of what the proper trades are going into November and lasting for an indefinite period of time. Here are JPMorgan’s “high conviction” trades:

Underweight US vs non-US Equities and short USD vs reserve assets (JPY CHF, Gold), given a US-specific event risk with limited implications for global growth; OW US HG Credit vs Equities given less issuance and Fed backstop;

And here are the Low Conviction trades:

US duration, given already-low level of yields; EM FX given rise in market volatility but a US rather than global growth dampener.

One final comment from JPM’s John Normand, who says that “if a Republican sweep is the least likely outcome, the most interesting scenario for markets is a Democratic sweep that puts fiscal and foreign policy in play. Either Trump’s re-election or Biden’s election with a divided Congress leaves only foreign policy and domestic social policy in play, which impacts markets across fewer dimensions.”

Full breakdown below:

d

 

By Daphne Howland of RetailDive

Summary:

• The pandemic — with its temporary store closures, social distancing requirements, e-commerce boom and supply chain disruption — in the first six months of this year fueled uncertainty for retailers and accelerated existing trends, according to BDO’s biannual bankruptcy update.

• BDO counts 18 retailers that headed to bankruptcy court in the first half of the year and another 11 in July through mid-August. Retail Dive’s bankruptcy tracker similarly lists 27 so far this year, compared to 17 in 2019. (BDO counts some businesses, like Gold’s Gym, as retailers.)

• The industry’s bankruptcy record so far put it on pace with 2010, following the Great Recession, when there were 48 bankruptcy filings by retailers, according to BDO’s report.

The COVID-19 pandemic has essentially interfered with what is normally a cyclical pattern for retailers and set up the industry for yet more bankruptcies in 2020’s second half, according to BDO researchers.

In the first six months of 2020, 18 retailers filed for Chapter 11 bankruptcy, with an additional 11 filing in July through mid-August. These defaults were concentrated in apparel and footwear, home furnishings, food and department stores, with many prominent retailers filing during this time period, including Pier 1, J. Crew, Neiman Marcus, Stage Stores, J.C. Penney, Tuesday Morning, GNC, Lucky Brand, RTW Retailwinds (New York & Co.), Brooks Brothers, Ascena (Ann Taylor, LOFT, Lane Bryant, Justice, Catherines), Le Tote (Lord & Taylor), Tailored Brands (Men’s Wearhouse, Jos. A. Bank, Moores Clothing, K&G) and Stein Mart.

With 29 filings in 2020 to date, this year is on-pace to rival 2010, following the Great Recession, that resulted in 48 total filings.

“In short, 2020 is on track to set the record for the highest number of retail bankruptcies and store closings in a single year,” they wrote. “Based on the trends set through mid-August, our expectation is that more retailers will struggle to navigate the effects of the pandemic — particularly those that are highly levered and mall-based.” 

But it’s not just Chapter 11 filings or liquidations. Brick-and-mortar store fleets, which were already being closely scrutinized as more consumers shopped online and avoided malls, are also being slashed by retailers in turnaround, BDO noted.

The firm is just the latest to note how the pandemic has sped up the downward spiral of malls. “[T]he closings of anchor and other stores in shopping malls will likely make visits to them less appealing and depress mall traffic overall, unless landlords are able to quickly fill these vacancies with attractive alternatives,” per the report.

By BDO’s measure, bankrupt retailers alone have announced nearly 6,000 store closings this year, more from January through mid-August “than the record 9,500 stores that closed throughout 2019,” and most of them in malls. But more than 15 retailers (including Macy’s, Bed Bath & Beyond and Gap) outside of bankruptcy court have announced a total of 4,200 closures, researchers said.

The holiday season may be more important than ever for retailers. High hopes for the fourth quarter could prevent more retailers from hurtling toward bankruptcy in the second half of the year, BDO said. Getting assortment and merchandising right and prepping e-commerce and in-store operations in light of COVID are essential, researchers said.

“To stay competitive, brick-and-mortar stores should assume touchless shopping options such as curbside pick-up and self-checkouts are here to stay, and apparel retailers should be reimagining what the fitting room experience will look like post pandemic,” they wrote.

Immigration and Customs Enforcement will conduct a series of immigration enforcement operations in three sanctuary cities as soon as this week, according to the Washington Post.

The enforcement actions, informally known as the “sanctuary op,” will first target illegal immigrants in California, followed by Denver and Philadelphia according to officials who spoke on the condition of anonymity. The Post is framing it as nothing more than a political messaging campaign.

Authored by Steve Watson via Summit News,

Ohio’s Case Western Reserve University (CWRU), the site of last night’s Presidential debate has set up dedicated ‘support spaces’ for students who have been triggered by the tense exchange.

For any poor snowflake babies who couldn’t handle the nasty orange man telling Joe Biden “There’s nothing smart about you,” CWRU is providing a “confidential safe space” where they can talk and cry about it.

The University says “students can discuss the impact of recent national events, including the presidential debate and upcoming election.”

There are eight “presidential debate support spaces” available for students to attend, according to the university which asks that everybody use “respectful dialogue.”

The spaces will remain active from Monday through to next Friday, for ‘virtual counselling sessions’.

The university announced that the “Support Space is not a substitute for psychotherapy and does not constitute mental health treatment.”

The spaces are a throwback to 2016 when education centers offered counseling after Trump won the election.

As Campus Reform notes, the University of Massachusetts-Boston, sponsored a “Coping and Balance” workshop in which students were able to interact with “Doggo, the therapy dog.”

Imagine the total meltdown that will occur if Trump wins a second term.

As we look ahead to the last jobs report before the Nov. 3 US election, a growing number of corporations across various hard-hit industries are announcing tens of thousands of layoffs, as ‘PPP’ employment restrictions expire and the financial backlash from COVID-19 continues to ravage corporations and households.

Already this week, Royal Dutch Shell, Continental Airlines, Dow Chemicals, and Marathon Petroleum have announced restructuring plans that involve laying off tens of thousands of workers. Yesterday, Disney announced plans to eliminate 28,000 jobs as most of its theme parks remain closed, and the movie business remains effectively shuttered.

Layoff news, past 24 hours:

* Disney: 28,000 jobs cuts
* Shell: 9,000
* Dow: six percent of workforce
* Marathon Petroleum: https://t.co/B6mgCoMu8b

— Carl Quintanilla (@carlquintanilla) September 30, 2020

Royal Dutch Shell announced Wednesday morning, a new layoff program to cut upwards of 9,000 jobs, or about 10% of its workforce, as the oil major overhauls its oil and gas segments to low-carbon energy.

The Anglo-Dutch company said it would cut between 7,000 to 9,000 workers by the end of 2022. The total includes around 1,500 workers who have already agreed to leave the company this year. 

The reductions are a move by Shell to decrease its corporate footprint and save costs as it transitions into low-carbon energy. 

“Reduced organisational complexity, along with other measures, are expected to deliver sustainable annual cost savings of between $2.0 to $2.5 billion by 2022. This will partially contribute to the announced underlying operating cost reduction of $3.0 to $4.0 billion by the first quarter of 2021. Job reductions of 7,000 to 9,000 are expected (including around 1,500 people who have agreed to take voluntary redundancy this year) by the end of 2022,” the company said in a press release. 

In a statement, Shell CEO Ben van Beurden said, “We have to be a simpler, more streamlined, more competitive organization that is more nimble and able to respond to customers.” 

“Make no mistake: this is an extremely tough process. It is very painful to know that you will end up saying goodbye to quite a few good people,” van Beurden added. 

As for Shell’s oil and gas production, there was a noticeable sharp drop in output to about 3.04 million barrels of oil equivalent per day due to the decline in demand because of the virus pandemic and a busy hurricane season in the US Gulf Coast that forced offshore platforms to halt operations. 

On Wednesday, oil continues to slump, extending losses from Tuesday, following new worries that rising global coronavirus cases could result in lower demand for crude products. Shell’s move reflects the challenge oil majors are facing as the virus pandemic persists. 

“Shell is exploring ways to reduce spending on oil and gas production, its largest division known as upstream, by 30% to 40% through cuts in operating costs and capital spending on new projects,” sources told Reuters in early September. 

We noted, in late June, Shell wrote down up to $22 billion worth of assets and warned about the “impact of COVID-19 and the ongoing challenging commodity price environment.” 

As for Shell’s net-zero carbon emission ambitions by 2050, well, Van Beurden said, oil and gas would still be produced by that date, but it would mostly sell low-carbon electricity, low-carbon biofuels, and hydrogen.

“We have to be net-zero in all our operations, which means major changes at refineries, chemicals sites, on-shore and offshore production facilities. But it also means that we have to change the type of products that we sell,” he added.

Bloomberg quoted Barclays Plc analyst Lydia Rainforth’s latest research note that said Shell’s transformation to a “leaner and lower-carbon organization is the right” plan, but the “macro environment is still challenging, this may take some time to reflect in the share price.”

And now, thousands of aviation layoffs loom as a dysfunctional Congress has yet to make meaningful progress in passing the next round of stimulus, and its concomitant bailout of the airline industry.

Via Greg Hunter’s USAWatchdog.com,

Renowned geopolitical and financial cycle expert Charles Nenner called this market just 2% from the top in January.  What does he think now?  He likes gold and says he “made more money in gold than in stocks” in the past few months. 

Nenner says, “We are playing the long term gold market…”

“We went out at $2,100 (per ounce), and the price target was $1,850 (on the downside).  We hit $1,850 a couple of days ago, so we bought back in.  We get in and out for a couple of hundred points, and it’s worthwhile.  So, the gold cycle is up for much longer.  $2,500 is the first target, and it could be we get higher targets.  I do not believe in the stock market, most of the markets we do nicely in are the gold market, silver market, crude oil market, bond market and the dollar.  It’s all very simple and normal, and the stock market is not going to end very well.”

Nenner is long the stock market now until close to the end of November.  Nenner says the rising market may be signaling a coming Trump win in November.  Nenner is not sure, but what he is very sure about is the stock market is way overvalued just like it was earlier this year.  Nenner explains,

“As you know, the stock market is still very much overvalued.  One of the reasons is the ‘Buffett Indicator,’ and that is the value of the stock market compared to the value of the entire GDP, and it’s extreme.  I think it’s more extreme than the 2000 bubble.  If you want to buy low and sell high, you have to have indicators of what is low and what is high, and, for me, this is high.  This is based on the fundamentals, but on the cycles, we can try to test the highs one more time.  This is not going to end well because everybody will try to get into the market, and then the whole thing is over.”

Nenner thinks with all the unemployment and businesses going under permanently, it is not an inflationary environment, at least not yet.  Nenner says,

“I still think we are going into a deflationary environment, and that still makes sense.  That is also why gold is up.  Most people don’t understand that because they always look for inflation for gold to go up.  I show them that most of the bull markets in gold are deflationary periods and not inflationary periods.  When you have deflation, there is nowhere to hide, and it’s very cheap to hold gold.  You are afraid for the financial system, and that’s why gold goes up…

Look what happened in real estate.  You thought you were safe in real estate.  Companies are not buying malls, and companies are not paying rent anymore, or they negotiate and they are not going to pay anymore.  So, that’s also not a safe place.  So, there is not much left.  People go into gold and store it away for the worst case scenario.  If banks don’t survive, they have the gold.”

On the war cycle and the recent peace deals in the Middle East, Nenner says, “…It is all putting pressure on Iran because they are all afraid of Iran…”

”  They are going to make a pact to resist Iran, and the more Iran feels itself in a corner, the more dangerous it gets. . . . If we can go the next three to four years without a major explosion, then we are safe, but this is a very dangerous period.  This is another reason why the DOW can go down to 5,000.  I don’t know what is going to do it, but something is going to do it.”

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with renowned cycle analyst and financial expert Charles Nenner.

*  *  *

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Continuing his weeks-long feud with Bill Gates, whom he lambasted days ago for having “no clue” about electric pickup trucks, Tesla CEO Elon Musk has now taken more shots at the Microsoft founder while decrying the idea of taking the coronavirus vaccine during a podcast with Kara Swisher. 

Musk said on the recent podcast that neither him, nor his children, are at risk of dying from Covid-19 and that, as a result, they would be unlikely to need the vaccine, according to RT. “I’m not at risk, neither are my kids,” he said. 

Musk said: “This is a no-win situation. It has diminished my faith in humanity, this whole thing… The irrationality of people in general.” 

He also spoke out against the global lockdowns (again), calling them a mistake and saying only the vulnerable should be in quarantine until after the virus passes. Musk had previously called the lockdowns “unethical” and “de facto house arrest”. 

Speaking about Bill Gates, Musk said: “Gates said something about me not knowing what I was doing. It’s like, hey, knucklehead, we actually make the vaccine machines for CureVac, that company you’re invested in.”

Gates had previously said of Musk that he hoped he “doesn’t confuse areas he’s not involved in too much.”

When he was asked about the risk of the virus to his employees and their families, Musk responded: “Everybody dies.”

He continued: “We’ve been making cars this entire time and it’s been great. Through this entire thing, [SpaceX] didn’t skip a day. We had national security clearance because we were doing national security work. We sent astronauts to the space station and back.”

Recall, just hours ago, we reported that Tesla’s Nevada Gigafactory had the highest Covid case count out of all businesses in its county. The Gigafactory beat out many of the largest casinos in Reno and Sparks – and Saint Mary’s Regional Hospital and the VA Hospital. 

 

The Gigafactory reported 117 cases, more than 5 times the local hospital and 6 times what the local VA hospital reported. The number of Washoe County coronavirus cases since June, listed by workplace, were as follows:

• Gigafactory: 117
• Renown: 104
• Walmart: 41
• UNR: 32
• UPS: 27
• Atlantis: 26
• Peppermill: 26
• Grand Sierra Resort: 25
• Washoe County School District: 25
• Silver Legacy: 24
• Saint Mary’s Regional Medical Center: 22
• Walkenhorst: 18
• World Pack: 18
• VA Hospital: 17

County spokesman Scott Oxarart said: “This data shows that COVID-19 is still prevalent in our community. People are frequenting places while infectious and are making it possible for future transmission. It’s important to remember that if you’re showing symptoms like fever, shortness of breath, coughing, or even symptoms such as sore throat, headaches, upset stomach, you should stay home and only go out to get a COVID-19 test or receive medical treatment.”

Oil prices rebounded overnight as stocks rallied on fiscal stimulus hope and the API-reported inventory data sank in.

“Traders see oil demand as fragile,” said Paola Rodriguez-Masiu, senior oil-market analyst at Rystad Energy. “We may see some production needing to be sent to inventories in 2020’s last quarter.”

API

• Crude -831k (+1.9mm exp)

• Cushing +1.61mm

• Gasoline +1.623mm (-1.3mm exp)

• Distillates -3.424mm (-1.7mm exp)

DOE

• Crude -1.98mm (+1.9mm exp)

• Cushing +1.785mm

• Gasoline +683k (-1.3mm exp)

• Distillates -3.184mm (-1.7mm exp)

A surprisingly large crude draw combined with a big distillates draw…

Source: Bloomberg

Most of the storm-impacted noise has now left the data.

Source: Bloomberg

WTI hovered around $39.50 ahead of the official data and maintained those levels immediately after…

Finally, we note that Bloomberg Intelligence Senior Energy analyst Vince Piazza warns that “daily U.S. crude output has crept close to 11 million barrels a day from the May low of 10 million, adding supply to a market whose downstream demand remains depressed by the effects of Covid-19. Well completions could drive production higher, and that would be compounded by any move of WTI into the high $40s. Coronavirus outbreaks in Europe and elsewhere add to the pressure on demand, and we believe adjusted storage remains high and limits long-term rally prospects.“