Category: zerohedge

Authored by Julianne Geiger via OilPrice.com,

The U.S. Presidential election coming up in November may well decide the fate of the infamous Keystone XL oil pipeline, with the conservative right and the liberal left facing off in a race that could shape the fate of the North American energy landscape for decades to come.  Politics is not for wimps–neither is oil pipeline construction in a climate that has labeled oil pipelines as pariahs in North America. And the Keystone XL project is a spectacular pawn in an extremely visible environmental battle.

The project is already underway and has permits, reinstated by President Trump. So, is it now really in jeopardy?

Oil Pipeline Commander in Chief

Presidential hopeful Joe Biden has promised to ax the entire Keystone XL project and has made it a part of his political campaign. President Donald Trump, on the other hand, has vowed to move forward with the oil project full-steam ahead. 

And this isn’t the first time the fate of this pipeline project has been tied to the highest office in the land. 

Former President Barack Obama nixed the project back in 2015 when he determined that Keystone XL “would not serve the national interest of the United States.” At the same time, he said that the project occupied “an overinflated role in our political discourse.”

True, indeed–and it turns out it is as true today as it was then.   

Is the Public Ready to Scrap Keystone?

Forget those politics for the moment. Is the public really ready to give up on a project that would carry oil from Canada’s tar sands to refineries on the Gulf Coast that rely on crude of the heavy variety? Are they ready to kick the habit? What is the alternative to this source of oil for U.S. refineries and for our citizenry?

The public battle over Keystone XL is perhaps not reflective of the true Keystone sentiment. While oil pipelines are continually scorned in North America–prominently in the media–signs indicate that U.S. citizens–for all their indignance over dirty fossil fuels–are not ready to make sacrifices that would lower the demand for these fossil fuels. 

Take auto sales, for example. Tesla has invaded the media as the cleaner automobile–a champion for going green and a hero in a battle that many hope will squash demand for fossil fuels forever. But what is being played out in the media–this climate consciousness that is politically correct and the often touted as the only publicly acceptable position–is contradicted by data.

What data? For one, data that suggests people really love those gas-guzzling SUVs. SUVs reached a major milestone in 2019, accounting for nearly 50 percent of all new vehicle sales in the United States, and more than 40 percent worldwide.  

As a portion of overall vehicle sales, this is a global record. So despite what people say out loud to their friends, and no matter what green bloggers and the media would have everyone believe, the data suggests that it is all too easy to admonish Keystone XL while commuting to work in their superconvenient soccer-mom SUVs. 

If the public isn’t ready to give up on those SUVs–and the transportation sector accounts for nearly a third of overall oil demand–are they ready to give up on some other oil-demanding practices, such as tech stuff like the internet? This is doubtful. 

Are there other alternatives to Keystone? Sure. Like resuming imports of Venezuelan oil, which is heavy like Canada’s. How about moving oil by rail? That idea is even less popular than pipelines.   

Even without a viable alternative, Keystone XL will likely factor into presidential campaigns. 

Reality Check 1, 2, 3

Will Biden really cancel the entire pipeline project if he were to win the presidency? Perhaps. Obama did. But Biden’s recent speaking out against the fossil fuel project panders to the Bernie Sanders’ supporters that Biden hopes will come out and vote in order for him to win. 

Sanders spoke out against the XL and even promised to shut down the existing Keystone pipeline after a roughly 9000-barrel spill, should he become president. 

Sanders has done a pretty good job bringing Biden closer to the left edges of the party, which is comprised of some who have expressed their reluctance to come out to the polls just to vote for not-Trump. 

Veering more closely to the left fringes, Biden is not only lashing out against Keystone XL, but against Canada’s tar sands industry in general. In an interview with CNBC, Biden said that not only has been against Keystone “from the beginning, it is tarsands that we don’t need — that in fact is very, very high pollutant.”  In an attempt to pacify the middle ground–and the steelworker and construction unions that typically support democrats–Biden added that we would “transition gradually to get to a clean economy.”

Biden added that he doesn’t see the Keystone project as keeping the industry moving, saying that that concept is “just not rational. It does not economically, nor, in my view, environmentally, make any sense.”

The current version of Keystone–operating for a decade–moves about 600,000 barrels of Canadian oil to the US every day. The expansion would add capacity to move 830,000 barrels per day.

Alberta’s Minister of Energy Sonya Savage responded this week to Biden’s promise to revoke Trump’s reinstatement of the Keystone XL project. “While we are disappointed to hear these reports from the Biden campaign, we remain confident Keystone XL remains a critical part of North America’s post-pandemic economic recovery,” adding that Keystone XL was the most studied in American history, but was careful not to wade directly into American politics. 

“Rather than speculating about the outcome of the U.S. election, we will spend our time continuing to meet with our U.S. allies and speak to Alberta’s role in supporting North American energy independence and security,” the Minister added.

While it is clear that Keystone XL will factor into the elections, whether it will truly bring about an end to the pipeline is questionable. If elected, would Biden return to the merry middle of his party, handing Alberta and U.S. oil refineries a much-needed win for their oil industries? Or would he follow in Obama’s footsteps and quash the unpopular project? We just don’t know.

But what we do know is that it is a near certainty that if President Trump is elected, the pipeline project will be complete. 

Nasdaq Composite and 100 are now both above 10,000 for the first time in history…

…because fun-durr-mentals…

The panic-buying in Nasdaq did not start until the cash open…

Retail bagholders large and in charge…

Robbing-hood indeed!

Workers at one of Tesla’s California factories tested positive for coronavirus last month, days after Elon Musk was fighting tooth and nail with Alameda County – and even Governor Newsom – to re-open in the midst of the global pandemic.

Supervisors at the company “held meetings with their teams to disclose the company had reported several cases of the coronavirus” and the employees who tested positive were told to stay home, according to the Washington Post. 

One employee said a supervisor confirmed two cases of the coronavirus at the company’s seat-assembly plant, which is located a “short drive” from the company’s Fremont factory:

The worker, in the separate building from Tesla’s main plant, said those affected included one from Tesla’s morning shift and another from its evening shift. The worker expressed concern over a perceived lack of caution on the production line.

Workers at Tesla said the restart of production was an “environment of fear”, according to WaPo.

One employee said of Tesla’s lack of precautions: “No social distancing at all when clocking in/out [because] people are … in a hurry to go home or get back to their work station. As far as social distancing, management don’t say anything to the associates [because] they’re not doing it either.”

The worker said the changes were “like nothing but with a mask on”. Recall, we documented Musk’s tussle with Alameda County surrounding re-opening of the company’s Fremont plant at length. On an April conference call, Musk had said of the lockdown:

“It will cause great harm, not just to Tesla, but to many companies,” Musk said on the call. “And while Tesla will weather the storm, there are many companies that will not. Everything people have worked for their whole life is being destroyed in real time.”

“It’s breaking people’s freedoms in ways that are horrible and wrong and not why they came to America or built this country. What the fuck. Excuse me. Outrage. Outrage.”

Meanwhile, this WaPo story interestingly comes days after CEO Elon Musk lashed out at Jeff Bezos over Twitter. One Tesla skeptic guessed that Musk’s outburst, where he claimed that Amazon was a monopoly, was due to a forthcoming negative story in the Washington Post (owned by Bezos). 

It appears he was right. 

Since not everybody knows Elon like I do, let me spell everything out:

The Washington Post is likely about to drop a deeply negative $TSLA story. As a courtesy, they probably asked him for a comment before publication. To get ahead of it, he randomly attacks $AMZN…

— TeslaCharts (@TESLAcharts) June 4, 2020

🚨🚨🚨🚨

Now we know why Elon attached Amazon last week!
I believe I had that.$TSLAQ pic.twitter.com/RyOWsELFZd

— TeslaCharts (@TESLAcharts) June 9, 2020

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

Have the events of 2020 caused you to consider moving somewhere else?  If so, you are definitely not alone.  The COVID-19 pandemic, a historic economic downturn and extremely violent riots in major cities all across America are fueling a sudden surge in interest in rural and suburban properties.  This represents a major shift, because prior to 2020 we had seen a tremendous boom in real estate prices in large cities such as New York, San Francisco and Seattle.  Now a lot of those buyers have become very motivated sellers, but there just isn’t a lot of demand for tremendously overpriced homes in core urban areas that are currently being torn to pieces by rioters.

Meanwhile, prices for rural and suburban homes are being pushed up as an increasing number of Americans seek to get away from the major cities.

At first, it was the coronavirus pandemic that was the primary reason why so many people wanted to move.  According to Redfin, page views for homes in rural communities and small towns were way, way up in March as the virus began to spread aggressively in the United States…

A report from Redfin (NASDAQ: RDFN) highlights this trend, showing that by late March, the seven-day average change in page views of homes in rural and small towns was up 115% and 88%, respectively.

Of course now the worst civil unrest in decades has been added to the equation, and this has caused even more city dwellers to consider a change in residence.  In fact, one poll found that approximately 40 percent of all city dwellers “are considering leaving”…

A recent Harris Poll found that more than 3 in 10 people in America say the pandemic makes them want to live in a rural area. And, 1 in 4 now want to live in a suburb exterior to a major city. In a separate Harris Poll, it was found that nearly 40% of city dwellers are considering leaving the city due to the pandemic.

Unfortunately, not everyone will be able to move.  In an economic environment where more than 42 million Americans have already lost their jobs, many people will be doing all that they can to cling to the jobs that they still have.

But for those with the liberty to live wherever they want, this is an opportunity to make a dramatic change.

At this point, even urban real estate markets that were once red hot like San Francisco appear to be cooling off in a major way…

Amid the depths of a global pandemic and financial downturn, the demand for real estate is unexpectedly rocketing in wealthy regions outside San Francisco, reports Bloomberg. Agents say that demand is soaring in affluent areas around the Bay Area such as Napa, Marin and further afield in Carmel, as people who have the means look to get away from the city. Meanwhile, the market in San Francisco and Alameda County is still well below where it was last year.

Elsewhere, Lake Tahoe has also seen a surge in real estate interest. The prospect of living out of the city on an alpine lake while maintaining a career is appealing for a new generation of young buyers, as many tech companies have signaled that remote work may be the new norm for a long time.

During the good times, our big cities had a lot to offer.

But now, many city dwellers have become completely convinced that their communities are simply no longer safe places to live.

Just look at what is happening in Chicago.  The last day in May was “the deadliest day” that the city had seen “since at least 1961″…

The city of Chicago notched a grim milestone last weekend, as 18 people were murdered on Sunday, May 31 alone, marking the deadliest day in the city since at least 1961.

The University of Chicago Crime Lab’s numbers do not go back further than 1961, so it’s impossible to say how long it’s been — if ever — since so many people were murdered in the city one 24-hour stretch.

We have come to expect a very high level of violence in Chicago, but one local expert says that the number of murders on that particular Sunday was “beyond anything that we’ve ever seen before”…

“We’ve never seen anything like it, at all,” the crime lab’s senior research director, Max Kapustin, told the newspaper. “I don’t even know how to put it into context. It’s beyond anything that we’ve ever seen before.”

Chicago’s next most violent day was Aug. 4, 1991, when 13 murders were recorded.

At one time, America’s beautiful shining cities were the envy of the entire planet.

But now thousands of retail outlets have been boarded up, homelessness is absolutely exploding, and it looks like there will be much more rioting, looting and violence in the months ahead.

I have been writing about the plight of our major cities for many years, and even though I have been relentlessly warning that this was coming, it doesn’t make it any less sad.

I have really been feeling so sad lately.  Things didn’t have to turn out this way for America, but our choices have consequences, and we have been making really bad choices for decades.

Ultimately, I am quite glad that I was able to get away from the big cities when I did, and countless other Americans have made the exact same choice.

Now we are potentially facing a mass exodus from the major cities in the months ahead, and that will likely drive real estate prices in the most desirable small towns and rural communities through the roof.

Those that are wealthy will be able to afford such prices, but many others may find themselves completely priced out of the market and unable to relocate.

After a mediocre 3Y auction to start the week, moments ago the Treasury sold $29BN (down from $32BN last month) in a 9-year-11-month reopening, which was downright ugly after today’s sharp drop in yields, which saw the 10Y slid as much as 6bps.

The high yield of 0.832% tailed the 0.819% When Issued by 1.3bps, the widest tail since January, and was 13.2bps higher than May’s record low 0.70% yield.

Just as ugly was the plunge in the bid to cover swung sharply lower, from 2.69 last month – the highest since Jan 2018 – to just 2.26, the lowest since August 2019.

The internals were also quite disappointing, with Indirects taking down 56.7%, down almost 10% from last month’s 66.1%, the lowest since January and below the 6-auction average of 59.8. And with Directs also paring down their interest, taking down 11.8%, below the 14.3 six-auction average, leaving Dealers with 31.%, the most since May 2019.

Overall, a very ugly auction which however can be attributed to the sharp runup in the bond market today amid the broader equity market weakness.

As public opinion coalesces around the view that at least some police reforms are needed, radical leftists and their allies in the press are capitalizing on the surge in public resentment toward the police to push a radical agenda Meanwhile, President Trump effectively plays right into their hands by doubling down on his attacks on demonstrators (demonstrators who even Trump has at times defended).

We’ve tried to highlight examples of this as the Minneapolis City Council “committed” on Sunday to dismantling the city’s police department and building a new “public safety” department in its place, while NYC Mayor Bill de Blasio and “mayor in waiting” Comptroller Scott Stringer have called for siphoning more than $1 billion in funding from the NYPD and shifting it to social and youth services. When the protest movement started, it was a backlash against police brutality, a problem that has plagued the public for decades, and has been increasingly spotlighted in the age of cellphone video cameras that have ushered in a new age of accountability.

Police Unions and entrenched interests have continued to reflexively resist reform (after all, that’s what public employee unions are designed to do, unless the “reform” somehow lessens their memberships responsibilities or increases their compensation); meanwhile, radical leftists have pushed to move the goalposts, calling for the all-out abolition of police. 10 years ago, this would be unimaginable. Yet, here we are.

Anybody with an ounce of common sense can probably imagine some less-than-desirable consequences to abolishing police departments. But in a sign of just how removed the far-left truly is from the perspective of the ordinary American moderate, consider this: Alison Hirsh,, a senior advisor to NYC Mayor Bill de Blasio, just left his office in protest over his treatment of the NYPD.

Hirsch wasn’t fired for criticizing her boss; instead, she’s being transferred to another city department and will retain her cushy $200k+ salary and generous city benefits (including a taxpayer funded pension).

Alison Hirsh

According to Politico, Hirsh was “offended” by de Blasio’s “defense” of the police when he warned peaceful demonstrators to disperse during one of the early protests, claiming that “your point has been made.”

Hirsh did not address de Blasio’s management of the protests in her statement, but those familiar with her decision said she had repeatedly challenged the NYPD’s tactics during staff meetings and calls with the mayor and Police Commissioner Dermot Shea. She witnessed what she considered unnecessary force while monitoring a march in Brooklyn on May 30, when police shoved demonstrators and used pepper spray to subdue them, the sources said.

The mayor was unmoved by the account — and many others caught on video, which which he often says he has not seen. Later that same night he defended the NYPD, including officers who drove a police car into a crowd of protesters who were tossing water bottles and traffic cones at the vehicle.

“Anyone who is a peaceful protester, it’s time to go home. The point’s been made,” he said during an impromptu interview on NY1 late that evening. He also said those particular officers “were trying to deal with an absolutely impossible situation” and blamed demonstrators for surrounding their car.

Hirsh — and many other past and present de Blasio staffers — were outraged by such a strong defense of police from a mayor who ran on a platform of reforming the NYPD and ending aggressive tactics toward black and Latino New Yorkers. In her Twitter bio, Hirsh describes herself as “anti-racist” and prior to joining the administration she was political director at the building service workers union that represents many low-income, black and Latino workers.

It’s just another example of how the radical left sees reality through a very, very different lens than both moderate Democrats, and conservatives alike.

Authored by Lance Roberts via RealInvestmentAdvice.com,

With investors throwing investing caution to the wind, technically speaking, it’s time to take on defensive positioning. Such was the warning we discussed in this past weekend’s newsletter. To wit:

“Regardless, the markets are bullish biased, and we must be respectful of that reality. No matter how you slice the data, the markets are back to more extreme overbought conditions on a short-term basis.

The break above the 200-dma triggered a parabolic advance in the market over the last week. The market is making a 3-standard deviation move to the upside. With indicators very overbought, short-term corrective action is likely. (Note the market was just 3-standard deviations BELOW the 50-dma in March.)”

The number of sectors and markets which are trading at extreme overbought levels confirms this extension. The chart below, available to our RIAPro.Net Subscribers (30-day Risk-Free Trial), shows a market rarity. Every sector and market, except for bonds, is extremely overbought.

The last time this happened was in the second week of April, which preceded a 4% correction, and then resolved itself in a month-long consolidation. The next good entry point came in mid-May. The price level was relatively unchanged, and the risk/reward for adding risk exposure was much improved.

The short-term overbought condition becomes further complicated by the more extreme deviations from the 50-day moving average. Historically, prices remain confined to a maximum deviation of +/- 5-7% from its short-term moving average. As shown below, we have blown well past those norms.

A Warning Sign For Defensive Positioning

With more than 95% of stocks now trading above the 50-dma, such has historically signaled short-term market corrections. Currently, the number of stocks above their 50-dma stalled at one of the highest levels in a decade. Watch for deterioration, or a negative divergence, in the percentage to signal an upcoming correction.

With the vast majority of stocks being above the 50- and 200-dma moving averages, all short-term momentum indicators are now egregiously overbought. As noted by the vertical red lines, when every measure is at historically overbought levels, corrections are frequent.

Short Covering Rallies Are Short-Lived

The furious rally in the “fundamentally weak” areas of the market was a painful counter-trade against investors with a fundamental discipline. As David Rosenberg noted yesterday:

“While it is hard to identify real buyers in the flow data, there is no selling of equities, and that alone is extremely important. On top of that, we have a huge short squeeze going on — the most shorted stocks have collectively soared 65% from the March lows. The CFTC data shows a squeezing of the four-year high net speculative short position on the CME. (Down 14% last week to 38,593 net S&P 500 short contracts to a three-week low).”

He is right, and this was a point I noted on Saturday.

“Currently, non-commercial speculators are carrying one of the largest net-short positions on the S&P 500 in recent history. While such positioning doesn’t necessarily mean the market will crash, it has historically aligned with short-term peaks and bear markets.”

The total put-call ratio all suggests similar positioning. With investors getting extremely aggressive by buying call options, the ratio is back to a historical high. The last time the put-call ratio was this elevated was in January when the belief was the “economy was firing on all cylinders.”

Such extremes do not historically last long and usually resolve themselves within a couple of weeks to months.

Buying Because We Have To

We can not dismiss the issues of technical price deviations, valuations, and subsequent risk when adding exposure. By the majority of measures that we track from momentum to price, and deviation, the market’s sharp advance has pushed the totality of those indicators back to overbought.

I understand if this seems confusing, but it is the difference between chasing markets short-term versus longer-term outcomes for portfolios. This analysis is part of our thought process as we continue to weigh “equity risk” within our portfolios.

Let me be clear about something.

As a portfolio manager, we buy “opportunity” because we have to. 

If we don’t, we suffer career risk, plain and simple.

However, you don’t have to. If you are indeed a long-term investor, you have to question the risk undertaken to achieve further returns in the market currently.

While we may indeed be shifting exposure and taking on some additional risk, we do so very cautiously.

Defensive Positioning

While we did increase our exposure to the markets yesterday, as the bullish trend continues, we did so in more “defensive” areas. With the momentum “junk” trade now very extended, we should see a rotation back into utilities, real estate, health care, and technology. (Which may already be underway.)

Furthermore, as noted Saturday, we are also backing that increase in equity risk with increases in our bond holdings.

(As opposed to the S&P 500, bonds are more than 3-standard deviations oversold. On Friday, bonds began a reversal rally. We recently added to our positions to take advantage of a risk rotation.)

“Even if we get a V-shaped recovery, we are going to be stuck in a deflationary pricing situation for a very long time. You have one-in-five Americans either unemployed or underemployed even after what was apparently a blockbuster jobs report. There is still too much idle capacity to be bidding up inflationary expectations at the moment.

That’s why Treasuries are a very good buy right now.” – David Rosenberg

Risk Does Not Equal Reward

While the Fed is flooding the system with liquidity, the economic and fundamental backdrop remains a disaster. Fundamental, economic, and earnings growth are substantially weaker, which are dependent on an unemployed consumer. Therefore, we may be required to reverse recent increases in equity risk quickly. However, bond yields are still heading to zero.

It is worth remembering that markets have a very nasty habit of sucking individuals into them when prices become detached from fundamentals. Such is the case currently and has generally not had a positive outcome.

What you decide to do with this information is entirely up to you. As I stated, I do think there is enough of a bullish case, technically, to warrant taking on some equity risk on a very short-term basis. We will see what happens over the next couple of weeks. 

However, longer-term dynamics are decidedly bearish. When those negative price dynamics combine with the fundamental and economic backdrop, the “risk” of having excessive exposure to the markets outweighs the potential “reward. “

Remember, investing is not a competition; it is a game of long-term survival. 

Rose-emoji-loving Democratic Socialists seemingly never stop complaining about “dangerous” threatening behavior – at least, so long as the threats are directed against other leftists.

But a white defense attorney in San Gabriel is reportedly under investigation by the LAPD after he published two Instagram posts offering to defend “one or two” cop killers pro bono, claiming that it is “high time” that “somebodies granddad [put] a couple of hollow points between the eyes of these PTSD-addled rednecks.”

He added that it “wouldn’t be the first time I’ve represented terrorists”.

Here’s more at FoxLA:

A San Gabriel criminal defense attorney is under LAPD investigation after posts from his Instagram account called for police to be murdered offered free legal representation to anyone who kills a cop.

FOX 11 exclusively obtained screenshots of highly disturbing social media posts allegedly authored by attorney Mark McBride on Instagram.

Reps from the LAPD police union responded to a request for comment from FoxLA, saying they found the comments “disturbing.”

“When we first saw the comments it was disgust, it was anger,” said Sgt. Jerretta Sandoz, Vice President of the Los Angeles Police Protective League, the union that represents LAPD rank and file.

“There are so many good police officers in this country and to be painted with a broad brush and then threatened with bodily harm, just for wearing a uniform, it’s disheartening and disgusting.”

In a phone call with FOX 11, LAPD called the comments extremely disturbing and said an investigation was underway.

McBride didn’t return any of my calls, texts, or emails on Monday.

When we stopped by the Beverly Hills address his website lists as his law office, nobody there had heard of him and the owners of the property told me they do not lease out any space to anyone named Mark McBride.

The backlash to his instagram posts has clearly been severe enough to upend the life of the poster – a lawyer named Mark McBride. When a FoxLA reporter approached him at a small office he apparently uses for his work (it was listed on his bar license), a “disheveled” man who initially denied being McBride, before affirming that he had no comment, and asking the reporter to please just go away.

EXCLUSIVE: A local defense attorney is under LAPD investigation after his Instagram posts called for police to be murdered & offered free representation to anyone who kills a cop. “These cocksucking, low IQ, can’t get into law school jarheads need an asphault nap.” 10pm @FOXLA pic.twitter.com/FhpNQMLh8U

— Bill Melugin (@BillFOXLA) June 9, 2020

According to FoxLA, McBride had a moderate profile in the area, and has represented several high-profile clients.

Here’s the text from that post, courtesy of FOXLA:

“It won’t stop until black people start murdering cops, which they should do often and with great relish. These ****sucking, low IQ, can’t get into law school jarheads need an asphalt nap, during which they’re bleeding out on the street where they’re shot down. I would have no problem with them. I would absolutely 100% defend to the death of any African American who picked off a cop or two. It’s time, it’s well past time.”

In a follow-up post, McBride allegedly wrote: “It wouldn’t be the first time I’ve defended “terrorists”, sign me up pro bono for somebodies granddad putting a couple of hollow points between the eyes of these PTSD addled rednecks, I’d take one or two pro bono.”

Leftists who constantly complain about abuse and threats on social media platforms were once again silent on this scandal. Project Veritas recently went undercover with an Antifa group that focused on training members for street combat, even if it means fighting police to the death. The lawyer is right that it is “time” – in fact, it’s past time: during the aftermath of Michael Brown’s killing during an altercation with an officer, a man went on a rampage in Dallas, killing nearly half a dozen cops.

A retired officer was killed during the riots in Minneapolis, and other innocents have also been killed amid the “largely peaceful” demonstrations.

Authored by Doug Kass via Seabreeze Partners,

• In nearly every market cycle, speculation in low-quality, virtually valueless and literally bankrupt stocks, marks a market top

• Statewide “shelter at home” orders coupled with the Fed’s liquidity injections and commission-free trading (on most platforms) have contributed to the boon in speculation this year

• Robinhood traders (and their ‘shiny object’ stock targets like Hertz) are symptomatic of this silly trading backdrop – its worrisome and could be symptomatic that painful market potholes lie ahead

“We don’t steal from the rich and give to the poor. We steal from the poor because they can’t fight back — most of them — and the rich take from us because they could wipe us out in a day.”

– Robinhood

Socially we may be in 1968 (“2020 Is Looking a Lot Like 1968, Without the Good Music“) but from a stock market standpoint things are looking a lot like the weird top in the first quarter of 2000 and/or like the top in the end of the third quarter/beginning of fourth quarter of 2007:

• The Early 2000 Top – In early 2000, the Dow Jones Industrial Average was the first major average to top out in January. Two months later the Nasdaq had its final move to the upside and while it took the S&P Index to a new high, the DJIA failed to make a higher high. The narrowness of the early 2000 move in the Dow Jones was so pronounced that the NYSE cumulative advance/decline line topped out in early 4Q1999, months before the DJIA recorded its top. Another feature of 2000 was the relatively few stocks guiding the Nasdaq higher.

• The Late 2007 Top – The weird part of 2007 was the absence of extreme bullishness. In that year, a sharp correction in July-August was followed by an abrupt rally to new highs by October. From there the S&P and DJIA dropped by about -55% each — it took about 1 1/2 years.

• The Early 2020 Top – Bewildering was the speed of the February-March drop and the rapidity of the recovery in April-June. This contrasts to normal bear markets that are between six months to two years. The -34% February-March decline and the 40%+ rally in April-June — neither was a bear market and the following rally was likely not a sustainable bull market. In terms of the historical precedent, today there is some similarity to both the speculative activity of 2000 and the lack of bullish investor sentiment in 2007.

If correct, we still have not had a primary bear market since The Generational Low in March, 2009. That’s a long time and the clock may be ticking.

As Stan Druckenmiller commented yesterday on CNBC, the breadth thrust of last week was impressive but if you look carefully at the Nasdaq, for example, you would be surprised to see how many stocks have underperformed – as a handful of large stocks coupled with a group of speculative (but valueless) equities have been carrying the weight of the Average.

I expect the market to now experience some wild volatility swings. I am even considering going long VIX, something I have avoided over the years.

Speculation

The is a place for speculative stocks in every portfolio.

But trading stocks that one knows is worthless (and that even has declared bankruptcy) because they are rising is a “fool’s errand” to me. Implicitly, the trader who buys something that has no value for $4, $5 or even $8 is basing his trading decision that another fool will pay higher for something that is worth nothing.

It proved sub optimal in 2000 – for those that “hung on” – and it will likely again in the time ahead.

But time after time, many will declare the efficacy of the approach.

Aided by the proliferation of free trading on most of the larger platforms, the new dominant day trader, Robinhood, has recently brought on a degree of speculation last seen 20 years ago – at the end of the dot.com bubble.

The setup for speculation in 2020 was unique: statewide “shelter at home” orders coupled with the Fed’s liquidity injections and commission-free trading (on most platforms) have contributed to the boon in speculation this year.

There are many glaring examples of chasing value less stocks these days – already bankrupt J.C. Penney (CPNQ), Chesapeake (CHK) (which closed at $69.92 last night and is now trading at $30/share – equities are the bottom of the capital structure) – its bonds (maturing in 2021) are at $0.04 on the dollar) , (WLL) , (NKLA) , and leveraged energy small caps – (XTEG) , Noble (NBL) , and so many others.

Perhaps the most conspicuous silly stage trading sardine is Hertz (HTZ) , which traded at $0.80 six days ago, opened higher at $3.37/share on Monday and closed +115% to $5.53 (+582% from last Wednesday), and traded close to $7 in after hours trading yesterday. The shares were back to under $5 this morning in the pre-market.

Finally, during periods of euphoria and speculation really stupid comments are made about how easy it is to make money trading bankrupt companies and declare how stupid the greatest investors of all time are.

Hubris, a late market cycle condition, has become contagious.

We did it. pic.twitter.com/HGTFj8g2MF

— Keubiko (@Keubiko) June 9, 2020

Bottom Line

The market is plain “goofy” and the recent advance has been accompanied by the worrisome amount of speculation in valueless securities.

Robinhood’s motto is “Investing for Everyone.”

Maybe not so much.

Today’s dash for trash has an historical precedent in participation and outcome.

History rhymes.

Caveat emptor.

Following three memorial services in Minneapolis, North Carolina and Houston, George Floyd, the black American man whose killing at the hands of a Minneapolis Police officer Derek Chauvin set off two weeks of protests (interspersed with violence, looting and murder), will be laid to rest in Houston on Tuesday. He will be laid to rest at Houston Memorial Gardens in Pearland, where his mother is buried.

The funeral is slated to begin at 11am Central Time, that is noon ET, according to the Washington Post.

Police will escort Floyd’s body into Pearland following a private funeral at the Fountain of Praise Church, and the procession will finish with Floyd’s body carried in a horse-drawn carriage.

The public are allowed to view the procession, but they are not allowed into the services. There are expected to be road closures to ease the procession, and mourners are being encouraged to wear face-coverings and to practice social distancing.

Progressive MSM outlets like the Guardian noted that VP Joe Biden met with Floyd’s family last night, while President Trump met with the police.

Live feeds covering the funeral have already started rolling, showing those who will attend the gathering, a list of roughly 500 that includes family and friends, community members, politicians and celebrities.

WATCH LIVE: Mourners in Houston arrive for the funeral of George Floyd
https://t.co/yHM9Hn1LCf

— CGTN Europe (@CGTNEurope) June 9, 2020

Here are the details:

• Floyd’s funeral is scheduled to begin at 11 a.m. Central time (noon Eastern time) at Fountain of Praise Church in Houston. The service will be live-streamed.
• The funeral will feature multiple speakers, including civil rights leaders who will call for justice and social reform, Fountain of Praise co-pastor Mia K. Wright told CNN.
• Rev. Al Sharpton is expected to deliver the eulogy, according to CBS News.
• Former boxing champion Floyd Mayweather is covering the expenses for the memorial, following earlier services in Minneapolis and North Carolina.
• High-profile guests are expected to include Houston Mayor Sylvester Turner, Rep. Sheila Jackson Lee, Rep. Al Green and rap stars Paul Wall and Slim Thug, according to KHOU.
• Around 1 p.m. local time, Floyd’s body will be taken in a horse-drawn carriage to Houston Memorial Gardens. The Houston Police Department will provide an escort.
• Floyd will be buried next to his mother’s grave.
• “We want to have a home-going celebration. We want to remember his name,” Wright, the pastor, told CNN.

Ahead of the ceremony, and following yesterday’s public viewing, the Chief of the Houston PD appeared on the Today Show Tuesday to express support for police reform efforts introduced by Congress yesterday, measures that police unions vehemently oppose. Anybody tempted to celebrate these types of admissions from the leadership should wait to hear what the unions think: if anything, it’s the unions, moreso than the department management, who are responsible for the culture of silence that protects the “bad apples”.

“I’m hopeful that the best days of our nation are in front of us.” Watch Houston Police Chief @ArtAcevedo’s full interview with @craigmelvin about the city’s response ahead of George Floyd’s funeral today, what he thinks about new police reform legislation and much more. pic.twitter.com/GYs8kKnDQc

— TODAY (@TODAYshow) June 9, 2020

The service will be streamed live.