Category: zerohedge

Authored by Jim Geraghty via NationalReview.com,

Moving Out & Not Coming Back

Yesterday on my work Facebook page, a reader asked, “Why is it that the places Covid-19 show up the most are in Democrat controlled areas?” As much as I’d like to believe that all the troubles in the world can eventually be traced back to Bill de Blasio, I responded, “Probably because ‘the places it shows up the most’ are large densely-packed cities with a lot of international and domestic air travel and high use of mass transit, where Democrats have been winning elections more than Republicans for at least a generation and in many cases several generations.”

You can split red and blue America in a lot of ways — race, age, religiosity — but arguably the strongest factor is geography. The “Big Sort” that Bill Bishop described has been at work for two decades. Sure, there are conservatives and Republicans who live in big cities and inner-ring suburbs, just rarely in the numbers that could make a difference. And there are progressives and Democrats who live in rural areas and exurbs, but again, rarely in the numbers that could make a difference in elections.

Kevin Williamson has noted that conservatives often don’t even try to persuade city-dwellers of the value of their ideas, and lapse into a casual to overt contempt of life in the big city.

Meanwhile, it is not hard to find examples of urban progressives looking at rural America with a combination of contempt, disdain, pity, smug superiority… heck, it’s not hard to find urban progressives who see suburbanites as somehow inferior and worthy of scorn, never mind residents of small-town America.

At some point the coronavirus crisis will end, but one of the extraordinarily difficult lessons of this ordeal is that the catastrophic scenarios that sound like something out of science fiction can happen in real life, and that the vast majority of us are at the mercy of fate in these scenarios. As mentioned last week, whichever way SARS-CoV-2 jumped into humans — a lab accident, wet markets, exotic-animal trader, a farmer using bat guano for fertilizer — it can happen again with another virus. Right now, as you are reading this, all around the world, scientists are working on dangerous viruses and pathogens in biosafety-level four, three, and two labs. Almost all wet markets are still open in China; all around Asia, the often-illegal trade in exotic species continues with minimal impediments; and farmers all around the world continue to use guano as fertilizer, prompting human beings to go into caves, and risk exposure to viruses that no human being has ever encountered before. Those viruses will probably be less deadly and contagious than SARS-CoV-2. But someday, humanity could encounter one that is even worse.

We will get through this crisis in a year or two. But we have no guarantee that additional pandemics aren’t waiting for us further along in this decade, or the next one, or the one after that. Maybe we’ll be lucky and the fudging-the-numbers-slightly meme declaring that we face a terrible plague once a century, in years ending in ’20, will turn out to be right.

We in the United States never suffered another terror attack on the scale of 9/11, but that didn’t mean that the threat of terrorism did not shape our thinking for at least a decade afterwards, and probably even to today. We will be thinking about the risk of global pandemics and how to mitigate them for a long time to come. And that will start to influence Americans’ decisions about where they want to live.

Today in the Wall Street Journal, Anne Kadet writes about the New York City residents who are moving out, and not coming back:

They’re hardly the only family spurred by the pandemic to make a fast move, said Alison Bernstein, founder and president of Suburban Jungle, a company that specializes in matching city clients with their ideal suburban town, and helped the Usherenkos find their new home. “This whole thing is catastrophic and petrifying for families in urban areas,” she said. “People want out of the city and now.”

Ms. Bernstein said demand for her firm’s services is up 40% from the same period last year. Some are prompted by safety concerns. Others worry the shelter-in-place edict will drag on, confining them to small city apartments.

Carlo Siracusa, president of Residential Sales for N.J.-based Weichert Realtors said while inventory is low due to sellers pulling homes off the market, demand remains high because of a new wave of city dwellers shopping in the suburbs.

“They’ve been confined to a small space the last 45 days and want out,” he said. “There’s a sense of urgency.”

Are cities still worth it? Many will conclude they are. The opportunities are unparalleled, lots of jobs are there, the arts scenes are thriving, the professional sports teams are there. Nearby international airports allow you to get anywhere in the world fairly easily. Cities have more people closer together than towns and suburbs, so they just have more things going on — fascinating museums, festivals, marathons, concerts, pedestrian-only streets lined with quirky shops, distinct ethnic neighborhoods, small businesses, unique non-chain restaurants, skyscrapers and observation decks, broad boulevards, huge libraries, inviting public squares. Even the train stations can be beautiful. People who appreciate all the joys of a city — and who can still afford the cost of living — won’t easily give up all of that. Our cities will not empty out.

But they may shrink, and this outbreak is likely to accelerate the trend of seeing urban life as a luxury for the wealthy and young and a necessity for the poor and old.

Whatever you want to call the trend in urban planning over the past two or three decades — I’d characterize it as Richard-Florida-ization — it has reoriented American big cities’ offerings, enhancing their appeal to certain groups of people, often at the cost of other groups of people. Florida now gets mocked as “the Patron Saint of Avocado Toast,” but I think the demographic numbers don’t lie. Cities are terrific and exciting places for young people, particularly college students and recent college graduates, and double-income, no-kids couples — and probably retirees as well. But once a couple has a child, urban life becomes a lot more difficult and less appealing. A small apartment can become unbearable with a new baby. The public schools are hit-and-miss at best. Bigger kids want a yard to play in, or maybe a swing set. The cost of living starts to be prohibitive.

And now we are learning, once again, that densely packed cities are particularly dangerous places to be during a disease outbreak.

If you’re living in New York City right now, the good news is that you’re living amongst some of the best doctors and medical personnel in the world. But you probably live in an apartment. Leaving that apartment requires using an elevator (use a glove to touch the buttons) or the stairs (don’t touch the railings or doorknobs with your bare hands). Once you get on the street, you can try to keep space between yourself and everyone else, but there are just lots of people around. Advocates for public transportation insist the connection between the subway system and the virus is ‘tenuous,” but . . . how many other places are you forced into relatively close contact with lots of strangers with circulated air for a significant stretch of time? How many people use those stairway railings each day? How many people touch the turnstiles and subway poles?

Life in a small town or the suburbs is no guarantee of protection from the coronavirus. Tiny Cynthiana, Ky., population around 6,300, had a cluster of cases, fourteen in the town and surrounding county. My stretch of suburbia, Fairfax County, has 2,306 cases. But we’ve got 1.1 million people spread out over 406 square miles — roughly the size of Los Angeles. At least we can walk around our neighborhoods and the trails in the woods with minimal fear of exposure.*

The world has been forced to embrace telework and experiment with working from home like never before. The need for white-collar workers to all be in one central location – and paying some considerable rent for that office space – is shrinking before our eyes.

When authorities require or recommend you stay inside your home, your home becomes exponentially more important — not just a place to sleep and store your stuff. Kitchens matter when you’re cooking almost every meal at home. A yard, patio, deck, porch, or gazebo gives you the ability to enjoy fresh air within your own space.

Who knows if the coming year or two will have on-and-off social distancing and stay-at-home orders? All of those glorious amenities of the city aren’t that appealing if they’re closed.

Some reacted to the previous trend of the urbanization of America with satisfaction. After “White Flight” and “Brain Drain” and so many bad trends in American cities in the 1970s and 1980s, many urban areas were finally enjoying a renaissance. A handful became “innovation hubs for the knowledge economy” — New York City, Seattle, Austin, Boston, Silicon Valley — enjoying an explosion of jobs — with a much slower increase in the amount of available housing. Rents and the cost of real estate skyrocketed, creating glittering cities with much of the rest of America on the outside looking in.

And now some people in the cities may not want to live in them anymore.

“Blue America” might be moving to the suburbs or right into “Red America” – and maybe we would be better off if we saw each other as neighbors, instead of rivals in a never-ending culture war.

*  *  *

ADDENDUM: It will probably not surprise you to learn I think Senator Tom Cotton has the assessment of the likelihood of SARS-CoV-2 arising from an accidental exposure of a naturally occurring virus just about right:

While the Chinese government denies the possibility of a lab leak, its actions tell a different story. The Chinese military posted its top epidemiologist to the Institute of Virology in January. In February Chairman Xi Jinping urged swift implementation of new biosafety rules to govern pathogens in laboratory settings. Academic papers about the virus’s origins are now subject to prior restraint by the government.

In early January, enforcers threatened doctors who warned their colleagues about the virus. Among them was Li Wenliang, who died of Covid-19 in February. Laboratories working to sequence the virus’s genetic code were ordered to destroy their samples. The laboratory that first published the virus’s genome was shut down, Hong Kong’s South China Morning Post reported in February.

This evidence is circumstantial, to be sure, but it all points toward the Wuhan labs. Thanks to the Chinese coverup, we may never have direct, conclusive evidence—intelligence rarely works that way—but Americans justifiably can use common sense to follow the inherent logic of events to their likely conclusion.

A New York businessman who had the foresight to stock up on personal protective equipment before the rest of the world “woke up” to the pandemic is now being charged with violating the U.S. Defense Production Act for “hoarding” and “price gouging”.

45 year old Amardeep Singh was storing the items at a warehouse in Long Island and was selling the items – at a hefty mark-up – from his store in Plainview. For his business acumen in the “land of the free”, he now faces up to a year of jailtime, according to Bloomberg.

President Trump’s March 18 executive order made it illegal to hoard medical supplies and then re-sell them at “excessive” prices.

Singh’s lawyer says he was unaware that he was breaking any Federal law: “This Defense Production Act is a very general law which lacks any specificity on what exactly price gouging is. Once all the facts are laid out, you will see that my client didn’t violate the law. We deny any wrongdoing that my client gouged on any profits. He’s innocent and will be cleared.”

Singh began to stock up on the equipment in mid-March to supply a “Covid-19 Essentials” section of his store, which included N95 masks, surgical masks, face shields and disinfectants. He was selling disposable face masks that cost $0.07 each for $1 each and bulk sales were made to “organizations serving vulnerable senior citizens and children battling the virus,” U.S. Attorney Richard Donoghue said.

Another U.S. attorney said: “Singh saw the devastating Covid-19 pandemic as an opportunity to make illegal profits on needed personal protective equipment.”

Postal inspectors then seized 23 pallets of inventory from Singh’s warehouse, including 100,000 face masks, 10,000 surgical gowns, 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves.

The capital deployed by Singh to obtain all of his store’s inventory, we’re guessing, will not be refunded to him. 

The New York State attorney general sent Singh a cease-and-desist letter on April 1 warning him about price gouging on hand sanitizer he was selling.

And so, that’s what you get for buying up things that are going to be in demand and reselling them for a profit – a U.S. attorney accusing you of “illegal” profits. Perhaps if the U.S. attorney’s office really want to rope in “illegal” profits their time would be better served overseeing Wall Street and the Fed, instead of hassling a local store owner.

Via Economic Cycle Research Institute (ECRI),

This may already feel like a brutal recession. But in one respect it may not be as bad as many think.

To understand why, you need to understand how a recession’s severity is measured. We have to look at the Three D’s: depth, diffusion and duration.

In terms of depth, this recession is extraordinarily deep. Already, 26.5 million people have filed for jobless claims, compared with a total of 8.7 million jobs lost during the Great Recession. And it’s not over.

Of course, a recession is really a vicious cycle, with declines in output triggering job losses, declining incomes and falling sales, which feeds back into a further drop in output. 

This is integral to the diffusion of weakness across the economy – how it spreads like wildfire, cascading from industry to industry, and region to region in the country. In terms of diffusion, this recession is certainly severe, affecting a wide range of industries.

But on the third “D,” duration, this recession could be among the shortest on record. Here’s why.

With economic activity plunging so deeply, even a slow, partial opening up of the economy would lift activity off those extreme lows.

This is where good leading indexes are critical.

Full ECRI interview with @seemacnbc on @TradingNation here: https://t.co/JMFWQhRLg6

— Lakshman Achuthan (@businesscycle) April 23, 2020

Such leading indexes will reveal if the recessionary vicious cycle will flip to a virtuous cycle of a self-feeding recovery.

In that case, the recession could end by summertime. If so, this would be among the shortest recessions on record, closer to half a year, compared with a year and a half for the Great Recession.

And while that sounds downright optimistic, the end of recession is only the start of a recovery, probably with double-digit unemployment rates, which are unlikely to plunge in short order. So, things won’t get back to “normal” anytime soon.

In the second week of March on Trading Nation we took a look at the growth in ECRI’s Industrial Price Index for commodities –both those that are speculative and traded on exchanges, and other key industrial inputs that aren’t exchange-traded, and are therefore non-speculative but based on hard data on supply chain dynamics in the real economy.

Back then, I said that, if non-speculative commodity price growth held up, it would indicate that the coronavirus was not sparking a recession, but that the situation needed to be very closely monitored.

Soon after that hit, non-speculative commodity price inflation did start to plunge, and it’s still sliding, with the latest reading at its lowest point since late 2015.

As of today, it’s not yet signaling a near-term recovery, but we’re keeping a close eye on this and our other high-frequency leading indexes.

The recession’s all about the three D’s: depth, diffusion and duration. Read @StephLandsman‘s article and watch today’s interview with @seemacnbc here: https://t.co/KTjrTWe7Kz

— Lakshman Achuthan (@businesscycle) April 23, 2020

*  *  *

[ZH: However, as we have detailed recently, if – as expected, a second wave of the virus is seen, forget the hopes of a V-shaped recovery but more of a U-shaped or even L-shaped.] 

Better hope a second wave can be thwarted, if not, a double-dip depression could be in the cards. 

In September 2017, Hugh Hendry stunned the world when, out of the blue one of the best investors of his generation shut down his hedge fund Eclectica (his farewell letter can be found is here) disgusted with how broken and impossible to navigate capital markets had become as a result of central bank intervention and retired to the warm embrace of St Barts, even though it was clear he still had much left to say about the investing process.

And so, after keeping a low profile for nearly three years, overnight the contrarian investor penned a lengthy tweetstorm from his his brand new twitter account, touching on all the latest market development and laying out some of his latest investing ideas. Below, we have aggregated his thoughts for the benefit of all those curious what the Scotsman thinks about when he is not pursuing his retirement interests which according to this twitter profile include “luxury real-estate, mentoring, and paddle-surfing.”

Never one to disappoint, Hendry reverts to his macro roots, discussing the fate of gold and the dollar in the helicopter money regime, what it would take for the S&P to hit 10,000, whether the entire VIX regime is now inverted due to central bank backstops, and asks the “two key questions”: are we transcending from a bull market in fear to a bull market in WTF!? And will QE infinity differ from its previous vintages by driving risk asset volatility levels higher??

Hendry also touches on an old favorite topic, namely hyperinflation, a thesis which he thinks “needs stock prices to fall further and vol to rise in the conventional manner.”  But his most topical observation is what are the core criteria that will allow MMT – i.e., that fusion of the Fed and Treasury known as “helicopter money”…

you can print as many dollars as you damn well please, as long as the yield curve doesn’t steepen and the dollar doesn’t rally precipitously…you’re good to go and MMT is dope.

… as the alternative is game over. As usual, his stream of consciousness answers, right or wrong, are fascinating.

The full stream is reproduced below:

I have spent last few weeks reminiscing about the launch of The Eclectica Fund way back in 2002. Our principal objective back then was to secure the flexibility of a macro mandate to capture the emerging bull market in gold. The chart is not vol. adjusted but provides context.

It’s remarkable how little time i allocated to the trade. We did make 50pc in the first calendar year, 2003, but then retreated as it traded flat vs the total return from the SPX 2004/6. But I do kick myself at missing the final explosive moves to the all time high 2009/12.

I’ve had a long sabbatical. If you remember my mantra from 2005 became, “if you fear inflation, buy bonds!” The reasoning being that gold would lack an explosive pulse higher without first an economic calamnity. 2008 proved our thesis and our bond-like positioning hit jackpot.

Today however, “if you fear inflation then you should buy more gold”. It is simple. The Fed is trying to debase the $ to help the economy. Will it help? Maybe. Will it help the stock market? Probably. Will it help gold? Definitely. This is the final leg that i envisaged in 2002.

So gold’s got your back. My only grumble is that it reverts to a short volatility asset at the most inopportune moments like October 2008. Many good men, myself included, then missed the real action. So don’t underestimate the emotional energy you’re gonna need to hold onto this.

I say this because unusual things are happening and I’m saying “what if the bull market in fear has peaked and we find ourselves in a bull market of WTF!?” I traded at start of April a long Aug / Short Oct Vix. I’m small offside. But a 12pc equity rally and vol is up! WTF!?

I’m fomenting the idea that negative interest rates beget negative oil prices beget negative volatility. The causation is of course totally false but its a cute thing to say nevertheless. Let’s see if i can do better?

The probabilities are high that gold proves rewarding as long as you can carry it for the duration of the journey. If you are willing to accept lower, much lower probabilities, then maybe there are even better trades that are insanely convex and have no counterparty risk.

What I want to say is that 2 universal truths might be in the process of changing or flipping around. First, that option skew might change – deep OTM equity puts are typically 2x more expensive than their call equivalents; always have been but not ordained to stay that way. I think today’s policy response could create the opposite dynamic. Difficult trade to structure selling deep OTM SPX puts to buy 2x more calls without risking bankruptcy. Sure trade at cash SPX 1700 but naked and have to experience the nightmare of every point below 1700…no way

I traded this in Japan in 2013 Sold deep OTM Nikkei put, bought an even deeper OTM put, sold an ATM call spread and bought 15pc OTM call. Or at least I think i did. But the older vintages of QE encouraged volatility to fall, not rise, and we never burst through the inertia.

The trade was therefore before its time but I am probably one of the few risk managers anywhere with the experience of running a big options/futures book that was seeking higher equity prices and higher volatility – just ask all the Japanese vol traders that I enriched…

Second, I think the futures curve for VIX is going to trade in backwardation; that the carry from short selling future volatility versus spot to a gullible public that was only too willing to pay almost anything to protect themselves against the next deflationary event has gone.

The key questions: are we transcending from a bull market in fear to a bull market in WTF!? And will QE infinity differ from its previous vintages by driving risk asset volatility levels higher??

The key is the dollar. It is to the Fed what the punitive gold reparations of the 1920 Paris Peace Accord were to the German Reichsbank and German stock prices. Which is to say that the Fed are going to have to issue many more trillions of dollars to stop the USD moving higher.

We were wrong. All of us. It was never going to be about soulless creditors rolling over and simply enriching debtors via paying them higher and higher wages like Henry Ford. No; changes, BIG changes, in major price regimes always begin with currency debasements.

And, remember that the dollar short is ALWAYS the largest short position. Foreign mismatching of dollar asset/liabilities is always the imperative justification to devalue the dollar to bail-out the rest-of-the-world and it always sets the stage for risk asset prices to recover.

It’s just that a 35% fall from the highs of the greatest bull market ever has precipitated c. $8trillion in global fiscal response and probably 5x that in its monetary equivalent if we consider swap lines etc with not a day passing where that figure seems like an understatement. And then you look at the charts and to quote Raoul Pal, who else cause he seems omnipresent, but the blinking dollar hasn’t blinked; not an inch, its barely sold off at all…that’s downright frightening.

And so here is where it gets really cookie for I believe you can’t forecast a risk recovery that witnesses the SPX reclaim its all time high. No. If that’s your mindset you have to imagine 2x or why not 3x? The SPX at 10,000 now that is a WTF idea!?

And I’m tiring now but I just don’t see that outcome materialising unless we see another profound, I want to say debilitating, decline in the SPX below 1700. That’s why I don’t like the gold trade on its own without some kind of long vol trade to cushion if not enrich the journey.

So maybe sell dollar cross or treasury vol as these are the naval plimsoll lines of MMT: you can print as many dollars as you damn well please, as long as the yield curve doesn’t steepen and the dollar doesn’t rally precipitously…you’re good to go and MMT is dope.

So we know the critical lines, the levels that absolutely must not be crossed, they, the authorities, and us, we all know it. The Fed has to, and will do, everything in its powers to flatten the yield curve and prevent the dollar appreciating from here.

And the consequences of their actions will be to becalm volatility in these assets making them a good source to fund, in the first instance, equity volatility, as I think the hyperinflation thesis needs stock prices to fall further and vol to rise in the conventional manner.

But should this happen I would want to buy those incredibly cheap Dec 21 3000 calls and forget about funding via selling OTM puts; but I’m getting way to far ahead of myself…you see what confinement does?

Hendry concludes with some “regional” observations, including what Hendry’s “macro volatility trade at World’s End for years” has been, and which nonetheless are just as interesting:

Where are all the customers’ yachts? I got to tell you that they seem to be en-route to St Barts. No cases of the virus in over a month on the island and from my vantage point, over-looking the sea, there isn’t a day that passes without another mega yacht sailing past my house.

The island is hard, almost impossible, to reach, unless you can charter a boat or your very own private jet. But where else would you rather stay if money is no option? The island is on the same time zone as NYC and it has the holy trinity of no debt, no taxes and no crime,

And you can still finance the purchase of properties here with 20 year €uro loans fixed for less than 2%! That’s not going to last forever…St Barts has been my macro volatility trade at World’s End for years

Like my German industrialist forefathers – I have no German ancestry ! although my name is derived from the German word hug meaning heart, mind and spirit – but markets, bankers and investors are always slow to recognise a transition to higher prices caused by currency debasement/

When i was younger i read all  those stories of international investors – the smart ones – hoovering up hard, cash producing German assets, funded by bankers who severely underestimated the potential for increases in interest rates that would make their loan books worthless…

Yet here we are 100 years later and my friend, who works in a restaurant, just secured 1.35PC fixed for 20 years! These loans are sure to become worthless as the pendulum finally  swings from the creditor to the debtor community. Maybe we’re all bank robbers now…WTF!!

Still want more? Then listen to the following 12 minute podcast Hendry recorded last week, and where every sentence seems to seep with nostalgia for the Scott’s  glory investing days.

Who knows, maybe if the market remains volatile enough, Hugh will come emergy from retirement for another try?

 

 

 

Via SaraACarter.com,

Stunning documents withheld for years from former National Security Advisor Michael Flynn’s defense reveal that the retired three-star general did not commit any crimes, as suggested by Department of Justice prosecutors in former Robert Mueller’s special counsel investigation, his attorney said.

Embattled Lt. Gen. Michael Flynn has hired well known defense attorney Sidney Powell to represent him before his sentencing hearing in Washington D.C.’s federal court.

Flynn, who fired his attorney’s last week, will still fully cooperate with the government in all cases pending, Powell told SaraACarter.com.

The new evidence was turned over to Sidney Powell, Flynn’s defense lawyer, by U.S. Attorney Timothy Shea, who obtained the information after an extensive review by attorneys appointed by U.S. Attorney General William Barr to review Flynn’s case. Barr’s team included United States attorney in St. Louis, Jeff Jensen, who is handling the Flynn matter, along with prosecutors from the office of the deputy attorney general, Jeffrey A. Rosen.

The documented evidence was sent to Powell by Shea but is under court seal.

“The enclosed documents were obtained and analyzed by USA EDMO in March and April 2020 and are provided to you as a result of this ongoing review; additional documents may be forthcoming. These materials are covered by the Protective Order entered by the Court on February 21, 2018,” Shea’s letter to Powell states.

Powell, who could not discuss the exact contents of the Brady material she has now obtained but has been fighting for since taking Flynn’s case, told SaraACarter.com the material exonerates her client.

“What else has the FBI buried,” said Powell to this reporter Friday.

“Where’s the original 302? And obviously some of the good agents are finally stepping up.”

In the supplement to Flynn’s motion to dismiss his case for egregious government misconduct Powell stated Friday that “this afternoon, the government produced to Mr. Flynn stunning Brady evidence that proves Mr. Flynn’s allegations of having been deliberately set up and framed by corrupt agents at the top of the FBI.”

“It also defeats any argument that the interview of Mr. Flynn on January 24 was material to any ‘investigation.’ The government has deliberately suppressed this evidence from the inception of this prosecution—knowing there was no crime by Mr. Flynn,” she added.

According to the documents produced by the government Powell “has found further evidence of misconduct by Mr. Van Grack specifically,” referring to the DOJ prosecutor in Flynn’s case, Brandon Van Grack.

“Not only did he make baseless threats to indict Michael G. Flynn, he made a side deal not to prosecute Michael G. Flynn as a material term of the plea agreement, but he required that it be kept secret between himself and the Covington attorneys expressly to avoid the requirement of Giglio v. United States, 405 U.S. 150 (1972). Exs. 1, 2,” she states in the motion.

“Since August 2016 at the latest, partisan FBI and DOJ leaders conspired to destroy Mr. Flynn,” Powell argued to the court in the motion.

“These documents show in their own handwriting and emails that they intended either to create an offense they could prosecute or at least get him fired. Then came the incredible malfeasance of Mr. Van Grack’s and the SCO’s prosecution despite their knowledge there was no crime by Mr. Flynn.”

“All this new evidence, and the government has advised there is more to come, proves that the crimes were committed by the FBI officials and then the prosecutors,” Powell’s motion to dismiss Flynn’s case states.

“The government’s misconduct in this case is beyond shocking and reprehensible.  It mandates dismissal.”

“Furthermore, this Court should order the government immediately to provide the defense with unredacted copies of the documents we have filed under seal solely in an abundance of caution because the government produced them under the protective order, and we request that they be unsealed as provided herein as Exhibit 3,” the motion states.

Powell, who has had a long battle to obtain the evidence and is still fighting to obtain information from FBI Director Christopher Wray, who replaced fired FBI Director James Comey said, “this Court must dismiss this concocted prosecution of General Flynn in full recognition of the travesty of justice that it is.”

This story is developing…

A guerilla artist in Atlanta has been installing ‘Wuhan Plague’ plaques around the city, depicting Winnie the Pooh patting his belly while holding a bat with chopsticks – prompting cries of racism. For the uninformed, Pooh has been used to mock Chinese President Xi Jinping, who bears a striking resemblance to the fictional bear.

According to VICE, police have no leads as to who’s installing the tiel and bronze plaques which first appeared April 13 on an electrical box in Inman Park, according to the Atlanta Police.

Three days later, a second plaque appeared at a nearby coffee shop in the neighborhood of Reynoldstown – while a third appeared two days later at Atlanta’s Candler Park Market, according to the report.

Winnie the Pooh’s association with Chinese culture originated in 2013 when parody comparisons between the cuddly bear and Prime Minister Xi Jinping went viral on social media — and China then banned Pooh images.

 

The plaques appeared to be glued to the sites where they were posted.

 

Hodgepodge Coffeehouse owner Kristle Rodriguez said her employees alerted her to the plaque at her site. Rodriguez said she immediately called the cops and the building’s landlord, who quickly removed the plaque. –VICE

“The adhesive was still wet, meaning this happened late morning or early afternoon,” Rodriguez wrote in a Friday post to Facebook. “This isn’t amusing, funny, politically incorrect, edgy, or punk rock. This is super fucking gross and racist. There’s enough xenophobia and ignorance being spouted from this administration, we certainly don’t need street art reinforcing this shit.“

On Wednesday we reported that Lululemon fired its art director for sharing

an Instagram link on Sunday to a shirt created by artist Jess Sluder featuring a Chinese take-out box decorated with bat wings and the words “no thank you” on the sleeves and back.

The shirt, titled “Bat Fried Rice” was listed for sale at $60 until it was taken down. Meanwhile, Fleming’s Instagram account has since been deleted, according to USA Today.

There have been 100+ daily attacks on Asian Americans since the start of #COVID19. To see people adding to the hurt & racism hurts my heart. I hope someone picks up this story and these individuals take responsibility. I am more proud than ever to be part of the AA community. ✊🏼 pic.twitter.com/nWy9WJeMVE

— Kamauri Yeh (@yehwho) April 19, 2020

Authored by MN Gordon via EconomicPrism.com,

Billionaire investor and American folk hero Warren Buffett’s been lying low.  This is a change from the 2008-09 financial crisis.  Back then he eagerly supplied cash to Goldman Sachs and Bank of America in exchange for high interest rates and warrants.  But not now.

Instead of making deals, Buffett says he’s “…drinking a little more Coca-Cola” to ward off coronavirus.  Yet is that really all he’s doing?  Buffett admirer Bill Ackman doesn’t think so.  Ackman – who’s been aggressively buying stocks – thinks the Oracle of Omaha has a few tricks up his sleeve.  When recently asked:

“Ackman said he suspected his mentor was quietly putting his $125 billion in cash to work buying stocks.  He was keeping a low profile to make sure the stocks stayed cheap while he is buying.  ‘After he invests that $100 billion and change,’ Ackman says, ‘he’ll let everybody know.”’

Maybe so.  And good for Buffett and Ackman.  If they want to put billions of dollars into stocks right now, good on them.

Most people have bigger fish to fry at the moment than buying stocks.  They’ve lost their jobs.  Their constitutional rights have been trampled on by the authorities for their own protection.

 Hence, Howard Buffett – Warren’s dad – offers far superior insights into what’s going on…

The elder Buffett, who hasn’t been among the living for over a half-century, was a member of the U.S. House of Representatives in the 1940s and early 1950s.  He was a Republican back when Republicans had principles.  According to Howard Buffett’s wife:

“He considered only one issue when deciding whether or not to vote for a bill: ‘Will this add to, or subtract from, human liberty?”

Money and Freedom

With the exception of Thomas Massie, today’s Representatives failed to consider Howard Buffett’s one issue when they voice voted on the CARES Act.  And only a few bothered when voting on this week’s Interim Economic Stimulus Package.  Thus, with trillions of dollars in government bailouts underway, and the resultant servitude of Americans, we’ll take a moment to consider another Howard Buffett insight.

This insight is fundamental, and almost elementary in nature.  But it is lost on practically all of today’s government officials.  In his 1948 article, Human Freedom Rests on Gold Redeemable Money, Representative Buffett opened as follows:

“Is there a connection between Human Freedom and A Gold Redeemable Money?  At first glance it would seem that money belongs to the world of economics and human freedom to the political sphere.

“But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty.

“Also, when you find that Lenin declared and demonstrated that a sure way to overturn the existing social order and bring about communism was by printing press paper money, then again you are impressed with the possibility of a relationship between a gold-backed money and human freedom.”

Representative Buffett went on to connect the relationship between money and freedom; that without a redeemable currency, the individual’s freedom to sustain himself or move his property is dependent on the goodwill of politicians.  Buffett also points out that paper money systems always end in collapse and economic chaos.  And that a gold standard restricts government spending and gives people greater power over the public purse.

Since Representative Buffett’s writing, the consequences of irredeemable paper money that he warned about have become increasingly pressing.  Moreover, the CARES Act, and its massive escalation of printing press money, has finally brought us to the critical stage.

At the moment, the pressures of deflation are mounting.  Oil demand has collapsed, taking the price of oil negative.  Many businesses are toast.  Unemployment claims are off the charts, with 26 million in five weeks.  Mortgage delinquencies are piling up like cow pies at a dairy farm.  And hopes for a V-shaped recovery have vanished.

To offset these deflationary pressures the Fed’s emitting vast quantities of printing press money.  The Fed’s balance sheet is rocketing towards $10 trillion by the end of the year.  The objective is to bailout credit markets, bailout businesses, levitate the stock market, pay for unemployment checks, and whatever else, to avoid massive defaults on the U.S. economy.

Helicopter money is also being dropped on consumers.  This is prescription for massive inflation…though the timing is uncertain.

With all this money printing, and in the absence of corresponding production, deflation will at some point give way to inflation.  To understand what’s in store in the years ahead we’ll juxtapose the plight of money over the last 100 years between the U.S. and our neighbors to the south.

Pesos and Dollars

Currencies, both north and south of the Rio Grande, ain’t what they use to be.  Several generations ago they were as reliable as a rooster’s call at dawn.  Now they’re as crooked as a politician’s spine.  We know this not by reading the history books, nor by hearsay, but by the honest, verifiable, silver dollar and silver peso we’re holding in our hands.

One coin, the Peace Dollar, is a United States silver dollar minted in 1921.  At the time of its mint, one coin equaled one dollar and each dollar contained 0.77344 troy ounces of silver.  The other coin, the 1922 Un Peso, is a Mexican silver peso.  At the time of its mint, one coin equaled one peso, and each peso contained 0.3856 troy ounces of silver.

The exchange rate was real simple.  Based on their silver content, two pesos equaled one dollar.  Nowadays, both pesos and dollars are merely paper promissory notes issued by their country’s central banks.  The value of pesos and dollars are derived by their government’s track record of stewardship, the size of their country’s military, and the international currency market’s perception of their government’s ability to make payments on their debt.

Today it takes roughly 24.77 pesos to buy one dollar.  As you can see, the Mexican government has been less upright in managing its currency than the U.S. government has over the last 100 years.  More importantly, when you use silver as the measuring stick, the picture dramatically changes for both dollars and pesos.

It took about $1.29 to buy an ounce of silver in the 1920s, while today it takes about $15.17 to buy an ounce of silver.  This means silver presently costs 1,076-percent more in dollar terms than it did in the 1920s.  In pesos, however, it’s a downright disgrace.  It took 2.58 pesos to buy an ounce of silver in 1922, while today it takes 375.76 pesos to buy an ounce of silver.  Astonishingly, in peso terms, silver now costs 14,464-percent more than it did in the 1920s.

Price inflation in the U.S., while insidious, has been much more subtle than in Mexico.  Yet with the Fed’s present efforts to destroy the dollar to save the economy, there could be a swift transition from subtle price inflation to a more hyper price inflation.

No doubt, the peso will be trashed along with the dollar.  But residents of Mexico have been through this repeatedly since 1980.  Just last week, for example, Fitch downgraded Mexico’s sovereign rating to one notch above junk (i.e. BBB-).

The point is, Mexicans have a better understanding of zeros than Americans do.  Over the next several years, however, it’s likely Americans will come to understand zeros too…as the relentless forces of inflation ravage the economy.

What You Must Know About Zeros in the Years Ahead

The way zeros work when money is being destroyed by governments is the same way mold spores work on wet drywall.  They multiply.  They make an unwanted appearance at the back of all prices.

When visiting relatives in Mexico City we get to experience the proliferation of zeros first hand.  During one visit in 2004 the exchange rate was roughly 10-to-1.  You could buy 10 pesos for $1.  The conversion was real simple…just the way we like it.

We could quickly discern if the peso price was fair in terms of our well established dollar reference point.  For example, if a merchant quoted a price of 10 pesos for a can of Coca-Cola (Warren Buffett’s drink of choice), we could quickly cover up the zero on a 10 peso note with our thumb and recognize the price as being $1; generally the equivalent of what we’d pay in the USA.  And 500 pesos for a nice pair of handcrafted leather shoes was merely $50; a bargain.

This may seem irrelevant, especially with oil prices being negative.  But at some point over the next several years the U.S. economy’s going to become oversaturated with the trillions of dollars of Fed printing press money.  Deflation will give way to inflation.

At first, as prices rise, economists at the government’s statistical bureaus will mistake it for an economic boom and recovery.  By the time it’s clear that price inflation has taken hold, it will be too late to stop.  That’s when Americans will come to understand zeros…as they show up at the back of consumer prices.

Your $3 cup of coffee at Starbucks will cost $30.  The $1 can of Coca-Cola will cost $10.  The $50 pair of shoes will cost $500.  And so on and so forth.

In fact, an inflation rate of 1,000 percent is all it takes to add a single zero to the back all prices.  This may seem extreme, but it’s really not.  When inflation goes hyper, 1,000 percent is actually quite tame.

Hyperinflation in Weimar Germany reached rates of more than 30,000 percent per month in 1923.  Prices doubled every few days.  Zeros were everywhere.  But that’s nothing…

Hyperinflation in Zimbabwe from 2007 to 2009 peaked at 79 billion percent per month – that’s a lot of zeros.  And in Hungary, in 1946, daily inflation exceeded 200 percent.  This equates to an annual inflation rate of over 13 quadrillion percent; prices doubled every 15 hours.  Now that’s too many zeros to count.

And if you’re eager to have your $350,000 mortgage inflated away to a relative $35,000, we caution you to think again.  Over time your burden will be lessened.  But the initial pinch – when consumer prices jump and wage growth lags – will be brutal.

Perhaps if you can make it through the initial squeeze you’ll make out okay.  Though any benefit you garner will be overwhelmed by the chaos and social disorder the inflation wreaks.  For example, that $1 million IRA you saved up over a 40 year career would be quickly reduced to a purchasing power of $100,000.  It would be like a zero was lopped off the back of your life savings.

Indeed, Howard Buffett was right all along.  This is how zeros work when governments conspire to destroy money.

We have warned that a rash of COVID-19 outbreaks at dozens of meatpacking plants across the country has quickly transformed into a crisis. Around 150 of these facilities operate within counties where virus cases and deaths are exceptionally high.

An outbreak of the virus has been reported at many of these processing plants, resulting in the closure of at least eight major ones in the last two weeks.

Every virus-related meat processing plant closure reduces the ability of local farmers to sell their animals at the market, now is leading to herd overcapacity at farms and resulting in hundreds of thousands of hogs that are about to be culled.

We noted on Thursday (April 23) that the latest closure of processing plants has shifted at least 15% of US’ hog-slaughtering capacity offline. Farmers in Minnesota are preparing to cull upwards of 200,000 pigs by the first or second week of May.

Rick Bergmann, chair of the Canadian Pork Council, said eastern Canadian farmers are preparing to euthanize hogs that were once set for slaughter. He said farmers are running out of room to store animals.

“This is an unacceptable situation and something must be done,” Bergmann told Bloomberg.

A culling wave of hogs across North America is about to be unleashed thanks to the closure of processing plants due to virus outbreaks at specific facilities. This has weighed on spot livestock prices while wholesale prices have surged.

“Hogs are the latest commodity that’s seeing supplies potentially go to waste as farmers in the US and Canada lose money, with nowhere to sell their animals. Dairy farmers are spilling milk that can’t be sold to processors, broiler operations have been breaking eggs to reduce supplies and some fruit and vegetables are rotting in fields amid labor and distribution disruptions,” Bloomberg notes.

Even before the pandemic, and mostly because of the trade war, demand for 40-pound feeder pigs has plunged since 1Q19.

The Canadian Pork Council said farmers are losing between $21 to $35 per hog. Backlogs for hog slaughter stands at 92,000 last Friday.

Western Canadian farmers who generally sell baby pigs to US processing plants have been unable to do so this month. He said the shutdowns are creating huge backlogs for animals to move through the system.

Canadian farmers are hoping for a government bailout of at least $20 per head.

“It’s backlogging and we’re fearful the problem is going to get worse,” Bergmann said.

David Preisler, CEO at the Minnesota Pork Producers Association, said backlogs and overcapacity at farms due to processing reduction had forced some farmers to cull mature hogs.

“Farmers are starting to run out of options with what to do with market-ready pigs,” he said in a telephone interview. “There are other pigs that have been born that need to get into that barn space.”

Steve Meyer, an economist at consultant Kerns & Associates, said hog farmers don’t have extra pens and feed yards, that is why many of them are starting to cull herds. He said overcapacity is everywhere in the farming industry and resulted in the dumping of products:

“Nobody wants to do this,” Meyer said. “It’s not as easy as dumping milk on the ground like the dairy guys do. It’s not as easy as breaking eggs in a broiler operation and eight weeks later having fewer birds on the market. We have a 10 month chain from the time until the pigs hit the market.”

Food shortages could occur “two weeks from now in the retail outlets,” warned Dennis Smith, a senior account executive at Archer Financial Services.

By now, it should be obvious the evolution of the virus crisis could trigger food shortages across the country at a time when an economic depression is unfolding with 26 million people out of work in five weeks. This all means the unraveling of social fabric is ahead.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Basing one’s decisions on analogs from the past is entering a fool’s paradise of folly.

Like addicts who cannot control their cravings, financial analysts cannot stop themselves from seeking some analog situation in the past which will clarify the swirling chaos in their crystal balls. So we’ve been swamped with charts overlaying recent stock market action over 1929, 1987, 2000 and 2008–though the closest analogy is actually the Oil Shock of 1973, an exogenous shock to a weakening, fragile economy.

But the reality is there is no analogous situation in the past to the present, and so all the predictions based on past performance will be misleading. The chartists and analysts claim that all markets act on the same patterns, which are reflections of human nature, and so seeking correlations of volatility and valuation that “worked” in the past will work in 2020.

Does anyone really believe the correlations of the past decade or two are high-probability predictors of the future as the entire brittle construct of fictional capital and extremes of globalization and financialization all unravel at once?

Here are a few of the many consequential differences between all previous recessions and the current situation:

1. Households have never been so dependent on debt as a substitute for stagnating wages.

2. Real earnings (adjusted for inflation) have nevet been so stagnant for the bottom 90% for so long.

3. Corporations have never been so dependent on debt (selling bonds or taking on loans) to fund money-losing operations (see Netflix) or stock buybacks designed to saddle the company with debt service expenses to enrich insiders.

4. The stock market has never been so dependent on what amounts to fraud–stock buybacks–to push valuations higher.

5. The economy has never been so dependent on absurdly overvalued stock valuations to prop up pension funds and the spending of the top 10% who own 85% of all stocks, i.e. “the wealth effect.”

6. The economy and the stock market have never been so dependent on central bank free money for financiers and corporations, money creation for the few at the expense of the many, what amounts to an embezzlement scheme.

7. Federal statistics have never been so gamed, rigged or distorted to support a neofeudal agenda of claiming a level of wide-spread prosperity that is entirely fictitious.

8. Major sectors of the economy have never been such rackets, i.e. cartels and quasi-monopolies that use obscure pricing and manipulation of government mandates to maximize profits while the quality and quantity of the goods and services they produce declines.

9. The economy has never been in such thrall to sociopaths who have mastered the exploitation of the letter of the law while completely overturning the spirit of the law.

10. Households and companies have never been so dependent on “free money” gained from asset appreciation based on speculation, not an actual increase in productivity or value.

11. The ascendancy of self-interest as the one organizing directive in politics and finance has never been so complete, and the resulting moral rot never more pervasive.

12. The dependence on fictitious capital masquerading as “wealth” has never been greater.

13. The dependence on simulacra, simulations and false fronts to hide the decay of trust, credibility, transparency and accountability has never been so pervasive and complete.

14. The corrupt linkage of political power, media ownership, “national security” agencies and corporate power has never been so widely accepted as “normal” and “unavoidable.”

15. Primary institutions such as higher education, healthcare and national defense have never been so dysfunctional, ineffective, sclerotic, resistant to reform or costly.

16. The economy has never been so dependent on constant central bank manipulation of the stock and housing markets.

17. The economy has never been so fragile or brittle, and so dependent on convenient fictions to stave off a crash in asset valuations.

18. Never before in U.S. history have the most valuable corporations all been engaged in selling goods and services that actively reduce productivity and human happiness.

This is only a selection of a much longer list, but you get the idea. Basing one’s decisions on analogs from the past is entering a fool’s paradise of folly.

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Alarming reports from Reuters indicate food bank networks are quickly running out of staple goods as 26 million people in five weeks are out of work, broke and hungry, as an economic depression could result in social decay. 

There’s nothing complicated about our analysis, but rather common sense, as a crashed economy and high unemployment could unleash a “social bomb.” Earlier this week, the “Pennsylvania Militia” rolled up to the state capitol building in Harrisburg in a military truck, packed with men wearing bulletproof vests and wielding rifles and shotguns, demanded the state government reopen the economy after it has led to widespread unemployment. 

In the last four weeks, we have reported food banks across Pennsylvania have experienced unprecedented demand as hungry families wait in mile-long traffic jams outside of these facilities for care packages. And as we’ve explained, food banks are becoming stressed across the country. 

Hundreds of cars wait to receive food from the Greater Community Food Bank in Duquesne. Collection begins at noon. @PghFoodBank @PittsburghPG pic.twitter.com/94YFaO7dqX

— Andrew Rush (@andrewrush) March 30, 2020

Reuters reports that the El Pasoans Fighting Hunger Food Bank, located in El Paso, Texas, has started to ration certain staple goods as product shortages develop. 

“We really have no dry goods,” said Bonnie Escobar, chief development officer of El Pasoans Fighting Hunger.

The same story is being shared in New York City as more than a third of the city’s food banks have shuttered operations because of the lack of goods. San Diego, Chicago, and Houston are other cities that have reported dwindling supplies at food banks. 

Feeding America told Reuters that 1 in 7 Americans relied on food banks before the pandemic. Now demand has surged to “doubled or tripled at many organizations.” 

With food banks running out of staple goods – US farmers are culling pigs, dumping dairy products, and breaking eggs as supply chains implode amid lockdowns and economic turmoil.

“And yet farmers are destroying produce, dumping milk and culling livestock because the pandemic has upended supply chains, making it impossible for many to get crops to market. Grocery stores struggle to stock shelves because suppliers can’t adjust to the sudden shift of demand away from shuttered restaurants to retailers, which requires different packaging and distribution networks,” Reuters said.

We are dumping milk in South Florida because there is no home for it. We still have to feed and care for our cows, and our farmers are still milking cows, in hopes that we can sell that milk in the future… #stillfarming pic.twitter.com/tn4dpUBuUa

— Ben Butler (@BenLButler) April 3, 2020

Feeding America said US food banks before the pandemic relied on grocery stores for about a third of fresh food and dry goods. Nearly a quarter of meats and cheese came from government programs, and the rest were donations and purchases made by the charities. 

However, grocery stores have been donating fewer products to food banks during the pandemic as their shelves have gone bare. Rapid food inflation has not helped as well, as it costs more money for food banks to purchase goods. A Nebraska food bank is set to spend upwards of $1 million on food for April, compared to regular times of around $70,000. 

“This is not an anomaly” across the region, said Angie Grote, a spokesperson for Omaha’s Food Bank for the Heartland, which operates facilities that serve 93 counties in Nebraska and Western Iowa. 

Family counts on family! The weather will not stop us from hosting another Mobile Food Pantry. Continued thanks to the Food Bank and Mentor Nebraska for your ongoing collaboration and partnership. #OPSProud #uswe #ethicofcare #partnershipsmatter pic.twitter.com/Me9YW8Ebw7

— Lisa A. Utterback (@lautterback33) April 16, 2020

Farmers generally donate excess products to food banks. However, overwhelmed charities don’t have labor or resources to handle bulk donations. Nor “can the government act fast enough to fill the gap left by disruptions of other sources and the sudden spike in hunger,” Reuters explains. 

Agriculture Secretary Sonny Perdue told Fox Business last week that President Trump wants to start purchasing excess products from farmers to supply food banks and prevent a hunger crisis. Though the gap to fill a shortage could be too late. 

Several years ago, the Greater Chicago Food Depository extended the capacity of its cold storage after a glut in food. Now, because of the unprecedented demand from broke and hungry Americans, its freezers have been wiped clean. 

Greg Trotter, a spokesman for the Chicago food bank, said some products are unavailable to restock and could take months for delivery.

 “Food manufacturers have struggled to keep up with demand” from grocery consumers, Trotter said, “and are therefore selling less food directly to food banks.”

As food shortages develop, the San Diego Food Bank reports the number of people it fed over the last month has nearly doubled to 600,000. A similar demand surge was also reported across Fresno’s Central California Food Bank. The state’s food disruptors have seen demand collapse with restaurant closures, as the ability to deliver bulk products has come to a standstill. Food banks are not able to process bulk foods because of the lack of workers and time to repackage. 

Vehicles line up at a drive-thru emergency food distribution center set up at SDCCU Stadium in San Diego by the food bank Feeding San Diego on Saturday, April 5, 2020 #foodsecurity #coronavirus pic.twitter.com/FIg6xTRhNB

— Evan Kirstel #StayHome #RemoteWork (@evankirstel) April 10, 2020

“We don’t have the ability to unpack it and repack it in family size,” said Kym Dildine, the Central California Food Bank’s chief administrative officer.

Monica White, CEO of Food Share of Ventura County, said her food bank had to reject bulk produce due to repackaging issues. 

“It’s like asking Tesla to start building gas cars,” White said.

Some farmers in the state have resorted to destroying crops as restaurant demand has collapsed, and food banks cannot accept bulk. 

But there is a glimmer of hope, the San Diego food bank has ordered a half-million-dollar machine to repackage bulk supplies of staples. But, in the meantime, that will not cure current food shortages.

The “new normal” in an economic depression is where 40% of residents in San Diego have turned to food banks. The one thing the government can’t afford is a food shortage that triggers a bunch of hangry people with no jobs. The clock is ticking.