Category: zerohedge

Miami Mayor Francis Suarez had a phone call with Elon Musk on Friday about digging a tunnel underneath Brickell Avenue and Biscayne Boulevard to alleviate traffic. 

Following the phone call, the Miami Herald spoke with Suarez about the Musk-owned Boring Co. building a $30 million tunnel under the Brickell Avenue Bridge. He said the tech billionaire told him the tunnel could be built in six months. 

“For him, it’s not about the money, it’s about creating a solution, creating something that creates happiness and prosperity to the people,” Suarez said.

Suarez said the tunnel would only be accessible to electric vehicles because a major cost-savings of the tunnel is the lack of ventilation systems. He said the call lasted about 30 minutes. 

“I think we have a unique opportunity to create a signature project, not just for Miami, but for the world,” Suarez said in a video statement on his Twitter account. 

Just had my call w/ @elonmusk regarding @boringcompany tunnels coming to MIA

DETAILS BELOW👇🏽 pic.twitter.com/NsJFYcvGeQ

— Mayor Francis Suarez (@FrancisSuarez) February 5, 2021

Musk has also spoken with Gov. Ron DeSantis and Miami-Dade County Mayor Daniella Levine Cava about the project. 

Suarez said the next step for him is to speak with DeSantis about the idea considering Miami-Dade County transit officials have already considered building a more expensive tunnel under the city. 

Already, Boring has found success in completing a third of a mile transport tunnel beneath the Las Vegas Convention Center at the cost of $52.5 million. 

Last week, San Bernardino County Transportation Authority in Southern California approved plans to connect a train station in Rancho Cucamonga, California, to Ontario International Airport with a Boring tunnel.

… and good luck to Miami officials, who believe Musk can deliver them a tunnel under budget and in six months. Musk has been notorious for overstating promises. 

We’re still waiting for the million robotaxis Musk promised on the road by 2020. 

Authored by Brandon Smith via Birch Gold Group,

Over the years, I have written extensively about the concept of economic “decentralization” and localization, but I think these ideas are difficult for some people to visualize without proper motivation. By that I mean, it’s not enough that the current centralized model is destructive and corrupt; it has to start breaking down or show its true totalitarian colors before anyone will do anything to protect themselves.

Sadly, the majority of people tend to take action only when they have hit rock bottom.

In recent months the pandemic lockdown situation has provided a sufficient wake up call to many conservatives and moderates. We have seen the financial effects of pandemic restrictions in blue states, with hundreds of thousands of small businesses closing, tax revenues imploding and millions of people relocating to red states just to escape the oppressive environment.

Luckily, conservative regions have been smart enough to prevent self destruction by staying mostly open. In fact, red states have been vastly outperforming blue states in terms of economic recovery exactly because they refuse to submit to medical tyranny.

I outlined this dynamic in detail recently in my article Blue State Economies Will Soon Crumble – But Will They Take Red States With Them?

The data is undeniable: the states and cities that enforce lockdown mandates are dying, the states that ignore mandates are surviving. However, with a Biden presidency there is a high probability that the federal government will now seek to force compliance from all states. In other words, lockdowns will become a national issue rather than a state issue.

For now, Biden is pretending as if reopening is right around the corner, but as I have noted in the past, the Reset agenda will never allow this. A reopening, if it happens at all, will be short and lockdowns will return. We are already seeing a new narrative being introduced to the public involving “COVID mutations”, which are supposedly “more deadly” than the original COVID-19 outbreak. So, there is a brand new and useful threat and the establishment will exploit it as a rationale for more lockdowns and restrictions.

Beyond the pandemic mandates, there are also numerous Reset agenda policies that will be implemented under the Biden administration, including insane Green New Deal related executive orders and legislation claiming to reduce carbon emissions. What they will really do is annihilate resource production. Millions of jobs will be lost and entire industries will be erased unless conservatives act to stop Biden in his tracks.

This means doing far more than stalling through political maneuvers. We are going to have to use concrete strategies to retake control of resource management within the states. Pointless globalist carbon policies composed by entities like the UN have no place in American economic planning. A message needs to be sent that they will never be accepted here.

Time is running out to prepare. Lockdowns will return within a few months and this time they will be federally enforced. Conservatives must be ready to defy these orders if they have any hope of saving their local economies. This is going to take individual efforts to stock necessities and secure their finances, but ultimately wider organization is going to be needed to weather the storm.

Conservatives must establish coalitions of counties and states, and certain economic measures will have to be applied to insulate from damage. The federal government and Biden will attempt to punish red states for refusing to submit, and we need to be ready for that eventuality.

Here are some ways that conservative communities can stop the Reset agenda…

Localization

On a smaller scale, conservatives can accomplish a lot by simply changing their buying habits. If you do 80% of your retail spending with big box stores and online outlets like Amazon and only 20% at local small businesses, then try to switch that ratio. Spend 80% at local businesses and 20% at corporate outlets. Yes, small businesses tend to cost a little extra, but who do you really want your money going to? Do you want your money filling the pockets of international corporate moguls that are working to destroy your freedoms and undermine your economy? Or, do you want your cash to circulate locally?

Individuals can also start their own business from home focusing on production of necessities or necessary skill sets. They can establish a small business co-op and encourage the community to buy locally. Often, people just don’t know how many services are available from small businesses in their area, so they automatically go to big box providers. Small businesses must work together to change the dynamic.

This strategy also extends to local farms. Consumers and grocery stores need to buy more of their produce from farms in the area and less from chains which ship in produce from other countries. There are millions of acres of farmland in the U.S. that do not grow food at all because these farms are paid by the federal government not to. Encouraging local food production is paramount to remaining free from centralized control.

Organized Refusal To Comply

The problem with conservatives is that we tend to be so independent that we avoid organization. This is a problem because it leads to self-isolation. During the pandemic lockdowns in blue states, some conservative-owned businesses refused to comply, but they were left mostly to fend for themselves with no aid from the wider community. If more businesses were to ally with each other and protested in tandem, dozens or hundreds of defiant businesses working together would be a lot harder to shut down than just a few.

By extension, it’s not enough for conservatives to merely argue against the lockdowns and demand businesses stay open, we need to also defend those businesses that take action. We need to support them with our dollars and stand in the way of anyone trying to close them down. They are taking a big risk for us, so we need to be willing to take risks for them.

Imagine if Biden tried to assert a national lockdown order and more than half the businesses in the country ignored him? What if patrons refused to allow federal agencies to intimidate those businesses? The lockdowns would be nullified, and Biden would have little recourse.

Establish Barter Networks

In the event that the U.S. economy breaks down completely, we must create contingencies to prevent total trade disruption. Without trade, populations become desperate because no one has the ability to provide every necessity all the time. People have to be able to barter goods and services in an open market.

Barter networks are a base fundamental, the universal go-to solution during economic collapse. Every society in modern history has used barter markets to stay afloat during financial crisis and to bypass government economic controls. We must be willing to do the same.

Conservatives must start organizing barter networks within their communities now. It does not matter if you are trading with a couple of people or hundreds; the process needs to start somewhere.

Why is this so important? Because there is a very good chance that the federal government will try to fiscally punish any state or county that opposes lockdown measures and Reset policies. This means that the government will first seek to cut off federal funding to red states. In the midst of economic crisis, many regions have become reliant on federal stimulus as a crutch, and this dependency makes them vulnerable to control.

To truly rebel against the Reset, local economies need to be free from federal oversight or consequences. With barter networks in place along with possible local scrip and alternative currencies, the public will be less fearful of economic retaliation.

Take Back Management Of Local Resources

We have already seen attempts by Biden to disrupt production of carbon based energy resources like oil and coal. Frankly, the time is long past due for states and counties to take back control of federal lands. The government has been stifling American production for decades and this has hurt rural communities in particular.

In my area, the EPA has essentially destroyed the timber harvesting industry through unfair regulations. This has led to federal mismanagement of forests to the point that fire hazard has become a major issue. All the young men in the county used work as lumberjacks to support their families; now they have to leave, or work as wildland firefighters. It’s completely backwards. And this is happening while U.S. lumber prices are skyrocketing.

Conservative counties and states need to take back land and resource management and allow reasonable production to return. Biden should have no say in whether or not oil wells in North Dakota stay operational, or coal mines in West Virginia stay open, or trees Montana are selectively harvested. As long as the bulk of wealth from the resource production stays within the state where the resources were harvested, I see no downside to this kind of response.

If the federal government tries to retaliate by cutting off federal funds, it won’t matter because the states will be producing jobs and wealth for themselves independently.

Immunity From Cancel Culture

In our current political environment, it is becoming a fact of life that the hard left can and will try to harm people that oppose their ideology. Big tech companies and government are helping them to do this. Now more than ever, conservatives that wish to remain free to voice their views and share facts that are contrary to the leftist narrative must seek protection from cancellation. But how do we do this?

For one, we can work for ourselves. Being self employed means never having to worry about being fired because of your political opinions. Or, conservatives need to work for conservatives. This means conservative companies need to focus on hiring conservative employees, and if the leftist mob tries to attack an individual, those companies can easily ignore them. Of course, this also means that conservative consumers need to start making a list of conservative companies that have proven themselves to be immune to leftist pressure. We need to support these companies.

Conservatives should also look into the possibility of campaigns to build more platform alternatives to Big Tech and social media. We need more web service providers that are owned by people who respect free speech rights. We may even need our own internet.

All of these things are possible, but it takes organization and effort. Conservative communities can become safe havens for civil liberties, but this means we cannot be isolated from each other anymore. We have to be connected by more than our principles, we must also be connected through actions.

*  *  *

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Super Bowl LV ticket prices have plunged in the last couple of weeks in the wake of the COVID-19 pandemic.

As of Friday, TicketIQ’s pricing data shows the average price for a Super Bowl ticket is $5,290, down 55% since the peak on Jan. 24. 

Compared with the last ten Super Bowls, the average $5,290 per ticket is still superior to any other, besides Super Bowl LIV. 

• Super Bowl LIV: Kansas City Chiefs vs. San Francisco 49ers (Miami) – $6,621

• Super Bowl LIII: New England Patriots vs. Los Angeles Rams (Atlanta) – $4,331

• Super Bowl LII: Philadelphia Eagles vs. New England Patriots (Minneapolis) – $4,788

• Super Bowl LI: New England Patriots vs. Atlanta Falcons (Houston) – $3,967

• Super Bowl 50: Carolina Panthers vs. Denver Broncos (Santa Clara) – $4,252

• Super Bowl XLIV: Seattle Seahawks vs. New England Patriots (Glendale) – $4,222

• Super Bowl XLVIII: Seattle Seahawks vs. Denver Broncos (New Jersey) – $2,516

• Super Bowl XLVII: Baltimore Ravens vs. San Francisco 49ers (New Orleans) – $2,524

• Super Bowl XLVI: New York Giants vs. New England Patriots (Indianapolis) – $3,040

• Super Bowl XLV: Green Bay Packers vs. Pittsburgh Steelers (Arlington) – $3,074

StubHub spokesperson Mike Silveira told CBS Sports, “as the event draws closer, we often see prices level off as the market more appropriately sets itself based on demand and inventory.” 

Some local health experts believe Super Bowl LV could be a super spreader event despite strict virus measures, such as health screenings, temperature checks, mask requirements, and social distancing on stadium grounds. 

While experts fret over the stadium being a super spreader event, a more significant concern is the parties and gatherings not tied to stadium events at bars, restaurants, and house parties around the country. 

Authored by Dave DeCamp via AntiWar.com,

The Biden administration notified Congress that it will remove Yemen’s Houthis from the US government’s list of foreign terrorist organizations, a designation made in the last days of the Trump administration.

“We have formally notified Congress of the Secretary’s intent to revoke these designations,” a State Department official said in a statement. “Our action is due entirely to the humanitarian consequences of this last-minute designation from the prior administration, which the United Nations and humanitarian organizations have since made clear would accelerate the world’s worst humanitarian crisis.”

Due to the US-backed Saudi-led war in Yemen that has been raging since 2015, about 80 percent of Yemenis are reliant on aid, and mass starvation has been ongoing in the country for years. The terror designation means anyone who does business with the Houthis could be targeted by US sanctions.

It essentially criminalizes the delivery of aid and other goods to Houthi-controlled areas, where most of the population lives.

After the Trump administration announced the designation, the UN predicted that it would cause a massive famine, the likes of which the world hasn’t seen in “40 years.” The Biden administration initially granted a temporary waiver for people to do business with the Houthis, but the UN said that was not enough and still called for the full reversal of the designation.

The reversal comes after President Biden announced that he will end US support for Saudi Arabia’s “offensive” operations in Yemen. While it was framed to leave wiggle room for the US to support the Saudis militarily in other ways, the administration seems serious about ending the conflict.

Biden also announced that he appointed Timothy Lenderking as the US special envoy to Yemen. Lenderking is a veteran diplomat who will work to end the fighting between the Saudis and the Houthis.

Crescat’s Tavi Costa points out something remarkable which many may have missed amid the short squeeze and “growth” stock frenzy: oil, that “value” age relic, has had its best YTD performance in 30 years. As Costa puts it “commodities are leading the way and the inflationary thesis keeps building up” (incidentally none of this is lost on those long XOM which is not only the most levered – for better or worse – way to bet on rising oil prices but pays a generous 7%+ dividend while waiting for Warren Buffett to announce that he has amassed a 10% stake).

Oil.
 
Best YTD performance in 30 years.
 
Stunning how no one is talking about this.
 
Commodities are leading the way and the inflationary thesis keeps building up. pic.twitter.com/SWnX1gdjgV

— Otavio (Tavi) Costa (@TaviCosta) February 6, 2021

In any case, those following the reflation theme better pay attention, because with crude oil prices joining their commodity cousins in repairing the pandemic damage, inflation rumblings are getting a little louder which means that the day central banks may be forced to tighten financial conditions (perish the thought) is nearing once again.

Of course, with every major developed economy still printing headline and core inflation below 2%, this is not today’s problem, but there is a reason for that: metrics such as CPI and PCE are politically convenient measures that strip away virtually all basket components whose prices are surging to give central banks leeway to pursue politically acceptable policies of reflating all assets (until the bubble bursts, but by then that will be some other politician’s problem).

Still, as BMO’s Doug Porter shows, the year-over-year rise in a basket of commodity prices (and they mostly all show a similar pattern) is now a bit above 25%. This is a problem because in the past 20 years, that’s been consistent with headline inflation of just under 4%… or rather, it would be a problem if government headline inflation data actually reflected the reality of prices.

That said, Porter notes some caveats and cautions that some of the biggest misses (where commodities popped and inflation didn’t) were immediately after recessions. That’s because there is still so much slack in the economy that cost increases don’t get fully passed along. (Note especially 2010/11.)

Still, as the BMO strategist concludes, “barring a fast fall in resource prices, it looks like the days of sub-1% inflation are rapidly drawing to a close.“

Authored by Jonathan Turley,

Over the last four years, we have seen an alarming trend of law professors and legal experts discarding constitutional and due process commitments to support theories for the prosecution or impeachment of Donald Trump or his family.  Legal experts who long defended criminal defense rights have suddenly become advocates of the most sweeping interpretations of criminal or constitutional provisions while discarding basic due process  and fairness concerns.   Even theories that have been clearly rejected by the Supreme Court have been claimed to be valid in columns. No principle seems inviolate when it stands in the way of a Trump prosecution.

Yet, the statement of House manager Rep. Jamie Raskin, D-Md., this week was breathtaking.

A former law professor, Raskin declared that the decision of Trump not to testify in the Senate could be cited or used by House managers as an inference of his guilt — a statement that contradicts not just our constitutional principles but centuries of legal writing.

Presidents have historically not testified at impeachment trials.  One reason is that, until now, only sitting presidents have been impeached and presidents balked at the prospect of being examined as head of the Executive Branch by the Legislative Branch. Moreover, it was likely viewed as undignified and frankly too risky.  Indeed, most defense attorneys routinely discourage their clients from testifying in actual criminal cases because the risks outweigh any benefits. Finally, Trump is arguing that this trial is unconstitutional and thus he would be even less likely to depart from tradition and appear as a witness.

Despite the historical precedent for presidents not testifying, Raskin made an extraordinary and chilling declaration on behalf of the House of Representatives.  He wrote in a letter to Trump that:

“If you decline this invitation, we reserve any and all rights, including the right to establish at trial that your refusal to testify supports a strong adverse inference regarding your actions (and inaction) on January 6, 2021.”

Raskin justified his position by noting that Trump “denied many factual allegations set forth in the article of impeachment.” Thus, he insisted Trump needed to testify or his silence is evidence of guilt. Under this theory, any response other than conceding the allegations would trigger this response and allow the House to use the silence of the accused as an inference of guilt.

The statement conflicts with one of the most precious and revered principles in American law that a refusal to testify should not be used against an accused party.

The statement also highlighted the fact that the House has done nothing to lock in testimony of those who could shed light on Trump’s intent.  After using a “snap impeachment,” the House let weeks pass without any effort to call any of the roughly dozen witnesses who could testify on Trump’s statements and conduct in the White House. Many of those witnesses have already given public interviews.

Of course, the relative passivity of the House simply shows a lack of effort to actually win this case.  The Raskin statement is far more disturbing. The Fifth Amendment embodies this touchstone of American law in declaring that “[n]o person . . . shall be compelled in any criminal case to be a witness against himself.”  It was a rejection of the type of abuses associated with the infamous Star Chamber in Great Britain. As the Supreme Court declared in 1964, it is the embodiment of “many of our fundamental values and most noble aspirations.”  Murphy v. Waterfront Commission, 378 U.S. 52, 55 (1964).

Central to this right is the added protection that the silence of an accused cannot be used against him in the way suggested by Raskin. There was a time when members of Congress not only respected this rule but fought to amplify it. For example, in 1878, Congress was enacting a law that addressed testimonial rights but expressly stated that the failure of an accused to request to testify “shall not create any presumption against him.”

The Supreme Court has been adamant that the type of inference sought by Raskin is abhorrent and abusive in courts of law. In Griffin v. California, 380 U.S. 609 (1964), the Court reviewed a California rule of evidence which permitted adverse comment on a defendant’s failure to testify.  The California rule sounded strikingly like Raskin’s position and mandated that a defendant’s “failure to explain or to deny by his testimony any evidence or facts in the case against him may be commented upon by the court and by counsel, and may be considered by the court or the jury.”  The Court rejected such references or reliance by prosecutors as unconstitutional.

Later in Carter v. Kentucky, the Supreme Court held that “the privilege to remain silent is of a very different order of importance . ..from the ‘mere etiquette of trials and …the formalities and minutiae of procedure.’” It goes to the most fundamental principles of justice in our legal system.

In the past, when such concerns have been raised, members and pundits have reached for the “anything goes” theory of impeachment. Such principles are dismissed as relevant in the purely “political” process of impeachment. I have long rejected this view. This is not a political exercise. It is a constitutional exercise. These senators do not take the take to act as politicians but to act as constitutional actors in compliance with the standards and procedures laid out for impeachments. It would make this process a mockery if, in claiming to uphold constitutional values, members like Raskin destroy the very foundations of constitutional rights.

Yet, Harvard Professor Laurence Tribe (who has routinely favored any interpretation that disfavors Trump) declared Raskin correct promising to use a decision not to testify as evidence of guilt: “If Mr. Trump declines the chance to clear his name by showing up and explaining under oath why his conduct on January 6 didn’t make him responsible for the lethal insurrection that day, it’ll be on him. He can’t have it both ways.” No, it is on us. The House cannot have it both ways in declaring that it is upholding constitutional values while gutting them.

It is true that this is not a criminal trial. It is a constitutional trial. As such, the Senate should try an accused according to our highest traditions and values.  That includes respecting the right to remain silent and not to have “inferences” drawn from the fact that (like prior presidents) Trump will not be present at the trial or give testimony.

This is not the first time that reason has been left a stranger in our age of rage. There appears no price too great to pay to impeach or prosecute Trump. Now, the House is arguing against one of the very touchstones of our constitutional system and legal experts are silent.  If everything is now politics, this trial is little more than a raw partisanship cloaked in constitutional pretense.

More than 100 hundred inmates overpowered correction officers at the City Justice Center in downtown St. Louis early Saturday morning. They gained control of one section of the jail for hours. 

About 115 detainees commandeered the fourth floor of the jail around 0230 ET, sparking fires, smashing windows, clogging toilets, and flooding floors, according to the St. Louis Post-Dispatch. It was the third disturbance at the prison in recent months.

Law enforcement officers regained control of the jail around 1030 ET, Jacob Long, spokesman for Mayor Lyda Krewson, told the St. Louis Post-Dispatch, adding that all inmates are back in custody. 

Jimmie Edwards, the city’s Department of Public Safety director, told reporters that one corrections office was injured and taken to a local hospital after a melee with inmates. 

Edwards said there’s been an ongoing issue with the prison’s locks. Though he didn’t mention if the faulty locks were the trigger of today’s chaos. 

Long said 115 detainees on the fourth-floor set fires, smashed windows, flooded floors, and clogged toilets. Around 0630 ET, inmates shattered windows to the building’s exterior – many of them could be seen with orange and yellow jumpsuits holding signs. 

More scenes of the chaos. 

Doyle Murphy, an editor of local newspaper Riverfront Times, captured video of the prisoners throwing items out broken windows in front of the jail. He said, “Inmates at St. Louis Justice Center have taken over at least part of the jail. There have been protests over COVID-19 dangers inside. Not sure if this is part of that.” 

Inmates at St. Louis Justice Center have taken over at least part of the jail. There have been protests over COVID-19 dangers inside. Not sure if this is part of that. pic.twitter.com/roSCtkIHSK

— Doyle Murphy (@DoyleMurphy) February 6, 2021

Long said the situation was a “very dangerous disturbance” but has since been resolved. At the time of the riot, there were 633 people in custody at the jail. 

The Marshall Project examines COVID-19 infections in state and federal prisons in a separate report. Between Nov. 10 and Dec. 22, there was a noticeable rise in infections at jails. 

This is the third riot at the facility in a matter of months as inmates “had expressed concern about unsafe conditions amid the coronavirus pandemic,” said St. Louis Post-Dispatch.

One week ago, when traders were still enthralled by the ongoing marketwide short squeeze, which started off as an isolate reddit attempt to (successfully) punish GME shorts such as Melvin Capital, and which cascaded into a widespread liquidation of most popular names as a wave of VaR shocks hit countless hedge funds which had no choice but to rapidly degross and puke their most profitable positions as their shorts spiked, leading to the biggest alpha drawdown in history…

… we summarized recent events in a simple and succicnt fashion: “What it all boils down to: the market has been broken since 2009, but broken in moderation and everyone is happy, the rich get richer, etc. But if someone (WSB, whoever) take this breakage to its absurd extreme (where stock prices no longer reflect anything), everything breaks”

What it all boils down to: the market has been broken since 2009, but broken in moderation and everyone is happy, the rich get richer, etc.

But if someone (WSB, whoever) take this breakage to its absurd extreme (where stock prices no longer reflect anything), everything breaks

— zerohedge (@zerohedge) January 31, 2021

And for a few seconds… everything did break, and only the rapid intervention of regulators/DTCC forcing Robinhood to effectively shutdown trading is what gave the system on full tilt the critical time it needed to take a breath force a reset and reverse the momentum.

Now, in a post-mortem to recent events, Goldman – which last week warned that if the squeeze isn’t halted, the consequences for market could be dire – wrote a somewhat lengthier take on what happened but its conclusion is similar: the price formation mechanism – and the fundamental investing process itself – broke when millions of retail investors (and a handful of very wily hedge fund investors) plowed into a the most shorted stocks, leading to an unprecedented disconnect between price and value.

It certainly explains why Goldman’s David Kostin starts off with what may well be the best quote to describe recent events:

More than a century ago and written in a completely different context, Oscar Wilde, the Irish playwright, penned a perfect description of the social psychology underpinning a short squeeze. In Lady Windermere’s Fan, one character asks, “What is a cynic?” The friend responds, “A man who knows the price of everything, and the value of nothing.” The dialogue continues, and the original inquirer states, “And a sentimentalist is a man who sees an absurd value in everything, and doesn’t know the market price of a single thing.”

Needless to say, a lot of cynics and sentimentalists were unleashed in the past two weeks.

As Kostin recaps recent events, “every financial market participant knows the recent sequence of events. An extraordinarily high short interest position in a few small cap stocks, most prominently GameStop (GME), was stampeded by a group of social media inspired retail investors. A flurry of odd-lot cash orders and out-of-the-money call options supercharged the stock price and forced short-covering at higher and higher share prices. The situation was compounded because the retail buy orders were placed with broker-dealers which suspended processing trade orders in order to meet the minimum capital requirements of the Depository Trust & Clearing Corp (DTCC). This sequence of events happened within just a few days and caused an epic short squeeze. Billions of dollars were made and lost as share prices rocketed higher and then collapsed within the span of a week.”

But so what: it’s not like this was the first time something like this happened: after all back in Sept 2008 when the world was crashing, a similar short squeeze made Volkswagen the world’s most valuable company… if only for a few hours.

Well, it appears this time was different because unlike back then, the current squeeze happened in a context where virtually everyone was forced to reasses the core principle and tenets of capital markets, or as Kostin poetically puts it:

The market implications of the stock price swings are both very significant and completely inconsequential.

Expounding on this claim, the Goldman chief market strategist says that “those two assessments are not in conflict.” Laying out the case first for why the marketwide short squeeze was a tempest in a teapot, to use the parlance of Jamie Dimon, Kostin says that while what happened was although certainly dramatic, “the wild price action of a few small-cap stocks was dwarfed by the rest of the companies in the market both in terms of scale of business activity and equity capitalization. Corporate fundamentals have been much stronger than expected. During the past month, upward estimate revisions for full-year 2021 EPS have occurred across all 11 sectors. Last week, S&P 500 fell by 3.6% from a then-record high. This week, it rebounded to establish a new high and is up 3% YTD.”

Ok fine, but good luck telling Melvin Capital (or Ken Griffin, or Steve Cohen for that matter) that what happened was “completely inconsequential.” They are more likely to focus on the “yes but” part of Kostin’s assessment, namely that… 

The disorderly sequence of events has implications for market structure and oversight. The House Financial Services Committee has scheduled hearings on February 18th to explore recent market volatility in a session titled: “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.” Topics likely to be addressed include payment for order flow, capitalization of broker-dealers, rejection of customer trade orders, trade settlement, mechanics of price-vs. liquidity-driven short-covering, and the gamification of retail investing.

Going back to the actual squeeze, Goldman writes that several aspects of the trading in GME shares are worth noting.

First, from a positioning perspective, for more than a year the short interest in GME exceeded 100% of the float of the company, and it reached 140% in January, a “situation which is highly unusual” because during the last 10 years, Goldman has found only 15 instances when the short interest outstanding exceeded 100% of a company’s float, and as the bank explains, perhaps for the cheap seats, “extremely elevated short interest is a pre-condition if a major short squeeze is going to occur” (we wonder if Goldman, or WSB for that matter, has ever looked at the short interest in the XRT ETF)

Second, and going back to the quote above, Kostin notes that “the acerbic lines from Wilde’s 1892 play perfectly capture the situation: The entire episode was all about price, and nothing about valuation” as “social media commentary typically referenced price action with lofty targets sometimes illustrated with rocket ship emojis. We almost never read a comment about valuation because the rally implied an astronomical P/E multiple.” Great point David – now maybe you can extrapolate a little beyond what you just said, and tell your clients some more about how the trillions in liquidity sloshing around market have made price and valuations so disonnected even you are forced to only showing the hilariously wrong Fed model as the only justification to keep buying stonks so they can hit your year-end price target of 4,300. Yeah, didn’t think so…

Still, that didn’t stop the Goldman strategist from decomposing Oscar Wilde’s quote into its components as they applied to GME:

• The price of everything. GME shares traded at an average price of $13.50 during 2018. The stock then fell sharply and between mid-2019 and mid-2020 (a period stretching from well before through the bottom of the Covidcrisis) the stock traded sideways at $5 per share. A 4Q rally pushed the shares to $19 at year-end. The explosion in stock price since the start of 2021 has been breathtaking. On Jan 13th the stock hit $30, rose to $40 the next day, and had jumped to $65 by Jan 22. The progression during the five days from Jan 25 to Jan 29 was epic: $77, $148, $348, $193, and the stock ended the month at $325, up 1,600% since the start of the year. However, this week the shares have plunged by 80% to $64.

• The value of nothing. Long before the pandemic, revenues for GME fell by 22% from 2018 to 2019 followed by an additional 20% drop last year. The plunge in earnings has been even more dramatic. In 2019 –pre-pandemic –EPS fell by 92%. In 2020, GME posted a loss (-$2.18) and analysts expect a loss in 2021 (-$0.17). Consensus projects GME will return to profitability in 2022. However, the forecast EPS in 2022 (+$1.35) is only half the realized EPS in 2018 (+$2.70) back when the shares traded at an average price of $13.50 (low of $11; high of $17) (see Exhibit 3).

Next, the Goldman chief strategist stubbornly keeps trying to make the point that what happened was an aberration of efficient markets and a “completely inconsequential” impossibility from a fundamental standpoint, as if anyone would even dream of arguing that GME would ever trade above $500 on its own merits…

The absurdity of the January spike in GME share price becomes readily apparent when viewed through the lens of implied valuation. The implied P/E on projected 2022 EPS two years into the future soared from 14x at year-end 2020 to more than 250x at the peak on Jan 27, before retreating to the current P/E of 42x. For context, the shares of Tesla (TSLA), a stock that has both skeptics and cheerleaders around its valuation, but is widely viewed to have strong growth prospects –consensus forecasts a doubling in sales and a quadrupling of EPS between 2020 and 2022 –trades at 140x expected 2022 EPS following its stunning 780% rise last year (just half the percentage gain in GME shares in January 2021). The more mundane S&P 500 index trades at 20x our 2022E EPS of $196.

… without even for a second stopping to consider that it was the Federal Reserve that made this peak absurdity possible. Why? Because in a market where virtually all valuations are in their 100% percentile…

… and where the thread between price and value is barely present across most “serious” companies which are trading at 100x or even 1000x of future earnings and revenues, all the GME daytrading public did was to sever any pretense of linkages between fundamentals and prices and as a result, quickly took prices to their absurd extreme which in the case of GME meant $513.12 per share early in the morning of Thursday, January 28…

Democratic Sen. Mark Warner (VA) is set to introduce a bill which would make it easier for social media users to sue tech giants for failing to police posts, photos and videos which threaten abuse, discrimination, harassment, the loss of life or other irreparable harm, according to the Washington Post.

Warner’s bill is the latest attack on Section 230, a decades-old federal rule which shields social media companies from liability over what their users post as long as they don’t act as publishers – an angle Republican lawmakers have used to claim no longer applies due to editorial discrimination and censorship of conservatives.

Democrats, meanwhile, say Section 230 allows tech companies to skirt responsibility for policing hate speech, election disinformation and other ‘dangerous content’ according to the report.

Yet, while Republicans seek to strip tech giants of their Section 230 protections, Warner’s bill maintains its core provisions – and would instead open an “easier legal pathway” for users to sue over failures to police content that they claim caused personal harm.

“How can we continue to give this get-out-of-jail card to these platforms that constantly do nothing to address the foreseeable, obvious and repeated misuse of their products and services to cause harm? That was kind of our operating premise,” said Warner.

Ultimately, it would be up to a judge to decide the merits of these claims; the bill mostly opens the door for Web users to argue their cases without running as much risk of having them dismissed early. Facebook, Google, Twitter and other social media sites stand to lose these highly coveted federal protections under Warner’s bill only in the case of abusive paid content, such as online advertisements, that seek to defraud or scam customers.

“You shouldn’t get immunity from this advertising content that’s providing you revenue,” said Warner, who is introducing the measure along with Democratic Sens. Amy Klobuchar (Minn.) and Mazie Hirono (Hawaii). –Washington Post

Warner’s bill comes after a mob of mostly Trump-supporters ‘stormed’ the US Capitol on Jan. 6 to protest the counting of the Electoral College votes for Joe Biden – many of whom coordinated over social media. And as WaPo frames it, the ordeal raises questions “about the extent to which Facebook, Google and Twitter, and a vast web of lesser-known forums, are properly policing their sites and services.”

“I’m going to be very interested to see how the industry reacts to this,” said Warner in an interview this week previewing his bill. “It’s going to be where the rubber hits the road. Are they going to pay lip service to reform?”

“If there are going to be victims of platform-enabled human rights violations,” said Warner, adding “that should not be thrown out of court.”

According to David Brody, a senior fellow for privacy and technology at the Lawyers’ Committee for Civil Rights Under Law, “This bill would make irresponsible big tech companies accountable for the digital pollution they knowingly and willfully produce, while continuing to protect free speech online.”

More than a year after the coronavirus arrived in the United States, American are “starting to understand the importance of balance again,” Mike Rowe told “The Story” Friday.

Fox News’ Michael Quinlan reports on the ‘Dirty Jobs’ host’s reality check for all Americans:

“Several months ago, New York Gov. Andrew Cuomo said no measure, no matter how draconian, could be deemed unwise if it saves but a single life,” the “Six Degrees with Mike Rowe” host told Martha MacCallum.

“I got a lot of flak when he said that, because I said, ‘That is a safety-first way of thinking’, and deep down we’re not a safety-first society.”

“Now we’re starting to see the price of safety is devastating,” Rowe added. 

“What is happening right now in the energy industry is really the thing that I think we ought to be focused on, because there feels to me, and feels to a lot of people I talk to on a day-to-day basis, like a concerted effort to wage a kind of war against energy. It’s not a war we can win, especially with regard to fossil fuels and all of the jobs that are wrapped up in that industry. I don’t mean to sound like an apologist, but I know of no greater investor in alternative energy than the fossil fuel industry.” 

MacCallum brought the discussion back to the issue of safety, saying, “We’re a country that was built on risk-taking. We want to take wise risks, we don’t want to be reckless, but that element of being strong and fighting through is something that I think is such an American value.

“Risk is the only four-letter word that matters,” Rowe agreed.

 “It impacts and informs every decision we make, from driving a car to walking around without a mask or wearing one mask or two masks.”

“We’re starting to see,” Rowe concluded, “if you elevate the business of staying alive to the very, very top of all things, then the only thing you’ll ever do is stay alive. You won’t go anywhere. You won’t try anything or build anything.”

Watch the entire interview below: