Category: zerohedge

It looks like the United States Post Office is getting in the business of voting.

It has recently been unearthed that he USPS filed for a patent on February 7, 2020 for a “Secure Voting System” that uses a blockchain access layer. Obviously, this could be one of the strongest signals of a welcome adaptation to blockchain by the U.S. government since blockchain was thrust on the map by Bitcoin.

“A voting system can use the security of blockchain and the mail to provide a reliable voting system,” the patent application says. “A registered voter receives a computer readable code in the mail and confirms identity and confirms correct ballot information in an election. The system separates voter identification and votes to ensure vote anonymity, and stores votes on a distributed ledger in a blockchain.”

The “United States Postal Service” is listed as the applicant on the application.

“Voters generally wish to be able to vote for elected officials or on other issues in a manner that is convenient and secure,” the application says. “Further, those holding elections wish to be able to ensure that election results have not been tampered with and that the results actually correspond to the votes that were cast. In some embodiments, a blockchain allows the tracking of the various types of necessary data in a way that is secure and allows others to easily confirm that data has not been altered.”

Equally as interesting as the patent itself is the fact that the application was filed before the coronavirus had wreaked total havoc on the country and long before the idea of mail in voting was being tossed around by pundits and the mainstream media on the daily. 

Brian Roemmele pointed the discovery out on Twitter:

Boom!

The US Postal Service just filed this new patent:

“SECURE VOTING SYSTEM”

It uses Blockchain of course but also the prospects of:#Bitcoin

Read this deeply, it says a lot about a lot of things ahead.

This is past “politics”—report to clients. https://t.co/pl482rq4bn pic.twitter.com/zYs07YEAsQ

— Brian Roemmele (@BrianRoemmele) August 14, 2020

Submitted by Joe Carson, former chief economist of AllianceBernstein

Retail sales hit new record highs in June and again in July. Record retail sales reflect a new normal in consumer spending patterns. Bans and restrictions emanating from the pandemic have boosted retail sales while curtailing spending on consumer services.

That’s the exact opposite of the typical sales pattern during a recession. Pent-up demand and fiscal stimulus also played a role.

Here are a few observations on retail sales:

• First, the initial report is based on a sample of 5,500 employer firms. Large retail employer firms have many retail establishments, but the initial reports still represent a small portion of the sales from 3-plus million retail establishments. That’s not to say the latest reports on retail sales are wrong. But in the current environment, it’s probably safe to assume the retail survivors and winners dominate the early reporting. Only when there is a more complete tally of store sales is it possible to properly assess the overall retail sales performance, as well as the sales trends at different retail establishments.
• Second, some of the recent sales reflect pent up demand from the closure of the economy for 6 weeks from late March to early May. At one point during the closure, sales at clothing, sporting goods, and furnishing and appliance stores fell to the lowest levels since the Census monthly sales report began in 1992.  So as the economy re-opened sales that would have taken place over of several months were bunched into a few months, making June and July sales appear exceptionally strong.
• Third, bans and restrictions emanating from the pandemic have directly and indirectly helped to boost retail sales, especially over the past few months. Unable to travel overseas or attend spectator events have compelled people to redirect their travel spending to their local community and entertainment budgets to their “home”. A record level of sales at electronic and appliance stores and home remodeling and building stores offer strong evidence that this shift in spending is occurring. How much of this has occurred or is still to come is hard to say. But it does involve a lot of money. In 2019, consumers spent $63 billion on passenger fare foreign travel, $100 billion on food, lodging and other items outside the US, and $80 billion on spectator events.
• Fourth, Federal stimulus payments also played a key role. That’s because the record $3 trillion in federal stimulus payments that flowed to people in Q2 is equivalent to the total dollars spent at retail establishments for the past 6 months combined. Failure by Congress to extend stimulus payments will hurt retail sales even as other factors continue to offer support.

The pandemic-driven consumer spending recession is atypical. In a typical recession, consumer spending on goods (retail sales) bears the brunt of the decline, while spending on consumer services often posts modest gains. But sales patterns have flipped flop in the current downturn.

In Q2, for example, consumer spending on consumer services contracted at an annualized rate of 43.5%, 4X times the 11.3% annualized decline in goods. That unusual sales pattern continues in Q3 with sales of goods improving while spending on services remains severely depressed. Spending on services accounts for 70% of total consumer spending. A full consumer spending recovery is still far off into the future.

Trump’s “secure the oil” policy in Syria is set to get increasingly costly as tensions rise and more such confrontations inevitably occur: on Monday US occupying forces and the Syrian Army exchanged fire in a rare direct clash, reportedly ending in casualties on the Syrian government side.

It happened in northeast Hasakah province just southeast of Qamishili, in an area where for the past couple years American special forces have bolstered Kurdish-led Syrian Democratic Forces (SDF). The Associated Press writes of the rare but not without precedent deadly encounter:

U.S. forces clashed with Syrian troops in the northeast on Monday, killing at least one soldier and wounding two others, state media said, while the U.S. military said it responded to small arms fire near a Syrian checkpoint.

It appears to have all started when a US military convoy approached a Syrian national checkpoint manned by soldiers. 

Like with some prior confrontations, the Syrian soldiers refused to let the Americans through, given Damascus sees them as illegal occupiers of their sovereign soil. This was similar to incident last month where bloodshed was barely avoided, and US armored vehicles were forced to turn around.

In that prior instance pro-government forces threatened to fire on the Americans.

RT Arabic was the first to publish video from the confrontation on Monday. Gunfire can be heard erupting, with spoke billowing from the government checkpoint:

But in this instance, it appears firepower was unleashed. A US helicopter was also reportedly part of the response, according to state-run SANA. AP continues:

State news agency SANA quoted an unnamed Syrian military official as saying a U.S. helicopter gunship attacked an army checkpoint in the village of Tal Dahab, near the town of Qamishli, at around 9:45 a.m. (0645 GMT). The official said a Syrian soldier was killed and two others were wounded.

The US ground convoy had been ordered by Syrian Army forces to turn around at “Rasho Checkpoint,” regional reports say.

Interesting. No airstrike conducted, according to OIR. #Syria-n govt’s Sana says helicopters attacked checkpoint with heavy machine guns. https://t.co/1DsnOzVWrT

— Nabih (@nabihbulos) August 17, 2020

There were initial reports that a major airstrike may have been conducted, but official Pentagon statements have denied this.

While some pro-Syrian government sources say the Americans took on casualties during the clash, no official casualties have been reported by the US military.

Authored by Adam Sabes via Campus Reform,

As colleges across America reopen for in-person learning this fall, some are asking students to report peers who might not be following guidelines that universities have set up to prevent the spread of COVID-19.

For example, the University of Miami has set up a system where “students are encouraged to report concerns about unsafe behaviors” of their peers, and administrators will review the concern.

Texas A&M University has a similar system where faculty members and administrators can file a report if they are concerned someone else on campus has COVID-19 or has come into contact with the virus.

Tulane University also has a system where university members can report “problematic behavior” related to COVID-19, and depending on the circumstance, are asked to call the university police.

“Do you really want to be the reason that Tulane and New Orleans have to shut down again?” Tulane Dean of Students Erica Woodly wrote on the reporting page announcement.

Yale University is even encouraging students to “make reports concerning COVID-19” to the university hotline.

The University of North Georgia has set up a similar “COVID-19 Concern for Others Form,” which prompted a letter to the university from the Southeastern Legal Foundation, which claims that the form may violate students’ right to privacy and could possibly censor speech.

“Colleges have a duty to protect student health and safety, especially during uncertain times like these. However, even in unprecedented times, students’ First Amendment rights remain unchanged. That means colleges and universities cannot engage in viewpoint or content-based discrimination, cannot enact vague and overbroad policies, and cannot chill student expression,” the letter stated.

“With a Concern Form at students’ fingertips, students wishing to prevent a controversial speaker from visiting campus or to stop a student organization from garnering interest in their cause can simply report members of that organization as symptomatic. Without stricter reporting guidelines and limits, it appears that such events could be shut down entirely with the press of a button. This may sound unlikely, but then again, who would have predicted 2020 to turn out as it has?” the letter added.

The SLF also said that the form could violate students’ Fourth Amendment rights by forcing students to get tested for COVID-19, even when there is no cause.

“Under the Fourth Amendment, individuals cannot be subject to unreasonable searches and seizures. The Supreme Court has even considered that right in the context of cheek swabs. The Court has held that a criminal arrested and charged with a serious crime can be subjected to a DNA cheek swab, so long as the charges are supported by probable cause, meaning there must be sufficient likelihood that the crime occurred. However, a swab is unconstitutional if there is no probable cause, the charge is not criminal, or if the DNA is used to gather medical information about the criminal,” SLF explained.

“Will UNG, upon receiving a report of a symptomatic student, subject that student to an invasive COVID-19 swab? Surely the university understands that this action would violate the Fourth Amendment,” the group adds.

In addition to encouraging other students to report their peers if they have concerns about their possible exposure to COVID-19, other schools are implementing different student volunteer programs to reduce the spread of the virus.

Columbia University, for example, is implementing a “Student Ambassador” program, where students will become a “peer leader” and “expert” on “COVID-19 prevention, the Columbia Community Health Compact and resources for students.”

The University of Denver is taking things a step further and is requiring students to “install an application on their mobile devices” that will track their location to aid with contact tracing efforts, as Campus Reform previously reported.

While universities across the country are involving students in their COVID-19 prevention plans, two Ivy League academics urged universities to not make students “the coronavirus police” in a New York Times op-ed.

Karen Levy, an assistant professor at Cornell University and Lauren Kilgour, a doctoral candidate at Cornell both agree that involving students “makes sense,” but that the systems may not be very effective and “put students in very tough positions.”

“Of course, many students understand the high stakes of a coronavirus outbreak and have a desire to help keep their communities safe. Some students may feel a sense of civic duty to participate in policing their classmates’ behavior,” they wrote. “But others may be loath to report on their friends, especially when doing so could result in harsh penalties.”

“People report on one another (truthfully or falsely) for a number of personal reasons, including competition, revenge, leverage and everyday aggravations. There’s every reason to assume that these motivations will bubble up in the college context, too. Students have their own loyalties, broken hearts, rocky roommate relationships and fraternity codes of silence,” Levy and Kilgour added.

Californians flocked to beaches, recreation areas, and lakes this past weekend to seek relief from one of the most extreme heat waves in a generation, straining the state’s power grid to the brink of collapse, reported Bloomberg. 

The heatwave brought triple-digit temperatures to parts of California over the last three days and sparked concerns of fiery tornados on Saturday.   

On Sunday, the National Weather Service’s (NWS) Weather Prediction Center (WPC) tweeted temperatures from Death Valley, a desert valley in Eastern California, in the northern Mojave Desert, reached 130F, the first time since 1913.

Per the climate data in xmACIS2, this is the first time since 1913 that Death Valley has reached 130F. In July 2013, it last reached 129F. If valid, it would be the hottest August temperature at the site by 3F. @NWSVegas pic.twitter.com/gZNBW4NXI4

— NWS WPC (@NWSWPC) August 16, 2020

Scorching temperatures were so intense, the state’s electrical grid warned of a continuous electricity supply shortage for Sunday into Monday and Tuesday. 

California Independent System Operator (California ISO) had purchased additional power to prevent another rolling blackout and issued a Flex Alert, urging customers to reduce energy in the afternoons. 

Severin Borenstein, a board member of the ISO and energy economist at the University of California, Berkeley, told SFGate that rolling outages are expected to continue early this week: 

“There is a real concern that they would have to do it again tomorrow and Tuesday,” he said Sunday about the rolling outages.

We noted Saturday that rolling blackouts started Friday when the state’s power reserves had fallen below a critical threshold due to elevated temperatures increased demand for power. The grid issued a “Stage 3 Grid Emergency,” which triggered the “load interruption.” 

According to ABC News, this is the first round of “Stage 3” blackouts facing the state since the 2000-2001 energy crisis that forced the state’s largest utility – PG&E – into bankruptcy and led to the ouster of former Gov Gray Davis.

The blistering heat was also a major concern for firefighters battling several wildfires in Northern California. 

Wendell Hohmann, an NWS forecaster, said a large, fast-moving wildfire in the Sierra area resulted in the weather service to warn local residences about firey tornados. 

A fiery tornado in Northern California. A wildfire East of Loyalton has burned at least 20,000 acres in a record-setting heatwave.pic.twitter.com/qy1PsNn7rm

— Disclose.tv 🚨 (@disclosetv) August 16, 2020

Factor in energy blackouts, prolonged heatwave, and firey tornados, on top of a virus pandemic and socio-economic collapse, well the state is being pushed to the edge ahead of the presidential elections. 

Authored by Alasdair Macleod via The Mises Institute,

Measured in dollars, the current bull market for gold started in December 2015, since which its price in dollars has almost doubled. Other than the odd headline when gold exceeded its previous September 2011 high of $1,920, only gold bugs seem to be excited. But in our modern macroeconomic world of government-issued currencies, which has moved on from the days when gold operated as a monetary standard, it is viewed as an anachronism – a pet rock, as Jason Zweig of the Wall Street Journal called it in 2015, only a few months before this bull market commenced.

Despite gold almost doubling, Zweig’s view of it is still mainstream. His comment follows the spirit of today’s macroeconomic hero John Maynard Keynes, who called the gold standard a barbaric relic in his 1924 Tract on Monetary Reform. Keynes went on to invent macroeconomics on the back of his 1936 General Theory, and whether you profess to be Keynesian or not, as an investor you will almost certainly kowtow to macroeconomics. It has been well nigh impossible to have a successful career in the investment industry unless you subscribe to inflationist Keynesian theories. You are required to substitute the economics of aggregates for those of the human action of individuals, upon which classical economics was based. And with it you must unquestionably accept the state theory of money.

Well, we are now witnessing the cataclysmic ending of the Keynesian fallacy – the destruction of macroeconomics in a systemic failure centered on paper markets for gold and silver…

The Rescue Attempt Has Already Failed

You may have missed the establishment’s last-ditch attempt earlier this year to save itself. Figure 1 below shows its failure:

Comex open interest peaked in January, when the gold contract was being overwhelmed by global demand. Never before had open interest been this high: the previous all-time record had been in July 2016, when it hit 658,000 contracts. At that time, the market had recovered strongly from a deeply oversold condition, the price rallying from $1,049 to $1,380, the December low in our headline chart. That was successfully crushed with open interest taken down to 392,000 and the gold price to $1,120. However, the takedown which commenced in earnest in January this year did not succeed.

There is no question that it was a coordinated attempt by the bullion bank establishment to contain a developing crisis. From its peak of 799,541 contracts on January 15, open interest fell to 553,030 on March 23. Initially, the gold price continued rising, to $1680 on March 9, but on March 18 it finally reacted, falling to $1471 in only nine trading sessions. But while open interest went on to fall to 470,000 in early June, the price exploded higher, with unprecedented price premiums developing on Comex from March 23 onward. The bullion banks’ short exposure net of longs on Comex in a rising market had risen to $35 billion and the gross position was $53.5 billion before the attempt to drive the market lower. Today, the respective figures are $38.3 and $53 billion.

The failure of this well-worn tactic precludes it from being used again. 

The Financial System Depends Entirely on Inflationary Fiat

In the investment industry it is monetary debasement that gives you your living, for the rise in the general level of prices of financial assets, measured by various indices, is little more than a reflection of the loss of purchasing power of your state’s currency. The world has been enjoying this phenomenon particularly since the mid-1970s, four years after President Nixon removed the last vestiges of Keynes’s barbarous relic from the monetary scene. A continual decline in the dollar’s purchasing power ensued. Apart from the occasional hiccup, from 1982, when the S&P500 Index rose from 291.34, to today’s 3,270, the general public has appeared to make money.

It has not been an easy environment to convincingly challenge, being populated by groupthinkers who believe their stock and property gains have been the consequence of their individual financial acumen. But one of those periodic hiccups is now upon us, threatening to be more disruptive than anything seen hitherto in our lifetimes, and which the macroeconomists in the central banks and governments tell us will require virtually unlimited inflationary finance to resolve.

The distinction between gold and unlimited fiat currency being issued by the state is important, because gold was always the money of the people, disliked by governments because its disciplines are limiting. History has always seen the right to issue money taken away from kings, emperors, and governments by their failures and handed back to the people, so the empirical evidence suggests that it will happen again. But macroeconomists argue that their science is an advance on former economic science, so what went before is irrelevant. Therefore, so is gold.

For these reasons, the investment industry is not attuned to gold. Physical gold is not even a regulated investment, which means that government regulators do not permit the funds they license to hold physical metal beyond a small exposure, if they permit it at all. The uncontentious position, taken by nearly all compliance officers, is for investment managers not to hold any. But besides mining stocks, today there are exchange-traded funds that do offer some investment exposure to gold for fund managers. Assuming, that is, that they are willing to contradict the Keynesian views of their colleagues.

Forget Currency Resets

In recent years, suggestions monetary authorities are planning a monetary reset centered on the dollar have been made by a number of observers. Central bank research into blockchain solutions have added to this speculation, but a recent paper by the IMF shows there is no consensus in central banks as to how and for what purpose they would use digital currencies—the central banking version of cryptocurrencies.

In any event, it is likely to take too long for a central bank digital currency to be implemented given the speed with which monetary events are now unfolding. Empirical evidence suggests that once initiated, a fiat currency collapse happens in a matter of months. Today, the Fed has tightly bonded the future of financial asset values to the dollar—one goes and they both go. The credibility behind financial asset values is already stretched to the limit, and the inevitable collapse, taking fiat money with it, is likely to be sudden.

As a side note, the last time a collapse in financial assets took the currency down in similar circumstances was exactly three hundred years ago—in 1720, when John Law’s Mississippi bubble failed. Interestingly, Richard Cantillon made his second fortune by shorting Law’s currency, the livre, and not his shares. His first fortune was made as a banker, lending money to wealthy speculators and taking in Mississippi shares as collateral, which he then promptly sold, pocketing the proceeds.

An attempt at a currency reset, with or without blockchains, can only be contemplated after the public has begun to abandon existing currencies. But the speed with which events unfurl when fiat currencies die precludes advance planning of currency replacements. Any attempt to produce a new fiat money after the existing one has failed will also fail—rapidly. The idea that the state can take control of the valuation of a new currency in a fiat reset in order to make it durable is the ultimate conceit of macroeconomics, the denial of personal freedom to make choices in favor of the management of the aggregate.

One of the specious arguments that arises time and again is that inflation reduces the true burden of debt. This is true for existing debt, but those who advocate it as a remedy for government indebtedness fail to understand that it also increases the cost of the government’s future debt. And while it similarly reduces the burden on private sector debtors, by destroying savings inflation it leads to capital starvation and hampers any recovery.

It is possible, and desirable, that the ills of fiat currencies will be properly addressed. But that will require an abandonment of inflationism, and a commitment to balanced budgets. It requires governments to rein in their spending, reducing their role in the economies they oversee. Statist interventions, both regulatory and mandated by law have to be axed, and full responsibility for their own actions handed back to the people. And only then can sound money, preventing governments from reverting to their inflationary ways, be successfully introduced.

Assuming all this is possible, the only sound money is one with a track record and over which governments have no control as a medium of exchange. In other words, metallic money. Governments will have no alternative to turning their currencies into substitutes fully convertible into gold, with silver in a subsidiary coinage role. Coins in both metals must be freely available on demand from all banks at the fixed rate of exchange for gold, and for silver equating to its monetary value.2 The circulation of gold and silver coins will ensure that the public fully understands their monetary role, thereby deterring future governments from inflationary policies. Bank credit must also be backed by gold, and not expanded by banks out of thin air.

But the pervasive and mistaken belief in macroeconomics appears to be an unsurmountable impediment to an orderly change toward sound money. Imposing their fervent denial of economic reality, macroeconomists are in charge of both economic and monetary policy in America, Europe, and Japan—and by extension that of almost all other nations. It is not even certain that a currency collapse will dislodge them from their position of power, prolonging the chaos that will ensue.

Talk of a monetary reset only makes any sense if those doing the resetting understand what they are doing. And one thing will become immediately clear: the Americans, who stand to lose power over global affairs, will be the most reluctant of all nations to accept that the days of its hegemonic currency are numbered and that a return to a credible gold standard is the only solution.

Protesters swarmed the DC and North Carolina homes of Postmaster General Louis DeJoy, after Democrats accused President Trump and DeJoy – a Trump appointee – of interfering with the 2020 election.

On Saturday, activist group “ShutDownDC” swarmed DeJoy’s home in the nation’s capitol, blowing air horns as they demanded action in a “wake-up call” and a “noise demonstration” against DeJoy ‘dismantling’ the USPS to rig the system in Trump’s favor.

pic.twitter.com/XYXBuLkyLp

— Kolbie Satterfield (@KolbieReports) August 15, 2020

“DeJoy has fired or reassigned much of the existing USPS leadership and ordered the removal of mail sorting machines that are fundamental to the functioning of the postal service. Meanwhile, mail delivery is slowing down under other decisions made by DeJoy, such as eliminating overtime for postal workers,” the group told USA9.

Protesters are making their way to the Postmaster General’s house for what they call a “wake-up call” pic.twitter.com/swK0CEboPv

— Kolbie Satterfield (@KolbieReports) August 15, 2020

This morning we stopped by @USPS Post Master General Louis DeJoy’s house to give him a wake up call. We need the postal service to #DeliverDemocracy this fall. Stop the attack on our mail! #USPSisEssential #USPS2020VOTE https://t.co/a8KmFt5hIU

— ShutDownDC (@ShutDown_DC) August 15, 2020

And on Sunday, protesters surrounded DeJoy’s Greensboro, North Carolina home in a similar show of opposition.

“This is what democracy looks like,” chanted protesters as they marched through the neighborhood – disrupting the Wyndham Championship golf tournament, according to Breitbart, which notes that “The protest came after Sen. Elizabeth Warren (D-MA) and Rep. Carolyn Maloney (D-NY), among others, last week asked the USPS inspector general to investigate ‘all recent staffing and policy changes put in place’ by Mr. DeJoy,” the New York Times reported.”

“We need to make some good trouble.The president has said he wants to cripple the post office,” one protester told the Greensboro News & Record.

To read more about the USPS controversy, click here.

Authored by Paul Joseph Watson via Summit News,

The Shadowgate documentary, which went viral after one of its producers was arrested on Friday, has now been removed by both YouTube and Facebook.

As we detailed yesterday, journalist Millie Weaver was charged with alleged “robbery, tampering with evidence, obstruction justice, and domestic violence” after police officers apparently from a local SWAT team showed up at her Ohio home Friday morning and took her to the Portage County Jail in Ravenna.

The Portage County Sheriff’s Office later confirmed that there was a “secret indictment” against Weaver but refused to give further details.

A woman claiming to be Weaver’s mother later commented that there had been a family dispute over a $50 cellphone on April 25, but that she had almost immediately dropped all charges against Weaver and expressed shock that her daughter had been arrested.

The arrest occurred on the eve of Weaver releasing Shadowgate, a documentary that purports to expose the “operational role the shadow government played behind the scenes carrying out the coup against President Trump.”

After the documentary received millions of views following its upload to Facebook and YouTube, both websites censored the film, with YouTube claiming the movie violated its rules against “hate speech.”

Weaver is expected to appear in front of a “tentative bond meeting” later today.

The full Shadowgate documentary can still be seen below (click the image to be transferred to view).

Trailer here:

*  *  *

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In the past few days, there has been an unprecedented amount of manufactured drama over the US Postal Service, as discussed in “Unpacking Fact From Fiction Behind The USPS Drama“, yet which has continued overnight

It took one second to debunk this @rexchapman lie on Google pic.twitter.com/tx86MksgaK

— Chuck Ross (@ChuckRossDC) August 17, 2020

And which as Byron York summarizes, “speculation about Trump and the Post Office has grown so frantic that it resembles the frenzy three years ago over allegation–from many of same people–that Trump conspired with Russia to fix the 2016 election.”

In any case, we won’t belabor the political talking points – as those will be with us every day for the next 78 days – but instead make a market-based observation that if the US Postal Service, which has had just three profitable quarters this decade…

… had been a publicly-traded company, it would easily have a massive market valuation. Why? Because in the last ten years or 40 quarters, the USPS has made $688.7 billion in revenue while losing $68.2 billion, an abysmally bad performance which even such cash incinerators as Tesla, Uber and Netflix can only admire in stunned silence.

And since this market rewards nothing quite as generously as massive cash burn, it is beyond debate that the USPS would have a market cap of over $1 trillion. In fact, thanks to its record net loss, it might even be the world’s most valuable company thanks to the Fed which has flipped every market fundamental upside down.

Authored by Bill Blain via MorningPorridge.com,

Unreal Summer Markets

“The appearance of things changes according to our emotions…”

It feels very unusual and strange for US market’s to be hitting record highs in the middle of the summer – as happened last week. Typically, nothing much happens in August – certainly not markets capping the strongest market recovery rally in 87 years – despite the looming threat of the deepest recession in recorded history. Yet equity markets remain very much “Risk-On” and looking poised for further upside. 

Something feels… very unreal about current market levels. 

Today’s zero-return markets make for a curiously appealing upside argument to buy stocks – bonds can’t go any higher, gold produces no return, therefore stocks are the asset-class with most upside! More money will pile into stocks on the basis they can still rise! Its two forces at work: financial asset stagflation inflated further by rising bubble conditions. Although I’ve warned before that “This Time It’s Different” are the most dangerous 4 words in the market lexicon – for the moment it is, because central banks have said it is. 

The record levels in stocks came on the back of Big Tech, (which kind of makes sense as I discussed last week in The Era of Debstolation), but also some gargantuan gains from “story” stocks – which largely make no sense at all. What’s more interesting is how last week’s wobble in Risk-Off assets: gold prices seem to have plateaued, and a minor rise in bond yields – has set a number of analysts claiming these are signals of “normalisaton”, and its time to pile yet more cash into stocks – basically trying to justify why stocks aren’t a bubble, but a considered market opportunity.  

Take such advice with a pinch of salt. This is not over. There is much more Pandemic driven grief and pain to come. Yet, central banks simply can’t afford for the sentiment crisis a major stock market crash would create. They have no choice but to continue the illusion – keeping returns repressed and inflating financial assets to unsustainable levels. 

Unsustainable means just that – but Central Banks can’t afford markets to pop now.. 

Therefore, I’d stick with an investment strategy that plays both to the promises of Central Bank “whatever it takes” market support, alongside building a clear Risk-Off base. (Basically – the strategy is to arbitrage Central Banks juicing markets while preparing your bunker for the market equivalent of nuclear winter…) 

In the meantime… what happens next. 

In terms of recession – does anyone really still think a V-shape is possible? There is plenty of economic data out there suggesting the recession outlook is not so bleak. Maybe jobs aren’t being lost as fast as feared, and maybe activity in the economy is picking up.. but in a very different global context. 

Glancing through the weekend papers they were full of doom and gloom as more retail names give-up, chains collapse, and more jobs are lost. China may have recovered – but it seems to be stabilising at less than 90% of pre-Covid activity – perhaps reflecting labour issues and snapped supply/demand chains. 

The stickiness of recovery in China is likely to be repeated elsewhere. Economies can’t regain full potential if a large number of working women are forced to remain at home because Bolshevik teachers refuse to work, and trains won’t carry full passenger loads. (I’m intending to come up to London some time in September – I confidently expect it will give me great material for an angry porridge rant.)

I suspect the concept of a “sticky” recovery – how the global economy recovers to some 90-95% capacity fairly quickly, but then struggles to get back the last 5% – is going to dominate discussion in coming months. I reckon its already happening in terms of redundant workers being permanently removed from the workforce. 

Meanwhile… 

There is an increasing ballyhoo about the US Election developing. The polls say Nice-But-Boring Joe is going to beat Trump, but the polls are reported by Trump hating Media. Biden isn’t attracting any strong views, but we know the 40% of American’s who do support Trump will happily follow him through the gates of the hot place. 

Now we are hearing much muttering about the risks of Kayne West’s presidential campaign costing Biden enough votes to lose in the all important electoral college. And Trump’s electoral plan is to ramp up tension with China – which is really not market positive. Other horror stories examine the risks of a losing Trump refusing to leave the White House because he claims electoral fraud. 

It’s noise – but it’s important noise as its likely to dominate the next 78 days… 

More Meanwhile – back in The Shire.. 

Here in England, the mood feels like it is turning worse. It’s the middle of the summer holidays, and the weather is going to be absolutely pants (a succession of rain, gales, and more rain,) which means loads and loads of unhappy families who can’t go abroad because of quarantine volatility need someone to blame. 

The net effect of England’s washout summer is rising deflection. On the back of the Pandemic missteps, the exam result farrago, and now summer holidays –blaming Boris and his band of incompetents is just too easy… harsh, very unfair, but that’s the way it works.

Compare and contrast to the Scots… who wisely send their kids go back to school in August. They are much happier – and not just because the English are unhappy. Two consecutive sunny days in Edinburgh when it was warm enough for the ice floes off North Berwick to melt is enough to make the whole Nation feel they’ve been blessed with a record summer…

No matter what the English government does.. the perception in Scotland is the Sassenach are getting it wrong. It’s been so bad everyone thinks Nicola Sturgeon is a relative political genius.  Long-term, it bodes very ill for the United Kingdom.. 

If you think the UK’s Brexit pains are the end of the story – think again. Relations with Europe will remain a pustulating sore, while trade deals remain tough, and a Scottish neverendum beckons.