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It’s official: Joe Biden, the oldest (or some might say ‘most seasoned’), presidential candidate in the modern history of the Democratic Party – a new kind of ‘placeholder’ who has already promised to serve just 4 years before gliding off into retirement (which is one reason why the hunt for his VP has become such a closely watched ordeal) – will be spared the traditional prime-time convention speech when he accepts the nomination later this month.

WSJ and a spate of other media outlets are reporting, citing anonymous insiders close to the DNC and Biden campaign, that Joe Biden won’t be traveling to Milwaukee to accept the nomination in person after it begins on Aug. 17 (it will run through Aug. 20). And it’s not just Biden: On the advice of “health officials working for the party” – according to the NYT – no senior party officials will travel to Milwaukee for the convention.

The decision will essentially transform the convention into an entirely virtual affair, offering little in the way of an economic boost to struggling Milwaukee. That’s terrible news for the city’s tourism industry.

Democrats are arguing Biden’s decision shows that he is taking the pandemic more seriously than President Trump, whom Biden has been guttersniping from the wings while President Trump faces the media and the reality on the ground every day (except when he’s playing golf, of course).

But that transparent excuse is almost comical for anybody who has been paying even the slightest attention to the race. Biden can hardly handle a television interview, let alone a major speech.

Now, he’ll get to accept the nomination from the comfort of his home state of Delaware. One can’t help but wonder: If he did defeat Trump, would Biden govern from the basement, too?

Apple received a rare analyst downgrade on Wednesday morning from Bank of America, as the market capitalization of the equity approaches an all-time high $2 trillion.  

BofA analyst Wamsi Mohan downgraded Apple’s stock to “neutral” from “buy”, citing rapid multiple expansion that has pushed valuations to rich levels. Besides the downgrade, the analyst increased his price target from $420 to $470. 

Mohan said Apple shares are trading at the highest premium to the S&P500 in a decade, and now represents 6.5% of the market cap of the entire S&P500.

He outlined several risks that remain ahead, including a lower impact from share buybacks, higher tax rate if Democrats win the U.S. elections in November, gross margin pressures for 5G iPhones, and tougher comparables in 2021 for high-margin App store growth.

BofA’s sum-of-the-parts valuation (SOTP)

He also said the virus pandemic, geopolitical risks with China, and anti-trust regulation on the App Store creates even more risks for the stock in 2021.

Mohan’s concerns about AAPL’s valuations come as the stock is trading at a record 45% above its daily 200 day moving average. 

As revenue stalls, Tim Cook’s successful scheme to goose the equity higher is a massive stock buyback program, making the company appear to beat earnings each quarter. 

Apple Revenue (Billions)
2020(est): 272
2019: 268
2018: 266
2017: 229
2016: 216
2015: 234
2014: 183
2013: 171
2012: 157
2011: 108
2010: 65
2009: 43
2008: 37
2007: 25
2006: 19
2005: 14
2004: 8.3
2003: 6.2
2002: 5.7
2001: 5.4
2000: 8.0
1999: 6.1
1998: 5.9
1997: 7.1
1996: 9.8$AAPL

— Charlie Bilello (@charliebilello) July 30, 2020

And as shares outstanding evaporate – with the explicit blessing of the Fed which is now buying AAPL bonds whose proceeds are used to repurchase stock –  the company’s EPS and stock price continue to soar.

Twitter handle Ben Mackovak makes a great point:

“It’s essentially the same story. $AAPL enterprise value +90% over past 2 yrs despite no net income growth. 100% driven by multiple expansion, which I think is driven by Fed policy. When the Fed Funds rate was 2.4% in 2019, AAPL had a PE of 15x. Today Apple PE ratio is 32x.”

 

Apple’s rapid multiple expansion, pushing valuations to extremes, along with overstretched technicals, could result in a Fed-induced blowoff. 

By Michael Every of Rabobank

The world is rightly shocked today by the terrible explosion that devastated Beirut, and our thoughts go out to the people of Lebanon. The cause is still unknown, but visual evidence and official government statements suggest it was a tragic accident due to storing fireworks next to up to 2,750 tons(!) of ammonium nitrate. Despite denials from daggers-drawn Israel and Hezbollah, even a region rife in conspiracy theories had dismissed thoughts of this being either (Lebanese) politics or regional geopolitics (indeed, Israel has offered medical assistance given Beirut’s hospitals are overflowing)…until US President Trump blurted out his generals had told him it looked like a bomb and “attack” of some kind. Speculation or confidential information? Either way, it’s explosive.

As is the fact that not too far away, the United Arab Emirates has opened its first nuclear reactor, a step to being able to develop a nuclear weapon if it so chooses – though it has sworn not to. Not so sworn, perhaps, is Saudi Arabia. The Wall Street Journal reports China has helped Riyadh construct a facility for extracting uranium ‘yellowcake’ from uranium ore, a crucial step to developing nukes. It’s ironic given China has signed a 25-year co-operation agreement with the Saudis’ bitter foe Iran, including military cooperation, and Tehran is itself not far from a nuclear breakout capability. It’s also tragic if this leads to greater regional instability – which has serious implications for energy prices we saw just a flicker of yesterday. It’s also a further indication that China and Russia are stepping into the energy-rich Middle East as the US has tried to step back.

Specifically, if China and Iran develop their deal on the ground and China expands the power of its Djibouti naval base with further ship-building, one could potentially see a not-too-distant future where oil flows to China via the Belt and Road and, at the same time, China could be able to close off the Straits of Hormuz and the Red Sea if it wanted, making it primus inter pares. That’s the stick that it would not want to use; the carrot would be helping all sides on trade, infrastructure, weapons, and nuclear energy (For a more detailed run-down, see here.) Even the carrot is a highly explosive prospect given what it implies for energy pricing and so the future of the US dollar. Indeed, it is something the US won’t just sit back and let happen under President Trump or any other president.

Meanwhile, Turkey has its own controversial Mediterranean energy claims it is pressing ahead with, to which France has reacted with talk of sending naval vessels to Cyprus. Markets are already on edge here, with USD/TRY testing towards the psychological 7 level and overnight interest rates hitting as high as 1,024%(!) yesterday: a volatile fusion of markets and geopolitics is at play again, it seems, which does not likely to get better anytime soon.

Likewise as talks to see Indian and Chinese forces –now including tens of thousands of men, heavy tanks, and planes– pull back from their disputed border have stalled. India is insisting China retreats from all the territory it has taken; China is literally digging in and insisting India drops its economic boycott of Chinese goods and services. Indian analysis underlines New Delhi faces a stark choice between accepting the loss of territory so far (and China the loss of influence and Indian market share) or pushing ahead militarily to reclaim the land – which would obviously be explosive. Markets are assuming it must be the former, “obviously”. Then again, markets didn’t see the border clash coming. They so often miss the obvious.

Like Bloomberg reporting “Highest-Level US Trip to Taiwan in Decades to Challenge China”, as the US Secretary for Health and Human Services) takes the largest and most senior delegation to Taipei for 40 years with an itinerary including meeting President Tsai Ing-wen. The Indian press has also been pushing for New Delhi to swing behind Taiwan to show China that it can take the diplomatic offensive, and not just always play catch-up defence. This is again all highly explosive.  

Sticking with things that are easier for markets to get their heads round, but also dangerous, the US and China will review progress of their phase one trade deal on 15 August and, as Reuters puts it, “air other grievances”. Which I presume will include TikTok. It does not take much analysis to see that China is far behind on its pledged purchase commitments from the US. That could be put down to Covid-19, of course. What cannot, however, is Beijing pushing ahead with a focus on the domestic market at the expense of imports wherever possible; and in particular in the policy unveiled yesterday to support the development of integrated chip manufacturing by offering ten years of no corporate taxes. Recall the US still holds the leading edge (with Taiwan) in this field, and China is still a large net importer of them: this looks like import substitution, which USTR Lighthizer will be able to see all the way from DC. Imagine if the trade deal were to *officially* collapse – which is something we see happening eventually. Imagine how markets will react then.

Especially in the case if there is still no big bang up in Washington DC on stimulus by then. The latest is talk of both sides digging in, and of possible executive orders of questionable constitutionality, and all the while as nearly USD2 trillion provided by the Fed sits there in the Treasury accounts and not in household pockets.

Markets at least get an inkling of how explosive that combination is when we see bond yields moving towards new lows. 10-year Treasuries are now at 0.51% and look to be heading for a sub-0.50% close ahead. 2-years are at just 0.11% and heading for single digits. 5-years are already just below 0.20%. Even 30-years are at 1.20%, roughly pricing in four Fed hikes over the course of the next generation. And that’s with most people in the market blissfully unaware of the prevailing geopolitical backdrop.

Authored by Joe Martino via Collective-Evolution.com,

IN BRIEF

• The Facts: The US government and Yale University collaborate in a clinical trial to determine the best messaging to persuade Americans to take the COVID-19 vaccine.

• Reflect On: Why do people need to be persuaded? Is it possible they have a lack of trust in public health recommendations for good reason?

The US Federal government in collaboration with Yale University held clinical trials to determine what the best messaging would be to persuade Americans to take the COVID-19 vaccine when it is ready. The news of this study does show an interest in finding the best way to persuade people into an ideal decision for the Federal government, and likely vaccine makers, and it also shows that a mandatory vaccine campaign may still be the plan B down the road, as opposed to plan A.

The official title of the trial is, “Persuasive Messages for COVID-19 Vaccine Uptake: a Randomized Controlled Trial, Part 1.”

According to the brief summary for trial:

This study tests different messages about vaccinating against COVID-19 once the vaccine becomes available. Participants are randomized to 1 of 12 arms, with one control arm and one baseline arm. We will compare the reported willingness to get a COVID-19 vaccine at 3 and 6 months of it becoming available between the 10 intervention arms to the 2 control arms.

Study participants are recruited online by Lucid, which matches census based sampling in online recruitment.

The study essentially looks at the best possible messaging that can be used on Americans, ranging from expressing vaccine benefits, to using messaging about economic impact, making someone feel guilty or embarrassed for not taking the vaccine, and so on.

The study looked at around 4000 participants aged 18 years and up, all of whom had to be US residents of course.

The various ‘arms’ used in the study when it came to messaging were as follows:

• Other: Control message
• Other: Baseline message
• Other: Personal freedom message
• Other: Economic freedom message
• Other: Self-interest message
• Other: Community interest message
• Other: Economic benefit message
• Other: Guilt message
• Other: Embarrassment message
• Other: Anger message
• Other: Trust in science message
• Other: Not bravery message

Interestingly, the study also looked at various social elements involved in vaccination, see below:

Primary Outcome Measures :

1. Intention to get COVID-19 vaccine [ Time Frame: Immediately after intervention, in the same survey in which the intervention message is provided ]This is a self reported measure, immediately after the intervention message, of the likelihood of getting a COVID-19 vaccination within 3 months and then 6 months of it becoming available. During analysis, responses among those assigned to different intervention messages will be compared to those in the control group.

Secondary Outcome Measures :

1. Vaccine confidence scale [ Time Frame: Immediately after intervention, in the same survey in which the intervention message is provided ]This is a validated scale. This scale will be used to assess the impact of the messages on vaccine confidence. (Outcome assessed only for the half of the sample that answers these items post-treatment)

2. Persuade others item [ Time Frame: Immediately after intervention, in the same survey in which the intervention message is provided ]This is a measure of a willingness to persuade others to take the COVID-19 vaccine.

3. Fear of those who have not been vaccinated [ Time Frame: Immediately after intervention, in the same survey in which the intervention message is provided ]This is a measure of a comfort with an unvaccinated individual visiting an elderly friend after a vaccine becomes available

4. Social judgment of those who do not vaccinate [ Time Frame: Immediately after intervention, in the same survey in which the intervention message is provided ]This is a scale composed of 4 items measuring the trustworthiness, selfishness, likeableness, and competence of those who choose not to get vaccinated after a vaccine becomes available.

Why This Matters: As more credible information about vaccinations and their associated dangers circles the internet and informs people, their choice to not vaccinate in certain situations is increasing. As noted by The World Health Organization, even doctors are starting to question and have a lack of trust in vaccines. Because of all of this, I believe pharmaceutical companies now have to work harder to convince people to get vaccines so their profits can stay where they are at. We are seeing the power of free and open media. You can likely guess you would not see a story like this nor honest coverage about vaccines in mainstream media.

The Takeaway: Humanity is waking up to truths that have long been held hidden behind the lack of honest media and government. As we begin to understand what is truly going on behind the scenes, we are beginning to ask even deeper questions. Why have we not be told the full story? Why do we give up our power to those who do not have our best interests at heart? What role are they playing in the awakening of humanity? Who are we? Why are we truly here and why are we not thriving as a global society? What is truly holding us back?

These questions lead us inwards to explore the true nature of who we are. Do we really lack the solutions in our world to allow humanity to thrive? Or is it that human consciousness is suppressed and stuck in a story of separation? Raising human consciousness is the solution we’re looking for.

The biggest political news of the day is undoubtedly the victory by a formerly homeless BLM activist who triumphed over a longtime Democratic incumbent. But it’s also worth noting that “Squad” member Rashida “Impeach the Motherf**ker” Tlaib managed to fend off a primary challenger running from the center.

The AP called the race Wednesday morning, with Tlaib winning 66% of the votes cast, with 87% of precincts reporting. She triumphed over Brenda Jones, a former Congresswoman and Detroit City Council president.

Tlaib was unquestionably the frontrunner going into the vote given her lead in fundraising and a steady lead in the polls. A Target-Insight survey released last month showed the lawmaker with 52% support, while Jones trailed with just 24%.

Interestingly, this isn’t the first time Tlaib and Jones have tangled over the seat. Jones defeated Tlaib in a race to fill the seat vacated by John Conyers in 2018. But Jones only served in Congress for a month (finishing out Conyer’s term) before Tlaib defeated Jones in a six-way primary, then went on to replace both Conyers and Jones in the seat for the new Congress, which started in 2019.

During those cycles, Tlaib managed to outraise Jones as well.

Before the vote, Tlaib received endorsements from both Bernie Sanders, and from establishment Dems like Nancy Pelosi, who are clearly too fearful of their growing power to repudiate “the Squad” publicly by, say, backing a primary opponent.

Tlaib, whose district, MIchigan’s 13th, includes the western half of Detroit, said her victory was evidence that the people support transformative change in Washington.

“Voters sent a clear message that they’re done waiting for transformative change, that they want an unapologetic fighter who will take on the status quo and win,” Tlaib said in a statement on Wednesday.

“We have a resounding mandate to put people before profits. Let it be known that in the 13th District, just like in communities across our country, we are done with establishment politics that put corporations first,” she continued. “If I was considered the most vulnerable member of the Squad, I think it’s safe to say the Squad is here to stay, and it’s only getting bigger.”

Though so far, Tlaib and the squad have accomplished little in the way of actual governance (lawmaker, policy implementation etc).

But at least they help the press generate clicks and sell papers.

Along with Ilhan Omar, Tlaib became one of the first two Muslim women to be elected to the US Congress.

As financial journalists across the US bang their heads against the wall trying to parse what President Trump meant when he said TikTok and Microsoft – or whoever ends up buying TikTok – would need to pay “key money” to the US Treasury, CNBC is reporting that Microsoft and ByteDance are starting to talk valuation for the deal.

To be sure, President Trump hasn’t said anything more about his extemporaneous rant about TikTok paying the US Treasury for the privilege of continuing to operate in the US (a remarkably socialist-sounding suggestion from a Republican president). But Microsoft has implied that simply paying taxes on the deal could satisfy this requirement, and we suspect all the speculation on CNBC and elsewhere is merely kayfabe.

But in bigger news, Instagram on Wednesday launched its new “Reels” features, something that critics and observers like Kara Swisher claimed was essentially a rip-off of TikTok. 

Earlier this week, the People’s Daily accused the US government of trying to “steal” TikTok from ByteDance. Now, it looks like ByteDance is about to get “Zucked”.

Here’s more on Instagram’s new product from Buzzfeed.

On Wednesday, Instagram launched possibly its most anticipated US update since Stories or the dog filter: its TikTok competitor, Reels.

And, I gotta say, Reels sure looks a lot like TikTok.

Of course, this all couldn’t come at a better time for Instagram or its parent company, Facebook. President Donald Trump has begun waging an all-out war against TikTok, which is owned by a Chinese company called ByteDance.

Last weekend, Trump threatened to ban the app from the US over what he called concerns with what the company is doing with American data.

In the middle of the drama, Instagram had the serendipitous luck (although, I put nothing past Mark Zuckerberg) of dropping what is essentially a TikTok clone. (Apropos of nothing, emails released cited in a Congressional hearing last week revealed that Facebook bought Instagram in the first place in order to “neutralize” a competitor.”)

It really is an uncannily similar product. I got access to Reels on Monday ahead of the US public launch, and immediately was kind of amazed at how TikTok-y Reels felt.

With the tap of a button, you can scroll through Reels almost exactly like you scroll through your ForYou page, falling into the same kind of mindless, addictive scroll-hole that has made TikTok a favorite pandemic time-waster of millions.

The early access was only open to select publishers, influencers, and journalists so there weren’t as many of the random teens, hilarious videos, and funny animals that you would see on TikTok, and the pool of videos was much smaller. However, a lot of the culture seems to have made the jump, with a lot of the same memes, songs, and sounds I normally see on my ForYou page popping up on Reels.

If nothing else, the launch will make it easier for TikTokers to simply upload all their “greatest hits” to Instagram.

Instagram’s cloning of TikTok via reels will undoubtedly remind many of how Instagram’s “stories” ripped off the most popular features from Snapchat, making Evan Spiegel regret his decision to turn down Zuck’s buyout offer all those years ago.

In other TikTok news, CNBC’s David Faber, who boasted about his thorough sourcing on air earlier, reported Wednesday that Microsoft and ByteDance have started talking TikTok valuation as deal negotiations advance. Apparently, both companies remain eager to strike a deal, despite allegations of “theft” levied by the People’s Daily, and lingering confusion (playing out on CNBC in real-time) about President Trump’s demands for “key money” that – according to Trump and nobody else – must be paid before CFIUS will approve the deal. Both companies are also working with CFIUS and each other to try and work out a plan for severing TikTok from ByteDance and transferring it to Microsoft in its entirety (in a way that ensures none of those pesky “backdoors” remain).

In keeping with the deal talks between Microsoft, TikTok and the US government, CNBC’s Faber said TikTok and Microsoft are hammering out a plan to separate some 15 million lines of code from ByteDance and transfer all of it to servers based in the US.

As TikTok tries to reassure CFIUS that it isn’t some kind of CCP trojan horse, the company announced three new measures on Wednesday that it says will help combat “misinformation” intended to tamper with the 2020 US election. Part of this will involve TikTok updating its policy on misleading content to clearly articulate “what is and isn’t allowed on TikTok”.

The TikTok teens, who are already bemoaning the loss of their favorite platform by moving en masse back to Instagram, might not like that.

Iranian state media has announced that a US Navy warship has seized a transport ship near the Chinese port of Qingdao on Wednesday morning.

The ship was reportedly en route to Iran loaded with medical manufacturing components, specifically zeolite, which Fars News Agency says is needed for manufacturing oxygen concentrators for coronavirus-infected patients.

“Only one imported part is used for production of oxygen concentrators, which is zeolite, and we are forced to purchase it from France and import it to the country through several intermediators,” Peyman Bakhshandeh-Nejad, an Iran-based pharmaceutical company CEO told state media.

Amid the raging coronavirus crisis in the Islamic Republic, which for over half a year has been among the hardest-hit countries in the world (and recall that last month President Rouhani shocked in a speech by saying the truer estimate of numbers of Iranian infected stands at some 25 million, not the official 300,000+), Tehran has been desperate to import vital hospital equipment and medicines.

However, US-led sanctions related to Iran’s alleged nuclear aspirations has made this extremely difficult. While Washington has denied it is targeting vital medicines and staples like food and hospital gear, Iran has said it’s precisely these things which are being blocked. 

Specifically in the case of the seized ship off China, zeolite is said to be crucial in oxygen concentrator systems for coronavirus patients who can rely on the vital devices at home without having to visit a hospital.

While the ship seizure allegedly by the US Navy is on Wednesday driving headlines inside Iran, there’s yet to be any early acknowledgement either from the US side or from Chinese port authorities.

But this does fit a pattern seen over the past two years of US intervention during alleged Chinese sanctions-busting related to Iranian oil transport.