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Authored by Thomas Farnan via TheNationalPulse.com,

Last week, the DOJ declassified three footnotes in the Inspector General’s FISA report. They showed the FBI knew Christopher Steele had associations with shady Russian oligarchs and that somebody – whose identity is redacted – suggested in 2017 that parts of the dossier may have included Russian disinformation.

Some responded as if the footnotes revealed Vladimir Putin and not an FBI-CIA-Clinton conspiracy was responsible for the ridiculous machinations of Russiagate. National Review editor Rich Lowry was especially over-the-top, even managing by passive-aggressive link to turn the disclosures into a criticism of President Trump:

In other words, the Kremlin may have succeeded in getting us to turn even more viciously against ourselves and conduct our politics in an atmosphere characterized by screaming headlines, dark insinuations and endless investigations — all by feeding a few lies to a private eye hired by the Hillary Clinton campaign to dig up dirt on Trump.

Let’s unwind that.

We already knew that something happened a few months after the election that made the FBI stop using the dossier to get FISA warrants. By then the British had come clean and were discrediting Steele. Maybe it was British spies saying, “Have you idiots considered yet whether this is Russian disinformation?”

Anyone with half a brain would have asked the question.

That would explain why the identity of the dossier skeptic in the footnotes is blacked out. Under the Five Eyes Agreement, details about British intelligence sharing cannot be disclosed. The second footnote (#350) says that whomever the undisclosed dossier skeptic is, he or she has “no information” tying its salacious allegations to Russia.

It is just speculation, in other words.

Did Russia fabricate the Steele dossier with the intent of getting us to turn viciously on ourselves?

It is theoretically possible that Vladimir Putin fed a whopper to Christopher Steele about Donald Trump hiring prostitutes to pee on a bed the Obamas had once used.

There are two problems with that scenario, though.

• First, Steele had not been to Russia for 20 years. He spent his professional life as an anti-Russia gadfly. Fatuous claims are made on his behalf that Putin had ordered him to be poisoned. If Christopher Steele is the ex-spy our vaunted intelligence services relied on to explore whether Putin had kompromat on Trump – that’s really bad.

• The bigger problem with any Russian disinformation scenario is for the dossier to affect the succession of power in America even slightly, the FBI would have to make 17 separate sloppy mistakes, all inuring to the benefit of Hillary Clinton and against Trump. Unless his name was Ras-Putin, there is no way Putin could have divined that such a wild story would be treated with a seriousness it never deserved. 

As I have asked on this page before:

“If the Steele dossier tapped Russian sources to reveal a Putin plot to harm Hillary, why did it primarily include crazy stuff that hurt Trump? And if it was created to smear Trump, why did the intelligence community rely on it to conclude that Putin was out to get Hillary?”

CBS reporter Catherine Herridge may have provided some answers this week when she uncovered two additional declassified footnotes from the report. These revealed, not surprisingly, that US spy agencies contorted themselves in 2017 to conclude that Steele was somehow connected to Russian intelligence, but he wasn’t compromised by them.

What a tangled web our spies weaved, huh? We already knew they were trying to sell the idea of kompromat, though. Indeed – by definition – it’s not kompromat if it’s not from Putin. 

More interesting in the notes was the admission that the FBI knew a Steele sub-source favored Hillary Clinton.  As those of us chided as conspiracy theorists have been saying for years, they were the only kinds of sub-sources Clinton opposition researcher Fusion GPS used. 

Most importantly, the footnotes reveal dubious intelligence assessments based on unidentified but compromised second and third-hand sources, and no real evidence of a Russian disinformation campaign.

Okay, let’s assume – even with all that –  it was the Russians.

If so, they were just messing with someone they hated (Christopher Steele) and probably thought if he repeated the pee tape stupidity it would only make him look like an idiot.

Read closely, though, the dossier tells you who fabricated it beginning on its first page, and it was not the Russians:

Source B asserted that the TRUMP operation was both supported and directed by Russian President Vladimir PUTIN.  Its aim was to sow discord and disunity within the US itself, but more especially within the Transatlantic alliance which was viewed as inimical to Russia’s interests.  Source C, a senior Russian financial official said that the TRUMP operation should be seen in terms of PUTIN’s desire to return to Nineteenth Century ‘Great Power’ politics anchored upon countries’ interests rather than ideals-based international order established after World War Two. S/he had heard PUTIN talking in this way to close associates on several occasions.

Unless Vladimir Putin goes around the Kremlin talking like an Ivy League graduate with a plush job waiting for him as an analyst at John Brennan’s CIA, he never said any of those things. An ideals-based Transatlantic alliance that defies the rabble who prefer governance based on national interest is, instead, a uniquely Western worldview.

Nobody has produced evidence that Source C was acting at the behest of the Russian government. Instead, he or she is parroting official Washington’s psycho-fantasies about the world. A good guess is that it was either a complete fabrication or a self-serving oligarch buying a favor by telling the Clinton campaign what it wanted to hear, who would later strongly deny any involvement. 

Even before the footnotes were released everyone knew Steele had connections with such characters. 

Lee Smith, the venerable, readable, oracle of Spygate is right: the dossier is a political operation sourced in Washington and any other interpretation is just a distraction.

Beware especially pundits associated with NeverTrump who assert with ontological certainty that Russia interfered in the election. They would love to believe that when people in Pittsburgh defied them and voted for Trump, we were tricked by Putin.

The problem with their self-serving ruse is that “Putin-did-it” provides a lifeboat for the Spygate conspirators. Brennan, Comey, McCabe et al. are going to say, “we were fooled by the Russians like everyone else.” In the hysteria they generated, Putin is the matinee villain du jour and Russian disinformation makes them victims of his shenanigans, poor fellas.

Three years of scrutiny has determined that the dossier was phony. That the FBI, CIA and Clinton campaign used it to orchestrate the biggest political dirty trick in American history is the real scandal, and Putin is a red herring.

As investors in the US and around the world confront the fact that the Federal Reserve is never really out of ammo, One River Asset Management Founder Eric Peters joined Erik Townsend for an interview on Townsend’s weekly MacroVoices podcast, which features in-depth interviews with portfolio managers and prominent figures in the wealth-management industry.

Markets finally rebounded last week after the fastest, most brutal selloff in modern history, a selloff that was inspired by the realization that half the world would need to stop to prevent millions from dying and hospitals from being absolutely overwhelmed like they were in Wuhan.

Fueling the enthusiasm, late last week, just before Peters’ interview, the Fed unleashed its latest program: a $2.3 trillion program that expanded liquidity to small businesses and municipalities alike – or at least that’s how Jay Powell marketed it.

With the Fed’s balance sheet on its way to $6 – and then $8 – trillion, Townsend asked Peters what he suspects will be the ultimate result of Powell & Co’s repeated interventions in credit markets, interventions that the market has come to depend on, especially now.

Whether or not the central bank’s decision is setting us up for an even more dramatic reversal later on no longer seems like a matter of speculation. The rapidity with which the market unraveled in March – erasing three years’ worth of artificially inflated gains in three weeks – is evidence of what happens when artificial supports finally give way, leaving chaos in their wake.

But at this point, actually swallowing the medicine is almost too painful a prospect to contemplate. Peters pointed out that it wasn’t just stocks that crashed. At points, corporate debt and gold have gotten hammered – the selling hasn’t been constrained to stocks.

The fact that the market was only 25% shows just how potent the Fed’s market interventions have been: Peters believes the drawdone in US equity benchmarks would have been “at least 50%” and possibly as much as 80% if the central bank had sat on its hands.

So you have a very leveraged economy. And all of a sudden, because of this catalyst (meaning the virus), people needed to gross down quickly. And so you had way too many people selling essentially everything, which is why you saw not only stocks fall but you saw bonds fall, you saw gold fall. Everything fell all at the same time. And if the Fed had not come in and drawn a line underneath that with the policies that they implemented, we would have seen a crash that was far worse than what we’ve seen. I think we had the US equity market fall 35% from the highs or something like – it may sound dramatic, but it was only down 25% on the year. So I think, just unambiguously, we would have been down at least 50% and perhaps 80% had the Fed not done what it did.

Why? Well, the logic behind Peters’ supposition is pretty straightforward: the central bank’s massive liquidity injections led virtually every private market participant to become a buyer.

And when the shock came and everybody turned to sell, the people at the controls suddenly realized – oh wait – there’s nobody to sell to. So the Fed needed to step in.

After all: “If everyone is overleveraged and they all need to gross their books down in one way or another at the same time, there literally is not a buyer. There is just no buyer. There is no strong hand out there. There is only one hand and that was the Fed.”

“So that’s what they did.”

And again, these losses aren’t really an exact reflection of the virus’s impact on economic fundamentals and therefore corporate earnings…this is simply a reaction, like the release of a slingshot. Because the truth is, the Fed set the stage for this reversal ten years ago in the aftermath of the crisis. As Townsend and Peters discussed, the outbreak was merely a catalyst for losses that probably would have been inevitable.

Though the coronavirus was probably about as bad as it gets for equity bulls.

Listen to the whole interview below:

Authored by Matthew Ehret via The Strategic Culture Foundation,

As the COVID-19 Crisis stagnates the Earth, there may be a big shake up going on in space…  

Whatever forces are behind the current spread of the coronavirus justifying the shutdown of major nations across the globe, one thing is increasingly certain: a new system will absolutely emerge from the currently collapsing one. What remains to be seen is whether this new system will be shaped by those fascist crisis-loving technocrats pushing for a unipolar world order, or whether it will be organized by sovereign nation states working together under a multi -polar community of principle.

Amidst the confusion and fear driven by the global pandemic, President Trump passed a fascinating Executive Order on April 6 calling for the mining of asteroids and the Moon which may serve as the gateway to shaping a new system of economic relations, rules and values around a shared future for humankind. Trump’s Executive Order states in part that “successful long term exploration and scientific discoveries of the Moon, Mars and other celestial bodies will require partnerships with commercial entities to recover and use resources, including water and certain minerals in outer space.”

In stark opposition to those cynics who wish to analyse every event from the lens of simple geopolitics, the executive order goes onto reject unilateralism in space (promoted by the Space Force ideologues seeking to extend militarisation beyond earth) and rather calls for cooperation, stating that the USA “shall seek to negotiate joint statements, and bilateral and multilateral arrangements with foreign states regarding safe and sustainable operations for the public and private recovery and use of space resources.”

This potential for a shared future for global (and celestial) development stands in stark opposition to certain forces who would rather use the two-fold crisis of economic collapse and viral pandemics to usher in a new age of fascism and world government under a Global Green New Deal. As I wrote in an earlier paper, this clash is exemplified by the closed system thinking of Malthusians and neocons vs. the open system thinking of genuine patriots and world citizens.

How the Dream of Open System Economics Was Lost

It was once believed in the west that the future would be beautiful, just, and as plentiful as it was peaceful. Under John F. Kennedy’s bold leadership the idea of space exploration was more than a simple “space race” or plopping a human being on the moon “within the decade and returning him safely back home”. Far from this narrow view, JFK and many leading American scientists saw this goal as a springboard to a new age of creative growth for all humanity both on the Moon and beyond. These stirring forecasts of an age of reason can still be heard in recordings of Kennedy’s Rice University address of September 12, 1962.

Unbeknownst to many, JFK also called for a USA-Russia joint Moon landing in order to defuse the Cold War formula of MAD and had this plan not been derailed, the world would have found itself on a much different trajectory.

Unfortunately, history unfolded on a different course. After JFK’s murder (weeks after the above speech), his program to remove troops from Vietnam was reversed and the USA was plunged into the disastrous Vietnam war for over a decade. As the war grew, federal funds needed for science and exploration were increasingly absorbed by the military industrial complex.

By 1972, the last human mission on the Moon took place and by 1976, Russia’s last lunar project also occurred with Luna 6. Although small efforts to keep the dream alive continued in piecemeal form over the years, Apollo was scrapped and national support for long-term objectives slowly decayed and a generation of space scientists and engineers found themselves disillusioned by decades of broken promises and a lost dream. Russian scientists suffering the debilitating effects of Perestroika shared in this dismal experience and found themselves unemployed throughout the 1990s and in many cases forced to use their powerful mathematical skills in the financial services sector of London in order to make ends meet (giving rise to the age of quants and speculative high frequency derivatives trading).

During this period of disenchantment, China arose silently under the radar patiently building its capacities from scratch.

The Rise of China’s Space Program

Although its first satellite launch took place during the height of the Cultural Revolution in 1970, the Chinese space program grew much more slowly than its counterparts in Russia or the USA. Patiently learning from the best engineering feats of the west, under the wise guidance of Deng Xiaoping, China finally became the third nation to successfully send a human into orbit in 2003 and one decade later, became the first nation in 37 years to return to the Moon with the successful landing of the Chang’e-3 rover in December 2013. Lieutenant General Zhang Yulin called this program “the great rejuvenation of the Chinese nation” and the world came to soon see what incredible plans were yet in store for China’s goals in space.

Soon China had launched the Tiangong 1 and 2 (Heavenly Palace) test space stations in preparation for the 2021 launching of the Large Modular Space Station named Tianhe (“Harmony of the Heavens”) which will be a vital platform for the earth-lunar economy for decades.

On January 3, 2019, China set a world milestone by becoming the first nation to successfully land a rover on the far side of the moon with Chang’e 4, which has begun topographical, resource and geological mappings of the lunar surface. Change’e 5, 6, and 7 will continue these explorations while adding the feature of returning samples to the earth and preparing the groundwork for a permanent lunar base by 2030. Chang’e-8 will be especially important as it will print the first ever 3D structures on the Moon by 2028.

Unfortunately, due to the Obama-era “Wolf Act” of 2011, American scientists could not participate in these achievements and had to watch from afar as China swiftly leapt to the forefront of space science dethroning America from the unchallenged stature she once enjoyed.

Asteroid Threats

Earlier in 2013, before Chang’e-3 landed on the Moon, another humbling event took place and served as a sort of divine slap in the face for many. This wake up call took the form of a 9000 ton asteroid which exploded 22 km over Chelyabinsk, Russia sending shock waves that shattered windows and injured over 2000 citizens. The Chelyabinsk incident served as a timely reminder that the universe offers enough existential challenges for humanity without the additional man-made calamities of regime change wars and fighting over diminishing returns of resources.

From this Russian incident, NASA’s Planetary Defense Coordination Office was created to begin to establish a plan for asteroid threats from space alongside similar departments in Roscosmos, and the European and Chinese Space Agencies. Ouyang Ziyan (the father of China’s lunar program) stated that asteroid defense “is worth attention while we are devoted to building a community with a shared future for humanity… Scientists around the world should cooperate to monitor near-Earth asteroids.”

In November 2019, Roscosmos Director of Science and Long Term Programs (Alexander Bloshenko) stated that Russia’s lunar development goals which included a base on the underside of the Moon within a decade were intertwined with asteroid defense stating: “There are plans to install equipment on this [lunar] base to study deep space and special telescopes to track asteroids and comets that pose a danger with their collision with earth.”

By Summer 2019, NASA’s administrator Jim Bridenstine also announced his intention for USA-Russian cooperation on asteroid defense- joining the earlier call made by Roscosmos’ head Dimitri Rogozin for a “Strategic Defense of Earth” which Rogozin described as a way to redirect nuclear weapons towards a common threat in space rather than towards each other. This call for cooperation dovetails the two-fold space strategy unveiled by President Trump in December 2017 with Space Policy Directive 1: Reinvigorating America’s Human Space Exploration Program, where he called for 1) The creation of the Lunar Gateway space station to orbit the Moon and 2) the launching of the Artemis Project that will “lead the return of humans to the Moon for long term exploration and utilisation, followed by human missions to Mars and other destinations.”

These developments were punctuated by Trump who took the time from his impeachment fiasco to call for an alliance that too many analysts have chosen to ignore saying on– :

 “Between Russia, China and us, we’re all making hundreds of billions of dollars worth of weapons, including nuclear, which is ridiculous… I think it’s much better if we all got together and didn’t make these weapons… those three countries I think can come together and stop the spending and spend on things that are more productive toward long term peace.”

Although the COVID-19 lock down has done major damage to the schedule for the Orion capsule and space launch system mega rocket needed to carry out the Artemis Project, the scheduled 2024 landing of a man and woman onto the moon’s surface is still on course.

A Revolution in Mining: Redefining “Resources”

But it doesn’t end there. Leading officials among all three Russian, Chinese and American space agencies have called for going beyond asteroid defense, and colonization with the call for lunar, mars and asteroid resource development strategies. These strategies require that humanity redefine the practice of “mining” as it has hitherto been known for thousands of years, but also re-define what a “resource” is, what “energy” is and what are the limits (if any) to human growth?

A helpful tool to conceptualize this revolution in thinking can be found in the 10 minute video All the World’s A Mine made in 2013:

In carefully mapping the lunar terrain with a focus on the far side of the moon, China wishes to come to a better understanding of the mineral distribution of vital resources like Titanium, Iron, silicon, aluminium, water, oxygen and hydrogen and especially Helium-3 which are abundant on the Lunar regolith. Helium-3, long called the “Philosophers’ Stone” of energy is the most efficient fuel source for fusion power when fused with deuterium or tritium in a plasma and though it is nearly non-existent on the earth exists in vast quantities on the moon due to the absence of a geomagnetic field. As the Moon’s far side never faces the earth or the earth’s magnetic field, there are far more abundant volumes of solar-produced Helium-3 that have accumulated there over millennia.

Ouyang Ziyuan stated clearly that Helium-3 could “solve humanity’s energy demand for 10 000 years at least” since “each year, three space shuttle missions could bring enough fuel for all human beings across the world.”

In 2013, Ziyuan stated “The Moon is full of resources- mainly rare Earth elements, titanium and uranium which the Earth is really short of, and these resources can be used without limitation… There are so many potential developments- it’s beautiful- so we hope we can fully utilize the Moon to support sustainable development for humans and society.”

China’s Premier Li Keqiang added his voice to the mix stating: “China’s manned space and lunar probe missions have a twofold purpose: first, to explore the origin of the universe and mystery of human life; and second, to make peaceful use of outer space… Peaceful use of outer space is conducive to China’s development. China’s manned space program has proceeded to the stage of building a space station and will move forward step by step.”

In September 2019, Russia and China signed a historical agreement to jointly collaborate on lunar development uniting the Chang’e-7 plans with Russia’s Lunar 26 Orbiter and lunar base development which both nations have on the agenda for 2030-2035.

A Word on the Moon Treaty of 1979

Donald Trump’s explicit rejection of the Moon Treaty of 1979 in his recent executive order, has garnered many angry criticisms which on closer inspection are completely unfounded. The 1979 Treaty requiring that all commercial activities in space must be defined by an international framework appears on the surface to be quite sensible. So is Trump’s rejection of any obedience to an “international framework” at this moment in history evidence of his selfish-nationalistic impulses to impose gangster capitalism onto the whole universe? Not at all.

As stated at the beginning of this report, President Trump’s order calls explicitly for “encouraging international support for the recovery and use of space resources” which is in no way characteristic of “narrow minded selfish nationalism” or “unilateral militarism” extolled by the many neocon ideologues struggling to take control of U.S. Space policy. Also when one considers that only 4 nations ratified that 1979 treaty (France, Guatemala, India and Romania), Trump’s refusal to obey it is not nearly as renegade and selfish as those critics make it appear.

Finally, when one considers who would define that “international framework” and considers the zero-growth paradigm currently dominant across the UN and European Union technocracy, then it quickly becomes clear that the Green New Deal agenda for shutting down industrial civilization is totally incompatible with the pro-growth, pro-space mining orientation of Russia, China and Trump’s USA alike.

After weeks of “climbing the coronacurve“, we finally have some good news – we are now officially over the hump “tipping point.” The global infection growth slowed from 90% W/W to just 38% W/W in the last fortnight (total infections: 2,157,108, deaths: 143,844, 6.7% mortality rate), and the number of global new daily cases has dropped to 65.6K, the lowest since the end of March.

This means that according to JPMorgan, most early entrants have now passed or are nearing, the infection peak. The following three charts show the snapshot of the “curve” over the past three weeks.

First, this is what the curve looked like on March 24, when only China was in the recovery phase (at least according to its fabricated data).

Then last week, both Korea and Germany had passed over the curve apex.

Fast forward to today, when the number of countries in the recovery phase has jumped and now includes also Australia, Malaysia, Spain and Thailand, with Italy just shy of apexing.

Showing the number of new cases on a log chart confirms the good news that a plateau appears to have been reached.

And so with many of the world’s countries in or near recovery, the focus shifts to the “exit plan.”

As JPMorgan’s MW Kim writes in his weekly update, emergency treatments such as lockdowns and strict social-distancing have been strong curve control solutions, but are proving costly. As a result, he proposes considering three social distancing relaxing checkpoints: 

• infection growth rate slowdown (checkpoint A),
• net infections start to decline (checkpoint B),
• midpoint of recovery stage (checkpoint C).

These are shown in the chart below:

The optimal stakeholder/social “utility function” determines which of the three is the most plausible economic re-opening checkpoint. In Kim’s view, point C is safest, but point B could be acceptable as long as infections are managed within hospital capacity.

• Point A: This is the spot where growth of net infections (= total infections – total recoveries – total death) consistently stays below 50% W/W. Based on backward calculation on the secondary infection rate in China and Korea, JPM estimates an average secondary rate (Ro) is around 2.0. Thus, once the net infection growth rate for a week has stayed below 50% W/W, it would imply high single-digit daily infection growth rate potential. In other words, new infections become small and recoveries are developing. Considering about 2-3 weeks of the virus cycle from symptoms to release, it would be viewed that the curve is in early control stage. Under the assumption that the trend would continue, discussion on relaxed forms of social distancing could be started. The risk of point A is that as daily recoveries are small and new infections are in early control, increasing social activities through the relaxation of social distancing would create possible “acceleration” of the infection curve which would put great pressure on hospital capacity and future public healthcare interventions as a “U-turn” on policy that re-introduces stricter social distancing until the curve is in better shape is deemed to be more costly. This sudden jump of the infection tally amidst the curve control stage is called a “tipping point”, recent infection statistics in Singapore could be good evidence, although we could see soon if the curve is to be in better control again.
• Point B: This is the spot where total infection growth is below low single-digits or when net infections start to decline (i.e., new infections < new recoveries). As this suggests that a smaller population has newly been in contact with infections and more infections are in the stage of recovery, with aggressive virus testing and a certain degree of social distancing, the curve could continue to move toward a recovery trend. In this curve stage the utility function could be optimised with relatively milder disagreement among stakeholders. At this stage, as total infections/ susceptible is largely under control, the curve could face potential acceleration of the infection tally, and risk would be a possible "rebound" on the curve.
• Point C: This is the curve in the full recovery stage (i.e., very few new infections, more recoveries). If there is a strong conviction that infection is only a one-time event with one curve, this could be the ideal strategy. Closing the curve clearly means that the society could remove future uncertainties related to infection risk. However, as most view that COVID-19 could last in society until a vaccine is fully available to the public with a possible series of infection waves, this could be a relatively safe point to resume the economy, although the overall level of hospital capacity and guidance on relaxed forms of social distancing would be of added importance. Compared to point A or B, the risk on curve control should be lower at point C. The caveat is that, even though re-opening of the economy resumes at this point, it does not mean that society would fully close the curve. Thus, the risk of a second wave could be a possible scenario. Perhaps, the infection curve in the real world would be similar to the one below.

Once society takes the underlying assumption that the risk of a series of waves persists, navigating the ideal exit point for reopening the economy (or relaxation of social distancing) should be needed. It should be noted that, particularly in Asia, overall lockdown periods are now generally matching with COVID-19’s life cycle (i.e., up to 2 weeks incubation + 3 weeks from symptoms to recovery) and many countries are in the recovery stage. China and Korea are heading to the first curve end. Malaysia and Thailand have just passed the peak point.

JPM also writes that it believes that a COVID-19 vaccine could potentially be under mass production and maybe available to the public in the next 12-18 months even under an optimistic scenario. This suggests that, for a while, the community would bear certain risks on COVID-19’s existence considering the asymptomatic nature, no exact drugs/therapies, and longer latent periods. In that perspective, the strategy of curve flattening should move from costly “closing the first infection curve” to “managing infections within small numbers below hospital capacity factoring in series of outbreak scenarios”. In this way, potential mortality spikes due to limited hospital capacity (i.e., ICU beds) could be partially solved.

Just days after The Wall Street Journal reported on the stellar performance of the greatest hedge fund in history (Renaissance’s ultra secretive and ultra lucrative – open only to friend and employees – Medallion fund), the directionally-agnostic, algo-driven system is apparently turning its attention to the crypto markets.

As we recently detailed, since 1988, Medallion has averaged annual gains of 39% after fees, and its best years include 2000 and 2008, difficult years for most investors.

For those unfamiliar, the Medallion fund holds thousands of stocks at any one time, while betting against thousands of other shares and trading currencies, commodities and bond futures, according to people close to the firm.

During market collapses, most investments tend to plummet in unison, which can make it hard for Medallion to profit. That phenomenon may help explain why the fund treaded water in early March. In the aftermath of these difficult periods, and as markets settle, Renaissance’s 35,000 computer processors comb 30 trillion bytes of data each day searching for mispricings.

Ironically, the best hedge fund is the one that not even its managers know what it does:

Renaissance’s predictive models, developed by the firm’s 320 or so string theorists, astronomers and other scientists and mathematicians, are built on more than 10 million lines of computer code and rely on historic prices and other data. Preset algorithms generate all its trades, eliminating human emotion from the investing decision.

In fact, because Renaissance’s system employs elements of machine learning and is so complicated, it can be challenging for the firm’s own executives to immediately understand why the firm is doing well or poorly. Some of them believe their gains, at least in part, could result from mistakes rival investors make during challenging markets.

“The computer runs itself and we hardly ever interfere, the machine tells us what we should do,” says someone close to the firm. “Every experience we’ve had shows that humans mess up worse than machines.”

Renaissance’s chainsmoking, codebreaking founder Jim Simons, who is worth over $23 billion, is working from his Long Island home amid the coronavirus pandemic like many others at the firm, the Journal’s Greg Zuckerman reports.

Of course, since the fund basically runs itself, it’s unclear why anyone would ever need to show up to the office at all.

Medallion is a “medium-frequency” trading firm, generally holding its investments from “moments to months,” in the words of an employee, rather than milliseconds, like high-frequency firms. Still, Medallion also can benefit from volatile markets like those trading shops.

There may be reason to think investors should brace for continued market volatility, at least according to Renaissance’s predictive models. In late March, Medallion’s investors were given the opportunity to put more money in the hedge fund so the firm could expand its size. That move may have been made because the computers anticipate more opportunity for profits – and more volatile and challenging markets – in the months ahead.

This is one occasion when we will say that the machines are right, hands down, and perhaps that is why the fund is now potentially entering the cryptocurrency markets since volatility has risen dramatically in recent weeks, potentially offering the RenTec algos more profitable trading arenas.

And now, as CoinTelegraph reports, in a brochure originally dated March 30, the United States regulator the Securities and Exchange Commission (SEC) confirmed that Renaissance Technologies’ Medallion Funds now have access to the burgeoning Bitcoin futures scene.

According to the literature, Renaissance will offer access to cash-settled contracts from CME Group, one of the two oldest-running Bitcoin futures providers.

The Medallion Funds are permitted to enter into bitcoin futures transactions, which Renaissance will limit to cash-settled futures contracts traded on the CME.

The underlying commodity for these futures transactions, bitcoin, is a relatively new and highly speculative asset.

Bitcoin and futures based on bitcoin are extremely volatile, and investment results may vary substantially over time. These instruments involve substantially more risk and potential for loss relative to more conventional financial instruments. Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.

Some of the risks associated with bitcoin are:

1) its limited history;

2) the absence of any recognition of bitcoin as legal tender by any government;

3) the lack of any central authority to issue or control bitcoin;

4) its susceptibility to manipulation by malicious actors or botnets;

5) its susceptibility to forking;

6) its substantial price volatility;

7) its possible correlation to the price volatility of other distributed ledger assets;

8) the susceptibility of bitcoin spot exchanges to the risk of fraud, manipulation, and other malfeasance;

9) the undeveloped and evolving nature of bitcoin regulation;

10) the enhanced basis risk in bitcoin futures compared to other types of investment vehicles;

11) the possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading; and

12) increased regulatory scrutiny of participants in the crypto space. Any of these factors could materially and adversely affect the value of the Fund’s investments.

At the same time, Bitcoin futures have been witnessing a return to form after suffering reduced participation in previous weeks. 

According to the most recent data from CME, its products reached all-time highs in terms of unique accounts last month, a combined annual growth rate of 161%.

CME Bitcoin futures accounts. Source: Hunter Horsley/ Twitter

Nonetheless, reactions to the Medallion Funds announcement underscored continued distrust of institutional investors among Bitcoin supporters. As Cointelegraph reported, suspicions last year focused on futures contract settlements artificially pressuring the Bitcoin price. 

Others, such as stock-to-flow creator PlanB, have publicly refuted the idea that futures are responsible for price manipulation.

As Coindesk.com notes, however, whether Medallion is participating in that market is unknown. The disclosure did not state if Medallion had begun buying bitcoin futures contracts or planned to in the future, and Renaissance, notoriously tight-lipped about its best-performing fund, did not respond to requests for comment.

Additionally, CoinTelegraph’s William Suberg notes that RenTec’s move towards the crypto markets comes just before the much-watched – and likely volatility-inducing – Bitcoin Halving in May.

The creator of the stock-to-flow (S2F) Bitcoin (BTC) price model says that the upcoming block reward halving will decide if it lives or dies.

In a series of tweets on April 16, PlanB said that he is sticking by the Bitcoin price increasing by “an order of magnitude” in the two years after the May halving.

Analyst looks for fundamental insights from halving

“(In my opinion) #bitcoin 2020 halving will be like 2012 & 2016. As per S2F model I expect 10x price (order of magnitude, not precise) 1-2 yrs after the halving,” he wrote. 

“Halving will be make-or-break for S2F model. I hope this halving will teach us more about underlying fundamentals & network effects.”

Stock-to-flow measures the issuance of new Bitcoins each block against Bitcoin’s existing supply, a method which has proven highly accurate in charting price performance. 

According to the model’s latest incarnation, BTC/USD should hit $30,000 by the end of 2020. 

Bitcoin stock-to-flow chart as of April 17. Source: PlanB/ Digitalik

BTC, macro “will not correlate forever”

Continuing, PlanB responded to queries regarding Bitcoin’s correlation to traditional markets. A key concern among many traders is that a repeat of March could still occur, BTC/USD shedding 60% in a day as stocks crashed.

Highlighting the Dow Jones, PlanB argued that current correlation was the result of the broader coronavirus crisis, and was not a permanent feature for Bitcoin:

“During crisis everything is correlated. What’s next is what’s interesting. They will not be correlated forever (in my opinion).”

Promising to throw out the stock-to-flow model altogether if it fails to deliver as planned, he added that he nonetheless was not nervous about such a scenario occurring. 

Recently, some well-known cryptocurrency figures have criticized the concept, arguing it is simply too optimistic and has created a “cult” which reinforces its prognosis. As Cointelegraph reported, they include Ethereum co-founder Vitalik Buterin and a Bitcoin whale known as J0E007.

“To be clear: I expect S2F-price relationship to hold,” PlanB confirmed.

That ‘jump’ certainly offers Jim Simons and his machines an opportunity one way or the other.

Finally, we note that hidden deep in the “Material Risks” section of the RenTech brochure is a series of warnings of the potential impacts of COVID-19 on markets’ functioning…

Many countries have been susceptible to epidemics, such as severe acute respiratory syndrome, avian flu, H1N1/09 flu, and, currently, COVID-19 (commonly known as the “CORONAVIRUS”), which the World Health Organization has declared to be a pandemic. The epidemic or pandemic outbreak of an infectious disease, together with any resulting restrictions on travel, transportation, or production of goods or quarantines imposed, will likely have a negative impact on the business activity in some if not all of the countries in which a Fund may invest and on the national, regional, or global economy, thereby adversely affecting the performance of the Fund’s investments. A continued escalation in the CORONAVIRUS outbreak could see a continual and drastic decline in global economic growth. CORONAVIRUS has led to significant volatility in the global financial markets, and the CORONAVIRUS and any future outbreak of an infectious disease or any other serious public health concern may lead to additional volatility and illiquidity of a Fund’s investments, the imposition of emergency or extraordinary regulatory restrictions on markets and trading activities, and significant interruption in the normal business activity of Renaissance and the Fund’s other service providers (including financial intermediaries), which could materially harm the Fund’s investments and negatively affect the performance of the Fund.

U.S. and other financial markets around the world and their participants, including the financial intermediaries through which the Funds clear or execute their transactions or have contractual relationships with, can be adversely affected by unusual market turmoil such as the ongoing CORONAVIRUS pandemic in 2020. The occurrence of such upheavals and ensuing market, legal, regulatory, reputational, or other consequences is unpredictable, but can be expected to have an adverse effect on the Fund’s business, trading, and profitability and restrict its ability to acquire, sell, or liquidate financial instruments at favorable times or prices (thereby also restricting the Fund’s ability to generate cash to fulfill redemption requests).

The prices of securities and of futures, forwards, and other derivatives are subject to unpredictable changes, which can be rapid and substantial. Such changes may result from, among other things, changing supply and demand relationships; changes in interest rates and stock-loan availability; currency fluctuations; government trade, fiscal, and economic policies; and other world events, including without limitation the outbreak of epidemics or pandemics, natural disasters, terrorist attacks, or military conflicts. Governments from time to time intervene in certain markets, often with the intent to influence prices. For example, in response to market conditions resulting from the CORONAVIRUS pandemic, various international regulators have recently imposed limits or prohibitions on engaging in short sales, which can impede a Fund’s ability to fully execute its trading strategy. Governments or applicable regulatory authorities could also, for example, close markets or limit the markets’ hours of trading.

Don’t say you were not warned.

In what will be remembered as one of the worst mass shootings in recent Canadian history (though the country is certainly no stranger to terroristic attacks), more than 10 people are dead, including an RCMP officer and the suspect, after an attack that continued over the course of several hours as police pursued the suspect across the province.

 

More than 10 people are dead, including an RCMP officer and the suspect, after a mass shooting incident in Nova Scotia.
The RCMP provided an update during a news conference in Dartmouth, Nova Scotia Sunday evening, releasing precious few details about a rampage that carried on across the province, with people apparently killed by the shooter in multiple locations.

“Today is a devastating day for Nova Scotia and it will remain etched in the minds of many for years to come,” said commanding RCMP officer Lee Bergman.

The shooter was identified as 51-year-old Gabriel Wortman. His motives remain unclear.

Wortman was killed by police outside the Irving gas station and Big Stop restaurant in Enfield Nova Scotia, roughly 25 miles from downtown Halifax.

The story of how the incident unfolded is long and convoluted (at least, that’s the way it was told by several local TV news stations), but here’s the gist, as far as we understand it. Remember, many details about the incident have yet to be released. The situation officially began late Saturday evening when officers responded to a firearms complaint in Portapique, a small town about 80 miles north of Halifax, the capital of Nova Scotia.

In a tweet sent overnight, police confirmed they were in the middle of an “active shooter situation” and asked residents to remain in their homes with their doors locked. Police said this stage of the incident involved “several victims”, but no figures were listed. There is no word on their identities or how many people may have been killed or injured. Investigators first released the suspect’s identity before 9 am Sunday. They said Wortman was considered armed and dangerous and warned that he should not be approached.

Around 10 am, police warned that Wortman was traveling on Highway 4 near Hidden Hilltop Campground in Glenholme and urged residents to avoid the area and lock their doors. A short time later, police said that Wortman might be driving what appeared to be an RCMP vehicle and wearing an RCMP uniform – though he is not an RCMP officer.

Wortman continue to travel across the province Sunday morning, with police warning at 10:21 am that he had been spotted in the Debert area. At 11:04 am, police said Wortman had been last seen traveling south on Highway 102 from the Brookfield area in the vehicle shown above. At 11:24 am, police said that Wortman was now driving a silver Chevrolet Tracker and had been spotted in Milford NS.

A short time later, they tweeted that he was “in custody” – though apparently he had already been mortally wounded at that point.

Watch a clip from a press conference held by local police officials after the scene was finally brought under control:

Police confirmed that Const. Heidi Stevenson, a 23-year veteran of the Nova Scotia RCMP, died Sunday morning while responding to the active shooter incident. A male RCMP officer was also taken to hospital with non-life-threatening injuries. His identity has not been released.

After a relatively drama-free weekend, futures have started off the new week lower by about 0.4%, trading at 2850, down 20 points from Friday’s CTA inspired and momentum-driven meltup which appears to be reversing as algos realize they have frontrun a rebound in not just 2021 earnings but also 2022 and 2023.

However, just like last week, it is commodities and specifically oil where the deflationary puke is taking place, with WTI tumbling over 5% at the open, and sliding to $17.30, down more than $10 from last Monday’s post OPEC+ kneejerk reaction higher and the lowest price since November 2001,

The ongoing crash in oil which OPEC+’s agreement to cut 9.7mmb/d in output last weekend has failed to halt, takes place as Crude prices in the US oil capital are getting dangerously close to zero. According to Bloomberg buyers bidding for crude in landlocked sections of Texas, ground zero of the shale revolution, are offering as little as $2 a barrel for some oil streams, a precipitous markdown from a month ago. And, as discussed here on various occasions, the plunging value of physical barrels is raising the possibility that Texas producers may soon have to pay customers to take crude off their hands.

Negative prices already hit more obscure corners of the North American oil market amid a bearish trifecta of collapsing demand, swelling supplies and limited storage capacity. AS we reported at the end of March, the first U.S. grade to bid under zero was a small landlocked crude stream known as Wyoming Asphalt Sour, which went for negative 19 cents a barrel last month.

Meanwhile, in Texas prices are heading in that direction. A subsidiary of Plains All American Pipeline bid just $2 a barrel for South Texas Sour on Friday, while Enterprise Products Partners LP offered $4.12 for Upper Texas Gulf Coast crude this week, according to Bloomberg.

“I’ve never seen Texas crude oil transition to negative price” but it’s possible, said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “It’s happened in the natural gas market at the Waha hub in west Texas,” Lipow added.

Fast depleting storage is still a major issue against a backdrop of unprecedented demand destruction from the coronavirus pandemic, and these could pressure prices below zero fast, Lipow added. To be sure, producers have been stashing oil both on land and at sea, with crude tankers now carrying a record 160mmb/d, double the amount two weeks ago, and there is still at least 150 million barrels of available land-based capacity. “But it’s the fill rate that is likely alarming the market, said Reid I’Anson, a global energy economist at Kpler, an industry research firm. Stocks at the key storage hub at Cushing, Oklahoma, have risen 18 million barrels in three weeks, which is 20% of shell capacity, he added.

The good news is that negative prices would be “extremely temporary,” said John Auers, executive vice president at energy consultant Turner Mason & Co. Under those circumstances, ultimately, supply will be forced to shut in. On that note, we will only remind readers that the Fed’s QE was also supposed to be temporary and instead if has since mutated into a permanent debt monetization ponzi scheme.

Authored by Andrew Sheet, Morgan Stanley chief global strategist

Short-Term Pain for Long-Term Gain

Late last year, I met with the pension fund for a physicians’ association in the western United States. I’ve been thinking a lot about that meeting recently, especially when some aspect of the market, or working from home, is particularly frustrating. However disrupted things may seem at the moment, they pale in comparison to what those in medicine, services and other fields at the front line of the response to the coronavirus are going through. So, this seems like a good time to emphasize a key part of our view: What’s best for fighting the pandemic, the health of the economy, and the market may be the same thing – making sure the reopening of the economy is done right.

In thinking about the path for the economy, Morgan Stanley’s economists and healthcare analysts have been working together. In last week’s Sunday Start, my colleague Matthew Harrison wrote about how we see virus dynamics beyond the ‘peak’, and how this informs our economists’ expectations for a ‘re-opening’.

As Matthew emphasizes, a sustainable re-opening requires that four key components are in place:

1. adequate surge capacity in hospitals,
2. public health infrastructure to support testing,
3. robust contact tracing to curtail ‘hot spots’ and
4. widespread access to serology testing (to determine who is already immune to the virus).

We see the process unfolding in waves, starting in mid-summer. Even then, however, the return to work will be slow, with our economists not expecting to see pre-recession levels of output for US or global growth until 4Q21.

When the discussion turns to markets, however, it is often presented as a trade-off: The faster the re-opening, the less pressure on earnings, defaults and asset prices. We disagree with this framing.

If you give investors confidence that the worst is behind them, history suggests they can put up with quite a bit of bad news. We think this is especially true for credit spreads and levels of volatility, which often hit their worst levels several months before the trough in economic data (and even farther ahead of things returning to ‘normal’). If, as we forecast, April and May represent the low of economic activity in the US, a market low in March would be very consistent with past patterns of market anticipation.

Indeed, the best times to invest are often when a weak economy creates lower prices. We hear investor concerns about a coming rise in default rates and large declines in earnings (we forecast these too). But credit spreads have tended to improve well ahead of the peak in default rates, while equity markets represent the present value of all future cash flows from now until the end of time. The former is a reason why my colleague Srikanth Sankaran is overweight corporate credit, the latter is a reason why my colleague Michael Wilson recently raised his year-end target for the S&P 500 to 3000. And both are reasons why we think equity volatility can fall further from here.

We think this applies even in the face of 2Q20 looking to be the worst quarter for economic activity in any investor’s lifetime. As long as investors are confident that the next quarter is a little better, and the path from there is improving, we think markets will be more forgiving of poor data.

But this thinking is predicated on April and May being the low for US and global activity. Trying to reopen the economy before the four key prerequisites are in place would inject significantly more uncertainty over whether the worst for the economy is behind us by the end of 2Q. Such a scenario would pose a clear risk to our positive bias towards current markets.

In short, we don’t see a trade-off between what’s required to control coronavirus cases and a better long-run impact for markets and the economy. Fascinatingly, over 100 years ago, the same appeared to be true. In an article for Liberty Street Economics, Fight the Pandemic, Save the Economy: Lessons from the 1918 Flu, March 27, 2020, Sergio Correia, Stephan Luck and Emil Verner from the New York Federal Reserve looked at the response of different cities to the 1918 pandemic. The whole article is great and well worth a read, but the conclusion is striking: Cities that implemented stronger social distancing measures ultimately saw higher levels of industrial production. Fighting the pandemic and protecting the economy were one and the same (in 1918, the Dow Jones Industrial Average rose 10%).

One of the cities with the most aggressive measures and strongest ensuing recovery was Seattle, Washington. Witnessing that response was the reason why my grandfather went into medicine, ultimately following the path of so many in the US whose parents had been born elsewhere. Today’s challenges are serious, scary, but also surmountable. What’s best for fighting the pandemic, protecting the economy and supporting the market may actually be one and the same. Draw a line under the worst of the crisis, and investors can sail through the squall.

As we pointed out earlier in the week, China-owned Smithfield Food’s decision to temporarily shutter the largest pork processing plant in the US, based in Sioux Falls, SD, due to a coronavirus outbreak is a much more significant even than the mainstream media gave credit for. While WaPo focused on bashing the state’s governor, whose refusal to issue a ‘stay at home’ order was blamed for the outbreak, the real significant wasn’t accorded sufficient time and attention, we feel.

The real takeaway here, is that the supply chain for American staples was badly damaged by the outbreak, with the damage still more extensive and stubborn than government officials have really acknowledged. Two months on, and millions of Americans are still having trouble finding toilet paper and sterilizing wipes. A comprehensive list of products in perpetual short-supply would be quite lengthy, at this point.

For all we know, Smithfield might be only the beginning. Earlier on Sunday, we noted a Hormel foods plant in Illinois has been forced to close temporarily after a cluster of cases in the surrounding counties was traced back to workers at the plant. That could leave millions of Americans without access to popular processed foods like Spam. An unopened can of Spam can keep for between 2 an 5 years, depending on storage conditions.

If closures like these continue, it could add further strain on the supply chain. Everywhere you look, you see experts talking about an overabundance of food thanks to the closure of restaurants, which has resulted in unprecedented levels of food waste. But sadly, thanks to the way our food distribution is set up, if there’s no way to process the products, package them and then distribute them to markets around the country, then the food will spoil before it’s eaten.

And if enough hungry, scared, desperate and irrepressibly, unceasingly furious Americans hear that piles of food are being left to spoil in the farm belt as the country starves – or if a sudden burst of inflation rattles both the Fed and hungry Americans as one of the many worst-case “supply-side” shocks unfolds – well, they just might riot.

Bloomberg warned on Sunday that these closures, along with a handful of others, are already putting upward pressure on meat prices at the point of sale in the market. As more processing facilities close, supermarkets are left with fewer options – because unfortunately many farmers who sell mostly to restaurants simply aren’t equipped to ship to supermarkets, and these types of changes unfortunately take time, as frustrating as that might sound.

BBG does a better job explaining the phenomenon:

The slaughter-plant closures are the latest injection of volatility in food markets in the coronavirus era. Shifting consumer buying patterns and closed restaurants has upended the supply chain, resulting in surging prices for goods like eggs but also prompted farmers to dump milk and vegetables due to lost markets.

“When you have a reduction in the slaughter like we’re having right now, we are going to have a jump in the cut-out values,” said Brian Hoops, senior market analyst at Midwest Market Solutions in Springfield, Missouri, said by telephone.

Wholesale pork posted the biggest back-to-back gain in more than two years, rising 15% to 60.13 cents a pound. Last week, pork prices fell to the lowest since 2009, U.S. Department of Agriculture data show. Choice-grade beef prices climbed six straight days through Thursday, rising to $2.36 a pound, a one-month high.

The report also noted several other major slaughterhouses where workers have been diagnosed with COVID-19, and closures have been raised.

Smithfield Foods Inc., the world’s biggest pork producer, indefinitely shut down a slaughter plant in South Dakota this week after hundreds of workers tested positive for Covid-19. The plant typically accounted for 4% to 5% of total hog processing in the U.S.
Two people who worked at a Tyson Foods Inc. pork plant in Iowa died and two dozen are ill, with operations down. Three people died who worked at a Tyson poultry plant in Georgia. A worker at a Cargill Inc. plant in Colorado also died. JBS USA delayed the reopening of a Pennsylvania beef plant from Thursday to Monday.

The companies are working with government officials on cleaning and testing to ensure they safely produce food and protect workers. But the disruptions mean less meat, at least short term.

The coronavirus that has killed several workers and sickened hundreds of others at U.S. meat plants is raising concerns of a shortfall in pork and beef at grocery stores.

As some slaughterhouses halt or slow output and buyers brace for more disruptions, meat prices are surging.

“This is sending wholesale prices sharply higher and will result in a noticeable reduction in supply for the consumer,” said Cassie Fish, an Omaha, Nebraska-based livestock market strategist.

Bottom line: Thanks to the surprising complexity of food supply chains, there’s a scenario where farmers dumping milk and other products while factories and farms close or roll back activity while the number of product getting to the shelves falls, leading to instantaneous upward pressure on prices.

Of course, as Russell Clark (Horseman Capital) noted in his letter to investors last week, he is giving up on deflation after a decade, and bracing for inflation:

“…what drives inflation is lack of supply. And I see supply chain disruption everywhere. I also see falling investment in the supply chain everywhere.”

Of course, if inflation suddenly comes roaring back after all these years, that would be Jerome Powell’s worst nightmare: it would force the central bank into a terrible dilemma: either hike rates and destroy the economy, or keep them low, and risk triggering a cycle of uncontrollable hyperinflation, that could cause just as much damage – probably more.

And just like that, we, the sheeple are enforcing authorities’ wishes… Despite being “warm, emotional people”, NYC Mayor De Blasio has some totalitarian tips for snitching on your social-distancing-denying neighbors…

How do you report places that aren’t enforcing social distancing? It’s simple: just snap a photo and text it to 311-692. #AskMyMayor pic.twitter.com/WQdCcVf1Rl

— Mayor Bill de Blasio (@NYCMayor) April 18, 2020

And remember, it’s for your (and their) own safety! Think of the children (oh wait no, think of the old people).