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Earlier today we discussed why BofA’s chief investment strategist, Michael Hartnett, remains stoically bullish on the market, at least until March 3, when he sees the S&P hitting the nice, odd number of 3,333: as he defines the current period, it is one of  “maximum liquidity, minimal growth”, as a result of a firehose of QE liquidity from the ECB, BOJ and the Fed (yes, the Fed is engaging in QE) with “QE annualizing a stunning $1.1 trillion in the past 4 months” even as global central banks have cut rates 80 times past 12 months, in the process “reducing concerns of recession, default, inflation in 2020.” One look at the chart below of the correlation between the global liquidity proxy and the S&P500 explains why all the market’s fears have been drowned, so to speak, in the past year.

However, the BofA strategist is far less sanguine about what happens after March, when the Fed is expected to start draining its repo liquidity, a process which began this week when the Fed’s “emergency” liquidity boost launched in the aftermath of the September repo debacle posted its first shrinkage in four months. It is also why Hartnett believes that “asset upside will be very front-loaded in 2020.”

And so, as we approach that moment in 2020 when the Fed’s liquidity glut turns from a massive risk tailwind into a headwind, and as the tension between market optimists and pessimists braces for a return, below Hartnett outlines the more interesting bull and bear arguments for risk assets in 2020.

Bulls say…

• There’s always a bubble in the ’20s: South Sea Company bubble in 1720s, UK mining stock bubble in 1820s, Dow Jones bubble in 1920s; big overshoot of asset prices (SPX 4,444) possible so long as Fed fixes rates at low & stable levels.
• There’s no inflation: Japanese wage growth YoY in December was negative in both nominal and real terms; this in an economy in which the population declined by 512k last year, the unemployment rate fell to its lowest rate in 30 years, and the assets owned by the central bank ($5.3tn) now larger than Japan GDP ($5.2tn); no inflation in Japan, Europe, US means no rate rises and cheap financing for populist politicians.
• There’s lots of liquidity: central banks net purchases were $92bn in Q3, $326bn in Q4 and are forecast to total $447bn in the next 6 months; global central banks cut rates 80 times in past 12 months, 789 times since Lehman (that’s 1 rate cut every 3½ trading days).
• There’s the Great Rotation: for all the bubbly stock market talk, global equities have only just exceeded their 2007 highs versus global bonds, and remain below their 2000 highs versus global bonds; and higher yields can cause Great Rotation from bonds to stocks, credit to commodities, US to non-US, large to small, growth to value, tech to banks and so on.

• There’s an inflection point in profits: BofA Global EPS Growth Model (function of global PMIs, Asian exports, Chinese financial conditions, and UST 2s10s yield curve) forecasts EPS growth of -5.4% in the next 12 months, below consensus of 1.2%; crucially for bulls both forecasts for 2020 EPS are inflecting higher.

 

Bears say:

• Impotence rising: equities are at highs & spreads at lows, but volatility in fixed income (MOVE Index) and equities (VIX Index) has crept higher in recent quarters despite renewed QE; higher risk prices and higher volatility a precursor to end of bull market.
• Inequality rising: S&P500 ended 2010s in longest bull market of all-time, & just 7% away from becoming the largest (3498); the absolute gains in stocks and bonds mean that the value of US financial assets (Wall St) grew to over 5.5x the size of US GDP (Main St) by 2019E, another all-time high; further Wall St gains, particularly via stock buybacks, increasingly politically unacceptable (note past 5 years 20 S&P500 companies spent $975bn on stock buybacks, that’s $381,000 for every person they employ).

• Inflation rising: US wage growth exceeds unemployment rate for first time since 2000, has historically coincided with big steepening of the US yield curve either because of inflation, defaults, or recession (Chart 7); note in 2019 US budget deficit surpassed $1tn and US federal government spent $4.4tn, that’s $35,500 for every income tax payer.
• 2020 recovery “priced-in”: semiconductor prices are “pricing-in” US ISM of 60, the highest since the financial crisis (vs. 47.2 today – Chart 8); Global FMS profit expectations (Nov/Dec = biggest 2-month jump since May’09) “pricing-in” global PMIs of 55 next 6-months; Global FMS 2020 ISM expectations was 53.5 in Dec.

Authored by Walter Williams, op-ed via Townhall.com,

A voter may dislike a black, homosexual or female candidate, but it’s not likely that he would openly admit it. However, diversity-crazed leftist/progressive Democrats have openly condemned the physical characteristics of some of their 2020 presidential candidates.

Joe Biden and Bernie Sanders are to be leading the polls despite the fact that they have been condemned as old white men. While Pete Buttigieg is homosexual, something that pleases diversity crazies, he is also a white man, young and religious. With Kamala Harris’ departure from the race, the Democratic field has lost one of its persons of color. Another, Senator Cory Booker, stands at 2% in the polls; his days are numbered. That means the only Democratic candidates polling high are those condemned as old white people — two men and one woman, Elizabeth Warren.      

LaTosha Brown, the co-founder of Black Voters Matter, said she was initially eager for Joe Biden to enter the race but now has second thoughts. Brown said:

“I’m over white men running the country. I don’t know if him (sic) getting in changes the field. He has name recognition, but his strength is also his weakness.”

Former presidential candidate Howard Dean lamented,

“If we have two old white guys at the top of this ticket, we will lose.”

The newest entry into the presidential sweepstakes, Michael Bloomberg, had to apologize for what some see as his diversity insensitiveness namely that of calling fellow presidential candidate Cory Booker “well-spoken” in a TV interview. The New Jersey senator said he was “taken aback” by what he saw as Bloomberg’s racist “trope.”       

Michael Moore gave us his racist warning:

“Two-thirds of all white guys voted for Trump. That means anytime you see three white guys walking at you, down the street toward you, two of them voted for Trump. You need to move over to the other sidewalk because these are not good people that are walking toward you. You should be afraid of them.”    

This is the new racism, much of it learned and taught at our nation’s colleges.

George Orwell said, “Some ideas are so stupid that only intellectuals believe them.”

The stupid ideas about inclusion and diversity originate with academics on college campuses. If their ideas didn’t infect the rest of society, they might be a source of entertainment. But these cancerous ideas have infected society. Statements such as “I’m over white men running the country,” or “If we have two old white guys at the top of this ticket, we will lose” are examples of that cancer.        

Last year, Philip Carl Salzman wrote “The War Against White People” in Minding the Campus. He declared:

“Anti-white hate is now mainstream American culture. Not just by racial extremists such as Black Lives Matter, for whom statements such as “all lives matter” or “blue lives matter” are racist. Our highest leaders sing the same song.”

When Barack Obama was campaigning for the presidency in 2008, he said of working-class white voters, “They get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

During the 2016 presidential campaign, candidate Hillary Clinton claimed that half of Donald Trump’s supporters were “a basket of deplorables” who were “racist, sexist, homophobic, xenophobic, Islamophobic — you name it.”

Do you think Clinton was talking about Trump’s black, Asian and Hispanic supporters? No, she was talking about millions of Trump’s white supporters.   

Then there’s Sarah Jeong, a member of The New York Times editorial board and graduate of the University of California, Berkeley, and Harvard Law School. She expressed publicly many anti-white opinions. Among them are:

“The world could get by just fine with zero white people.”

“Dumbass f—ing white people marking up the internet with their opinions like dogs pissing on fire hydrants.”

It’s “kind of sick how much joy I get out of being cruel to old white men.”

I guarantee you that The New York Times would have fired any employee making similar statements about black, Hispanic or homosexual people.

The bottom line is that the new racism, born in academia, is just as ugly as the old racism. 

It looks like America’s favorite “creepy porn lawyer” just caught the legal break of a lifetime.

Lawyers representing celebrity attorney Michael Avenatti are pressing the judge in his federal extortion case to allow them to subpoena Nike lawyers who allegedly mocked the FBI in a string of text messages.

This isn’t the first hiccup in the Avenatti prosecution: Back in November, the Feds added an additional count of wire fraud, but were forced to drop 2 conspiracy charges that were widely seen as the crux of Nike’s case.

Avenatti gained a national profile thanks to his representation of former porn star Stormy Daniels, who published a book about her life that largely focused on a brief fling she allegedly had with President Trump. Avenatti was indicted last year for allegedly trying to extort Nike, the world’s largest manufacturer of sportswear, out of as much as $25 million after he uncovered what he described as ‘corrupt’ payments to youth basketball players.

News of his indictment broke just minutes after he tweeted about plans to hold a press conference implicating Nike in an undescribed scandal. During a conversation with Nike lawyers that was taped for the Feds, Avenatti allegedly said that his revelations could wipe as much as $1 billion off of Nike’s market cap.

But Avenatti’s lawyers are saying the text messages, apparently uncovered in what appears to be a lengthy discovery process, suggest Nike wasn’t serious about aiding the government, and was merely trying to kneecap an adversary. Avenatti is saying that the company tried to incriminate him to stop him from blowing the whistle.

“Nike’s contempt for the government’s investigation of its conduct is readily apparent from documents viewed by the defense for the first time just yesterday,” Avenatti’s lawyer Scott Srebnick said in the filing. “For instance, right in the middle of the FBI investigation, on April 11, 2018, two of the subpoenaed Nike executives were sending each other texts cursing at the FBI and pejoratively ridiculing the investigation.”

“Nike was motivated to (belatedly) self-report to those same prosecutors and point the finger elsewhere in order to curry favor with them,” according to the filing.

Unfortunately, the exact text of the messages that Avenatti’s lawyers are citing hasn’t been made public, and the names of the correspondents have not been revealed.

US District Judge Paul Gardephe is weighing Avenatti’s request to subpoena the executives before his trial, which starts Jan. 21 in Manhattan.

Nike said in a statement to Bloomberg that it “will not respond to the allegations of an individual facing federal charges of fraud and extortion. Nike will continue its cooperation with the government’s investigation into grassroots basketball and the related extortion case.”

This definitely looks good for Avenatti. But before you get all excited about the possibility that he might get back in the ring for the 2020 primary, remember: even if this case is eventually thrown out, he’s still facing separate charges that he tried to bilk a client out of settlement money.

Authored by Brandon Smith via Alt-Market.com,

Gold has seen an impressive price spike in the past 18 months, and if you are wondering what the cause is, you’ll find almost everyone has a different theory. That said, certain factors in historic gold rallies tend to be ignored. For example, the mainstream financial media often hyper focuses on stimulus measures by the Federal Reserve as the cause, but I would remind people that the most recent upward trend in gold started while the Fed was tightening liquidity and raising interest rates, not stimulating. Also, many analysts suggest that precious metals absorb investment cash flows when equities are sliding, yet, for now, stocks have been rallying for the past year as gold prices also trend upward. So, what is the mainstream missing here?

First and foremost, it’s important to understand that gold is not necessarily just an inflation hedge; it is also a crisis hedge. As economic and geopolitical uncertainty grows, gold prices skyrocket. The past decade has seen uncertainty and instability that the world has not seen for almost a century. The problem is, the average American is oblivious to this state of affairs. They have no idea how bad the situation can get, as they assume there are checks and balances to counter any potential disaster in the financial structure. They assume that the government or the banks will step in.

However, there are signals that tell us that this will not be the case. In fact, it appears that central banks around the world are preparing for an event that they either cannot quantify yet or simply refuse to warn the public about. This is evident in the acceleration in gold stockpiling by banking institutions.

In 2018, foreign central banks bought levels of gold not seen since 2010. The past year of 2019, according to 3rd quarter figures, shows that banks bought even more; 12% more than in 2018. Last year, central banks purchased at least 550 tons of the “barbaric relic”, and it looks like they don’t plan to stop anytime soon.

Leading buyers have included Russia, China and Turkey, with the former two being the leading buyers for several years now. But central banks aren’t just buying gold, they are also demanding their gold storage be transferred away from offshore holdings and back to their own vaults.

Germany repatriated $31 billion (583 tons) in gold from Paris and New York vaults. Turkey repatriated 220 tons from the Federal Reserve. The Netherlands repatriated 122 tons. Poland repatriated 100 tons of gold from vaults in England. Both Hungary and Romania have announced plans to get their gold holdings back, and nationalists in Italy have demanded that Italy’s gold reserves be released by banks and returned to public control.

The bottom line is, there is a gold rush going on by central banks as well as governments, and the public is being left utterly out of the loop as to why.

I would suggest that it’s clear what is going on: They know that a global crisis is about to happen, and so they prepare as any smart investor would, by buying the one commodity that always goes up when the manure hits the fan and most other assets go down. But what is the nature of the crisis they are preparing for? Most likely, a geopolitical conflagration followed by a monetary crisis with the U.S. dollar at the epicenter.

Economic disasters do not generally happen in a vacuum. There are always geopolitical threats that trigger the collapse of financial bubbles, or, the threats are engineered to coincide with the bubble collapse in order to obscure the true culprits behind it. One way or another, it would appear that central banks are privy to a looming calamity that will result in a threat to the current monetary order. I suspect that this event will be preceded by a geopolitical conflict; a smokescreen or scapegoat that will take the blame for the disaster while the central banks that created the mess in the first place escape scrutiny.

The growing rift between the U.S. and other major trading partners, along with the increased danger of regional war with nations like Iran, are setting the stage for what I predict will end in the loss of the dollar’s world reserve status. Some people might see this as a good thing, but such a reset would leave the American economy in shambles for decades to come, as our economy acclimates to losing the single thread that was holding our system together. Rebuilding the system without dependency on reserve status or centralization would be nice, but that can only happen if the central bankers are removed from the equation and true free markets and price discovery are allowed to flourish.

As long as the banking elites remain in charge, our economy will never be healthy and will never recover from a major crash or monetary crisis.

Frankly, they don’t want us to recover anyway. If central banks intended to save the current system, then they would tell the public why they have been stockpiling gold and what the specific threat is that they are preparing for. They would be encouraging the public to buy gold and silver as well and find some financial independence and security.

I am often asked why globalists and international banks would seek to deliberately hide or instigate a global economic crash. Wouldn’t this threaten their base of power, the golden goose that they use to exploit vast amounts of capital and entire political systems?

My answer is simple but historically correct: The banking elites need crisis to consolidate power. They don’t lose power or financial influence during a fiscal panic, they gain power and influence. With each passing financial demolition, the public loses more and more hard assets. These assets are gobbled up and devoured by financial institutions, not because they have much use for all that private property, but because they don’t want YOU to have private property.

That is to say, the banks are machines designed to slowly (or sometimes quickly) siphon private property away from the public until private property is a memory. Once private property is gone, public survival depends on the “charity” of the state and its corporate partners. Without property, dependency metastasizes like a cancer.

Property is protected by hedging capital into defensive commodities, as well as by organized defiance of theft. During any major crisis there is always a window of time in which precious metals can be used to secure hard necessities while countering the loss of buying power common during inflation or stagflation. The longer you can remain solvent during crisis, the more influence you will have over the course of events. The more dependent or desperate you are during a crisis, the less use you will be to anyone.

The levels of central bank gold buying have increased so rapidly in the past two years, this suggests to me that whatever they are preparing for is about to occur very soon. With consumer and corporate debt at all-time highs, the recent liquidity crisis and repo market loan response from the Fed, along with the highly volatile tensions between the U.S. and Iran, I seriously doubt we will make through 2020 without a shock to the system.

Certain central banks have been positioned to benefit. Others, like the Fed, are decidedly unprepared as there is not much concrete proof that our own gold reserves exist. Looking at the bigger picture, the shift in gold holdings around the world shows us where the global elites plan to stash their cash while the U.S. takes a nosedive. These will be the regions most immune to a monetary wildfire.

While price fluctuations are always rampant in times like this, as I noted in July of last year, the overall trend for precious metals will be up from here on. And, unless you suddenly see central banks start dumping their gold reserves instead of buying hand over fist, then I suggest readers copy their strategy and get a stack of physical gold as well.

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With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.

There are now two definitions of “lead parachute” – one, of course, is a Boeing 737 MAX, the other is the farewell payment former Boeing CEO Dennis Muilenberg will receive for his 35 year contribution to the company. Or rather won’t.

Late on Friday, Boeing issued a terse, brief and to-the-point statement in which it announced that as a result of the recent catastrophic collapse in Boeing’s reputation following the countless scandals that have emerged in the aftermath of the 737 MAX grounding in which it emerged that the company was eager to repeatedly cut any and all corners and gamble with people’s lives just to get a quick, cheap version of the 737 workhorse plane in the air former CEO Dennis Muilenburg would get not severance or annual bonus:

Boeing Statement on Compensation for Dennis Muilenburg

We thank Dennis for his nearly 35 years of service to The Boeing Company. Upon his departure, Dennis received the benefits to which he was contractually entitled and he did not receive any severance pay or a 2019 annual bonus.s

At the same time, the company also issued an 8K laying out the compensation arrangement of “certain officers”, in which it got this close to disclosing whether Muilenburg was fired or quit on his own…. and then whiffed, courtesy of the passive voice, to wit: “as previously disclosed, Dennis A. Muilenburg ceased to serve as President and Chief Executive Officer of the Company.” One thing is certain: he wanted to spend more time with his family, if only to tell them never to fly on a 737 MAX.

Boeing also provided a full breakdown of what Muilenburg would receive (as per his contractual obligations):

In addition, as previously disclosed, Dennis A. Muilenburg ceased to serve as President and Chief Executive Officer of the Company, and resigned as a member of the Board, on December 22, 2019. Mr. Muilenburg is not entitled to-and did not receive-any severance or separation payments in connection with his retirement after more than 30 years with the Company. In addition, the Board has confirmed that Mr. Muilenburg will receive no payment under the Company’s annual incentive plan for 2019. Mr. Muilenburg also forfeited 11,266 RSUs, 10,398 performance-based restricted stock units (“PBRSUs”), and 72,746 performance awards in connection with his retirement. Mr. Muilenburg is entitled to contractual, pre-existing retirement benefits. As a result, he vested in pro-rated portions of previously granted long-term incentive awards based on the number of months he was employed during the applicable vesting or performance period. These consist of:

• 25,034 RSUs;
• 23,384 PBRSUs, which will be paid only to the extent earned based on the Company’s total shareholder return relative to peer companies; and
• 130,780 performance awards, which will be paid only to the extent earned based on Company operating performance.

Based on the closing stock price on January 9, 2020, and assuming performance at target for the PBRSUs and performance awards, the forfeited awards would have been valued at approximately $14.6 million, while the vested long-term incentive awards would be valued at approximately $29.4 million. Additional terms of the long-term incentive awards are disclosed in the 2019 Proxy Statement. Mr. Muilenburg also vested in certain stock unit awards earned prior to his service as President and Chief Executive Officer that, based on the closing stock price on January 9, 2020, are valued at approximately $4.3 million. In addition, Mr. Muilenburg will receive distributions of pension and nonqualified deferred compensation benefits earned during his tenure with the Company that, including contributions made by Mr. Muilenburg, were valued at approximately $28.5 million as of December 31, 2019. As disclosed in the 2019 Proxy Statement, Mr. Muilenburg also holds options to purchase 72,969 shares of Company common stock. These options have an exercise price of $75.97 and vested in full in 2013, prior to his service as President and Chief Executive Officer.

Finally, Boeing also disclosed that as part of the company’s new CEO compensation, David Calhoun would be eligible to receive “additional long-term incentive award valued at approximately $7 million which will be earned only upon continued employment and the achievement of several key business milestones, including full safe return to service of the 737 MAX.”

And before you say “so never”, remember that all it will take is for another generation of Boeing monkeys to cut corners, and get the clowns to send the death-machine back into the air.

Via SovereignMan.com,

Are you ready for this week’s absurdity? Here’s our Friday roll-up of the most ridiculous stories from around the world that are threats to your liberty, your finances, and your prosperity.

Town charges woman $60,000 as a fee to renovate her own home

For 40 years Linda and Gary Cameron always dreamed of renovating their small home to accomodate more family and friends.

Sadly, this dream could only be realized when Gary passed away, and Linda received money from his life insurance.

But when the town of Richland in Washington state found out the renovation cost would exceed $50,000 they dropped the hammer.

According to local ordinance in Richland, any home renovation that costs over $50,000 requires that the homeowner also renovate some town property.

I was shocked when I found this out and couldn’t believe it. Sure enough, it’s true. Chapter 12 of the City of Richland’s municipal code spells out “impact fees”, which are fees that the local government assesses on any building project that might have an impact on city infrastructure.

The municipal code goes on to explain that the city can essentially charge whatever they want. And they do.

In order to add a second bedroom and bathroom to her home, Linda was told she had to pay a  $60,000 impact fee.

Pretty crazy. Now she has to sue the town government just to be able to make some minor renovations to her own property.

Click here to read the full story.

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Microsoft says if even ONE person is offended, that’s “one too many”

We want to wish the best of luck to the second largest company on Earth as they embark on their mission to ensure they don’t offend a single person.

In mid-December, Microsoft developers added a tiny icon of a Santa hat in the bottom left corner of one of their programs (Visual Studio Code, also known as vscode).

1 person… as in ONE… complained on the Microsoft’s Github page, posting, and I quote:

Microsoft’s “The Santa Hat on vscode insiders and pushing of religion is very offensive to me, additionally xmas has cost millions of Jews their lives over the centuries. . .”

This ONE complaint led the company to respond, “we’re sorry we hurt your and other’s feelings. We’ll remove the Santa Hat.”

Microsoft then switched the Santa hat icon with a more ‘culturally-neutral’ icon of a snowflake… perhaps to appease generation snowflake and its hypersensitivity.

The company then announced that “. . . the Santa hat was divisive and offensive to some of our users (even a single person being offended is one too many), meaning it represented the opposite of what we wanted to convey to our users.”

But was that the end of the controversy? Oh no.

Other users were offended that Microsoft would nix the Santa hat icon because a single person was offended.

“Well, that was unexpected,” Microsoft’s update on the incident begins.

And there-in lies the catch-22 encircling all modern “woke” companies. Being offended is America’s favorite pastime.

Click here to read the full story.

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Pokemon breach Canadian military base

Canada had to assign soldiers to play Pokemon Go in order to keep a military base secure.

Pokemon Go is a smartphone game that uses augmented reality to place virtual Pokemon in the real world. The Pokemon show up on users’ camera screens when they aim their smartphone at the right spot.

Newly released documents detail how shortly after the game was released, a number of civilians were arrested after wandering into secure areas of a military base in search of virtual Pokemon.

The soldiers found that not only were Pokemon spawning on base, but that the base had also been infiltrated by a PokeGym.

It all kind of seems like a joke how clueless people can be.

But the game was actually designed by a mapping company owned by Google called Niantic. They collect detailed information on users’ location and behavior, and use it for marketing purposes.

If the point was to drive traffic to certain locations, it was clearly a success. They even breached a military base.

Click here to read the full story.

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Vermont considers year in prison for anyone under 21 in possession of CELL PHONE

A Vermont state senator introduced a bill this week to ban the use of cell phones among anyone under 21.

You read that right. And no, not just the use of cell phones while driving.

The proposal is to make it illegal, punishable by up to one year in prison, for people 20 and under to have or use a cell phone.

The bill has some great justification written right into it.

For instance:

“The Internet and social media, accessed primarily through cell phones, are used to radicalize and recruit terrorists, fascists, and other extremists… Cell phones have often been used by mass shooters of younger ages for research on previous shootings.”

The bill concludes that since the Vermont government has seen fit to ban under 21 use of cigarettes, alcohol, and firearms, this is the logical next step.

Click here to read the full text of the bill.