Tag: finance

Authored by Mike Shedlock via MishTalk,

There is plenty of blame to go around but where is the preponderance?

A bipartisan coalition has been working to reach a Covid compromise on state and local aid plus a liability shield. 

The bickering seems endless. It’s been ongoing since September.

The Wall Street Journal reports GOP Leaders See Bipartisan Group’s Covid-Aid Effort Falling Short.

Top Senate Republicans signaled Thursday they wouldn’t accept a bipartisan group’s efforts to craft a compromise on state and local governments and liability protections during the pandemic, undercutting the coalition’s attempt to break the months-long impasse over a coronavirus relief package.

“My sense is that they’re not going to get there on the liability language,” Senate Majority Whip John Thune (R., S.D.) told reporters Thursday. “Even though they spent a lot of time trying to come up with sort of creative, innovative solutions to it, they’re just not going to be able to thread the needle.”

Aides to Senate Majority Leader Mitch McConnell on Wednesday night told the staff of House Speaker Nancy Pelosi (D., Calif.), Senate Minority Leader Chuck Schumer (D., N.Y.) and House Minority Leader Kevin McCarthy (R., Calif.) that he didn’t see any possible path from the bipartisan group on those two contentious issues that would be acceptable to Republicans, according to a senior Democrat familiar with the conversations.

The Issues

1. Republicans want liability for businesses. Democrats don’t.

2. Democrats want more state aid and Republicans don’t.

3. Trump wants another broad round of checks. Neither a majority of Republicans or Democrats want that but the Progressives side with Trump, a curious mix. 

Trump muddied the water for no reason, siding with Bernie Sanders of all people. 

Previously, Trump objected to blanket checks on the basis some people make more being unemployed than employed. He was correct then, not now.

But that is not where the blame goes. 

Easy Compromise

Senate Majority Leader Mitch McConnell came up with an easy compromise: Put off liability and other contentious issues until next year and agree on a basic package.

Until this week, Mr. McConnell had said that any package that passes the Senate must include beefed-up legal protections for businesses, schools and other entities operating during the pandemic. On Tuesday, Mr. McConnell instead urged moving forward with a smaller relief package that omits both the liability provision that Republicans want, as well as state and local funding, a Democratic priority, saying they could potentially be addressed next year.  

“Our Democratic colleagues have not even let us pass noncontroversial money to invest in vaccine distribution,” Mr. McConnell said on the Senate floor Thursday. “Not unless the two parties settle a whole list of issues that are controversial the way they want.”

Pandemic Benefits Expire

On December 26, all the pandemic benefits at the Federal level expire in every state.

For many states and millions of people, Federal benefits have already expired. 

McConnell’s compromise would get checks into the hands of the unemployed and provide money for vaccine distribution as well.

Nancy Pelosi suggested liability for 6 months, but that solves nothing.  Lawyers would wait 6 months then fire a barrage of lawsuits. 

Ironically, McConnell’s compromise leaves intact all lawsuits if you spend 2 seconds to think about it. 

The Blame?

This one is easy. Nearly all of the blame goes to the Democrats for not accepting McConnell’s offer to do something that both sides agree on. 

If Trump were to veto such a package, then the blame would go to Trump (or Republicans for not overriding the veto).

For discussion of expiring benefits and the number of people affected, please see Unemployment Claims Jump to Highest Level Since September

Now that SoftBank has unwound the options-trading strategy that earned it the nickname “the Nasdaq Whale”, the Japanese telecom-VC hybrid is resorting to unloading pieces of its portfolio to try and generate badly needed liquidity.

Reuters reports that SoftBank is unloading Boston Dynamics, the robotics company known for its terrifying “robot dog”. “Spot”, the autonomous robot dog, recently made headlines for building a radiation map of Chernobyl.

Hyundai Motor Group, the South Korean carmaker, has agreed to take an 80% stake in BD. The deal values the robotmaker at $1.1 billion (which means Hyundai paid some $880 million for its stake).

Any readers who are wondering why a carmaker might want to buy a fledgling robotics company, the answer lies in Hyundai Motor Group chairman Euisun Chung’s pledge to reduce reliance on traditional car manufacturing. To accomplish this, the company is exploring methods to streamline its plant operations, cutting reliance on human workers and the pesky unions who represent them.

BD has already signed up carmakers, including Ford, which has leased two Spot robots in July as part of a pilot program. Though details weren’t clear, we suspect Ford, like Hyundai, is simply trying to save money on manufacturing and labor. Ideally, the South Koreans see BD as an opportunity to try and remain competitive with their rising Chinese rivals.

For the deal to bolster Hyundai’s share price, Wall Street will be watching to see if Hyundai can not only benefit internally, but also derive profits from leasing BD’s technology to rivals, like BD has been doing with Ford.

“Hyundai needs to prove that Boston Dynamics can be commercially successful and is capable of competing with cheaper Chinese rivals,” said Koh Tae-bong, an analyst at Hi Investment & Securities.

The deal is also notable for signaling SoftBank’s withdrawal from the robotics business, something that Chairman Masayoshi Son once heralded as a critical component of SoftBank’s growth strategy. SoftBank owns stakes in – or owns outright – more than 100 companies.

 

Reuters reported that SoftBank’s “rump” robotics business is now looking “increasingly isolated.” Amazon infamously bought Kiva Systems and transformed it into “Amazon Robotics”. It has since integrated the technology into its warehouses, forming the bedrock of its reputation for ruthless efficiency.

Somewhere, some union leaders in Seoul, Detroit and elsewhere are taking notice of this news with a sharp sense of foreboding.

Authored by Steve Watson via Summit News,

A State Senator in New Jersey wants the coronavirus vaccine made mandatory for all school age children, despite them being the least at risk group.

Middlesex Democrat Senator Joseph Vitale also wants to eliminate exemptions that have been used in the past to prevent their children from receiving shots.

“When it is that a vaccine is appropriate for children, I believe it ought to be included in that list of vaccines that are required for children,” Vitale told reporters.

“I’d like to incorporate it into the other vaccination bill that would require children to get vaccinated as a condition to entering school,” he added.

Vitale also says there is a separate effort underway to make the vaccine mandatory for University students in the state.

“It’s not complicated to decide whether or not to include a COVID vaccine as a condition of school,” he said, adding “The decision is going to be whether or not the vaccine is available, and if the science supports its efficacy.”

New Jersey currently mandates that children must have several vaccines in order to attend school, including MMR, polio, and chickenpox. However, thousands of children have been exempted from the shots, with parents citing religious beliefs.

There was an attempt last year by lawmakers to eliminate such exemptions and mandate the vaccinations across the board, but it failed when angry parents stormed the statehouse:

While New Jersey officials have stopped short of saying they will force everyone to get the vaccine, Governor Phil Murphy has signed an executive order that will see everyone who does get it automatically enrolled into a ‘New Jersey Immunization Information System’ , a move that some have seen as a way of coercing people to take the shot.

Speaking to reporters, Sue Collins, co-founder of the New Jersey Coalition for Vaccine Choice said “Putting the cart before the horse and saying when it’s available everyone has to get it does not build trust.”

“No medical procedure should ever be mandated for anyone — especially something so new, with so many unknowns and no long-term knowledge at all,” Collins added.

Pushing back against the creep toward mandating the vaccine in the state, Republican Assemblyman Gerry Scharfenberger, has sponsored a bill to prevent it from becoming compulsory.

While he says he is not anti-vaccine, Scharfenberger says he cannot support mandating medication, and is responding to the concerns of constituents.

The developments in New Jersey come after a State Assemblymember in New York introduced legislation that would make it compulsory for residents to get vaccinated against coronavirus.

Democrat Linda Rosenthal said she introduced the bill because “there has been a “concerning uptick in dangerous anti-science, anti-vax rhetoric.”

As soon as the FDA approves the vaccine for children, there will likely be a torrent of states moving to add it to the compulsory vaccination list for school kids. Reports have suggested that Pfizer has begun conducting some tests of its vaccine on children, with Moderna also scheduling trials for tests on kids.

Currently, California, Mississippi and West Virginia are the only states that allow medical exemptions to vaccinations, according to the National Conference of State Legislatures.

A further 30 states, including New Jersey, currently allow religious exemptions, with 17 more states still allowing exemptions for religious and personal or philosophical beliefs.

€On an otherwise abysmal day for the Dow, Disney shares are the lone standout as the “streaming service with a theme park/content studio attached” is showing Wall Street that its decision to go toe-to-toe with Netflix is panning out even more quickly than the company had initially warned.

Despite initial warnings that – thanks to the resource-intensive process of launching its “Disney+” streaming service – it would take as long as 5 years before the business becomes profitable, the world’s largest entertainment company saw its shares hit an all-time high on Friday as Disney’s big bet on streaming was officially declared a “winner”.

To be sure, the business remains a cash inferno. Like Netflix, Disney – which held its investor day on Friday – is committing to burn absurd amounts of cash on a slate of programming that has awed both viewers and Wall Street analysts alike. According to Bloomberg, Disney announced an ambitious development slate with a budget of between $14BN and $16BN to finance dozens of new shows and movies over the next four years.

The company’s internal projections, which have apparently been taken at face value by Wall Street, project that “Disney+” could draw as many as 350MM subscribers by 2024, thanks to popular programming from Marvel, Star Wars and Pixar.

Additionally, Disney is moving forward with a price-hike telegraphed earlier this year. In the US, the service will rise by $1/month to $8/month, while a 29% price hike in Europe will bring the cost to $11 (€9).

Disney’s shares rallied more than 11% on Friday, adding more than 125 points to the Dow.

Importantly, Disney also announced a handful of big wins on the live sports front, seen as critical new territory for the clutch of streaming services competing for eyeballs.

Executives at the presentation also announced that ESPN and ABC will become the home for the Southeastern Conference’s top football and basketball games under a 10-year deal starting in 2024, featuring teams like Alabama and Auburn. The company will pay in the low $300 million range each year on top of previous commitments, or more than six times what CBS currently pays, Sports Business Daily reports, citing unidentified people.

“We’re definitely still in launch mode as it relates to Disney+ – we’re still going into new markets,” Chief Financial Officer Christine McCarthy said. “And this is where we are at this point in time. This is a minimum amount of content that you will be seeing.”

Many analysts suspect that streaming will eventually turn into a zero-sum game, with only a handful of competitors becoming “must haves” (a status accorded to nobody but Netflix, and maybe HBO) while the rest languish. Right now, Disney+ probably has the best claim to join that top tier.

Another incidental benefit of relying on a streaming service for growth: You can also boost profits by slashing jobs at your legacy businesses, as Disney is also doing, since people aren’t going to be visiting movie theaters or theme parks much when we’re all living in our private hygienic bubbles. As far as theater owners are concerned, Disney isn’t sticking the knife all the way in – at least not yet. Unlike Warner Bros, Disney, the most dominant player at the American Box Office, Disney will still release some of its biggest-name theatrical films in theaters.

Authored by James Rickards via The Daily Reckoning,

As of yesterday, nearly 15 million Americans have tested positive for COVID-19, while over 281,000 people with the virus have died.

Caseloads are actually higher than they were in April (although fatalities are not as great because of improved treatments and new therapeutics).

The U.S. registered over 4 million infections in November alone, more than double October’s record 1.9 million infections.

But here’s the good news:

Several highly effective COVID vaccines are already approved for use or are expected to be approved shortly.

The major pharmaceutical companies are geared up to produce billions of doses (and several billion doses are already produced, just waiting for the final approvals).

This vaccine campaign will start slowly and take time to have an impact. In the U.S., these vaccines will go first to health-care workers and nursing home patients. Gradually, the injections will be available for those over 60 years of age and those with comorbidities such as asthma and diabetes.

By late next year, most of the U.S. population that wants the vaccine should have it. Similar efforts are underway in Europe, Japan and Australia. Russia and China have their own vaccines. We don’t know much about them, but they are gradually being used on their own populations.

So, that’s the good news. The bad news is that vaccines won’t rescue the U.S. economy in time.

Lockdowns Aren’t Effective

Lockdowns are to be reimposed as the only remedy in the meantime (in addition to the basic advice of washing hands, social distancing and masks). Unfortunately, the evidence is clear that lockdowns don’t work well. The virus is highly contagious; it goes where it wants.

But, politicians don’t know what else to do, and they’re driven by the need to appear to be doing something, so lockdowns are the answer.

Lockdowns may not be effective against the virus, but they are very good at destroying economies.

The same pattern we saw last spring is repeating itself.

Businesses will not only lock down; they will also go bankrupt or close for good. Job losses will not be temporary; they will be permanent. There will be no pent-up demand if the lockdowns abate. A missed meal is a missed meal; I won’t order ten dinners next time I go out, I’ll order one.

The U.S. economy will probably tip into recession in the first quarter of 2021. This will mark the first “double-dip” recession since the 1980-81 period when a new recession began just one year after the prior recession ended.

This time the gap may be just six months since the last recession ended on June 30, 2020. Stock markets have not yet corrected for this coming recession. They will soon.

Meanwhile, assuming Joe Biden will be the next president, his administration will have to confront this recession. How might his economic team try to stimulate the economy and restore growth?

Get Ready for MMT

It could be telling that Janet Yellen will be the next Treasury Secretary.

Economist Stephanie Kelton has called for merging the Fed and the Treasury into a single spending/monetization entity to implement Modern Monetary Theory (MMT). She has gained influence in Democratic policy circles.

Investors need to pay attention to it, whether they agree with it or not because it will influence fiscal and monetary policy in a new Biden administration. Putting former Fed Chair Janet Yellen as the new Secretary of the Treasury is a clear sign that that’s what a Biden administration plans to do.

What better way to achieve that merger than to appoint the former Fed head as the new Treasury head with her former Deputy still in place back at the Fed? With a former Fed head as new Treasury head, I’d say Mission Accomplished.

For those unfamiliar with MMT, it says that the U.S. can spend as much as it wants, borrow to cover the deficits and monetize the debt with Fed money printing.

The “theory” is not much of a theory because it lacks evidence, and there’s nothing “modern” about it because it has been around for over 100 years. Still, it is all the rage in Washington, D.C. these days.

Three Main Tenets of MMT

MMT has three basic tenets. The first is to treat the Treasury and the Fed as a single entity with a single balance sheet. Legally the two institutions are completely separate, but MMT insists that government can operate as if it were. This means merging Treasury and Fed operations into a single engine for spending, borrowing and printing.

The second idea is that citizens must accept dollars (whether they like it or not) because you need dollars to pay taxes, and if you don’t pay taxes, you’ll go to jail. In effect, the dollar is supported by the barrel of a gun, to paraphrase Mao Zedong.

The third idea is that there is no practical limit to how much debt the U.S. can issue. The U.S. debt-to-GDP ratio today is about 130% (up from 106% last year). But, MMT cheerleaders point to Japan’s ratio, which is over 250%, as proof that the U.S. can borrow a lot more.

These ideas are all badly flawed. Japan is not a good test case because the Japanese buy their own debt (the U.S. relies on foreign investors), and the Japanese economy has barely grown for 30 years (try that in the U.S.).

You can operationally merge the Fed and Treasury, but once it becomes apparent to markets that you are monetizing all the new debt, confidence will erode, rates will climb and this pyramid scheme will collapse.

And, once confidence is lost, citizens can turn to land, gold, silver, natural resources and other hard assets as dollar alternatives. You don’t owe taxes on unrealized gains, so the MMT tax police will have nothing to keep them busy.

Disaster in the Making

MMT is a disaster in the making (although it may take a few years to play out). It’s OK to borrow money if you invest in highly productive assets. But, if you just spend the money to support a stagnant economy with handouts, you’re simply digging a deeper debt hole for yourself.

Multi-trillion dollar deficit spending plans will emerge soon from the new Congress. The Treasury will spend the money. The Fed will buy the Treasury debt with newly printed money.

Eventually, you end up with default, inflation, higher interest rates, higher taxes or all of the above. The U.S. will go broke. It’s not quite the rosy scenario that the MMT crowd would have you believe. Still, it may be coming soon.

And, a clueless Janet Yellen will supervise the entire operation.

Back in 2014, Bloomberg chairman Peter Grauer effectively admitted that the media titan will go “soft” on its China coverage because it “needs to be there” for one reason: Bloomberg terminal sales.

As the NYT reported then, Grauer said that the company should have reconsidered articles that deviated from its core of coverage of business news, because they jeopardized the huge sales potential for its products in the Chinese market. The comments, as the NYT said “represented the starkest acknowledgment yet by a senior Bloomberg executive that the ambitions of the news division should be assessed in the context of the business operation, which provides the bulk of the company’s revenue. They also signaled which of those considerations might get priority.”

Acknowledging the vast size of the Chinese economy, the world’s second-biggest after that of the United States, Mr. Grauer, said, “We have to be there.”

“We have about 50 journalists in the market, primarily writing stories about the local business and economic environment,” Mr. Grauer said in response to questions after a speech at the Asia Society. “You’re all aware that every once in a while we wander a little bit away from that and write stories that we probably may have kind of rethought — should have rethought.”

Grauer’s comments on Bloomberg’s “journalistic priorities” in China reflected what some Bloomberg employees said was “skepticism from the business side about whether investigative journalism is worth the potential problems it could create for terminal sales.”

“Being in China is very much a part of our long-term strategy and will continue to be so going forward,” Mr. Grauer said. “It occupies a lot of our thinking — Dan Doctoroff, our C.E.O.; me; Mike; and other members of our senior team.”

The reason for that is simple: Michael Bloomberg has built his multi-billion fortune on sales of the company’s terminals, which are ubiquitous on bankers’ desks around the world, and account for over 80% of the company $10 billion in revenue. But sales of those terminals in China declined after the company published an article in June 2012 on the family wealth of “president for life” Xi Jinping, at that time the incoming Communist Party chief. After its publication, officials ordered state enterprises not to subscribe to the service. Mr. Grauer did not specifically mention the article about Mr. Xi or any other articles.

So Bloomberg backed off, effectively refusing to cover the illicit practices of the world’s most corrupt regime.

Which is ironic because fast-forwarding to today, Bloomberg reported that Chinese authorities detained Haze Fan, who works for the Bloomberg News bureau in Beijing, “on suspicion of endangering national security.”

“Chinese citizen Ms. Fan has been detained by the Beijing National Security Bureau according to relevant Chinese law on suspicion of engaging in criminal activities that jeopardize national security. The case is currently under investigation. Ms. Fan’s legitimate rights have been fully ensured and her family has been notified,” the Chinese authorities said.

Fan was last in contact with one of her editors around 11:30 a.m. local time on Monday. Shortly after, she was seen being escorted from her apartment building by plain clothes security officials.

Throughout the four days since her disappearance, Bloomberg has sought information on Fan’s whereabouts from the Chinese government and the Chinese embassy in Washington, DC. Her family was informed within 24 hours. Bloomberg LP, the parent of Bloomberg News, on Thursday received confirmation that Fan is being held on suspicion of participating in activities endangering national security.

“We are very concerned for her, and have been actively speaking to Chinese authorities to better understand the situation. We are continuing to do everything we can to support her while we seek more information,” said a Bloomberg spokesperson.

Fan, a Chinese citizen, began working for Bloomberg in 2017 and was previously with CNBC, CBS News, Al Jazeera and Thomson Reuters. Chinese nationals can only work as news assistants for foreign news bureaus in China and are not allowed to do independent reporting.

One wonders what it was the Bloomberg published – or was about to publish – that sparked this latest retaliation, and does this mean that Bloomberg terminal sales in China are about to slide again…

Authored by Bill Blain via MorningPorridge.com,

“A price is just a price… it’s a relative thing.”

How Bonkers is this world? The ECB, IPOs and finally accepting ESG has some good points to make – with caveats! 

If there is a single theme to sum up what a nonsense year 2020 has been…

it’s the British couple who are both over 100, been married 77 years, and haven’t been allowed to see each other for 10 months because of the pandemic. Who do the authorities think they are helping? What kind of society are we for letting it happen?

Or there is the ECB swinging another €500 bln at the Euro-bond market in the expectation it will drive a European recovery next year. Some might wonder if doing the same thing again and again is a sign to be concerned. They’ve been doing for years – ie pumping money into financial assets rather than the real economy –  hoping it will trigger recovery. Nope. It won’t. All its done is institutionalise the European bond markets, kill private financing, distort markets and ultimately it will fundamentally destabilise society through inequality. Another EU big bazooka and inflation tumbles. Brilliant. Definitionally stupid.

The Brightside in Europe is they are finally ungluing the gummed up fiscal policy levers by approving the Recovery Fund.. which will deliver money via grants and loans.. But only to countries that suck up to Brussels. Next Year? Brilliant.  

But if you really want to worry about how euphoric markets are, think about this week’s US IPO market. Toppy or what? I want to know what the retail market is collectively smoking – and please please can I have some?

It’s been truly extraordinary. DoorDash, a food delivery company that’s never made a penny profit is worth $70bln? It exists in a no-barriers-to-entry, highly price competitive, and ultimate risk sector – where if Micky D makes a bad burger they get the blame. It’s also a concept that’s shifting on the value curve. Money ain’t made on deliveries, but in the manufacture of meals:  you probably aren’t getting your Kentucky Fried Rat from the Colonel, but from some Dark Kitchen on an industrial site. Costs are slashed, but they can still charge extra by slapping a posh restaurant’s name on a 50 pence burger from Iceland.

Yesterday’s Airbnb IPO was just completely hat-stand. 

This was a company IPO that analysts were struggling to justify a $40 dollar price last week, and it finally opened at $163 y’day. It’s a very, very mildly profitable company, but is its really worth more than the global hotel industry or a multiple of the package sector? As some wag noted it values each Airbnb property around $13k, so all any competitor needs to do is clone the software and marketing, then pay Airbnb owners $10K to switch to their new firm to become instant billionaires. 

What’s driving all these extraordinary prices is a combination of multiple factors, a conjunction of hatstand market madness, plus a complete and utter suspension of disbelief by an incredulous market of retail marks – the ultimate Jubbs, the greater fools. The big banks and funds will be delighted to take the IPO allocations and run. 

Let me try to explain: Every single day I come up with lots and lots of very clever ideas. My biggest failure has been failing to effectively monetise them. Every so often someone does monetise a clever idea and makes Quintillions. But most clever ideas are not SMART Ideas. Smart Ideas are the ones that really change the world. Sometimes it take a long time to discover a Smart Idea was actually just a clever one…. Usually accompanied by the sound of a bubble popping.

Ultimately, every investor wants to invest in something that is a monopoly and will reap monopoly profits. So they buy into things like Standard Oil, Microsoft, Apple, and Facebook and pretenders like Tesla, Snowflake, AirBnb and the petfood delivery company that is now worth more than the land value of the Emperor’s Palace in Tokyo. Some are safe monopolies – like no one else can make an iPhone. Some are risk-monopolies where regulation to break oil giants, control social media and calls to break up Facebook or deter Amazon are tangible risks. The pretenders might have first mover advantage, but they are vulnerable to competition as they progress. 

If you are Elon Musk you can make lots of noise about the company and extend the illusion it’s a monopoly by controlling the narrative – its not a car company, it’s an energy, self-driving, taxi monopoly. Eventually it bursts. (Credit where credit is due. Even though the spaceship crashed earlier this week, SpaceX is brilliant. It could have become a valid monopoly/duopoly in space launch if Musk hadn’t decided to use it to create his Starlink satellite internet monopoly – which will compete with every other provider of same.)

At the moment the market is being deluged by the money governments and central banks have injected in to stimulate recovery. Oh, you thought that money was being used to create jobs and companies? Wrong. All that free money is pushing up financial asset prices, making the rich richer. Everyone wants to be rich, so everyone (bear with me here) is investing in stocks – which pushes them yet higher confirming what these new investors believe.. stocks can only go higher.

Remember Blain’s Market Mantra No 1: The Market Has But One Objective: To Inflict The Maximum Amount of Pain on the Maximum Number of Participants. 

I read that internet purchases increased by some 63% in the US over the course of the pandemic. Many stocks are rising on the basis the pandemic has accelerated the transition to new tech, like internet shopping, and other tech. Or it could be these things happened because of the virus offering no alternative. When it’s done we’re going to want to spend a Saturday in the shopping mall or high street, or going to luxury hotels (rather than dodgy Airbnb where the owner is filming you in the shower… just saying. It happens.)

The Pandemic was a massive unpredictable shock. The markets have been fuelled by the massive predictable response. The next massive unpredictable shock is what happens when it all reopens and unwinds? Maybe not what you expect. 

Meanwhile… back in La La ESG Land

As readers will be aware I am an avid consumer of anything on the topic of ESG (Environment, Governance and Social) investment… mainly so I can question the assumptions that underly them. It’s long been my opinion Common Sense beats rules-based investments every time. Rules are like taxes – they tend to be “optimised”. Usually badly.

Earlier this week, I stumbled upon an extraordinary piece of ESG frippery. I shall not name them, but a German ratings firm has shocked the global financial community after its’ exhaustive research concluded: France’s CAC40 Index scores slightly better than Germany’s DAX 30 when the average environmental impact of its component stocks is calculated. A fractional difference but a difference! 

Therefore.. As ESG credentials (rather than old fashioned returns or fundamentals) are now top of the list of investment parameters, I suppose we should immediately dump Germany, and buy France till our noses bleed! (Probably not… while being aware of the environment is a plus, other factors also matter.) 

Nicht alles verloren ist for Germany though… Apparently French firms might be greener, but German firm perform better when it comes to Governance and Social issues. The agency says ESG acts like an early warning system for portfolio managers, showing future regulatory risks and associated costs … Hmm? Just like they did for Wirecard and VW’s bogus pollution reporting…? The careful application of common sense would have been better.

The rest of the report droned on about stuff that didn’t really register, till I nearly flatlined when I got to stuff about Sustainable Finance Disclosure Regulations. It’s all so depressing. Finance used to be fun. Can anyone explain what this actually means:

 “The ESG impact score is based on calculating the cost of the externalities of a company’s activities including its supply chain – using well-established, publicly available macro-economic data describing the interdependence of sectors and geographies – for every euro of revenue the company generates.” 

If I had the energy, I could go back, reread the sentence a couple of times and work out what it might mean. But its Friday. Forget it. Life is too short.

However – and this is a big moment because I am about to accept that ESG matters – ESG, corporate social responsibility and sustainability are critical investment components. Maximising shareholder value and returns is one aspect, but to get the potential buyers over the investment line we do need to demonstrate the environmental, social and governance issues around the deal business, structure and management are identified, addressed, solid – and ultimately sustainable.

I am going to add ESG to my fundamentals list. The buy decision on any ticket should include just how the management are addressing their business in terms of climate concerns, what are the social implications of the business and how management is incentivised and accountable. Calling it ESG is fine – even if you have to slap a label on it. 

Until there is a clear definition about what qualifies as “green” or “social” it makes sense to use frameworks like the Sustainability Acccounting Standards Board (SASB) to outline the ESG risks.  At the moment there are green bonds, social bonds, sustainability bonds and a host of competing principals and guidelines. It’s tough out there..

*  *  *

Only a few days to go on this year’s charity appeal. Tomorrow morning Nicky (She-who-is-Mrs-Blain) and I set off on our final 20km hike in aid of this year’s charity appeal – raising money for Walking With The Wounded, helping ex-military with mental health issues. We are Team Morning Porridge! Please read about the charity and make a donation. 

After disappointingly dropping in November, analysts expected preliminary December sentiment data to extend its decline but instead – despite lockdowns spreading virally, jobless claims surging back, and no relief checks from Washington – UMich reports a huge jump from 76.9 to 81.4 for the headline sentiment index!

The rise was led by a spike in ‘current conditions’ to its highest since March, while a measure of expectations improved 4.2 points to 74.7.

Source: Bloomberg

Respondents’ outlook for the economy in the next five years climbed in early December by the most since May 2011…

Source: Bloomberg

The brighter sentiment likely reflects optimism around the imminent distribution of a vaccine, which is seen easing business restrictions and allowing many in-person activities to resume. Even so, the virus continues to spread unchecked, with record cases and deaths, while lawmakers remain at odds over a new aid package.

For the first time since Trump was elected, Democrats are more confident than Republicans…

Source: Bloomberg

Four years ago, UMich Director Richard Curtin wrote, in Consumer Economic Expectations: Persistent Partisan Differences, that the rise in partisanship reflected a basic underlying split in preferred economic policies.

While expressions of partisanship are often couched in raw animus, the primary and sustaining cause lies in differences about how to best provide for fair and equitable growth in income and wealth. Although policy disagreements have always existed, the broad societal agreement that existed in the past has been transformed by persistent cleavages in desired policies. The extreme partisan shifts following presidential elections simply reflect an expected switch in policies in one or the other direction. It will not be easy to reestablish common policy objectives with rampant animosity.

The longer it lasts, however, the greater the drain economic aspirations and motivations.

1-Year Inflation expectations collapsed…

Source: Bloomberg

Broadly speaking, the ‘soft’ survey data is accelerating down to the disappointingly not-v-shaped moves in ‘hard’ real data…

Source: Bloomberg

‘Hope’ is fading fast – and with lockdowns being imposed across the country at holiday-time, we suspect this will collapse soon without some more handouts from Washington, even with the vaccines.

The Australian government has canceled further development of a COVID-19 vaccine after several trial participants had false positive tests for HIV. The vaccine was being developed by the University of Queensland, while Australian biotech company CSL Limited had been under contract to provide 51 million doses. The vaccine had been on schedule for mid-2021, with phase two and three clinical trials due to commence in December.

On Friday, however, Australian Prime Minister Scott Morrison announced that the “University of Queensland vaccine will not be able to proceed based on the scientific advice, and that will no longer feature as part of Australia’s vaccine plan,” adding “I think the decision we’ve made today should give Australians great assurance that we are proceeding carefully, we are moving swiftly, but not with any undue haste here.”

“Our processes will not be compromised. At the end of the day, the Therapeutic Goods Administration – like with any vaccine in Australia – must give their tick-off. Without the tick, there’s no jab when it comes to vaccines in this country. That is true for the Covid-19 vaccine, as it is true for any other vaccine that is administered here in Australia,” Morrison added.

The vaccine was one of four secured by the Australian government, which will now turn its focus to the AstraZeneca vaccine as well as Pfizer’s.

The Government will now look to the AstraZeneca vaccine for Australians.

— 10 News First (@10NewsFirst) December 10, 2020

CSL said in a Friday statement that “following consultation with the Australian government, CSL will not progress the vaccine candidate to phase 2/3 clinical trials.”

According to Australia’s 10 News, the decision to drop the University of Queensland vaccine was over fears that the false positive results would scare Australians away from the vaccine, despite the fact that patients had not actually contracted the disease.

The now-canceled vaxx focused on the COVID-19 “spike protein” using ‘molecular clamp technology’ to lock the protein into a shape which the human immune system can identify and neutralize. To ensure an immune response, the clamp chosen to trick the immune system into attacking includes two fragments of a protein found in HIV, which by themselves do not pose a threat.

Trial participants were advised of the possibility that vaccine-induced HIV antibodies might be detected as a result, but it was nonetheless unexpected. Subsequent HIV tests provided definitive negative results in the trial participants.

While the HIV tests were false positives and there was no risk to the trial participants, significant changes would need to be made to well-established HIV testing procedures to accommodate rollout of this vaccine, the researchers said. The Phase 1 trial will continue, where further analysis of the data will show how long the antibodies persist. –The Guardian

Professor Paul Young, co-lead researcher on the vaccine, said that it would be possible to re-engineer it to avoid false positives but there wasn’t enough time. “Doing so would set back development by another 12 or so months, and while this is a tough decision to take, the urgent need for a vaccine has to be everyone’s priority,” he said.

Health Minister Greg Hunt said that while the HIV test results were false, “the scientific advice is that the risk to vaccine confidence was the principal issue here.”

Australia, meanwhile, has secured contracts for 140 million doses of vaccine, “one of the highest ratios of vaccine purchases and availability to population in the world” according to Hunt, who added “What we can do is vaccinate our population twice over.”

Authored by Katabella Roberts via The Epoch Times,

Credit card companies MasterCard and Visa on Dec. 10 announced they will no longer allow their cards to be used to process payments on pornographic website Pornhub following accusations it showed videos of child sexual abuse.

Pornhub, which is owned by Montreal-based company Mindgeek, came under fire last week after The New York Times reported that the website hosts unlawful content, including nonconsensual pornography and videos of child sexual assault.

In a statement to The Associated Press on Sunday, Pornhub said it is “irresponsible and flagrantly untrue” to suggest that it allows images of the sexual abuse of children on its site.

However, the website later pledged to crack down on illegal content and said it will only allow properly identified users to upload content. It also removed its download function, which meant removed content could easily resurface, and announced that it will be employing a new team of moderators solely to self-auditing the platform for potentially illegal material.

But on Thursday, financial services companies MasterCard and Visa announced they will be terminating the use of credit cards on the site following Mastercard’s own investigations into the site’s content.

In a statement, MasterCard said,

“Today, the use of our cards at Pornhub is being terminated. Our investigation over the past several days has confirmed violations of our standards prohibiting unlawful content. We continue to investigate potential illegal content on other websites.”

Visa was yet to complete its own inquiry but said that it too has decided to block transactions.

“Given the allegations of illegal activity, Visa is suspending Pornhub’s acceptance privileges pending the completion of our ongoing investigation,” it said in a statement on Twitter.

“We are instructing the financial institutions who serve MindGeek to suspend processing of payments through the Visa network. At Visa, we are vigilant in our efforts to stamp out illegal activity on our network, and we encourage our financial institution partners to regularly review their merchants’ compliance of our standards on this and other platforms.”

Pornhub has described the decisions as “extremely disappointing” as they come just two days after the website instituted the “most far-reaching safeguards in user-generated platform history.”

Last year, payment service PayPal stopped Pornhub and providers of videos to the site from making and accepting payments through its site, citing unauthorized transactions.