Tag: finance

As precious metals accelerated higher in the last few days, we joked (kinda) on Twitter that the surge in momentum would soon become a magnet for the new trading gurus manning their desks at home – whether in China or Chinatown – and send it to new all time highs. 

All gold needs to hit 2,500 is for China’s momentum maniacs or the Robinhooders to start chasing it

— zerohedge (@zerohedge) July 22, 2020

One day later, it’s happening as Robinhood users flood into the gold and silver ETFs. For SLV, the number of RH users holding the ETF has surged from around 15,000 to 20,000 in the last few days…

… making it the 16th most popular pick on Robinhood as of the past 24 hours.

In GLD, we have seen less of a sudden surge so far, but the higher it goes the more RH users are buying with over 28,000 now holding the gold ETF…

And in typical Robinhood fashion, every dip is being furiously bought:

Does this spell disaster for the rally in precious metals? With momo chasers piling in at the margin? Well it didn’t seem to hurt TSLA…

And besides, there are plenty of fundamental drivers for re-allocation into precious metals (as opposed to the vapor underlying TSLA’s acceleration), including the resurgence in global negative-yielding debt…

The question is, will CNBC cheer the retail participation in gold and silver as loudly as they celebrate the millennials buying the most expensive stock market ever?

With scant support among Senate Republicans, the White House has agreed to nix a payroll tax cut which President Trump had previously insisted on for the next round of coronavirus relief.

“It won’t be in the base bill,” said Treasury Secretary Steven Mnuchin during a Thursday interview with CNBC, while noting that it might be included in future pandemic relief legislation.

Mr. Mnuchin said the president preferred that the legislation include direct payments to the public, arguing that such a measure offers more immediate benefits to people struggling as a result of the economic fallout from the pandemic.

“He wants to get money into people’s pockets now because we need to reopen the economy,” Mr. Mnuchin said, referring to the president. “One of the issues I think you know about the payroll tax cut is people get that money over time. So, the president’s preference is to make sure that we send out direct payments quickly.” –WSJ

After months of arguing in favor of the payroll tax cut, Trump began to signal that he was willing to drop the issue earlier this week, saying “We’re talking about a lot of things, not just the payroll-tax cut.”

According to the Journal, “Economists and lawmakers in both parties were skeptical about a payroll tax cut, saying it would be inefficient at this moment because it isn’t targeted at the problems in the labor market. They said it wouldn’t provide a large enough incentive for hiring and retaining workers and that it would do little for those who aren’t working.”

Authored by Ivan Pentchoukov via The Epoch Times,

The Twitter hackers who breached the accounts of Barack Obama, Bill Gates, Elon Musk, and more than 100 other targets accessed the direct message inboxes of up to 36 of the victims, the social media giant announced on July 22.

“We believe that for up to 36 of the 130 targeted accounts, the attackers accessed the [direct message] inbox, including one elected official in the Netherlands. To date, we have no indication that any other former or current elected official had their [direct messages] accessed,” the company said in a statement.

Direct messages on Twitter are a private form of communication which is never displayed to the public. While Twitter did not reveal which accounts had their inboxes compromised, the news added significant suspense to the incident because the hack impacted the who’s-who in international business and entertainment, including Kanye West, Kim Kardashian, Jeff Bezos and Warren Buffett.

Twitter’s disclosure that there is no indication that “any other former or current elected official had their DMs accessed,” suggests that the inboxes of Joe Biden and Mike Bloomberg, both former elected officials, were not broken into.

Twitter said it had conducted a “complete review of all targeted accounts” before disclosing the news of the compromised inboxes. The company said it would be contacting the owners of the accounts.

On July 15, hackers gained access to 130 Twitter accounts and posted messages containing a common bitcoin scam. The attack generated just over $117,000, prompting cybersecurity experts to assess that the bitcoin scheme was a cover for a more sinister breach.

Twitter said the hackers used social engineering, a low-tech approach which involves manipulating Twitter employees. The attackers gained access to an internal Twitter dashboard available only to support staff and used it to reset the passwords for 45 accounts. The hackers then logged into the accounts and sent tweets on their behalf.

Twitter had announced earlier that the attackers also downloaded the complete Twitter data from eight accounts using the “Your Twitter Data” tool. None of the eight accounts were “verified”, the company said, meaning it did not impact the major business and politics luminaries.

The FBI opened an investigation into the hack. Twitter said it is cooperating with authorities.

While Twitter has had security incidents in the past, the July 15 attack was by far the most brazen and far-reaching. In 2017, a rogue employee briefly deleted President Donald Trump’s account. Last year, a hacker gained access to Twitter CEO Jack Dorsey’s account and posted racist messages.

Twitter’s share price has not been affected by the breach.

Gordon Johnson of GLJ Research put out a note after Tesla’s earnings telling us what we already know for the most part: Tesla’s growth story is an illusion and the company was only able to turn a profit when it reported yesterday due to the sale of regulatory credits an other financial engineering. 

Post-earnings, Johnson wrote that it was how the company achieved the numbers that was the real feat.

Johnson had predicted prior to earnings that the company would turn a profit, though even his wildest expectations in terms of how many regulatory credits the company would sell would turn out to be way short of the massive $428 million worth that they sold this quarter (a new record).

Without regulatory credit sales, as @TeslaCharts points out, it is a starkly different picture for Tesla’s earnings:

Johnson wrote in his note that Tesla’s CFO, Zach Kirkhorn, pointed out on the company’s conference call that the ongoing sale of regulatory credits was not a guarantee going forward.

“We don’t manage the business with the assumption that regulatory credits will contribute in a significant way to the future. Yeah, I do expect regulatory credit revenues to double in 2020 relative to 2019, and it will continue for some period of time, but eventually this stream of regulatory credits will reduce,” Kirkhorn said on the call. 

Johnson also noted that in Q2, the company broke out its A/R distribution by segment for the first time:

That is, in 2Q20, TSLA, for the first time, disclosed that its accounts receivable (“A/R”) distribution was segmented by: (1) $594mn – Regulatory Credits (40%), (2) $448mn – Auto Sales (30%), and (3) $448mn – Mystery (30%).

He then made note of the fact that there were tons of regulatory credit revenues still stuck in A/R. He thinks this is a result of revenue recognition engineering – or even Tesla possibly not selling the credits to begin with:

Stated differently, half of 1Q20, and all of TSLA’s 2Q20 regulatory credit revenues are still in accounts receivable (“A/R”). So what’s the big deal? Well, we interpret this as one of two things, namely: (1) TSLA sent a regulatory credit invoice to a customer and claimed it as revenue up-front (i.e., we’ll give you a price break on the regulatory credits you are buying, and let you pay us at a later date when the credits are actually needed, if you “buy” the credits now – such a transaction would create a receivable), or (2) TSLA did not sell the credits to anyone. We see the former as the most likely scenario.

Reading the tea leaves, Johnson also notes that this was a key quarter to make numbers (S&P inclusion depended on it) and that the company immediately guided these credits lower and backed away from them for Q3:

Why? Well, when looking at TSLA’s credit-revenue-per-car-sold by quarter 1Q18-2Q20, we notice a sharp spike in both 1Q20 and 2Q20. Furthermore, and also rather telling, coincidentally right after the quarter in which TSLA needed to achieve positive GAAP net income (i.e., 2Q20), its CFO is guiding 3Q20 regulatory credit sales to fall >50% QoQ (likely pushing the company back into deep losses) – at risk of stating the obvious, we see TSLA’s 1H20 quarterly credit sales as highly arbitrary/managed/inorganic.

Recall, pre-earnings Johnson had predicted regulatory credit sales of $249 million. 

Johnson’s conclusion post-earnings is that Tesla may have “pulled forward cashless/one-time regulatory credit sales based on cars Tesla may not have sold to people who have not paid for them, enabling ‘goal-sought’ 100% gross-margin ‘paper’ sales in order to be included in the S&P 500.”

“We see this quarter’s earnings as among the lowest in TSLA’s history,” he concluded.

For our full wrap-up of Tesla’s earnings yesterday, you can view our write-up here.

By Michael Every of Rabobank

Monocle Vision on US-China tensions

“Houston, we have a problem” was a headline I would have run with in yesterday’s Global Daily if: (1) I hadn’t finished writing it before the news broke about the US kicking China out of its consulate in Texas for various alleged nefarious activities; and 2) Bloomberg hadn’t stolen half of it after it had. (However, Bloomberg ran with just “We have a problem”, which is one of the greatest comedy missed open goals since someone asked my mum back in the 1980s “Where are the Andes?” and she blurted out “The end of your armies!” to general confusion rather than the correct response –usable only once in a lifetime at best– which is “On the end of your wrist-ies”).

Yet the Chinese consulate issue itself is no laughing matter. Barely a day goes by without some new line in the sand being crossed between the US and China, and this is diplomatically almost unprecedented – but then so much else is too nowadays. It is additionally reported that the US is seeking a Chinese individual in the San Francisco consulate who the FBI believe is responsible for industrial espionage – and this is claimed not to be an isolated case. Indeed, President Trump is also reportedly threatening to close further Chinese diplomatic missions in the US ahead. Meanwhile, China is moving to close the US consulate in Chengdu in response, and Wuhan and Hong Kong are also possible targets; and it has also retaliated against the UK for what it sees as separate diplomatic provocations over Hong Kong by last night blocking transmission of the English Premier League. The US NBA will be sweating very heavily, no doubt.

Once again we see both the US and China getting dragged into an escalating tit-for-tat, and we see it spilling over into areas that one would simply not have imagined could happen: which is, of course, precisely what does happen when two economic giants start to disentangle themselves over clashing political-economy and geopolitical positions. It’s just not something that most market scribblers have ever seen. After all, one needs to be in ones late-40s to even properly recall the first Cold War.

US Secretary of State Pompeo is going to give a speech today to commemorate 50 years since ‘Nixon went to China’ and brought the country back in to the world economy from behind the Bamboo Curtain. Please let’s not forget that’s how it actually went. Yes, China had to decide to open up and take undertake bold and visionary reforms; but the US and the West had to also allow China in as well. People tend to forget that fact today. This was a house the US built post-WW2 on blood, sweat, and tears –as well as realpolitik– not a global architecture that emerged fully formed, effortlessly, everywhere, as reading only the ‘Bloombergs’ of this world one would presume is the case.

Pompeo is likely to take out the biggest sabre yet and perhaps not even rattle it: he might go so far as to lick the blade, so to speak. It is almost certainly going to be a verbal evisceration of the Chinese Communist Party, a confrontational rhetorical thread he has been exploring for some time now. The key question is if it will also be a further US escalation with concrete actions to match given the significance of the anniversary. Meanwhile, Bloomberg plaintively tries to report that, yes, China is still buying US soybeans. Which, as we know, seems to be the only metric that matters to both ‘Bloombergs’ and President Trump, most of the time.

If having lived longer and/or reading more widely is a good thing to have done at present if one wants to understand what is actually going on, it also helps to have travelled a bit outside of the generic ‘Monocle’ world of glamorous (and not-so glamorous) hotels that the global business and financial elite used to circuit so frequently until recently.

Believe it or not, there are still parts of the world with geographic proximity and real economic motivations for all kinds of trade exploiting their different factor advantages – and yet which see virtually no goods, or people, or money trickle over the border. Perhaps they won’t be the anomaly for much longer, however. (On which note, France has de facto joined the list of countries banning Huawei from national 5G projects, and even Deutsche Telekom has just struck a deal with Ericsson, it appears; a US ban on TkTok on all government devices is also a step closer.)

Of course, we live in a seamless globalised world where all anyone cares about is yield and risk on/risk off, a destabilising dynamic that Karl Marx described prophetically in his works that led to the first Cold War. As a result, even this US-China diplomatic escalation doesn’t matter – for now. Yes, CNY is at 7.0 again, but that’s hardly a slump; yes, 10-year Treasuries are below 0.60% again, but there was no risk of them rising anyway and there are pressing local reasons for that (like the Republicans proposing to slash extended unemployment benefits from USD2,400 a month to….USD400 a month. That will do wonders for the V-shaped recovery!); and meanwhile the currencies you don’t want to hold in any kind of serious crisis, like EUR and AUD, are still holding up well. Indeed, as I told Bloomberg would transpire when asked about Houston yesterday, five minutes later things will rally as usual.

However, as I also stated, despite this is still the latest escalation in a series that will end up in an inflection point that means a real crash for US-China relations, for Hong Kong, and for the Yuan (with its mighty 1.76% share of global SWIFT payments, as released today), among other things, if the dynamic doesn’t change; and yet markets will seemingly refuse to notice until they get shot in the head.

That was something that actually happened a lot during the Cold War too.

Yesterday, as California and Texas set new records for daily COVID-19 cases and deaths, Brazil reported more than 60k cases in a day. There hasn’t been much in the way of major COVID-19 headlines this morning, but there have been a few notable reports from around the world, particularly in Asia.

Australia, for example, reported its highest daily number of coronavirus-related deaths in three months as new infections continued to climb in Australia’s second-most-populous state. Victoria state said it had confirmed another 403 infections, while five people had died from the virus in the last 24 hours. The daily death toll was Australia’s biggest since April. Tokyo also reported 366 new cases on Thursday, its latest record-breaking number.

In Iran, officials confirmed 221 new deaths from the virus, bringing the nationwide death toll to 15,074, according to the Health Ministry. Another 2,621 people tested positive for COVID-19 in the last 24 hours, raising the overall count to 284,034, according to a spokesperson for Iran’s health ministry.

As its outbreak continues to worsen, India just reported an all-time high of nearly 45,600 new infections over the last day, as the spread of the virus accelerates in the world’s second most populous country. India’s confirmed coronavirus caseload has now risen to 1.2 million, 28,890 of whom have died. The country also reported a record high of 1,120 deaths in the same period. However, the tally also included the addition of more than 444 earlier coronavirus deaths in the southern State of Tamil Nadu that were not previously attributed to the virus.

Northeastern Spain’s Catalonia region reported 721 new  cases on Wednesday, with 3/4ths of these found in the Greater Barcelona Area.

Russia reported 5,848 new cases, pushing its national tally to 795,038, still the fourth-largest in the world. More than 12,700 deaths have been recorded  to date and more than 570,000 have recovered. SA has roughly half of total cases in South Africa.

South Africa’s confirmed coronavirus cases are rapidly closing in on 400,000 as the country suffers a new daily high of 572 deaths. In terms of reported cases, SA is now the world’s fifth worst-hit county.

South Africa is now one of the world’s top five countries in terms of reported virus cases, and it makes up more than half of the cases on the African continent with 394,948. Deaths are at 5,940.

Public hospitals are struggling as patient numbers climb, and more than 5,000 health workers have been infected.

Finally, China’s National Health Commission has reported 22 new cases of the virus on the mainland on Thursday, with most of them discovered in the far western region of Xinjiang where mass testing, and a strict lockdown, is under way.

Urumqi, capital of NW China’s #Xinjiang Uygur autonomous region, is carrying out free nucleic acid tests for all residents and people who are visiting the city, in a bid to screen for novel #coronavirus infections and reduce the risk of the epidemic spread. #Covid_19 pic.twitter.com/d55Dvf3GAy

— China Daily (@ChinaDaily) July 23, 2020

The Trump administration is expecting that trillions of dollars in fiscal injections with trillions more of monetary crack from the Federal Reserve can boost the economy and revert economic activity to the “good ol’ days.” However, decades of Democratically-controlled big government in inner cities is learning that the promise of progressive policies and printing/borrowing their way out of economic collapse has yet to prevent social decay, let alone, socio-economic turmoil within American cities. 

It’s why President Trump is sending hundreds of federal agents to inner cities as record-high stock market prices have yet to translate into economic revival for “lawless” communities where high unemployment plagues low-income households. 

The administration can blame the other political party for the socio-economic decay, or we can simply point the finger at decades of failed monetary policy, resulting in the widest wealth inequality in history. So when a virus-induced recession comes along, inner-city households with no savings, insurmountable debts, and non-asset holders, are instantly wiped out when businesses close, and layoffs surge. 

The chaos unfolding in Chicago is a perfect example of social disintegration. After years of worsening murder rates – earning the city the nickname ‘Chiraq’, there’s now an armed gang of children carjacking folks at gunpoint. 

Chicago police say the children, ages 10-17, have been on a carjacking spree across Chicago’s South Side, which started in late June. 

The group of kids, in two incidents, have discharged weapons in broad daylight as they approached their victims.

People in the community are terrified about these armed kids:

“I’m scared to use my garage. I don’t feel safe in my neighborhood,” carjacking victim and school teacher Alyssa Blanchard told Fox 5.

Blanchard said her BMW was stolen and used by the kids to carjack a woman at Trinity Hospital. 

“I don’t want to have to tell my kid about how some young woman was killed or shot with kids using my vehicle. It was traumatizing,” she said.

Blanchard said she was carjacked on July 14 by the children.

 “It was so instantaneous … I was just scared for my life. I thought, ‘this is it,'” she said.

Blanchard said she was horrified to see young children involved in this type of violent crime.

Maybe it’s time for local government administrators to stop ignoring the social-economic collapse of American cities uner their watch and cease the farce of ‘defunding the police’ – how is that going to make the scared people above feel any safer?

While the president’s plan to send federal law enforcement into cities is a way to get the collapse under control – it certainly won’t solve the wealth, health, and education inequalities that have been building for decades among low-income households. Nevertheless, handing out free money, similar to universal basic income, won’t solve the wealth inequality problem.

What’s even more ridiculous is Democratic freshman representative Alexandria Ocasio-Cortez’s latest comment about surging inner-city crime is because low-income folks are “stealing bread to feed their kids.” 

Deep structural change is needed; at the moment, there are no solutions offered by the administration and the central bank that will solve the inner city crisis. 

So, in the meantime, kids running around with guns in Chicago, reenacting what they saw on the Grand Theft Auto video game, is simply not surprising. Another thing to remember, some Democratically controlled cities are refusing to jail minors as police departments are being defunded, which allows criminal gangs to employ kids to steal cars. This is also happening in Baltimore…. 

The first rise in jobless claims since March prompted a brief Tyson-esque “punch in the face” of reality for the incessant dip-buyers in the stock market…

And bond yields are sliding to near cycle lows once again…

An additional catalysts for the derisking was back to back interviews with Mnuchin and Hoyer on CNBC which spooked investors over whether a CARES Act ‘bonus’ extension is coming (and Republicans proposing to reduce extended unemployment benefits from $2,400 a month to $400 a month as Hoyer demands 100s of billions for states and cities).

The following is an excerpt of a Chart Book featured on The Felder Report PRO:

Just three stocks, Apple, Amazon and Microsoft, make up more than 16% of the S&P 500 Index and over a third of the Nasdaq 100 Index.

Together they are now valued at nearly $5 trillion. That’s larger than the entire economy of Germany and roughly the size of the Japanese economy. 

What is really most astounding, though, is the aggregate valuation of these three behemoths relative to their free cash flow.

Only at the peak of the Dotcom Mania have we see anything like it – which begs the question: ‘If that was a bubble, what’s this?’