Tag: finance

In what appears to be yet another strike against public officials like LA County’s Barbara Ferrer – that is, Democrats and others who insist that lockdowns should continue perhaps until a vaccine has been discovered and that police should punish anyone who dares violate these orders – a study from the Korean Centers for Disease Control and Prevention has found that patients who test positive for COVID-19 after recovering from the illness appear to be shedding dead copies of the virus.

That would suggest that these patients are not infectious, the scientists said, which helped dispel fears that some patients can remain infectious for months after being infected. While the study doesn’t answer every question about the virus’s longevity – such as patients who almost appear to have developed a “chronic” form of the illness because their symptoms have persisted for so long.

But still, the finding was greeted as a major relief, and, if anything, should encourage economies to reopen more quickly, as a potential trigger for reinfection that had panicked some experts appears to be a non-issue.

The research also undermines the reliability of ‘antibody’ tests like the ones NY Gov Andrew Cuomo insisted would be ‘critical’ for NY’s reopening.

The results mean health authorities in South Korea will no longer consider people infectious after recovering from the illness. Research last month showed that so-called PCR tests for the coronavirus’s nucleic acid can’t distinguish between dead and viable virus particles, potentially giving the wrong impression that someone who tests positive for the virus remains infectious.

The research may also aid in the debate over antibody tests, which look for markers in the blood that indicate exposure to the novel coronavirus. Experts believe antibodies probably convey some level of protection against the virus, but they don’t have any solid proof yet. Nor do they know how long any immunity may last.

A recent study in Singapore showed that recovered patients from severe acute respiratory syndrome, or SARS, are found to have “significant levels of neutralizing antibodies” nine to 17 years after initial infection, according to researchers including Danielle E. Anderson of Duke-NUS Medical School.

Other scientists have found higher levels of IgM, an antibody that appears in response to exposure to an antigen, in children, according to an article published on medRxiv. That suggests younger populations have the potential to produce a more potent defense against Covid-19. The study has not been certified by peer review.

Bloomberg offers a succinct review of some of the research into the infectious qualities of the virus, and the efficacy of antibodies in keeping patients safe from reinfection. As BBG shows, studies of SARS, which is related to the virus that causes COVID-19, suggest that antibodies keep patients safe for years, undermining warnings about a possible second wave, or worries that the virus might become endemic, which were recently raised by the WHO.

The research may also aid in the debate over antibody tests, which look for markers in the blood that indicate exposure to the novel coronavirus. Experts believe antibodies probably convey some level of protection against the virus, but they don’t have any solid proof yet.

Nor do they know how long any immunity may last.

A recent study in Singapore showed that recovered patients from severe acute respiratory syndrome, or SARS, are found to have “significant levels of neutralizing antibodies” nine to 17 years after initial infection, according to researchers including Danielle E. Anderson of Duke-NUS Medical School.

Other scientists have found higher levels of IgM, an antibody that appears in response to exposure to an antigen, in children, according to an article published on medRxiv. That suggests younger populations have the potential to produce a more potent defense against Covid-19. The study has not been certified by peer review.

The study’s findings are apparently convincing enough for South Korean health authorities to no longer require patients to be re-tested after they’ve recovered from COVID-19 and all symptoms have subsided.

As a result of the findings in the South Korea study, authorities said that under revised protocols, people should no longer be required to test negative for the virus before returning to work or school after they have recovered from their illness and completed their period of isolation.

“Under the new protocols, no additional tests are required for cases that have been discharged from isolation,” the Korean CDC said in a report. The agency said it will now refer to “re-positive” cases as “PCR re-detected after discharge from isolation.”

Some coronavirus patients have tested positive again for the virus up to 82 days after becoming infected. Almost all of the cases for which blood tests were taken had antibodies against the virus.

If nothing else, this study is just the latest reminder of how much we don’t know about the virus.

Authored by Charles Hugh Smith via OfTwoMinds blog,

A Covid-19 vaccine, or lack thereof, will have zero effect in terms of reversing these cycles. Call it Fate, call it karma, call it what you will, but the cycles have aligned and nothing can stop the unraveling of all that was foolishly presumed to be permanent.

We like to think we’re in charge and that technology conquers all, but history moves in cycles that are larger than any person, corporation, elite or (gasp) technology. My first version of the chart below was drawn in 2008, when the Global Financial Meltdown revealed the cracks in the happy-story facade of permanent wonderfulness based on the amazing magic of borrowing / printing ever greater sums of currency, a.k.a. “money.”

Longtime correspondent Cheryl A. suggested I revisit the alignment of long-wave cycles, and so let’s start by what the study of cycles is not: it is predictive in terms of trends and turning points, not precise time or amplitude targets. In effect, the study of cycles is the study of human nature as it plays out in long-term social, political and economic dynamics.

Sir John Glubb’s succinct and deeply informed 1978 essay The Fate of Empires lists these stages of social development and decay that manifest as the rise and decline of empires:

• The Age of Pioneers (outburst or Boost Phase)

• The Age of Conquests

• The Age of Commerce

• The Age of Affluence

• The Age of Intellect

• The Age of Decadence

The slippery slope to collapse–decadence–is characterized by greed, corruption, irreconcilable internal political rifts, moral decay, frivolity, materialism–hmm, sound familiar?

The global status quo sped through The Age of Intellect (postmodernism) with little to show for the vast expenditure of resources, and is now firmly in the final terminal stage of decadence and collapse.

All of this fits the S-Curve model which I’ve described here many times, for example:

As I discussed a few months ago in The Taxonomy of Collapse (December 9, 2019), any number of events or trend reversals can trigger the rapid decline and collapse of what was widely viewed as permanent.

The book The Fate of Rome: Climate, Disease, and the End of an Empire makes a compelling case that the Western Roman Empire centered around the Mediterranean suffered from a slow environmental transition from an unusually wet era that enabled grain to be grown in previously marginal areas to a drier era that no longer supported the immense grain harvests needed to feed the empire.

The imperial machinery accustomed to there’s always more somewhere refuses to trim its expenses, elites refuse to lessen their skim, and since the fat of elite excess is retained, eventually the muscle of military power and trade decay, leaving a hollowed out empire on the edge of a precipice awaiting one final kick into the abyss.

The Covid-19 pandemic is the final kick into the abyss. Triggers of collapse can overlap, of course, accelerating the final decline, and hence our interest in long-wave cycles that align in the present era.

All complex, tightly bound systems are intrinsically fragile and prone to disruption; we don’t see the fragility or vulnerabilities until the decline has reached the terminal phase.

The higher up the wealth-power pyramid the observer is, the more prone they are to a magical-thinking belief that the status quo is forever, even as it is crumbling around them. I discussed this earlier this month in Our Inevitable Collapse: We Can’t Save a Fragile Economy With Bailouts That Increase Fragility (May 1, 2020).

Let’s consider the four overlapping/aligning cycles depicted on this chart. I could have added more, for example Glubb’s cycle of imperial expansion and decline, or Peter Turchin’s cycle of social integration and disintegration which he explained in his 2016 book Ages of Discord: human history manifests cycles of social disintegration and integration in which the impulse to cooperate in large social structures waxes and wanes.

Turchin identified 25-year cycles that combine into roughly 50-year cycles, comparable (though not identical with) Kondratieff’s economic cycles.

These 50-year cycles are part of longer 150 to 200-year cycles that move from cooperation through an age of discord and disintegration to a new era of cooperation.

This work draws upon his previous books, including War and Peace and War: The Rise and Fall of Empires, which I referenced in Following in Ancient Rome’s Footsteps: Moral Decay, Rising Wealth Inequality (September 30, 2015) and The Lesson of Empires: Once Privilege Limits Social Mobility, Collapse Is Inevitable (April 18, 2016).

These long cycles parallel the cyclical analysis of David Hackett Fischer, whose masterwork The Great Wave: Price Revolutions and the Rhythm of History I’ve referenced many times over the years, most recently in We’ve Entered an Era of Rising Instability and Uncertainty (July 18, 2016).

Turchin’s model identifies three primary forces in these cycles:

1. An over-supply of labor that suppresses real (inflation-adjusted) wages

2. An overproduction of parasitic Elites

3. A deterioration in central state finances (over-indebtedness, decline in tax revenues, increase in state dependents, fiscal burdens of war, etc.)

These combine to influence the social order, which is characterized in eras of discord by declining loyalty to self-serving special interests (disintegration).

The four cycles depicted are:

1. The cycle of credit expansion and contraction, which is now in the final blow-off stage of unsustainable credit expansion (bubble) which will inevitably lead to renunciation of debt (credit collapse) and global depression.

2. The generational cycle (4 generations or approximately 80 years) of American history which leads to nation-changing social, political and economic upheaval (The American Revolution: 1781 +80 years = Civil War, 1861 +80 years = 1941, World War II + 80 years = 2021) as described in the book The Fourth Turning.

3. The 100+ year cycle of price inflation and stagnation of wages’ purchasing-power which began around 1901 is now reaching the final stage of widespread turmoil, shortages, famine, conflict and crisis. (This can be viewed as aligned with Turchin’s cycle of social disorder and disintegration.)

4. The demographic cycle: the workforce stops expanding and starts shrinking while the population of dependent elderly explodes higher, triggering a decline in earnings and the tax base just as taxes must increase to pay for the care of the rising population of elderly. (This is one dynamic in Turchin’s deterioration in central state finances.)

All of these cycles aligned around the Global Financial Meltdown of 2008-09, and elites have done nothing but kick the can down the road for over a decade in an ad-hoc explosion of TINA (there is no alternative). Nothing that’s broken has been fixed; all that’s been done is trillions in currency has been borrowed or printed to paper over the dissolution, decay and decline.

— The demographic cycle has only accelerated.

— The expansion of credit has now reached extremes no one thought possible, much less necessary, just 15 years ago.

— The generational cycle is playing out perfectly, with Trump, Brexit, Yellow Vests, etc. all erupting a few years before the terminal crisis begins in 2021.

— Asset inflation has exploded higher since the late 1990s in one asset class after another until now it’s the Everything Bubble. Despite official claims of low inflation, the costs of healthcare, childcare, higher education, rent and other essentials has skyrocketed in the past decade, and the cost of tradable goods is now beginning to accelerate as globalization and financialization unravel long supply chains and zombie corporations.

Resource depletion and geopolitical conflicts could create scarcities that the status quo has long dismissed as “impossible”–scarcities that could push prices for necessities through the roof.

The future won’t be as placid, secure and predictable as the status quo would have you believe. A Covid-19 vaccine, or lack thereof, will have zero effect in terms of reversing these cycles. Call it Fate, call it karma, call it what you will, but the cycles have aligned and nothing can stop the unraveling of all that was foolishly presumed to be permanent.

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Grimes’ mother, and grandmother to Elon Musk and Grimes’ latest child, has put the Tesla CEO on blast on Twitter.

Perhaps tired of watching her almost-son-in-law act like a jackass publicly or perhaps just annoyed that her grandchild is named “X Æ A-12”, Elon Musk’s money and fame, which usually save his ass, don’t seem to be winning over his baby mama’s mama.

Grimes’ mother is Canadian prosecutor and arts advocate Sandy Garossino.

Responding to Musk’s Tweet a couple of days ago to “Take the red pill” – a phrase that is used by men’s rights activists who are “presumedly unhappy over women making their own choices” according HuffPo – Grimes’ mother responded with two tweets that have since been deleted.

In the first, she asked: “If your partner went through a challenging pregnancy and childbirth in the last two weeks… and you were over 16 years old, would you be blaring MRA bullshit on Twitter right now?”

In a second Tweet, Grimes’ mother reminded Musk that the child was “Not yet 2 weeks old” in response to someone reminding Musk to maybe lay off Twitter, since he has a child to take care of. 

Recall, Musk and his baby’s mother engaged in a Twitter spat just hours after the child was born about what the child’s name means.

That was, of course, hours after Musk Tweeted out a photograph of his newborn child with faux-tattoos on its face.

It is the first child for Grimes, but the seventh for Musk, who has six sons with his ex-wife Justine Musk. 

Authored by William Smith via TheAmericanConservative.com,

Fittingly, the Federal Bureau of Investigation (FBI) was founded by a grandnephew of Napoleon Bonaparte, Attorney General Charles J. Bonaparte, during the Progressive Era. Bonaparte was a Harvard-educated crusader. As the FBI’s official history states, “Many progressives, including (Teddy) Roosevelt, believed that the federal government’s guiding hand was necessary to foster justice in an industrial society.”

Progressives viewed the Constitution as a malleable document, a take-it-or-leave-it kind of thing. The FBI inherited that mindset of civil liberties being optional. In their early years, with the passage of the Espionage and Sedition Acts during World War I, the FBI came into its own by launching a massive domestic surveillance campaign and prosecuting war dissenters. Thousands of Americans were arrested, prosecuted, and jailed simply for voicing opposition. 

One could write a long history of FBI abuses and failures, from Latin America to Martin Luther King to Japanese internment. But just consider a handful of their more recent cases. The FBI needlessly killed women and children at Waco and Ruby Ridge. Anyone who has lived anywhere near Boston knows of the Bureau’s staggering corruption during gangster Whitey Bulger’s reign of terror. The abuses in Boston were so terrific that radio host Howie Carr declared that the FBI initials really stood for “Famous But Incompetent.” And then there’s Richard Jewell, the hero security guard who was almost railroaded by zealous FBI agents looking for a scalp after they failed to solve the Atlanta terrorist bombing. 

But it was 9/11 that really sealed the FBI’s ignominious track record. The lavishly funded agency charged with preventing terrorism somehow missed the attacks, despite their awareness of numerous Saudi nationals taking flying lessons around the country. Immediately after 9/11, the nation was gripped by the anthrax scare, and once again the FBI’s inability to solve the case caused them to try to railroad an innocent man, Stephen Hatfill.

With 9/11, the FBI also began targeting troubled Americans by handing them bomb materials, arresting them, and then holding a press conference to tell the country that they had prevented a major terrorist attack—a fake attack that they themselves had planned. 

9/11 also opened the floodgates to domestic surveillance and all the FISA abuses that most recently led to the prosecution of Michael Flynn. I am no fan of Flynn and his hawkish anti-Islamic views, but the way he was framed and then prosecuted really does shock the conscience. After Jewell, Hatfill, Flynn, and so many others, it’s time to ask whether the culture of the FBI has become similar to that of Stalin’s secret police, i.e. “show me the man and I’ll show you the crime.”

I am no anti-law enforcement libertarian. In a previous career, I had the privilege to work with agents of the Drug Enforcement Administration (DEA) and they were some of the bravest people I have ever met. And while the DEA can be overly aggressive (just ask anyone who has been subjected to federal asset forfeiture), it is inconceivable that its agents would plot a coup d’état against the president of the United States. The DEA sees their job as catching drug criminals; they stay in their lane. 

For the FBI, merely catching bad guys is too mundane. As one can tell from the sanctimonious James Comey, the culture at the Bureau holds grander aspirations. Comey’s book is titled A Higher Loyalty, as if the FBI reports only to the Almighty. They see themselves as progressive guardians of the American Way, intervening whenever and wherever they see democracy in danger. No healthy republic should have a national police force with this kind of culture. There are no doubt many brave and patriotic FBI agents, but there is also no doubt they have been very badly led.

This savior complex led them to aggressively pursue the Russiagate hoax. Their chasing of ghosts should make it clear that the FBI does not stay in their lane. While the nation’s elite colleges and tech companies are crawling with Chinese spies who are literally stealing our best ideas, the chief of the FBI’s Counterintelligence Section, Peter Strzok, spent his days trying to frame junior aides in the Trump campaign. 

Some conservatives have called for FBI Director Christopher Wray to be fired. This would accomplish nothing, as the problem is not one man but an entire culture.

One possible solution is to break up the FBI into four or five agencies, with one responsible for counterintelligence, one for counterterrorism, one for complex white-collar crime, one for cybercrimes, and so on. Smaller agencies with more distinctive missions would not see themselves as national saviors and could be held accountable for their effectiveness at very specific jobs. It would also allow federal agents to develop genuine expertise rather than, as the FBI regularly does, shifting agents constantly from terrorism cases to the war on drugs to cybercrime to whatever the political class’s latest crime du jour might be.

Such a reform would not end every abuse of federal law enforcement, and all these agencies would need to be kept on a short leash for the sake of civil liberties. It would, however, diminish the ostentatious pretension of the current FBI that they are the existential guardians of the republic. In a republic, the people and their elected leaders are the protectors of their liberties. No one else. 

Eager to show geopolitical rivals like China it’s operationally ready amid the coronavirus pandemic still restricting US bases and personnel around the world, the Pentagon has ordered the COVID-19 stricken nuclear aircraft carrier USS Theodore Roosevelt back out to sea this week.

It’s been two months since an outbreak on board which eventually witnessed 10% test positive for the virus forced the carrier to divert its regular mission in the West Pacific to dock at Guam, where more than 4,000 of the 4,800 crew members had to enter quarantine on shore. 

But now the crew is making final preparations to return to sea this week, AP reports, even though some 1,800 sailors are still in quarantine on shore. 

The ship will sail which a smaller crew of about 3,000 sailors, despite the alarming instance of 14 sailors actually testing COVID-19 positive for a second time after already having the virus as we detailed at the end of last week.

Navy Capt. Carlos Sardiello told AP when pressed over whether the ship is actually ready to conduct missions despite the smaller crew size: 

“Do I have a crystal ball? I do not. But I think we have set the conditions for a high probability of success, and we’re going to go to sea and do our mission.”

It doesn’t sound exactly convincing — at least not through Beijing or Moscow’s eyes, who are likely watching very closely. Per the AP citing an anonymous military source, the carrier will resume missions in the Pacific before returning to its home port of San Diego. It appears an attempt to simply get the stricken vessel and crew members safely back to the US coast with as graceful an exit as possible. 

No doubt whatever limited ‘missions’ it conducts, it’s meant more to signal Beijing that ‘all is well’ — given that in mid-April at the height of the crisis Chinese PLA military spokesman appeared positively gleeful that the carrier and other ships had been hampered by the virus.

CNN described at the time of a PLA English-language media report: “A Chinese naval flotilla headed into the Pacific over the weekend, evidence that the People’s Liberaty Army Navy has done a much better job controlling coronavirus than the US Navy, according to a story posted on the PLA’s English-language website.”

Top Pentagon officials, however, have consistently emphasized continued operational readiness despite the virus set back, which also resulted in the Roosevelt’s commander being dismissed, and even the Secretary of the Navy over botched handling of the whole situation. 

“We’re still capable and we’re still ready no matter what the threat,” Joint Chiefs Chairman General Mark Milley had responded in wake of Chinese taunts last month. “I wouldn’t want any mixed messages going out there to any adversaries that they can take advantage of an opportunity, if you will, at a time of crisis,” he added. “That would be a terrible and tragic mistake if they thought that.”

Authored by Paul Joseph Watson via Summit News,

A Cartoon Network show is teaching kids about “intersex, non-binary” gender identities.

A clip from the Steven Universe show made in partnership with the Dove Self-Esteem Project was uploaded to Twitter in which one of the characters says, “Let’s talk about social media, this is my page.”

The profile page belonging to the character reads “Intersex, non-binary, they-them.”

LGBT propaganda targeting children on Cartoon Network pic.twitter.com/nNWexq6POk

— Strucker (@BaronStrucker) May 18, 2020

As the character is scrolling through the social media timeline, the words “Intersex rights are human rights!” and “Intersex Awareness Day October 28th” are displayed.

Steven Universe, which was also made into a movie last year, was created by animator Rebecca Sugar, a self-described “bisexual non-binary woman,” an identity which, according to her Wikipedia page, “has encouraged her to stress the importance of LGBT representation in art, especially in children’s entertainment.”

As we previously highlighted, bombarding children of increasingly younger ages with information about sexuality and gender fluidity has become a goal of progressivism.

The World Health Organization’s ‘Standards for Sexuality Education in Europe: A framework for policymakers, educational and health authorities and specialists’, advises children be taught about sexually pleasuring themselves and transgenderism before they’ve even fully learned to talk.

Drag Queen Story Time, during which drag queens read to and sometimes perform sexually suggestive routines to toddlers, has also been celebrated by the media, as have ‘drag kids’ like Desmond is Amazing.

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After months of the world’s attention focused on the pandemic and resulting national shutdowns and economic pauses, the fact that the US and Iran were only months ago almost at war in Iraq seems a world away. But a proxy war pitting Iranian-backed Shia paramilitary fores in Iraq against US interests and allies has continued unabated, threatening once again to draw in American military intervention.

In the latest instance, multiple rockets were fired on the US embassy in Baghdad Tuesday morning. “A rocket struck Baghdad’s heavily fortified Green Zone, the seat of Iraq’s government, early on Tuesday morning, according to an Iraqi military statement, the first attack on the area since a new prime minister was sworn in earlier this month,” AP reports.

“An Iraqi official said the rocket had struck near the US Embassy, without elaborating,” the report notes. Local media said in total three rockets were launched toward the embassy —though it’s rarely the case they hit their intended target. Sirens could be heard blaring throughout the central secured area.

While it’s not the first such attack on Baghdad’s high secured ‘Green Zone’ of the past months, it comes amid renewed street protests and popular outrage triggered by accusations that MBC media — a major Middle East broadcaster seen as aligned to Western interests (given it first launched from London before moving to Dubai) — insulted the memory of Abu Mahdi al-Muhandis, the Iraqi paramilitary leader killed alongside IRGC Quds Force chief Qassem Soleimani by US drone strike on Jan. 3.

In total four members of the US-led coalition have been killed by rockets believed fired by Iraq’s Kataib Hezbollah going back to December.

The tit-for-tat, which has seen Washington conduct major airstrikes on Iraqi paramilitary bases believed supported by Tehran, has seen more and more US intervention even as popular protests demanding the end of US presence rages on the streets.

Likely there’s more turmoil to come as Iraq is dealing crises on multiple fronts, including an economy on the precipice given sinking oil prices and the coronavirus lockdown, as well as reports of a resurgent ISIS amid the mayhem. 

AP describes further that “The new administration of Prime Minister Mustafa al-Kadhimi, who came to power earlier this month, is preparing for a strategic dialogue with Washington, expected to take place next month. The talks will touch on security and economic cooperation between both countries.”

Leaked phone calls between Joe Biden and former Ukrainian President Petro Poroshenko explicitly detail the quid-pro-quo arrangement to fire former Ukrainian Prosecutor General Victor Shokin – who Poroshenko admits did nothing wrong – in exchange for $1 billion in US loan guarantees (which Biden openly bragged about in January, 2018).

Shokin was notably investigating Burisma, the Ukrainian energy company that hired Biden’s son, Hunter, to sit on its board. Shokin had opened a case against Burisma’s founder, Mykola Zlochevsky, who granted Burisma permits to drill for oil and gas in Ukraine while he was Minister of Ecology and Natural Resources. In January, 2019, Shokin stated in a deposition that there were five criminal cases against Zlochevesky, including money laundering, corruption, illegal funds transfers, and profiteering through shell corporations while he was a sitting minister.

The leaked calls begin on December 3, 2015, when former Secretary of State John Kerry starts laying out the case to fire Shokin – who he says “blocked the cleanup of the Prosecutor Generals’ Office,” and sated that Biden “is very concerned about it,” to which Poroshenko replies that the newly reorganized prosecutor general’s office (NABU) won’t be able to pursue corruption charges, and that it may be difficult to fire Shokin without cause.

Later in the leaked audio on February 18, 2016 – less than three months after the Kerry conversation – Poroshenko delivers some “positive news.”

“Yesterday I met with General Prosecutor Shokin,” says Poroshenko. And despite of the fact that we didn’t have any corruption charges, we don’t have any information about him doing something wrong, I specially asked him – no, it was day before yesterday – I specially asked him to resign. In, uh, as his, uh, position as a state person. And despite of the fact that he has a support in the power. And as a finish of my meeting with him, he promised to give me the statement on resignation. And one hour ago he bring me the written statement of his resignation. And this is my second step for keeping my promises.“

To which Biden replied: “I agree.”

Four weeks later on March 22, 2016, Biden says “Tell me that there is a new government and a new Prosecutor General. I am prepared to do a public signing of the commitment for the billion dollars.“

Poroshenko tells Biden that one of the leading candidates is the man who replaced Shokin, Yuriy Lutsenko who later said in a deposition that Hunter Biden and his business partners were receiving millions of dollars in compensation from Burisma.

Then, on May 13, 2016, Biden congratulates Poroshenko on “getting the new Prosecutor General,” saying that it will be “critical for him to work quickly to repair the damage Shokin did.”

“And I’m a man of my word,” Biden adds. “And now that the new Prosecutor General is in place, we’re ready to move forward to signing that one billion dollar loan guarantee.”

Poroshenko thanks Biden for the support, and says that it was a “very tough challenge and a very difficult job.”

Shokin, meanwhile, filed a criminal complaint against Biden in Kiev this February, in which he writes:

During the period 2014-2016, the Prosecutor General’s Office of Ukraine was conducting a preliminary investigation into a series of serious crimes committed by the former Minister of Ecology of Ukraine Mykola Zlotchevsky and by the managers of the company “Burisma Holding Limited “(Cyprus), the board of directors of which included, among others, Hunter Biden, son of Joseph Biden, then vice-president of the United States of America.

The investigation into the above-mentioned crimes was carried out in strict accordance with Criminal Law and was under my personal control as the Prosecutor General of Ukraine.

Owing to my firm position on the above-mentioned cases regarding their prompt and objective investigation, which should have resulted in the arrest and the indictment of the guilty parties, Joseph Biden developed a firmly hostile attitude towards me which led him to express in private conversations with senior Ukrainian officials, as well as in his public speeches, a categorical request for my immediate dismissal from the post of Attorney General of Ukraine in exchange for the sum of US $ 1 billion in as a financial guarantee from the United States for the benefit of Ukraine.

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And now we have the audio that shows how the deed was orchestrated.

Authored by Lance Roberts via RealInvestmentAdvice.com,

On Monday, the markets surged on hopes for a “virus vaccine” and encouraging words for the Federal Reserve that liquidity isn’t going away. Such puts us in the awkward position of having to chase market momentum, knowing fundamentals will eventually matter.

As portfolio managers, we are in the unfortunate position of having to deliver performance for our clients. Such means that while “fundamentals” paint a very an inferior risk/reward environment for investors, momentum continues to trump reason.

As I noted in “The Great Divide:”

“The juxtaposition between economic data and the ‘bull market’ in stocks is quite astonishing.”

“In other words, to no one’s real surprise, the driver of the market is simply ‘The Fed.’ As the Fed engages in ‘QE,’ it increases the “excess reserves” of banks. Since banks are NOT lending to consumers or businesses, that excess liquidity flows into the stock market.”

Jerome Powell’s promise of “unlimited liquidity” on Sunday’s 60-minutes interview was all the markets needed on Monday to take out the trading range.

Fundamentals Will Matter

I certainly understand it seems like “fundamentals don’t matter.” However, eventually, they will.

For now, the excuse is that markets are looking “past” 2020 and into 2021. While such may indeed be the case, there are two problems with that assessment.

1. The current advance is pricing in the best possible outcomes in the future, i.e., a “v-shaped” economic recovery, a successful vaccine, and no secondary viral outbreak. A failure on any, or all, of those outcomes, will leave a void beneath stocks.

2. With earnings estimates already dropping for 2020 and 2021, investors who are looking past 2020 are banking on a “hockey stick” recovery in earnings. However, there is more than a substantial risk earnings fall a lot more before they start to recover.

We addressed the second point in “Stuck In The Middle:”

“The other problem is investors remain overly optimistic about the recovery prospects for earnings going into 2021. As shown, in April 2019, estimates for the S&P 500 was $174/share (reported earnings) at the end of 2020. Today, estimates for Q4-2021 now reside at $147/share. Such is a 15% contraction in estimates when we are discussing a 30-40% decline in GDP.”

“With expectations for the S&P 500 to return to all-time highs in 2021, such would mean that valuations currently paid by investors remain at historically high levels.”

But it isn’t just me, Goldman Sachs is showing the same thing. (Chart courtesy of ZeroHedge)

“Goldman is lowering its EPS growth estimates for 3Q to -30% (from -21%) and no longer sees a full recovery in the fourth quarter, instead of expecting Q4 EPS to be down -17%Y/Y (from +27%) “to reflect a more gradual recovery with quarterly EPS remaining below 2019 levels for the full year.”

All That Matters Is Momentum

Despite the fundamental problems, all that matters currently is the Fed. With momentum pushing stocks higher, as noted above, we have to allow for participation in portfolios while managing inherent risk.

The breakout of the month-long consolidation range to the upside, and above the 61.8% retracement level is indeed bullish.

The “gap up” opening on Monday also flipped the short-term “sell signals” back to “buy,” which suggests we could potentially see some follow-through over the next couple of days.

The “bad news,” if you want to call it that, is the market is now wrestling with both the 200-dma, and the previously broken uptrend line. This level of resistance will be important for the “bulls” to conquer if the markets are going to push higher in the near term.

If the “momentum” trade can indeed break above the 200-dma there is little to stop the market from rallying back to 3100. However, the more extreme overbought conditions will also potentially limit the upside in the short-term.

Re-Evaluating Risk & Reward

The last time the market was at 2900, we laid out the risk/reward suggesting there was downside risk to the 50-dma. The sell-off last week approached that level of support. With the rally and breakout, yesterday, we can re-evaluate those risk/reward brackets.

• -5.5% to last week’s lows vs. 1.4% to the 200-dma. Risk/reward negative.

• -7.6% to the 50% retracement/50-dma vs. 5.6% to the March peak. Risk/reward negative.

• -16.9% to the April 1st lows vs. 9.1% to January’s bottom. Risk/reward negative.

• -24.1% to the March 23rd low vs. 14.5% to all-time highs: Risk/reward negative.

While it may not seem like it at the moment, the risk of a downside retracement, as we head into summer months, outweighs the current upside. Importantly, this does NOT mean the markets can’t rally to all-time highs. It is possible. It is also just as likely that things do go as smoothly as planned, and we wind up retesting March lows.

Such is why we have to weigh the risk and reward of chasing markets.

Positioning Changes

With seasonal sell signals in place, we are very focused on our positioning. Over the last couple of weeks, we have continued to increase our equity exposure. However, as noted previously, we continue to do so in areas that remain defensive, currently out of favor, or opportunistic.

We also balanced our increases in “risk” exposure with matched weights in shorter-duration Treasury bonds, gold, or dollar hedges to reduce our risk.

Yes, we are clearly chasing momentum at the moment. However, we do so with a clear understanding of our risk, reward, and overall net positioning. We continue also to hold a larger than normal level of cash to mitigate volatility risk.

As portfolio managers, we have an obligation to our clients to “make money” when we can. We have a “fiduciary duty” to protect them from significant declines that would destroy their financial plans.

The Pin That Pricks The Bubble

The problem for the market going forward, as noted, is that markets have priced in a speedy recovery back to pre-recession norms, no secondary outbreak of the virus, and a vaccine. If such does turn out to be the case, the Federal Reserve will have a very big problem. 

The “unlimited QE” bazooka is dependent on the Fed needing to monetize the deficit and support economic growth. However, if the goals of full employment and economic growth are quickly reached, the Fed will face a potential “inflation surge.”

Such will put the Fed into a very tight box. The surge in inflation will limit their ability to continue “unlimited QE” without further exacerbating the inflation problem. However, if they don’t “monetize” the deficit through their “QE” program, interest rates  will surge, leading to an economic recession.

It’s a no-win situation for the Fed.

It’s worse for consumers as the Fed’s actions have historically operated as a “wealth transfer” system from the middle-class to the rich.

The only outcome that allows the Fed to monetize the deficit without an inflationary surge is for fundamentals to matter ultimately. A reversion in asset prices will provide the cover needed to continue monetary interventions, but it also means “bullish case” didn’t work out as expected.

Of course, this has always been the case historically. Just as the “Coyote” always wound up going over the cliff when chasing the “Roadrunner,” excessive bullish optimism is always met with disappointment.