Tag: finance

Just a day after Riverside County Sheriff Chad Bianco told California Governor Gavin Newsom that his department won’t be “blackmailed, bullied or used as muscle” against residents during the pandemic, The Epoch Times reports that Orange County Sheriff Don Barnes announced that deputies would not enforce the regional stay-at-home order that was scheduled to go into effect Dec. 6 throughout Southern California.

“Compliance with health orders is a matter of personal responsibility and not a matter of law enforcement,” Barnes said in a Dec. 5 news release.

“Orange County Sheriff’s deputies will not be dispatched to, or respond to, calls for service to enforce compliance with face coverings, social gatherings, or stay-at-home orders only.”

It is not the first time the sheriff has declared deputies would not enforce a state order over coronavirus restrictions. When Gov. Gavin Newsom ordered a curfew in November for all California counties in the purple tier amid climbing coronavirus cases, Barnes said deputies would not be enforcing that order either.

A state-mandated, regional stay-at-home order was scheduled to go into effect at 11:59 p.m. on Dec. 6. The mandate was triggered when intensive care unit (ICU) bed availability remained below 15 percent after the Southern California region’s Dec. 5 daily COVID-19 case-rate update, according to the California Department of Public Health.

In his statement, Barnes said deputies would continue to respond to calls for potential criminal behavior and the protection of life and property, actions he said remain “consistent with the protections of constitutional rights.”

But he said the “ever-changing nature” of Gov. Gavin Newsom’s stay-at-home orders and the increase in COVID-19 case numbers “bring additional uncertainty and stress to California residents.”

“To put the onus on law enforcement to enforce these orders against law-abiding citizens who are already struggling through difficult circumstances, while at the same time criticizing law enforcement and taking away tools to do our jobs, is both contradictory and disingenuous,” he said.

He cautioned that people should remain diligent in preventing the spread of the disease, and should take the recommended public health precautions like wearing face coverings and practicing social distancing.

“Conversely, policy makers must not penalize residents for earning a livelihood, safeguarding their mental health, or enjoying our most cherished freedoms,” Barnes stated.

Citing rising COVID-19 hospitalizations and deaths over the past month, Newsom on Dec. 3 announced plans for regional stay-at-home orders that would be triggered when ICU bed availability in select areas fell below 15 percent.

Full Statement below:

The Department of Homeland Security (DHS) is launching an inspector general investigation into whether federal agencies surveilled Americans via their cell phone data without a warrant. While this sounds like nothing new, it involved federal agents buying access to a large commercial database.

According to a letter the DHS sent to Congressional leaders last week and obtained by The Wall Street Journal:

The department’s inspector general told five Democratic senators that his office would initiate an audit “to determine if the Department of Homeland Security (DHS) and its components have developed, updated, and adhered to policies related to cell-phone surveillance devices,” according to a letter sent last week to Capitol Hill and shared with The Wall Street Journal.

Putting aside the dubiousness of a major federal agency mounting an “objective” probe of one of its own internal departments over violations of Constitutional rights, the episode shows the US government has done little in the way of reform after the Edward Snowden NSA revelations of 2013. Of course, there were few that believed subsequent empty “promises” of politicians to curtail illegal domestic spying in the first place.

In this newest case the investigation will focus on US Customs and Border Protection (CBP) and its alleged use of of commercially-available phone tracking data to snoop on the whereabouts of individuals. Congressional inquiries started when it was first revealed the CBP payed up to $500,000 to private company for access to a commercial database which has “location data mined from applications on millions of Americans’ mobile phones.”

The company at the center of the probe is a government contractor named Venntel which sources its data from mobile advertising to create “100 percent commercially available data”.

Last Wednesday a group of Senators led by Ron Wyden (D-Ore.) and Elizabeth Warren (D-Mass) issued a statement which said the following: 

If federal agencies are tracking American citizens without warrants, the public deserves answers and accountability, I won’t accept anything less than a thorough and swift inspector general investigation that sheds light on CBP’s phone location data surveillance program.

“CBP is not above the law and it should not be able to buy its way around the Fourth Amendment,” the senators said in the letter addressed to Inspector General Joseph Cuffari.

🚨DHS is opening an investigation into CBP’s warrantless collection of phone location data that @SenMarkey @SenWarren @SenBrianSchatz and I pushed for. I‘ll accept nothing less than a thorough and swift investigation that sheds light on CBP’s location data surveillance program. pic.twitter.com/pBtiRbdrSl

— Ron Wyden (@RonWyden) December 2, 2020

Simultaneous to the Congressional probe the American Civil Liberties Union (ACLU) last week filed a lawsuit demanding the release of “records about their purchases of cell phone location data for immigration enforcement and other purposes.” 

One crucial detail which remains unclear at this point, however, is the degree to which CBP was obtaining the tracking data of illegal immigrants or foreigners of questionable legal status in the United States. Even if so it’s likely they were accessing tracking data of American citizens in the process.

The CBP defense of their actions may hinge on such an argument, namely, that the methods were necessary and only applied to snooping on non-US citizens seeking to evade border and immigration authorities.

By Andrew Sheets, chief cross-asset strategist at Morgan Stanley

The biggest debate about 2021 probably isn’t where the market is going. It’s how it gets there.

We, and many others, are optimistic on the next 12 months. But there’s less agreement among investors on how these gains will be achieved. With our economists still in the ‘V-shaped recovery’ camp, we think returns will be powered by strong economic growth, driving an early-cycle, post-recession pattern of returns. Buy what you’re usually supposed to buy following a recession.

Others disagree. They think our forecasts for economic growth are too optimistic and expect COVID-19 to take longer to dissipate, with a more serious, longer-lasting impact on the global economy. They argue that the drawdown and recovery happened so fast that the economic cycle never truly reset, leaving both the corporate and sovereign sectors overleveraged. For these investors, liquidity and low rates will be the principal drivers of market gains. Secular stagnation lives.

In investing, as in life, more than one thing can be true at the same time. Morgan Stanley’s economists forecast both above-consensus global growth and US$3.4 trillion of G4 balance sheet expansion in 2021. We’re positive on the year ahead in part because we think that growth and monetary policy will be rowing in the same direction.

Our argument is simply that weak-but-improving growth and supportive liquidity are a normal post-recession backdrop. Meanwhile, market pricing often remains sceptical that economic ‘normalcy’ will return any time soon. Better growth, supportive liquidity and attractive valuations are all reasons to adopt a ‘pro-cyclical’ stance across key cross-asset pairs: Long US small-caps over large-caps, long AUD/NZD/SEK/NOK versus USD and long high yield over investment grade. We think that US 10-year rates will hit 1.45% by end-2021, and are underweight government bonds.

But what about that missing reset? The economic collapse and recovery were unusually fast, bypassing the large defaults of 2008-10. There hasn’t been a single significant bank failure in the wake of the world’s largest economic drawdown on record and, more strikingly, there hasn’t been a single significant capital raising. The US trailing 12-month speculative-grade default rate sits at 8.0%. In 2009, a milder recession, it peaked at 14.2%.

This failure to reset is often cited as a key reason why this can’t be the start of a new economic cycle: Recessions, while painful, help to clear out weaker, less-productive and undercapitalised businesses, making room for stronger, more dynamic ones to prosper in their place. The historic levels of policy intervention in 2020 prevented this ‘creative destruction’. Without that clearing out, a dynamic recovery is unlikely. With it, a wider run of corporate defaults is inevitable.

Since we do think this is the start of a new economic cycle, do believe it will be ‘dynamic’ (we’re above consensus on growth) and don’t expect a surprisingly high wave of defaults, this would be a good time to explain why we don’t subscribe to the counter-argument.

• First, recessions are about more than just high default rates. They also often mean high unemployment, low inventory levels, high savings rates and low consumer confidence (among other things). Early-cycle environments gain momentum from all these negatives becoming ‘less bad’. In our forecasts, over the next 12 months, all of them do.
• Second, about those default rates. Pruning unproductive businesses from the market is a painful but necessary process. But this argument assumes that the businesses in question are fundamentally broken, not ‘fine were it not for a once-in-a-century global pandemic’. We don’t see how letting scores of otherwise solvent firms default would result in a better long-run result for the economy or investors, especially as these firms would have been forced to reorganise, or liquidate, near the nadir of economic activity.

Indeed, one of the great ironies of 2020 is that for all the hand-wringing around ‘covenant-lite’ lending, it was probably a blessing. ‘Weak’ terms on lending gave borrowers a helpful level of flexibility during the 1H downturn, where strict provisions would have forced more defaults. Neither owner, employee nor lender would have benefited from debt suddenly coming due in the depths of a recession; if you don’t believe me, search ‘recovery rates March 2009’.

Finally, it’s also unfair to say that policy prevented any pain from being endured. If we combine the trailing 12-month default rate (8.0%) with our credit strategists’ forecast for the next 12 months (6.0%), we get a 24-month default rate of ~14.0%. We can compare that two-year default rate to two-year changes in economic activity (i.e., taking a somewhat broader view of this unusual year). Viewed this way, things look more normal.

If you’re constructive on the year ahead, the question of ‘how you get there’ still matters. We remain in the pro-cyclical, early-cycle camp, and don’t believe that the ‘absence’ of a larger corporate default wave nullifies this story. Our corporate and securitized credit strategists are constructive with an early-cycle bias: positive on junior exposure in CLOs and CMBS, and on high yield over investment grade.

In what should come as a surprise to no one, foot traffic in New York’s hottest business districts continues to suffer, though things have improved since the summer according to the Wall Street Journal.

Neighborhoods which were booming before the pandemic, such as Flatiron and Union Square, were crippled by lockdown restrictions, leading to a sharp dropoff in foot traffic.

Prior to the pandemic, approximately 9% of the district’s retail corridor was vacant in 2018.

A follow-up survey conducted by the NYC Department of City Planning in July revealed that the number of inactive storefronts in the district – both closed and vacant – jumped had jumped 36%, which the planning department attributed in part to a lack of both commuters and tourists.

Still, things have improved somewhat since the summer.

“It is moving in the right direction, it’s just been gradual,” said James Mettham, executive director of the Flatiron 23rd Street Partnership, who added that more businesses have reopened since the summer amid improving foot traffic.

Still, the Wall Street Journal conducted an analysis of Foursquare foot-traffic data, and found that pedestrian activity was still down across the Flatiron, Union Square and Chelsea neighborhoods vs. February before the pandemic restrictions went into effect.

While this is an improvement from a 75% drop in foot traffic in the spring, it’s still slower than several outlying areas such as Morris Park in the Bronx and New Drop on Staten Island – which saw pedestrian activity return to pre-pandemic levels by September.

Some local shops are facing less dire, yet still precarious financial situations.

“We’re still bleeding money,” said Chris Calkins, CEO of Gotham Coffee Roasters on West 19th Street. “but unless things get worse, we’re good until June.” Gotham’s sales have improved somewhat since the spring – down 60% vs. 85% earlier in the year. Calkins says he’s remained afloat through his mail-order business, federal grants and loans, and a rent reduction from his landlord of 30%.

That said, with New York governor Andrew Cuomo warning on Modnay of more potential lockdowns, we have to wonder if the slight gains made throughout NYC’s business districts will be wiped out amid what Joe Biden lovingly referred to as an impending “dark winter.”

“The holiday season is going to have a profound effect. It already has,” Cuomo said on Monday. “The holiday season is going to have a profound effect. It already has.“

Authored by Chris Hamilton via Econimica blog,

I’m a proud native Oregonian.  I’ve lived in Asia, Europe, and traveled most of the world, but I choose to live in Oregon. It’s that good.  Oregon is also great because it is a political and social dichotomy.  Ultra liberal Portland, Eugene, Bend vs ultra conservative rural Oregon. There is a little something for everybody…and I love every bit of it.

So, as I’m watching the states recent implosion…I’m heartsick. Like everywhere else, Coronavirus has found it’s way into Oregon. In March, the state chose to shut down and enter into a prolonged lockdown. I disagreed but couldn’t do so with great conviction, because the reliable data to prove the shutdown wasn’t warranted just didn’t exist.

However, as reliable data has been growing…the state has chosen to keep schools closed, cancelling athletic and social clubs, alongside in person learning.  And now the state has entered a second partial lockdown; shutting down restaurants, gyms, bars, and other select business’. 

At the most critical business time of the year, the state has taken business owners/employees ability to earn a living with no compensation offered. This has been done to slow the spread of Coronavirus and avoid an overwhelming crush of patients in the states hospitals.

Like the Governor, I too want to keep Oregonians from needlessly dying. But I’m also cognizant that the state government is there to serve the people, not dictate to them. The state is there to educate to the risk factors and respect it’s citizens well informed decisions. Unilaterally taking away many Oregonians right to run small and large business’, send their children to school, etc. would have to be done based on some very hard and lethal evidence. It is this evidence I want to review.

First, consider the total number of Coronavirus cases, per age group, and the associated deaths (chart below). It should be obvious that the under 50 year old population makes up the vast majority of positive cases (and actual cases are likely 5x to 10x higher due to asymptomatic &/or mild undiagnosed cases) but under 50 year olds make up so few of the Coronavirus deaths.

Looking at cases and deaths, by age group (chart below), consider…

• Under 30yr/olds = 37% of cases, 9% of hospitalizations, & 0.2% of deaths.

• 30 to 60yr/olds = 46% of cases, 34% of hospitalizations, & 9.1% of deaths.

• 60+yr/olds = 17% of cases, 57% of hospitalizations, & 91.7% of deaths.

From the above chart, it should be abundantly clear who the “at-risk” population is and where the focus of attention and support should be directed.  Not school closures or business closures…but helping the primarily elderly population with at-risk maladies avoid the general public…not have the generally well public avoid contact with the generally well public! These interactions and potential infections lead to few hospitalizations and a statistically minute number of deaths.

To emphasize the point of who is filling Oregon’s hospitals, and who needs greater support and care in avoiding the general public…again, it is the elderly population that is utilizing the hospitals (chart below)…not the young. As for the young and concern of long term impacts from fighting Coronavirus, the numbers of severe cases requiring hospitalization as so rare that the percentage of those with long term issues will be statistically incredibly low.

Further, the CDC has made it plain that Coronavirus alone is very rarely the cause of death. 

As per the CDC, “For 6% of the deaths, COVID-19 was the only cause mentioned. For deaths with conditions or causes in addition to COVID-19, on average, there were 2.6 additional conditions or causes per death.”

Coronavirus, on it’s own, is statistically so unlikely to cause death among the general public that they can go on with their lives w/out undue fear…and the focus should be safeguarding the at-risk.

The point of this article is not to create greater division or offer more finger pointing…it is to offer clear data that Oregonians who are healthy are at no great risk from Coronavirus. The economy should remain open while those in poor health (they generally know who they are; elderly, fighting cancer, obesity, type 2 diabetes, immunocompromised, COPD, etc.) should be offered support to help them to avoid contact with the general public. Households with at-risk persons should consider avoiding sending their children to school but be offered online schooling options.  And it is a shame that solutions to avoid the ongoing high mortality within nursing homes isn’t getting more attention (encompassing nearly 40% of all Coronavirus deaths).

Simply, the tax base should be used (rather than abused) supporting those at risk should to avoid general interaction until a vaccine is ready (why the generally healthy public would take a vaccine for a virus that poses little to no threat is a question for another day). Things like subsidizing Instacart online shopping rather than in person shopping, etc. etc. Let’s get creative, as lives are on the line.  This is just common sense that the state would focus the quarantine on the small population of at-risk persons, and offer/focus their support/resources there rather than harm the large, well, not at-risk population. Lastly, small business owners running restaurants, bars, gyms, etc. providing jobs and tax revenue should be hailed rather than bankrupted.

Oregon has long been an innovator and leader, and now it is time for Oregon to learn and lead again. It is time to re-open Oregon’s business’ and focus the state’s resources on protecting the at-risk population rather than harming the large at very low risk population.

The data for this article is taken from the Oregon Health Authority

I also offer the below national data from the CDC, generally mirroring that of Oregon, FYR.

The problem with many of the world’s top militaries is that short-range defenses against small unmanned aerial vehicles (UAV) are lacking, well, at least a cost-effective weapon that doesn’t cost thousands, if not hundreds of thousands or in some cases millions of dollars to shoot down a cheap enemy drone.

Russia learned this back in 2018 after its security forces of the Khmeimim airbase and Russian Naval CSS point in Tartus, Syria, combated a series of UAV attacks. 

Two years later, Russia has revealed the Derivatsiya-PVO self-propelled anti-aircraft gun that will “create a shield from a hail of projectiles that burst with shrapnel in the air, forming an impenetrable barrier against enemy drones,” according to Russia Beyond. 

Russia Beyond said the Derivatsiya is based on the BPM-3 infantry fighting vehicle. It has an AU-220M automatic weapon station that fires up to 120 artillery shells per minute. 

“Its ammunition kit includes remotely detonated and guided projectiles, which means that anti-aircraft gunners can fire a shell and detonate it with a single keystroke during the flight, or adjust its path to track the enemy’s movements,” a Russian military-industrial complex source told Russia Beyond. 

Derivatsiya was designed to knock out small UAVs that fly several hundred meters above the ground. 

“Drones have become the scourge of our army in the Middle East, and not only ours. Militants make remote-controlled ‘helicopters’ from improvised means, attach bombs to them, then dispatch a whole flock of ‘suicide bombers’ to blow up expensive air-defense systems or tanks and helicopters. Basically, any equipment that costs millions of dollars,” said the expert.

He added that Derivatsiya was developed to lower the cost per round in combating these new threats on the modern battlefield. 

“It is to save money and equipment on destroying these buzzing bomb-laden irritants that Derivatsiya is being developed,” he said.

The proliferation of small drones on the modern battlefield also led the US Navy to recently “revive” anti-aircraft flak rounds used in World War II for its current warships to combat small drone threats. 

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

This is not news. But an historical reminder of what happens when the people get fed up with a corrupt government incapable of serving their interests.

Remember this?

The president of Argentina has left the building. According to the Daily Mail 20 years ago:

President Fernando De la Rua resigned and fled the government palace in a helicopter, driven from office by a devastating economic crisis and days of rioting that left 22 people dead and homes and supermarkets across Argentina ransacked.

Fast forward to today:

This is the news: Police faced rioters with stones this week.

Argentina😳😳😳

It’s like mufukin million man dodgeball pic.twitter.com/HEcIKzu8BX

— Wes’ ghost (@wes92i_1) December 4, 2020

This is what the face of real anger and desperation in the face of a government that is equal parts corrupt and inept looks like.

No one wants to see this kind of abuse of any other human being. It’s anathema to life itself. But everyone makes a choice. The police choose to put on their uniforms and riot shields to enforce immoral orders while the people make the choice to stand up to it.

It is the fundamental problem of rule through force that eventually leads to these regrettable outcomes. No one wants to see policemen, presumably decent men with the right motivations to maintain societal order, stoned in public.

But when people have had their ability to make their grievances heard peacefully taken away from them they will, eventually, make their grievances heard violently.

It’s who we are. It’s human nature.

And the lesson here is for all of these would-be tyrants currently laughing about winning a fraudulent election in the U.S. through changing the rules is that they will face this same moment as these cops did very soon.

Because elections are the opportunity for us to air our grievances with our government peacefully. And what so many in politics fail to understand, but what the people who voted for Donald Trump do, is that these past two elections haven’t been referenda on Hillary Clinton or Donald Trump.

They have been referenda on the whole political class and culture which has driven people to the edge of insanity, bankruptcy and despair.

So, laugh it up Stacey Abrams, Rahm Emmanuel, Barack Obama, Dan Crenshaw and Mitt Romney. Watch this video carefully. This is your future.

The same goes for Tony Blair, Emmanuel Macron, Bill Gates, Angela Merkel, George Soros and Benjamin Netanyahu.

You may scare people into taking your vaccine and issuing your medical passports but what happens on the day when the cops fail to show up to control the crowd for fear of being stoned?

The same people today screaming “my body, my choice” will line up for their COVID-19 vaccine if it means they can’t continue infecting the minds of students with Critical Race Theory.

Congratulations on turning everyone into a desperate, cognitivally-dissonant response monkey.

That stuff cuts both ways folks.

Obedience is not acquiescence. No one really loves Big Brother no matter how much you torture them. The longer you suppress the anger the worse it gets.

Until it explodes.

And people won’t be turning that anger on the idiots on the streets in Portland.

We’ve seen what it looks like when the would-be tyrants riot — the ideologically possessed race hustlers and commies in Antifa and BLM. We haven’t seen what it looks like when the conscientious ‘right’ who just want to live without abuse looks like.

Well, in fact we do. They vote twice, overwhelmingly for Donald Trump and throw British tea into Boston Harbor. They veto legislation designed to sell their people out to the Politburo in Brussels.

Italians will soon have to make their choice.

#BREAKING: Italian conservatives are calling for PM #Conte to resign, shouting “Liberty! Liberty!” in open protest against #COVID19 restrictions.

Travel restriction will be tightened starting 21December, with many regions even restricting #Christmas Midnight Mass. pic.twitter.com/m8WpN47tht

— Bree A Dail (@breeadail) December 4, 2020

This isn’t a breakdown of the civil order, this is the beginning of a restoration of civil order that is already gone. The idea that we the people control our elected officials governing us is rapidly being revealed as a lie.

And it leaves people with no other option than violence.

This is why, in my mind, the election fraud is the single issue that we have to come together on, Democrat, Republican and, yes, you too feckless and cowardly libertarians.

Because it’s not about the mechanics of voting. It’s not about its inherent immorality. At certain moments in time the value of your vote and what it represents rises above all of that.

It is still the least violent act one can take in conjunction with others to say, “No more. That’s enough.”

I didn’t vote for Trump because I thought he did a good job while in office. I voted for Trump twice because I wanted to stick my finger in the eye of the people who have materially made my life and the lives of millions of people around the world worse.

I voted for Trump to bitch slap Nancy Pelosi, laugh at Chuck Schumer and put James Comey in jail.

I voted for Trump to blow up the false dyad of Republican v. Democrat, out Lindsey Graham and rein in the military-surveillance state.

I didn’t vote for Trump for a tax cut, though it was a nice bonus. My price is a metric shit-ton higher than that you wretched trolls.

Trump stood up to them for four years and by doing so exposed them to such an extent I never thought possible. And now, he and all the people who voted for him are being laughed at by corrupt state legislators, judges, election officials and party hacks.

The normie Republicans think the Georgia run-off elections matter. Without an overhaul of the voting systems themselves what does it matter if two Democrats win or two RINOs do?

And do you really think the outcome of that run-off hasn’t already been determined?

It’s all a rigged game. And now that that has been fully exposed what comes next?

Because how many people in the U.S. are coming to the same conclusions as those people throwing rocks at cops in Argentina, that their government is terminal, its authority illegitimate and its edicts unworthy?

I’ve been long guillotines and rope-makers for the past eighteen months, I may have to double my position.

*  *  *

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A recent survey of 2,000 Americans carried out by “innovation consultancy” Highland took a close look at how personal finances and spending habits have changed since the start of the COVID-19 pandemic, which crushed the US economy and has triggered a protracted downturn around the world.

With the US labor market adding just 245K new jobs last month, a sign that the sharp rebound from the chaos of March has already run its course, and millions of Americans waiting on more stimulus from Washington, the share of people living check to check has expanded rapidly.

Even before the pandemic, a staggering percentage of Americans didn’t have enough cash on hand for an unexpected hardship of $400. But what’s even worse for America’s consumption-driven economy is that a solid majority of Americans have reduced spending, some dramatically, as pandemic has made socialization difficult. According to the survey, 63% have cut back on spending since the start of the pandemic.

Asked for their reasons, respondents cited the need to be more cautious with their finances (60%), experiencing a reduced salary or income (49%), and staying home more often (40%).

For those who have cut back, 64% say they are spending less on dining out or takeout, 61% have reduced spending on entertainment such as concerts or movies, while 55% are buying less apparel and 52% are spending less on travel.

It is interesting to note that 21% of respondents say they have been spending more since the pandemic. Of those respondents, 51% say they are buying more food or groceries, and 50% are buying more household supplies.

After the unemployment rate spiked to more than 14% in April, Americans continue to be wary about their job security and income. According to respondents, more than a quarter feel they do not currently have a stable income, and 63% say they have been living paycheck to paycheck since the pandemic. Millennials appear to be the hardest hit demographic as 64% say they are living paycheck to paycheck.

Moreover, 25%  of respondents feel they don’t currently have a stable income.

27% of respondents also said they’ve taken on more than $10K in debt.

But perhaps the most alarming number from the entire survey: a whopping 82% of respondents said they wouldn’t be able to cover an emergency $500 expense without borrowing money.

For context, prior to the pandemic, surveys showed that roughly half of Americans couldn’t afford a $500 emergency expense, which means the number of people who say they couldn’t cover a small emergency has risen by 60%.

Nearly half added that they now regret living beyond their means for so long before the crisis.

But the market’s at record highs, so at least those who have the option can borrow against their 401(k)s for a little emergency cash (that is, if they have a 401(k)).

From Eric Peters, CIO of One River Asset Management

Dusted off a Jan 2018 anecdote about the reflexivity in volatility markets. It’s something I think about when tracking cycle phases. Of course, the cycle that started in early 2020 is unique relative to anything seen for decades. The unprecedented policy response to the pandemic has forced investors to now build portfolios of risk assets without being able to rely on treasury bonds to materially offset the negative convexity. Consequently, the industry now faces an acute shortage of portfolio diversifiers at a time when it must take ever more risk to achieve its return targets (as noted earlier, JPM believes that consensus crowded trades are the biggest risk to markets as we enter 2021).

And the unintended consequences are as profound as they are not yet fully appreciated, let alone understood.

* * *

Anecdote (Jan 7, 2018):

To sell implied volatility at current 50yr lows, investors must imagine tomorrow will be virtually identical to today. They must imagine that bond yields won’t rise despite every major central bank eager to hike interest rates and exit QE. They must imagine that economies at or near full employment will not create inflation; that GDP will neither accelerate nor decelerate; that governments will tolerate historic levels of income inequality despite citizens voting for the opposite; that strongly rising global debts will be supported by structurally decelerating global growth.

And volatility sellers must imagine that nine years into a bull market, amplified by a proliferation of complex volatility-selling strategies and passive ETFs with liquidity mismatches, that we will dodge a destabilizing shock to market infrastructure. I can imagine a few of those things happening, but neither sustainably nor simultaneously. It is much easier to imagine a tomorrow that looks different from today.

Also consider that investment banks and asset managers have always devised creative strategies to make money once asset valuations exceed reasonable levels. These perpetual prosperity machines typically combine leverage and alchemy, transforming real risk into perceived safety. Examples abound. But in this cycle, a proliferation of cleverly disguised volatility-selling strategies has dominated.

Zero interest rates and quantitative easing left yield-starved investors with few ways to achieve their target returns. Wall Street’s engineers developed many wonderful solutions to this problem. Their magnificence is matched only by the amount of negative convexity now lurking in investment portfolios.

As volatility has declined, investors have had to sell even more of it to sustain sufficient profits. This selling reinforces the trend lower, which produces an illusion that legacy volatility shorts are less risky today than yesterday. Lower volatility thus begets lower volatility. And this also ensures that quantitative models reduce overall portfolio risk estimates, which allows (and in many cases forces) investors to buy more assets at prevailing prices.

This in turn reduces volatility, reflexively.

Naturally, the reverse is also true. Rising volatility begets rising volatility. And given the unprecedented volatility-selling in this cycle, this market is exposed to a historic reversal somewhere along the path to policy normalization. Which has now begun.

* * *

ZH: Three weeks after this was published, during the February 2018 volmageddon event which wiped out numerous retail favorite inverse VIX ETFs, the VIX erupted the most in years after trading in the single digits for the longest period on record. The VIX is currently trading at 20, or roughly in line with its long-term average.

In a brief tweet this afternoon, President Trump says that his attorney Rudy Giuliani has tested positive for COVID-19:

.@RudyGiuliani, by far the greatest mayor in the history of NYC, and who has been working tirelessly exposing the most corrupt election (by far!) in the history of the USA, has tested positive for the China Virus. Get better soon Rudy, we will carry on!!!

— Donald J. Trump (@realDonaldTrump) December 6, 2020

Many offered positive remarks, wishing him well…

Get better soon Rudy!! We love you!

— Denny Bags (@BagsDenny) December 6, 2020

He’s working his butt off for us!! Thank you Rudy…get well! Take regeneron!

— LaissezFaire (@Laissez00310508) December 6, 2020

We need him Get over it soon @RudyGiuliani 🙏🙏

— Joanne (@Joanneloveboris) December 6, 2020

But, as we have become accustomed to, the liberalati on Twitter is quick to gloat…

Well, it’s about time. Do not treat the #RudytheWeasel! pic.twitter.com/2xIrYSuhHb

— Emmanuel (@EmmanuelKlonk64) December 6, 2020

Maybe the Idiot should wear a mask! It’s his own fault!

— David Gilchrist (@DavegFla) December 6, 2020

pic.twitter.com/iHidB4UVlG

— WeirdIsGood (@JaneVal45317286) December 6, 2020

Hey Bitches, meet Karma AGAIN!#TrumpDeathCult

— LauraLovesGunSafety (@lpetitt50) December 6, 2020

Herman Cain is waiting for Rudy. pic.twitter.com/XHV5TR9Lsv

— Ian (@IanMCohen) December 6, 2020

Sad! Or disgusting!