Tag: news

Here’s Who Made A Real Killing On Wirecard (Hint: Not The Stock Shorts)

Here’s Who Made A Real Killing On Wirecard (Hint: Not The Stock Shorts)

Tyler Durden

Fri, 06/19/2020 – 14:50

With Wirecard emerging as one of the biggest corporate frauds of the post-crisis era (at least until the emperor of a certain other company is finally exposed as naked and stoned), one which has terminally crushed the reputation of Germany’s regulator Bafin – which instead of exposing the biggest German fraud ever was targeting short sellers and journalists and banning shorting – it has been quite a payday for the shorts such as Armin S, and numerous others who patiently waited until the hammer dropped.

Indeed, with the stock plunging more than 80% since news of the missing billions broke, the result has been a $2.2 billion payday for shorts.

Yet while the shorts most certainly deserve to be congratulated for their patience, the victory did not come without pain, and in addition to being targeted by a hostile regulator, the stock recently surged more than 60% since the March lows, likely forcing many bears to cover their positions at sizable losses.

So who is the biggest winner here?

Well it is the shorts, but not in the stock – which as a reminder can only generate profits that are capped at 100% assuming the stock plummets to zero – but in the bonds, in the form of long CDS position, where the upside was virtually unlimited.

As the chart below shows, Wirecard’s 5Y CDS has blown out from a spread of just over 500bps (or 18 points up) two weeks ago to 8600bps, or roughly 73 points upfront, a gain.

This means that the biggest winners in this case were the CDS longs (i.e., bond shorts), whose only limitation was the initially available capital (the theta, or coupon, is tiny by comparison).

Which begs the question: are we about to witness the second coming of CDS, whose very use by its reflexive definition, forces markets to reasses the fair value of credits… and will the ECB (or Fed) be forced to go company by company and bail them out by purchasing their bonds out of bankruptcy? We will find out soon.

Meanwhile, for those who have yet to catch up on the Wirecard saga, here is a good recap courtesy of Donut Shorts:

via ZeroHedge News https://ift.tt/2YPEyCq Tyler Durden

Retail Sales Bounce, But Consumers Are Tapped Out…

Retail Sales Bounce, But Consumers Are Tapped Out…

Tyler Durden

Fri, 06/19/2020 – 14:30

Authored by Lance Roberts via RealInvestmentAdvice.com,

There was a good bit of excitement on Tuesday with the release of the retail sales report, which came in stronger than expectations. However, the bounce will be difficult to maintain as tapped out consumers face high unemployment and a slow recovery.

As we have discussed many times previously, the consumer is the lynchpin to the economy, comprising roughly 70% of economic growth.

The most valuable thing about the consumer is they are “financially stupid.” But what would expect from a generation whose personal motto is “YOLO – You Only Live Once.” However, this is why you “never count the consumer out,” as they always find a way to go further into debt.

Consumers are also why companies spend billions on social media, personal influencers, television, radio, and internet advertising. If there is an outlet where someone will watch, listen, or read, you will find ads on it. Why? Because psychologically, consumers are “trained” to “shop till they drop.” 

As long as individuals have a paycheck; they will spend it. Give them a tax refund; they will spend it. Issue them a credit card; they will max it out. Give them a government stimulus check; they will spend it as well. Don’t believe me, then why is consumer debt at record levels?

Debt-Driven Consumption

If consumers were even partially responsible, financial guru’s like Dave Ramsey wouldn’t have a job selling products to get people out of debt.

However, consumers spending themselves further into debt is what keeps stock markets going higher and the economy going. Note, that I said “going,” and not “growing,” Take a look at the chart below:

In 1980, household credit market debt stood at $1.3 Trillion. To move consumption from 61% to 65% of GDP by 2000, it required an increase of $5.5 Trillion in debt. Since 2000, consumption as a percent of the economy has risen by just 3% over the last 20 years. To support that increase in consumption, it required an increase in personal debt of more than $11 Trillion.

You should not dismiss the importance of that statement. It has required twice as much debt to increase consumption by 3% of the economy since 2000 than it did to increase it by 4% from 1980-2000. The problem is quite clear. With interest rates already at historic lows, consumers heavily leveraged and economic growth running at sub-par rates; there is not much capability to increase consumption that would replicate the economic growth rates of the past.

The Mirage Of Wealth

The mirage of consumer wealth has been a function of surging debt levels. “Wealth” is not borrowed but “saved.” Such is a lesson too few individuals have learned.

This record level of household debt is also why the Fed’s measure of “Saving Rates” is entirely wrong. It is also why economic growth will continue to weaken as debt continues to deter disposable incomes away from consumption into debt service.

“The ‘gap’ between the ‘standard of living’ and real disposable incomes is shown below. Beginning in 1990, incomes alone were no longer able to meet the standard of living so consumers turned to debt to fill the ‘gap.’ However, following the ‘financial crisis,’ even the combined levels of income and debt no longer fill the gap. Currently, consumers cannot fill the record $2654 annual deficit to maintain their lifestyle without more debt.”

The gap between the standard of living and incomes is another reflection of the wealth inequality which is pervasive in the economy.

Less Than Meets The Eye

While there was a massive jump in retail sales in May, a look below the headlines revealed a different picture. As noted by Mish Shedlock:

“Despite the surge, sales numbers are back to levels seen in late 2015 and early 2016. On a year-over-year basis, sales are  6.1% below May 2019. Total  sales for the March 2020 through May 2020 period are down -10.5% from the same period a year ago. 

Here are the 5-month totals:

  • Total: -4.7%

  • Motor Vehicles and Parts: -10.5%

  • Furniture: –18.1%

  • Electronics and Appliances: -19.3%

  • Building Materials: +6.7%

  • Food and Beverage Stores: +13.1%

  • Health & Personal Care: -2.4%

  • Gasoline: -16.7%

  • Clothing: -42.9%

  • Sporting Goods: -9.9%

  • Department Stores: -21.0%

  • Nonstore Retailers: +16.6

  • Food and Drinking Places: -22.3%”

Notice the only positive sectors were those directly related to the partial reopening of the economy. Such was not unexpected, but it is also likely unsustainable. The stimulus checks are gone and more checks may be problematic to get through a deeply divided Congress. The additional $600 in unemployment benefits runs out next month, and there is only talk of a bill to extend them at reduced levels.

Unemployment is still a problem.

No Getting Back

Given that retail sales make up roughly 40% of personal consumption expenditures which in turn comprises roughly 70% of GDP, the impact to sustained economic growth is important to consider. As noted unemployment is running at very high levels, but without a substantial pickup in retail sales, re-employment may be disappointing.

What the headlines miss is the growth in the population. The chart below shows retails sales divided by the current 16-and-over population. (If you are alive, you consume.) 

Retail sales per capita were previously on a 5% annualized growth trend beginning in 1992. However, after the financial crisis, the gap has yet to be filled and currently runs at just a 3% growth rate. Assuming we recover to full-employment next month, and retail sales return to its 3% growth trend, retail sales will take another step backward.

Such is the same outcome as we discussed last week with expectations for economic recovery. To wit:

“Before the “Financial Crisis,” the economy had a linear growth trend of real GDP of 3.2%. Following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Instead of reducing the debt problems, unproductive debt, and leverage increased.”

Employment Problem

There are two reasons for this, which are continually overlooked or worse simply ignored, by the mainstream media and economists. The first is that despite the “longest run of employment growth in U.S. history,” those who are finding jobs continues to grow at a substantially slower pace than the growth rate of the population. The economic shutdown exposed this weakness.

“Since the beginning of the last economic expansion, the working-age population has grown by 25.3 million while employment has fallen by 1.14 million through May. As the BLS confirms above, there are over 26 million who are “missing” due to how employment is calculated.”

“What is crucially important to the economy is full-time employment, which creates enough income to expand economic growth. The number of full-time employees to the working-age population is at 44.81%, which is not high enough to support economic growth.”

If you don’t have a job, and primarily live on government support (as 1-in-4 Americans currently do), it is difficult to consume at higher levels to support economic growth.

Consumers Are All Tapped Out

Secondly, while stimulus checks and extra-benefits may provide a temporary boost to incomes, that income boost is only temporary. The reality is that 80% of Americans continue to live paycheck-to-paycheck and have little saved in the bank. With years of wage stagnation, the cost of living now exceeds what incomes and debt increases can sustain.

It is also why despite the annual hopes of “stronger economic growth,” the 3-year average of economic growth continues to deteriorate. With consumers forced to consume more on credit, such will lead to a slower economic recovery as the ability to tap additional credit becomes problematic.

The impact on the economy from record levels of unemployment will have a wide range of impacts forestalling an economic recovery. The first, is a deep suppression of wage growth, which is derived from both recessionary drags and job losses.

Tightening Up

As stated, with reduced incomes, it is harder to make ends meet harder to obtain additional credit. Given consumers are dependent upon credit to “fill the gap,” and with banks tightening lending standards, access to credit will become more difficult.

Both of these factors will likely ensure the expected “V-shape” recovery in the economy is overly optimistic. While the data has certainly bounced as the economy is reopened, the headwinds will likely stall the advance.

One of the ongoing problems with the data is that aging demographics, massive monetary interventions, and the structural change in employment has skewed the seasonal-adjustments in economic data. These issues skew every report from employment, retail sales, and manufacturing to appear more robust. Such is a problem mainstream analysis continues to overlook but will be used as an excuse when the data reverses.

Deterioration in economic confidence is hugely important. The most significant factors weighing on consumption are job losses which crush spending decisions by consumers. Such starts a virtual spiral in the economy as reductions in spending put further pressures on corporate profitability. Lower profits lead to more unemployment, and lower asset prices, until the cycle is complete.

Conclusion

As I discussed last week, the current detachment of the stock market from the economy is likely an illusion that will not last long.

“The economic destruction playing out in real-time will eventually weigh on markets. There is a negative feedback loop between employment and consumption. As unemployment rises, consumption falls due to a lack of income. Since businesses operate based on demand for goods and services, the correlation between PCE, fixed investment, and employment is high.”

As noted, even with the reopening of the economy, businesses will not immediately return to full operational activity, until consumption returns to normalized levels. Without a ready vaccine, if there is a second wave of the virus, consumer confidence would likely reverse. Such would put further pressure on sales and, ultimately, corporate profits.

As I concluded in a note last year:

“It is hard for consumers to remain ‘confident’ and continue spending when they have lost their source of income.“

While the markets have indeed managed a strong “rally” from the March lows, there are reasons to be cautious.

We are just entering into what will likely be a more protracted, deeper, and more damaging recession than what we saw in 2008. Defaults and bankruptcies are only in the very early stages. Liquidity from the Fed has repaired credit spreads for the time being. Still, the longer this recession drags on, the higher the risk is the Fed only delayed the inevitable.

The Federal Reserve did move quickly to assist the credit markets in remaining operational, as discussed here. However, those “emergency measures” don’t translate into more robust economic prosperity, revenues, or corporate profits.

Despite the bounce in retail sales, there will still be no “V-shaped” recovery. 

Invest accordingly.

via ZeroHedge News https://ift.tt/2V2pjor Tyler Durden

Colorado Police Reforms Mandate Body Cameras, Strip Bad Officers of Lawsuit Immunity

policeprotests_1161x653

A long list of policing reforms has just been ushered into law in Colorado.

This morning, Democratic Gov. Jared Polis signed the Law Enforcement Integrity Bill, passed by the state’s House and Senate last weekend. The legislation, S.B. 217, includes changes that criminal justice reformers have been demanding for years:

  • It will require officers to wear body cameras and to record interactions with the public that are initiated by the officer. (There are some exceptions to avoid recording personal information or unrelated contacts.) If the officer fails to follow this rule, statements or other evidence presented by that officer may be ruled inadmissible in court; the officer may also face discipline up to and including termination. If it’s determined that a cop turned off a camera to conceal misconduct or obstruct justice, the officer’s certification may be suspended for up to a year. If the incident involves the death of a civilian, the officer’s certification may be permanently revoked. The bill includes a process for making body camera footage public and for redacting private information that the footage may have captured.
  • It will launch a database of police use-of-force incidents, documenting the type and severity of the force used, demographic data about the people subjected to the force, and instances where a police officer resigned while being investigated for misconduct. The state will host this database online in a searchable format.
  • It forbids officers from firing less-than-lethal projectiles (such as rubber or foam bullets) at a protester’s head, pelvis, or back, and it bars cops from firing indiscriminately into crowds of protesters. When police use pepper spray or tear gas to disperse protests, they will be required to warn people first—and to give them time to comply with the orders before firing.
  • It will strip police officers of qualified immunity in civil court if they are sued for violating people’s rights or for failing to intervene when they witness another officer violating a person’s rights. These officers may be held personally liable. There is a two-year statute of limitation on filing a civil action against an officer under such circumstances.
  • It will formalize officers’ duty to attempt to prevent excessive force by other police officers, will forbid law enforcement agencies from retaliating against officers who intervene in such cases, and will establish a misdemeanor offense for officers who fail to intervene.
  • It will establish an oversight board to examine police use of force. The oversight board will maintain a database of problem officers who have been caught engaging in misconduct or have been terminated.

“Millions of Americans have become part of our nation’s largest civil rights demonstrations in half a century,” Polis said in a speech before signing the bill. “This legislation specifically contains landmark evidence-based reforms that not only protect civil rights but will help restore trust between law enforcement and the communities that they serve.”

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Taxpayers Still on the Hook for Stadium Debts, Even Though Coronavirus Canceled Sports

iconphotos075012

The Pawtucket Red Sox’s final season was supposed to be hitting its midpoint right about now. After 51 years in Rhode Island, the “Paw Sox” are scheduled to decamp to Worcester, Massachusetts, where city officials have used their eminent domain powers—and taxpayers’ money—to lure the team to one of the most expensive minor league ballparks ever built.

The coronavirus pandemic has delayed, and maybe fully canceled, the team’s season-long goodbye to Pawtucket. In Worcester, meanwhile, the COVID-19 outbreak should cause city officials to worry they might have made a huge mistake.

The Massachusetts city issued more than $100 million in bonds to pay for the construction of the ballpark, two adjacent hotels, an office park, and a collection of apartments, restaurants, and bars. Almost all of that could have been funded by private developers, but the city decided to take the risk itself. Although the Red Sox are supposed to pay off $36 million of the project’s cost with future revenue, Worcester taxpayers are on the hook for more than $70 million in general obligation bonds tied to the project.

Ed Augustus, Worcester’s city manager, admits to Bloomberg that the city isn’t “immune from the reality—from changes in travel and tourism,” but he maintains that the city has enough “breathing room” to weather the downturn in demand for both commercial real estate and professional sporting venues. Worcester doesn’t owe payments on the debt until 2023, so there’s still time for things to work out.

Still, the risk is obvious. As Bloomberg notes, using general obligation bonds to finance a stadium project (and other questionable development) is what landed Harrisburg, Pennsylvania, in dire economic straits after the last recession.

American cities are going to lose about $360 billion in revenue over the next three years, according to a projection from the National League of Cities. The coronavirus pandemic isn’t just emptying stadiums and eliminating ticket revenue. It’s causing all sorts of economic spending to crater—including the common “tourist taxes” that cities often use to back debt, like those applied to hotel rooms and rental cars.

But these stadium projects were bad deals even before the pandemic-induced economic shutdown.

“The pandemic and the event cancellations it has generated have seriously disrupted the financial calculations that cities made in building stadiums at taxpayers’ expense,” writes David Boaz, executive vice president of the libertarian Cato Institute. “But they were never a good bargain.”

The projections used to justify Worcester’s investment in the stadium were iffy even under the best of circumstances. When the Worcester Business Journal surveyed 10 experts about the viability of the city’s plan, nine of them expressed skepticism that the ballpark would pay for itself. The only dissenter was a Smith College economist hired by the city to make the case for the project. Study after study after study has debunked the idea that publicly funded stadiums are financially beneficial to anyone other than the team owners, who get free infrastructure for their business.

Worcester isn’t the first place to learn this lesson, and it won’t be the last. Sixty miles south, Hartford, Connecticut, is losing $3 million annually on publicly funded minor league ballpark that has been a years-long catastrophe for the city. Stadium debt had already wrecked the finances of Glendale, Arizona, long before the coronavirus hit, but now the city may have to yank $1 million out of a rainy day fund to avoid defaulting on those obligations. That’s $1 million in taxpayer money that could have been used to deliver vital services, or returned to residents struggling to make ends meet right now.

Cities that bet on minor league baseball could be in for another surprise. Major League Baseball is reportedly aiming to reduce the number of minor league teams that are directly affiliated with major league franchises. Although the Pawtucket-but-soon-to-be-Worcester Red Sox were not included on a leaked list of teams to be cut, the COVID-19 pandemic has strained major league teams’ budgets; unloading more minor league affiliates (which generally siphon funding from their big league brethren) remains a possibility. Will the people of Worcester end up paying for a stadium that doesn’t have a team?

If Worcester officials are worried about missing out on a tax revenue windfall from the stadium project, the good news is that there was never going to be a windfall in the first place, quips Neil deMause, a critic of publicly funded stadiums who runs the Field of Schemes blog and wrote a book of the same name.

“The bad news,” he adds, is that “that’s not very good, as news goes.”

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Louisville Moves to Fire Police Officer Involved in Breonna Taylor Shooting

Breonna-Taylor-family-photo

The Louisville Metro Police Department (LMPD) will fire one of the officers involved in the fatal shooting of Breonna Taylor during a botched nighttime no-knock raid, Mayor Greg Fischer announced today.

In a termination letter obtained by local news outlet WDRB, Acting Police Chief Robert Schroeder wrote that Det. Brett Hankison, one of the three officers involved in the fatal March raid, “displayed an extreme indifference to the value of human life” and violated the department’s deadly force policy when he “blindly fired 10 rounds” into Taylor’s apartment.

Lawyers for Taylor’s family say she was asleep in bed with her boyfriend Kenneth Walker on the night of March 13, when LMPD officers serving a no-knock narcotics warrant broke down their door with a battering ram. Walker, a registered gun owner, shot at the officers believing it was a home invasion, hitting one officer in the leg. The officers fired back and hit Taylor eight times, killing her.

The search warrant was illegal. No drugs were found in Taylor’s apartment, and the main suspect that LMPD narcotics officers were pursuing, Jamarcus Glover, was already in custody when police broke down Taylor’s door. As of yet, no officers have been criminally charged for Taylor’s death.

The incident sparked national outrage, which boiled over into protests across the country following the May police killing of George Floyd in Minneapolis.

In the termination letter, Schroeder writes that he was “alarmed and stunned” by Hankison’s recklessness.

“In fact the 10 rounds you fired were into a patio door and window which were covered with material that completely prevented you from verifying any person as an immediate threat or more importantly any innocent persons present,” Schroeder writes. “You further failed to be cognizant of the direction in which your firearm was discharged. Some of the rounds you fired actually travelled into the apartment next to Ms. Taylor’s endangering the three lives in that apartment.”

In the wake of Taylor’s death, LMPD Chief Steve Conrad announced that he would retire. Before that could happen, he was unceremoniously fired after police fatally shot another Louisville resident during the protests. During that shooting, none of the LMPD officers on the scene had their body cameras activated. 

The Louisville Metro Council has also banned no-knock raids in legislation named after Taylor. The FBI is currently investigating her death.

According to the termination letter, Hankison was disciplined last year for for “reckless conduct that injured an innocent person.”

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Taxpayers Still on the Hook for Stadium Debts, Even Though Coronavirus Canceled Sports

iconphotos075012

The Pawtucket Red Sox’s final season was supposed to be hitting its midpoint right about now. After 51 years in Rhode Island, the “Paw Sox” are scheduled to decamp to Worcester, Massachusetts, where city officials have used their eminent domain powers—and taxpayers’ money—to lure the team to one of the most expensive minor league ballparks ever built.

The coronavirus pandemic has delayed, and maybe fully canceled, the team’s season-long goodbye to Pawtucket. In Worcester, meanwhile, the COVID-19 outbreak should cause city officials to worry they might have made a huge mistake.

The Massachusetts city issued more than $100 million in bonds to pay for the construction of the ballpark, two adjacent hotels, an office park, and a collection of apartments, restaurants, and bars. Almost all of that could have been funded by private developers, but the city decided to take the risk itself. Although the Red Sox are supposed to pay off $36 million of the project’s cost with future revenue, Worcester taxpayers are on the hook for more than $70 million in general obligation bonds tied to the project.

Ed Augustus, Worcester’s city manager, admits to Bloomberg that the city isn’t “immune from the reality—from changes in travel and tourism,” but he maintains that the city has enough “breathing room” to weather the downturn in demand for both commercial real estate and professional sporting venues. Worcester doesn’t owe payments on the debt until 2023, so there’s still time for things to work out.

Still, the risk is obvious. As Bloomberg notes, using general obligation bonds to finance a stadium project (and other questionable development) is what landed Harrisburg, Pennsylvania, in dire economic straits after the last recession.

American cities are going to lose about $360 billion in revenue over the next three years, according to a projection from the National League of Cities. The coronavirus pandemic isn’t just emptying stadiums and eliminating ticket revenue. It’s causing all sorts of economic spending to crater—including the common “tourist taxes” that cities often use to back debt, like those applied to hotel rooms and rental cars.

But these stadium projects were bad deals even before the pandemic-induced economic shutdown.

“The pandemic and the event cancellations it has generated have seriously disrupted the financial calculations that cities made in building stadiums at taxpayers’ expense,” writes David Boaz, executive vice president of the libertarian Cato Institute. “But they were never a good bargain.”

The projections used to justify Worcester’s investment in the stadium were iffy even under the best of circumstances. When the Worcester Business Journal surveyed 10 experts about the viability of the city’s plan, nine of them expressed skepticism that the ballpark would pay for itself. The only dissenter was a Smith College economist hired by the city to make the case for the project. Study after study after study has debunked the idea that publicly funded stadiums are financially beneficial to anyone other than the team owners, who get free infrastructure for their business.

Worcester isn’t the first place to learn this lesson, and it won’t be the last. Sixty miles south, Hartford, Connecticut, is losing $3 million annually on publicly funded minor league ballpark that has been a years-long catastrophe for the city. Stadium debt had already wrecked the finances of Glendale, Arizona, long before the coronavirus hit, but now the city may have to yank $1 million out of a rainy day fund to avoid defaulting on those obligations. That’s $1 million in taxpayer money that could have been used to deliver vital services, or returned to residents struggling to make ends meet right now.

Cities that bet on minor league baseball could be in for another surprise. Major League Baseball is reportedly aiming to reduce the number of minor league teams that are directly affiliated with major league franchises. Although the Pawtucket-but-soon-to-be-Worcester Red Sox were not included on a leaked list of teams to be cut, the COVID-19 pandemic has strained major league teams’ budgets; unloading more minor league affiliates (which generally siphon funding from their big league brethren) remains a possibility. Will the people of Worcester end up paying for a stadium that doesn’t have a team?

If Worcester officials are worried about missing out on a tax revenue windfall from the stadium project, the good news is that there was never going to be a windfall in the first place, quips Neil deMause, a critic of publicly funded stadiums who runs the Field of Schemes blog and wrote a book of the same name.

“The bad news,” he adds, is that “that’s not very good, as news goes.”

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Louisville Moves to Fire Police Officer Involved in Breonna Taylor Shooting

Breonna-Taylor-family-photo

The Louisville Metro Police Department (LMPD) will fire one of the officers involved in the fatal shooting of Breonna Taylor during a botched nighttime no-knock raid, Mayor Greg Fischer announced today.

In a termination letter obtained by local news outlet WDRB, Acting Police Chief Robert Schroeder wrote that Det. Brett Hankison, one of the three officers involved in the fatal March raid, “displayed an extreme indifference to the value of human life” and violated the department’s deadly force policy when he “blindly fired 10 rounds” into Taylor’s apartment.

Lawyers for Taylor’s family say she was asleep in bed with her boyfriend Kenneth Walker on the night of March 13, when LMPD officers serving a no-knock narcotics warrant broke down their door with a battering ram. Walker, a registered gun owner, shot at the officers believing it was a home invasion, hitting one officer in the leg. The officers fired back and hit Taylor eight times, killing her.

The search warrant was illegal. No drugs were found in Taylor’s apartment, and the main suspect that LMPD narcotics officers were pursuing, Jamarcus Glover, was already in custody when police broke down Taylor’s door. As of yet, no officers have been criminally charged for Taylor’s death.

The incident sparked national outrage, which boiled over into protests across the country following the May police killing of George Floyd in Minneapolis.

In the termination letter, Schroeder writes that he was “alarmed and stunned” by Hankison’s recklessness.

“In fact the 10 rounds you fired were into a patio door and window which were covered with material that completely prevented you from verifying any person as an immediate threat or more importantly any innocent persons present,” Schroeder writes. “You further failed to be cognizant of the direction in which your firearm was discharged. Some of the rounds you fired actually travelled into the apartment next to Ms. Taylor’s endangering the three lives in that apartment.”

In the wake of Taylor’s death, LMPD Chief Steve Conrad announced that he would retire. Before that could happen, he was unceremoniously fired after police fatally shot another Louisville resident during the protests. During that shooting, none of the LMPD officers on the scene had their body cameras activated. 

The Louisville Metro Council has also banned no-knock raids in legislation named after Taylor. The FBI is currently investigating her death.

According to the termination letter, Hankison was disciplined last year for for “reckless conduct that injured an innocent person.”

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Pandemic-Weary New Yorkers Spark Housing Boom In Suburban New Jersey 

Pandemic-Weary New Yorkers Spark Housing Boom In Suburban New Jersey 

Tyler Durden

Fri, 06/19/2020 – 14:12

“When you go from a $3 million apartment to a $3 million home, you triple or quadruple your space,” real estate consultancy Otteau Valuation Group said while referring to pandemic-weary city dwellers fleeing Manhattan to spacious New Jersey communities. “You really don’t care if the mayor shuts down the beaches, or the mayor shuts down the parks because you’ve got all that in your backyard.”

The exodus of wealthy people fleeing Manhattan and other parts of New York City is expected to be a boon for Bergen, Essex, Union, and Middlesex counties, located in New Jersey, noted Bloomberg, citing an Otteau report.

Jeffrey Otteau, president of the firm, forecasts single-family home prices this year will slump in the New Jersey counties mentioned above but could see a surge in price by at least 6% in 2021, would be one of the most significant annual increases since 2005, due mostly to the trend gain in momentum of people fleeing the big city for the comfort of suburbia.

“This looks like the 1970s, which was a time when people were leaving the cities,” Otteau said. “You had tremendous growth in places like Long Island and Westchester County, at the expense of the Manhattan economy.”

The breaking point for many Manhattanites was three months of lockdowns, followed by weeks of social unrest. It appears urban revival is about to abruptly reverse as folks seek rural communities and small towns to isolate from an imploding inner city. 

Reduced demand and oversupplied conditions will pressure urban home prices in the city. The opposite, of course, will happen outside in surrounding counties. We mentioned this on Wednesday in a piece titled “Housing Market Outside New York City Booms As City Dwellers Flee.” 

In May, Manhattan apartment deals crashed 80% compared with a year ago – it appears high-end deals were hit the hardest.

At the same time, contracts to purchase New Jersey homes at more than $2.5 million jumped 69% from a year earlier, according to Otteau’s data. The increase was seen in New Jersey counties not too far away from the Big Apple. 

Sotheby’s International Realty Tony Verducci said pre-corona, it took 101 days to sell a $3 million-plus home in Short Hills section of Millburn. Verducci said as people leave New York City – he’s sold two luxury homes in the area within 15 days of their listing.

“You’re taking everything you used to do outside and doing it in the home,” Verducci said. “Everyone wants a home gym because their gyms are closed. They want a nicer kitchen because they’re cooking now. When you’re working from home, you kind of need a Zoom room.”

In Westchester County, contracts to buy million-dollar homes jumped 40% in May from a year earlier, according to data from appraiser Miller Samuel Inc.

We’ve noted in the last several weeks, the exodus from big cities to rural communities is happening across the country: 

The trend is your friend – the smart money is getting the hell out of dodge as virus pandemic and social unrest implodes inner cities across America – suggesting urban home prices are slated for a decline. 

Why isolate in a tiny million dollar apartment, when one can easily enjoy the luxury of a 10,000 sqft mansion in the suburbs for a similar price range. 

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Stocks Only Go Up…

Stocks Only Go Up…

Tyler Durden

Fri, 06/19/2020 – 13:51

Via AdventuresInCapitalism.com,

I have always run my book with two distinct buckets.

  • One bucket is focused on “global micro trends,” which means that I find thematic inflections in global markets and position myself in small and mid-cap names that are likely to benefit. This is the fun stuff that I like to write about.

  • My other bucket, which I rarely write about, is focused on event-driven, tactical opportunities in idiosyncratic market dislocations and mispricing.  Rarely do these two buckets overlap, but of course, 2020 is anything but the norm.

Starting in late 2019, I noticed a change in market structure—suddenly and relentlessly, Implied Volatility (IV) for smaller companies began to increase. At the time, I attributed it to the accelerating economic recession that started in the third quarter of 2019. However, even as the VIX made new lows during the winter, the IV of many smaller companies I follow continued to increase. It was a curious divergence at a time full of curious divergences. Then, COVID-19 hit, the markets went bonkers and I sort of forgot about it, until things quieted down in the broader VIX during June, while the IV in my names only partly declined from peak levels back in March.

Now, you can attribute this to many causes. For starters, realized volatility is simply off the charts for the past few months. Dealer desks have been replaced by stay-at-home traders in bathrobes who don’t exactly have the permission of risk managers to take directional bets and compress IV. Besides, no one knows what will happen on dozens of complex issues from the economic, to the social to the geopolitical, to the election itself in November. The range of possibilities is massive and the world is clearly unsettled—volatility ought to be elevated, but should prosaic names with clean balance sheets trade at triple digit IVs?

With that in mind, it’s time to point out the newest variable – Robinhood.

While the average account at Robinhood is small, the capital deployed and the cohesion of investing strategies is terrifying. In the past, a group of investors conspiring to buy out of the money (OTM) calls and gamma-screw the dealers was illegal. Now, various message boards openly recruit members to run stocks up in thin after-hours sessions when market makers are least able to hedge their books. Tilray (TLRY – USA) may have been the first coordinated mob-rush over $1 billion, but there have been dozens since. What market maker wants to take the other side of such risk?

These factors have then been accentuated by the listing of weekly options on many stocks. No longer do you need to buy a month of Theta. Now you can buy Thursday OTM paper for pennies and play your games with almost nothing risked. In summary, while there are factors unique to 2020’s overall realized volatility, there are also structural factors that may now be semi-permanent. The ability of a horde of retail to corner the market in a billion Dollar stock has never existed until now. It’s new and is suddenly getting reflected in the unusually elevated IVs of rather mundane companies. Nothing in markets is ever permanent, but this one may be with us for quite some time.

Thus far, all of Robinhood’s attacks have been on call options. Bear raids are simply harder to orchestrate. That said, a put is really just a reflection of call option volatility (yeah, yeah, I know there’s more to it, but let’s roll with it for now). I want to draw your attention to these puts as we seem to be entering a time where many of them are structurally overvalued.

Throughout my career, there were always a handful of battlefield stocks with elevated put volatility, it was more a curiosity than something bankable. Suddenly, companies I actually want to own have triple digit IV. You can go far OTM writing puts and earn a high-single-digit percent monthly return. You can sometimes earn well past 20% for at the money (ATM) monthly paper. It’s gotten to the point where owning shares seems sub-optimal when compared with the alternative of writing puts and compounding at double-digit monthly rates (unless you’re long shares and selling covered calls which are also suddenly quite attractive). Don’t think of this as style drift on my part—I’m still structurally long undervalued stocks, I’m just expressing it through time decay.

Normally, when IV is high, it is because the market has just crashed and everyone is focused on buying stocks that are down 80%—IV is high because there’s no one taking the other side of it as there are better uses for capital. This is different, I simply cannot think of a time when the market has been a few percent off all-time highs and you could earn double-digit returns writing short-dated puts on low risk names.

At worst, you get long something you’d like to own at a discount to today’s price. I’m not here giving any premium writing targets—that’s for you to sort out. Rather, I want to note that small-cap volatility is unusually elevated and I think it may be somewhat structural as millions of Robinhooders machine-gun the market makers with 2-lots. You don’t get very many times where you can be the casino and play against retail who seem to enjoy massively overpaying for options, but selling puts in certain names sure seems like that sort of scenario.

Having noted that these puts are structurally mispriced, I’d be remiss if I didn’t end with one broad based warning; writing puts is like crack, it’s amazingly addictive and your broker will stand around feeding you margin while you overdose.

 NEVER write more premium than your ability to absorb the notional value of the underlying if you got assigned on EACH and EVERY one of them.

In summary, we’re in a unique moment in time where my new favorite “global micro trend” (massive inflows of capital from brain-dead retail investors) mixes with my idiosyncratic event-driven bucket (short-term market dislocations). Market makers are stepping back and retail is running rough-shod over professionals. IV is higher than where it should be (potentially structurally) and I’m taking advantage of it by writing puts. Besides, J-POW has my back…

via ZeroHedge News https://ift.tt/2YP2dTj Tyler Durden

COVID-19 Outbreak At Phillies Clearwater Training Camp Sickens 5 Players, 3 Staff

COVID-19 Outbreak At Phillies Clearwater Training Camp Sickens 5 Players, 3 Staff

Tyler Durden

Fri, 06/19/2020 – 13:33

In the middle of a bitter labor dispute that is already threatening to scrap the 2020 season entirely (such an unfortunate outcome, according to MLB Commissioner Rob Manfred, now appears virtually inevitable), several Phillies players have reportedly tested positive for COVID-19.

As Florida experiences a major outbreak that is threatening to make the state into one of the new hotspots, alongside Texas and Arizona, five Phillies players who had been training at the team’s facility in Clearwater, Florida have tested positive for coronavirus in recent days, according to NBC Sports Philadelphia.

In addition to the five players, three staff members have tested positive, though the identities of those infected aren’t known.

Even before the labor dispute took a turn for the worse, owners feared a rash of player and staff infections that could force the league to abandon a hoped-for July 4 start date for a 50-game abbreviated season. Now, a “significant number of team personnel” are awaiting test results, a sign that the numbers could rise in the next day or two.

None of the eight people who have been infected have been hospitalized; all apparently have pretty mild infections.

The outbreak in Clearwater is the first known instance involving MLB players and the commissioner’s office is aware of it. It is not known if the situation will affect negotiations with the union, though both sides have insisted that health issues trump all financial considerations.

The Phillies closed their Spectrum Field facility in mid-March when the sporting world shut down because of the COVID-19 crisis. At the time, the facility was thoroughly cleaned.

“I’m not trying to scare anyone, but this is real and it spreads quickly and easily and people need to know,” said one person who knows some of the Phillies personnel who has tested positive.

via ZeroHedge News https://ift.tt/3diAaAO Tyler Durden