Facebook And Instagram Suffer Widespread Global Outage

Facebook and Instagram users around the world reported outages on Wednesday, beginning with reports from south-eastern England and spreading into the United States and South America. 

Users have either been greeted with a message that reads: “Sorry, something went wrong. We’re working on getting it fixed as soon as we can,” or were timed out on their connection. 

Facebook and its subsidiary Instagram each have more than two billion monthly active users around the world. 

The cause of the outage is unknown, however users took to Twitter to discuss:

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Bernie Sanders and Elizabeth Warren Are Wrong About Trump’s Medicare Cuts

Over the last few days, both Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.)—both of whom are currently vying for the Democratic presidential nomination—have attacked President Trump for proposing Medicare cuts in his latest budget.

You might get the impression from these tweets that Trump is proposing to slash Medicare’s benefits. For the most part, that’s not true. As Trump’s acting budget director said when the budget plan was released, the president is “not cutting Medicare,” and “there are no structural changes for Medicare.” Too bad.

Instead, the cuts, such that they are, are focused on eliminating that conveniently vague Washington standby—”waste, fraud, and abuse.” Trump’s budget, like previous presidential budgets, won’t become law, so this is in some sense an argument about vague cuts that almost certainly won’t happen.

In this case, the proposed cuts mostly take the form of payment reductions to health providers, like hospitals. (In the world of health care policy, you can usually tell whose payments are on the chopping block by which industry group issues the loudest objection.) About 11 percent of the reductions would hit Medicare Part D, the prescription drug program, and could affect how much seniors pay out of pocket.

There are a few things to note about these reductions.

The first is that the total reduction is not the $845 billion Sanders claims. Instead, it’s $515 billion. As the Committee for a Responsible Federal Budget (CRFB) noted in a recent analysis, the $845 billion figure includes money that is being moved out of Medicare and into other parts of the budget for the Department of Health and Human Services, which oversees Medicare. These aren’t really cuts; they’re organizational reclassifications.

The second is that these Medicare cuts are quite similar to the provider reimbursements backed by the Obama administration, which cut Medicare payments by about $800 billion as part of Obamacare. As an Axios report notes, President Obama defended those reductions by saying they wouldn’t affect seniors’ benefits. According to the CRFB analysis, many of the cuts included in Trump’s budget “closely resemble or build upon proposals made in President Obama’s budgets.”

At the time, Republicans criticized those payment reductions, implying they would hurt seniors. In reality, the main effect would be to make obvious hypocrites out of everyone involved. Obama responded to GOP criticism by portraying those payment reductions as necessary to “strengthen and preserve” Medicare. If that’s what Obama was doing then, then that’s what Trump is doing now.

Perhaps Sanders and Warren believe that reimbursement cuts would force providers to reduce service: Pay doctors less, and you’ll get less from them.

If so, it’s worth recalling that both are backers of Medicare for All—single-payer plans that would scrap today’s private health insurance coverage as well as today’s Medicare program for seniors and replace them with a new, government-run program covering all Americans. Sanders’ single-payer plan is premised on paying health care providers far less than they are paid right now, with some estimates putting the reduction around 11 to 13 percent, and others putting it closer to 40 percent. In any case, doctors and other health care providers would, overall, be paid quite a bit less than they are today.

The transition to single-payer would be fairly rapid, with the Sanders plan calling for full-scale implementation in just four years, and another plan recently introduced by House Democrats calling for a two-year timeline, meaning doctors would face a sudden payment cliff.

There is a reasonable debate to be had about exactly how provider rates affect service, and what sort of payment reductions and reimbursement tweaks doctors and hospitals can absorb. Americans tend to pay higher prices for health care services than in other countries, and health care workers at all stations are often paid more as well. Trump’s budget would cut existing Medicare rates; single payer would reduce payments from today’s mix of private and public payers. Too much of the health care industry lacks any meaningful price signals, and even payers and providers themselves don’t always fully understand the various reimbursement systems they interact with. It’s complicated.

But it is hard to imagine that a rapid transition to a nationwide government-run system of health care financing that dramatically reduces provider payments would not significantly impact the quality or quantity of health care delivery in the United States. Yet by supporting Medicare for All, that is what Sanders and Warren are saying they want for every American.

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Tesla Whistleblower Bombshells: Hacking, Lies To Police, Meth, Cocaine And Sex At Gigafactory

While the rest of the world moved on from Business Insider’s summer 2018 report that Tesla was reworking or scrapping 40% of its raw materials at its Gigafactory, Elon Musk wasn’t able to do so. As Bloomberg details in a new long-form, Elon Musk “stewed for weeks” trying to figure out who had leaked the detailed information with the press.

We now knew that the responsible party was Tesla’s first official whistleblower: Martin Tripp, a worker on the assembly line at Tesla’s Gigafactory. Tripp claimed to have leaked the information for altruistic and safety purposes, trying to get Tesla to fess up to wrongdoing and clean up its act. Musk disagreed, and called Tripp someone who engaged in “extensive and damaging sabotage” of the company and claimed Tripp had shared more confidential information with “unknown third parties”. 

Martin Tripp (Souce: BBG)

Tesla subsequently sued Tripp for $167 million in late June of 2018, which we reported on previously. On the same day, Tripp heard from the sheriff’s department in Storey County, Nev., who claimed they had gotten a tip from Tesla security. Meanwhile, Tesla security claimed someone had called in to the Gigafactory, warning them that Tripp was planning a mass shooting at the gigafactory. 

When the police tracked down Tripp later that evening, he was unarmed and “in tears”, claiming that he was terrified of Tesla CEO Elon Musk, who he thought may have called in a falsified tip himself. The Sheriff contacted Tesla to tell them that the tip was bogus and that Tripp was not dangerous. Bloomberg reports that “Tesla’s PR department spread rumors that Tripp was possibly homicidal and had been part of a grand conspiracy.”

At the same time, Musk took to Twitter to decry the author of the Business Insider report, Linette Lopez. He accused her of being on the payroll of short sellers and claimed that Tripp had admitted to taking bribes from her in exchange for “valuable Tesla IP”. Lopez forcefully denied the accusations immediately on Twitter, mocking Musk for wasting his time on her. 

In a surprise reversal, the Gigafactory’s head of security at the time, Sean Gouthro, has now also turned into a whistleblower. He claims that Tesla security “behaved unethically in its zeal to nail” Tripp. Among other things, he claims that Tesla investigators hacked into Tripp’s phone, had him followed and misled police. Further, Gouthro says that Tripp didn’t sabotage Tesla or hack anything and that Elon Musk knew all of this, but still tried to damage his reputation. 

“They had the ability to do things I didn’t even know existed. It scared the shit out of me,” Gouthro told Bloomberg. 

Sean Gouthro (Photo: BBG)

Gouthro said he wasn’t surprised that Tripp went unnoticed at the Gigafactory when he tried to point out problems. The factory “had been filled with workers so quickly that it was almost impossible to control,” he said. 

He also said that soon after he started in January 2018, he discovered many employees (some living out of their cars) were using cocaine and meth in the bathrooms. Others were having sex in parts of the factory that weren’t constructed yet. 

“A member of a Mexican cartel was in fact trafficking in potential large quantities of methamphetamine and cocaine,” one of Gouthro’s underlings, Karl Hansen, would later state publicly. Hansen was cited as Gouthro’s motivation to go public with his story – Gouthro sought to corroborate Hansen’s claims. 

In terms of security at the factory, Gouthro said that “the scanners guards used to check badges were unreliable, so they’d wave in anyone with a piece of paper that looked legitimate.”

After Tripp went public, Gouthro looked back through video footage to identify him as the leaker. He sent a plainclothes security guard to ask Tripp to turn his laptop in for a “routine update” that was actually a comprehensive forensic audit. Tripp later admitted, in an interrogation with company HR, that he was the leaker – but the transcript of the interrogation showed that he denied taking bribes, which Musk later accused him of on Twitter. 

Gouthro claimed that Tesla somehow had access to texts and e-mails that Tripp was sending while at the Gigafactory:

Gouthro, who wasn’t in the interrogation room, says at one point he saw a colleague reading the text messages and emails that Tripp was sending during breaks in the questioning. He says that somehow Tesla was able to access Tripp’s communications in real time.

The six hour interview wound up finishing on relatively civil terms, according to the transcript, though Gouthro said he had to debrief a “furious” Musk via video conference, before Tesla fired Tripp on June 19. 

You can read the full Bloomberg feature here

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Tailing 30Y Auction Prices At Lowest Yield In 8 Months

After a mediocre 3Y auction and a stellar 10Y auction, today the Treasury concluded the week’s coupon issuance with the sale of $16 billion in reopened 29-year 11-month bonds. The high yield of 3.014%, while coming at the lowest since July 2018, was a surprisingly big tail to the 3.006% When Issued, suggesting some indigestion during the auction process.

Yet while the high yield left a little to be desired, the internals were solid with the Bid to Cover printing at 2.254, fractionally below February’s 2.27% which also happened to be the 6 auction average. Meanwhile, following some growing concern about Indirect bidder, i.e. foreign buyers, stepping back, today’s take down was solid, with 57.8% going to foreign official institutions, above last month’s 56.4%, if below the recent auction average of 60.9%. And with Directs fading modestly, taking down 14.1% after last month’s 17.0%, Dealers ended up with 28.1% of the auction, above both Feb’s 26.6% and the recent auction average.

In summary, a solid auction with in line internals, despite some weakness headed into the 1pm auction deadline. As a result, there was virtually no reaction in the secondary bond market.

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Small Business Hiring Suggests We May See More Weak Employment Data

Authored by Bryce Coward via Knowledge Leaders Capital blog,

Last week we were presented with a fairly cold employment report with the number of job gains being lowest in 18 months and one of the lowest readings in the last decade. The problem is not necessarily the one weak employment report – which did come with at least some bright spots including a lower overall unemployment rate – but the fact that the data has been unquestionably weak across a number of economic indicators from employment to manufacturing activity to durable goods orders (an indicator of capex intentions).

In this type of environment, it becomes harder and harder to give bad data a “pass” as a one off statistic. This is especially true when we start to see weak data points being confirmed by more forward looking data, and that is exactly what we saw today in the National Federation of Independent Businesses (NFIB) survey.

Specifically, it was the small business hiring plans component that caught our attention. It came in at the lowest level in about a year and was a continuation of the sharp drop seen in the January report.

This is important because the one year change in the NFIB hiring plans indicator tends to lead year over year changes in both the unemployment rate and initial claims by about four months.

In other words, the fact that small businesses are signaling a slowdown in hiring suggests we may be in for more weak employment reports in the months ahead, a prospect neither stocks nor bonds are discounting at the moment.

 

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The Washington Post Blames Obama for Fentanyl Deaths

A story in today’s Washington Post makes the case that the Obama administration failed to take the proliferation of fentanyl as a heroin booster and substitute seriously enough, resulting in drug-related deaths that otherwise would not have occurred. The story is formatted in white type on a black background, interspersed with examples of people who died after taking fentanyl, so you know the Post‘s intentions are serious. I wish I could say the same about its argument, which makes much of press conferences that did not happen and reports that should have gotten more attention but fails to identify a single policy that would have made an important difference.

Reporters Scott Higham, Sari Horwitz, and Katie Zezima note in passing that the crackdown on prescription opioids pushed nonmedical users (as well as some bona fide pain patients) toward black-market alternatives, which are much more dangerous because their potency is inconsistent and unpredictable. Initially the main alternative was heroin, which was “cheaper and and more available,” notwthstanding a century of government efforts to eliminate sources, interdict shipments, and put distributors in prison. To the extent that such efforts have been successful at all, they have only encouraged traffickers to replace heroin with more potent products such as fentanyl, which makes it possible to pack more doses in any given volume and is “20 times more profitable than heroin by weight.” Yet the main solution Higham et al. suggest is eliminating sources, interdicting shipments, and putting distributors in prison, a strategy that by their own account has manifestly failed to stop Americans from obtaining the psychoactive substances the government says they should not want.

Higham et al. implicitly fault former Attorney General Eric Holder’s “Smart on Crime” initiative, which among other things urged federal prosecutors to refrain from triggering mandatory minimum sentences in run-of-the-mill drug cases involving low-level, nonviolent offenders. “Out in the field,” they write, “some drug agents and prosecutors said they noticed an immediate difference, just as fentanyl started to show up on the streets.” Draconian mandatory minimums “provide powerful incentives for people to talk,” they explain, and Holder’s policy deprived drug warriors of that weapon.

The Post cites Dominick Capuano, a former New York City narcotics cop, who “said federal prosecutors would no longer take the lower-level cases and morale among his drug agents plummeted as heroin and fentanyl overdoses soared.” According to Capuano, the attempt to curtail the use of mandatory minimums undermined the NYPD’s anti-drug tactics. “The low-lying fish is where you start the cases,” he tells the Post. “Those are the people who flip, who give information, and that’s what leads to these bigger cases.”

Let us leave aside the question of whether threatening “low-lying fish” with manifestly unjust prison terms is morally justified because it “leads to these bigger cases.” Is there any reason to think “these bigger cases,” which had not stopped heroin from being cheap and plentiful, would have been any more successful when deployed against fentanyl? The fentanyl supply is, if anything, harder to disrupt than the heroin supply, since it is a synthetic product that does not rely on crops and enters the country in small packages from myriad sources, including the mail and private courier services as well as hidden compartments of vehicles crossing the border at legal ports of entry.

If there is a pattern to be seen in the facts cited by Higham et al., it is not the Obama administration’s insufficient zealousness in prosecuting the war on drugs. It is the fultility of that endeavor, which never manages to block the supply of illegal drugs, as Donald Trump keeps promising to do, but does manage to make drug use more dangerous. Prohibition created a black market in which potency is highly variable, which leads to fatal dosing errors. Restricting access to prescription analgesics pushed more people into that market, resulting in more fatalities. Attempts to curtail the heroin supply encouraged the shift to fentanyl, which made potency even more unpredictable and drug-related deaths even more common.

But things can always get worse. Already the use of superpotent fentanyl analogs is on the rise, and the strategy implicitly endorsed by the Post is apt to encourage that trend.

“This is a massive institutional failure, and I don’t think people have come to grips with it,” John P. Walters, George W. Bush’s drug czar, tells the Post. “This is like an absurd bad dream and we don’t know how to intervene or how to save lives.” Walters is absolutely right, but not in the way he thinks.

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One thing Congress gets right: funding their own pensions

Turns out Congressmen make a lot of money…

A study found that while the average American’s net worth increased 3.7% per year between 2004-2012, members of Congress averaged 15.4% annual gains.

That high level of pay means half the members of Congress are millionaires today… and continue to collect their $174,000 annual salary.

Of course it’s you, the taxpayer, paying that cushy salary.

But did you know the taxpayer also foots the bill for insane retirement benefits for Congress?

Each retired member can start collecting a pension at age 62 if they’ve spent just five years in Congress.

And they’ll collect 80% of their $174,000 annual salary.

That’s almost $140,000 a year, for the rest of their lives… for five years of service.

Where can I sign up?

Meanwhile, 40% of Americans can’t cover an unexpected $400 emergency expense… 57% have less than $1,000 in savings.

And a third of baby boomers—the generation currently retiring—have NOTHING put away for retirement.

While Congress’ pension is secured by your tax dollars, only 13% of regular Americans have pensions today. And even if you were promised one, collecting it is another story…

A recent Boston College report estimates 25% of private US pension funds—the pools of capital that pay out retirement benefits—will go bankrupt in the next decade. Public local, state, and federal pension funds are in even worse shape: $7 TRILLION short on what they promised to pay retired government workers.

But most Americans are relying on a different broken retirement fund… Social Security.

The Social Security Administration admits it is $50 trillion underfunded, and will run out of money by 2034.

That means cutting payouts, raising the retirement age, or both. And even that is only a short term solution…

There are, however, at least two Senators who see the injustice in all of this. They introduced legislation to eliminate pensions for members of Congress.

They say it’s not fair that while the poor get poorer, Congress gets richer.

The median American household net worth declined .94% per year from 2004 to 2012. And over the same period, 100 members of Congress watched their net worth gain 114% per year.

Members of Congress added $316.5 million to their net worth during this time period.

(But it wasn’t the Socialists in Congress who introduced the bill to address this wealth gap. They’re happy to ignore this prime example of the rich literally stealing from the poor.)

Getting rich at the taxpayers’ expense, collecting a salary 3x the median household income, and getting a six-figure lifetime pension…

That’s Congress’ reward for sinking the US government $22 trillion in debt… for creating debt bubbles in housing and student loans… for utterly failing to address a broken Social Security system… for wasting billions on things like a broken Obamacare website, defending Congressmen from sexual assault lawsuits… and fighting like children during a government shutdown while millions of Americans were out of work.

But whatever happens next with the economy, whatever destruction their actions cause, rest assured, they’ll take their money and run…

Just like they did in 2008 before the big financial crash. Strange how 34 different members of Congress rearranged their investment portfolios within two days of talking to top Treasury and Federal Reserve officials.

One Senator even sold up to half a million dollars’ worth of Lehman Brothers stock the day after he met with the Treasury Secretary… just months before the firm declared the largest bankruptcy in history.

These politicians suffer no consequences for the policies they force on the entire nation. On the contrary, they personally gain tremendously from the turmoil they cause.

Even if their pensions are cut — I’m not holding my breath — it is largely a symbolic move. It won’t make a dent in the dire debt and liabilities of the US government.

Unlike members of Congress, you’re on your own for retirement.

One option is, if you can’t beat them, join them. Run for Congress and watch your net worth skyrocket. Even without their golden pensions you’ll be all set for retirement.

But a more realistic (and ethical) solution is to plan your retirement assuming the government promises will not be fulfilled.

One solution is to take matters into your own hands by using self directed structures for your IRA or 401(k).

But perhaps a better solution is to become a better investor. Saving an extra couple grand a year, and putting it into the right places can make a huge difference over the course of a couple of decades.

Sovereign Man’s Chief Investment Strategist Tim Staermose was on our Podcast last week explaining two different targeted investment strategies with proven track records. You can listen here.

Worst case scenario is we are wrong—the government by some miracle saves Social Security, pays off the debt, funds its pensions, doesn’t tank the economy and avoids another recession…

And you’ll still be better off having prepared for the worst.

Source

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Manafort Indicted On 16 New Charges In New York State 

Less than an hour after former Trump campaign manager Paul Manafort was sentenced to an additonal 43 months in prison in the second of two trials – bringing his total sentence to 90 months, or 7.5 years for tax fraud, bank fraud and conspiracy, Manhattan District Attorney Cyrus Vance Jr. slapped Manafort with a new indictment. 

Manafort will face 16 charges, including an accusation that he committed residential mortgage fraud by falsifying loan documents “in the first degree.” 

Of note, President Trump would not have pardon power over a state conviction.

While Mr. Trump has not said he intends to pardon his former campaign chairman, he has often spoken of his power to pardon and has defended Mr. Manafort on a number of occasions, calling him a “brave man.”

The new state charges against Mr. Manafort are contained in a 16-count indictment that alleges a yearlong scheme in which he falsified business records to obtain millions of dollars in loans, Mr. Vance said in a news release after the federal sentencing.

“No one is beyond the law in New York,” he said, adding that the investigation by the prosecutors in his office had “yielded serious criminal charges for which the defendant has not been held accountable.” –NYT

Developing…

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Explosive Lisa Page Testimony: Dossier Timeline Contradictions And DOJ Interference

Via SaraCarter.com,

Testimony provided to Congress from former FBI lawyer Lisa Page reveals contradictions as to when she learned about former British spy Christopher Steele’s anti-Trump dossier, sheds light on the “insurance policy” and exposes the Obama Justice Department’s decision not to charge Hillary Clinton with allegedly violating the Espionage Act.

Page’s testimony, which was delivered behind closed doors last July before a joint task force of the House Oversight and Judiciary committees, reveals the internal machinations between senior bureau leadership and the DOJ. Basically, her testimony adds more depth to what happened during the critical months during the FBI’s investigation into President Trump’s election campaign and the bureau’s “Midyear Exam” investigation into Clinton.

As for the Clinton investigation, Page said the bureau “did not blow over gross negligence.” She told Rep. John Ratcliffe, R-Texas, there were ongoing discussions with former FBI Director James Comey and other senior officials about the issue. She said “on its face, it did seem like, well, maybe there’s a potential here for this to be the charge. And we had multiple conversations, multiple conversations with the Justice Department about charging gross negligence,” she said.

She added “the Justice Department’s assessment was that it was both constitutionally vague, so that they did not actually feel that they could permissibly bring that charge.”

Page’s testimony does coincide with what former FBI General Counsel James Baker’s told the committee on “gross negligence.” In testimony he stated that he originally believed Hillary Clinton’s mishandling of highly classified information was “alarming” and “appalling,”  as first reported at SaraACarter.com. He also believed her use of a private server to send the classified emails was sufficient enough to secure an indictment to possibly charge her for violations under the Espionage Act, for mishandling sensitive government documents.

However, her testimony focuses on the DOJ’s push not to charge Clinton, whereas Baker puts the onus on Comey. He said Comey did not believe the charges would stick and that he argued with Comey until just before the public announcement not to charge Clinton. Baker suggested he changed his mind shortly before Comey announced publicly on July 5, 2016 not to charge the then presidential candidate.

Crossfire Hurricane

Page also expands on the FBI’s controversial “Crossfire Hurricane” investigation into members of the Trump campaign and links the investigation to controversial text messages made between her and former FBI Special Agent Peter Strzok regarding the “insurance policy” against Trump. Strzok and Page were removed from Special Counsel Robert Mueller’s investigation after their anti-Trump text messages were discovered. Page left the FBI and Strzok was fired shortly after DOJ Inspector General Michael Horowitz report was made public last year.

Page expresses in her testimony that during the investigation into the Trump campaign there was a sentiment at the time among bureau officials regarding the president’s electability: nobody believed he would win.

“So, upon the opening of the crossfire hurricane investigation, we had a number of discussions up through and including the Director regularly in which we were trying to find an answer to the question, right, which is, is there someone associated with the [Trump] campaign who is working with the Russians in order to obtain damaging information about Hillary Clinton,” states Page.

She adds, “and given that it is August, we were very aware of the speed and sensitivity that we needed to operate under.”

“[W]e don’t need to go at a total breakneck speed because so long as he doesn’t become President, there isn’t the same threat to national security, right,” Page added.

“But if he becomes President, that totally changes the game.”

Ohr and Page Testimony On Steele Don’t Match Up

Moreover, Page contradicts Ohr’s testimony regarding when she first knew about former British spy Christopher Steele’s dossier. She claims in her testimony that she did not know about the dossier in August 2016, however, Ohr’s testimony reveals that he delivered Steele’s information to the bureau shortly after meeting with Steele. In fact, he met with former Deputy Director Andrew McCabe and specifically, Page at the bureau to deliver the information.

Ohr reveals this during an exchange with then-Chairman of the House Oversight and Government Reform Committee Trey Gowdy, R-SC.

“Why? Why did you meet with them,” asks Gowdy.

“To pass the latest information that I had received,” Ohr responds.

“How did you find out who to meet with? Who did you call to find out,” questions Gowdy.

Ohr explains that prior to that meeting with McCabe and Page he had met with Steele on July 30, 2016.

“After the July 30th meeting with Chris Steele, I wanted to provide the information he had given me to the FBI. I reached out for Andrew McCabe, at that time, Deputy Director of the FBI and somebody who had previously led the organized crime, Russian organized crime squad in New York and who I had worked with in the past, and asked if he could meet with me,” he said. 

“I went to his office to provide the information, and Lisa Page was there. So I provided the information to them. And some point after that, I think, I was given Peter Strzok, or somehow put in contact with Peter Strzok.”

Gowdy then asks when exactly did Ohr meet Strzok and Page.

“I don’t recall the exact date,” Ohr says.

“I’m guessing it would have been in August since I met with Chris Steele at the end of July, and I’m pretty sure I would have reached out to Andrew McCabe soon afterwards.”

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BMO: Our Market Timing Model Is About As Negative As It Ever Gets

Something very strange has been taking place in the market over the past three days: as we showed on several occasions earlier this week, while stocks are once again soaring, led by the old faithful tech sector, and perhaps facilitated by the low-volume flux ahead of this Friday’s quad-witching which tends to always inflict ‘max pain’ on established derivative positions, bonds are not only not “buying it” quite literally, but are telegraphing further economic weakness ahead. Nowhere is this more visible than in the latest divergence between stocks and bonds shown below.

This morning, BMO’s chief technical analyst Russ Visch makes just this observation and in his daily action report writes that “the divergence between the S&P 500 and the U.S. 2-year yield (which have traded in lockstep for many months now) is only getting worse. Either the bond market has it wrong here, or equity markets do.”

The bond market certainly hasn’t been buying into this week’s strength in equity markets either. The divergence between the S&P 500 and the U.S. 2-year yield (which have traded in lockstep for many months now) is only getting worse. Who has it wrong here? Bonds or equities?

We couldn’t agree more, and while we reserve judgment on who is right and who is wrong – although the historical track record has shown time and again that it is bonds that virtually always end up being correct in the long- or even medium-run – Visch has no such qualms, and writes that “despite the recent price strength our short-term equity timing model remains negative so we’re willing to bet it’s the latter.”

And speaking of BMO’s market timing model, Visch notes that “while the trend for equities has been positive so far this week”, it remains a “bit of a head scratcher since coming into the week our short-term timing model was just about as negative as it ever gets” and adds that “there’s not a lot to like outside of the price action in the major averages” bringing attention to the lack of participation, saying that “volume has been nonexistent during this latest bounce.

Meanwhile, he points out that composite bullish sentiment ticked lower for the first time in nine weeks.

So what can make Visch – and his model – turn bullish? As he caption the S&P chart below, while “the short-term trend remains negative. Only a close above 2815 negates the near-term negative outlook” and similarly for the Nasdaq, only a close above multiple resistance levels in the 7650-7675 zone “negates the short-term negative call here.”

 

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