Tag: news

Earlier today we said that with the collapse of “Blue Wave” hopes, and with them expectations of a massive fiscal stimulus (made even less likely now that Nancy Pelosi is facing a growing rebellion within the Democratic party), the Fed is now the only game in town…

When Powell asks for more fiscal stimulus tomorrow, who will tell him it’s not coming.

— zerohedge (@zerohedge) November 4, 2020

… which naturally means even more QE (assuming the Fed refuses to cut rates to negative), before eventually the Fed launches a digital dollar sparking an inflationary conflagration.

And sure enough, this morning the realization that the end of the “reflation trade” means the start of the QE trade has sparked a massive bid across all risk assets, which has pushed the S&P 2% higher, with the Nasdaq even higher, but it’s the dollar collapse trades that are really exploding.

With the dollar plunging as traders start anticipating even more monetary easing, the fiat-alternatives are surging, with gold spiking more than 2%…

… once again tracking the stock of global negative yielding debt tick for tick…

… but it’s really crypto where the action is, with bitcoin soaring…

… and rising above $15,000 for the first time since January 2018…

… and lifting the entire crypto space higher.

Authored by Bill Blain via MorningPorridge.com,

“to blow these Scotch beggars back to their mountains!”

The 5th of November is the day we celebrate Guy Fawkes’ attempt to blow up the UK’s parliament. (These are his words in this morning’s quote by the way.) However, as we enter a new lockdown, and the stresses of watching our treasonous cousins across the pond elect their new king unwind, maybe it’s time to pause, take a deep breath, calm down… count to ten.. And release. 

Eyes open on a bright new era…? Maybe.. maybe not…. Rumours of potential violence around Trump’s claims of electoral theft swirl round markets this morning. Maybe someone should be asking Trump about the 10% of postal votes HIS postal service failed to deliver? 

Enough! We’re nearly done about the US Elections. Let’s move on and work out what happens next: what are the likely investment scenarios for this changed world? If the objective is to maximise returns – how do we get there? I guess we need to start by understanding where we are now! 

First, let’s make the informed assumption we’re going to get Joe Biden as US president later today while the Republican’s hang onto the Senate by a couple of seats. Does that mean long-term gridlock and, as some papers suggest – a Lame-Duck Biden regime stymied by a failure to enact stimulus, growth policies and even make new appointments to the Fed? Or, will the removal of Donald J Trump from the scene result in a coming together of Republicans and Democrats to solve the critical issues? 

Whatever, but stocks loved it! Up in Europe and the US. Why? Because markets think anything is better than Trump’s chaotic tenure? Or more likely that potential gridlock means lower spending and consensus, yet they still anticipate stimulus from government and QE infinity for ever from the Fed? These seem mutually exclusive…. but maybe not! 

I’m positive: the thin Rep. Senate majority of 2 seats, a sense of unity in the face of crisis, and the end of the era of Trump division means we may see a return to a new normal of deal making in Congress. If the Americans can learn to talk to each other again, then they can be part of the solution on the big global issues; Trade, the Western Alliance, Climate Change, and Equality.

If I’m right and accommodation is probable, then let the stock party continue! 

Second, the most immediate critical issue is the Pandemic. The virus is the critical challenge of the modern age for the West. This morning the UK starts its second Lockdown, as is happening across Europe. Italy has put a curfew in place. The implications on corporate solvency, jobs, growth and confidence are immense – and deepening. At this stage, the only policy appears to be containing the virus to stop health services from being overwhelmed. 

Is there any upside? 

Yes, there is: flattening the hospital admission curves is one part, and damaging but probably necessary part of the strategy. Therapies are vastly improved raising and speeding up recovery. Govts finally understand track and trace. A 100% effective vaccine remains a long-shot, but shots that provide some form of boost will raise confidence, dim the fearfulness and boost confidence. The Pandemic will not be forever.

We might not have gotten a V-shaped recovery.. but it will end and growth will resume. 

Third, how to address the growing instability and distrust across the West the US election has highlighted. It’s happening in the UK and in Europe as electorates are increasingly frustrated and feel put upon. How close Trump came to retaining the presidency sums up the distrust of conventional politics – for very valid reasons. 

What does it mean for further populism across Europe as electorates fear for their jobs and seek to protect themselves against uncertain futures? What does that mean for the confidence underlying the West and Capitalism? What does it mean for the future of Government?  It is not a necessary evil – without Government we’d still be hunting mammoths. Societies thrive because of not less, but better government. 

I’m hopeful here as well – voters aren’t daft. Society changes and government eventually catches up. There is also a cyclical shift underway that could improve Governance and resolve inequalities. There is a shift from wealth towards society.  The trend is visible in the focus on ESG investments, but also in the more long-term cycle shift from Shareholder Capitalism – the old Freidman trope about businesses to being run to benefit shareholders only, to a refocus on sharing the benefits among all – the Stakeholder society. 

This shift is upsetting the Right and particularly the small band of libertarian nut-jobs who will do literally anything to stem it. They seem to forget 99% of people actually like other people, and even get a kick of doing good for others! Helping and being nice to others makes anyone a good person – and if that means they are a “socialist”, then I’d like to be one too! And that’s not incompatible with being a capitalist! 

Fourth, how to invest in financial markets which are utterly distorted by policy and regulatory action? Yields have been repressed – some $17 trillion of Sovereign bonds now trade at sub-zero yields. The effect is to cause all financial asset prices to rise, despite the underlying economic weakness triggered by the pandemic: financial asset stagflation. 

It leads to two consequences:

i) taking greater risk for lower returns and a risk/return equation that’s increasingly unbalanced, and

ii) a search for “better” returns which has simply spread financial asset stagflation from the bond market across all assets.

When you get told to buy, say, wine because its outperforming other investments, that’s a good example of how the search for returns is driving yield tourism! 

The current big theme in “Yield Tourism” is China – the argument being the west is so weakened and crippled by pandemic, low growth, political friction and unemployment that it makes sense to switch to high growth China. Yesterday the news about the cancellation of Ant Financial’s IPO was generally overshadowed by the US election, but it was a classic warning moment. (I did write about in the Porridge y’day!)

Interestingly there is a lesson in the humiliation of Ant re banks. Bank have suffered post 2008 due to regulation, which reduced their capacity to lend, thus spurring the growth of Fintechs in the lending space. The Chinese regulators are trying to push high capitalisation rules on Ant which will effectively hobble it just as the banks are… but without lenders like banks once were, or the FIntechs want to be now – how to SME’s access swift and cheap financing? I suspect China’s regulators will make all the same mistakes that have been made in the West…

There are serious ESG risks investing in China. It’s even more fundamental to understand that China might be capitalism but, paraphrasing Dr. Leonard McCoy; “its capitalism Jim, but not as we know it”. The basics of investing in domiciles where the rule of law, the enforcibility of contracts, and the right of clear title are unequivocal and should not be forgotten. When the government has the ability to do whatever it wants, then that’s a reason to be cautious. 

I guess I forgot that fundamental rule when I upped my position in Alibaba and other China stocks just last week…!  

As I wrote yesterday, lets wait for the dust to settle and then figure out where we go from here… I suspect nothing much has really changed…

Just yesterday we wrote about a ballot initiative in Oregon that decriminalized hard drugs, including cocaine, heroin, meth and magic mushrooms. Meanwhile, on the other side of the country, New Jersey was approving a constitutional amendment to legalize cannabis in the state. 

New Jersey authorized the legal use of recreational marijuana on election day after what the NY Times called “years of legislative failures” to do so. Supporters of the bill pointed to the disproportionate number of arrests occurring in minority communities as a result of marijuana. 

The initiative passed by a “wide margin” and the next step now becomes state officials starting a “potentially lengthy” process of establishing rules around issuing cannabis licenses. The vote is also expected to pressure surrounding states like New York and Pennsylvania to follow suit. 

State Senator Liz Krueger of New York said: “I’m going to cheer on New Jersey and hope that it helps us beat them to the punch.”

The state is planning to tax 6.625% on marijuana sales. Municipalities have the option of charging an extra tax of up to 2%. The state’s Cannabis Regulatory Commission will have 5 members for “hashing out” additional details. To date, only one member has been appointed.

The tax revenue is appealing for the state, and may push New Jersey to move quickly in order to help address some of the state’s budget gaps. The initiative could generate up to $126 million per year. 

State Senator Nicholas Scutari wants existing medical marijuana companies in the state to be able to turn around and sell to recreational users, also: “We’re anticipating moving very quickly with enabling legislation, which would in fact allow medical marijuana shops to sell to the general public immediately. We’re happy to invite New York residents over to enjoy.”

He has called the war on marijuana in the state a “colossal waste of resources and a colossal waste of people’s lives.”

On the Wednesday before election day, New Jersey Governor Phil Murphy weighed in on the issue on Twitter, tweeting at 4:20PM, “time to legalize it”. 

4:20 PM.

Time to legalize it. pic.twitter.com/157WC7qgof

— Governor Phil Murphy (@GovMurphy) October 28, 2020

Across the country, Montana and Arizona both approved ballot measures to legalize recreational marijuana. South Dakota also had legalization on the ballot. If the initiative passes in these states, almost 33% of the entire country will have legalized smoking marijuana without a medical justification. 

Recall, it has been just 8 years since Colorado and Washington were the first states to do so. The process is starting to accelerate for states who have approved marijuana for medical use, as well. For example, Massachusetts took just two years to go from medical approval to recreational approval. 

Authored by Brandon Smith via Alt-Market.us,

Just as I successfully predicted the outcome of the 2016 election months in advance, my predictions on the 2020 election are now coming to pass. In July of this year in my article ‘Election 2020: The Worst Case Scenario Is The Most Likely One’, after I outlined the strange factors surrounding Biden and Trump, I stated that:

“These factors and more lead me to predict that Election 2020 will be a contested election which ends with Trump staying in office but accused of usurping the democratic process. This outcome is the worst possible outcome and also the most advantageous for the globalist establishment.”

I also noted the predictive programming campaign by the media and members of the Council On Foreign Relations like Max Boot to acclimated the public to the idea of a contested election while also “wargaming” (planning) that exact outcome. I stated:

“…Boot is back again, this time writing about how he thinks Donald Trump will try to “hijack” the presidency in 2020.

In an article for the Washington post titled ‘What If Trump Loses But Insists He Won’, Boot outlines a scenario that was “war gamed” by a group called the Transition Integrity Project. The group played out a scenario in which there is a razor thin victory for Joe Biden, followed by actions by Trump to keep control of the presidency through lies and legal wrangling. The group also predicted civil unrest leading to potential “civil war” as the fight over the White House expands.

This article is, I believe, an attempt at predictive programming by the establishment. They are TELLING US exactly what is about to happen. A contested election, civil war, martial law, economic collapse and the US will be destroyed from within.”

The bizarre behavior of vote counters in swing states, including PA where they stopped the count altogether overnight, indicates a program to incite national tensions and rage. The media refusing to call certain states for Trump even though he held clear leads while rushing to call states for Biden even though the count was far from unfinished will only exacerbate people’s suspicions that the election is being rigged or stolen.

Trump has said he will take the results to the Supreme Court and there is no doubt that recounts will be held in states like Michigan and Arizona. I continue to predict that Trump will stay in office despite the close election. I also predict that numerous fake ballots will be discovered during recounts only throwing gasoline on the fire and implicating Democrats in certain districts with fraud. Social justice leftists will surely try to riot in response, and Trump will call for martial law if the current scenario plays out as I expect.

The leftists will NOT accept the results of a Supreme Court decision in favor of Trump. Conservatives WILL NOT accept a Biden presidency.

I think it’s clear where this is all headed…

Nevada, a state where Democratic presidential nominee Joe Biden has been favored to win, currently has the Democratic contender leading President Trump by a thin margin.

State officials are preparing to release election results on Thursday at noon (ET) but the Trump administration is planning to hold a press conference 30 minutes before, likely announcing a lawsuit alleging fraud and malfeasance by the Democrats.

The presser in Las Vegas is expected to start at 1130ET and will host various individuals, including former intelligence official Richard Grenell, former Nevada Attorney General Adam Laxalt, Chairman of the American Conservative Union Matt Schlapp, and Nevada GOP Chair Michael McDonald. 

Fox News notes the Trump campaign will announce a lawsuit of voter fraud:

Ric Grenell, the former acting Director of National Intelligence, is slated to hold a Thursday morning press conference in Las Vegas to announce the Trump campaign is filing a lawsuit that seeks to count every “legal” vote. The Trump campaign is alleging that at least 10,000 people voted in the state, despite no longer living there.

Nevada’s six electoral votes could be crucial for a Biden victory, currently at 264 electoral votes, with another six needed to secure the 270 win. Pennsylvania was thought to be the must-have battleground ground state, where lawsuits would fly, and who thought it would all come down to Nevada?

As explained recently by constitutional law expert Jonathan Turley, on Fox News, the Trump administration’s strategy is to file lawsuits in states, such as Pennsylvania, Michigan, and Georgia, where there are legitimate objections to voter fraud. 

Tensions are running high across the nation as the election outcome remains uncertain.

Though there could be a major announcement early afternoon from Biden from Wilmington, Delaware, tweeted VOA’s Steve Herman. 

There are indications @JoeBiden could be making a public statement from Wilmington, #Delaware in the early afternoon. #Election2020

— Steve Herman (@W7VOA) November 5, 2020

Via SchiffGold.com,

It looks like Joe Biden will ultimately win the presidential election, although it will likely be weeks before all of the official votes are in and the legal wrangling could go on even longer. One thing that is clear is that the polls were horribly wrong. They were projecting a Biden landslide. If Trump did lose, it was barely.

In his podcast, Peter Schiff offered some post-election analysis and said investors are as clueless as the pollsters.

The projected “Blue Wave” never materialized. It not only looks like the GOP will maintain control of the Senate, they also picked up seats in the House. As Peter put it, the Blue Wave was barely a splash.

Joe Biden barely squeaked in with the narrowest of margins, assuming that the challenges don’t hold up.”

Before the election, Peter speculated that a lot of people might split their ballot, voting for Biden because they dislike Trump, but voting Republican in congressional races in order to keep the Democrat in check.

Wall Street had handicapped this scenario as the worst possible outcome because they perceive a Republican Senate as an impediment to stimulus. In fact, despite the third straight day of gains driven by anticipation of a Biden presidency with plenty of government stimulus, the Dow Jones sold off into the close Wednesday as it became increasingly clear the Republicans would likely maintain control of the Senate.

Anything that would slow down the stimulus juggernaut was going to be bad news, certainly for the market, which is a one-trick pony and that trick being stimulus.”

But Peter said he doesn’t think the Republicans will stem the stimulus tide. He said he does think the Republicans will show a little more backbone with Biden in the White House, “but not much.”

The package will be there. The Republicans are not going to stop the aid. Everybody agrees, unfortunately, that people need help and nobody wants to deny that help. But I do believe that with the Republicans in control of the Senate that the size of the spending plan will be somewhat smaller than otherwise would have been the case had the Republicans not maintained control of the Senate. I don’t think Republicans are going to stop the tax hikes. I do think they will mitigate the size of the tax hikes. So, I do think that corporations and upper-income taxpayers are going to be hit with higher taxes. The blow just may not be as bad as it would have been had the Democrats taken control of the Senate. But I don’t think that the economy is going to be spared either increases in government spending or higher taxes.”

Peter said the stimulus and the tax hikes will act as “an economic sedative.”

And I do not believe it will provide the type of support to the stock market that similar stimulus has provided in the past because I do believe we are going to overdose on that stimulus and the fatality is going to be in the US dollar, and then, of course, by extension, the entire US economy that rests upon the foundation of the overvalued dollar.”

Nevertheless, the stock market celebrated the election led by the NASDAQ. Peter termed it a relief rally. But he said the celebration may be a bit premature if Wall Street really thinks tax hikes aren’t coming just because the GOP maintains the Senate. And he said the real problem will be the increase in spending that’s coming down the pike.

Which means the deficits are going to be much larger, which means the monetary stimulus supplied to finance those deficits, to monetize those deficits, are going to be much larger. And that means the real economic damage will be much greater and the losses far more severe for people who are holding US-denominated assets – particularly bonds.”

Peter said he also thinks the regulatory burden on businesses will increase. A lot of the deregulation during the Trump administration came via executive order. Biden can undo those with a flick of a pen. He can also add additional regulations in the same way.

Gold hasn’t made any kind of big move in the wake of the election, but it did rally back above $1,900 and has held that level.

Gold really should have had a much bigger move up. I mean, gold is what people should be buying as a result of this election. They should be buying gold regardless of the outcome of the election because the one thing that’s certain is that money is going to be printed. There is going to be a lot of inflation in the future, even more so than what we had in the past, and that means a lot more money is going to go into gold.”

The real question is how much longer can the delusion that the outcome of this election is somehow a positive for an already substantially overvalued stock market continue?