Month: March 2020

Boeing is making a massive bet with the hiring of new mechanics for its shuttered 737 Max production line that a restart could begin imminently, reported Bloomberg. 

Max production lines were suspended last month as there was no clear pathway for the planes to return to the skies via the Federal Aviation Administration (FAA).

Boeing started hiring hundreds of new employees late last year with the expectation production would resume by mid-2020. In early December, Boeing hired 115 new mechanics to its Pacific Northwest manufacturing hub. Another 122 were brought on in early January and another 143 by mid-month. IAM District 751, Boeing’s largest labor union, said the plane manufacturer had hired 730 new workers, a figure that is entirely net increases, despite 31 mechanics leaving. 

Boeing’s labor and supply chain management expenses related to the Max have been soaring since the planes were grounded about a year ago, and the company incurred even higher costs associated with production shutdowns last month. About 3,000 employees remain on payroll to avoid a fracturing of its supply chain. 

Boeing’s timetable for a mid-year production restart could be a little too optimistic with planes grounded. The FAA has provided limited details on when the aircraft will return to the skies. 

There are some signs that Boeing’s restart could be nearing, or maybe it’s just more gambling by its suppliers: Spirit AeroSystems Holdings Inc., Boeing’s top supplier with 3,200 employees, said it would resume Max fuselage production at the end of March.

Ken Herbert, an analyst with Canaccord Genuity, said 200 of the recent Boeing hiring’s had been mechanics for the Max production line. Herbert said other workers had been shifted to other product lines but would be diverted back to Max production when restart occurs.

Doug Alder, a Boeing spokesman, told Bloomberg that “we’ve maintained our staffing levels on the 737 program to focus on factory initiatives, while temporarily assigning some employees.” 

Getting Max production off the ground by mid-year could be a difficult task for Boeing, and the number of resources it’s allocating into its supply chain for immediate restart could prove disastrous if delays continue.

Hints of new delays are coming from Southwest and United Airlines, who have extended Max cancelations until late August to the early September timeframe.

And more issues are developing, with about half of undelivered Max planes have foreign-object debris (FOD) in their fuel tanks.

Boeing’s big bet on mid-year production restart could prove disastrous if more delays are seen. 

Over the weekend, China-watchers – or at least the ones who don’t really watch China all that closely and instead rely on others’ “hot takes” – were shocked to learn that in February both the Chinese manufacturing and non-manufacturing PMIs had crashed far below consensus expectations, tumbling to record low levels, surpassing even the economic contraction observed at the peak of the global financial crisis.

Meanwhile, anyone who was following out periodic updates of China’s “alternative”, high-frequency indicators demonstrating the real state of the economy was hardly surprised, because as we showed over the past few weeks, after China’s catastrophic post-Lunar New Year collapse the economy has yet to stage a material rebound as profiled previously:

• China Has Ground To A Halt: “On The Ground” Indicators Confirm Worst-Case Scenario
• China Is Disintegrating: Steel Demand, Property Sales, Traffic All Approaching Zero
• Terrifying Charts Show China’s Economy Remains Completely Paralyzed

And yet, judging by the market’s torrid surge on Monday, it appears that – as so often happens – traders took China’s latest numbers in stride, and specifically as an indication of Beijing “kitchen sinking” the collapse in February, with a V-shaped recovery sure to follow.

Or maybe not, because while not only has China’s economy not picked up even modestly, but it is only a matter of time before Beijing, which has forced people to go to work against their will, succumbs to a second wave of coronavirus infections, one which will result in an even worse economic slump than the current one, which incidentally has yet to show any actual recovery!

So what do the latest high-frequency economic indicators show? It may come as a surprise to some that not only has China’s economy barely posted any improvement since our last update on this topic a week ago, but it has in fact lost ground in some metrics. Courtesy of Goldman, here is the latest “alternative” data:

First, daily coal consumption has barely rebounded from the recent lows, and is in fact where it was when the Lunar Near Year started, and tracking almost 30% Y/Y:

In line with the reduced daily coal consumption, railway-loaded coal volumes are also tracking substantially below the average level of the past three years, and what’s worse, the 2020 series appears to have slowed down in recent days.

An even more ominous indicator is China’s traffic congection index – a proxy of overall trade and commerce – which has barely budged since its new year lows and remains far below the same period in previous years.

With commerce frozen and amid fears that the government is lying about the true extent of the coronavirus spread, it will hardly come as a surprise that passenger traffic has failed to stage even a modest rebound from its new year lows, and is about a quarter of where it was one year.

One of Wall Street’s favorite real-time indicators, traffic congestion in major Chinese cities, has seen a modest rebound in recent days, however even it remains just barely above its level at the start of the lunar new year, and is below half where it has been in recent years.

It’s not just passenger traffic that is moribund: the load factor on domestic flights remains a fraction of where it has been in recent years.

Even the one area where there was been a modest rebound in recent days, daily property sale, remains in dire territory, or about 68% down compare to last year.

Looking at end markets for commodities used in construction, the operating rate of rebar  slumped further on both weak demand and high inventories. Likewise, the operating rate of HRC and galvanized steel, mainly used in the manufacturing sector, is now at just 50% of capacity and shows no signs of recovery.

And, as Goldman points out, while the bank has found increased orders from cable and wires fabricators while, operating rate of copper rod producers remained as low as 50% for big companies and 30% for medium-sized producers. What’s more, some small producers have not restarted yet at all, according to a Goldman survey with onshore contacts.

There is a silver lining to China’s ongoing economic paralysis: anyone who ventures into one of the country’s thousands of cinemas will have the building all to themselves.

The failure of China’s economy to reboot comes even as authorities have ordered owners of closed factories – whose employees are scared to return to work – to boost electricity usage to pretend that the economy is back to normal, and to fool those people who look at the charts above, into getting the impression that China’s economy is humming again. We described this bizarre example of central planning on Saturday, and here is Rabobank’s Michael Every commenting on this very phenomenon on Monday morning:

Saturday’s China PMI data were frankly shocking. Manufacturing was at 35.7 and services at 28.9: these are not recessionary levels, but outright depressionary. The private Caixin PMI was also awful at 40.3, again saying a deep downturn is biting. Of course, the real issue is if we get a V-shaped recovery in output – or in virus infections. Optimists, and Chinese stocks this morning, are cheering the former – and Chinese stocks are always freely traded and never, ever manipulated by the authorities, as well all know. Realists, and NASA satellite imagery of no pollution over China, lean towards the latter: as does one anecdotal, unsubstantiated report trending over the weekend that China has been ordering factories to leave the lights on to make them look busier from space and to boost electricity output in case pesky foreigners start trying to use that as a GDP proxy.

Finally, for all those expecting that Beijing will unleash another massive stimulus to kick-start the economy which remains paralyzed at a time when most analysts said activity would be back to normal by the first week of March, we give the last word to Nomura’s China economist Ting Lu, who not only correctly predicted the plunge in PMIs, but also said that “the likelihood of another round of massive stimulus appears low as policy space remains limited.””

“We believe markets might underestimate the scale of the current growth slump. Due to a slower-than-expected rate of business resumption, we have cut our year-on-year Q1 real GDP growth forecast to 3.0% and expect Beijing to ramp up policy easing measures in coming months. That said, the likelihood of another round of massive stimulus appears low as policy space remains limited.”

In short, for China – which was the world’s growth dynamo during the global financial crisis and helped the world rebound from the 2009 global depression while raking up tens of trillions in debt – the end of the economic road may finally be here.

The Australian Strategic Policy Institute (ASPI) published a new report that says at least 27 factories in nine Chinese provinces are using forced labor of at least 80,000 Muslim Uyghur minority from the western Xinjiang autonomous region. 

“Under conditions that strongly suggest forced labour, Uyghurs are working in factories that are in the supply chains of at least 83 well-known global brands in the technology, clothing and automotive sectors, including Apple, BMW, Gap, Huawei, Nike, Samsung, Sony, and Volkswagen,” ASPI’s report said.

After several years of intense international criticism of China’s Uyghur re-education camps of more than one million people, many of these folks have graduated and been funneled into government-directed factories around the country. 

The report said, “It is extremely difficult for Uyghurs to refuse or escape these work assignments, which are enmeshed with the apparatus of detention and political indoctrination both inside and outside of Xinjiang. In addition to constant surveillance, the threat of arbitrary detention hangs over minority citizens who refuse their government-sponsored work assignments.” 

It added that “local governments and private brokers are paid a price per head” by the Xinjiang provincial government to “organise the labour assignments,” which ASPI says a new phase of government “repression” of Uyghurs is underway in forced labor factories making products for Western consumers. 

The Shandong-based Taekwang factory is one of many factories Uyghurs have been forced into labor. Taekwang is owned by South Korean chemical and textile conglomerate (chaebol), is one of the largest manufacturers of shoes for Nike, turning out upwards of eight million pairs per year. 

ASPI said hundreds of Uyghurs workers did not choose to work at the factory; they were assigned by the government. 

“The Chinese government is now exporting the punitive culture and ethos of Xinjiang’s ‘re-education camps’ to factories across China,” said Vicky Xiuzhong Xu, the report’s lead author.

It was seen in some cases that Uyghurs were transferred from re-education camps directly to factories. 

 “For the Chinese state, the goal is to ‘sinicise’ the Uyghurs; for local governments, private brokers and factories, they get a sum of money per head in these labour transfers,” Xu added.

And while the appeal of cheap slave labor is enticing for Western companies, the Chinese government promotes Uyghurs integration in factories as their strong efforts at ‘multicultralism’…

 “By ‘encouraging’ ethnic minorities in Xinjiang to ‘interact and develop themselves,'” Wang Yang, an official in charge of Xinjiang labor policies, recently said. “China has immensely promoted interaction and integration among different ethnicities.”

As China attempts to restart its manufacturing base, specifically in the Hubei region, where shortages of workers remain because of the virus outbreak, it’s only a matter of time before the government sends in Uyghurs to pick up the broken pieces. 

Beto O’Rourke will be the third former Democratic presidential contender to endorse Vice President Joe Biden Monday night during a rally in Dalls, the New York Times reports.

Former Representative Beto O’Rourke of Texas, who became a progressive star in his spirited race against Senator Ted Cruz before mounting a less-successful presidential campaign, will endorse Joseph R. Biden Jr. and appear with him in Dallas Monday night, according to two Democratic officials familiar with his plans.

Mr. O’Rourke, who dropped out of the primary last fall, has returned to his native El Paso and largely stayed out of the campaign.

But one night before the Texas primary, he will line up with his fellow former candidates, Pete Buttigieg and Amy Klobuchar, in their effort to coalesce behind Mr. Biden and slow the momentum of Bernie Sanders.

The shock-and-awe message is clear: Despite his innumberable stumbles and the fact that his campaign was on life-support just days ago (though he still has tens of millions in his campaign war chest), the DNC has anointed Joe Biden the winner of the primary.

At this point, the only non-Bernie frontrunner who hasn’t dropped out is Elizabeth Warren, who was probably busy Monday night celebrating the demise of Chris Matthews’ career, just the latest ‘scalp’ on Warren’s wall.

You shouldn’t have to be a billionaire with a concierge service to get tested, treated, and vaccinated for coronavirus. My plan will let every American get the coronavirus protections they need for free. https://t.co/JPsaw6Gvnq

— Elizabeth Warren (@ewarren) March 3, 2020

On Twitter, Warren was busy sharing one of the several stories published Monday bashing the rich over imaginary resource hoarding that isn’t even happening.

You shouldn’t have to be a billionaire with a concierge service to get tested, treated, and vaccinated for coronavirus. My plan will let every American get the coronavirus protections they need for free. https://t.co/JPsaw6Gvnq

— Elizabeth Warren (@ewarren) March 3, 2020

Still, Robyn Kanner’s 72 hours aren’t yet up.

I think we’re only 72 hours out from an overwhelming majority of Presidential candidates dropping out. It’s been a hell of a race. Proud of all the staffers on campaigns. Let’s unite. Let’s beat Trump.

— Robyn Kanner (@robynkanner) March 1, 2020

Here’s Buttigieg endorsing Biden live. We expect to see Beto and Amy shortly.

HAPPENING NOW: Pete Buttigieg endorses Joe Biden at campaign rally in Dallas https://t.co/H9n7JKbYS7 pic.twitter.com/faHkxRmbuq

— CBS News (@CBSNews) March 3, 2020

Though Bloomberg is stubbornly hanging on (for now), unless something incredibly shocking happens tomorrow, it’s pretty much down to Biden vs. Bernie. Although, as Trump argued earlier, it’s not really a race – it’s a coup.

Amid the broader market carnage which culminated with the fastest 10% S&P correction from an all time high, last week also we observed the biggest one-day point drop in the Dow Jones ever (this in turn was followed by the biggest one-day Dow point surge ever on Monday). But more notably, following several days of freefall, on Friday equity long/short hedge funds finally stepped up, and whether it ends up being the “best trade”, the “worst trade”, or something in between, Morgan Stanley’s prime brokerage writes that “the buying of US equities among Equity L/S funds on Friday was the biggest we’ve seen in the past decade.” And while Monday’s ramp certainly eased some concerns about another year of woeful hedge fund performance, Morgan Stanley cautions that depending on what happens to stocks from here, it “raises the risks that we could see a rotation and alpha drawdown, should these flows look to reverse in the future.”

As we first observed two weeks ago, the record high leverage, crowding, and factor risks among the hedge fund community have raised the risk for future violent hedge fund rotations.

And while we have not yet seen these risks realized in the sharp sell-off over the past weeks, the recent behavior and mixed performance among HFs has made Morgan Stanley more concerned that we could be getting closer to a sharp rotation. In particular, three of the things the bank is watching have changed recently and are driving its greater concern:

• HFs have been actively adding to gross leverage, particularly by adding longs in the largest amounts of the past decade last Thurs and Fri. This is concerning because in 3 of the 4 similar past episodes since 2014, large long selling has followed afterwards and has coincided with negative HF alpha (see Figure 1 below)
• L/S funds bought large amounts of Momentum last week (and sold Value), once again crushing Marko Kolanovic’s argument that a rotation out of momentum/low-vol and into value stocks is imminent.
• Performance (while good relative to the markets) has declined in absolute terms into negative territory and crowded stock performance has been mixed

So was Friday’s record dip buying a sign that hedge funds have finally gotten their mojo back and are again able to time market inflection points? According to Morgan Stanley that is hardly the case, and instead last week’s flush into risk assets merely underscores the top three rotation risks, which are as follows:

Rotation Risk Consideration #1: Largest Long Buying of Past Decade

Throughout the sharp sell-off last week, HF activity showed almost no signs of active de-grossing. In fact, the opposite was largely the case as L/S funds bought longs throughout last week and Quant funds generally added to both sides of their  books to keep their leverage from falling as fast as it would simply due to the falling markets. Put simply, there were no real signs of capitulation among Hedge funds.

While this behavior of buying dips and adding to gross exposure is fairly common during market pullbacks, the magnitude of the long buying among L/S funds spiked to unprecedented levels on Friday. For context, the long buying on Thursday was in line with the prior high from 2010-2019 and Friday’s buying was ~75% higher than that. Similarly, large long buying has often come near short term market troughs, aside from what happened in late 2018 (i.e. HFs generally exhibited good timing from a broad market perspective). Looking at the peak long buying within the green ovals in Figure 1, they peaked on the following dates:

• Feb 6, 2014
• Aug 27, 2015
• Feb 9, 2018
• Oct 17, 2018

However, this behavior raises the rotation risk that Morgan Stanley’s Prime Brokerage has been getting more concerned about for a while. Essentially, the concern is that HFs have tended to sell longs afterwards (often as markets rebounded) and this selling coincided with negative alpha from L/S funds.

Notably, the one time there wasn’t a subsequent alpha drawdown in the next few months was early 2018. But as one can see from the next chart below, the long buying then was a reversal from long selling into the Jan ’18 peak, rather than an acceleration of long buying as we’ve seen recently. The chart below tracks the trend in the cumulative long activity over time to help show when longs have been built up or reduced. To be clear, HFs were covering shorts aggressively from 4Q17 to early ’18 so nets were going higher, but L/S funds weren’t arguably pressing their longs into the market high.

In addition, this chart shows that, while the long buying in Jan 2016 and Aug 2019 were not quite as extreme over a short period of time (as highlighted in the green rectangles in Figure 1), the long risk had been building for months leading up to  the drawdowns in 1Q16 and Sep-Oct 2019.

Rotation Risk Consideration #2: Increased Momentum Buying (and Value Selling)

It’s not just that L/S funds were adding risk by buying the dip last week, what’s also notable is what they were buying. From a sector/industry perspective, they were mostly buying areas they’re already quite long: Software, IT Services (payments), Aero & Defense, Semis, Internet Retail, Hotels Restaurants & Leisure, and Entertainment.

From a factor standpoint, this manifested itself in one of the largest weeks of buying of Momentum in many years. It was the largest since last Sep (during the brief rebound after the sharp drawdown) and last Aug. In addition, it was the largest selling of Value in years. From a net exposure standpoint, L/S fund Momentum exposure is around the 50th %-tile since 2010 (and similar to where it stood prior to the selloff last Sep) while Value is around the 10th %-tile since 2010.

Rotation Risk Consideration #3: Performance Declines

For many HFs that are net long the market, there were few places to hide last week. Thus, it’s not surprising that funds lost about 4-5% gross last week as markets were down about 10%. This shifts returns into negative territory on a YTD basis. Needless to say, dipping into negative territory on a YTD basis early in the year is very different from doing so late in the year and leads to different investing behavior. Thus, being down about 2% hasn’t apparently triggered large de-grossing, especially as equity markets are now down 8-9% on the year.

For those looking for a performance trigger, Morgan Stanley suggests that one reference point might be early 2016. As the S&P sold off 9% from Dec 31 to Jan 20, L/S funds were down about 4-5%. However, the tipping point was that as the S&P rallied towards the end of Jan to be down only 5%, L/S were still down about 3.5-4% (i.e. there was little upside capture on the rebound). When markets started to sell-off again in early Feb and funds went back to being down closer to 5% on the year, they aggressively switched to de-grossing.

So while performance has held up so far, the concern is that a breakdown in returns could cause risk appetite to decline and de-grossing to increase. Two things to note on this front are:

1. The crowded longs in the US have held in relatively well lately, but the 2 best days last week were last Thurs & Fri, which coincided with outsized long buying among HFs
2. The crowded shorts have not been working well, which may suggest less cushion if the longs start underperforming

In conclusion, Morgan Stanley reminds us that a few weeks ago that the Combined Risk Metric of leverage-crowding-factors was back at highs, BUT that we had not yet seen aggressive HF behavior at that point and the rotations usually came a couple months after the metric hit highs. As such, “with the changes in behavior last week and more time passing, the risks of a rotation appear to be greater now and if capitulation (i.e. de-grossing) does play out among HFs, this would likely be fairly painful.”

Oh, the perfect irony that after almost four years of abusing Donald Trump (during his campaign and presidency) for endless character flaws, it will be President Trump that outlasts the MSDNC anchor.

At the beginning of tonight’s show – ‘Hardball’ – Chris Matthews abruptly announced his retirement after a tumultuous month that included calls for his firing.

“I’m retiring. This is the last ‘Hardball’ on MSNBC, and obviously this isn’t for lack of interest in politics,” the 74-year-old said in addressing the audience in scripted remarks.

“As you can tell, I’ve loved every minute of my 20 years as host of Hardball. Every morning I read the papers and gung-ho to get to work. Not many people have had this privilege.”

pic.twitter.com/ZKwShVaTWE

— Hardball (@hardball) March 3, 2020

“Retired” is one way of calling it…

Matthews was notably absent from the network’s live coverage of the South Carolina primary on Saturday, one day after being accused of sexual harassment by GQ columnist Laura Bassett (lambasting Matthews for comments made to a variety of women during his MSNBC career).

“I was afraid to name him at the time for fear of retaliation from the network; I’m not anymore. It was Chris Matthews. In 2016, right before I had to go on his show and talk about sexual-assault allegations against Donald Trump, Matthews looked over at me in the makeup chair next to him and said, ‘Why haven’t I fallen in love with you yet?’

So he is a sexist?

“Another time, he stood between me and the mirror and complimented the red dress I was wearing for the segment. ‘You going out tonight?’ he asked,” Bassett wrote, adding that Matthews told the makeup artists at the time, “Make sure you wipe this off her face after the show. We don’t make her up so some guy at a bar can look at her like this.”

And a bigot?

Then things got super awkward during coverage of President Donald Trump’s rally in South Carolina on Friday evening when Matthews thought Republican South Carolina Senator Tim Scott was Jaime Harrison, a Democrat running against the other senator from that state, Lindsey Graham.

The exchange between Matthews and Harrison occurred after the two had already spoken several minutes prior. Later, when Matthews saw Scott standing next to Graham, he mistook the junior South Carolina senator for Graham’s black Democratic opponent.

“Jaime, I see you standing next to the guy you’re gonna beat right there, maybe, maybe maybe, Lindsey Graham,” Matthews quipped.

“That’s Tim Scott, Tim Scott,” a female voice said off-camera.

“Jaime?” Matthews said.

“Who is that?” said the obviously confused MSNBC anchor after another correction.

“That’s Tim Scott,” Harrison said, smiling.

And is having senior moments?

Confusing two Americans because they have the same skin color?

Omg Chris Matthews Just confused Jamie Harrison for Tim Scott!
But don’t worry about it Chris I think all you old white men with toupees all look alike too! #hardball pic.twitter.com/83OGMX6sP3

— Mayday Mindy🌹🌊 (@maydaymindy9) February 29, 2020

Or is he racist?

Perhaps he should have ‘removed from office’ sooner?

In fact after his statement of retirement, Matthews attempted to address some of the recent controversies and allegations around him, trying to offer an apology.

“After my conversation with NBC, I decided tonight will be my last ‘Hardball.’ I’ll tell you why. The younger generations are ready to take the reigns. We see them in Politics, the media, they have proven in the workplace. They grew up with better standards, fair standards.”

“Compliments on a woman’s appearance some men, including me, might have once incorrectly thought were okay were never okay. Certainly not today. For making such comments in the past, I’m sorry.”

Have a great retirement Chris. Watching Trump win in November.

Authored by W.J.Astore via BracingViews.com,

In the South Carolina primary won on Saturday by Joe Biden, Tulsi Gabbard earned only 1.3% of the vote.  Her poor showing was due in part to her outcast status among the Democratic establishment joined by mainstream media outlets like MSNBC and CNN. 

Speaking of CNN, I caught a few minutes of coverage over the weekend during which its commentators confessed they couldn’t understand why Tulsi was still running. One person (Anderson Cooper, the weasel) suggested she was angling for a job with Fox News. 

Of course, Tulsi’s principled opposition to regime-change wars and other disastrous U.S. foreign policy decisions went unmentioned.  When her name is mentioned by the corporate-owned media, it’s usually in the context of the candidate most likely to succeed – in Russia.

By running in the election, Tulsi Gabbard continues to make an invaluable contribution:

She highlights the power of the military-industrial-Congressional-media complex and its rejection of any candidate willing to challenge it. 

Gabbard’s status as a major in the Hawaii Army National Guard, her service in Congress on the House Armed Services Committee, her military deployments to Iraq: all of this is downplayed or dismissed.  Meanwhile, Mayor Pete’s brief stint in Afghanistan is celebrated as the height of military service.  What’s the difference between them?  Mayor Pete plays ball with big donors and parrots talking points of the Complex – Tulsi doesn’t.

In a recent op-ed for The Hill, Tulsi yet again does America a service by calling out red baiting in America’s elections.  Here’s how her op-ed begins:

Reckless claims by anonymous intelligence officials that Russia is “helping” Sen. Bernie Sanders (I-Vt.) are deeply irresponsible. So was former New York City Mayor Michael Bloomberg’s calculated decision Tuesday to repeat this unsubstantiated accusation on the debate stage in South Carolina. Enough is enough. I am calling on all presidential candidates to stop playing these dangerous political games and immediately condemn any interference in our elections by out-of-control intelligence agencies.

A “news article” published last week in The Washington Post, which set off yet another manufactured media firestorm, alleges that the goal of Russia is to trick people into criticizing establishment Democrats. This is a laughably obvious ploy to stifle legitimate criticism and cast aspersions on Americans who are rightly skeptical of the powerful forces exerting control over the primary election process. We are told the aim of Russia is to “sow division,” but the aim of corporate media and self-serving politicians pushing this narrative is clearly to sow division of their own — by generating baseless suspicion against the Sanders campaign.

Tulsi is right here – and she’s right when she says that:

The American people have the right to know this information in order to put Russia’s alleged “interference” into proper perspective. It is a mystery why the Intelligence Community would want to hide these details from us. Instead it is relying on highly dubious and vague insinuations filtered through its preferred media outlets, which seem designed to create a panic rather than actually inform the public about a genuine threat.

All this does is undermine voters’ trust in our elections, which is what we are constantly told is the goal of Russia.

She also accurately notes how the “corporate media will do everything they can to turn the general election into a contest of who is going to be ‘tougher’ on Russia. This tactic is necessary to propagandize the American people into shelling over their hard-earned tax dollars to the Pentagon to fund the highly lucrative nuclear arms race that the military-industrial complex craves.”

Tulsi Gabbard may not be in the democratic race much longer, but that’s not because she lacks guts.  Indeed, her willingness to buck the system – and her commitment to making the world a less militaristic place – make her a notable candidate.  She’s been a noble voice crying in a corrupt and self-serving wilderness.

Money manager and metals specialist Bill Fleckenstein appeared on the Quoth the Raven Podcast on Sunday to give his thoughts about gold, the market’s reaction to coronavirus and the Fed’s coming “confidence crisis”.

Gold

First, talking about last week’s move in gold, Fleckenstein says he doesn’t attribute the move to margin calls, as many had speculated. He instead says that gold likely just fell victim to “hot money”, which he noted often happens when gold spot rallies hard and the miners don’t follow – exactly what happened last week.

Bill said:

“Gold has gone up, but the mining stocks really didn’t participate. That concerned me because when the mining stock sputter and gold keeps going, then gold gets hit,” he says.

He continued:

“When gold was spiking on the coronavirus news, it didn’t quite act right in conjunction with other things, and I was a little nervous. Then, of course, it got destroyed on Friday. I suspect there was a lot of trend following money in gold. A lot of hot money. Hot money because it’s going up.“

The Market’s Volatility

The rally late last week was because people thought the “Fed was going to save them”. Fleckenstein says he doesn’t believe it to be the case that the Fed is going to give the market a rate cut anytime soon. He thinks the market will have to crash further before central banks intervene.

He also doesn’t think we’ve seen real panic in the equity markets yet. 

“When I look at the personalities of some of the absolute crap, like Tesla, they’re still valued like a total joke. I don’t think we saw a hell of a lot of panic,” he says.

“This was not about illiquidity”.

The Fed’s Coming Crisis

Bill continued: “The Central Banks are going to get panicked. They’re panic prone because they’re so stupid,” he says.

He also thinks the market is eventually going to wise-up to what the Fed is doing: 

“This is the moment in time we have been waiting for. Those of us who think these central bank policies are no good. We’re at the moment in time where they could lose credibility to a certain degree,” he says of the Federal Reserve.

“Slowly but surely people could realize it’s not working.”

He continued: “The Fed probably won’t cut today and the market’s going to keep getting tatered until the Fed does. But the real opportunity on the short side will be the big rally after when the Fed cuts. That rally ought to fail. If that failed rally occurs and they start down again, they will accelerate a lot, and you will have broken the psychology of the ‘The Fed can rescue us’.”

“Then you can have much more of the crash. That’s kind of the road map that I see,” he says.

You can listen to the entire podcast here:

*  *  *

The QTR Podcast is a completely, 100% listener supported podcast that is always going to be free. The podcast is full time work, if you enjoy the content, please support the QTR Podcast in any, or all of the following ways:

Please make a small recurring donation, which is gratefully accepted at: https://www.patreon.com/QTRResearch