Month: July 2020

Today in “Why work when I can make more on unemployment” news…

A (now former) Amazon driver, Derick Lancaster, took to social media yesterday to inform the world not only that he was quitting his job as an Amazon driver, but also of the location of his fully stocked delivery van, which he claims to have left at a Metro Detroit gas station. 

“Fuck that driving shit,” Lancaster tweeted, alongside the location of his apparently abandoned delivery van. “It’s full of gas with the keys in the ignition,” he said.

I quit amazon fuck that driving shit i left the van on 12 mile and Southfield y’all can have that bitch and it’s full of gas wit the keys in the IGNITION .

— Derick. (@_lilderick) June 29, 2020

The Tweet has gone viral and has almost a quarter of a million “likes”. The 22 year old driver told The Detroit News on Monday: “I was making 200-300 stops a day, and I just couldn’t do it anymore. I was working from 9 in the morning to about 10 at night, and I couldn’t do it anymore.”

Lancaster says he was working for Amazon for 5 months “and was based out of Amazon’s Hazel Park delivery station.” After starting with a position in the warehouse, he switched to delivery, the report says.

He said that while warehouse workers have a set schedule, drivers can’t go home at the end of the day until all of their packages are delivered. “You work for every penny when you’re delivering,” he said. Oh, the horror of having to work for your money.

Lancaster also said he used a rideshare service to pick him up and take him home after abandoning his van. He said he wasn’t worried about customers getting their packages and said “They’re going to get them regardless.”

“I didn’t think it would pop off the way it did. I guess it touched a lot of people’s hearts who think Amazon overworks people,” he concluded.

Fed Minutes TL;DR: things can get better, or worse. We have no idea what happens next but everyone agreed we should sound confident and give “forward guidance” as if we know what is coming. Also, we will buy stocks and equity ETFs after the next 20% drop.

Since The Fed statement on June 10th, gold has outperformed (even beating Nasdaq) as the “lower for… ever” mantra is reinforced…

After moving hawkishly higher after the FOMC meeting, the market has drifted notably dovishly in the last two weeks

As a reminder, the FOMC kept rates unchanged at 0-0.25%, at the June 9-10 meeting, as was expected; it did not announce any enhanced forward guidance, nor did it announce any yield curve control policy but did formalize its QE program. Perhaps most notably, Powell adopted a cautious tone during the press conference and has maintained that stance, until yesterday’s congressional testimony where he suggested that the economy had “entered an important new phase and has done so sooner than expected”, signaling more optimism.

Today’s Minutes are not expected to produce any market-moving comments but Fed-watchers will be listening for discussions of negative rates and yield curve control, and any fears of excess valuations (as noted in The Fed’s semi-annual outlook).

*  *  *

As expected The Fed’s Minutes show that officials reviewed other options to provide more support for the economy but Fed officials did agree there was no more need to analyze yield curve control (mentioned 15 times in the minutes).

A number of participants commented on additional challenges associated with YCT policies focused on the longer portion of the yield curve, including how these policies might interact with large-scale asset purchase programs and the extent of additional accommodation they would provide in the current environment of very low interest rates.

In their discussion of the foreign and historical  experience with YCT policies and the potential role for such policies in the United States, nearly all participants indicated that they had many questions regarding the costs and benefits of such an approach.

“some participants said [YCT could result] in the central bank inadvertently setting yield caps or targets at inappropriate levels. “

This is important as consensus expected some form of YCT policy adjustment in September.

Instead, Fed officials preferred to focus on inflation-based forward guidance:

“That could possibly entail a modest temporary overshooting of the Committee’s longer-run inflation goal but where inflation fluctuations would be centered on 2 percent over time.

“They saw this form of forward guidance as helping reinforce the credibility of the Committee’s symmetric 2 percent inflation objective and potentially preventing a premature withdrawal of monetary policy accommodation.”

On how long they will remain easy…

“The staff presented results from model simulations that suggested that forward guidance and large-scale asset purchases can help support the labor market recovery and the return of inflation to the Committee’s symmetric 2 percent inflation goal.

The simulations suggested that the Committee would have to maintain highly accommodative financial conditions for many years to quicken meaningfully the recovery from the current severe downturn.”

Full Minutes Below:

Global hedge fund data reveals a massive liquidation of funds was seen in the first quarter of 2020, marking the highest level of fund liquidation since 2015, as coronavirus market gyrations led to steep losses and soaring redemptions, according to Reuters, citing a new HFR Global Hedge Fund Industry Report. 

HFR released the report on Tuesday that shows 304 funds liquidated in 1Q20. This was the highest level of fund liquidation since the fourth quarter of 2015, when 305 funds shut down. Shown below, the number of closures in 1Q20 is about 50% higher than the last quarter in 2019. 

Even before the pandemic, hedge funds suffered eight straight months of redemptions, the longest stretch since the financial crisis. 

During the market turmoil in late February and March, money managers were severely bruised by collapsing asset prices, lockdowns, economic paralysis, and high unemployment. HFR showed investors pulled $33 billion out of hedge funds in the first quarter, the fourth largest outflow in history. 

Only 84 new funds were created in the first quarter, the slowest pace of fund creation since the fourth quarter of 2008. The decline in new funds began in the back half of 2019. 

In total, HFR data shows 8,081 hedge funds, and 1,167 funds of hedge funds were seen across the world. 

Readers may recall, hedge funds concentrated their portfolios even further into growth stocks after the virus pandemic sent equities into a tailspin (the investment thesis has been purely based on a Fed put). 

Despite positioning, hedge funds have struggled to deliver returns to clients as retail daytraders on Robinhood are netting hundreds of percentages by bottom fishing bankrupted stocks, such as Hertz and Chesapeake Energy. 

It’s only until now, hedge funds are back in favor with US investors as the Nasdaq recently made an all-time-high. 

Some well-known fund managers, sensing the moment, began accepting new capital for the first time in years, including D.E. Shaw & Co. and Seth Klarman’s Baupost Group. Twenty-five of these funds, have pulled in about $15 billion this year, according to one prime broker. A Credit Suisse Group AG survey released this week highlighted the shift: Investors are more interested in hedge funds than any other major asset class going into the second half of the year. – Bloomberg 

Kate Holleran, managing director of capital solutions at Barclays Plc, said, “we’re hearing anecdotes of investors revising or paring back their redemption requests” with hedge funds.

With all this newfound optimism for hedge funds as equity markets have already soared on unprecedented central bank intervention, any hiccup in reopenings, or if investors catch wind a V-shaped recovery in the economy is merely a hoax – then expect stocks to sell and investors to resume redemptions. 

Authored by Mike Shedlock via MishTalk,

Are people paying their bills on time? Thanks to Covid regulations, there is no way to tell.

Banks Are Flying Blind

Businesses are not allowed to report to the credit agencies who is in mortgage, credit card, or auto loan forbearance plans. 

So how do banks decide who is a good credit risk when they are Flying Blind?

“Without accurate information, their only option is to pull back on credit,” said Michael Abbott, head of banking for North America at consulting firm Accenture PLC. “Banks don’t know who is going to pay and who isn’t. It’s like flying blind into a credit storm.”

Banks started tightening their underwriting standards in March, when the first wave of coronavirus layoffs began.

By early April, 33% of banks that responded to the Federal Reserve’s senior loan officer survey said they had increased their minimum credit-score requirements for credit cards over the previous three months, up from 14% in January. Bank respondents tightened lending standards for all consumer-loan categories tracked by the survey.

Loan originations have fallen, a result both of the tightening and a decline in consumer demand. An estimated 79,000 personal loans were extended in the week ended May 10, compared with 226,000 in the week ended March 22, according to Equifax Inc. Auto loan and lease originations fell to 266,000 from 390,000 during the same period. General-purpose credit-card originations totaled 483,000, down from 856,000. In 2019, weekly card originations rarely fell below 1.2 million.

Some lenders pay for phone data to see who is calling the unemployment office. Other lenders are using natural disaster codes instead of late payment codes. 

TransUnion is selling data on deferrals but supposedly it is against the law for lenders to use it. 

Fair Isaac is rolling out a new index to inform lenders how likely the applicant is to withstand financial difficulties during the downturn.

Lending Standards Tightest in Six Years

With lending standards at tightest in six years, it’s easy to see a higher % of pending home indications not come to fruition because of denied applicants

To your point, pending home sales will overshoot transactions until unemployment abates which is key to income verification https://t.co/xc5zqzXBSO

— Danielle DiMartino Booth (@DiMartinoBooth) June 29, 2020

Mortgage Applications

absolutely. as we hinted in past, lower mortgage approval rates. So need to take lending applications (MBA) with large pinch of salt. 💪 pic.twitter.com/ljHfD8blFx

— Τάκης Χριστοδουλοπουλος (@takis2910) June 29, 2020

At Least 20 Million Out of Work

Impossible to Sugarcoat the Disastrous Unemployment Claims

There are close to 20 million unemployment claims a the state level. That does not count perhaps as many as another 10 million in federal payment protection programs. 

For discussion, please see Impossible to Sugarcoat the Disastrous Unemployment Claims. 

Mortgage Forbearance On the Rise

Mortgage forbearance plans topped the $1 trillion mark in unpaid principal last week. 

These loans are not reported to credit agencies as delinquencies.

For details, please see Mortgage Forbearances Rise for the First Time in 3 Weeks

Since banks have no idea who is paying the bills, they have curtailed credit.

Meanwhile, reopenings are in reverse in several place including Arizona, Texas, and Florida. 

Reopenings in Reverse

• Drinking Banned at Florida Bars and What About the NBA?
• Texas Shuts Bars at Noon as Covid Cases Surge

The only solution is more free money.

Got Gold?

In case you missed it, please see More Gold Hype: No Escape for Shorts

Congressional leaders have demanded answers, and those answers have come in the form of multiple US intelligence agencies and chiefs essentially throwing cold water on the NY Times Russian bounties to kill American troops in Afghanistan story, as we’ve detailed. 

We expect this “bombshell” will be very short-lived, perhaps being memory holed by the weekend, akin to the fate of other Russiagate-related ‘anonymous sources say’ type stories. 

The Pentagon is the latest to say that DOD-wide there is currently “no corroborating evidence at this time to validate the recent allegations regarding malight activity by Russian personnel against US forces in Afghanistan,” according to a late Tuesday evening statement by Defense Secretary Mark Esper.

I want to assure all of our service members that we take seriously any and all potential threats against U.S. military personnel. pic.twitter.com/Tcg3xzkZQ8

— @EsperDoD (@EsperDoD) July 1, 2020

And yet the Times is busy publishing photos of slain Marines to help bolster what’s increasingly looking like a propaganda hit piece ahead of the November election, for which there’s already been considerable backlash from the public.

As of Wednesday it’s been revealed that a highly respected career intelligence officer previously made the decision to not brief President Trump on what the Washington Post now belatedly admits was widely “deemed sketchy” information the CIA had obtained in 2019 through either a foreign source or report.

This line from the Post is certainly awkward for them and the Times:

The Washington Post reported on Tuesday that White House officials were first informed in early 2019 of intelligence reports that Russia was offering the bounties to kill U.S. and coalition military personnel, but the information was deemed sketchy and in need of additional confirmation, according to people familiar with the matter.

National security adviser Robert O’Brien said in a Wednesday FOX interview, reported by WaPo that it’s “another false story.”

“The president was not briefed because at the time of these allegations they were uncorroborated,” he said. “As a result, the president’s career CIA briefer decided not to brief him because it was unverified intelligence, and by the way, she’s an outstanding officer, and knowing all the facts I know, I certainly support her decision.”

And further WaPo describes in a story it had a hand in pushing alongside the Times:

The agenda for the oral briefing is often worked out in advance with the national security adviser, with input from the Director of National Intelligence and CIA director, said a former senior intelligence official familiar with the briefing process, who requested anonymity to discuss matters not in the public view.

O’Brien said leaks to the media about the episode have hampered U.S. intelligence officials from determining what actually happened.

“Sadly because of the leak, it may now become impossible ever to get to the bottom of this, to get to the truth of the matter, and that’s one of the very sad things,” he said. “We were working very hard on this matter. It might be impossible to get to the bottom of it because someone decided to leak to hurt the president rather than uphold their obligations to the American people.“

Days ago CIA Director Gina Haspel said something similar.

Trump Calls Bounty Report A ‘Hoax’ Despite Administration’s Briefing Of Congress https://t.co/HgoZ8kBlMm

— NPR Politics (@nprpolitics) July 1, 2020

Instead of “confirming” the original Times reporting, the CIA chief did quite the opposite, targeting the leaker or leakers for playing politics with cherry-picked unvetted intelligence. 

Again, at this point this non-story looks to be dead by the weekend as it’s already unraveled. But we won’t hold our breath for the NY Times retraction or any level of mea culpa anytime soon.

Submitted by NewsSquawk

FOMC MEETING RECAP:

The FOMC kept rates unchanged at 0-0.25%, at the June 9-10 meeting, as was expected; it did not announce any enhanced forward guidance, nor did it announce any yield curve control policy. It did however formalize its QE programme, and will now be buying at a rate of USD 80bln per month of Treasuries (which is in line with the current purchase rate, and the bottom-end of the 80-120bln consensus) and USD 40bln per month of MBS (which was above expected – the street had expected between USD 25-35bln). The Committee’s forecasts showed it expects the unemployment rate to end the year at 9.3% (analysts expected 9.5-10.5%) improving to 6.5% by the end of 2021 (expected between 5.7-7.1%), and then 5.5% by the end of 2022. The new dots showed the Committee expects rates to stay at current levels through its forecast horizon.

POWELL PRESS CONFERENCE RECAP:

Ultimately, Fed chair Powell adopted a cautious tone, saying that the decline in growth this quarter is likely to be the most severe on record, and the situation with regards to joblessness was still severe, and saw downside pressures to inflation. Powell reiterated statement guidance that rates were going nowhere until progress has been made towards the Committee’s dual objectives, and that the Fed was ‘not even thinking about thinking about’ raising rates. Powell noted the uncertainties presented by the SEP, and said the Fed will update its stance when more information is available; the Fed did not change its longer-term dots, and Powell suggested his own personal motivation for that was his belief that the Fed can prevent the longer lasting damage to the economy caused by the pandemic.

Powell said the current stance of monetary policy was well positioned to support the recovery. The Fed chair said a full recovery is unlikely to be seen until people are confident in resuming activity; he sees that recovery starting in the second half of this year, lasting over the next couple of years, supported by low rates; he added the somewhat obvious caveat that the outlook remained uncertain – in fact, he seemed very aware that a second wave of the virus might derail the recovery efforts. He did note that there would still be a significant amount of people who remain jobless even when the recovery takes hold, so preserving credit was essential to mitigate risks and set the stage for recovery; over the “coming months”, the Fed will be maintaining purchases at least at the current rate. The Central Bank will put the extraordinary tools back in the toolbox “after the crisis has passed”; Powell said that yield curve control policies had been discussed, and its effectiveness remains “an open question”.

Once again, Powell called for more fiscal support, which could make a critical difference (PPP, stimulus checks and unemployment insurance had helped, he said). Several times, Powell highlighted caution, noting that the Fed was watching incoming data closely, and we would learn ‘what the real story’ will be for the US economy.

SINCE THE MEETING:

Powell’s testimony to lawmakers was notable in that the Fed Chair noted that the economy had “entered an important new phase and has done so sooner than expected”, a more upbeat assessment than the caution expressed at the FOMC; Powell did caveat his optimism, reiterating that there were uncertainties that remained.  He again reiterated that the path forward would also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.