Month: September 2020

At the bottom of a lengthy press release issued on Wednesday morning, Nikola said it would be “rescheduling” its in-person Nikola World 2020 event, citing Covid-19 and stating that the even would not be rescheduled until “we can bring the Nikola community together safely”.

The event was scheduled for December 3-5 and was supposed to be the forum for the Badger pickup truck to make its public debut. “The Badger was first announced on Feb. 10, 2020 and will make its public debut Dec. 3-5, at Nikola World 2020 in Arizona,” General Motors’ press release announcing the Nikola partnership said.

Nikola’s press release this morning fails to mention the Badger by name.

Nikola Executing Strategy and Vision to Deliver Innovative Technology, Energy and Transportation Solutions | There is no mention of $GM and/or the Badger in this $NKLA statement. Seems an important omission. https://t.co/YtzI9ezKyV

— Diogenes (@WallStCynic) September 30, 2020

Additionally, amidst a slew of allegations of both fraud  – and now sexual abuse by Nikola’s founder – it looks as though the original date for the Nikola/GM partnership to close is going to come and go without anyone signing on the dotted line. The date for a potential closing now appears to be December 3, when both sides have the option of terminating the deal. 

Some have speculated that GM may be looking to make the deal sweeter for themselves, while others have guessed the legacy automaker may be reconsidering their involvement. Both sides of the deal refused to comment in detail to various news outlets on Tuesday. GM said last week that it remained committed to forging forward with the partnership. 

“The parties anticipate closing the transaction prior to Sept. 30, 2020,” was how the partnership was described weeks ago, prior to the allegations. With no deal finalized on Wednesday, “Executives at both companies are expected to extend the talks,” CNBC reported. 

GM gave Jalopnik the same line it fed to many other news outlets early this week: “Our transaction with Nikola has not closed. We are continuing our discussions with Nikola and will provide further updates when appropriate or required.”

Nikola was also putting out statements on Tuesday, though theirs sounded slightly rosier than GM’s. “Nikola continues to work with GM towards a closing and will provide further updates when appropriate or required,” they told Jalopnik. 

Recall, another wrench was thrown in the gears when on Monday evening, CNBC posted a lengthy article detailing allegations of “sexual abuse” against Nikola founder Trevor Milton by two women who have now filed complaints. One of the two allegations had never been reported on in the past. The new allegation involves a woman who is now 32 years old and is a lawyer, who alleged that Milton “digitally penetrated” her in 2004, when she worked for Milton, who was 22 while she was 15. 

“I kind of put that whole scenario of memory in a dark place, locked it up and tried to just forget about it,” the victim told CNBC. “He was in a position of power and he would give me a ride home from that job and this happened at the end of one of the days that I worked there and I was somewhat at his mercy because I couldn’t even go home until he was going to give me a ride home.”

A former friend of Milton’s claims that he remembered Milton bragging about the incident. “He told me he fingered her. He kept going on, saying I like young girls and I like virgins because they are naive,” Milton’s former friend, Tyler Winona, said.  

Trevor Milton’s spokesperson said he “strongly denies” the “false allegations” and said that “at no point in his life has Mr. Milton ever engaged in any inappropriate physical contact with anyone.”

While Tuesday’s chaotic “shitshow” of a presidential debate between Trump and Biden revealed absolutely anything about either candidate’s core policies for the 2020-2024 period, it succeeded in raising analysts’ concerns about a bitter election and reinforced the view of slim prospects for further stimulus. As noted earlier, S&P futures fell as the debate left investors concerned that the election would indeed be bitterly contested well into the end of 2020 and perhaps into early 2021, however they have since erased all losses.

This view was confirmed by Chris Weston, head of research at Pepperstone Group, who said that “what we’ve seen from the debate is the reinforcement that if Biden wins, Trump is not going to accept that. People positioned for an ugly contest afterwards have been validated….I don’t think we were expecting anything else from Trump. He continues to put that contested (result) risk premium back into the market.”

The confusion over the debate also meant confusion over who won. As Rabobank’s Michael Every writes, a CBS flash poll had Biden winning 48 – 41, and the CNN poll was 60 – 28. Yet a WGN poll, which is less partisan, saw Trump win 60 – 40, and Telemundo (US Spanish TV) viewers showed Trump winning 66 – 34, all underlining that people see these things in very different ways. Rabo also quoted veteran Republican pollster Frank Luntz who tweeted that his sample group saw some undecided voters now convinced not to vote at all, with the most common refrain being “I’m so sad for our country.”

Every also addressed the last question of the evening on the legitimacy of the upcoming election process, where Trump said “This will not end well,” talking of no winner for months, which “concluded the evening under the darkest cloud, suggesting political risk will linger on in the market’s mind.”

Discussing the direct outcome of the debate, the Rabobank strategist writes that “it seems incredibly unlikely that Trump’s performance will have won back any of the wealthy suburban voters who are migrating from the Republicans to Biden. However, the larger question is if the same performance will stop a more than matching shift towards him from working class and rural voters, according to some deep-dive data, a demographic who don’t get surveyed by headline-style pollsters much, or who won’t answer when asked. Only time will tell if this is an abnormal ‘normal’ election, or one of major US political realignment.”

Others agreed that the debate was nothing less than a dumpster fire: “The debate just added to the confusion about how the election will run,” said SEB investment management’s global head of asset allocation Hans Peterson. “But financially it doesn’t change anything.”

“The share market normally prefers the incumbent (president) to win,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney. “U.S. futures initially rose, as perhaps Trump delivered some punches, but it wasn’t enough.”

Meanwhile, Deutsche Bank’s Jim Reid writes that “in a raucous debate that was indeed full of shouting, it is unclear that either President Trump or Vice President Biden changed the trajectory of the election last night. The President came into the night down -6.8% in the fivethirtyeight.com national polling average while trailing in many of the battleground states, and we will track how polls change in the next few days. There was very little substance in the debate and almost no new information proffered. The story of the debate will likely surround the President’s consistent interruption, though Mr Biden was not able to stay above the fray and traded insults at times with Mr Trump. Acrimony ruled.”

Below, courtesy of Bloomberg, are several other reactions from Wall Street analysts:

AGF Investments, Greg Valliere

• “Chilling comments by Trump on a ‘rigged’ election reinforced our belief that he will go all the way to the Supreme Court if it looks like he narrowly lost,” Valliere wrote in a note.
• “The markets have to brace for weeks of uncertainty,” Valliere warned, as a protracted stalemate may lead to civil unrest, noting that “Trump didn’t make any effort last night to calm his far-right supporters.”
• He added that “Friday’s unemployment report might show that the summer economic recovery is running out of steam,” and that he believes the economy needs more fiscal stimulus, though a “deal is more likely to come later rather than sooner.”

Raymond James, Ed Mills

• “If you found the first Presidential Debate informative or productive, please reach out, because we are at a loss,” Mills wrote.
• Though continuing negotiations on fiscal relief are positive, “this debate will add a new political hurdle,” while questions on election fraud “will add to concerns about a volatile post-election period if there is a close or uncertain electoral outcome.”
• Mills flagged discussions on health care, Covid, the economy, climate, civil unrest, fiscal relief, and the integrity of the election, with Biden reiterating his support for raising the corporate tax rate to 28% and ensuring that large profitable companies don’t use the tax code to prevent any tax liability.

Cowen, Chris Krueger

• Krueger wrote that he disagrees with the “notion that debate was a dumpster fire: by definition, dumpster fires are contained.”
• Biden cleared the low hurdle Trump set with “Sleepy Joe,” he said; “was it Romney vs. Obama in the first 2012 debate? No. But he didn’t fall off the stage like Bob Dole in the 1996 race either. So that — in 2020 — is a win.”
• He doesn’t see the election’s trajectory changing, as each side’s bases were appeased, and called another stimulus deal “very unlikely.”

Authored by Andrea Widburg via AmericanThinker.com,

The short version of the debate is that Biden did well if one ignored that almost every other statement he made was a lie or fantasy; Trump dominated him, almost too aggressively; and Chris Wallace may have been the worst and most obviously biased moderator since Candy Crowley. Most significantly, though, Biden and Trump each made a critical point. Biden’s was a tacit admission that, if he is elected president, he will preside over the end of the filibuster, allowing Democrats to pack the courts and add two new Democrat-majority states. Trump’s point was that he’s holding damning evidence about the Democrats’ coup attempt.

Let’s begin with Biden, whose squirming on court-packing and the filibuster promises the end of the American experiment. Chris Wallace, in one of the few tough questions he posed to Biden, said this:

So my question to you is, you have refused in the past to talk about it, are you willing to tell the American tonight whether or not you will support either ending the filibuster or packing the court?

Biden refused to answer, something the Trump quickly challenged. Here’s the colloquy:

BIDEN: Whatever position I take on that, that’ll become the issue. The issue is the American people should speak. You should go out and vote. You’re voting now. Vote and let your Senators know strongly how you feel.

TRUMP: Are you going to pack the court?

BIDEN: Vote now.

TRUMP: Are you going to pack the court?

BIDEN: Make sure you, in fact, let people know, your Senators.

TRUMP: He doesn’t want to answer the question.

BIDEN: I’m not going to answer the question.

TRUMP: Why wouldn’t you answer that question? You want to put a lot of new Supreme Court Justices. Radical left.

BIDEN: Will you shut up, man?

TRUMP: Listen, who is on your list, Joe? Who’s on your list?

WALLACE: Gentlemen, I think we’ve ended this-

BIDEN: This is so un-Presidential.

TRUMP: He’s going to pack the court. He is not going to give a list.

Presidential debate ERUPTS when @JoeBiden REFUSES to say he won’t “pack the court” if @realDonaldTrump‘s SCOTUS nominee Amy Coney Barrett is confirmed.

“Would you shut up, man?”

😱😱😱 pic.twitter.com/yE30PUJsY7

— The First (@TheFirstonTV) September 30, 2020

You can see that Biden made a nonsense statement to avoid answering whether he will preserve the filibuster and the Supreme Court’s current system of nine justices. Shamefully, Wallace let him get away with not answering. Wallace surely understands that Biden’s handlers plan to end the filibuster so that they can pack the court and add D.C. and Puerto Rico as states.

Packing the court ends the American experiment as we know it. It means that the Supreme Court will be a political body that will exist solely to put its imprimatur on Democrat policies. And for those who say, “Well, if they pack the Court, then Republicans will pack it more when they’re in power,” that’s sadly foolish.

If Democrats pack the Court, there are no more Republicans. The whole democratic republic will be over. Once Democrats pack the Court, they never again need to persuade American voters to support their policies. One of their first policies in that new era will be to add hard-left Washington D.C. and Puerto Rico as the 51st and 52nd American states. That means four more Democrat Senate votes and a permanent Democrat party majority.

You see, the hard-left Democrat party views our American political system the same way Turkey president Recep Tayyip Erdoğan viewed democracy before becoming a dictator for life: “Democracy is like a train. We shall get out when we arrive at the station we want.” This time around, once the Democrats win, they will change the rules so they can never lose again.

Heed this warning: If Biden wins, our constitutional America is gone. We will be a socialist country. If you don’t believe me, just read the Democrat platform. They’re not hiding their goals.

Trump, though, might have some aces up his sleeve. When the subject of a “transition” came up (based on Biden’s assumption that he will win), Trump stated that he’d been denied a transition period. Instead, there was a coup attempt (emphasis mine):

There was no transition because they came after me trying to do a coup. They came after me spying on my campaign. They started from the day I won and even before I won. From the day I came down the escalator with our First Lady. They were a disaster. They were a disgrace to our country. And we’ve caught ‘em.  We’ve caught ‘em all.  We’ve got it all on tape.  We’ve caught ‘em all.

“We’ve Caught em All. We’ve Got It All On Tape. We’ve Caught em All.”-@realDonaldTrump pic.twitter.com/qg2O1DuM0k

— John Basham 🇺🇲 (@JohnBasham) September 30, 2020

Maybe Trump’s exaggerating, but I don’t think so. And maybe he’s going to keep that evidence secret, but I don’t think that either.

My guess is that this October, the Trump administration is going to release one piece of evidence after another showing that the Democrat party, from Hillary to Obama, and from the FBI to the CIA to the DOJ, and everywhere in between, engaged in a massive, seditious conspiracy to overturn the results of the 2016 election. Indeed, the information cascade has already begun with the release of DNI John Ratcliffe’s letter about Hillary’s conceiving of the Russia hoax.

In sum, amidst all the sound and fury of the debate, these two important points emerged:

(1) If he wins, Biden will almost certainly sign off on ending the filibuster to pack the courts and add two new states for a permanent Democrat majority that will leave the Constitution behind.

(2) Trump may have announced that he’s about to reveal that the Democrats, from Obama on down, engaged in a coup against an American president.

In its third estimate of Q2 GDP, the BEA reported moments ago that the largest US economic contraction in history was revised slightly higher, from -31.7% to -31.4%. This in turn was also an improvement from the first estimate of -32.91% which nonetheless is still pretty bad considering nearly a third of the US economy was effectively shut down on an annualized basis.

The revision to GDP reflected an upward revision to consumer spending on services that was partly offset by downward revisions to exports and to business investment in intellectual property products. Specific changes were as follows:

• Personal Consumption: from -24.76% to -24.01%
• Fixed Investment: from -5.20% to -5.27%
• Private Inventories: from -3.46% to -3.50%
• Net Exports: from 0.90% to 0.62%
• Government consumption: from 0.82% to 0.77%

The BEA also announced that profits decreased 10.3% Q/Q after plunging 12.0% in the first quarter. Corporate profits decreased 19.3% in the second quarter from one year ago. Some more details:

• Profits of domestic non-financial corporations decreased 12.9 percent after decreasing 14.4 percent.
• Profits of domestic financial corporations increased 6.1 percent after decreasing 8.9 percent.
• Profits from the rest of the world decreased 18.9 percent after decreasing 8.4 percent

Of course, none of the data above matters as it is 3 months stale now. The real question is what will be announced on Oct 29, when the first estimate of Q3 GDP is released and which is expected to be in the 30%+ ballpark, which will make it the strongest annualized GDP growth in US history. The fact that it will come just days before the election will be surely used by Trump.

Personal consumption fell 33.2% in 2Q after falling 6.9% prior quarter

GDP price index fell 1.8% in 2Q after rising 1.4% prior quarter

Core PCE q/q fell 0.8% in 2Q after rising 1.6% prior quarter

MNI Chicago Business Barometer was expected to be released at 0945ET but most data outlets are now printing the data early… and it’s a huge beat.

Against expectations of a small rise from 51.2 to 52.0, September’s Chicago PMI screamed up to 62.4.

Source: Bloomberg

This is well above the highest (56.3) estimate from analysts… this is in fact a 10-Sigma beat!

Source: Bloomberg

7 of the components rose vs last month:

• Prices paid rose at a faster pace; signaling expansion

• New orders rose at a faster pace; signaling expansion

• Employment fell at a slower pace; signaling contraction

• Inventories fell at a slower pace; signaling contraction

• Supplier deliveries rose at a faster pace; signaling expansion

• Production rose at a faster pace; signaling expansion

• Order backlogs rose and the direction reversed; signaling expansion

Again we warn this is not confirmed, but it is widespread.

Summary:

• US sees deaths, hospitalizations plateau as scientists warn of fall resurgence
• New rapid COVID test approved in EU
• Scientists question herd immunity threshold
• UK PM faces insurrection over lockdown powers
• Novartis CEO says vaccines won’t be enough
• World Bank pushes new vaccine initiative
• India reports roughly 80k new cases in last 24 hours
• Second Russian vaccine completes clinical trial

* * *

Update (0840ET): The latest update from the COVID-19 Tracking Project finds that the number of people hospitalized in the US has plateaued at around 30,000 over the past week, following a decline from nearly 60,000 toward the end of July. Deaths, meanwhile, averaged about 750 over the seven days through Sunday, higher than the roughly 600 deaths a day seen during the first week of July.

Now, as the seasons turn and the global death toll from COVID-19 tops 1 million, signs suggest there will be more deaths and serious illness ahead. Data collected by the Covid Tracking Project shows that the number of people hospitalized in the US has plateaued at about 30,000 in the past week, after a decline from nearly 60,000 that began in late July. They interpreted this as a sign that cases and deaths could soon rise as more restaurants, bars and now schools reopen.

* * *

Although the news was first reported last night, the market seemed to embrace news of Moderna’s latest safety and efficacy data Wednesday morning, as Joe Biden’s ‘win by default’ during Tuesday’s first presidential debate appeared to weigh on stocks. During the debate, the former Veep accused Trump of doing nothing to stop the coronavirus pandemic in the US, and laid blame for the 200k+ deaths in the US at President Trump’s feet.

In response, Trump claimed his decision to bar travelers from China staved off a worse disaster, and argued that every single death is an unacceptable tragedy – though the president made clear that it’s Beijing that should shoulder the blame.

In the UK, PM Boris Johnson is facing an insurrection from Tory MPs who want to limit HMG’s ability to unilaterally impose another national lockdown, or embark on other strict COVID-19 measures. The controversy has reopened the debate about “herd immunity”, which has become a controversial notion – what President Trump calls “going herd” – as Sweden and other countries have denied that it was part of their srategy for battling the virus.

While President Trump would have his followers believe a vaccine might be coming as soon as next month, most other official sources – including Trump’s own vaccine czar – agree that a vaccine won’t be widely available in the US until the early spring, at the earliest. As the debate rages, it’s worth reading this latest opinion piece by Bloomberg’s John Authers.

Authors starts off by pondering how markets have been able to maintain their “relative” calm (well, relative to the chaos seen in March) amid the resurgence in new cases in Europe and the US. He argues that scientits are divided on the issue of the “second wave”, and that “even the most alarming data of the last few weeks don’t establish that one is under way.”

Critically, deaths linked to the virus have remained well below their levels from the spring, even on the worst of days. To be sure, herd immunity is about lowering the spread of cases, not the number of deaths. But as Authers points out, a spate of new research from some of the most respected researchers working at the crossroads of advanced modeling and epidemiology suggests the threshold for “herd immunity” is lower than many believe. And it’s due to a concept called “heterogeneity.”

The theoretical basis for hope lies in heterogeneity. Not all people will be equally susceptible to the virus, and there is now a debate over why some are so much worse affected than others. Whether prior exposure, possibly to other coronaviruses, could help some people to resist Covid-19 is now the subject of intense research. Similarly, not all people will be equally exposed.

Some naturally come into contact with far more people than others do, during the course of their daily lives. These people are more likely to have had it already, and won’t therefore infect anyone else in a second wave. This paper by Patinkin of David Capital explains the argument clearly.

The mathematics are head-spinning. Gabriela Gomes of the University of Strathclyde in Scotland, one of the most respected mathematicians in the field, explains the ideas behind heterogeneity and its lowering of the threshold for herd immunity in this podcast.

Gomes discusses the idea in more detail in a podcast which can be found here.

Moving on Authers shares several other charts, including one showing how – for whatever reason – this latest wave in the UK is less lethal than a second wave.

While that’s certainly one view, analysts at Bank of America are projecting the herd immunity threshold in the US to be much higher, and that, if left to its own devices, the virus could take more than 2 years to finally burn out. Oddly, another piece of research published by BofA a few days earlier estimated the herd immunity threshold might be as low as 12%, compared with the 60% “consensus” estimate among high profile academics including Dr. Fauci.

Looking back at the latest data, global cases have reached 33,646,813, per Johns Hopkins University data, while the worldwide death toll has hit 1,007,839.

Finally, Becton Dickinson and Co.’s rapid COVID test that returns results in 15 minutes has been cleared for use in countries that accept Europe’s CE marking, the diagnostics maker said Wednesday. The test is part of a new class of tests that focus on proteins called antigens that can be found on the surface of the virus.

Here’s the other major news from overnight and Wednesday morning.

Moderna coronavirus vaccine appears to work for older adults, according to researchers (Newswires).

Russia has completed the clinical trials of a second potential COVID-19 vaccine produced by the Vector Institute (Newswires).

As we first reported yesterday, Regeneron Pharmaceuticals said its experimental two-antibody cocktail reduced viral levels and improved symptoms in non-hospitalized patients with mild-to-moderate symptoms (Newswires).

World Bank President David Malpass, nominated to the position by President Trump, said he is seeking board approval for $12 billion of vaccine financing and distribution initiative for developing countries (Newswires).

Novartis CEO stated that vaccines alone will not be enough to combat COVID-19, adding that significant supplies of highly effective vaccines will likely not be available until the end of 2021. (Newswires)

Indonesia has reported 4,284 new coronavirus cases, taking the total number of infections to 287,008, data from the country’s COVID-19 task force show. There were also another 139 coronavirus-related deaths, taking the total number of fatalities to 10,740 (Nikkei).

India’s coronavirus case tally surged to 6.23 million after it reported 80,472 new infections for the past 24 hours. Deaths from the virus rose by 1,179, to 97,497.

Mainland China recorded 19 new cases on Wednesday, up from 12 a day earlier, the country’s national health authority says (Nikkei).

After two month of disappointingly low employment gains, ADP reports a 749,000 increase in jobs in September (better than the 649k expected and close to payrolls 800k expectation for Friday).

Source: Bloomberg

For some perspective on that ‘rebound’, this is the same level of employment as at Dec 2014…

Source: Bloomberg

Medium- and Large-businesses dominated the hiring with only education seeing a drop in employment…

Transportation and Manufacturing saw the biggest job gains…

As a reminder, Friday’s is the last payrolls data ahead of the election.