Month: November 2020

Via SchiffGold.com,

The US stock market is coming off its worst week since March. It was also the worst pre-election stock market in history. In his latest podcast, Peter talked about the market, the election and what’s likely ahead.

A weak stock market right before election day doesn’t bode well for President Trump’s reelection, given that he’s touted the stock market as his great accomplishment. Peter has said he doesn’t think Trump will win and that the stock market would ultimately sell off on the reality of a Biden presidency – that it would be “buy the rumor, sell the fact.”

Well, apparently they’re not waiting for the fact and they’re selling on the rumors. They bought on the rumor Biden was going to win and now they’re selling on the rumor that he’s going to win, because a Biden victory is not good for the stock market. It means much higher taxes and that is not going to be offset by the Federal Reserve.”

Most people seem to think that regardless of who wins, even if we have a contested election and don’t know a winner for days or weeks, it really won’t be a problem for the markets because the Federal Reserve will step in and backstop it. Everybody seems confident that the Fed has their back.

The only leg that this market is standing on is the Federal Reserve and money printing. But ultimately, that’s not going to be enough. The market is not going to be able to survive when that is the only support.”

Tech stocks were hit particularly hard during last week’s sell-off. The NASDAQ had the biggest decline on Friday and is down over 11% from its September high. But even with the drop, many tech stocks still have sky-high valuations.

Typically, a big selloff in stocks means a strong bond market, but last week, the bond market was also relatively weak. Long-term interest rates were up. Normally, when you see people running to get out of stock, they move into bonds.

There was no refuge this week because even if you had a diversified portfolio, you were down on your stocks and you were down on your bonds. Yes, your bonds went down less than stocks, but everything went down and nothing went up.”

Peter said he thinks this will compound problems in the stock market. Typically, a surging bond market during a stock market selloff helps mitigate the pain. When bonds rise as stocks fall, the lower interest rates help stock valuations. Rising bond prices also offset stock losses for those with diversified portfolios. But if both stocks and bonds are falling at the same time, you have no gains to offset losses. You just have losses on top of your losses.

So, I think this is going to be particularly brutal, because not a lot of people have hedges that are outside of traditional US stocks and bonds. There’s not a lot of investors that have gold or gold stocks that are hedging their portfolio. I think eventually they will. As I’ve been saying for a while, I think gold is going to be the last safe haven standing and ultimately that’s where all the safe-haven money is going to flow.”

Gold also sold off this week. As we have reported, it looked an awful lot like early March with everything selling off. But gold wasn’t down significantly and it rallied a bit on Friday. Peter doesn’t think we’re going to see a significant drop in gold this time around, even if stocks really crash.

Given where the Fed is, given how much money has already been printed, given how much money is going to be printed, I just don’t think you’re going to see any kind of significant weakness in the price of gold. So, any weakness that you get is going to be a buy signal.”

Meanwhile, the Fed has already thrown out one lifeline, lowering the limit on its Main Street lending program to small businesses to $100,000. Peter asked a key question: why does the Fed even need to run such a program? Why can’t small businesses just get these loans from their banks? Answer: they aren’t credit-worthy.

They know they’re not going to get the money back because these companies are bad credit risks and so private lenders don’t want to make the loans. Now, why should the government do that? If these businesses can’t repay the loans, why is the government lending them any money? And it’s not really a loan. If you’re loaning money to businesses that can’t repay it, it’s not really a loan, it’s a grant, or it’s a gift. But you know it sounds a lot better if you can pretend it’s a loan. But this is all pure inflation. The Fed is just printing up money and handing it out to small businesses.”

Peter said he thinks this explains the number of small businesses being created in the midst of an economic collapse. They can take advantage of this giveaway and get money from the government.

Of course, none of this is constitutional. And it’s bad economics. Peter said the craziest thing is nobody even seems to care.

Last week we reported that thanks to what may be the world’s most sophisticated check kiting scheme, Chinese and Hong Kong banks were giving local retail investors a mindblowing 33x margin leverage with which they could then turn around and purchase stock in what is now the world’s largest IPO – China’s fintech Ant Financial, which is set to raise $34.5BN in new capital for its dual listing in Hong Kong and Shanghai ahead of its trading debut on Nov. 5, surpassing the former champion, Saudi Aramco.

As a result, the retail portion was a ludicrous 870 times oversubscribed as bidding was so intense in Hong Kong that one brokerage’s platform briefly shut down after becoming overwhelmed by orders. This in turn gave confidence to institutions that there is no way the stock would drop, leading to a mindblowing 284x oversubscription for institutional investors (this is real money).

Demand for Hong Kong shares was so strong that Ant stopped taking orders from professional investors a day earlier than scheduled. Institutions and strategic investors may take up about 97.5% of the offering in Hong Kong, according to Ant’s prospectus, though the figures may change due to clawback and greenshoe provisions.

Putting these numbers in context, last Thursday, the Chinese financial-technology giant said individual investors in mainland China had placed the equivalent of more than $2.8 trillion of orders for their slice of Ant’s record-breaking initial public offering, which is listing simultaneously in Shanghai and Hong Kong.

While it is hardly a surprise that investors, when given free 33x leverage, will go insane this number is simply staggering: according to the WSJ, it exceeds the value of all the stocks listed on the exchanges of Germany or Canada. Mom-and-pop investors in Hong Kong have also clamored to buy into this IPO, betting that Ant will soar in value after it goes public next Thursday.

While the number of orders is in itself mind-blowing, it is even more impressive given the high hurdles for participating in IPOs on Shanghai’s new STAR Market, a Nasdaq-style technology-focused board that launched last year where Ant will trade: Individuals must have at least two years of stock-trading experience and brokerage-account assets totaling at least 500,000 yuan, the equivalent of $74,300. The IPOs are routinely heavily oversubscribed and stocks often soar after listing, which is to be expected: with retail investors putting down just 3% equity, anything less than a surge could lead to a historic crash.

In any case, with unprecedented, record demand for Ant shares, it is hardly a surprise that as Bloomberg reports overnight, institutional investors have been buying Ant’s shares at a 50% premium in the gray-market, signaling the Chinese fintech giant is poised to soar in its debut this week following the world’s largest initial public offering, as some trades were executed as high as  HK$120 ($15.50) in gray-market trading Monday, compared with the listing price of HK$80.

According to Bloomberg, in the so-called gray market, investors can bid for new shares before they officially start trading on a stock exchange.

The over-the-counter mechanism is often seen as an early indicator of investor demand for an IPO. Retail buyers will be able to trade through a similar channel a day before Ant’s Thursday debut.

“This is huge: the largest IPO ever, priced at the top end and now this huge premium in the gray market,” said Gary Dugan, chief executive officer of the Global CIO Office in Singapore, which didn’t take part in the IPO. “It’s pretty extraordinary given the backdrop and it shows you how much Asia is decoupling from the United States.”

“The market’s infatuation with growth stocks is very strong at the moment,” said Arnout van Rijn, chief investment officer for Asia-Pacific at Robeco. With many investors betting China’s domestic economy will be sheltered from the trade war with the U.S., “it’s not surprising that there’s more demand than supply for a stock like this.”

Of course, with retail going all in the stock, it makes the margin of risk for institutions even more attractive as Beijing will not allow Ant to drop, crashing retail sentiment. As a result, the IPO is also attracting interest from some of the world’s biggest money managers.  T. Rowe Price Group Inc., UBS Asset Management and FMR LLC, the parent of Fidelity Investments, are among the money managers angling for a piece of the deal, a Bloomberg source said.

All this foreign interest means that more than HK$252 billion has flowed into the city since September 14, forcing the Hong Kong Monetary Authority, the de facto central bank, to intervene almost 50 times to try to weaken the Hong Kong dollar.

This is also why contrary to the expectations by China skeptics such as Kyle Bass, Hong Kong’s fund flows continue to flood into the territory rather than out, because China has figured out that the simplest way to ensure it never has a dollar shortage is to guarantee that foreign investors will always make money on such massive equity offerings.

And as long as China has companies that go public – and are 1000x oversubscribed – the foreign capital inflows will continue. Which is the Ant IPO is about so much more than the world’s biggest IPO – it explains how HK, and by extension China, funnels foreign (mostly dollar) capital to make sure that there is never a full-blown run on the world’s reserve currency.

Authored by Paul Joseph Watson via Summit News,

Gun stores in Michigan are being “cleaned out” by people buying firearms for the first time over fears that there could be massive civil unrest following tomorrow’s presidential election.

Detroit gun shop owner Bill Kucyk told Sky News that his store was being inundated by people who don’t really know how to purchase or handle weapons but are desperate to acquire them.

“They don’t even know the process,” said Kucyk.

“They just want to buy guns – and I’m getting about a hundred calls a day about it,” he added.

Kucyk said he was struggling to keep up with demand as people clamor to stock up on guns before what many fear could be weeks of intense rioting should the election result be contested.

“Normally I’d have about a hundred guns in this cabinet but they’ve been sold twice over. The store has been cleaned out several times,” he commented.

Lexus Lewis, a young mother of two, was attempting to buy a shotgun but “was struggling to hold up to her shoulder” according to the report, with Kucyk remarking, “She’s going to need some serious training to use that.”

Lewis said that she was scared of what people were capable of doing given recent events.

“All of this is new,” she said. “I’ve always been a little insecure living in Detroit, Michigan, but it’s all new to me… people are doing things that we’ve never even thought about doing before… taking it to limits that we never thought about going before.”

The rest of the article goes on to blame the emergence of “militia groups” as the reason for why people are buying guns, completely ignoring the real reason, which is the fact that left-wing extremists representing Antifa and Black Lives Matter have been rioting in American cities for the last 5 months.

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Elections officials in Cumberland County, Pennsylvania were rattled last week after a Trump campaign aide requested ‘highly specific details’ about the county’s ballot security, according to The Sentinel.

A Tuesday email from Trump aide Leslie O’Shaughnessy requested the names of people transporting ballots from voting machines once polls close, the names of people with access to the ballots, and locations where ballots are stored – including room numbers.

County Commissioner Gary Eichelberger (R) called the request ‘intrusive,’ and suggested that it might disrupt the election process in the county of 253,000 residents.

“It’s almost kind of chilling the sort of data they wanted us to provide,” said Eichelberger. “This is basically the whole security plan. We’ve never received a request of this detail and I find it troubling that one of the interested parties [in the election outcome] feels they have a right to information that obviously could jeopardize the security of the ballots.”

Campaign spokeswoman Thea McDonald told the Washington Post that the request was for “standard election transparency details,” and that the campaign had been in touch with out counties – “some of which transparently provided answers to these important, reasonable questions via less formal requests.”

“As part of the Trump campaign’s efforts to ensure a free and fair election, we have asked county clerks for information so that we can gain a detailed understanding of voting processes — and the similarities and differences that may exist in different jurisdictions,” she told the Post in an emailed statement.

The email contained an attached, bullet-pointed list of the details requested, which O’Shaughnessy described as being pursuant to “your office’s compliance with existing statutes and law.”

“Please respond to these questions no later than 5:00 pm EST, tomorrow, Wednesday, October 28, 2020,” the email stated, asking for the response to be sent to a Gmail account bearing O’Shaughnessy’s name, and also including a phone number.

…

the details O’Shaughnessy asked for in her email do not concern ballot verification; rather, they are specific physical security details for ballots and voting machines.

These include information on “the location(s) that ballots are immediately sent to when polls close (including address and room number)” as well as “the individuals who transport the ballots to the location(s).”

The campaign is also asking for “the time(s) when are ballots are transported to canvass site,” information on any security provided, and “the best point of contact for each storage location(s) of the ballots.” –The Sentinel

“Given that more than 500,000 mail ballots were tossed out in this year’s primaries, we must look into these critical issues ahead of November,” McDonald told the Sentinel, linking to a Washington Post article on the volume of vote-by-mail ballots which were disqualified in the spring due to missing signatures, illegible marks, late arrivals and other reasons.

Read the rest of the report here.

Following Europe’s continued Manufacturing PMI rebound, US manufacturing was expected to have stabilized at September’s  levels through October.

• October US Manufacturing ISM BEAT 59.3 – vs 56.0 exp vs 55.4 prior

• October US Manufacturing PMI BEAT – 53.4 vs 53.3 exp vs 53.2 prior

That is the highest Manufacturing PMI since Jan 2019, and highest ISM Manufacturing since Aug 2018, and these improvements happen as US macro data is serially disappointing…

Source: Bloomberg

Although domestic demand ticked higher, Markit reports that new export orders fell for the first time since July.

However, under the ISM hood, export orders improved…

And overall new orders rose at their fastest pace since Jan 2004…

Source: Bloomberg

And ISM respondents are a lot more positive than the mainstream media suggests…

Chris Williamson, Chief Business Economist at IHS Markit said:

“With clues being sought as to whether the economy can sustain its recovery after rebounding from lockdowns, the rise in the PMI in October is encouraging news. It’s inevitable that the pace of economic expansion will weaken after the surge seen in the third quarter, but the strength of the PMI hints at a recovery for which the underlying trend continues to strengthen at the start of the fourth quarter.

“Producers of investment goods such as business equipment and machinery are leading the upturn in a welcome sign of rising business confidence and corporate investment, but it was worrying to see consumer goods producers report weakened order book growth, reflecting rising virus-related worries. Going forward, much will naturally depend on the extent to which the economy can remain open and functioning in the face of rising virus case numbers.”

Finally, in case you agreed with government data that there’s no inflation…

Maybe tap the brakes Mr.Powell?

Authored by Mike Shedlock via MishTalk,

The Ice cream eatery has estimated liabilities of up to $100 million and no way to pay them.

Friendly’s Goes Under Again

Bloomberg reports Iconic Restaurant Chain Friendly’s Files for Bankruptcy

Friendly’s Restaurants LLC, an iconic chain on the East Coast of the U.S. known for its sundaes, became the latest dining institution to go bankrupt amid the pandemic.

The pandemic and lockdown have dragged down sales at restaurants around the world, and led many already-struggling eateries to buckle under debt loads. Pizza Hut franchisee’s NPC International Inc., the holding company of Chuck E. Cheese CEC Entertainment Inc. and the U.S. arm of Le Pain Quotidien have sought bankruptcy protection since the Covid-19 crisis started. 

This isn’t the brand’s first brush with bankruptcy. In 2011, Friendly Ice Cream Corp. and its subsidiaries, the operator of Friendly’s restaurants and a nationwide distributor of ice cream products, had entered Chapter 11.

More Lockdowns

COVID restrictions and lockdowns rise in US and Europe, as Trump’s rallies are blamed for cases.

Also note  Fauci, Warning of Bleak Winter, Draws White House Rebuke

As Mr. Trump toured the country assuring Americans that the U.S. has “turned the corner” on the coronavirus, Dr. Fauci looked ahead to the coming winter and declared that “you could not possibly be positioned more poorly.”

“We’re in for a whole lot of hurt,” Dr. Fauci said in an interview with The Washington Post published on Saturday.

Mr. Trump, in a battle for re-election and eager to portray the virus as tamed, has preferred the counsel of another pandemic adviser, Dr. Scott W. Atlas, who has questioned mask use and offered a number of other contrarian philosophies.

Ordinarily circumspect, Dr. Fauci directly criticized Dr. Atlas in the interview.

“I have real problems with that guy,” he said.

Agree with them or not, more lockdowns are coming.

This will be the final death bell for many chains and independents.

[ZH: In addition to Friendly’s, mall-owner CBL & Associates and Pennsylvania REIT also announced bankruptcy this morning.]