Month: February 2021

Israel is blaming Iran for the Thursday incident in the Gulf of Oman wherein a cargo vessel owned by an Israeli businessman was hit by a ‘mystery’ explosion, forcing it to divert to the nearest port after sustaining severe damage.

Defense Minister Benny Gantz has announced as part of an “initial assessment” that Tel Aviv believes Iran was behind a bomb attack on the car-carrier vessel, identified as the Helios Ray. Suspicion of Iran’s involvement has been rampant in Israeli media since the blast. However, there’s yet to be definitive proof or evidence that either a state actor or terrorist elements were involved, much less any specific details released to the public. 

“Iran is looking to hit Israeli infrastructure and Israeli citizens. The location of the ship in relative close proximity to Iran raises the notion, the assessment, that it is the Iranians,” Defense Minister Benny Gantz said on Saturday, according to Reuters.

Photos circulating of damage to Helios Ray after explosion on board. There are some similarities to photos from previous limpet mine attacks in Gulf of Oman. #Israel #OOTT #Iran pic.twitter.com/gPnvSElQpX

— Jason Brodsky (@JasonMBrodsky) February 26, 2021

Gantz appears to be speculating to a large degree, likely with an intelligence investigation still pending. He added: “Right now, at an initial assessment level, given the proximity and the context – that is my assessment.”

No crew were reported harmed in the blast which struck the hull of the Bahamian flag vessel as it traveled through the Gulf of Oman from Saudi Arabia to Singapore. It’s now reported to be docked in Dubai as the damaged is assessed, some photos of which circulated online in the past two days.

Pentagon sources confirmed the damage yet without specifying blame. “A U.S. defense official in Washington said the blast left holes above the waterline in both sides of the hull. The cause was not immediately clear and no casualties were reported,” Reuters noted.

During the summer 2019 ‘tanker war’ involving Iran and the West, the Islamic Republic was blamed for limpet mine attacks on commercial vessels in the region; however, Tehran vehemently denied these attacks, which many speculated was ‘retaliation’ for the UK seizing and temporarily detaining the Iranian oil tanker ‘Grace 1’ off Gibraltar, citing compliance with US-led sanctions.

Authored by Caleb Fuller via The Mises Institute,

Since the days of Adam Smith, economists have sought a set of social institutions which permit “neither dominion, nor discrimination,” to use Nobel Prize–winning economist James Buchanan’s phrase. In this, economists are joined by all people of goodwill—including those in the Biden administration, which has enshrined equity and inclusion as cornerstones of how they’ll govern.

What separates the economist from other social do-gooders, however, is an unflinching focus on the means used to achieve noble goals. It’s therefore with alarm that I consider the Biden administration’s dual focus on “diversity and equity” and its doubling down on the “fight for $15.” I’m alarmed because the minimum wage impedes our ability to foster a society genuinely built on “diversity and equity.”

Here’s the straight talk on the minimum wage that you probably didn’t learn in school: the minimum wage has been a powerful weapon in the arsenal of racists and bigots. Economists have illuminated the devastating effects of the minimum wage on minorities with empirical evidence and entire books on the subject, but to see one reason why the policy targets minorities, first consider a little basic economics.

Consider the demand side of the labor market.

Firms will hire fewer workers if the government criminalizes voluntary agreements to work for less than $15 per hour. This is an uncontroversial point to make about virtually any other market. If the price of apples doubles, people buy fewer apples. They buy more oranges instead. Employers do the same thing. Under the minimum wage, they start buying more machinery, like the kiosks you see in Panera. The upshot: fewer jobs.

Now let’s consider the supply side of the labor market, where the higher minimum wage attracts new workers to the labor market—those, like college students, who might have sat on the sidelines otherwise. The upshot: more job seekers.

Fewer jobs plus more job seekers means that more people will be searching for jobs than there are jobs available—a labor surplus. In other words, the minimum wage creates a “buyer’s market” in labor, because it causes job seekers to line up in front of employers who have limited jobs to offer.

Suppose an employer receives a hundred applicants for a job opening. How does he choose whom to hire?

Without the minimum wage, whoever wants the job most will outcompete other jobseekers by offering to work for less.

With a minimum wage, the employer can’t say: “Who will work for $14.95?” If he does, he’s a criminal; he literally violates the law.

Since he can’t just pick the most eager job seekers, he needs some alternative way to select from his hundred applicants. When you have a surplus of labor in a market with a minimum wage, prices aren’t allowed to adjust, so the employer picks from that surplus based on personal preferences. These may include race, sex, gender, religion, or other personal characteristics that have little to do with productivity. In fact, in the past, it has included just that. Faced with more job seekers than there are jobs available, a bigoted employer bears little cost when he refuses to hire a member of a group he dislikes. He knows someone else in the applicant pool will be from his preferred group.

In a market without a minimum wage, when an employer turns down an applicant to satisfy his bigoted tastes, he doesn’t have ninety-nine other job seekers to choose from. There’s no labor surplus. If he chooses to indulge his bigoted tastes, the job remains unfilled for longer, which means less money for our racist employer. Consider that in the United States the African American teenage male unemployment rate was lower than the white teenage male unemployment rate through the late 1940s. The 1950s saw the single largest increase (in percentage terms) of the minimum wage. The reasoning I just gave explains why the African American teen joblessness rate then soared above that of whites. That gap remains to the present day. Like Adam Smith, James Buchanan, and the Biden administration, I too desire a society where the power of bad people to exercise “dominion or discrimination” is constrained, even eliminated. Presumably, my fellow Pennsylvanians do too. The fact that nearly two-thirds of them (and 89 percent of liberals) support a $15/hour minimum wage is therefore troubling. My fellow citizens should consider whether this policy facilitates or impedes the ability of bad men to do harm. Economics says it facilitates.

So does history. As Princeton’s Thomas Leonard has demonstrated in his book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era, the early minimum wage advocates saw it as a prime tool to exercise “dominion and discrimination” over those they deemed ill-suited to reproduction. The minimum wage was well suited to perform the Progressives’ dirty work of discriminating against (what they considered) the least productive by making them unemployable.

It has been over a hundred years since the Progressive Era. But the laws of economics haven’t changed. The only question is: Have we?

Late on Friday afternoon, when an FDA panel unanimously endorsed the J&J Covid vaccine finding that its benefits outweigh any risks, we wrote that the “FDA could now give the green light to the single-dose vaccine as early as Saturday, and it probably will.” And just after 6pm on Saturday, that’s precisely what happened when the Food and Drug Administration on Saturday authorized Johnson & Johnson’s single-shot, non-mRNA Covid-19 vaccine for emergency use for people 18 and older beginning the rollout of millions of doses of a third effective vaccine that could reach Americans by early next week.

The announcement come following weeks of steep declines in coronavirus cases (which however may have stabilizied in recent days) and millions of Americans are on waiting lists for shots.

The FDA’s decision comes after a Wednesday report according to which the J&J shot is highly effective at preventing severe Covid-19, with no serious side effects.

On Sunday, a committee of vaccine experts who advise the Centers for Disease Control and Prevention will meet to discuss whether certain population groups should be prioritized for the vaccine, guidance that state health officials have been eagerly awaiting in anticipation of the F.D.A.’s authorization.

Joe Biden hailed the vaccine’s authorization, calling it “exciting news” in a statement on Saturday.

“Thanks to the brilliance of our scientists, the resilience of our people, and the eagerness of Americans in every community to protect themselves and their loved ones by getting vaccinated, we are moving in the right direction,”

That said, we are confident that Trump – under whose watch operation WarpSpeed was launched – could say the exactly same thing and have more credit.

Johnson & Johnson has pledged to provide the United States with 100 million doses by the end of June. When combined with the 600 million doses from the two-shot vaccines made by Pfizer-BioNTech and Moderna scheduled to arrive by the end of July, there will be more than enough shots to cover any American adult who wants one.

But federal and state health officials are concerned that even with strong data to support it, some people may perceive Johnson & Johnson’s shot as an inferior option. That’s because the new vaccine’s 72% efficacy rate in the U.S. clinical trial site falls short of the roughly 95% rate found in studies testing the Moderna and Pfizer-BioNTech vaccines. Across all trial sites, the Johnson & Johnson vaccine also showed 85 percent efficacy against severe forms of Covid-19 and 100 percent efficacy against hospitalization and death from the virus.

“Don’t get caught up, necessarily, on the number game, because it’s a really good vaccine, and what we need is as many good vaccines as possible,” Anthony Fauci said in an interview with the NYT on Saturday. “Rather than parsing the difference between 94 and 72, accept the fact that now you have three highly effective vaccines. Period.” And when it comes to pitching “ballpark” figures who better than the person who admitted to lying about herd immunity to trick Americans into getting the vaccine.

If Johnson & Johnson’s vaccine would have been the first to be authorized in the United States instead of the third, “everybody would be doing handstands and back flips and high-fives,” said Dr. James T. McDeavitt, dean of clinical affairs at the Baylor College of Medicine.

As a reminder, unlike Pfizer and Moderna, J&J’s vaccine is made from a common cold virus that doesn’t replicate in the body but triggers an immune response to fight off infection. In the U.S. portion of a more than 43,000-person global trial, it was found to be 72% effective at preventing moderate to severe Covid.

To create this vaccine, the Johnson & Johnson team took a harmless adenovirus – the viral vector – and replaced a small piece of its genetic instructions with coronavirus genes for the SARS-CoV-2 spike protein.

After this modified adenovirus is injected into someone’s arm, it enters the person’s cells. The cells then read the genetic instructions needed to make the spike protein and the vaccinated cells make and present the spike protein on their own surface. The person’s immune system then notices these foreign proteins and makes antibodies against them that will protect the person if they are ever exposed to SARS-CoV-2 in the future.

The adenovirus vector vaccine is safe because the adenovirus can’t replicate in human cells or cause disease, and the SARS-CoV-2 spike protein can’t cause COVID–19 without the rest of the coronavirus.

Policy makers claim they have been eager to get more people immunized before virus mutations can take firmer hold in the U.S. J&J’s vaccine provided less protection against the new variants, trial data suggested. In Brazil, the shot was 68% effective against moderate-to-severe disease 28 days after vaccination, while in South Africa it was 64% effective. But across the globe, including in countries with emerging variants, the shot successfully prevented all hospitalizations and deaths.

Speaking to Bloomberg, Mathai Mammen, the head of global research and development for J&J’s pharmaceutical division, said in an interview last month that it’s impossible to compare overall efficacy levels between the vaccines, given that the trials were carried out in different locations at different times in the course of the pandemic.

“What people fear is getting sick, so sick they have to go to an emergency room, or hospital, and even die,” he said “This vaccine, in a single shot, protects completely from that kind of fear.”

J&J is still testing a two-shot regimen in a large, global trial that is expected to produce results before year-end. Like Pfizer and Moderna, the company is working on boosters tailored to the variants. And it plans studies soon in children, pregnant women and the immunocompromised. J&J executives have said the company will charge no more than $10 a dose for the vaccine during the pandemic — a price at which it won’t profit. The Pfizer-BioNTech vaccine costs the U.S. $39 for the full regimen, and the Moderna vaccine costs $33 for both doses.

* * *

In any case, Johnson & Johnson has said it will ship nearly four million doses as soon as the F.D.A. authorizes distribution and another 16 million or so doses by the end of March. That is far fewer than the 37 million doses called for in its $1 billion federal contract, but the contract says that deliveries that are 30 days late will still be considered timely. The federal government is paying the firm $10 a dose for a total of 100 million doses to be ready by the end of June, substantially less per dose than it agreed to pay Moderna and Pfizer.

More importantly, Johnson & Johnson’s one-dose vaccine might allow states to rapidly increase the number of people who have been fully inoculated. Unlike the other two vaccines, it can be stored at standard refrigeration temperatures for at least three months.

Dr. Danny Avula, the vaccine coordinator for Virginia, said the Johnson & Johnson shipments would increase the state’s allotment of vaccine next week by nearly one-fifth. “I’m super-pumped about this,” he said. “A 100 percent efficacy against deaths and hospitalizations? That’s all I need to hear.”

He said the state was planning mass vaccination events specifically for the Johnson & Johnson vaccine, partly to quell any suspicion that it is a lesser product targeted to specific groups.

“It will be super clear that this is Johnson & Johnson — here’s what you need to know about it,” he said. “If you want to do this, you’re coming in with eyes wide open. If not, you will keep your place on the list.”

New York Governor Andrew Cuomo has been accused of sexual harassment by a second former aide, according to the New York Times.

Charlotte Bennett, a former executive assistant and health policy adviser to the Cuomo administration up until November of last year, told the Times that Cuomo had asked her sever questions about her sex life – including whether she ever had sex with older men, and whether she was monogamous in her relationships.

He also allegedly told her during a June, 2020 encounter that the 63-year-old governor complained about being ‘lonely during the pandemic,’ and that he “can’t even hug anyone.”

Ms. Bennett, 25, said the most unsettling episode occurred on June 5, when she was alone with Mr. Cuomo in his State Capitol office. In a series of interviews this week, she said the governor had asked her numerous questions about her personal life, including whether she thought age made a difference in romantic relationships, and had said that he was open to relationships with women in their 20s — comments she interpreted as clear overtures to a sexual relationship. –New York Times

 Cuomo told The Times on Saturday that he thought he was acting as a mentor, and “never made advances toward Ms. Bennett, nor did I ever intend to act in any way that was inappropriate, before asking for an independent review of the matter – and imploring New Yorkers to await the results “before making any judgements.”

Bennett related an exchange in which she felt Cuomo made clear he wanted to sleep with her.

Ms. Bennett said that during the June encounter, the governor, 63, also complained to her about being lonely during the pandemic, mentioning that he “can’t even hug anyone,” before turning the focus to Ms. Bennett. She said that Mr. Cuomo asked her, “Who did I last hug?”

Ms. Bennett said she had tried to dodge the question by responding that she missed hugging her parents. “And he was, like, ‘No, I mean like really hugged somebody?’” she said.

Mr. Cuomo never tried to touch her, Ms. Bennett said, but the message of the entire episode was unmistakable to her. –New York Times

“I understood that the governor wanted to sleep with me, and felt horribly uncomfortable and scared,” Bennett said. “And was wondering how I was going to get out of it and assumed it was the end of my job.”

Bennett says she reported the interaction to Cuomo’s chief-of-staff, Jill DesRosiers, less than a week later – and was subsequently transferred to another job as a health policy adviser, where her office was located on the other side of the Capitol. Bennett also says she reported the incident to a special counsel to the governor, Judith Mogul, towards the end of last June – after which she chose not to insist on an investigation because she “wanted to move on” with her new job.

Cuomo, in his statement, called Bennett a “hard-working and valued member” of his staff who had “every right to speak out,” revealing that she had opened up to him about being a survivor of sexual assault.

“The last thing I would ever have wanted was to make her feel any of the things that are being reported,” said Cuomo, who did not deny asking Bennett personal questions.

Bennett’s accusation comes less than a week after a woman accused Cuomo of sexually harassing her several times between 2016 and 2018, at one point allegedly giving her an unsolicited kiss on the lips at his Manhattan office.

Cuomo says Boylan is lying. 

Today I am telling my story. I never planned to share the details of my experience working in the Cuomo administration, but I am doing so now in hopes that it may make it easier for others to speak their own truth. https://t.co/n1Lcc6Ac66

— Lindsey Boylan (@LindseyBoylan) February 24, 2021

In response to the allegations against Cuomo – and in light of recent revelations that he withheld nursing home death data in order to avoid prosecution by the Trump DOJ, a top New York state lawmaker, Tim Kennedy (D), said that there’s a ‘need to get more information,” adding “And I believe we’re going to be looking for that in the coming days.” 

Authored by Dr. Binoy Kampmark via Southfront.org,

The ghost of Edward Teller must have been doing the rounds between members of the National Commission on Artificial Intelligence.  The father of the hydrogen bomb was never one too bothered by the ethical niggles that came with inventing murderous technology.  It was not, for instance, “the scientist’s job to determine whether a hydrogen bomb should be constructed, whether it should be used, or how it should be used.”  Responsibility, however exercised, rested with the American people and their elected officials.

The application of AI in military systems has plagued the ethicist but excited certain leaders and inventors.  Russian President Vladimir Putin has grandiloquently asserted that “it would be impossible to secure the future of our civilization” without a mastery of artificial intelligence, genetics, unmanned weapons systems and hypersonic weapons.

Campaigners against the use of autonomous weapons systems in war have been growing in number.  The UN Secretary-General António Guterres is one of them. 

“Autonomous machines with the power and discretion to select targets and take lives without human involvement,” he wrote on Twitter in March 2019, “are politically unacceptable, morally repugnant and should be prohibited by international law.” 

The International Committee for Robot Arms Control, the Campaign to Stop Killer Robots and Human Rights Watch are also dedicated to banning lethal autonomous weapons systems.  Weapons analysts such as Zachary Kallenborn see that absolute position as untenable, preferring a more modest ban on “the highest-risk weapons: drone swarms and autonomous chemical, biological, radiological, and nuclear weapons”.

The critics of such weapons systems were far away in the Commission’s draft report for Congress.  The document has more than a touch of the mad scientist in the bloody service of a master.  This stood to reason, given its chairman was Eric Schmidt, technical advisor to Alphabet Inc., parent company of Google, which he was formerly CEO of.  With Schmidt holding the reins, we would be guaranteed a show shorn of moral restraint.  “The AI promise – that a machine can perceive, decide, and act more quickly, in a more complex environment, with more accuracy than a human – represents a competitive advantage in any field.  It will be employed for military ends, by governments and non-state groups.”

In his testimony before the Senate Armed Services Committee on February 23, Schmidt was all about “fundamentals” in keeping the US ascendant.  This involved preserving national competitiveness and shaping the military with those fundamentals in mind.  But to do so required keeping the eyes of the security establishment wide open for any dangerous competitor.  (Schmidt understands Congress well enough to know that spikes in funding and outlays tend to be attached to the promotion of threats.)  He sees “the threat of Chinese leadership in key technology areas” as “a national crisis”.  In terms of AI, “only the United States and China” had the necessary “resources, commercial might, talent pool, and innovation ecosystem to lead the world”.  Within the next decade, Beijing could even “surpass the United States as the world’s AI superpower.”

The testimony is generously spiked with the China threat thesis.  “Never before in my lifetime,” he claimed, “have I been more worried that we will soon be displaced by a rival or more aware of what second place means for our economy, our security, and the future of our nation.”  He feared that such worries were not being shared by officials, with the DoD treating “software as a low priority”.  Here, he could give advice on lessons learned in the spawning enterprises of Silicon Valley, where the principled live short lives.  Those dedicated to defence could “form smart teams, drive hard deliverables, and move quickly.”  Missiles, he argued, should be built “the way we now build cars: use a design studio to develop and simulate in software.”

This all meant necessarily praising a less repressible form of AI to the heavens, notably in its military applications.  Two days of public discussion saw the panel’s vice chairman Robert Work extol the virtues of AI in battle.  “It is a moral imperative to at least pursue this hypothesis” claiming that “autonomous weapons will not be indiscriminate unless we design them that way.”  The devil is in the human, as it has always been.

In a manner reminiscent of the debates about sharing atomic technology in the aftermath of the Second World War, the Committee urges that the US “pursue a comprehensive strategy in close coordination with our allies and partners for artificial intelligence (AI) innovation and adoption that promotes values critical to free and open societies.”  A proposed Emerging Technology Coalition of likeminded powers and partners would focus on the role of “emerging technologies according to democratic norms and values” and “coordinate policies to counter the malign use of these technologies by authoritarian regimes”.  Fast forgotten is the fact that distinctions such as authoritarianism and democracy have little meaning at the end of a weapon.

Internal changes are also suggested to ruffle a few feathers.  The US State Department comes in for special mention as needing reforms.  “There is currently no clear lead for emerging technology policy or diplomacy within the State Department, which hinders the Department’s ability to make strategic technology decisions.”  Allies and partners were confused when approaching the State Department as to “which senior official would be their primary point of contact” for a range of topics, be they AI, quantum computing, 5G, biotechnology or new emerging technologies.

Overall, the US government comes in for a battering, reproached for operating “at human speed not machine speed.”  It was lagging relative to commercial development of AI.  It suffered from “technical deficits that range from digital workforce shortages to inadequate acquisition policies, insufficient network architecture, and weak data practices.”

The official Pentagon policy, as it stands, is that autonomous and semi-autonomous weapons systems should be “designed to allow commanders and operators to exercise appropriate levels of human judgment over the use of force.”  In October 2019, the Department of Defence adopted various ethical principles regarding the military use of AI, making the DoD Artificial Intelligence Centre the focal point.  These include the provision that, “DoD personnel will exercise appropriate levels of judgment and care, while remaining responsible for the development, deployment, and use of AI capabilities.”  The “traceable” principle is also shot through with the principle of human control, with personnel needing to “possess an appropriate understanding of the technology, development processes, and operational methods applicable to AI capabilities”.

The National Commission pays lip service to such protocols, acknowledging that operators, organisations and “the American people” would not support AI machines not “designed with predictability” and “clear principles” in mind.  But the note of warning in not being too morally shackled becomes a screech.  Risk was “inescapable” and not using AI “to solve real national security challenges risks putting the United States at a disadvantage”.  Especially when it comes to China.

It was just last Tuesday when he presented our readers with the latest observations from JPM quant Nicholas Panaigrtzoglou, who warned that the rapid rise in bond-equity correlations…

… was bringing memories of previous violent bond tantrum episodes, including Bernanke’s famous Taper Tantrum from May-June 2013, the Bill Gross-inspired Bund tantrum of May-June 2015, the period into the US election Oct-Nov 2016, Feb 2018 and Q4 2018. All of those ended with pain for both bond and equity longs, and certainly risk parity and 60/40 balanced funds who were crushed on both long legs.

Well, just two days later this warning was realized as we saw a surge in bond volatility as global bond prices plunged and yields soared as the latest inflation scare finally came to the fore (catalyzed by the catastrophic 7Y auction which sparked massive liquidation volumes across the curve).

And, as Panigrtzoglou writes today, the surge in the bond-equity correlation together with the increase in volatility is putting even more pressure on multi-asset investors, such as risk parity funds and balanced mutual funds to de-risk (something we also discussed last Thursday in “Vol, Correlation Massacre Means Capitulation Is Just Starting“).

And though we now know what catalyzed last week’s furious liquidation in rates, the question everyone is asking is whether the puke is over. And while some, such as the Nomura quant who correctly called both the early CTA liquidation and shorting that sparked last week’s rout now believe that the worst is over and CTAs are are now covering their shorts, Friday’s action which saw stocks closely sharply at their lows suggests that few are convinced.

Which brings us to the key question posed by JPM’s Panigirtzoglou, namely “what conditions are needed for the current episode to subside and for equity and risk markets to resume their uptrend?”

He then proceeds to answer his  own question, the lesson from the previous positive bond-equity correlation episodes of May-June 2013, the Bund tantrum of May-June 2015, the period into the US election Oct-Nov 2016, Feb 2018 and Q4 2018, is that there are two main conditions:

1. Rate vol needs to decline from its current very high level
2. Bond yields need to subside and unwind a decent portion of most recent increases, in particular at the 5yr UST tenor.

Neither of these should come as a surprise to our readers. After all just last Sunday we laid out the week’s events clearly, when we proposed the opposite question, i.e., “Are Yields About To Blast-Off: Here Are The 3 Things To Watch“, concluding that “the aptly named MOVE index is the best real-time measure of potential runaway yields.” And sure enough, just days later the MOVE exploded to the highest level since last March’s bond crash.

So now that what the two critical conditions that must be present for a return to normalcy, the next question is “how could these conditions be achieved.” Here JPM envisages four scenarios.

A) The Fed intervenes by raising its bond buying pace in a similar fashion to March 2020. At the time, the Fed justified its intervention by seeking to restore functioning in rate markets. Thus far at least, this argument does not yet appear justified at the current level of market stress according to JPM, although as we noted earlier, BofA is already convinced that the Fed may address nervous markets as soon as this week.

Here JPM notes that while its market depth metrics for 10y UST futures and cash bonds have deteriorated, they still appear well above levels during March 2020 and this is true for both the 5y and 10yr tenor. And, as JPM claims, without further deterioration in UST liquidity it would be difficult to envisage a Fed intervention a la March 2020, especially if one views the recent bond selloff as a function of investors embracing the reflation trade. At the same time, Fed Chair Powell and Governor Brainard are scheduled to speak next week, and it will be important to watch for signs of how it views the bond market correction.

B) CTAs and other momentum traders hit oversold levels as mean reversion signals kick in. This, JPM writes, would provide at least some temporary relief (and it sure would especially if Nomura is right that the CTA shorting has now reversed). But back to JPM’s own calculations, the bank asks how far are we from oversold conditions on our momentum traders framework? The sell-off in 10y USTs to close just above 1.5% on Feb 25th has seen the bank’s shorter-term momentum signal for 10y USTs reach extreme bearish territory at -1.7 standard deviations, below even its early 2018 low of -1.5 standard deviations. The average of the shorter and longer-term signals reached a level of -0.8, still some way from its early 2018 low of – 1.2 standard deviations, but it would only take a further extension of the sell-off for 10y yields to 1.6% for this to reach its early 2018 low, while for the average of the shorter-term and longer-term signals to reach its 2018 low would take a further sell-off of just 5bp to around -0.2%.

Long story short, JPM agrees with Nomura that at 10y maturities, it appears the shorter-term signals for USTs have reached levels where mean reversion or profit taking signals by CTAs should  start kicking in, while the average of shorter-term and longer-term signals are approaching those levels. That said, while there are signs that the shorter-term signal for 10y USTs and Bunds reaching extreme levels has triggered some CTAs to reduce short duration exposure, for the signals to more decisively reach oversold conditions for CTAs could take 10y UST yields reaching 1.6% and for 5y to reach 1.0%. This means that more yield momentum chasing higher could be in store in the coming days.

C) Japanese and Euro area investors step in to buy USTs to take advantage of the large yield pickup on a currency hedge basis relative to their domestic bonds. As the chart below shows, the recent TSY sell-off has seen the attractiveness of US Treasury yields rise on a currency-hedged basis, particularly for Japanese investors, and yet the probability of this flow materializing at current levels of UST vol is low as these investors and in particular banks tend to be averse to high levels of rate volatility.

Indeed, the latest weekly data on Japanese residents’ net purchases of foreign bonds for the week ending Feb 19th already saw net sales of around $18bn amid last week’s sell-off.

Before these investors step in, JPM suggests that first other flows or central bank actions are need to materialize first to induce a decline in volatility.

D) Finally, rebalancing flows by balanced mutual funds and/or pension funds would help bond markets to stabilize and bond yields to subside. Unlike foreign flows, the chance of these flows materializing is high during the current quarter according to JPM, though the timing is harder to predict and could happen. In the event it materializes more towards the end rather the beginning of March, it could create a flow vacuum for rate markets over the next two weeks. One potential risk: if and when these rebalancing flows emerge, they are unlikely to be supportive of equities, as they combine bond buying with equity selling.

* * *

Putting it all together, when thinking about the above four scenarios JPM finds that the conditions needed for this week’s market stress – which is reminiscent of the previous positive bond-equity correlation episode of Q4 2018 – to subside “may not yet be fully in place” which is a surprisingly bearish assessment, especially if as Nomura (correctly) observes, the CTA unwind of shorts has already begun and the next stop is likely to be 1.20%. Of the four scenarios, Panigirtzoglou concludes that there are some signs at least of the second starting to take shape as shorter-term momentum signals for 10y reached oversold conditions. In any event, if urgent stabilization is required and does not emerge, dragging equities lower, BofA will be right and the Fed will have to address the ongoing liquidation wave… although what the Fed will say is unclear.

After all, as we said earlier, the Fed is in a very big bind – the reason we have the current tantrum is precisely due to the massive liquidity injections from central banks who have been desperate for more inflation. Well, they have their inflation and to reverse it they plan to do what – inject even more liquidity? At some point even our broken markets will have to concede that what is going on is complete and terminal idiocy.

Authored by Mike Shedlock via MishTalk,

Despite vaccines and a falling number of cases Dr. Fauci keeps moving the goalposts.

Not Yet, When?

Dr. Facuci says Vaccinated People Shouldn’t Dine Indoors or Go to the Theater Quite Yet.

“There are things, even if you’re vaccinated, that you’re not going to be able to do in society,” Fauci said on Monday during a White House COVID-19 press briefing.

“For example, indoor dining, theaters, places where people congregate. That’s because of the safety of society.“

Though vaccines can help prevent people from contracting severe cases of COVID-19, the jabs may not stop them from getting sick altogether. It’s also still unclear whether vaccinated people can be disease carriers, meaning they might spread illness to unvaccinated people in a community where vaccination is far from universal, prolonging the pandemic.

“We hope that when the data comes in, it’s going to show that the virus level is quite low and you’re not transmitting it,” Fauci said, cautioning:

“We don’t know that now. And for that reason, we want to make sure that people continue to wear masks despite the fact that they’re vaccinated.”

Early signs are looking promising that vaccinated people may not spread the virus well, but it’s still too soon to say for sure.

I understand wearing masks. I understand avoiding groups and parties. But enough already. 

Double masking and telling people not to eat out even after they have been vaccinated is too much to take. 

The teachers’ unions will pick up on this and play it for all it’s worth.

Addendum

I was asked about my brief teachers’ union comment above. I will explain in detail in just a bit in another post.

Meanwhile, please note Fauci falls silent following New York nursing home scandal after repeatedly praising Cuomo response.

A US District Judge in San Jose, California says she was “disturbed” over Google’s data collection practices, after learning that the company still collects and uses data from users in its Chrome browser’s so-called ‘incognito’ mode – and has demanded an explanation “about what exactly Google does,” according to Bloomberg.

In a class-action lawsuit that describes the company’s private browsing claims as a “ruse” – and “seeks $5,000 in damages for each of the millions of people whose privacy has been compromised since June of 2016,” US District Judge Lucy Koh said she finds it “unusual” that the company would make the “extra effort” to gather user data if it doesn’t actually use the information for targeted advertising or to build user profiles.

Koh has a long history with the Alphabet Inc. subsidiary, previously forcing the Mountain View, California-based company to disclose its scanning of emails for the purposes of targeted advertising and profile building.

In this case, Google is accused of relying on pieces of its code within websites that use its analytics and advertising services to scrape users’ supposedly private browsing history and send copies of it to Google’s servers. Google makes it seem like private browsing mode gives users more control of their data, Amanda Bonn, a lawyer representing users, told Koh. In reality, “Google is saying there’s basically very little you can do to prevent us from collecting your data, and that’s what you should assume we’re doing,” Bonn said.

Andrew Schapiro, a lawyer for Google, argued the company’s privacy policy “expressly discloses” its practices. “The data collection at issue is disclosed,” he said.Another lawyer for Google, Stephen Broome, said website owners who contract with the company to use its analytics or other services are well aware of the data collection described in the suit. –Bloomberg

Koh isn’t buying it – arguing that the company is effectively tricking users under the impression that their information is not being transmitted to the company.

“I want a declaration from Google on what information they’re collecting on users to the court’s website, and what that’s used for,” Koh demanded.

The case is Brown v. Google, 20-cv-03664, U.S. District Court, Northern District of California (San Jose), via Bloomberg.

Authored by Steve Watson via Summit News,

A poll conducted by Echelon has found that while Republican voters are concerned with issues such as illegal immigration, lack of police resources, and high taxes, Democrat voters’ top concerns are supporters of President Trump, racism, and discrimination against LGBTQ people.

While 81% of Republican voters cited immigration as the top issue, 82% of Democrats said that ‘Trump’s supporters’ is their top issue at the moment.

Of the issues we presented to ALL respondents, the economic damage from COVID-19 is the top concern in large part because it is the most bipartisan – three-quarters of GOP and Dems are very/extremely concerned. pic.twitter.com/nhL8loHaw2

— Kristen Soltis Anderson (@KSoltisAnderson) February 24, 2021

A further 79% and 77%, respectively cited ‘white nationalism’ and ‘systemic racism’ as the issues they are most concerned about.

This is actually pretty incredible

It also shows how effectively the Democrats/media have marginalized the Bernie Bros and other substantive leftist concerns by instead spending their time dehumanizing Trump supporters https://t.co/wHggxBDuW3

— Will Chamberlain (@willchamberlain) February 25, 2021

Commentators immediately noted that the results highlight how the Democratic Party and the leftist media has brainwashed liberals into purely caring about identity politics over substantive issues.

It should be noted that Echelon says it created a list of “likely primary issues” for supporters of each party.

To the full sample, we did test some items that have big party gaps. But when doing a survey, you want to be mindful of “respondent fatigue” – asking people to rank 30+ issues would be A LOT. So we created a list of issues that are “likely primary issues” for each party….

— Kristen Soltis Anderson (@KSoltisAnderson) February 24, 2021

But still, when collating the full range of issues, ‘Trump’s supporters’ was a top concern for Democrats:

Looking at the full range of issues asked of each side, Republicans still say illegal immigration and lack of police support are top concerns, while for Democrats concern about spread of COVID is top of the list, with Donald Trump’s supporters” in second. pic.twitter.com/TQgKZgQ6Jy

— Kristen Soltis Anderson (@KSoltisAnderson) February 24, 2021

Also of note was the finding that those who identify as Trump supporters, rather then ‘party-first’ Republicans are more concerned about every issue:

When we look at the likely GOP primary issue concern broken out by whether people see themselves as “Trump supporters” or “Republican party supporters”, we see Trump supporters more concerned about pretty much everything, but especially election fraud. pic.twitter.com/WW1GQQBha3

— Kristen Soltis Anderson (@KSoltisAnderson) February 24, 2021

The US Supreme Court on Friday invalidated a California county’s ban on indoor religious services, ruling that Santa Clara County must allow five churches to hold indoor services, according to Mercury News.

The ruling, which comes less than three weeks after the country ordered places of worship to remain shut in defiance of a previous US Supreme Court ruling allowing indoor religious services at 25% capacity, stems from a November lawsuit brought against Gov. Gavin Newsom (D), the county, and County Health Officer Sara Cody.

The new ruling by a 6-3 vote requires indoor worship services to resume at 20% capacity in the county, tossing an “erroneous decision by the US Court of Appeals for the Ninth Circuit (located in San Francisco).

“This outcome is clearly dictated by this court’s decision in the South Bay United Pentecostal Church v. Newsom,” reads the Supreme Court decision.

The churches are San Jose’s Gateway City Church and The Spectrum Church, Campbell’s The Home Church and Orchard Community Church, and Morgan Hill’s Trinity Bible Church. They have argued the county has lacked scientific backing to justify its ban on indoor worship services and that it is unlawfully denying the churches’ rights to peacefully assemble and freely exercise their religion.

Following the high court’s lifting of California’s statewide ban on indoor religious services, Santa Clara County argued that it was not subject to the ruling because it prohibited all indoor gatherings — regardless of whether they’re related to religion — rather than instituting a specific ban on indoor religious services.

Shortly after, the five Santa Clara County churches filed a motion in the U.S. District Court for the Northern District of California to attempt to block the county’s ban, arguing that the U.S. Supreme Court’s ruling must apply to the county. A U.S. district court judge granted an injunction to temporarily block the county’s ban on indoor worship services.

But in an abrupt reversal less than two days later, the U.S. Court of Appeals for the Ninth Circuit temporarily suspended the order, concluding that the county’s prohibition on all indoor gatherings — including indoor religious services — could remain in place for the time being. –Mercury News

“The Supreme Court order was issued without any analysis at all of the County’s gathering rules, which have always been neutral and applied equally to all gatherings across-the-board,” said attorney James Williams, counsel for Santa Clara County. “Indoor gatherings of all kinds remain very risky, and we continue to urge all religious institutions to carefully follow the public health recommendations to avoid spread of COVID-19 among their congregations and the broader community.”

Bishop Oscar Cantú disagrees, saying that he joins “all Catholics and people of faith in Santa Clara County in expressing our satisfaction,” adding in a Friday night statement: “Banning indoor worship and yet allowing people to gather at airports, personal services establishments, and retail shopping is unconstitutional — and the Supreme Court has said so several times.”