Month: May 2021

Authored by Jeff Harris via The Ron Paul Institute for Peace & Prosperity,

You would think that during the worst Pandemic since the 1918 Spanish Flu life insurance companies would be hedging their bets to avoid major losses from Covid-19.

I haven’t written a life policy for several years so I was wondering what was going on?

I called one of the brokers I deal with that interacts with hundreds of big life insurers to get an inside look into how the Covid crisis has changed their business.

Imagine my surprise when she said it was pretty much business as usual!

Last year when the hysteria was just getting ramped up she did say the companies temporarily tightened up underwriting and reduced the amount of coverage they would offer. But as time went by and the hard data came rolling in those same companies went back to business as usual.

I asked her specifically if life insurers wanted a Covid test as part of the underwriting process and she said none that she was aware of.

Hmm, that’s pretty interesting isn’t it?

The most lethal pandemic in decades descends on the globe with deadly mutations taking millions of innocent lives and the life insurance companies couldn’t care less.

I also asked if the cost per thousand of coverage had increased due to Covid and again she said no.

Rates were pretty much the same as they were before the Covid Pandemic ravaged the earth.

Life Insurance companies are very risk adverse.

They don’t like losing money to unnecessary claims.

The fact they’re treating Covid as a nonevent should be an indicator that something is very wrong with the whole narrative.

President Biden, possibly most famous for his – and his son’s – business dealings in China coming into question whilst running for the Presidency, may wake up this week to find out from one of his top advisors that he’s now a China hawk.

That is, if you ask Kurt Campbell, the U.S. coordinator for Indo-Pacific affairs on the National Security Council. 

Campbell said this week that the U.S. was “entering a period of intense competition with China as the government running the world’s second-biggest economy becomes ever more tightly controlled by President Xi Jinping,” according to Bloomberg. 

Campbell, speaking at Stanford University, commented: “The period that was broadly described as engagement has come to an end. China will now operate under a new set of strategic parameters. The dominant paradigm is going to be competition.”

“China is determined to play a more assertive role,” he said. He said that President Xi has “almost completely disassembled nearly 40 years of mechanisms designed for collective leadership.”

He cited President Xi’s policies as reason for the “shift” in U.S. policy: China’s economic war with Australia, its military clashes near India and the rise of what he called “harsh power” or “hard power”. 

China Foreign Ministry Spokesman Zhao Lijian said this week: “China-U.S. relations will naturally experience some competition, which is prevalent among other major-country relations, but it is wrong to define the relationship with competition because it will only lead to confrontation and conflict.”

The comments came at the same time that U.S. Trade Representative Katherine Tai and Chinese Vice Premier Liu He were speaking for the first time. Tai had noted prior to the discussion that the U.S. and China faced “very large challenges” in diplomacy. 

Meanwhile, President Biden appears to finally be waking up to the idea that Covid may not have occurred, and/or made its way out of China, naturally, and asked the U.S. intelligence community to redouble its efforts in investigating the origin of the virus this week. 

When Biden asked for an “evidence-based international investigation and to provide access to all relevant data and evidence,” China’s embassy in Washington called it a “smart campaign and blame shifting”. 

Wang Yiwei, director of Renmin University’s Institute of International Affairs and a former Chinese diplomat, commented on the growing tensions: “The U.S. idea of engagement is one that has conditions and is about bringing China into its system, not only in economics but also in politics. The U.S. sees China overtaking its own economy, so it is looking to contain China and prevent it from moving up the value chain.”

Campbell concluded: “We believe that the best way to engage a more assertive China is to work with allies, partners and friends. The best China policy really is a good Asia policy.” 

Meanwhile, we can’t help but wonder if the shift in attitudes will affect whatever Chinese Board designation Hunter Biden is working on achieving this week…

Authored by Paul Joseph Watson via Summit News,

Criminals who repeatedly targeted an auto shop in Spring Lake, North Carolina by leaving racist graffiti referencing the KKK and Nazis turned out to be two African-American men after the owner caught them on camera.

Business owner Dwyane Haynesworth (who is black) took action after having a car stole off his lot and then discovering the racist graffiti, which included a drawing of a swastika.

After setting up the security cameras, that same night the criminals returned and broke into more vehicles before smashing windows and attempting to hot wire one of the cars.

The footage revealed the culprits to be two black men.

“By now, police must know to narrow down their list of suspects whenever racist graffiti is left at the scene of a crime. That doesn’t fit the modus operandi of Caucasians,” writes Dave Blount.

“Leftists who demonize and attempt to defund or otherwise hamstring the police are not siding against whites in favor of blacks, despite the way the liberal establishment frames it. They are siding against Dwyane Haynesworth in favor of punks who pointlessly destroy other people’s property.”

While the criminals in this instance clearly weaponized the racist graffiti in a bid to deceive authorities, fake hate crimes have become an all too common occurrence in America over the last five years.

Back in 2019, we highlighted the case of Amari Allen, a 12-year-old African-American girl who claimed a group of white boys cutting off her dreadlocks.

The entirety of the mainstream media, as well as lawmakers like Rashida Tlaib, fell for and amplified the story before Allen admitted she made it all up.

The gunman in Boulder who killed 10 people at a supermarket back in March also routinely threatened his classmates with threats of filing fake hate crime charges after violently attacking them, eyewitnesses told the media.

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We knew it would be a crazy day for today’s reverse repo early this morning, when the overnight GCF repo rate traded at -0.01% and refused to rise, an indication that there was far too much money chasing good collateral.

Looking at the scramble for repo, interbroker dealer Wrightson ICAP said on Thursday morning that it saw Reverse Repo volumes rising to around $470 billion Thursday, though the risks are “still tilted to the high side.”

They were, because moments ago the Fed announced that at 1:15pm some 50 counterparties (up from 46 on Wednesday) parked $485.329BN in reserves with the Fed (in exchange for the generous rate of 0.000%), which was up $35BN overnight, up $134BN in the past week, and the highest on record!

Why does this matter? Three reasons, all of which we explained in extensive detail in “Fed Alert: Overnight Reverse Repo Usage Soars Above Covid Crisis Highs“, Repo Crisis Looms: Fed’s Reverse Repo Usage Soars To $351BN, Fifth Highest Ever, and Zoltan On The Coming QE Endgame: “Banks Have No More Space For Reserves“,

1. The Fed is taking Treasurys out of the market through QE purchases and putting them right back in via the RRP as the central bank is now chasing its own tail as it monetizes so much US debt it has no place where to park the reserves it creates out of thin air
2. The heavy use of the o/n RRP facility tells us that foreign banks too are now chock-full of reserves.
3. Banks don’t have the balance sheet to warehouse any more reserves at current spread levels.

And now that everyone is once again a reverse repo expert…

we are weeks away from everyone turning into a reverse repo expert again

— zerohedge (@zerohedge) May 19, 2021

… Bloomberg writes that “the glut at the front-end has been spurred by the central bank’s ongoing asset-purchase program, commonly referred to as quantitative easing, as well the drawdown of the Treasury’s general account. The latter has been driven by the looming debt- ceiling reinstatement, which is due to take place at the end of July, and the flow of pandemic stimulus funds to taxpayers.” Additionally, Federal relief payments to state and local municipalities are also adding to the glut, and that is being exacerbated as regulatory constraints encourage banks to turn away deposits, directing that cash into money-market funds.

Also chiming in is JPM’s versatile multi-strat quant who tends to opine on everything from cryptos to retail call buying, writing yesterday that “perhaps motivated by the expiry of SLR exemptions, US banks have been pushing much of the $350bn of excess liquidity generated from the contraction in the TGA balance into MMFs. And the combination of increases in MMF AUM along with a contraction of outstanding Tbills appears to have induced MMFs towards heavier use of the Fed’s ON RRP facility.”

Better make that $485BN now.

Of course, when discussing repo one has to mention Zoltan Pozsar, and in a note published this morning, the Hungarian repo guru writes that as a result of the massive reserve glut, he expects three-month dollar Libor-OIS spreads to go “slightly negative” by mid-July. It only gets worse after:

By mid-July, we’ll have even more reserves to absorb due to the debt ceiling, and while a lot of that cash will go to the o/n RRP facility, some of it will chase higher yields in the FX swap market amid a lack of demand for U.S. dollars. Three-month cross-currency bases may flip positive by mid-July, and those implied yields may drag three-month U.S. dollar Libor-OIS slightly negative

As for the immediate market implications they are even more ominous: either the Fed will have to hike the IOER fast or rates will soon go negative. Worse, with the Fed still planning to do at least $1 trillion in QE even assuming a December taper, and potentially as much as $2 trillion based on the latest just released Fed “forecast”, there is simply no place to park all of these reserves.

It’s not just us concerned about how clogged up the market plumbing has become: in his daily Repo Market Commentary note from Monday, Curvature’s repo market guru Scott Skyrm wrote the following:

RRP Explosion

On March 17, a little over two months ago, there was no volume at the Fed’s RRP window. Nothing. Today, it was almost $400 billion! How do you go from zero to $400 billion in two months? Not only was today’s activity at the RRP one of the largest ever, it was also THE largest non-quarter-end, non-year-end print. There’s an incredible amount of cash in the Repo market right now! Clearly, the Fed took too much collateral out of the market – or – added too much cash.

The market is distorted from too much QE and hopefully QE tapering will be announced in June.

And while Powell & Co pretend that they can continue business as usual for years to come, the repo market is not only cracking but banks, full to the gills with inert reserves and which increase by $30 billion every week, are on the verge of pulling a Mr Creosote…

President Biden is just fine releasing the US Intelligence community’s 90-day examination of where COVID-19 originated, unless it contains surprises.

Shortly before boarding Air Force One for a Thursday trio to Ohio, Biden was ashed whether he planned to release the intelligence report, to which he replied “Yes,” adding “unless there’s something I’m unaware of.“

Watch:

President Biden says he pledges to release the full report on COVID-19’s origin after 90 days “unless there’s something I’m unaware of” https://t.co/yfsqs3e1t7 pic.twitter.com/9YTl0ggmZV

— CBS News (@CBSNews) May 27, 2021

As we noted on Wednesday, less than 24 hours after CNN threw Biden under the bus for canceling a State Department effort launched under Trump to get to the bottom of the origins of COVID-19, Biden backpedaled – ordering the US intelligence community to conduct a 90-day investigation into how the pandemic began.

In a statement via the White House website, the Biden administration claims that officials have been pursuing various possibilities – including “whether it emerged from human contact with an infected animal or from a laboratory accident,” it’s clear that the administration is in full damage control mode.

We expect the 90-day review to conclude that ‘the virus could have come from anywhere, and there’s equally scant evidence’ that the virus, which first appeared in Wuhan, China, either emerged from the Wuhan Institute of Virology, where they were modifying bat coronaviruses to better infect humans, or whether the pandemic began via ‘natural origin’ – which holds that a yet-to-be discovered intermediary species caused a bat strain to naturally mutate.

“The U.S. intelligence community does not know exactly where, when, or how the Covid-19 virus was transmitted initially,” according to DNI spokeswoman Amanda Schoch, who said that the intelligence agencies had come together around the two likely scenarios, according to the New York Times.

“The I.C. continues to examine all available evidence, consider different perspectives, and aggressively collect and analyze new information to identify the virus’s origins,” Schoch added.

We can’t imagine common sense or Occam’s razor factors in.

Authored by Viktorija via SovereignMan.com,

Last week after my little ‘incident’ when I was almost mugged in downtown Las Vegas, I felt the need to unwind and have a drink.

Apparently everyone else had the same idea, because the hotel bar was packed as tightly as a ‘mostly peaceful’ protest.

Curiously, though, despite such brisk business, there was only ONE waitress working.

She couldn’t possibly keep up with all the orders and looked like she was on the verge of a nervous breakdown. So I walked over to see if she was doing OK.

She was almost in tears as she told me that there would usually be at least 4-6 other servers… but all of her colleagues had simply stopped showing up and the hotel hadn’t found anyone to replace them.

After all, why actually work if the government is willing to pay you to Netflix and chill all day?

This is an area where the mainstream press has been noticeably silent. They have plenty of stories about the high unemployment rate in the United States. But they rarely talk about how much the government is incentivizing people to NOT work.

Now, I was born in Eastern Europe in the tiny country of Lithuania towards the end of the Soviet period, and I had never in my life heard of such a bizarre economic policy.

I even called my mother, who spent most of her life living under communism.

My mother, bear in mind, has zero background in economics. But after I explained this policy in the US to pay people to stay home, she thought I was joking… and said, “who is going to be left to do any work?”

She also told me that not even the Soviet Union paid people to stay home.

It’s easy to see the effects of this policy; both Uber and Lyft, for example, have complained about a massive driver shortage, resulting in longer wait times and higher prices.

And nearly half of small businesses across the country are struggling to find workers, according to the most recent National Federation of Independent Business survey.

But this trend of ‘money for nothing’ is growing.

There’s a Reddit group called “Antiwork” with 317,000 members, whose goal is “unemployment for all, not just the rich!”

I know I’m just a foreigner in this country, but I don’t understand how someone could think that rich people don’t work, or somehow became rich because of unemployment benefits. This is such a strange assertion.

People become wealthy BECAUSE they work hard… and they work smart. Not because they laze around and demand free money from the government.

On top of this Reddit group, a petition on change.org to pay $2,000 per month to every American, i.e. Universal Basic Income, received 2.2 million signatures.

And of course there’s plenty of support in Washington for $2,000/month stimulus checks until the economy has fully recovered from the pandemic.

This would start a never-ending cycle of dependency, because the economy will never fully recover as long as they’re paying people to not work.

It’s extraordinary that so many people, including some very powerful politicians, don’t seem to grasp the basics of how an economy grows and prospers.

There are consumers and there are producers. There is supply and there is demand. One does not survive without the other one.

Productive people are critical to keeping this ecosystem healthy.

But even though millions of people seem to have no interest in participating in economic prosperity any longer, I tend to look on the bright side and see the positive side of things.

For example, I believe there are a lot of great opportunities now for the shrinking number of productive individuals who are willing to get off their butts, be productive, and take action.

For the third year in a row, I was invited to be a judge for Parallel 18; if you haven’t heard of it, it’s a startup accelerator program based in Puerto Rico that provides funding, mentorship and business connections.

I have watched some amazing pitches. For example, one company wants to improve the education system. Another wants to simplify investment due diligence process. Another wants to make lending more accessible and trustworthy to all counter-parties.

Parallel 18 is only one such program; there are similar accelerators around the world looking to support creative, entrepreneurial people.

And that makes right now a really compelling time to start a business.

Millions of people are happy to laze around and cash their free government checks. But that means less competition when starting a business, or seeking investment capital, or trying to acquire new customers.

Finding employees is clearly going to be difficult… but businesses that are lean on employees, and long on automation and value, have a lot of potential to be very successful and receive a lot of support from investors and accelerators.

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What a difference three months makes: on this day in February, a catastrophic 7Y auction was this close to failing, and sparked a violent market selloff first in bonds, and then in stocks, leading to a flood of fears that the Fed had lost control over inflation. Fast forward to today, when moments ago we get the final of the week’s coupon auction results when the Treasury sold $62BN in 7 year paper in what can be best described as a stellar auction.

The high yield of 1.285% was below last month’s 1.306 and the lowest since February; it also stopped through the When Issued 1.291% by 0.6bps, the first stop through since January.

The bid-to-cover of 2.412 was impressive, rising from 2.314 last month, and not only well above the 6-auction average of 2.264 but also the highest since September.

The internals were also solid, with Indirects taking down 59.6%, the highest since January. And with Directs taking down 20.7%, or just above April’s 20.6%, Dealers were left holding 19.7%, the lowest since January.

Overall, this was easily the strongest 7Y auction of 2021, and a far, far cry from the dismal February 7Y auction which sparked so much turmoil in the market.

As we noted over the weekend, positive US data surprises seem to be normalizing (i.e. the Citi US econ surprise index has flatlined) due to a combination of analysts catching up with the prior stronger pace of growth, and also due to some evidence that the rate of change of US growth is peaking out (JPMorgan disagrees).

However as DB’s equity strategist Parag Thatte points out in his latest positioning piece, “US inflation data surprises are at their highest in the 20-year history of the series with the last 10 data points almost ‘off the chart’.”

As DB’s Jim Reid points out, inflation surprises during the Gloval Financial Crisis were sharply negative and didn’t positively overshoot after. During the pandemic we didn’t undershoot and are now overshooting massively.

As the credit strategist continues, “while it is easy to blame transitory factors, these were surely all known about before the last several data prints and could have been factored into forecasts. That they weren’t suggests that the transitory forces are more powerful than economists imagined or that there is more widespread inflation than they previously believed.“

To be sure, all such ‘surprise’ indices always mean revert so the inflation one will as well. However as Reid concludes, “the fact that we’re seeing an overwhelming positive beat on US inflation surprises in recent times must surely reduce the confidence to some degree of those expecting it to be transitory. “