Month: May 2021

When it comes to the autonomous vehicle wars in the U.S., it still looks like reining leader Waymo is setting both the pace of innovation and the tone for safety for the rest of the players in the industry. Elon Musk full self driving .

This week, Waymo took the extremely responsible step of ceasing the use of the term “self-driving” to describe its vehicles. The company said it was doing this “so as not to give drivers a false sense of security in the technology,” according to Chief Safety Officer Mauricio Pena, who wrote an op-ed for CNBC this week.

“At Waymo, where I’m Chief Safety Officer, ensuring that the public has an accurate perception of the technology is a top priority. We’re confident that autonomous driving technology has the potential to save lives—as demonstrated by study after study. But we also know that many people don’t fully understand how ADVs work, and that people fear what they don’t understand,” he wrote.

The op-ed continues:

“Several years ago, we launched a public education campaign aimed at demystifying the technology for the general public, because we’ve seen that the more people learn about it, the more eager they’ll be to embrace it. Through that work, we have witnessed how language shapes people’s perception, and how the words we use to describe technology will ultimately influence how people engage with and use it.”

And finally explains Waymo’s reasoning for replacing the term with “autonomous driving”:

“That’s true of working in any nascent industry, because you’re not just creating the foundational technology that future generations will build on, but you’re also introducing it to people for the first time. That is just as true for building ADVs here at Waymo as it was for me when I worked on innovative rocket launches and commercial space travel.

And it’s a big reason why we decided to drop the term “self-driving” from our lexicon earlier this year, and instead started using the term “autonomous driving,” exclusively. It’s not just a branding exercise, and it’s not just a hypothetical—it’s about limiting confusion to improve safety outcomes.”

“If someone is overly confident in a technology because they misinterpret the words used to describe it, they could unknowingly take risks that jeopardize their own safety and the safety of the people and cars around them,” the op-ed concludes.

Recall, back in early May, we wrote an article about how Tesla had admitted it was “firmly in Level 2” autonomy still, several levels below Waymo. Tesla’s CEO, Elon Musk, has been crowing about Full Self Driving in Tesla vehicles – a feature that neither exists, per what its name claims, nor has been proven to be reliably safe – for years.

Whilst doing that, Tesla has sold billions of dollars in vehicles and taken deposits for years based on the idea that Full Self Driving technology would come to fruition at some point in the future.

But in early May an admission from Tesla seemed to confess what anyone paying attention already knew: there will be no Full Self Driving by the end of 2021. The company “told a California regulator that it may not achieve full self-driving technology by the end of this year,” according to Reuters earlier this month. The memo was originally unearthed by legal website PlainSite. 

“Tesla indicated that Elon is extrapolating on the rates of improvement when speaking about L5 capabilities. Tesla couldn’t say if the rate of improvement would make it to L5 by end of calendar year,” the memo said. 

It continued: “Tesla indicated that they are still firmly in L2. As Tesla is aware, the public’s misunderstanding about the limits of the technology and its misuse can have tragic consequences.”

If that’s the case – and Waymo has done the right thing by speaking out – why not make a similar public statement about Autopilot, or even change the “feature’s” name. 

WTI slipped back below $66 this morning as investors weighed signs of an improving demand outlook in some regions against the prospect of more crude supply flowing from Iran.

“The potential for a return of Iranian oil supply into the market has been keeping oil prices from gaining further,” said ING analyst Warren Patterson.

The swings in crude and product stocks in the last couple of weeks have been noisy thanks to the Colonial Pipeline shutdown. This week we should start to put that behind us, although product stocks may still be impacted.

API

• Crude -439k (-1mm exp)

• Cushing -1.153mm

• Gasoline -1.986mm (-1.1mm exp)

• Distillates -5.137mm (-2mm exp)

DOE

• Crude -1.66mm (-1mm exp)

• Cushing -1.008mm

• Gasoline -1.745mm (-1.1mm exp)

• Distillates -3.013mm (-2mm exp)

Analysts expected inventory draws across the entire complex and last night’s API data confirmed that and the official data just confirmed that further with significant drawdowns in stocks across crude, gasoline, and distillates (7th week in a row)…

Source: Bloomberg

It is also worth noting, as Bloomberg points out that Midwest gasoline stockpiles are of great interest with a big travel weekend ahead starting at the end of the work week. This means more folks getting out of Chicago and Detroit to breathe in the forest air in places like Wisconsin and Upper Michigan for Memorial Day.

Source: Bloomberg

In the mid-March EIA report, Midwest gasoline inventory was at a seasonal low dating more than 21 years, with 45 million barrels on hand. That means PADD 3 gasoline stockpiles have not been this low at this time of year this century.

US crude production remains ‘disciplined’ still despite strong gains in oil prices and rig counts…

Source: Bloomberg

WTI hovered around $65.50 ahead of the print

“In our view, the fundamental situation on the oil market remains balanced,” said Commerzbank analyst Eugen Weinberg, adding that Brent “will make a renewed bid for the $70 per barrel mark in the next few days.”

Alaska’s Great Sitkin volcano erupted on Wednesday, prompting the United States Geological Survey (USGS) to issue a “red alert” for the surrounding area as a column of ash spewed thousands of feet into the atmosphere. 

AVO Great Sitkin RED/WARNING – Explosive eruption began at 21:04 AKDT (5:04 UTC 26 May) and is continuing. https://t.co/8gDGARtWVM

— USGS Volcanoes🌋 (@USGSVolcanoes) May 26, 2021

The Alaska Volcano Observatory (AVO) said the volcano erupted around 21:04 AKDT (5:04 UTC 26 May), resulting in an ash cloud up to 15,000 feet above sea level. 

“Since that explosion, seismicity has decreased and satellite images show that the ash cloud has detached from the vent and is moving towards the east. Additional explosions are possible and the Aviation Color Code remains at RED and the Volcano Alert Level at WARNING,” AVO said. 

Great Sitkin Volcano is a basaltic andesite volcano that resides on the most northern half of Great Sitkin Island and is a part of the Andreanof Islands group in the central Aleutian Islands.

It’s unclear how the eruption may affect or has affected flights around Alaska. Volcanic ash can damage an aircraft’s turbine blades. Planes usually steer clear of ash clouds. 

Volcano activity has picked up this year with places like Iceland or on the island of St. Vincent or Japan’s Sakurajima or Mount Nyiragongo in eastern Cong experiencing eruptions. 

… and the question remains: What is driving increasing volcanic activity? 

By Ven Ram, Bloomberg reporter and Markets Live commentator

The dynamics that spurred Treasury yields higher in the first quarter have paused for now, suggesting that the next wave of selling may have to wait for a rebound in real yields and inflation pricing. Treasury 10-year yields have stalled around 1.60% after inflation expectations moderated, while real rates and term premiums declined, stealing the impetus from bearish expressions on long-dated bonds.

A simulation based on factors such as real rates, inflation expectations and expected economic growth suggests that 10-year real rates and 5y5y swaps need to climb by 30 basis points each from Monday’s close for the key nominal yield to approach 2%.

Real yields, which surged more than 45 basis points in the first quarter, have since retreated. The pace of increase through March — the fastest since 2016 when the Federal Reserve was tightening rates — proved unsustainable, raising the question of whether real rates will climb back into positive territory anytime soon. Remember that the key rate was well above 0% as recently as last year, before the pandemic struck.

Real rates are now near the lowest they have ever been, both in absolute terms and in relation to forecast economic growth. The gap between this year’s forecast GDP growth of 6.50% and the 10-year real rate is about 736 basis points, the widest it’s been in Bloomberg data going back nearly a quarter of a century.

Meanwhile, term premiums have also declined, eroding the compensation needed to adjust for maturity differences and underscoring why yields have retraced.

While expectations for price pressures have moderated, they seem to have the scope to climb at a quicker pace than real rates should realized inflation continue to print higher. The chart below shows the isolated effect of a surge in inflation pricing, holding all other factors constant.

With economists raising their forecasts for inflation each quarter through March next year, markets’ forward pricing may approach 3% in the coming months. Indeed, investors were anticipating inflation above 3% in the run-up to Fed’s taper announcement in May 2013.

While the Fed has made it clear that it will look through one-off and transitory inflationary signals, a print that is considerably higher than what is already penciled in by economists (allowing for base effects and like) would set a cat among the pigeons. That would also spur a divergence among Fed policy makers, with possibly enough breaking ranks to cause concern about the evolving trajectory of inflation.

While policy makers’ current monetary stance and recent comments have put a taper discussion on the back burner, a revival of the debate by the Fed itself may be just the impetus the market needs to send yields higher.

To be sure, 10-year Treasuries were trading at a discount of about 30 basis points on my model as of Monday, suggesting that despite the recent dalliance, the market’s bias is for higher yields. While a retracement toward fair value can’t be ruled out as a tactical play, the strategic direction for yields may be pointing north — should the economic recovery continue apace.

It has been a while since we have seen the heads of all the major Wall Street banks huddled before Congress. A lot has changed since House Financial Services Committee Chair Maxine Waters last dragged them all to Washington: a pandemic has swept across the global economy, trillions of dollars and stimulus and loans have authorized by the federal government, and Citigroup has appointed Jane Fraser to the CEO’s chair – the first time a woman is leading a Wall Street megabank.

Readers can watch it live below starting at 1000ET:

Of course, we have discussed at length why the latest data on bank lending has shown that something is seriously wrong with the US financial system, as deposits have soared during the pandemic, while loan growth has dragged, leaving banks with an excess amount of reserves that are choking the baking system. But these issues can be complicated, which makes it more difficult for lawmakers and their staff to address the issue (for instance, loan demand is nowhere near enough to offset the Fed’s forced deposit creation which incidentally ends up not in the economy but in capital markets, resulting in broad deflation offset by asset price hyperinflation).

It’s much easier to score points by bashing the bankers for being greedy over-paid predator capitalists… than admit “It’s The Fed, Stupid!”

So, the heads of America’s six largest banks are convening (virtually, it should be said) for what’s being billed as an annual series of hearings. Wednesday morning they will face Senate Banking, where Elizabeth Warren is a member, and gravel-voiced midwestern progressive Sherrod Brown serves as chairman.

On Thursday, they will convene again to face off against Waters and other members of the House Financial Services Committee, which includes AOC, Rashida Tlaib and Ayanna Pressley, three of the four members of “the Squad”. Other progressive members include Al Green, who filed articles of impeachment against President Trump before it was cool, and Chicago’s Chuy Garcia.

Judging by their prepared remarks, the CEOs intend to defend Wall Street’s role in the American recovery effort. Bank’s doled out PPP money, while trillions of dollars in stimulus checks landed in customers’ accounts. And while Morgan Stanley’s decision to appoint four white men as possible successors to CEO James Gorman, JP Morgan has positioned two women to take the CEO job once Jamie Dimon finally retires (though that day might still be far off, unless he has another heart attack).

Banks have helped disburse almost $796 billion in loans through the federal ‘PPP’ – or Paycheck Protection Program – as of late May, which helped many small businesses pay employees and cover rent and other expenses.

Fortunately for them, Wall Street has learned how to pay lip service to addressing “pervasive racial inequalities, unequal access to traditional banking products and services and unaddressed systemic risks threatening US financial stability,” staff for Waters wrote in a memo to the committee on Monday. Democrats are expected to press the CEOs about “commitments” to righting “unequal access to traditional banking products and services” while addressing “systemic racism” in access to financial services.

Republicans, meanwhile, are, according to WSJ, expected to ask banks whether they are going too far in their stated support for “stakeholder capitalism” – the notion that companies should operate not just for the benefits of its shareholders, but for other “stakeholders”, like employees, the broader community etc.

In addition to racial equity, the hearings are likely to touch on climate change, sustainable investing and the health of the economy, among other topics.

The hearings follow blockbuster quarterly earnings reports from all the big banks who will be represented.

All six CEOs have submitted prepared testimony, starting with Wells Fargo CEO Charles Scharf, who was present during the last round of Wall Street CEO testimony in his previous job as head of BNY Mellon, the custody bank that won’t be making an appearance this time around. Speaking on behalf of Wells Fargo, which memorably faced issues with a Fed-imposed restriction on asset expansion that complicated the early stages of Wells’ ‘PPP’ program, Scharf said that while his bank’s response wasn’t perfect, it nevertheless managed to offer “unprecedented assistance at a scale and speed that had never been done before,” including waiving fees and deferring payments for 3.7 million consumer and small business accounts.

“We provided more than one million mortgage forbearances and suspended residential property foreclosures and evictions to keep people in their homes. And we processed approximately $80 billion in federal stimulus payments,” Scharf said.

Next up, Goldman CEO David Solomon, who was also present last time around, and will likely be questioned about his bank’s treatment of junior employees, after a handful of desperately overworked analysts went public with their concerns. Solomon’s prepared remarks cut right to the point, asserting that Goldman and its peers “are more able to withstand stress events and are also ultimately more resolvable without threatening the financial system or needing government support, consistent with Dodd-Frank’s resolution plan requirements.” Later, in the “appendix” to Solomon’s testimony, the CEO addresses the results of Goldman’s “One Million Black Women First Round of Capital Investments and Philanthropic Grants.”

Making her first appearance, Citi’s Jane Fraser addressed how Citi has improved its capital base since the financial crisis, allowing it to easily manage the risks associated with the pandemic, while the bank helped millions of customers by offering late-fee relief and other types of assistance. In a section where Fraser addresses the bank’s “priorities going forward,” “building on our record of financial inclusion to support an inclusive recovery” was No. 1. “. At Citi, we have a strong record of breaking down barriers impeding access to financial services and helping direct the flow of capital into communities that have traditionally lacked it,” she said.

JPM’s Jamie Dimon will likely come in for a few “attaboys” from lawmakers after appointing two of the bank’s most-senior female executives to co-manage JPM’s consumer banking operation, a move that will put both of them in the running to succeed Dimon. Moreover, in his testimony, Dimon discussed the bank’s commitment to expanding access to financial services in communities of color. “We opened our first Community Center branch in New York’s Harlem community, and have replicated that model in minority communities around the country, including Chicago, Minneapolis, New Orleans, Dallas, and the Crenshaw neighborhood in Los Angeles, with many more coming in the next year.”

Bank of America CEO Brian Moynihan declared that the 2010s were a “decade of transformation” for Bank of America as t “took significant steps to reduce the scope and complexity of our company, as envisioned in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Finally, we have Morgan Stanley’s James Gorman, who – after a review of the bank’s capital leverage ratios, buybacks and dividend payments – discussed the bank’s “successes and failures” in recruiting a diverse workforce. “I acknowledge that progress in this area has been slow for us – and we can and should do better. The events of 2020 focused all of us in a way we had not been before and this was the ultimate call to action to make meaningful change.”

Will that be enough to stave off a shellacking from Democrats hammering Morgan Stanley for setting up another white man to take over after Gorman? We shall see when the hearing begins at 1000ET. It’s expected to last for hours, before CEOs call it a day, and return to rehash most of the same issues tomorrow with members of the House.

Gamestop is creating a team for a non-fungible token (NFT) platform based on Ethereum. On Tuesday, Redditors found a new portal on the company’s website called “nft.gamestop.com.” Not much is known about the portal, but the title of it reads “Change The Game.”

Scrolling through the portal, one discovers a console that resembles a GameBoy from the 1990s that has three powerful statements:

• Power to the players. 
• Power to the creators. 
• Power to the collectors.

The video game retailer went on to say it’s welcoming “exceptional engineers (solidity, react, python), designers, gamers, marketers, and community leaders” to join its NFT team. 

The announcement comes as NFT mania has likely transformed into the next crypto bubble. Signs of excess have been spotted in NFTs for digital art going for millions of dollars. 

Even Ebay wants to get into the action… 

Details are scant about what Gamestop will conjure up. However, back in April, the company revealed it was seeking a security analyst with a background in blockchain, cryptocurrency, and NFTs.  

Gamestop is the first “meme stock” that Reddit traders steamrolled hedge funds who were heavily short the stock. Shares in the company surged hundreds of percent to nearly $500 on Jan. 28. but have since slumped. In recent sessions, shares have perked up, and as of Wednesday, shares were up more than 12%, trading around $234. 

The portal also shows an Ethereum smart contract address as well.

Data from Ortex shows investors shorting meme stocks, such as GME and AMC, lost $754 million on Tuesday. That number is likely to increase during today’s US cash session. 

All of this comes as Roaring Kitty Capital, LP on WallStreetBets doubled down on his GME shares. 

Presented with little comment…

Another day, another total panic buying rush at the US cash open…

Aside to ask – is this deja vu all over again?

Family and friends of Russian citizen Sofia Sapega – who was detained alongside her boyfriend Roman Protasevich on the Ryanair which was forcibly diverted to Minsk on Sunday – are saying she was simply in the wrong place at the wrong time.

Since the pair’s arrests, Western power have condemned what they called an act of “state piracy” and a “hijacking” of an airliner, with the EU ready to heap more sanctions on the Lukashenko government and with European flights now avoiding Belarusian airspace altogether over safety concerns. The whole bizarre episode appears to be leading toward another major diplomatic “Navalny-style showdown” between the West and Russia and its allies, given especially Putin’s vocal support for embattled Lukashenko over the past months since the disputed election.

According to Reuters, “Sapega is a student at a university in the Lithuanian capital Vilnius. She was flying there on Sunday with Protasevich after their holiday in Greece to defend her master’s thesis ahead of graduation, according to the university.”

Russia’s Foreign Ministry has since confirmed that 23-year old Sapega is a Russian national and is facing charges in Belarus along with her boyfriend “in connection with the suspicion of having committed, between August and September 2020, offences under several articles of the Belarusian Criminal Code,” according to an official statement.

Protasevich was an influential figure in independent and opposition Belarusian media reporting, specifically via a popular Telegram channel, which helped fuel massive anti-Lukashenko protests since his controversial re-election to a sixth term late last summer (which will extend his 27-years in power).

Looks like the #EU is serious about banning Belavia. Flight Minsk to Barcelona took off, circled two hours and returned. Check out the flight path on flight radar. pic.twitter.com/suKfFcMUa9

— Frederik Pleitgen (@fpleitgenCNN) May 26, 2021

Sofia Sapega stands accused of assisting Protasevich in helping to organize protests, but also publishing personal information of law enforcement personnel to the internet, which is a crime in Belarus.

Within a couple days after their detention, videos appeared online of the two “confessing” to a litany of crimes which has outraged the Belarusian opposition as it has the hallmarks of a forced confession, given also it’s expected to come with significant prison sentences. 

Belarus release a video of Roman Protasevich claiming that he is in good health and being treated lawfully. He also acknowledges he was at the protests and is cooperating with the govt.

This has all the hallmarks of a forced confession and I can only imagine how fearful he is. https://t.co/1wIwQsvSJG

— Bianna Golodryga (@biannagolodryga) May 24, 2021

The two are facing charges related to organizing riots which could bring 15 years in prison…

#Belarus @novaya_gazeta reported that Sofia Sapega might be charged under two articles – plotting riots (up to 15 years in prison) and organisation of action that violate public order. “Riots” in Belarus are organised by 26-year old bloggers and 23-year-old students. Interesting pic.twitter.com/d9Eajw2ERP

— Hanna Liubakova (@HannaLiubakova) May 26, 2021

They are expected to be kept in pre-trial detention for up to months, while Belarusian opposition leader Sviatlana Tsikhanouskaya issued a statement through a spokesman from neighboring Lithuania saying of Sapega that “She is guilty of being a friend of Roman. And they forced her to confess to ‘crimes’ she did not commit.”

Various leaders have weighed in on the pair’s fate in particular in the wake of the “confession” videos, with Britain’s Prime Minister Boris Johnson denouncing Belarus: “The video of Roman Protasevich makes for deeply distressing viewing. As a journalist and a passionate believer in freedom of speech I call for his immediate release.” And he added a moment the EU and multiple Western governments are preparing further sanctions: “Belarus’ actions will have consequences.”