Bonds & Bullion Bid, Stocks Skid As Stimmy-less Sentiment Slumps

Bonds & Bullion Bid, Stocks Skid As Stimmy-less Sentiment Slumps

The day started off with an exuberant buying-panic in Small Caps at the US cash open (as the rest of the majors were sold). That lasted around 12 minutes before Small Caps reversed that maniacal spike and everything accelerated into the red and beyond into the European close. A brief bounce ensued, only for that rip to be sold and as the old “WSB” names started to rise, so Small Caps and the rest of the major indices tumbled in the last hour. Nasdaq managed to close green, none of the other majors did with Small Caps the laggards (from up 1% at the open to down 1% at the close)

Amid the lowest volume of the year…

Source: Bloomberg

Sentiment slipped for the first time this year with buying plans crashing. New home sales crashed… and home prices are exploding… and RRP volumes are exploding…

Those old “WSB” short-squeeze names were back today…

Source: Bloomberg

With GME topping $200 once again…

And AMC even more aggressively bid…

The dollar ended slightly lower despite China’s best efforts overnight…

Source: Bloomberg

As China told its banks to buy USD to intervene in the Yuan’s strength…

Source: Bloomberg

Bonds were aggressively bid too – down around 4bps across the curve – helped by a rock solid 2Y auction…

Source: Bloomberg

With 10Y tumbling below 1.60 and accelerated down to critical level near its lowest close in over two months…

Source: Bloomberg

Real yields are continued to revert lower (catching up with Gold’s signal)…

Source: Bloomberg

Gold futures surged back above $1900 – almost back in the green for the year…

Silver rallied back above $28 today…

WTI ended very marginally lower on the day, stalling around the $66.50 level once again ahead of tonight’s inventory data…

Cryptos were mixed today, though generally lower in the majors. Ethereum oscillated around $2600…

Source: Bloomberg

And Bitcoin hovered around $38k after briefly tagging $40k…

Source: Bloomberg

Finally, it is pretty clear that there are some serious issues occurring under the hood of ‘calm’ in these markets as the size of RRPs is exploding in a massive rejection of The Fed’s liquidity spigot

Source: Bloomberg

And, as Curvature notes, “Yesterday, GC averaged at -.0099%, which was the lowest non-quarter-end, non-year-end average EVER. The previous record low was -.0078% on March 19.”

And we all know what “reality” the ‘market’ faces, if The Fed ever stops… (and don’t forget SF Fed’s Daly admitted today that they’re “talking about talking about tapering…”)

Trade accordingly.

Tyler Durden
Tue, 05/25/2021 – 16:01

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Minnesota Threatens To Fine This Engineer for Calling Himself an Engineer


Copy of grand forks

The head of an urban policy nonprofit is suing Minnesota’s engineering licensing board after they threatened him with fines and other sanctions for calling himself an engineer in speeches and articles while having a temporarily expired engineering license.

Charles Marohn, a licensed civil engineer since 2000 and president of the advocacy group Strong Towns, argues that the board is violating his First Amendment rights by policing his description of himself as a professional engineer in connection to his policy advocacy.

The sanctions he’s being threatened with, he contends, are retaliation against Strong Towns’ activism, which is critical of spending more money on large infrastructure projects typically beloved by professional engineers.

The state’s licensing board “is making findings that I have been dishonest and misrepresented myself to the public, that I made false statements. These things are not only unfounded, they are just deeply, deeply damaging,” says Marohn. “I’m not practicing engineering. This board has no authority to regulate what my speech is and what I’m out saying.”

Marohn’s problems began in February 2020. That’s when a South Dakota engineer, David D. Dixon, submitted a complaint to the Minnesota Board of Architecture, Engineering, Land Surveying, Landscape Architecture, Geoscience, and Interior Design (AELSLAGID) after reading an article authored by Marohn that was critical of traffic engineers on Strong Towns’ website.

Marohn’s website biography said that he was a “Professional Engineer (PE) licensed in the state of Minnesota.” According to Dixon’s complaint, he searched Marohn’s name on the AELSLAGID website only to find that his license had expired in June 2018.

“Based on that, I sought to determine whether this reference on [Strong Towns] was an isolated reference, perhaps an oversight, or part of a deliberate effort to mislead the public,” wrote Dixon in his complaint, which notes that Marohn is also described as an engineer in “about the author” page of his February 2020 book and in materials for a 2019 conference at which Marohn was a speaker.

“Mr. Marohn talks about being a policy expert, the type that reads law and ordinance. It is not reasonable to assume that Mr. Marohn was not aware that use of the term Professional Engineer, PE, or other similar representations while not licensed, is a violation of law,” Dixon says in his complaint. “I urge the board to investigate as it sees fit, and to send a clear message that frauds of this sort are not tolerated.”

Marohn received notice of this complaint from AELSLAGID in July 2020, over a month after he’d already renewed his expired license.

Minnesota engineering licenses expire on June 30 of even-numbered years. Licensees are required to proactively renew them.

AELSLAGID sends out courtesy notices reminding people of their need to renew their licenses. Marohn has been a licensed engineer in the state since 2000. In 2016, however, he moved without informing the board, and thus missed the biennial renewal reminder that was sent to his old address in 2018.

Then in June 2020, a Strong Towns co-worker brought it to Marohn’s attention that his license had lapsed. Screenshots of Slack messages that Marohn submitted to AELSLAGID show him reacting with surprise at the news. He renewed it the same day and also paid a late renewal fee of $120. His lawsuit notes that he’d also completed the required continuing education hours during the time his license was expired.

“It’s kind of silly. I don’t go out and practice as an engineer. I’m a writer. I do public speaking, and I do writing. I do advocacy work. I don’t sign plans; I don’t do construction drawings,” Marohn told Reason in July 2020. He said at the time that he didn’t expect the board to sanction him over an obvious bad-faith complaint.

That prediction has turned out to be wrong. In November 2020, AELSLAGID informed Marohn that their investigation had determined that disciplinary action was warranted.

Specifically, the board demanded he pay a $1,500 fine and sign an order admitting he’d violated Minnesota law by using the title of “professional engineer” in his writings and speeches while his license was expired. They also wanted him to admit he’d lied to AELSLAGID when filling out his license renewal application, part of which requires the applicant to certify they haven’t improperly represented themselves as a licensed professional.

Marohn objected to the idea that he’d engaged in any willful deception. In a written response to AELSLAGID, he also said that under his reading of Minnesota law, the restrictions on the use of the title “professional engineer” only applied in circumstances where people were actually trying to practice engineering.

He thus declined to sign off on the board’s particular sanctions.

That led to a March virtual hearing with AELSLAGID’s five-member Complaint Committee. Here too, Marohn says that the primary concerns of the board were about his use of the term engineer in connection to his advocacy work.

One member of the board, he says, expressed concern that his description of himself as an engineer in talks he gave at Google, The American Conservative, and TEDx might make people more likely to listen to his ideas, thus endangering public health and safety.

That notion “is ridiculous because it’s not like I was any less qualified during the gap in my licensure,” says Marohn. “I was just talking; I’m giving a speech.”

Following the hearing—and in an effort to put the whole thing behind him—Marohn told AELSLAGID that he’d agree to a $500 civil fine and would sign a “stipulated order” admitting that he called himself a professional engineer while his license had lapsed.

In exchange, he wanted the board to acknowledge in writing that he’d renewed his license before being made aware of any complaint against him and that they drop their accusation that he’d made “untruthful” and “false” statements.

In April, AELSLAGID’s Complaint Committee declined that settlement. So last week, Marohn sued AELSLAGID in the U.S. District Court for the District of Minnesota arguing the board’s sanctions against him violate the First Amendment’s Free Speech protections.

“The board’s enforcement against [Marohn] raises some serious First Amendment concerns,” says Sam Gedge, an attorney at the Institute for Justice.

The government does have the ability to restrict unlicensed people referring to themselves as professional engineers to prevent fraud, Gedge says. But that would only apply to a very narrow set of circumstances like commercial advertising.

“The board is concerned that this gentleman referred to himself as a professional engineer in books, and speeches and communications like that. In that context, the government has no business policing the truth or falsity of speech,” he tells Reason.

The Institute for Justice has litigated similar cases before. In 2017, it sued Oregon’s engineering board after it fined Beaverton man Mats Järlström for referring to himself as an engineer in letters to the board, despite not having a state engineering license.

“The government licensing boards are the new censors in America. They’re aggressive, and time and time again it becomes clear they just don’t believe the First Amendment applies to them,” he says, adding that AELSLAGID “seems to be in need of suing.”

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Ron Paul: How Texas Killed COVID

Ron Paul: How Texas Killed COVID

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

In March, Governor Greg Abbott announced that Texas would open for business 100 percent without a statewide mask mandate.

The pro-lockdown “experts” were shocked. If a state as big as Texas joined Florida and succeeded in thumbing its nose at “the science” – which told us that for the first time in history healthy people should be forced to stay in their houses and wear oxygen-restricting face masks – then the lockdown narrative would begin falling apart.

President Biden famously attacked the decision as “Neanderthal thinking.” Texas Democratic Party Chairman Gilberto Hinojosa warned that, with this order, Abbott would “kill Texans.” Incoming CDC Director Rochelle Walensky tearfully told us about her feelings of “impending doom.”

When the poster child for Covid lockdowns Dr. Fauci was asked several weeks later why cases and deaths continued to evaporate in Texas, he answered simply, “I’m not sure.” That moment may have been a look at the man behind the proverbial curtain, who projected his power so confidently until confronted with reality.

Now a new study appearing as a National Bureau of Economic Research working paper, highlighted recently in Reason Magazine, has found “no evidence that the reopening affected the rate of new COVID-19 cases in the five-week period following the reopening. …State-level COVID-19 mortality rates were unaffected by the March 10 reopening.”

In other words, not only did the doom and gloom predicted by the lockdown fanatics fail to materialize, but the steady, seasonal downward trend of the virus toward extinction continued regardless of government action. As we have repeated for a year on the Liberty Report, the virus was going to virus regardless of anything we did about it. And Texas proved it.

However, some very important questions remain to be answered as the Covid panic across the United States is finally starting to recede.

First, will anyone be held responsible for the thousands who died because of the prohibition on safe treatments such as hydroxychloroquine and Ivermectin that have since been shown to be effective against Covid-19?

As soon as Donald Trump mentioned that hydroxychloroquine might be effective against the virus, the “experts” circled the wagons. It was banned for use, until it later was quietly un-banned.

The politicization of medicine is anti-science, anti-human, and anti-American. Will those who needlessly died due to this politicization finally get their justice?

Second, though Abbott deserves credit for taking the bold step, shouldn’t he be held accountable for closing the state in the first place?

After all, when someone has been punching you in the face and then they stop, do you thank them for letting up or do you ask why they punched you in the first place? Will all the tyrannical rule-by-decree orders across the United States be stricken from the books? Or will they just be allowed to do this again for any reason they choose?

Third, thanks to Senator Rand Paul, we are now all aware of Dr. Fauci’s role in funding gain-of-function research on viruses in China.

Will we be able to find out exactly why we are being forced to pay for the mad scientist research into how to create more deadly viruses? Can we opt-out of this funding?

Though Greg Abbott deserves much criticism for shutting Texas down, his re-opening decree effectively ended Covid tyranny across the country. We are thankful for that. Now we must resolve to never let this happen again.

Tyler Durden
Tue, 05/25/2021 – 15:41

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The SPAC Bubble Is Bursting: “Dozens” Of Companies Canceling Mergers As PIPE Investors Evaporate

The SPAC Bubble Is Bursting: “Dozens” Of Companies Canceling Mergers As PIPE Investors Evaporate

SPACs have officially fallen out of favor. 

The SPAC bubble burst started with fallen angel Nikola Motors and has since continued, with short sellers and market skeptics unveiling the less than savory elements to numerous names brought public through the merger-style transaction that allows companies to go public quicker, and with less red tape, than the traditional IPO process.

Chamath Palihapitiya, once heralded as the “king of SPACs” is now more likely to be seen as the face of a SPAC bubble that looks as though it is in the process of popping. 

As a result of the bubble bursting, banks are starting to “pass” on funding SPAC transactions. One recent example was Simplifi Holdings, which, when it attempted to go public last month valued at nearly $2 billion, found that bankers, mutual funds and hedge funds were balking at financing the transaction, according to Reuters.

And this is just one of the “dozens” of companies that have canceled or reconsidered due to the changing climate for SPACs. This has been reflected in the Defiance Next Gen SPAC Derived ETF, which is down 28.1% over the last 3 months. 

Investors are now lamenting whether or not SPACs have taken too many companies – specifically pre-revenue companies with little financial prospects – public, too quickly. 

Amir Emami, global co-head of SPAC Coverage at RBC Capital Markets, said: “PIPE investors have really put on the brakes in recent weeks and are focusing on more quality opportunities.”

It is odd to see bankers cool on the deals given how quickly they are generally able to exit from such transactions. PIPE investors can sell shares as little as 30 days after a deal consummates, the report notes.

The number of SPACs has fallen off a cliff: only 30 companies have merged with SPACs since the beginning of April, down from 69 from February to March. 

Latham & Watkins LLP partner Tad Freese said: “Most of the SPAC mergers that are getting announced are trading below $10 a share soon after, so there is a very real possibility that folks will redeem their shares and shoot them down.”

60% of the 146 SPAC mergers that have been announced since the start of the year are now trading below the IPO price of their SPAC, Reuters notes.

Tyler Durden
Tue, 05/25/2021 – 15:21

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Meme Meltup: Traders Stumped As Gamestop, AMC Soar On Massive Volume

Meme Meltup: Traders Stumped As Gamestop, AMC Soar On Massive Volume

Don’t look now but the meme stocks are back.

Having crept higher in recent days, both Gamestop and AMC, the two most popular meme stocks which shook the hedge fund industry in February when several prominent hedge funds suffered massive losses on their shorts, have exploded higher today, with GME up as much as 18%…

… and AMC close behind, up 14%.

The move may be a ramp in sympathy because while GME short interest is a pale shadow of its former glorious self…

… AMC’s short interest has soared back to all time highs.

Whatever the reason behind the buying frenzy, volumes are massive: more than 123 million shares of AMC had changed hands by 2:35 p.m. in New York, making it the second most traded stock with a value greater than $1; 8 million shares of GME had traded, more than double what’s been seen over the past 10 sessions.

Helping the spike is the resurgence of positive mentions on WallStreetBets of both GME and AMC, which are the 1st and 3rd most discussed stocks today.

Meanwhile, Bloomberg notes that retail investors on social media platforms like Twitter and Stocktwits extended intraday rallies in mid-afternoon trading on Tuesday as volumes accelerated.  AMC has continued to rally as hashtags like #NOTAPENNY trended on Twitter and the company was the most mentioned on Stocktwits.

The surge in memo stocks has helped push the original WSB “short-squeeze” basket to the highest level since early April…

… while a basket of the 37 so-called meme stocks tracked by Bloomberg jumped 5.7% to trade above its 50-day moving average for the first time since March. Other stocks to rally in afternoon trading include Koss +11%, Naked Brand +5.6%, Express +4.3%, Sundial Growers +4.2%.

While there is no clear catalyst driving today’s melt up, there have been some whispers that with Amazon buying the MGM portfolio and moving into videogaming, it may seek to acquire a new brick and mortar chain to compliment its Whole Foods expansion.

Should the ramp continue, and if we are indeed set for a repeat of the torrid February meme meltup, expect a vicious spike in the illiquid overnight session where the bulk of the buying was concentrated during the epic late January/early February meme meltup, especially if one or more hedge funds are again caught short and are forced to cover.

Tyler Durden
Tue, 05/25/2021 – 15:07

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Awkward Exchange: Netanyahu Trashes US Nuclear Talks With Iran In Front Of Blinken

Awkward Exchange: Netanyahu Trashes US Nuclear Talks With Iran In Front Of Blinken

Secretary of State Antony Blinken’s Mideast trip where he first met with Israeli Prime Minister Benjamin Netanyahu in Jerusalem on Tuesday was supposed to focus on maintaining the Israel-Gaza truce and finding a lasting solution toward preventing a future flair up of violence. 

However, an emboldened Netanyahu bluntly shared his thoughts on the impending restoration of the Iran nuclear deal while standing next to Blinken during the press conference that followed their meeting. As expected Netanyahu urged the US to stay away from the deal, forcing Blinken to quickly contradict the Israeli leader, leading to an awkward exchange among the close allies. It took a mere 90 seconds for Netanyahu to run through a few vague commitments related to the Gaza ceasefire before he turned to trashing the JCPOA nuclear deal as leaving the Jewish state open to possible annihilation by Iranian nukes…

“I can tell you that I hope that the United States will not go back to the old JCPOA because we believe that that deal paves the way for Iran to have an arsenal of nuclear weapons with international legitimacy,” Netanyahu asserted.

“We also reiterated that whatever happens, Israel will always reserve the right to defend itself against a regime committed to our destruction, committed to getting the weapons of mass destruction for that end,” the Israeli prime minister added. 

On the eve before meeting with Blinken, Netanyahu had told a meeting with top Mossad officers that he won’t hesitate to take “courageous, independent” action should Israel assess that Iran is close to getting the bomb.

The Times of Israel details:

Speaking to Mossad officers this evening at an awards ceremony just hours before US Secretary of State Antony Blinken is set to arrive in the region for talks, Prime Minister Benjamin Netanyahu suggests Israel may take an “independent” tack on Iran.

“I appreciate our friend the United States very much. It has stood by us for many years,” Netanyahu says. “That’s a vital part of our national security.”

“But,” he adds, “there could come a situation where our principal goal — to ensure the ayatollahs don’t end the millennia-long existence of the Jewish people — demands that we make courageous and independent decisions. The State of Israel won’t allow Iran to acquire nuclear weapons.”

However, Blinken confirmed the US is still moving ahead undeterred with attempts to restore the nuclear deal with Iran, at a moment the fifth and final round of talks in Vienna progress this week, which resumed Tuesday.

Blinken said: “We’ll continue to strengthen all aspects of our longstanding partnership. And that includes consulting closely with Israel, as we did today, on the ongoing negotiations in Vienna around a potential return to the Iran nuclear agreement, at the same time as we continue to work together to counter Iran’s destabilizing actions in the region.”

Blinken’s itinerary which began Tuesday will not only include Jerusalem, but also Ramallah, Cairo and Amman – and through Thursday he plans to hold additional meetings with Palestinian Authority President Mahmoud Abbas, as well as Jordan’s King Abdullah and Egyptian President Abdel Fattah Al-Sisi. 

Tyler Durden
Tue, 05/25/2021 – 14:44

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Biden’s Jobs Plan: How Some Jobs Destroy Wealth

Biden’s Jobs Plan: How Some Jobs Destroy Wealth

Authored by Gary Galles via The Mises Institute,

It seems that every time something adverse happens in the labor market, it restarts the partisan battle between those currently in and out of power as to who is a better steward of the economy.

That was illustrated by the Bureau of Labor Statistics’s (BLS) release of the job numbers for April, which made headlines when job growth, which was expected to surge, came in “unexpectedly” low. The 266,000 jobs created were only a quarter of some forecasts, which topped 1 million. Further, March job creation was also revised down by 146,000. And unemployment ticked up for the first time since the lockdown, despite a reportedly massive shortage of workers, as illustrated by the 7.4 million unfilled job openings reported for February.

The Biden administration, put on its heels by the poor results and the finger-pointing at its policies that followed (particularly the $300 weekly unemployment bonus), insisted the economy is improving, and tried to claim credit for it (even though the economy was recovering far faster than anticipated before he took office) but that the magnitude of the problems faced means that still more government aid is necessary, almost as if they are trying to introduce quadrillion as a measure in common use when talking about deficits and debt, rather than trillion.

This battle, like many before, include skirmishes about a multitude of measurement issues—whether employment or unemployment measures are more accurate, which unemployment measure is the best, reasons for changes in labor force participation, part-time versus full-time jobs, discouraged workers, how many officially unemployed workers are really gaming the system, seasonal adjustments, and more. Other discussions include whether government programs create jobs or just move them, given that the resources must come from elsewhere, whether that transfer produces increased or decreased value, etc.

However, the discussion generally overlooks a further factor. Many of the jobs created directly or indirectly by government policies impose costs on society rather than producing benefits. Such job creation worsens rather than improves Americans’ well-being.

The most obvious illustrations come from the vast (and getting vaster) crazy-quilt of federal executive agencies, mandates, regulations, czars, etc. Peaceful wealth creation arises from voluntary agreements among people, but the primary activity of the regulatory state is often to interfere with mutually productive jobs, undermining social coordination and destroying wealth. Imposing added constraints on voluntary productive arrangements does create some jobs, but that acts as a massive regulatory tax on jobs that benefit other people.

Professors Susan Dudley and Melinda Warren have studied federal regulatory agencies that explicitly restrict private sector transactions. They found 277,000 such regulators in 2015 (substantially larger than General Motors’ worldwide workforce) and an eighteenfold increase in those agencies’ inflation-adjusted budgets since 1960, to over $57 billion (in 2009 dollars).

Government’s forcible interventions also create private sector jobs to comply with its expanding range of dictation. For example, many human resources and healthcare industry jobs were created to comply with Obamacare. But for ill-advised programs and restrictions, those jobs entail costs rather than benefits for society.

Government’s increasing redistributive power over every wallet also means more lobbyists are hired to help special interests benefit at others’ expense. That, in turn, pushes others to hire more lobbyists to minimize the extent of robbery they will be forced to bear. The expanded fight to control federal government theft creates influence industry jobs, which have dramatically stimulated the economy in Washington, DC, but which produces a negative-sum game that destroys wealth for people everywhere else.

Similarly, when laws or rules of questionable constitutionality or legality are promulgated, it increases the number of lawyers and legal resources government employs. It also increases the number employed by those who would be abused. Such opposition can be one of the most valuable investments for Americans in stopping such inroads on people’s rights, but even fighting them to a standstill leaves Americans no better off than if those overstepping initiatives had not been advanced in the first place.

While the battle over President Biden’s job creation underachievement continues, we should remember that in one area, he clearly aims to overachieve—creating jobs in government (as well as because of government) that harm Americans’ ability to mutually benefit one another. Such job creation may boost the employment numbers Biden desires, but they block rather than boost our well-being.

Tyler Durden
Tue, 05/25/2021 – 14:21

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US Department of Commerce Head Announces Chip Funding Could Result In Ten New Plants 

US Department of Commerce Head Announces Chip Funding Could Result In Ten New Plants 

At an event outside a US Micron Technology Inc chip factory on Monday, Commerce Secretary Gina Raimondo told an audience that a proposed bill on Capitol Hill for $52 billion could bolster domestic semiconductor manufacturing by funding seven to 10 new US factories, according to Reuters.

Raimondo told the audience in a tented event outside of Micron’s Manassas, Virginia, chip factory that she expects the $52 billion proposal to enhance US competitiveness with China would generate “$150 billion-plus” in investment for chip manufacturing and research from state and federal governments and private-sector firms. 

“We just need the federal money … to unlock private capital,” she said, adding, “it could be seven, could be eight, could be nine, could be 10 new factories in America by the time we’re done.” 

Raimondo said states would compete for federal funding for new chip factories. 

Virginia Senator Mark Warner also spoke at the event, who reiterated federal funding could bolster new domestic semiconductor plants to “seven to 10.” 

Warner admits the plan isn’t going to “solve the domestic semiconductor shortage overnight.” He said, “it will take years for the Commerce Department to make these investments.”

Last Tuesday, Senate Majority Leader Chuck Schumer called the plan “a historical and immediate infusion of federal money” to restore chip-making in the US critical to the military, automobiles, farm equipment, and electronics. 

“This legislation will allow the United States to out-compete countries like China in critical technologies like semiconductors, create good-paying American jobs and help improve our country’s economic and national security,” Schumer said. 

This all comes as chip shortages enter the “danger zone” as semiconductor lead times reached new highs, indicating that shortages of these critical components intensify. 

Source: Bloomberg

Chip shortages could result in global automakers losing upwards of $110 billion in sales this year. Ford Motor Co., General Motors Co., and other vehicle makers are idling plants as critical tiny chips cause supply chain bottlenecks. 

Industry insiders are warning the shortage may last for years. 

Intel’s CEO Pat Gelsinger has been the latest in a chorus of industry voices to warn about the ongoing semiconductor shortage that will last for a “couple of years.”

Gelsinger said US dominance in the chip industry had dropped so much that only 12% of the world’s semiconductor manufacturing is made in the US, down from 37% about 25 years ago.

“And anybody who looks at supply chain says, ‘That’s a problem.’ This is a big, critical industry and we want more of it on American soil: the jobs that we want in America, the control of our long-term technology future,” he said.

America squandered its share of semiconductor production over the last three decades by offshoring the manufacturing sector to Asia, which has resulted in unprecedented bottlenecks in supply chains that may last for years.

Tyler Durden
Tue, 05/25/2021 – 14:10

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“RRP Explosion”: Fed Reverse Repo Soars To Third Highest With “Incredible Amount Of Cash”

“RRP Explosion”: Fed Reverse Repo Soars To Third Highest With “Incredible Amount Of Cash”

Ahead of today’s 1:15pm overnight Reverse Repo deadline we asked (for the second day in a row) if today was the day the repo market finally cracks, pushing the amount of reserves parked at the Fed to a new record above $500 billion.

And for the second day in a row, we were off, but we are getting warmed by the day: on Tuesday, the Fed revealed that the amount of overnight reserves parked at the Fed rose by another $38BN to $433BN (with 48 counteparties, down from 54 yesterday) from $394.9BN on Monday, which was the 3rd highest in history, up a whopping $190 billion in one week and the highest non-quarter end reverse repo usage ever!

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 HighsRepo 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
  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.

As for the immediate market implications they are even more ominous: either the Fed will have to hike the IOER 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…

… and balking at even a penny of additional liquidity. How the Fed will continue to monetize debt then, when the repo system is now out of collateral, is anyone’s guess.

Tyler Durden
Tue, 05/25/2021 – 13:41

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As Anger Toward Belarus Mounts, Recall The 2013 Forced Landing Of Bolivia’s Plane To Find Snowden

As Anger Toward Belarus Mounts, Recall The 2013 Forced Landing Of Bolivia’s Plane To Find Snowden

Authored by Glenn Greenwald via Substack,

What Belarus did, while illegal, is not unprecedented. The dangerous tactic was pioneered by the same U.S. and E.U. officials now righteously condemning it…

Bolivian President Evo Morales holds a press conference at the Vienna International Airport on July 3, 2013, angrily denying any wrongdoing on Wednesday after his plane was diverted to Vienna over suspicion fugitive US intelligence leaker Edward Snowden was on board. (Photo: Patrick Domingo/AFP via Getty Images)

U.S. and E.U. governments are expressing outrage today over the forced landing by Belarus of a passenger jet flying over its airspace on its way to Lithuania. The Ryanair commercial jet, which took off from Athens and was carrying 171 passengers, was just a few miles from the Lithuanian border when a Belarusian MiG-29 fighter jet ordered the plane to make a U-turn and land in Minsk, the nation’s capital.

On board that Ryanair flight was a leading Belarusian opposition figure, 26-year-old Roman Protasevich, who, fearing arrest, had fled his country in 2019 to live in exile in neighboring Lithuania. The opposition figure had traveled to Athens to attend a conference on economics with Belarus’ primary opposition leader Svetlana Tikhanovskaya and was attempting to return home to Lithuania when the plane was forcibly diverted.

Protasevich, when he was teenager, became a dissident opposed to Belarus’ long-time authoritarian leader Aleksandr Lukashenko, and has only intensified his opposition in recent years. When Lukashenko last year was “re-elected” to his sixth term as president in a sham election, the largest and most sustained anti-Lukashenko protests in years erupted. Protasevich, even while in exile, was a leading oppositional voice, using an anti-Lukashenko channel on Telegram — one of the few remaining outlets dissidents have — to voice criticisms of the regime. For those activities, he was formally charged with various national security crimes, and then, last November, was placed on the official “terrorist list” by Belarus’ intelligence service (still called the “KGB” from its days as a Soviet republic).

Lukashenko’s own press service said the fighter jet was deployed on orders of the leader himself, telling the Ryanair pilot that they believed there was a bomb or other threat to the plane on board. When the plane landed in Minsk, an hours-long search was conducted and found no bomb or any other instrument that could endanger the plane’s safety, and the plane was then permitted to take off and land thirty minutes later at its intended destination in Lithuania. But two passengers were missing. Protasevich was quickly detained after the plane was forced to land in Minsk and is now in a Belarusian jail, where he faces a possible death sentence as a “terrorist” and/or a lengthy prison term for his alleged national security crimes. His girlfriend, traveling with him, was also detained despite facing no charges. Passengers on the flight say Protasevich began panicking when the pilot announced that the plane would land in Minsk, knowing that his fate was sealed and telling other passengers that he faces a death sentence.

Anger over this incident from American and European governments came swiftly and vehemently. “We strongly condemn the Lukashenko regime’s brazen and shocking act to divert a commercial flight and arrest a journalist,” U.S. Secretary of State Antony Blinken posted on Twitter on Sunday night, adding that U.S. officials “demand an international investigation and are coordinating with our partners on next steps.”

Because the E.U. includes as member states both the departing country of the flight (Greece) and its intended destination (Lithuania), and because Ryanair is based in another E.U. country (Ireland), its officials are expressing similar condemnations. EU Commission head Ursula von der Leyen denounced the forced landing as “outrageous and illegal behavior” and warned it “will have consequences”. The leaders of Lithuania and Ireland demanded serious retaliation and sanctions. It is unclear what retaliatory options are available given the strong international sanctions regime already imposed on Lukashenko and his allies.

There is little doubt that the forced landing of this plane by Belarus, with the clear intention to arrest Protasevich, is illegal under numerous conventions and treaties governing air space. Any forced landing of a jet carries dangers, and safe international air travel would be impossible if countries could force planes flying with permission over their air space to land in order to seize passengers who might be on board. This act by Belarus merits all the condemnation it is receiving.

Yet news accounts in the West which are depicting this incident as some sort of unprecedented assault on legal conventions governing air travel and basic decency observed by law-abiding nations are whitewashing history. Attempts from U.S. officials such as Blinken and E.U. bureaucrats in Brussels to cast the Belarusians’ behavior as some sort of rogue deviation unthinkable for any law-respecting democracy are particularly galling and deceitful.

*  *  *

In 2013, the U.S. and key E.U. states pioneered the tactic just used by Lukashenko. They did so as part of a failed scheme to detain and arrest the NSA whistleblower Edward Snowden. That incident at the time caused global shock and outrage precisely because, eight years ago, it was truly an unprecedented assault on the values and conventions they are now invoking to condemn Belarus.

In July of that year, the democratically elected President of Bolivia, Evo Morales, had traveled to Russia for a routine international conference attended by countries which export natural gas. At the time of Morales’ trip, Edward Snowden was in the middle of a bizarre five-week ordeal where he was stranded in the international transit zone of Sheremetyevo Airport in Moscow, unable to board a flight to leave Russia or exit the airport to enter Russia.

On June 23, Hong Kong officials rejected a demand from the U.S. Government that they arrest Snowden and hand him over to the U.S. Hong Kong was the city Snowden chose to meet the two journalists he had selected (one of whom was me) because of what he regarded as the city’s noble history of fighting against repression and for independence and free expression. When announcing their refusal to hand over Snowden, Hong Kong officials issued a remarkably defiant, even mocking statement explaining that Snowden had been permitted to leave Hong Kong “on his own accord.” That statement also accused the U.S. of having issued a legally improper and inaccurate extradition demand which they were duty-bound to reject, and then pointedly noted that the real crime requiring investigation was U.S. spying on the populations of the rest of the world.

Snowden thus left Hong Kong that day with the intent to fly to Moscow, then immediately board a flight to Cuba, and then proceed to his ultimate destination in a Latin American country — Bolivia or Ecuador — in order to seek asylum there. But even after then-President Barack Obama denied that the U.S. Government would be “wheeling and dealing” in order to get Snowden into U.S. custody — “I’m not going to be scrambling jets to get a 29-year-old hacker,” he dismissively claimed during a June press conference — the U.S. Government was, in reality, doing everything in its power to prevent Snowden from evading the clutches of the U.S. Government.

Led by then-Vice President Joe Biden, U.S. officials warned every country in both Europe and South America said to be considering shelter for Snowden of grave consequences should they offer asylum to the whistleblower. Threats to Havana caused the Cuban government to rescind its commitment of safe passage they had issued to Snowden’s lawyer. Under Biden’s pressure, Ecuador also reversed itself by proclaiming the safe passage document issued to Snowden was a mistake.

And on the day that Snowden had left Hong Kong, the U.S. State Department unilaterally cancelled his passport, which is why, upon landing in Moscow, he was barred from boarding his next international flight, destined for Havana. With the Russian government unable to allow him to board a flight due to his invalidated passport and with Snowden’s asylum requests pending both with Russia and close to two dozen other states, he was forced to remain in the airport until August 1, when Moscow finally granted him temporary asylum. He has lived there ever since. This has always been a staggering irony of the Snowden story: the primary attack on him by U.S. officials to impugn his motives and patriotism is that he lives in Russia and thus likely cooperated with Russian authorities (a claim for which no evidence has ever been presented), when the reality is that Snowden would have left Russia eight years ago after a 30-minute stay in its airport had U.S. officials not used a series of maneuvers that barred him from leaving.

(Obama’s claim to not care much about Snowden was issued at roughly the same time that the U.S. and U.K. governments were engaged in other extreme acts, including sending law enforcement agents into The Guardian‘s London newsroom to force them to physically destroy their computers used to store their copy of the Snowden archive, as well as detaining my husband, David Miranda, under a terrorism law at Heathrow Airport, with the advanced knowledge of the Obama administration).

While in Moscow, President Morales — on July 1, the day before he was scheduled to return to Bolivia — gave an interview to a local Russian outlet in which he said Bolivia would be open to the possibility of granting asylum to Snowden. The next day, Morales boarded Bolivia’s presidential jet to fly back to La Paz as scheduled, with a flight plan that including flying over several E.U. member states — including Austria, France, Spain, Italy and Portugal, as well as Poland and the Czech Republic — with a stop to refuel in Spain’s Canary Islands.

The Bolivian plane flew through Poland and the Czech Republic without incident. But flight records show that while flying over Austria toward France the plane suddenly took a sharp turn to the east, back to the Austrian capital of Vienna, where it made an unscheduled landing. Morales and his entourage were stranded there for twelve hours before re-boarding the plane and flying back to Bolivia.

Bolivian officials immediately announced that in mid-flight, they were told by France, Spain and Italy that their permission to fly over those countries’ air space had been rescinded. Without enough fuel to fly an alternative route, the Bolivian pilot was forced to make a U-turn and land in Vienna. Bolivian officials were told that the reason for the mid-air refusal of these E.U. countries to allow use of their airspace was because of assurances they were given by an unspecified foreign government that Snowden was on the plane with Morales, and that he was traveling because Bolivia had granted him asylum.

After Morales’ plane was forced to land at the Vienna airport, Austrian officials quickly announced that they had searched the plane and determined that Snowden was not on it. While Bolivia denied that they consented to any such search of the presidential plane, Bolivian officials angrily mocked the notion that Snowden would be secretly smuggled by Morales from Russia to Bolivia. The whole time this was happening, Snowden was in Moscow. Needless to say, had Snowden been on Morales’ plane that was forced to land in Vienna, Austrian officials would have instantly detained him and turned him over to the U.S., which had by then issued an international arrest warrant. The only reason Snowden did not suffer the same fate that day as the one Protasevich suffered on Sunday is because he happened not to be on the targeted plane that was forced to make an unscheduled landing in Vienna.

The international outrage toward the E.U. and U.S. over the forced downing of the Bolivian presidential plane poured forth just as swiftly and intensely as the outrage now coming from those states to Belarus. Bolivia’s U.N. Ambassador called it an attempted “kidnapping” — exactly the term which the states he so accused are now using for Belarus. Brazil’s then-President Dilma Rousseff expressed “outrage and condemnation.” Then-Argentine President Cristina Kirchner described the downing of Morales’ plane as the “vestiges of a colonialism that we thought were long over,” adding that it “constitutes not only the humiliation of a sister nation but of all South America.” Even the U.S.-dominated Organization of American States expressed its “deep displeasure with the decision of the aviation authorities of several European countries that denied the use of airspace,” adding that “nothing justifies an act of such lack of respect for the highest authority of a country.”

As the controversy exploded, the key E.U. states tried at first to falsely deny that they played any role in the incident, insisting that they had not closed their airspace to Bolivia’s plane. France had quickly claimed that while it had originally denied use of its airspace to the Bolivian plane while in mid-air, then-President Francois Hollande reversed that decision after he learned Morales was on board. Eventually, though, the French fully admitted the truth: “France has apologised to Bolivia after Paris admitted barring the Bolivian president’s plane from entering French air space because of rumors Edward Snowden was on board.”

Meanwhile, Spain also ended up apologizing to Bolivia. Its then-Foreign Minister cryptically admitted: “They told us they were sure… that he was on board.” Though the Spanish official refused to specify who the “they” was — as if there were any doubts — he acknowledged that the assurances they got that Snowden was on board Morales’ plane was the only reason they took the actions they did to force the plane of the Bolivian leader to land. “The reaction of all the European countries that took measures – whether right or wrong – was because of the information that had been passed on. I couldn’t check if it was true or not at that moment because it was necessary to act straight away,” he said. While denying Spanish authorities had fully “closed” its airspace to Morales, they acknowledged what they called “delays” in approving mid-flight air space rights forced Morales to land in Austria and apologized for this having been handled “inappropriately” by Madrid.

BBC, July 5, 2013

Along with numerous other countries, Bolivia had no doubt about who it was who told all these countries, falsely, that they were certain Snowden was on Morales’ plane and thus demanded it be forced to land. Its defense minister, who was on the plane, left no doubt on this question: “This is a hostile act by the United States State Department which has used various European governments.” The Bolivian foreign minister said that these countries, at the behest of the Obama administration, conspired to “put at risk the life of the president.”

Given that it was only the U.S. which was so desperate to get their hands on Snowden — they had already used Vice President Biden to lead a highly coercive effort to threaten countries with punishment if they gave him asylum — few doubted where this false intelligence originated and who was behind the unprecedented act of forcing a presidential plane to land. Indeed, all of this was so glaringly obvious that not even the U.S. government was willing to deny it.

The duty to answer international questions about this incident was left to the spokesperson for the Obama State Department. At the time, that position was occupied by Jen Psaki, now the Biden White House Press Secretary. As he so often does, the Associated Press’s State Department reporter Matt Lee led the way in relentlessly pressing Psaki, demanding answers to what role the U.S. played in this incident. As she so often does, Psaki did everything possible to refuse even minimal transparency — neither admitting nor denying that the U.S. was behind all of this — yet she nonetheless made critical concessions at the July 3 State Department Press Briefing:

QUESTION: Did the U.S. have any role in encouraging Western European countries to block the flight of the Bolivian President yesterday? Was there any communication between the U.S. and those countries in the affair?

MS. PSAKI: Well, as you know because we’ve talked about it quite a bit in here, the U.S. has been in touch – the United States, I should say, officials – have been in touch with a broad range of countries over the course of the last 10 days. And we haven’t – I haven’t listed those countries; I’m certainly not going to do that today.

Our position on Mr. Snowden has also been crystal clear in terms of what we want to happen, and that message has been communicated both publicly and privately in a range of these conversations we’ve had with countries. And let me just repeat: He’s been accused of leaking classified information. He’s been charged with three felony accounts and should be returned to the United States. I don’t know that any country doesn’t think that that is what the United States would like to happen. . . .

QUESTION: There’s been a great deal of criticism though from Latin American leaders about the decision, not least because Snowden doesn’t appear to have been on board. You don’t sound like you’re denying that there were conversations about this. I mean, they – a number of Latin American leaders today have specifically criticized the U.S. for intervening in a diplomatic flight. Are you – am I right in understanding you’re not denying there were conversations about that?

MS. PSAKI: I’m not going to get into diplomatic conversations that happened over the past 10 days and which countries they were with, but I would point you to the countries that you’re referring to and ask you to ask them about decisions that were made.

QUESTION: But Jen, were you in communication with those countries or alerted to the fact that they would be either – well, not allowing a certain plane to land – the President’s plane?

MS. PSAKI: We have been in contact with a range of countries across the world who had any chance of having Mr. Snowden land or even transit through their countries, but I’m not going to outline when those were or what those countries have been.

QUESTION: Jen —

QUESTION: Why isn’t it unseemly for any country to essentially deny a head of state safe passage through its airspace? Why – regardless of whether Snowden was on that plane, why isn’t that in and of itself patently offensive?

MS. PSAKI: Well, Roz, I would point you to those specific countries to answer that question.

QUESTION: But if the – if a similar situation were to happen involving Air Force One, it would be an international incident.

MS. PSAKI: I’m not getting into a hypothetical. That’s not something that is currently happening that we’re currently discussing. . . .

QUESTION: Can you say whether the United States or whether you are aware that the U.S. Government ever at some point had any information that Snowden might be on this plane?

MS. PSAKI: I’m not aware of – I’m not aware of, but not something I would get into even if I did know. . . .

QUESTION: At the airport, the Austrian authorities searched the plane of Morales. Did the U.S. ask for that?

MS. PSAKI: Again, we – I would point you to all of these individual countries to describe to you what happened and why any various decisions were made.

QUESTION: Did you consult with Austrian authorities when they let the plane touch down, when they let plane go on the ground?

MS. PSAKI: I think my last answer answered that question.

That exchange led to headlines confirming what most had already strongly suspected: “US admits contact with other countries over potential Snowden flights.” As Psaki put it, even while refusing to admit that the U.S. was behind the downing of Morales’ plane: “I don’t know that any country doesn’t think that that is what the United States would like to happen.”

Illustrating how little the U.S. cares about even pretending to abide by the standards it imposes on others, the Biden administration on Monday sent out Psaki herself to condemn Belarus’ conduct as “a shocking act” and “a brazen affront to international freedom and peace and security by the regime.” It would not even occur to Biden officials — just for the sake of appearances if nothing else — to try to find someone to do this other than the same person who, in 2013, obfuscated and defended the actions of the U.S. and E.U. in doing the same thing to Bolivia’s presidential plane. U.S. officials simply do not believe that they are bound by the same standards to which its adversaries must be subjected.

None of what happened with this Morales incident has any bearing on the justifiability of what Belarus did on Sunday. That the U.S. and its E.U. allies committed a dangerous international crime in 2013 does not mitigate the criminal nature of similar actions by Belarus or any other country eight years later. The dangers of forcing down airplanes in order to arrest someone who is suspected to be on that plane are manifest. The danger increases, not decreases, as more countries do it.

But no journalist, especially Western ones, should be publishing articles or broadcasting stories falsely depicting Sunday’s incident as an unprecedented assault that could be perpetrated only by a Russian-allied autocrat. The tactic was pioneered by the very countries who today are most vocally condemning what happened. Any reporting of this story that excludes this vital history and context in favor of a false narrative of this being “unprecedented” — as is true of the vast majority of Western media reports about what Belarus did — does a grave disservice to both journalism and the truth. If it is outrageously dangerous and criminal to force the downing of a plane to arrest the passenger Roman Protasevich, then it must be equally dangerous and criminal to do the same in an attempt to arrest suspected passenger Edward Snowden.

Indeed, the only two differences between these situations that one can locate are factors against the Western nations responsible for the downing of Morales’ plane. Unlike what Belarus did, the U.S. and its European allies obviously had no confirmation of Snowden’s presence on the plane. They forced it to land based on a guess, on rumor, on speculation, which turned out to be utterly false. The second difference is that there are obviously additional international and diplomatic implications from forcing the plane of a democratically elected president to land as opposed to a standard passenger jet: that is, at the very least, a profound attack on the sovereignty of that country. Again, there are no valid justifications for what Belarus did, but to the extent one wants to distinguish its actions from what US/EU nations did in 2013, those are the only identifiable differences.

The Washington Post, July 3, 2013

The blatant double standards the U.S. and Europe have endlessly tried to impose upon the world — whereby they are freely permitted to do exactly what they condemn when done by others — is not just a matter of standard lawlessness and hypocrisy. While there was extensive coverage in the Western press on the downing of Morales’ plane, there was not even a fraction of the media indignation expressed over the actions by their own governments as they are now conveying when the same is done by Belarus. In Western media discourse, only Bad Countries are capable of bad acts; the U.S. and its allies are capable, at worst, only of well-intentioned mistakes. Thus do the exact same actions by each side receive radically different narrative treatment from the Western press corps.

When the U.S. media helps to perpetuate this narrative, it deceives and misleads the audience they purportedly inform by concealing the bad acts of the U.S. and implying if not stating that such acts are the sole province of the Bad Countries who are adverse to the U.S. Doing so both enables rogue nation behavior by Western powers and implants jingoistic propaganda. It is hard to imagine a case where this dynamic is more vividly present than this outpouring of outrage at Belarus for doing exactly that which the U.S. and Europe did to Bolivia in 2013.

Tyler Durden
Tue, 05/25/2021 – 13:40

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