Month: June 2021

For the first time since April 2020, US Manufacturers new orders fell in April. The 0.6% MoM drop was triple the expected 0.2% MoM drop.

Source: Bloomberg

For context, here is inflation ‘surprises’ versus production ‘surprises’…

Source: Bloomberg

Stagflation anyone? What are you going to do Mr.Powell?

In recent weeks we have been inundated with an idiotic narrative that “struggling” women are being kept out of the labor force due to lack of childcare. This narrative, which has appeared in tabloids such as Business Insider (“The April jobs report shows women are still struggling“) has been sparked by similarly idiotic statement by some of the most clueless Fed members, such as Neel Kashkari, whose quote here may explain where the confusion comes from:

• KASHKARI: CHILDCARE ISSUES STILL KEY TO RESTORING ECONOMY

All of this, of course, is just to perpetuate the lie that there are other major factors at work besides the generous unemployment benefits that are keeping most Americans out of the labor force (spoiler alert: there aren’t – as long as Americans can collect hundreds of dollars every month for doing nothing, they will do just that and will not work).

To be sure, there was one – just one – data point that gave some validity to this claim, and it had to do with the composition of the April jobs report, which saw all the (modest) job gains go to men while women actually lost jobs.

There is just one problem with every such narrative that uses only one data point as justification: the next data point could easily crush it.

And that’s precisely what happened today, because buried inside the jobs report was the breakdown in job gains between men and women and… well, instead of talking about it, here it is for May: it’s self explanatory.

As the chart above shows, while women did indeed lose 8K jobs in April, they more than made up for its in April when they gained 398K jobs. At the same time Men gained 336K jobs in April and just 45K in May: tough to get the “childcare crisis” narrative in here. In other words, in the past two months, women have gained 390K jobs, while men have gained 381K. Oops.

And just to complete the picture – something the Biden admin propaganda refuses to do – here are the job gains by men and women over the past 12 months.

Some more cumulative job gains by sex, first since the start of the year:

• men: +581K
• women: +1,207K

And here is the data since the start of the pandemic.

The numbers:

• Women have lost 3.3 million jobs since February 2020
• Men have lost 3.8 million jobs since February 2020

With that we can officially discard the “women can’t work due to XXX” narrative, while leaves us with just the right answer: massive welfare handouts from Uncle Biden which has broken the job market, putting countless small businesses at risk and sparking the next crisis which will take place roughly around the time emergency benefits stop in September. Because if socialism has taught us one thing, it is that when you cut people off from free money, the result is usually very unpleasant.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Janet Yellen’s latest commitment to support the Biden progressive agenda from higher taxes to unionization, will not lead to increased economic prosperity. Instead, it will lead to more outsourcing and offshoring of U.S. Labor. Such was evident in two recent comments.

“With corporate taxes at a historical low of one percent of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share: we propose simply to return the corporate tax toward historical norms.”

And;

“Workers, particularly lower-wage earners, have seen wage growth stagnate over several decades, despite overall rising productivity and national income. There are several contributors to this troubling trend, but one important factor is an erosion in labor’s bargaining power.”

In theory, there is nothing wrong with either of these two statements. Why not have corporations pay more in tax and push companies to unionize.

In reality, however, if Janet Yellen and Joe Biden get their wish, it would lead to a sharp increase in the offshoring of manufacturing and employment.

Let’s dig into both of these issues.

Increase Corporate Tax Rates

Increasing corporate tax rates certainly seems like an easy task. However, the negative impacts of increasing taxes on the primary suppliers of employment will likely outweigh the revenue increase. 

Let’s start by understanding some of the most basic facts.

In the U.S. there are roughly 30.7 million businesses. Of those, 81% have ZERO employees. Such is important to understand because many of these “businesses” are set up for tax shelters and estate planning purposes.

The remaining 19% employee 100% of all non-governmental workers.

Importantly, when Yellen suggests we raise taxes on corporations, she is primarily talking about the roughly 10,000 major corporations in the U.S. However, 50% of all jobs are created by firms with fewer than 500 employees, and almost 90% by firms with less than 1000.

While Yellen is suggesting we go after those “evil corporations,” she is only talking about a fraction of the businesses that employ workers. However, the impact of higher taxes, unionization, etc., impact all businesses and hurts the small business owners that employ the most workers the most. 

Such was a point made by the Chamber of Commerce in response to Janet Yellen’s statement:

“The data and the evidence are clear: the proposed tax increases would greatly disadvantage U.S. businesses and harm American workers, and now is certainly not the time to erect new barriers to economic recovery.” – Suzanne Clark, CEO/President US Chamber of Commerce

Unionization Is A Barrier To Employment

As we discussed recently, the cost of operating a business is increasing. For small businesses which already struggle to remain profitable, increasing the cost of “labor” is problematic. The cost of a “union shop” costs nearly 1/3rd more to operate than a “non-union” shop.

“Research indicates that the cost of running a unionized operation is 25% to 35% greater than for a non-unionized one, and this figure does not reflect any negotiated changes in unionized employee wages or benefits.

The administrative budgets of the unionized plants were 30% higher. In addition to obvious increased costs, there are those that affect morale, creativity, and resiliency. Ultimately, an organization’s profit margin can decline. Productivity appears to be lower in unionized environments.” – Adams, Nash, Haskell & Sheridan

Increased costs of labor are the primary reason why companies look to “offshore.”  To wit:

“The two main reasons that organizations decide to outsource are to reduce costs and to have the ability to focus on core business goals and planning. But the research shows a shift in industry thinking. Outsourcing is not just about saving money anymore. It’s seen as a critical tool in innovation.” – Deloitte

Of course, the companies that are outsourcing labor are the industries with the highest wage-paying jobs.

“The primary industries for outsourcing are Consumer & Industrial Products, Financial Services, Life Sciences & Healthcare, and Technology, Media & Telecomm. There has also been a growing increase in outsourcing from industries such as Real Estate, Facilities Management and Procurement.”

That leaves the lower-wage paying jobs in the U.S. which are being automated to further save costs.

The Carrier Reality

A great example of trying to “onshore” jobs came during the early days of the Trump administration.

Pay attention to the details.

The deal made with Carrier Industries, which makes heating, air conditioning, and refrigerator parts, meant roughly 1,000 workers would keep their jobs in Indiana. However, in exchange for keeping those jobs in Indiana, Carrier received $7 million in tax credits and other incentives which fell to the taxpayers of Indiana. Carrier also invested $16 million in its Indianapolis plant.

According to Carrier, they would have saved $65 million a year by moving operations to Mexico. 

So, how do tax credits and company investment of $16 million equalize the disparity of costs?

For that answer let’s go to an interview with Greg Hayes, the CEO of Carrier: (Transcript courtesy of Business Insider)

JIM CRAMER: What’s good about Mexico? What’s good about going there? And obviously what’s good about staying here?

GREG HAYES: So what’s good about Mexico? We have a very talented workforce in Mexico. Wages are obviously significantly lower. About 80% lower on average. But absenteeism runs about 1%. Turnover runs about 2%. Very, very dedicated workforce.

JIM CRAMER: Versus America? Much higher.

GREG HAYES: Much higher. And I think that’s just part of these — the jobs, again, are not jobs on an assembly line that people really find all that attractive over the long term. Now I’ve got some very long service employees who do a wonderful job for us. And we like the fact that they’re dedicated to UTC, but I would tell you the key here, Jim, is not to be trained for the job today. Our focus is how do you train people for the jobs of tomorrow?

Entitlement Is A Problem

While foreign countries have cheaper labor (not demanding $15/hr) they also have a more dedicated workforce. To wit:

GREG HAYES: The assembly lines in Indiana — I mean, great people, great people. But the skill set to do those jobs is very different than what it takes to assemble a jet engine.

There are several problems that should be readily evident with American workers:

• We believe we are entitled to higher wages, benefits, time off, support, bonuses, health care, etc. 

• Our skill set, and dedication to the job, lags that of other countries. 

• We now believe “blue-collar” work is degrading. 

As we discussed in “The Adverse Consequences Of $15/min Wage:”

“Increasing the cost of employing low-wage workers generally leads employers to reduce the size of their workforce. The effects on employment cause changes in prices and different labor and capital types.

By boosting the income of low-wage workers who keep their jobs, a higher minimum wage raises their families’ real income, lifting some families out of poverty. However, real income falls for some families because other workers lose their jobs, business owners lose income, and prices increase for consumers.

Higher wages increase the cost to employers of producing goods and services. The employers pass some of those increased costs on to consumers in the form of higher prices. Those higher prices, in turn, lead consumers to purchase fewer goods and services. The employers consequently produce fewer goods and services, reducing their employment of low-wage and higher-wage workers.”

Here is the most important point:

“When the cost of employing low-wage workers goes up, the relative cost of hiring higher-wage workers or investing in machines and technology goes down.”

While U.S. workers believe they are entitled to higher wages, employment is ultimately driven by competition, costs, and relative skills.

Yellen’s Prescription Won’t Work

So, as I asked earlier, how do you equalize the cost of saving $65 million annually by moving a plant to Mexico in exchange for $7 million in one-time tax credit and incentives?

That is where the $16 million investment came in.

In order to justify keeping the Indiana plant open, the company injected $16 million to drive down the cost of production and reduce the operating gap between the US and Mexico.

GREG HAYES: Right. Well, and again, if you think about what we talked about last week, we’re going to make a $16 million investment in that factory in Indianapolis to automate to drive the cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with a lower cost of labor? No. But we will make that plant competitive just because we’ll make the capital investments there.

JIM CRAMER: Right.

GREG HAYES: But what that ultimately means is there will be fewer jobs.

While the idea of higher corporate taxes and unionization sounds great in theory, businesses operate from a position of profitability.

However, Yellen’s prescription of unionization and taxes won’t reduce the employment, wage, or wealth gap. Instead, those policies will only create incentives for businesses to fight back by passing on costs, reducing labor, increasing automation, and offshoring labor.

There’s no better Hollywood story than a second act for a convicted fraudster – and only time will tell whether or not it’ll be a true redemption story or yet another episode of American Greed.

But it appears you “can’t keep a good man down” – as former Enron CEO Jeff Skilling moves forward with what Reuters is calling his “stealth energy investment venture” by staffing it with former McKinsey & Co. consultants. Slide decks incoming…

Skilling himself was a former consultant for McKinsey and specialized in natural gas marketing and financing for Enron. 

He aims to bring a “technology edge” to oil & gas returns, the report notes. (Whatever that means). His new venture, called Veld LLC, has been “set up as a digital marketplace to sell packages of oil and gas production to investors”.

Veld supposedly is bringing to the table “analytical software that investors can use to evaluate packages for their potential returns”. There’s been no word as to whether or not the software can analyze off-balance sheet arrangements for any of its prospective investments. 

Ron Hulme, formerly of a 26 year tenure at McKinsey, joined as the company’s Chairman. Taek Chung is listed as a managing director for Veld Applied Analytics. 

Ed Hirs, an Energy Fellow and lecturer at the University of Houston, hilariously commented that Skilling’s reputation “should not have a significant impact” on its ability to generate business. Hirs told Reuters: “I don’t see it as a positive or negative. To succeed, they have to compete with the established firms in the business.”

We reported back in 2019 that Skilling had already landed an investment from former Enron executive and local strip club rewards member Lou Pai who, after selling hundreds of millions of dollars worth of Enron stock before the company collapsed, somehow avoided jail time or any kind of major legal repercussions, outside of a paltry $31.5 million settlement.

The former Enron executive is situated in a new office in Houston and nondisclosure agreements have been signed between him and potential partners in his new project. Skilling is said to have began working on his new project while serving six months at a Texas halfway house, before being set free again. 

He had met with more than two dozen former Enron executives, we noted in 2019, while preparing for the project. We noted then that as part of a judgement with the SEC, Skilling is permanently barred from serving as an officer or director of a public company. Pai, who was referred to as “the invisible CEO” in Enron: The Smartest Guys in the Room has no such bar.

Godspeed, Jeff.

Authored by Steve Watson via Summit News,

Revered scientific journal The Lancet has created a ‘task force’ to investigate the origins of the coronavirus that caused a global pandemic, yet it has decided to employ as it’s leader the very guy who funded the dangerous gain of function research at the Wuhan lab and subsequently allegedly ‘bullied’ other scientists into avoiding looking into the lab as a potential source of the outbreak.

In the wake of renewed scrutiny of the lab leak hypothesis, the Lancet’s task force will reportedly “focus on analyzing data on all of the theories put forward on the origins of COVID, on the reasons why SARS-CoV-2 was able to break out of Wuhan and spread globally, and on the most plausible strategies to prevent future pandemics.”

It also states that “The Task Force will review thoroughly and objectively all publicly available evidence, particularly the peer-reviewed literature, and conduct interviews with key leaders in science, medicine, policy and civil society.”

‘Objectively’. Right.

Dr Peter Daszak, who is heading up this task force, is perhaps the least suitable scientist on the planet to objectively analyse the data, given his track record.

Daszak, as President of the EcoHealth Alliance, shovelled at least $600,000 to the Wuhan Institute of Virology in the past few years to play around with coronaviruses inside the lab through the now infamous ‘gain of function’ research.

Daszak, who also works for the World Health Organisation, is on record admitting that he was involved with manipulating coronaviruses. Here is a video of him talking in DECEMBER 2019 about how ‘good’ the viruses are for altering in a lab:

Daszak notes that “coronaviruses are pretty good… you can manipulate them in the lab pretty easily… the spiked proteins drive a lot about what happens. You can get the sequence you can build the protein, we work with Ralph Baric at UNC to do this, insert into the backbone of another virus and do some work in a lab.”

No wonder then that Daszak as lead investigator for the WHO investigation  determined within 3 hours of visiting the Wuhan lab in February 2021 that there was ‘nothing to see here’?

Recently released emails now document that Daszak thanked Dr Fauci for dismissing the lab leak theory before any scientific research had been done on the possibility.

Daszak was later employed as an ‘expert fact checker’ by Facebook when it was monitoring and removing ‘misinformation’ about the origins of COVID on its platform, much of which was credible scientific research. Facebook has since reversed the policy of banning any posts containing information suggesting COVID-19 was “man-made”.

Daszak’s Twitter profile is basically one long ‘it came from bats not a lab’ thread, much to the annoyance of some other scientists:

Having approved the awarding of NIH funding to Wuhan Institute of Virology–twice–Fauci has a massive conflict of interest on subject.

Failure to disclose this conflict of interest represents journalistic malpractice.

— Richard H. Ebright (@R_H_Ebright) May 5, 2020

Why does this guy keep getting put in charge of investigations, task forces and ‘fact checking’, when it’s abundantly clear that he has the biggest motive to dismiss the lab leak notion?

As microbiologist Professor Richard Ebright has noted, “Daszak was the contractor who funded the laboratory at the Wuhan Institute of Virology that potentially was the source of the virus with subcontracts from $200million [£142million] from the US Department of State and $7million [£5million] from the US National Institutes of Health and he was a collaborator and co-author on research projects at the laboratory.”

Daszak has already lied about the type of research that was being conducted at the Wuhan lab, claiming, after the outbreak happened, that he didn’t know if it was gain of function or not. His own previous statements, and the Fauci emails prove he knew full well what was going on in the lab.

In addition, as reported by The Daily Mail and other outlets, Daszak “orchestrated a ‘bullying’ campaign and coerced top scientists into signing off on a letter to The Lancet aimed at removing blame for Covid-19 from the Wuhan lab he was funding with US money.”

Daszak used his influence to get the journal to publish the letter, which stated that to even suggest the lab leak theory had any credibility was equal to spreading “fear, rumours, and prejudice.”

It effectively shut down discussion among the scientific ‘consensus’ of the lab leak potential for a whole year until intelligence findings brought the matter back to the attention of the mainstream media.

WHO scientific advisor Jamie Metzl described Daszak’s letter as “scientific propaganda and a form of thuggery and intimidation.”

“By labelling anyone with different views a conspiracy theorist, the Lancet letter was the worst form of bullying in full contravention of the scientific method,” Metzl added.

The letter further stated that “We stand together to strongly condemn conspiracy theories suggesting that Covid-19 does not have a natural origin,” and even had the audacity to state that “We declare no competing interests.”

Indeed, Daszak had made sure that the letter would be devoid of any link to EcoHealth, and even considered leaving his own name off it, emails released via the Freedom of Information Act have revealed.

To make matters worse, the other members of The Lancet’s task force are practically all minions of Daszak, some of whom helped him draft the letter that unequivocally stated the lab leak theory was dangerous, and others who either worked with him on ‘fact checking’ for Facebook, or were cited as sources during that activity.

Taking all this into account, it is obvious what the outcome of The Lancet’s inquiry will be, and it should not and cannot be used as credible evidence against the lab leak theory.

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US equity markets pumped, dumped, and re-pumped after the disappointing payrolls print this morning…

But the big move is in the dollar, which is rapidly erasing yesterday’s biggest jump in 9 months…

Source: Bloomberg

Bond yields spiked lower, recovered, and are now falling once again…

Source: Bloomberg

It seems bad news is good news as Powell and his pals have more excuses to stay on the sidelines (while inflation rips).

As Bloomberg’s Chris Antsey notes, the Fed’s leadership “is likely to see this report as a modest improvement but not near the “substantial further progress” on employment required to taper its bond-buying program. While inflation is now topping the central bank’s 2% goal, jobs remain not really close to the goal.”

Two videos surfaced on YouTube Thursday of a massive 316-meter-long containership smashing into another vessel resulting in a crane collapse at the Port of Kaohsiung in Taiwan. 

Taiwan News reports at 01100 local time Thursday, the OOCL Durban, a 316-meter-long containership, veered off course and struck the bow of YM Constancy, a 210-meter-long containership, causing a dockside gantry crane at container yard Yang Ming Marine Transport Corp. at the Port of Kaohsiung’s Pier 70 to collapse, knocking down a stack of containers as workers ran for their lives. 

Scenes from multiple points of view of the incident appeared as they were from the American horror movie “Final Destination,” but this is a real-life port accident.

Dockworkers can be seen running for their lives to avoid being struck by the flying containers. 

Luckily, no one died, and several workers sustained minor injuries. 

A statement from the Port of Kaohsiung said OOCL Durban was heading to Pier 66 when the vessel veered off course. 

“The ship was booked to berth at Pier 66 of Kaohsiung Port, but when the ship passed through Pier 70, it collided with the bow of the “Yong Hung Ship (Gross Tonnage 32,720)” anchored at Pier 70 slightly damaged, and one of the overhead crane One GC8 bridge crane. After the collapse of the GC8 bridge crane, the adjacent GC6 crane was seriously damaged. A total of 1 collapsed, 1 severely damaged but not collapsed and 30-50 containers were damaged, and 1 GC8 bridge crane was caused,” the port said in a statement (translated into English).

Kaohsiung is the 14th busiest in the world, just behind Antwerp, and the last thing strained global supply chains need is a major port facility with reduced capacity. 

Already, we’ve reported shipping containers are falling overboard at “alarming rates,” mainly because containerships are stacking truck-size intermodal containers to the brim to deal with some of the busiest shipping lanes ever. 

With so much of the recent labor market discourse focusing on widespread shortages resulting from Uncle Sam’s generous unemployment benefits (15 million people still collecting some form of weekly unemployment benefit), today’s jobs report which is expected to show a substantial rebound from April’s big miss, was set to be defining: another big miss and the shortage narrative would dominate for a long time, a big beat would meanwhile spark renewed reflation worries.

Well, it appears that “shortages” won out in the end because moments ago the BLS reported that in April just 559K jobs were added, which while a big improvement to April’s upward revised 278K, was another big miss compared to the 674K expectations.

Developing