Month: September 2021

When it comes to the spreading “FOMO” and feelings of insecurity and jealousy among younger Americans – especially teenagers – Instagram is perhaps the worst offender in the entire social-media ecosystem.

And that assessment isn’t coming from a third party, but from Facebook’s own internal research (Facebook bought Instagram back in 2012) which was leaked to a team of WSJ reporters, who on Tuesday published the first of what they say will be a series of deep dives on Instagram and Facebook’s impact on teen mental health, the political discourse and human trafficking.

Facebook’s reasoning for releasing the information to the media is pretty clear. Its motivation was perhaps best articulated by an academic at San Diego State.

When told of Facebook’s internal research, Jean Twenge, a professor of psychology at San Diego State University who has published research finding that social media is harmful for some kids, said it was a potential turning point in the discussion about how social media affects teens.

“If you believe that R.J. Reynolds should have been more truthful about the link between smoking and lung cancer, then you should probably believe that Facebook should be more upfront about links to depression among teen girls,” she said.

The subtext here is pretty clear: Unlike the tobacco companies, Facebook is trying to get out in front of the growing mental-health backlash to Instagram and other social media platforms. Unfortunately (for the teens) this suggests that the company is trying to get out in front of the problem, not fix it.

Jen Selter, Instagram’s “queen of the butt selfie”

For the past three years, Facebook has been conducting internal research into how Instagram impacts the mental health of the teens and younger users who make up an important segment of the app’s user base. Their conclusion is this: for users who don’t struggle with anxiety and depression, the app is relatively benign. But for the roughly one-third of users who do report these issues, Instagram clearly exacerbated them.

“Thirty-two percent of teen girls said that when they felt bad about their bodies, Instagram made them feel worse,” the researchers said in a March 2020 slide presentation posted to Facebook’s internal message board, reviewed by The Wall Street Journal. “Comparisons on Instagram can change how young women view and describe themselves.”

Another slide put it even more bluntly.

“We make body image issues worse for one in three teen girls,” said one slide from 2019, summarizing research about teen girls who experience the issues. “Teens blame Instagram for increases in the rate of anxiety and depression,” said another slide. “This reaction was unprompted and consistent across all groups.”

What’s more: Among teens who reported suicidal thoughts, 13% of British users and 6% of American users traced the desire to kill themselves to Instagram, one presentation showed.

At this point, some might question: why is Facebook even doing these studies considering that they’re almost guaranteed to go public? The answer is that Facebook has a lot on the line here, and so it needs to be in control of the public discourse every step of the way. One WSJ source claimed Facebook makes $100 billion in revenue a year thanks to Instagram’s popularity with the teenage demographic.

This research represents nothing less than a 180 from Facebook’s management, who curiously decided to comment on the record for the WSJ report. WSJ notes that CEO Mark Zuckerberg has insisted Instagram’s impact on teens as “positive”.

“The research that we’ve seen is that using social apps to connect with other people can have positive mental-health benefits,” CEO Mark Zuckerberg said at a congressional hearing in March 2021 when asked about children and mental health.

Instagram head Adam Mosseri has made similar statements. But speaking to WSJ before the story hit, he seems to have flip flopped.

In May, Instagram head Adam Mosseri told reporters that research he had seen suggests the app’s effects on teen well-being is likely “quite small.”

In a recent interview, Mr. Mosseri said: “In no way do I mean to diminish these issues.…Some of the issues mentioned in this story aren’t necessarily widespread, but their impact on people may be huge.”

Management’s new official line is that it was “late” to realizing the tremendous psychic damage Instagram has inflicted on a generation.

Now, what is Facebook planning to do about it?

Authored by Matthew Vadum via The Epoch Times,

A federal judge on Tuesday granted an emergency injunction blocking the state of New York from enforcing a new CCP (Chinese Communist Party) virus vaccine mandate for healthcare workers.

Seventeen medical health professionals had asked the court to enjoin enforcement of New York’s mandate that then-Gov. Andrew Cuomo announced on Aug. 16. The mandate required staff at hospitals and long-term care facilities such as nursing homes, adult care facilities, and other congregate care settings, be vaccinated for COVID-19 to continue to be employed.

The plaintiffs, including doctors, nurses, a medical technician, and a physician’s liaison, were facing termination, loss of hospital admitting privileges, and the destruction of their careers unless they consent to be vaccinated with vaccines in contradiction of their religious beliefs, the lawsuit argued.

Their religious beliefs compelled the plaintiffs “to refuse vaccination with the available COVID-19 vaccines, all of which employ aborted fetus cell lines in their testing, development, or production,” according to court documents. 

The health care employees argued that the vaccine mandate would nullify protections for sincere religious beliefs under Title VII of the Civil Rights Act of 1964, even though the prior state health order in effect just days earlier had afforded the same protections.

“What New York is attempting to do is slam shut an escape hatch from an unconstitutional vaccine mandate,” attorney Christopher Ferrara, Thomas More Society special counsel, said in a statement before the injunction was granted.

“And they are doing this while knowing that many people have sincere religious objections to vaccines that were tested, developed, or produced with cell lines derived from aborted children.”

Judge David Hurd of the U.S. District Court for the Northern District of New York, a Bill Clinton appointee, granted a temporary restraining order the morning of Sept. 14 in the case. The lawsuit was brought against New York Gov. Kathy Hochul (D).

“The vaccine mandate is suspended” and the New York Department of Health “is barred from taking any action, disciplinary or otherwise, against the licensure, certification, residency, admitting privileges or other professional status or qualification of any of the plaintiffs on account of their seeking or having obtained a religious exemption from mandatory COVID-19 vaccination,” Hurd’s order states.

Ferrara learned the court injunction was granted while he was being interviewed over the telephone by The Epoch Times.

Asked if he was pleased by the ruling, Ferrara laughed, “Are you kidding me?”

Oil prices ended largely unchanged on Tuesday as tropical storm Nicholas brought heavy rain and power outages in Texas but caused less damage to U.S. energy infrastructure than Hurricane Ida caused earlier this month.

“The Gulf situation is not resolving itself quickly,” said John Kilduff, partner at Again Capital LLC in New York.

More than 39% of the U.S. Gulf of Mexico’s production of crude and natural gas remained shut on Tuesday, the regulator Bureau of Safety and Environmental Enforcement (BSEE) said. Also of note was the fact that the, now infamous, Colonial pipeline, the largest U.S. fuel pipeline, partially resumed operations after shutting due to a power outage early in the day.

Details on China’s plans to sell crude from strategic reserves pressured prices, but all algos attention will be focused in the short-term on API’s inventory data…

API

• Crude -5.437mm (-3.5mm exp)

• Cushing -1.345mm

• Gasoline -2.761mm

• Distillates -2.888m

Analysts expected crude inventories to fall for the 6th straight week and were correct with a larger than expected crude draw accompanied by draws at Cushing and across gasoline and distillates…

Source: Bloomberg

WTI was hovering around $70.40 ahead of the print and extending gains after the inventory draws…

 

 

Authored by Charles Hugh Smith via OfTwoMinds blog,

A great many essential components in America are on ‘indefinite back order’, including the lifestyle of endless globally sourced goodies at low, low prices.

Setting aside the “transitory inflation” parlor game for a moment, let’s look at what happens when critical parts are unavailable for whatever reason, for example, they’re on back order or indefinite back order, i.e. the supplier has no visibility on when the parts will be available.

If the part that blew out is 0.1% of the entire machine, and the other 99.9% still works perfectly, the entire machine is still dead in the water without that critical component. That is a pretty good definition of systemic vulnerability and fragility, a fragility that becomes much, much worse if there are two or three components which are on indefinite back order.

This is the problem with shipping much of your supply chain overseas: you create extreme systemic vulnerability and fragility even as you rake in big profits from reducing costs. Speaking of costs, let’s look at the costs of having a large, costly, complex mechanism sitting idle in a non-functioning state due to some broken element for which there is no substitute available. Whatever productive capacity the mechanism, process, etc. had is now stuck at zero.

Buying a new replacement is extremely costly, and that’s not always available for all the same reasons that parts and components aren’t available. Finding someone to fabricate a new component is not easy due to the wholesale transfer of manufacturing moxie and capability overseas.

You might be able to find someone to weld a replacement strut, but try finding someone to fab a new bicycle derailleur or better yet, a multilayer semiconductor chip. What about 3-D fabrication? Doesn’t that solve this problem? If the part can be “printed,” yes, but there are limits on what can be 3-D fabbed. You can’t 3-D fab a complex thermostat or controller, for example. You can’t 3-D fab a rubber gasket, either, or a great many other bits of petrochemical-based manufacturing.

Scarcities are not limited to parts and components; skilled people can be scarce, too. For example, there is a limited supply of ICU doctors and nurses. The training required to work in an ICU is specialized and experiential; throwing someone with minimal training in is not a substitution that’s going to work. You can’t order an ICU staff from China or print one digitally the way the Federal Reserve creates currency out of thin air. It takes many years to train the staff to function at a high level in ICU.

A great many such labor scarcities exist for skilled workers who cannot be replaced except by someone with the same training and years of experience. This is one reason ICUs can break down: there is no replacement staff available, and no way to “print more.”

It turns out there’s also a scarcity of people willing to do the dirty-work jobs America needs done for wages that haven’t kept up with inflation. As I have explained here, the $1.65 minimum wage I earned in 1970, if factored for real-world inflation, is around $18 per hour, and arguably closer to $20 per hour.

The solution is to raise the pay to levels that attract workers, but then this requires raising prices on the good and services to the point that customers can no longer afford them.

But wait, can’t we automate all work and deliver full-gee-whiz free-money, no-work communism to everyone? I invite everyone who reckons this is in the realm of the do-able to design, program and manufacture an automated robot that can trundle out to the laundry room, pop open a broken clothes dryer, diagnose the problem, manage to find a new controller board, fit it correctly and properly reconnect all the little wiring bits, close it up, test it, lift the dryer back on the washing machine and do all that for the relatively modest cost of a human repairperson. When you accomplish fabricating and programming that robot to do all the work without instruction or oversight, by all means let us all know how much it cost to design, program and manufacture, what the payback of the development and manufacturing process will cost amortized over the (short) life of the robot and how reliable it is in the real world.

The point is, fantasies are nice but reality is far more demanding.

There can also be scarcities of competence. There may be replacements who claim competence, but when reality intrudes on the shuck-and-jive, their competence was illusory, and the net result is the entire institution can be described by President G.W. Bush’s memorable phrase, this sucker’s going down.

There can also be scarcities of institutional infrastructure and capacity. Once the institution, enterprise, state agency, etc. has been stripmined of redundancy, institutional memory and competence, then the first scarcity that cannot be replaced is the first domino that topples all the other dominoes of systemic vulnerability and fragility.

The Federal Reserve can print trillions of dollars and the federal government can borrow and blow trillions of dollars, but neither can print or borrow supply chains, scarce skills, institutional depth or competence. That nice shiny new semiconductor fab you reckon will resolve the chip shortage? You can print the billions of dollars needed in an instant, but the machinery, expertise and time can’t be conjured quite so easily. That fab is years away from completion no matter how many freshly conjured dollars you throw into the air.

When Critical Parts Are On “Indefinite Back Order,” the Machine Grinds to a Halt: that’s the U.S. economy in a nutshell.

A great many essential components in America are on indefinite back order, including the lifestyle of endless globally sourced goodies at low, low prices.

That lifestyle is out of stock and cannot be replaced with financialization fakery.

Hey, Federal Reserve, can you conjure up a non-corrupt financial system, a domestic supply chain, and an economy of open competition, transparency, accountability and competence? If not, you are even more worthless than we feared.

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A slightly weaker than expected CPI print prompted kneejerk panic-buying by the algos as it may delay The Fed’s taper. However, record-er and record-er highs in stocks is just as likely to trigger financial stability anxiety among some Fed members and as the US cash market opened, sellers appeared and erased all the un-taper gains. Small Caps were worst on the day, Nasdaq the least bad…

Today was the worst for Small Caps and The Dow since mid-July

Stocks are red for the month of September…

A “down” day… umm! (S&P 6th down day of last 7)

The Dow broke below its 100DMA…

The S&P tested down to its 50DMA once again – will this be a dip to buy, or is September’s back-half seasonality about to bite?

SpotGamma warned that 4440 was an important line in the sand today from an options/gamma persective…

Small Caps broke down below the 100DMA, heading to 200DMA support…

Apple investors seemed unimpressed by the new bright shiny objects… New iPad (same as the old one except faster, oh and smaller iPad mini), New Apple Watch (bigger display), Guided Meditation (seriously), and a new iPhone 13 (that looks exactly like all the other iPhones)

Financials underperformed today as yields tumbled and banks made headlines on trading volume outlook reductions and “normalization”. Healthcare was best today, managing to hold unchanged…

Source: Bloomberg

Defensive and Cyclical stocks both fell together today, no rotational flows…

Source: Bloomberg

The stalemate between recovery and lockdown stocks continues…

Source: Bloomberg

Treasury yields were down notably across the board today, all bond bid aggressively from the CPI print…

Source: Bloomberg

30Y Yield tumbled to 6-week lows…

Source: Bloomberg

10Y Yield fell back below its 50DMA…

Source: Bloomberg

Debt Ceiling Anxiety continues to rise as McConnell said “Republicans are united in opposition to raising the debt ceiling”…

Source: Bloomberg

The dollar dived on the CPI miss, bounced back, scrambling to recover its losses as stocks legged down…

Source: Bloomberg

Bitcoin surged back above yesterday’s WMT/LTC spike highs…

Source: Bloomberg

Bitcoin is also on the verge of a ‘golden cross’ of its 50DMA above its 200DMA (for the first time since May 2020)…

Source: Bloomberg

Gold spiked back above $1800 today…

A choppy day left oil prices unchanged ahead of tonight’s API data…

Finally, it feels like we are getting close… Nasdaq 100 (Growth) is back at record highs relative to The Dow (Quality)…

Source: Bloomberg

And no, investors aren’t hedged…

On Monday, Deutsche Bank’s chief credit strategist Jim Reid released his annual Long-Term Asset Return Study, which marks the 50th anniversary of fiat money – on which it is focused –  thanks to President Nixon ending the dollar’s link to gold in August 1971, arguably the most catalytic event that helped unleash the gargantuan wealth inequality we see today. Nixon broke down the Bretton Woods system that linked other currencies to gold, as well through a system of fixed exchange rates.

Excerpting from this lengthy piece, Reid dedicated his Chart of the Day to “Fiat, Fifty and Frail” in which he writes that “since the money we use today isn’t generally tied to anything, that gives policymakers a lot more scope to use inflationary policies, which is something they’ve definitely taken up the option on.”

Sure enough, with the link to gold broken, Reid then goes on to note that “over the last half century, we’ve seen the most inflationary period ever in the data series we have going back to the 13th century. So even though inflation has been tamer over the last decade, don’t be fooled that fiat money is anything other than inflationary through history.”

And in a remarkable twist, in which Reid basically sounds like a conspiracy theory blogger from ca. 2010 (it’s remarkable how so much “conspiracy talk” just a decade ago has been widely accepted by some of the most respected Wall Street strategists including Reid, Matt King, Michael Hartnett, Michael Every, and others), he refers to the chart below noting that “when fiat has arrived, inflation has followed. This is more graphically shown in the piece as we have the same graph for the US, UK, Germany, France, Italy and Japan through the centuries.” As Ried puts it “it collectively shows a stunning and even more extreme picture.”

Of course, it’s true that there have been a number of isolated hyperinflations in previous centuries, such as during the French Revolution, or in 1920s Germany. But, as the DB strategist points out, “the last 50 years is the first time we’ve seen such a broad upswing in the global price level across multiple countries.” Furthermore, since the chart uses a median series, that should also remove the impact of extreme values in some countries.

This brings up the next logical question: how long can this last for? As Reid writes, over the last half century, we’ve stress-tested our monetary system to extreme levels, with much higher levels of debt and unprecedented money printing from central banks. Fortunately, a number of exogenous factors have kept inflation lower than it might have been in recent years, like rising globalization and favorable demographics.

But can these always be relied upon (both are reversing) and will policymakers post-covid continue to flex fiat money even more aggressively, Reid asks? In response, his report highlights that monetary systems have changed a lot over prior centuries, and indeed for most of the twentieth century (and certainly before) most people couldn’t have imagined a world without money tied to gold.

So, he concludes “don’t take it for granted that our system of the last 50 years will survive your whole career.” Don’t worry, though, both bitcoin and gold fix this.

Over the past few years, one of our recurring laments about the Bank of America Fund Manager Survey was the at times irreconcilable intellectual inconsistency of the survey respondents, who on one hand have panned the state of the economy even as the piled into risk assets (or so they said, one wouldn’t know it by looking at the chronic underperformance of the active manager cohort), although in retrospect that has served them well in a world where “bad news has consistently been good news for stocks.”

Well, in the latest, September, edition of the BofA FMS which polled 258 panelists managing $839 billion in AUM, and which was titled “Fiscal Frenzy Flips to Fiscal Flop”, this apparent inconsistency has finally caught up to poll organizer, Chief Investment Strategist Michael Hartnett who notes that a “rare FMS disconnect between asset prices & fundamentals growing” whereby a net 50% long stocks vs 20-year average of 29%; while net 69% short bonds (vs 43% avg) even as global growth expectations have continued to plunge, and in September, economic growth expectations are now just net 13%, the lowest since April 20 and down from the 91% peak in March 21. This is notable because as Hartnett points out, “global growth expectations have historically led FMS investor equity allocation but equity allocation has lagged this cycle.” In other words, any last connection between stocks and the underlying economy has now been irrevocably torn.

And alongside this drop in “peak boom” expectations, stagflation concerns are starting to rise again, as below trend growth and above trend inflation was up +5% MoM to now 20%.

Starting with the survey bottom line, Hartnett summarizes the findings as follows: “tanking macro optimism = lower-for-longer rates = everyone “long stocks-short bonds”; And as a result of the inability of the Biden fiscal frenzy to sustain the “boom”, portfolios have flipped from long cyclicals to long barbells, even as few Wall Street professionals “are positioned for credit events, recession or stagflation.”

Hartnett then takes us down the key categories, starting with macro, where expectations for global growth has plunged to just 13% – the lowest since May’20, and sharply down from 75% in Jun’21 – for rising profit to 12%, down from 89% in Mar’21…

… and for rising inflation to negative, or net -1%, down from the peak in Apr’21 of 93%. This was the first time since May’20 that a net % of FMS investors have expected inflation to fall.

Yet while “peak inflation” is now far in the rearview mirror, short-term rate expectations remain elevated and lag inflation expectations more than historically.

And yet, in another example of just how disconnected the survey is from reality, just 6% of respondents expect recession. Maybe most of them are 25-year-old fund managers who got their financial education on TikTok?

Even more concerning is that in this environment of slowing growth and stock euphoria where nobody expects a recession, margin expectations have plunged to net -22%, meaning the majority now expect profit margins will shrink.

Hartnett then addresses policy, where 84% expect taper by year-end (some 59% say monetary policy “too simulative” the most since May’11); but consensus on the first Fed hike has been pushed out from Dec’22 to Feb’23…

… which as we discussed previously is a mistake since even the WSJ now warned that the taper will begin in November, with Goldman assigning 70% odds to this month being the “start.” Asked what could prevent the Fed from tapering, 49% of investors – who clearly are unaware that Delta has now long peaked in the US – think Delta will be the most likely reason that will prevent the Fed from tapering in the next 6 months. 36% think payrolls, followed by inflation (7%).

Touching on fiscal, respondents expect $1.9 trillion in fiscal stimulus…

… and 82% of investors expect China to ease in H2’21.

Continuing to risk appetite, the survey reveals that cash levels are modestly higher to 4.3% from 4.2%, and BofA’s Bull & Bear Indicator down slightly to 5.7 from 5.8. “Clearly there is no panic.”

… yet it another paradox, the survey finds that equity protection is at the lowest level since Jan’18, a far cry from media reports that everyone is extremely hedged to an upcoming drawdown…

… while “liquidity conditions” are “ominously” viewed as best since Jul’07…

… and for good reason – the Goldman financial conditions index has never been easier. .

Next, Hartnett addresses stock exposure, where he finds higher levels of risk taking (now at a net 9%, up modestly 6% MoM) but down from the peak of 25% in Feb’21 (20 year avg = -15%). And here yet another paradox: since risk levels have historically paralleled equity allocation, growth expectations are saying equity allocations should fall “but risk taking is telling the story that investors are ignoring the macro.”

Separately, the FMS found that investor positioning in small cap/value/junk is back to pre-election Oct’20 lows (don’t tell JPM which every day is pounding the table on the value/reflation trade).

Instead, investors have a preference for barbell trades: health care/tech (growth) & banks/industrials/EU (value), while defensives are  being shunned with bond proxy utilities as the biggest underweight;

Not surprising with the Nikkei soaring to 30 year highs, the survey found that Japan short-covered 11ppt to a net 1% underweight, the lowest underweight since May’21 (even so, the current allocation is 0.2 stdev below its long-term average.)

… while as a result of China’s turmoil, Emerging Markets were cut to 1st underweight since May’20.

Addressing the $64 trillion question, the number of respondents saying that inflation is transitory increased in September, with the number rising to 69% while only 28% say inflation is permanent. As a reminder, on Wall Street the majority is always wrong.

Finally, while this indicator is usually the most useless (and incorrect) of all, the FMS respondents said that the most crowded trades are long tech, ESG, short China stocks.

At least the 25-year-old survey respondents who are confused by the simplest financial concepts, were right to correctly identify the biggest risk facing the market: inflation.

Authored by Paul Joseph Watson via Summit News,

Senator Elizabeth Warren is demanding Amazon censor best-selling books because they contain information that challenges the official narrative on coronavirus.

Warren wrote a letter asserting that Amazon was complicit in spreading “COVID-19 misinformation” because it allows people to buy books authored by people like Dr. Joseph Mercola, who has been targeted by the mainstream media as a purveyor of “dangerous” fake news about COVID and vaccines.

“During the week of August 22, 2021, my staff conducted sample searches on Amazon.com of pandemic-related terms such as ‘COVID-19,’ ‘COVID,’ ‘vaccine,’ ‘COVID 19 vaccine,’ and ‘pandemic,’” Sen. Warren wrote in a letter addressed to Amazon’s CEO Andy Jassy.

“The top results consistently included highly-ranked and favorably-tagged books based on falsehoods about COVID-19 vaccines and cures.”

Of course, the claim that these are “falsehoods” is a completely arbitrary assertion made by Warren and her staff, with no objective standard of proof required.

Mercola was again singled out for condemnation.

“[Dr. Mercola] has posted over 600 articles on Facebook casting doubt on COVID-19 vaccines and been subject to multiple federal investigations (with one false- advertising investigation leading to a $2.95 million consumer settlement). But Amazon’s algorithms promoted ‘The Truth About COVID-19’ as a best seller and top result in response to common pandemic-related search terms,” Warren wrote.

As Cindy Harper highlights, Warren’s efforts to have Amazon ban books follows a similar effort by Rep. Adam Schiff, who claimed that 10 per cent of Amazon search results related to vaccines returned “misinformation” (a description again solely determined by Schiff and his staff).

At what point did we enter an era where the very thing that drove scientific progress for hundreds of years – challenging the official orthodoxy – is now treated as heresy?

Putting people on lists with terrorists and sex traffickers before deplatforming them from social media sites is not enough.

Erasing information published by actual doctors and scientific experts that dares to question the ever-shifting goalposts of what “the science” says is also insufficient.

Now the digital book burnings must begin.

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