By Ven Ram, Bloomberg Markets Live cross-asset strategist.
The S&P 500 Index will find its equilibrium band for 2022 between 3,900 and 4,130.
That’s according to an analysis that parses the benchmark as lesser-rated quasi-debt securities. The study is based on the premise that the aggregate earnings per share of the S&P 500 companies will be about $225 to $240 this year (hence the forecast band for the index rather than a single-point estimate) and that current forward rates correctly anticipate the Fed’s policy trajectory over 2022.
It assumes that stocks trade with risk premiums over default-free securities to allow for their higher variance of returns. In other words, investors can price these securities by factoring in a spread to the default-free curve, akin to the concept of a Z-spread.
The analysis doesn’t imply that stocks have found a bottom — far from it. Rather, the assumption is that — after probably yo-yoing above and below posited levels — stocks will find equilibrium at those levels this year. More specifically, they may oscillate closely around the central value this year.
The study suggests that the decline we saw earlier this week to 4,222 was far from coincidental.
The slump is a consequence of the markets finally paying heed to the writing on the wall vis-a-vis the Fed’s benchmark rate, and its implications for the Treasury curve. If 2020 was marked by an acute need for pension funds and portfolio managers to go long stocks in a desperate search for yield, last year proved to be no different given the Fed’s uber-accommodative stance.
Last year, the risk premium on the S&P 500 over the 10-year Treasury yield shrank to the lowest since 2007, leaving the index vulnerable to a major shift in risk appetite. That came after the market capitalization of the Wilshire 5000 Index amounted to 190% of then-U.S. gross domestic product, eclipsing valuations that prevailed even during the dotcom bubble.
How well could this analysis fare? Just in December, a study showed that the base case for the Nasdaq 100 basket of stocks was far lower than prevailed then based on earnings estimates. If anything, the index has slumped more and sooner than I expected. (Current earnings predictions suggest the technology barometer may slide to around 13,450 this year).
The analysis is dynamic, which is to say it’s extremely sensitive to changes in earnings and interest rates, meaning the posited central level will change in line with forecasts on both. The more drastic the changes in the projected earnings and interest rates, the greater will be the variance from the central level.
At the moment, overnight indexed swaps are factoring in about 100 basis points of increase in the Fed funds rate. If threats from variants upend the forecast economic recovery, that pricing may not fructify, throwing a wrench in the forecast for the index. In such an adverse scenario, stocks may stay supported at levels higher than posited.
On the other hand, if the Fed were to raise rates more than four times and also shrink its humongous balance sheet, stocks will find themselves plumbing lower.
FCC Bars China Unicom From Operating In US After Lengthy National Security Review
With his approval rating in the gutter, President Biden has apparently decided to try his luck (once again) by mimicking his predecessor. To wit, the FCC has revoked the operating license of state-owned telecom giant China Unicom, barring it from continuing to operate in the US.
The committee announced the decision in a statement released by Commissioner Brendan Carr, in which he cited “security concerns” as the main reason for revoking the company’s license.
NEW: We just voted @FCC to revoke China Unicom America’s license to operate based on serious national security concerns.
This builds on the FCC’s decisions in 2019 to block China Mobile and in 2020 to revoke China Unicom’s license. pic.twitter.com/4BhPEeDrtL
The decision echoes similar moves engineered by the Trump Commerce Department that involved “black listing” companies like Huawei, ZTE and even (much later) TikTok owner ByteDance.
As it happens, the FCC’s decision is the result of a “top to bottom review” instituted after the agency blocked China Mobile USA from entering the US market, effectively killing the subsidiary. According to the FCC’s statement, other executive branch agencies (most notably the DoJ) have identified Unicom as a “serious national security and law enforcement risk”. Congress has empowered the FCC to protect American wireless networks secure by granting it the authority to revoke the licenses of mobile service providers and other operators who don’t want to play by US rules.
The FCC cited “security concerns” as its reason for ejecting China Unicom. The agency also acted against a subsidiary of Pacific Networks called Comnet.
Residents of Fort Mill, South Carolina, had to wait 18 long years for construction to start on a hospital that state regulators determined in 2004 was necessary—and then proceeded to hold up in an absurdly long legal battle that eventually went all the way to the state Supreme Court.
Hopefully, that saga won’t ever be repeated.
The state Senate voted 35–6 on Tuesday to repeal most of South Carolina’s Certificate of Need (CON) regulations that require hospitals and other health care providers to obtain permission from the state before expanding facilities, buying new equipment, or offering new services. Often, those regulations gave de facto veto power to existing providers, which lobby health policy bureaucrats to block the approval of new competition.
That’s exactly what happened in Fort Mill, where plans for a new 100-bed hospital were tied up for more than a decade and a half, in part because a rival hospital wielded the state’s CON laws in an attempt to block the new facility, as Reasonpreviously reported.
“Eighteen years, no hospital. Eighteen years, no medical care. Broken bones, ruptured spleens, heart attacks, births—all of it came and went,” state Sen. Michael Johnson (R–Fort Mill) told the Associated Press this week, after the bill passed with bipartisan support.
The CON repeal bill moves next to the state House, where it is likely to be picked up in March after lawmakers finish work on the state budget.
The bill passed by the state Senate would eliminate South Carolina’s CON regulations for all health care facilities except nursing homes.
If the bill becomes law, the Charleston Post and Courierreports, it would clear the way for 28 projects that are currently tied up in legal battles despite having won preliminary CON approval. Another 34 projects awaiting review by the state’s Department of Health and Environmental Control would be able to proceed as well. The paper estimates that those delayed projects represent more than $1 billion in health care investment in the state.
All those backlogged projects—and the time-consuming, expensive litigation associated with navigating the CON review process and inevitable lawsuits—nicely illustrate the often hidden costs of these rarely considered regulations.
And that doesn’t include the loss of projects that never materialized in the first place. A recent report published by the Americans for Prosperity Foundation, a free market think tank that advocated for the CON repeal bill, found that 25 percent of South Carolina CON applications during a recent three-year period were denied or withdrawn after being submitted. Those applications represented more than $450 million of investment in the state that never occurred—simply because regulators got in the way, or because competitors would have objected.
As the same report notes, the president of the South Carolina Hospital Association, which opposes the elimination of CON laws in the state, once admitted to the state Legislature that the lengthy and expensive CON process “does not serve the community.”
That became too apparent even for state lawmakers to ignore, thanks in part to the COVID-19 pandemic. As part of his emergency order issued when COVID-19 first struck in March 2020, Gov. Henry McMaster (R) suspended enforcement of CON regulations—making South Carolina one of several states to do so because of the pandemic. When it became obvious that the sky wasn’t falling in the absence of those rules, some state lawmakers rightly began to question whether they were needed in the first place, says Candace Carroll, South Carolina state director for Americans for Prosperity.
“Government should never stand in the way of any South Carolinian receiving quality, affordable health care—especially during a global pandemic,” Carroll told Reason. “Now, it’s up to the House to finish the work the Senate has started by swiftly sending a repeal bill to the governor’s desk to sign.”
Previously, then-Gov. Nikki Haley had tried and failed to kill South Carolina’s CON laws in 2013 when she used a line-item veto to scratch it out of the state budget. Hospitals sued, and the state Supreme Court ruled in 2014 that the regulations would remain on the books.
Artificially limiting the supply of health care services can be a major issue when a pandemic or another emergency strikes, of course, but CON laws harm public health even without the help of COVID-19. States with CON laws have higher mortality rates for patients with pneumonia, heart failure, and heart attacks, according to research published in 2016 by the Mercatus Center, a free market think tank that argues for repealing CON laws. Other studies show that CON laws contribute to health care shortages in rural areas because they force medical providers to focus on wealthier, more populated areas in order to make up for the added costs imposed by the CON process.
The federal government is ultimately to blame for the CON laws that litter state governments—though some, like South Carolina, are finally getting repealed. As Reasonhas previously explained, CON laws were originally intended to curb rising health care costs by limiting capital investment by hospitals and other health care providers. In 1974, Congress mandated that all states must pass CON laws for health care providers in order to continue receiving Medicaid funding. By the mid-1980s, amid mounting evidence that CON laws were not achieving that goal and were instead creating anti-competitive arrangements that drove costs even higher, Congress repealed the mandate. Unfortunately, the damage had been done.
Now, pretty much everyone (except the hospitals and other providers who are shielded from competition) agrees CON laws are bad policy. But removing the inertia in state capitals is no easy task, even after situations as ridiculous as what happened in Fort Mill.
If the repeal bill becomes law, state Sen. Wes Climer (R–Rock Hill), who sponsored it, predicts it will unleash health care investment in South Carolina. “Now all they have to do,” he toldThe Post and Courier, “is raise the money and go build it.”
Earlier this week, in the latest in a series of scolding campaigns, a Britain-based group called the Center for Countering Digital Hate gave a sneak peek at a research report on Substack to The Guardian and The Washington Post. Both outlets came out with their scare pieces this morning. From The Guardian:
A group of vaccine-skeptic writers are generating revenues of at least $2.5m (£1.85m) a year from publishing newsletters for tens of thousands of followers on the online publishing platform Substack, according to new research…
Imran Ahmed, chief executive of CCDH, said companies like Substack were under “no obligation” to amplify vaccine skepticism and make money from it. “They could just say no…”
The Post, citing “some misinformation experts say” — the pandemic version of “people familiar with the matter” — added:
These newer platforms cater to subscribers who seek out specific content that accommodates their viewpoints — potentially making the servicesless responsible for spreading harmful views, some misinformation experts say.
If these stories sound familiar, it’s because this same Center for Countering Digital Hate two years ago tried to pull the same stunt with The Federalist, using NBC to ask Google to crack down on them. Humorously, and typically — this happens a lot with these stories — that effort ended in fiasco. The piece NBC ended up writing boasting of the success of its “Verification Unit” in getting the site demonetized, entitled, “Google bans two websites from its ad platform over protest articles,” turned out to itself be misinformation. The Federalist was never banned, only warned, and the issue was its comments section, not its articles. Google had to issue a statement:
The Federalist was never demonetized.
— Google Communications (@Google_Comms) June 16, 2020
Still, panic campaigns in legacy press consistently focus on handfuls of sites, and with impressive dishonesty describe them as representative. I was particularly struck by a recent Mashable article that talked about a supposed “backlash” against Substack’s “growing collection of anti-trans writers,” which seemed to refer to Jesse Singal (who is no such thing) and Graham Linehan and — that’s it. Substack is actually home to more trans writers than any other outlet, but to the Scolding Class, that’s not the point. The company’s real crime is that it refuses to submit to pressure campaigns and strike off Wrongthinkers.
Substack is designed to be difficult to censor. Because content is sent by email, it’s not easy to pressure platforms to zap offending material. It doesn’t depend on advertisers, so you can’t lean on them, either. The only real pressure points are company executives like Hamish McKenzie and Chris Best, who are now regular targets of these ham-fisted campaigns demanding they discipline writers.
The latest presents Substack as a place where, as Mashable put it, “COVID misinformation is allowed to flourish.” The objections mainly center around Joseph Mercola, Alex Berenson, and Robert Malone. There are issues with the specific critiques of each, but those aren’t the point. Every one of these campaigns revolves around the same larger problem: would-be censors misunderstanding the basic calculus of the freedom of speech.
Even in a society with fairly robust protections, as ours once was, the most dangerous misinformation is always, without exception, official.
Whether it’s WMDs or the Gulf of Tonkin fiasco or the missile gap or the red scare or the twenty-year occupation of Afghanistan, the worst real-world disasters always turn out to be driven or enabled by official falsehoods. In the case of Afghanistan (and Iraq, and Vietnam before both), the cycle of war disaster was perpetuated by a sweeping, organized, and intricate system of official lying, about everything from the success of missions to the efficacy of weaponry to the political devotion of supposed allies. The only defense against these most dangerous types of deceptions is an absolutely free press.
People know authorities lie, which is why the more they clamp down, the bigger their trust problem usually becomes. Unfortunately, censors by nature can’t help themselves. Our official liars are always trying to learn from their errors. For instance, film of wounded, suffering, or dead American boys, as well as of the atrocities we committed, not only resulted in pressure to end the Vietnam War, but probably prevented future invasions of countries like Nicaragua, as voters recalled the sickening “quagmire.”
Military officials saw this, and when they finally got to go to war again, they banned the filming of coffins and instituted an embed system that closed off the bulk of adversarial reporting. Of course, that was not enough, because organizations like Wikileaks found ways to sneak out forbidden pictures. So, the powers that be imposed much tougher penalties on whistleblowers going forward. Instead of letting the Daniel Ellsbergs of the world write books and give lectures, the new reality for people like Julian Assange or Edward Snowden is permanent exile or imprisonment. The jailers seem quite proud of this, but the unofficial pseudo-ban on Assange coverage has only added to the impression of a not-free, certainly not trustworthy system of media.
Instead of seeing the root causes of this atmosphere of rapidly declining trust, officials keep pushing for even more sweeping campaigns of control, most recently seeking to make platforms like Google and Twitter arbiters of speech.
This puts the issue of the reliability of authorities front and center, which is the main problem with pandemic messaging. One does not need to be a medical expert to see that the FDA, CDC, the NIH, as well as the White House (both under Biden and Trump) have all been untruthful, or wrong, or inconsistent, about a spectacular range of issues in the last two years.
NIAID director Anthony Fauci has told three different stories about masks, including an episode in which he essentially claimed to have lied to us for our own good, in order to preserve masks for frontline workers — what Slate called one of the “Noble lies about Covid-19.” Officials turned out to be wrong about cloth masks anyway. Here is Fauci again on the issue of what to tell the public about how many people would need to be vaccinated to achieve “herd immunity,” casually explaining the logic of lying to the public for its sake:
When polls said only about half of all Americans would take a vaccine, I was saying herd immunity would take 70 to 75 percent. Then, when newer surveys said 60 percent or more would take it, I thought, “I can nudge this up a bit,” so I went to 80, 85.
We’ve seen sudden changes in official positions on the efficacy of ventilators and lockdowns, on the dangers (or lack thereof) of opening schools, and on the risks, however small, of vaccine side effects like myocarditis. The CDC also just released data showing natural immunity to be more effective in preventing hospitalization and in preventing infection than vaccination. The government had previously said, over and over, that vaccination is preferable to natural immunity (here’s NIH director Francis Collins telling that to Bret Baier unequivocally in August). This was apparently another “noble lie,” designed to inspire people to get vaccinated, that mostly just convinced people to wonder if any official statements can be trusted.
To me, the story most illustrative of the problem inherent in policing “Covid misinformation” involves a town hall by Joe Biden from July 21 of last year. In it, the president said bluntly, “You’re not going to get COVID if you have these vaccinations,” pretty much the definition of Covid misinformation:
“It is rare for people who are fully vaccinated to contract COVID-19, but it does happen,” the site wrote. They then cited CDC data as backup. “The data that the CDC collected before May 1 show that, of 101 million people vaccinated in the U.S., 10,262 (0.01%) experienced breakthrough cases.” Politifact’s “bottom line”: Biden “exaggerated,” but “cases are rare.”
Anyone paying attention to that story will now distrust the president, the CDC, and “reputable” mainstream fact-checkers like the Pew Center’s Politifact. These are the exact sort of authorities whose guidance sites like the Center for Countering Digital Hate will rely upon when trying to pressure companies like Substack to remove certain voices.
This is the central problem of any “content moderation” scheme: somebody has to do the judging. The only thing worse than a landscape that contains misinformation is a landscape where misinformation is mandatory, and the only antidote for the latter is allowing all criticism, mistakes included. This is especially the case in a situation like the present, where the two-year clown show of lies and shifting positions by officials and media scolds has created a groundswell of mistrust that’s a far bigger threat to public health than a literal handful of Substack writers.
About that: here’s the lede of a BBC report about an incident that took place in December, called “Australia police arrest quarantine escapees”:
Australian police have arrested three people who broke out of a Covid quarantine compound in the middle of the night.
The Howard Springs centre near Darwin in the Northern Territory is one of Australia’s main quarantine facilities for people returning to the country.
Police said the trio scaled a fence to break out of the facility.
Officers found them after a manhunt on Wednesday. All had tested negative to Covid the day before.
Although I’m very much not a fan of Dr. Joseph Mercola’s, the fact that the CCDH wants to shut down articles like his “The Unvaxxed May Soon Be Shipped to Quarantine Camps” — which among other things contains passages about the Australian program — shows how little they understand about how media audiences think.
As is the case with the Assange story, the paucity of information in mainstream press about the serious draconian measures in places like Australia and Germany has already massively heightened distrust in those outlets and in official reassurances. The “nothing to see here” attitude about the potential downsides of authoritarian policies has reached sick joke status (see Russell Brand’s hilarious but depressing take on the Australia situation here). As the Substack folks themselves pointed out today, our society has a trust problem, and attempts to sweep it under a rug only make things worse.
Censors have a fantasy that if they get rid of all the Berensons and Mercolas and Malones, and rein in people like Joe Rogan, that all the holdouts will suddenly rush to get vaccinated. The opposite is true. If you wipe out critics, people will immediately default to higher levels of suspicion. They will now be sure there’s something wrong with the vaccine. If you want to convince audiences, you have to allow everyone to talk, even the ones you disagree with. You have to make a better case. The Substack people, thank God, still get this, but the censor’s disease of thinking there are shortcuts to trust is spreading.
Lastly, while the Post certainly has its own problems in this area, the Guardian editors should puke with shame for even thinking about condemning anyone else’s “misinformation,” while their own fake story about Assange’s “secret talks” with Paul Manafort in the Ecuadorian embassy remains up. Leaving an obvious hoax uncorrected will tend to create a credibility problem, and you compound it by pointing a finger elsewhere. This is a lesson in this for health authorities, too. Clean your own houses, and maybe you won’t have such a hard time being believed.
Residents of Fort Mill, South Carolina, had to wait 18 long years for construction to start on a hospital that state regulators determined in 2004 was necessary—and then proceeded to hold up in an absurdly long legal battle that eventually went all the way to the state Supreme Court.
Hopefully, that saga won’t ever be repeated.
The state Senate voted 35–6 on Tuesday to repeal most of South Carolina’s Certificate of Need (CON) regulations that require hospitals and other health care providers to obtain permission from the state before expanding facilities, buying new equipment, or offering new services. Often, those regulations gave de facto veto power to existing providers, which lobby health policy bureaucrats to block the approval of new competition.
That’s exactly what happened in Fort Mill, where plans for a new 100-bed hospital were tied up for more than a decade and a half, in part because a rival hospital wielded the state’s CON laws in an attempt to block the new facility, as Reasonpreviously reported.
“Eighteen years, no hospital. Eighteen years, no medical care. Broken bones, ruptured spleens, heart attacks, births—all of it came and went,” state Sen. Michael Johnson (R–Fort Mill) told the Associated Press this week, after the bill passed with bipartisan support.
The CON repeal bill moves next to the state House, where it is likely to be picked up in March after lawmakers finish work on the state budget.
The bill passed by the state Senate would eliminate South Carolina’s CON regulations for all health care facilities except nursing homes.
If the bill becomes law, the Charleston Post and Courierreports, it would clear the way for 28 projects that are currently tied up in legal battles despite having won preliminary CON approval. Another 34 projects awaiting review by the state’s Department of Health and Environmental Control would be able to proceed as well. The paper estimates that those delayed projects represent more than $1 billion in health care investment in the state.
All those backlogged projects—and the time-consuming, expensive litigation associated with navigating the CON review process and inevitable lawsuits—nicely illustrate the often hidden costs of these rarely considered regulations.
And that doesn’t include the loss of projects that never materialized in the first place. A recent report published by the Americans for Prosperity Foundation, a free market think tank that advocated for the CON repeal bill, found that 25 percent of South Carolina CON applications during a recent three-year period were denied or withdrawn after being submitted. Those applications represented more than $450 million of investment in the state that never occurred—simply because regulators got in the way, or because competitors would have objected.
As the same report notes, the president of the South Carolina Hospital Association, which opposes the elimination of CON laws in the state, once admitted to the state Legislature that the lengthy and expensive CON process “does not serve the community.”
That became too apparent even for state lawmakers to ignore, thanks in part to the COVID-19 pandemic. As part of his emergency order issued when COVID-19 first struck in March 2020, Gov. Henry McMaster (R) suspended enforcement of CON regulations—making South Carolina one of several states to do so because of the pandemic. When it became obvious that the sky wasn’t falling in the absence of those rules, some state lawmakers rightly began to question whether they were needed in the first place, says Candace Carroll, South Carolina state director for Americans for Prosperity.
“Government should never stand in the way of any South Carolinian receiving quality, affordable health care—especially during a global pandemic,” Carroll told Reason. “Now, it’s up to the House to finish the work the Senate has started by swiftly sending a repeal bill to the governor’s desk to sign.”
Previously, then-Gov. Nikki Haley had tried and failed to kill South Carolina’s CON laws in 2013 when she used a line-item veto to scratch it out of the state budget. Hospitals sued, and the state Supreme Court ruled in 2014 that the regulations would remain on the books.
Artificially limiting the supply of health care services can be a major issue when a pandemic or another emergency strikes, of course, but CON laws harm public health even without the help of COVID-19. States with CON laws have higher mortality rates for patients with pneumonia, heart failure, and heart attacks, according to research published in 2016 by the Mercatus Center, a free market think tank that argues for repealing CON laws. Other studies show that CON laws contribute to health care shortages in rural areas because they force medical providers to focus on wealthier, more populated areas in order to make up for the added costs imposed by the CON process.
The federal government is ultimately to blame for the CON laws that litter state governments—though some, like South Carolina, are finally getting repealed. As Reasonhas previously explained, CON laws were originally intended to curb rising health care costs by limiting capital investment by hospitals and other health care providers. In 1974, Congress mandated that all states must pass CON laws for health care providers in order to continue receiving Medicaid funding. By the mid-1980s, amid mounting evidence that CON laws were not achieving that goal and were instead creating anti-competitive arrangements that drove costs even higher, Congress repealed the mandate. Unfortunately, the damage had been done.
Now, pretty much everyone (except the hospitals and other providers who are shielded from competition) agrees CON laws are bad policy. But removing the inertia in state capitals is no easy task, even after situations as ridiculous as what happened in Fort Mill.
If the repeal bill becomes law, state Sen. Wes Climer (R–Rock Hill), who sponsored it, predicts it will unleash health care investment in South Carolina. “Now all they have to do,” he toldThe Post and Courier, “is raise the money and go build it.”
One Month After “Cash Is Trash”, Bridgewater Now Sees Stocks Crashing As Much As 20% More
Back in late November, when billionaire Bridgewater founder Dennis Gartman Ray Dalio issued his latest broken record prognostication that cash continues to be trash, telling CNBC that “cash is not a safe investment“…
… we reminded our readers that “Every single time dalio says “cash is trash” markets crash”
Every single time dalio says “cash is trash” markets crash
Just over a month later, this was (partially) confirmed when the Nasdaq and S&P entered a correction, and the Russell and most Asian markets tumbled into a bear market, down 20% from recent highs.
But instead of taking the L and quietly moving on – and no longer trying to predict the future when it clearly has no idea what will happen (or even what is going on right now) Bridgewater – which once was the feared giant of hedge funds and has since devolved into a bit of a comic sideshow – decided to take an already deep hole and make it much deeper when the firm’s co-CIO, Greg Jensen, predicted that stocks will drop as much as 20% more before the Fed bails out the market.
That’d put the S&P 500 below 3,500, or close to where it was before the Covid-19 pandemic began two years ago. The benchmark U.S. index closed Wednesday at 4,350.
The question of what the strike price of the Powell Fed Put (or, as some now speculate, Call) is, has obsessed Wall Street now that stocks have tumbled: after all an entire generation of “traders” has no idea how to trade a market without explicit Fed support. Of course, in retrospect it would have been much more useful to have this discussion a month ago before everything crashed (a discussion we held in mid-December as stocks were trading around 4800 in “As Markets Swing Wildly Seeking The Fed Put, Morgan Stanley Has Some Bad News“).
So not even two months after Dalio’s latest “cash is trash” effusion, Jensen “explained” that the Fed has little reason to halt the violent selloff that has savaged the most speculative stocks and spurred equity volatility to a 12-month high. On repeating tired and tried talking point, the co-CIO argues that with inflation in the U.S. is running at the hottest in four decades, labor is scarce and companies are building inventories because of supply-chain threats, the Fed will keep hiking (which it does so is anyone’s guess: after all, as we noted earlier and as even Powell recognizes, its actions have no impact on supply-driven inflation).
“Some decline in asset prices is not a bad thing from the Fed’s perspective, so they’re going to let it happen,” Jensen, 47, told Bloomberg in a Zoom interview. “At these levels, it would take a much bigger move to get the ‘Fed put’ into the money. They’re a long way from that.”
And so, the experts at the fund whose learned boss urged everyone to dump cash in November, are out with even more ludicrous predictions, and Jensen now says that it would take a drop of 15% to 20% more from here to alarm the central bank, and even that would depend on how fast the bottom falls out from under the market. So far, Jensen said, the decline over the past few weeks has been “mostly healthy” because it has “deflated some of the bubbles,” such as cryptocurrencies (incidentally, back in November, Dalio was also pitching cryptos, so… there’s also that).
Of course, judging by Bridgewater’s dismal track record in recent years, the increasingly frentic – and incorrect – forecasts are hardly new. They do however suggest that the $150 billion asset manager is starting at even more losses. As Bloomberg notes, “Jensen represents the house view at the world’s biggest hedge fund, with about $150 billion in assets. And in Bridgewater’s analysis, much of what has been happening lately is simply math: Asset prices were elevated by injections of “excess liquidity.” Now that policy makers are withdrawing that monetary stimulus, “there aren’t enough buyers to make up the difference,” Jensen said.”
The result is what he calls a “liquidity hole” affecting both stocks and bonds.
Well yeah… of course: a five year old can tell you that – it’s called the market discounting some $2.5 trillion in liquidity drainage.
However the actual question is how soon with everything break as the Fed sets off on this massive tightening experiment. Our bet: a few more rate hikes, a few months of QT and it will all be mercifully over as the Fed Put vigilantes make it clear that “this aggression will not stand” and after a brutal correction, the Fed will capitulate again, as it always does.
But that does not stop Jensen from plowing on with what is some of the most naive, rudimentary analysis we have seen from a person of this caliber. And instead of thinking ahead, Jensen extrapolates current conditions indefinitely – as if $90 oil is sustainable in this economy, and as if the US won’t slump into a recession at this rate now that Biden’s stimmies are all gone – and told Bloomberg that anyone who expects the Fed to blink, as it did after the last pre-pandemic selloff in late 2018, is misreading the economy: “Things were different then. Inflation was below the Fed’s 2% target and big companies were buying back shares instead of adding capacity, stockpiling supplies and raising wages.”
Jensen wasn’t all wrong, however: he did correctly pinpoint the genesis of the Fed’s relentless bubble-blowing skills:
“Since the 1980s, problems have always been solved by easing. That was true fiscally and monetarily, and the countries that eased more did better than the countries that eased less,” he said. “We’re at a turning point now and things will be much different.”
Echoing what we said months ago (when we alone amid an army of incompetent economists and sellside analysts said inflation was not transitory but was here to stay) Jensen said that for the first time since Paul Volcker’s Fed of the early 1980s, inflation has accelerated so fast it’s become a political issue and Biden may well be calling Powell daily to do something about the current climate which is devastating for Biden’s polls and democrats in general.
Powell, speaking to reporters after the Fed’s meeting on Wednesday, acknowledged the central bank may have to jack up borrowing costs faster than the market anticipated to stop prices from spiraling higher. Of course, all of that will change once the US economy contracts and/or enters a recession, an outcome which we anticipate can become reality in just a few months.
But not Jensen, who made the deep hole even deeper and said the 10-year Treasury yield has to reach 3.5% or even 4% – up from less than 1.9% today – before private investors are ready to absorb all the government debt that the Fed has been monetizing.
In that scenario, with Treasury prices set to decline further, bonds fail as a hedge against stocks and the traditional 60/40 balanced portfolio is useless as a diversification tool. Jensen said a 1970s-style “stagflation” playbook is more appropriate – echoing what we said months ago when we were mocked for this view – and investors need to increase their commodity holdings (such as pushing Exxon since 2020), trade out of U.S. stocks in favor of international equities and use breakevens to combat inflation.
“Expecting the environment to feel like it did over the past couple of decades is a big mistake,” he said,
And incidentally, Bridgewater is wrong again because no matter how bad stagflation gets, if it means sacrificing the markets, the Fed will pick throwing retail under the bus any time: the last thing Powell will dare to do is undo decades of “wealth effect” creation just to offset inflation which everyone knows will reverse in very short course on its own due to the three D: demographics, debt and disruption.
Incidentally, those wondering where the market will truly bottom should look to the latest note out of Morgan Stanley’s Michael Wilson who has been spot on in his bearishness so far: he sees a fair value for the S&P around 4,000 today and then sliding more unless the collapse in PMIs is contained, which it will be as the alternative is a recession.
As explained in priorposts, in a lawsuit seeking all of the documents the FDA relied upon to license Pfizer’s COVID-19 vaccine, a federal judge shot down the FDA’s requested rate of 500 pages per month and instead ordered the FDA to produce at the rate of 55,000 pages per month starting on March 1.
Since the government has trillions of dollars of our money, it is putting it to good use by fighting to assure that the public has the least amount of transparency possible. To that end, it has now asked the Court to make the public wait until May for it to start producing 55,000 pages per month and, even then, claims it may not be able to meet this rate.
The FDA’s excuse? As explained in the brief opposing the FDA’s request, the FDA’s defense effectively amounts to claiming that the 11 document reviewers it has already assigned and the 17 additional reviewers being onboarded are only capable of reading at the speed of preschoolers.
Meanwhile…
As the FDA tries to obtain months of delay, guess who just showed upon in the lawsuit? Yep, Pfizer. And it is represented by a global chair and team from a law firm with thousands of lawyers. Pfizer’s legal bill will likely be multiple times what it would cost the FDA to simply hire a private document review company to review, redact, and produce the documents at issue. Within weeks, if not days.
Pfizer is coming in as a third party. But Pfizer assures the Court it is here to help expedite production of the documents. Sure it is! Where was Pfizer before the Court ordered the 55,000 pages per month? Right, doing what it normally does: letting the government work on its behalf – like the way the government mandates, promotes, and defends Pfizer’s product.
But the government did not please Pfizer this time and so here it comes, likely looking for a second bite at the apple. Of course the FDA consented to Pfizer appearing. You can read the response my firm filed to Pfizer’s motion , as well as all of the other relevant recent filings in the link provided below.
Let me end by noting that all of this insanity is simply in response to an attempt to obtain some basic transparency. This should again bring into sharp focus why the government should never coerce or mandate anyone to get an unwanted medical product or procedure. Just look at this circus – the government mandates Pfizer’s product, gives it immunity for any safety or efficacy issues, promotes its product using taxpayer money, gives Pfizer over $17 billion and then uses taxpayers’ money to fight to avoid providing even the most basic level of transparency to the public.
The introduction from the brief opposing the FDA’s request is below and you can find copies of all the relevant court filings (FDA Motion to Modify Scheduling Order, January 18, 2022 / Plaintiff Opposition to Motion to Modify, January 24, 2022 / Pfizer Motion to Intervene, January 21, 2022 / FDA Response to Pfizer Motion, January 25, 2022 / Plaintiff Response to Pfizer Motion, January 25, 2022) here:
It is understandable that the FDA does not want independent scientists to review the documents it relied upon to license Pfizer’s vaccine given that it is not as effective as the FDA originally claimed, does not prevent transmission, does not prevent against certain emerging variants, can cause serious heart inflammation in younger individuals, and has numerous other undisputed safety issues.[1] However, the FDA’s potential embarrassment over its decision to license this product must take a back seat to the transparency demanded by FOIA and the urgent need and interests of the American people to review that licensure data. The Court already recognized this unprecedented urgent need in its January 6th order directing the FDA to produce 55,000 pages per month.
The FDA now insists it must delay its first 55,000-page production until May 1, 2022 – four months after the Court entered its order. However, the FDA’s own papers seeking this delay make plain it can produce at a rate of 55,000 pages per month in February and March. The FDA affirms it has already “allocated the equivalent of nearly 11 full-time staff to this project” and that “a review speed of 50 documents per hour was within the normal range for document review in a complex matter” in private practice; and here the 50 document per hour rate would be faster since there is only a need to review for personally identifying information (“PII”) for most pages. Hence, if the FDA’s 11 full-time reviewers work only 7.5 hours per day and review 50 pages (not documents) per hour, the FDA could review over 88,000 pages per month in February and March. That is more than sufficient to produce the 55,000 pages per month currently ordered for these two months.
Instead of complying with this Court’s reasoned order, the FDA claims these 11 reviewers can only review a total of 10,000 pages per month. What the FDA does not say, and what basic math shows, is that a rate of 10,000 pages a month for 11 full-time reviewers amounts to only 5 pages per hour! This rate is made even more absurd because most of the pages the FDA will be reviewing during this period are repetitive data files that only require second level review to redact minimal amounts of PII that Pfizer may have left in the documents. FDA’s reality defying claim and contemptuous approach to its production obligations should not be countenanced. (Infra § I.)
It is also apparent that the instant demand is just the start of a campaign to delay the production ordered by the Court. In this first salvo, the FDA is not really asking the Court. It is instead expressly telling the Court it does not intend to produce more than 10,000 pages per month for February and March, and despite claiming it is making “unprecedented” efforts, the FDA repeatedly tells the Court: “It is not possible to guarantee that FDA will be able to fully comply” with the 55,000-page production rate thereafter. (Dkt. No. 38 at APPX004, APPX008.) Americans must follow the law and the FDA, a multi-billion-dollar agency, should similarly be given no safe harbor from complying with the orders of this Court. (Infra § II.)
The FDA should also be held to what it attests. The FDA, with over 18,000 employees and an over $3 billion discretionary budget, repeatedly assures the Court that it is taking steps to “marshal every possible resource available to it,” “acting with maximal urgency to assemble every possible resource available to it” and “putting every available resource at its disposal into its efforts to achieve compliance.” (Dkt. No. 37 at 10, 3, 10.) The FDA also attests that over the coming weeks, it will have 28.5 full-time people reviewing the documents. Working 7.5 hours per day for 20 business days per month, 28.5 people reviewing 50 pages per hour can review a total of approximately 213,750 pages per month. Putting aside that most of this production can be reviewed far faster than the rate of 50 pages per hour, Plaintiff asks that the FDA be held to its representations and be directed to produce at the rate of 180,000 pages per month starting in April. (Infra § III.)
The Court is, other than Congress, the only check on the FDA. In a free country, transparency is paramount, and the FDA has chosen to thwart transparency and the requirements of FOIA by anemically understaffing the office it maintains to respond to FOIA requests. It is akin to the boy that kills his parents and asks for sympathy for being an orphan. Decrying that this Court is now making it comply with the law – by actually producing documents in a timely manner – is ridiculous. It is also incredible for the FDA to claim that compliance here would harm its health policy objectives. Even if the FDA really does need to spend $4 to $5 million which, as shown below, is an absurd overestimate, that is an inconsequential amount of its overall $3.41 billion discretionary budget. Moreover, the issues with the Pfizer vaccine – including waning immunity, variants evading immunity, the failure to prevent transmission, myocarditis, and pericarditis – show that the FDA’s priority should be to address this product before rushing off to engage in other activities. (Infra § IV.)
For these reasons, as explained below, the Court should refuse to reduce the rate of production in February and March and should increase the rate of production for April and thereafter to 180,000 pages per month consistent with the FDA employing 28.5 full-time reviewers in the coming weeks to conduct the review and the fact that most of the pages need only be reviewed for PII.
[1] Reflecting the issues with this product, the FDA failed to send a representative to a federal court hearing in this matter on December 14th because of the “FDA’s protocols” regarding COVID-19. Meaning, despite the FDA’s claim the vaccine is “effective,” the FDA is apparently still scared to send a representative to the hearing. Its actions speak volumes and cast serious doubt on its words.
When President Bill Clinton tapped Stephen Breyer to fill a vacancy on the U.S. Supreme Court in 1994, he told the country that Breyer would be a justice who would “strike the right balance between the need for discipline and order, being firm on law enforcement issues but really sticking in there for the Bill of Rights.”
The news of Breyer’s impending retirement at the close of the Supreme Court’s current term gives us an opportunity to weigh Clinton’s words against Breyer’s record. Alas, the former president proved to be only half right. Breyer was certainly “firm” in his deference toward law enforcement. But that same judicial deference often led Breyer to do the opposite of “sticking in there for the Bill of Rights” when major Fourth Amendment cases arrived at SCOTUS.
Take Navarette v. California (2014). At issue was an anonymous and uncorroborated 911 phone call about an allegedly dangerous driver which led the police to make a traffic stop that led to a drug bust. According to the 5–4 majority opinion of Justice Clarence Thomas, “the stop complied with the Fourth Amendment because, under the totality of the circumstances, the officer had reasonable suspicion that the driver was intoxicated.” Law enforcement won big and Breyer signed on.
The deficiencies of that judgment were spelled out in a forceful dissent by Justice Antonin Scalia. “The Court’s opinion serves up a freedom-destroying cocktail,” wrote Scalia, who was joined in dissent by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan. “All the malevolent 911 caller need do is assert a traffic violation, and the targeted car will be stopped, forcibly if necessary, by the police.” That disturbing scenario, Scalia wrote, “is not my concept, and I am sure it would not be the Framers’, of a people secure from unreasonable searches and seizures.” Breyer was apparently untroubled by that Fourth Amendment–shredding scenario.
Notably, this was not the first time that Scalia was more “liberal” than Breyer in a 5–4 Fourth Amendment case. One year earlier, in Maryland v. King (2013), Breyer joined Justice Anthony Kennedy’s controversial majority opinion allowing police to conduct warrantless DNA swab tests incident to arrest.
“Make no mistake about it,” Scalia protested in dissent, joined (again) by Ginsburg, Sotomayor, and Kagan. “As an entirely predictable consequence of today’s decision, your DNA can be taken and entered into a national DNA database if you are ever arrested, rightly or wrongly, and for whatever reason.” Breyer was apparently untroubled by that disturbing scenario too.
Breyer’s retirement will be good news for the Fourth Amendment as long as President Joe Biden picks a replacement who resembles Scalia more than Breyer in these sorts of cases.
Is crime up or down? It’s complicated. We’ve been hearing a lot of panic lately about crime in San Francisco, often offered in service of some political ends. Folks suggest that criminal justice reform measures—or mere demands for them—make America more dangerous. That liberal/progressive policies are driving social unrest and violence. That police need more money and governments need more ways to invade privacy.
But in San Francisco—and a number of other cities, large and small—crime is actually down from pre-pandemic levels. And in the Bay Area and other areas around the country, crime data are much more mixed than much of the moral panic would have you believe. Some crimes are up from last year but down from 2019 and preceding years. In a lot of places, homicides are up but overall violent crime, and/or other types of crime, are down.
According to the latest data out of San Francisco, violent crime in 2021 was up 1 percent over 2020 levels, and property crimes were up 11 percent. But the crime rate in 2021 was still lower than crime rates in 2014 through 2019.
“From 2014 to 2019, between 56,000 and 63,000 total violent and property crimes were recorded. In 2021, there were a total of 49,685 recorded crimes,” SFGate.com reports.
Rapes and robberies last year in San Francisco were at their lowest level since 2014. “We had 204 rapes reported last year which is a little bit below where we were in 2020. We saw a significant decrease between 2019 and 2020,” San Francisco Police Chief Bill Scott said at a press conference. “We ended the year with 2,242 robberies, which was a slight decrease from the previous year.”
Burglaries were up 40 percent from 2019, but down from their 2020 levels. Homicides were also up from 2019 levels, but the same as they were in 2017 and lower than in 2016.
In the Bay Area, “many cities—San Jose and Berkeley, for two—enjoyed a second consecutive year of decreases in property crime. And even those that endured year-over-year increases still have not risen back to pre-pandemic peaks,” notesThe Mercury News. “Oakland saw a 7.5% increase in all property crime from 2020 but is still down 12.3% overall from 2019.…Even Walnut Creek—where a mid-November mass attack on a downtown Nordstrom reverberated nationwide—has seen property crime decline 9% from two years ago.”
All of this is to say that the narrative of a recent spike in crime across the board is just not accurate. And that’s not just true for San Francisco, but other areas around the country as well.
In Amarillo, Texas, homicides were up—21 last year, 15 in 2020—but overall “violent crime decreased more than 10% in 2021 compared to 2020…The department also reported an 8% decrease in property crime in 2021.”
In Los Angeles, crime last year was up from 2020 but lower than in 2019. “There were a total of 204,205 crime reports in Los Angeles last year, everything from vandalism to stolen cars to homicide. That’s a 4.9% increase from 2020, when the city spent several months on lockdown. But it’s 5.4% below 2019,” reports Crosstown.
Anti-Asian hate crimes spiking? In other things-are-more-complicated-than-they-seem news, San Francisco is reporting a 567 percent spike in hate crimes against Asian Americans and Pacific Islanders (a factoid that has garnered headlines across the country). Preliminary numbers from last year show 60 such victims, according to San Francisco Mayor London Breed. This is up from nine victims in 2020.
However, more than half of these crimes—mostly vandalism and some robberies—were committed by one person. That leaves us with much less of a general increase in anti-Asian hate crimes and more of a one-man spree.
“More than 30 of the 60 incidents were committed by the same offender. An individual we arrested last August,” Police Chief Scott said. That person—36-year-old Derik Barreto—was arrested and charged with four counts of second-degree burglary, 27 counts of vandalism, 31 counts of hate crime enhancement, 31 counts of being armed in the commission of a felony, and four counts of possession of burglary tools.
Breed blamed San Francisco’s rise in anti-Asian crimes on former President Donald Trump and his rhetoric around China and COVID-19. But as with previous “hate crime spikes” attributed to Trump, there’s not necessarily any evidence for this. And if it was the case, why did the number spike in 2021, not 2020?
What actually did change in 2021 was more focus on anti-Asian hate crimes, from San Francisco leaders and media and press around the country. For instance, there was a concerted push in San Francisco last year to get people to report hate crimes.
That the increase in anti-Asian bias incidents comes as people have been especially attuned to hate crimes in general and anti-Asian hate crimes in particular suggests a) more people may have come forward about incidents they normally wouldn’t have and b) police and prosecutors may have been more likely to categorize things as hate crimes than they did before.
Substack pushes back against calls to ban certain sorts of content or writers. “As we face growing pressure to censor content published on Substack that to some seems dubious or objectionable, our answer remains the same: we make decisions based on principles not PR, we will defend free expression, and we will stick to our hands-off approach to content moderation,” the company’s co-founders write. “While we have content guidelines that allow us to protect the platform at the extremes, we will always view censorship as a last resort, because we believe open discourse is better for writers and better for society.”
At Substack, we don’t make moderation decisions based on public pressure or PR considerations.
An important principle for us is defending free expression, even for stuff we personally dislike or disagree with. We understand principles come at a cost. ????
New Yorkers are fighting for the right to get legal advice from nonlawyers. “Rules in New York, as in most states, forbid practicing law without a license, and giving individualized advice on how to respond to litigation is generally considered practicing law,” notesThe New York Times. A nonprofit called Upsolve is challenging that practice:
On Tuesday, Upsolve took a step aimed at undoing the catch: It filed a lawsuit against the state attorney general’s office in federal court in Manhattan, arguing that barring nonlawyers from giving the kind of basic advice Upsolve would teach them to offer would violate the First Amendment….
Upsolve says a ruling in its favor would clear the way for thousands of lay professionals — social workers, clergy members, community organizers and the like — to help correct a gigantic imbalance in the legal playing field.
QUICK HITS
• Supreme Court Justice Stephen Breyer is retiring. People have already begun speculating about who President Joe Biden will nominate to replace him:
So it's probably Ketanji Brown Jackson. She got 53 votes including Lindsay Graham in 2021. GOP may be better served to let it go given it's replacing Breyer and keep pressing Biden on inflation/covid/economy and issues that will matter in Nov.
• Researchers have “identified biological factors that might help predict if a person will develop long Covid,” notesThe New York Times.
• San Jose “voted Tuesday night to require gun owners to carry liability insurance in what’s believed to be the first measure of its kind in the United States,” the Associated Press reports.
• ‘The typical U.S. home spent less than two weeks on the market in December, while home prices were up nearly 20% at the end of the month from a year earlier,” according to The Wall Street Journal. “In a testament to unmet demand, Redfin reported average U.S. rents saw their largest annual increase in December since February 2019, rising over 30% in nine major metro areas in December year over year.”
• “Much of Biden’s first year has been a simple continuation of his predecessor’s wrongheaded approach to U.S. trade policy,” writes Scott Lincicome, examining how Biden’s first-year trade record holds up to expectations.
• “Jex Blackmore, a Detroit activist and artist…ingested a mail-order abortion pill during a live interview with Fox 2′s Charlie Langton on Sunday,” MLive.com reports.
Included in the America COMPETES Act just introduced in the House, and which will very likely pass in some form, is a provision that would be disastrous not just for cryptocurrency but for privacy and due process generally. https://t.co/vLJLnIhQhBpic.twitter.com/1EC0SBaetk
27 Russian Diplomats Expelled From US – Embassy Laments “Very Bitter Event”
27 Russian diplomats left the United States on Wednesday after a prior State Department order had set a deadline of Jan.30 for their departure, at a moment the showdown at the Russia-Ukraine border continues, and amid deteriorating US-Russia relations.
Calling it a “very bitter event at our embassy,” Russian Ambassador Antoly Antonov said in a social media video of the diplomats departing on a bus to the airport: “Our comrades were forced, at the request of the Americans, to leave earlier than the period for which they came here.”
The US had framed the prior order to leave as being due to the expiring visas of over 50 diplomats, however, Russia has called the refusal to renew the visas effectively an expulsion.
“Back in September, we were invited to the State Department and given a list of 55 people,” Amb. Antonov described, according to an English translation. And the embassy said in a statement that the diplomats were “forced to leave earlier than their tenure expired.”
Russia was first notified in late November of last year that the diplomats must prepare to exit US soil. Amb. Antonov said at the time in an interview that “our diplomats are being expelled” and detailed that 27 diplomats and their families are due to be expelled from American soil.
This had followed two dozen Russian diplomats being told to leave in September, with the US refusing to renew their visas as is the normative practice. When that prior event happened, Antonov complained, “It has gotten to the point where the U.S. authorities cancel valid visas of spouses and children of our staff with no reasons provided. The widespread delays in renewing expired visas are also aimed at squeezing Russian diplomatic workers out of the country.”
The State Department at the same time has downplayed that the moves have been retaliatory, instead framing it as but the result of an expired, unrenewed visa issue.
Meanwhile, in Ukraine all US citizens in the country are being advised to make exit plans and leave…
“Our message now for any Americans in Ukraine is to strongly consider leaving,” Sec. of State Antony Blinken says amid threat of Russian invasion, says U.S. embassy in Kyiv will remain open. https://t.co/RlSrq2ZzXcpic.twitter.com/YHlcodNdAz
Ukraine’s government has protested the move, calling it “premature” – to which the State Dept responded as follows…
“These are prudent precautions that in no way undermine our support for, our commitment to Ukraine,” a senior official said. The decision was made “based on this military buildup, based on how we see these developments,” with the official calling it the “right moment.”
