Month: August 2022

Once a week, energy traders hop on a call with UK’s electricity network operator, National Grid, managers to ask a series of questions about the state of power markets. Bloomberg’s Javier Blas‘ latest opinion piece reveals some of these conversations between traders and managers that paint a rather dark winter for the UK. 

Here are a series of questions from power traders from last week’s call:

“Are you war-gaming possible options for if/when cross-border trading collapses under security of supply pressures this winter?”

 And another: “Can we have a session where we talk through the emergency arrangements?” 

Another participant said that the forecast for demand-and-supply electricity balance showed “how bad the winter could be for anyone who can do the maths.”

The same caller was blunt about the grid’s own predictions: “I don’t think you believe what you’ve written, and nobody else does.”

One trader asked a question about intervention during a winter crisis:

 “Based on where winter ’22 products are trading, where does this position yourself with respect to securing power over the winter?” asked one participant. 

Why are energy traders so concerned about grid instabilities in the months ahead? Well, UK power prices for winter are going parabolic at about £1,000 per megawatt hour, up from £242 in June. The move is due to declining Russian energy supplies to Europe ahead of winter. 

As Blas pointed out, the British government is offering an optimistic tone about there’s nothing to worry about: 

“Households, businesses and industry can be confident they will get the electricity and gas that they need over the winter,” Downing Street said earlier this week. “That’s because we have one of the most reliable and diverse energy systems in the world.”

Traders are also concerned that if a system-stress event hits a neighboring country and cross-border electricity flows are switched off, that could spark even more chaos for the UK grid. 

“Please, the market needs to understand more fully how interconnectors are to be used in periods of very high prices and potential generation shortfall,” one market participant said last week.

Traders also discussed demand destruction by households and businesses because of soaring power costs. 

“What level of demand reduction, demand destruction, are you forecasting for the winter ahead from commercial industrial consumers as a price response?” was one recent example.

Another repeated the request: “What demand destruction, if any, is included in your demand forecast for this winter for residential and industry?” 

Blas said grid managers could not forecast any figures related to demand destruction to the traders. 

He concluded with three critical takeaways after listening to several calls with traders and grid managers: 

 First, the looming power emergency is worse than many industry executives publicly acknowledge, and a lot more dangerous than the government admits. Second, high prices are a big problem, but security of supply is at risk, too. Third, time is running out to prepare before temperatures start to drop.

Blas warned: “European governments have a duty to come clean with their voters about the magnitude of the coming crisis.” 

Authored by Techno Fog via The Reactionary (emphasis ours),

The DOJ just released the affidavit submitted in support of the search warrant of former President Trump’s Mar-a-Lago residence.

Here it is for download.

As expected, the judge allowed the Government to heavily redact the affidavit before it went public. In yesterday’s order, the judge found that parts of the affidavit must remain sealed because:

disclosure would reveal (1) the identities of witnesses, law enforcement agents, and uncharged parties, (2) the investigation’s strategy, direction, scope, sources, and methods, and (3) grand jury information protected by Federal Rule of Criminal Procedure 6(e).

This aligns with the DOJ representations that (1) information in the affidavit “could be used to identify many, if not all” of the witnesses; (2) the affidavit would provide a “roadmap for anyone intent on obstructive the investigation.”

Affidavit allegations:

• Classified materials and “evidence of obstruction”

• The contents of the boxes reviewed by the FBI

• Discussions of declassification.

 

• Allegations of improper storage of materials.

• Details regarding the search of Trump’s office.

Other thoughts.

Some aren’t so convinced. According to The Wall Street Journal, Kash Patel, one of the foremost experts on Russiagate, has stated he didn’t know what was in the boxes taken from Mar-A-Lago by the FBI. The New York Times also has doubts about whether the documents included Russiagate materials:

None of those documents or any other materials pertaining to the Russia investigation were believed to be in the cache of documents recovered by the F.B.I. during the search of Mar-a-Lago, according to a person with knowledge of the situation.

In fact, many of the Russiagate documents declassified by Trump may already be in possession of the National Archives. According to June 2022 reporting from Politico:

Former President Donald Trump has told the National Archives to grant journalist John Solomon access to non-public administration records, according to Solomon and a spokesperson for the former president.

Solomon said Trump specifically directed the Archives to give him access to documents related to the Russia probe that were declassified in the final days of his administration. And he said the Archives have been cooperative and accommodating.

Then there’s the issue of classification. Does it matter if the documents at Mar-A-Lago were classified or unclassified?

As we stated when the warrant was released, the statutes in question do not necessarily require the documents to be classified. One of the statutes mentioned in the warrant – 18 USC § 2071 – prohibits the removal of “any record, proceeding, map, book, paper, document, or other thing, filed or deposited with any clerk or officer of any court of the United States, or in any public office. . .” Prosecution under § 2071 does not depend on the classification of the document.

The Espionage Act (18 USC § 793) is also referenced in the warrant. Over at Lawfare they guessed that “the part of the Espionage Act that is likely most relevant in this case is § 793(d).” They ended up being wrong. The affidavit cites to 793(e), which prohibits the unauthorized possession and retention of documents “relating to the national defense.”

The Espionage Act does not contain the term “classified.” And although the law’s application considers the status of classification, there’s a question of whether the documents must be classified for charges to be brought. See US v. Morison, 844 F.2d 1057, 1076 (4th Cir. 1988) (discussing the narrowing of the definition of documents “relating to the national defense” to those documents “which had been ‘closely held’ by the government and was ‘not available to the general public’”). This leads us to ask whether the government can consider a document to be “closely held” if it isn’t classified.

The affidavit answers that question, stating “information related to the national defense” has been construed broadly by the courts.

Make no mistake: the Garland DOJ would see no issue with prosecuting for the retention of unclassified documents. But maybe they don’t need to go that far, as they’re alleging the materials at Mar-a-Lago were classified. From the DOJ’s April 29, 2022 letter to Trump’s attorneys: “among the materials in the boxes are over 100 documents with classification markings, comprising more than 700 pages.” And back in May 2022, NARA stated it had “identified items marked as classified national security information, up to the level of Top Secret and including Sensitive Compartmented Information and Special Access Program materials.” And now we have the affidavit’s allegations that the materials were classified.

Read more here…

[ZH: Some hot takes from The Federalist‘s Sean Davis]

And a Breitbart article pic.twitter.com/EJHjQrh5WB

— Jeff Cunningham (@jeffrygc) August 26, 2022

According to the government’s own affidavit demanding authority to raid Trump’s home, the unprecedented raid was necessary because a bureaucrat at the National Archives was mad that Trump had “newspapers, magazines, [and] printed news articles.” https://t.co/RwcfYi8ADP pic.twitter.com/OSpDrc1KeJ

— Sean Davis (@seanmdav) August 26, 2022

Transparency is one of DOJ’s and FBI’s passions. pic.twitter.com/1friuvyTyG

— Sean Davis (@seanmdav) August 26, 2022

The U.S. and China, in their first measure of any type of diplomatic progress in months, appear to have reached a preliminary agreement on audit inspections for U.S. listed, China-based companies. 

China-linked U.S. listed stocks are rocketing higher in the pre-market session as a result. The KraneShares CSI China Internet ETF was up almost 5% on the news, as China-based tech stocks like Alibaba, JD and others were bid higher. 

Even Chinese equities caught a bid, with the iShares China Large-Cap ETF rising almost 3% pre-market:

“Beijing and Washington have reached a preliminary agreement to allow American officials to review audit documents of Chinese businesses, according to American officials,” Bloomberg reported early on Friday morning.

SEC Chair Gary Gensler said in a statement: “This agreement marks the first time we have received such detailed and specific commitments from China that they would allow PCAOB inspections and investigations meeting U.S. standards.” It “will be meaningful only if the PCAOB actually can inspect and investigate completely audit firms in China. If it cannot, roughly 200 China-based issuers will face prohibitions on trading of their securities in the U.S. if they continue to use those audit firms.”

The news follows reports on Thursday that the two countries were close to getting a deal done. The agreement was officially announced by the Securities and Exchange Commission and Public Company Accounting Oversight Board on Friday. 

The news was also confirmed by the China Securities Regulatory Commission, who wrote put an official statement on their website Friday morning. 

#BREAKING

The China Securities Regulatory Commission and the Ministry of Finance signed an audit supervision cooperation agreement with the US PCAOB on Aug 26, and relevant cooperation will be launched soon, according to a statement on the CSRC’s website. pic.twitter.com/UpPfQWRqoG

— YUAN TALKS (@YuanTalks) August 26, 2022

Authored by Lance Roberts via RealInvestmentAdvice.com,

The bear market is over. While that statement fills the mainstream media, it remains a hotly debated question in every media forum. It is an interesting point considering that it was just in June we were answering the question of “when will this bear market end?”

“Bear markets are not uncommon and follow preceding bull market excesses. Over the last 120 years, there have been 14-bear markets that averaged roughly a 33% decline from peak to trough.”

It only took a 50% retracement rally from the lows in July to get the bulls declaring the bull market is over. As I discussed in May, such was not surprising, stating that“investor sentiment was so bearish, it’s bullish.”

“As Bob Farrell’s rule number-9 states:

‘When all the experts and forecasts agree – something else is going to happen.’

As a contrarian investor, excesses get built by everyone being on the same side of the trade. Currently, everyone is so bearish that the reflexive trade will be rapid when the shift in sentiment occurs.

The takeaway from this commentary is not to let media headlines, financial narratives, or concerns over long-term issues like valuations, economics, or geopolitical events impact the decision-making process in your portfolio strategy.

There are plenty of reasons to be very concerned about the market over the next few months. However, markets can often defy logic in the short term despite the apparent weight of evidence to the contrary.“

With everyone back in the bullish camp, such would suggest the risk/reward balances have flip-flopped.

But is that case? The short-term technical backdrop does support that view.

Technically Speaking – The Bull Market Is On.

From a technical perspective, a rising bed of evidence supports the “bear market is over” claims. One such bit of evidence comes from Ryan Detrick, CMT, who recently stated:

“Friday triggered a rare, but quite bullish signal. More than 90% of the components in the S&P 500 are now above their 50-day moving average. As you can see, these signals take place in strong uptrends historically.”

However, it is just the number of stocks above the 50-dma but also the market itself technically performing better. As noted above, an important indicator is a 50% decline retracement. When stocks have historically accomplished such a reversal, markets performed better over the next 12 months.

“Since WWII, every time the S&P recovered 50% of the bear market price decline, while the 500 may have re-tested the prior low, it never set a lower low,” Sam Stovall, Chief Investment Strategist at CFRA Research

Such is what happened in mid-August as the market rallied to its 200-dma.

While such a technical measure has a strong track record of suggesting the lows are in, it does NOT mean the market can have a significant pullback.

“Prior 50% retracements in 1974, 2004, and 2009 all saw decent shakeouts shortly after clearing that threshold.” – Jonathan Krinsky, Chief Market Technician at BTIG

However, there are concerns with the rally. As shown in the middle panel, one such worry is the lack of volume. While the market surged higher in August, on balance, volume barely budged. Such suggests that, at least short-term, commitment to rally could be limited. However, with the market well above the 50- and 100-dmas, pullbacks should be contained to the current uptrend.

While the short-term technicals are indeed bullish and argue for further gains over the next 12 months, such does not preclude another “bearish decline” in the markets first.

Bear Market Over? Maybe Not.

My colleague, Doug Kass, recently made an excellent point.

“While I thought that the move lower in the market in June provided a good entry point, based upon our calculus of upside reward vs. downside risk – the speed and magnitude of the strong advance during the month of July surprised me.

Indeed, the swiftness and size of the rise in equities last month have recently driven the markets back to valuation levels that concern me – reducing the general attraction of equities and posing the risk of more negative outcomes for stocks.

I now believe that risk assets are at risk. It should be clear that in observing the unusual market volatility and frenetic weekly/monthly moves that we are not in our father’s market – things have changed as markets have grown increasingly manic.“

Indeed, the markets have grown “manic,” swinging wildly from extreme pessimism to optimism in very short time frames. Such is not the basis on which investing activity resides but rather where speculation abounds in its purest form.

Over the next 12 months, the “bear market is over” thesis will depend much on the Federal Reserve, Government policies, and inflation. The recent passage of the “Inflation Reduction Act” will increase taxes on corporations and households. Such will reduce growth and profit margins along with stubbornly high inflation.

Such is an important backdrop. The markets are pricing earnings of roughly $214 per share by the end of 2023, down from $242 in July. However, if the Fed continues its fight against inflation and triggers a recession, earnings could drop to $188/share. At a generous forward multiple of 18x those earnings, you are looking at a fair market calculation of 3400 on the S&P 500 index.

Not surprisingly, as I noted recently, earnings are already declining in anticipation of slower economic growth while stocks have rallied solely on hopes of a “Fed pivot.” Should inflation remain persistent, taxes rise, and the Fed continues to extract monetary accommodation from markets, a further reversion is possible.

Of course, while every market environment is different, one key element that defies the “bull market is over” thesis remains.

Don’t Discount The Fed, Yet

As is always the case, the bearish argument is grounded more in the macroeconomic, monetary, and financial fundamentals. While the bulls are ramping up equity risk in hopes of a “Fed pivot,” there is little indication from the Fed that such is likely anytime soon. In fact, from a historical perspective and even recent comments, the Fed’s focus is singular on bringing inflation down to its 2% target. As noted, even if CPI prints at 0.2% every month, it will take until the end of 2023 for inflation to decline to the Fed’s target.

Furthermore, the Federal Reserve is not keen on running a $9 Trillion balance sheet. The Fed needs a higher Fed Funds rate and reduced balance sheet to engage those policy tools to offset the next recession. Equities are at risk as the Fed’s inflation fight will trigger a recession. We can “review the tape” of the 1970s to see that bear markets and recessions were common when the Fed was hiking rates and combating inflation.

However, when it comes to equity risk, it is corporate earnings that will drive equity prices. As the Fed hikes rates to slow economic activity and potentially cause a recession, such will translate into slower earnings growth and reduced profit margins. Given that valuations are near 30x earnings currently, such suggests that stocks will need to reprice lower. The 6-month annual rate of change of the Leading Economic Index (LEI) supports that thesis, meaning earnings will decline over the next two quarters.

Whether the bull or bear market view wins out will only be found out in time. However, as noted, while the bulls currently control the technical picture, the Fed still has control of the macro environment. While we will continue to trade the markets tactically in the short term, in our view, there is still a risk of a more profound decline unless the Fed changes course in short order.

We will have to wait and see who wins the “bull market is over” debate.

Donald Trump’s 2020 presidential campaign rejected an offer to buy the diary of President Joe Biden’s daughter, Ashley, and instead urged the would-be sellers to surrender it to the FBI.

As Just the News notes, court filings from the Southern District of New York reveal that Aimee Harris and Robert Kurtlander – who pleaded guilty to stealing the diary (which Ashley Biden left behind at a friend’s house in Delray Beach, FL).

“On or about September 6, 2020, AIMEE HARRIS and ROBERT KURLANDER, the defendants, attended a political fundraiser in Florida meant to benefit the campaign of an individual [Trump] who was running for office against [now-President Joe Biden]. HARRIS and KURLANDER attended the fundraiser with the intent of showing the Victim’s stolen property to a campaign representative of [Trump], hoping that the political campaign would purchase it,” read the filings.

“On or about September 10, 2020, a representative of [Trump’s] political campaign conveyed to AIMEE HARRIS and ROBERT KURLANDER, the defendants, that the campaign was not interested in purchasing the property and advised HARRIS and KURLANDER to provide the items to the Federal Bureau of Investigation (‘FBI’),” the document continues. “KURLANDER texted HARRIS, “[Trump] campaign can’t use it. They want it to go to the FBI. There is NO WAY [Trump] can use this. It has to be done a different way.”

So – more or less the opposite of paying a British spy to fabricate salacious lies and covertly spread them to the FBI and the media.

As we noted on Thursday,

Aimee Harris, 40, and Robert Kurlander, 58, admitted they took part in a conspiracy to transport stolen materials from Florida, where Ashley Biden had been living, to New York, according to the New York Times.

“Harris and Kurlander stole personal property from an immediate family member of a candidate for national political office,” said Damian Williams, the U.S. attorney for the Southern District of New York.

The pair eventually sold the diary to Project Veritas, which declined to publish it (and were still raided by the Biden DOJ). On Oct. 24, 2020, National File published excerpts – and the full diary two days later. While treated as potentially fake at the time, we now know that the contents are legit – including claims that Joe took ‘probably inappropriate’ showers with Ashley, and that she believes she was sexually molested as a child.

Entries in the diary include the author revealing she believes she was sexually molested as a child and shared “probably not appropriate” showers with her father, some that detail the author’s struggle with drug abuse and the author’s crumbling marriage with multiple affairs, along with entries showing the family’s fears of a potential scandal due to her brother’s new home, and those that show a deep resentment for her father due to his money, control, and emotional manipulation. –National File

What are the odds that both Biden kids abandoned evidence that would be highly damaging to their father in the runup to the 2020 election, forcing the intelligence community and the MSM to coordinate massive damage control campaigns?