Month: May 2024

Donald Trump has added roughly $1.8 billion more to his net worth after regulatory filings show that he increased his stake in Truth Social by a significant degree – bringing the former president’s ownership to nearly 65% in Trump Media & Technology Group (TMTG).

Trump secured an additional 36 million shares of TMTG, bringing his stake to 114.75 million shares, according to an April 30 filing with the SEC. According to the latest price of nearly $50 per share, Trump’s stake in TMTG is valued at around $5.7 billion.

The additional $1.8 billion was secured through 36 million additional “earnout shares” granted if TMTG hit certain performance metrics over a certain period, according to an April 15 filing. That said, Trump can’t sell any shares due to a six-month lockup agreement.

As the Epoch Times notes further, TMTG shares have been on a roller-coaster ride since the company listed on Nasdaq last month through a merger with a special purpose acquisition company (SPAC) and was snapped up by Trump supporters and speculators.

After the initial surge of interest, TMTG shares pulled back to around the $62 mark, where they traded until news broke on April 1 that, in 2023, the company suffered a $58 million loss.

Word of the loss sent its stock price on a downward trajectory, to $22.84 by April 16, which marked a bottom.

Since then, TMTG shares have rallied, with only one meaningful pullback between April 19–23, and are now trading at $49.90 per share, the highest since an April 3 close of $48.81.

Much of the $58 million loss that sent the stock price falling on April 1 appears to be related to an interest expense of $39.4 million on its outstanding debt, according to the 8-K filing. In 2022, the company made a net profit of $50.5 million.

The former president said on April 4 that media fixation on the $58 million loss was misguided. He touted TMTG fundamentals—which he said include over $200 million cash and no debt—as “very solid.”

TMTG CEO Devin Nunes echoed that in an April 1 statement: “Closing out the 2023 financials related to the merger, Truth Social today has no debt and over $200 million in the bank, opening numerous possibilities for expanding and enhancing our platform.”

“We intend to take full advantage of these opportunities to make Truth Social the quintessential free-speech platform for the American people,” he added.

TMTG’s meteoric rise and subsequent wobble sparked massive interest in shorting the stock—meaning betting money on its potential price decline.

Mr. Nunes expressed concern about “naked” selling of TMTG stock, which is the practice of traders selling shares of a company without borrowing them first, according to the letter.

The tech CEO added that the company has become the “single most expensive stock to short in U.S. markets” as of early April, arguing that traders now “have a significant financial incentive to lend non-existent shares” of the stock.

Pressing the issue further, TMTG issued a notice to DJT investors on April 23, highlighting steps they can take to prevent the lending of their shares by brokerage firms for the purpose of short selling.

“TMTG wants to clarify that brokerage firms may facilitate short selling in DJT shares by lending DJT shareholders’ shares held in margin accounts,” the notice reads.

“Through this practice, brokerage firms earn an alternative source of revenue by ‘lending’ shares to sophisticated and institutional investors who are betting that the stock’s price will fall. If the stock price in fact falls, then the brokerage firm and the sophisticated and institutional investors will profit while retail investors will not,” it added.

To prevent their shares from being loaned out for the purpose of short selling, DJT investors were advised to hold their shares in cash accounts at their brokerage firms, rather than in margin accounts.

They should also opt out of any securities lending programs, according to the notice.

Authored by Simon White, Bloomberg macro strategist,

The largest firms in the US are unsurpassably pulling ahead of their smaller rivals by earning more, investing more, holding more cash and buying back more of their stock.

The bull market is thus likely to remain historically lackluster and less robust as smaller companies continue to lag their bigger counterparts.

They say the rich get richer, and nowhere is that more true than for the most-valuable firms in the US. The “Magnificent Seven” is by now a well-worn moniker for a septet of some of the biggest companies in the world, such as Nvidia, Apple and Amazon.

Yet the widening leadership that the largest firms already enjoy extends beyond the monopolies or oligopolies that benefit many of them. They are also bolstering their financials and investing in the future in such a way that they are leaving their smaller brethren in the dust, rendering their lead invulnerable.

Large-cap indexes in the US have never been so concentrated, with the Magnificent Seven accounting for 27% of the S&P 500’s market cap. The outperformance really began to take off in the pandemic. Expanding to the largest 50 stocks in the S&P, we can see these began to significantly outpace the index’s smallest 250 members after 2020.

What lies behind this dominance? There are at least five reasons:

• Massive loosening of monetary policy in the pandemic

• The US running its largest ever pro-cyclical deficit

• Tech firms benefiting from mass working-from-home during Covid

• Companies taking advantage of the pandemic disruptions to raise margins by almost more than they ever have before – with the largest firms taking advantage of monopolies to raise prices the most

• The AI boom kickstarted by ChatGPT

These advantages are allowing the largest firms to move into an unbeatable position, condemning the smallest ones to playing permanent second fiddle. Such a set-up means the bull market is fated to be mild compared to historical bull runs, as well as being less robust.

Market concentration can also be seen in earnings, with the largest 50 firms accounting for 35% of the S&P’s total Ebitda. An acceleration in earnings at the largest firms since the pandemic is fortifying that effect. The top 50’s Ebitda has risen over 3.5x since 2020, while it has only doubled for the smallest 250 companies in the S&P.

Those earnings are further ingraining big firms’ advantage. They are now outspending their smaller cousins on future investment on an epic scale. Tech firms are ploughing money into GPU chips, data centers and energy production in a way that makes it increasingly impossible for others to ever catch up – not only in technology, but across the economy as AI gnaws away more and more at the need for many jobs.

 
The largest firms are also bolstering their cash positions. While smaller companies’ cash and marketable securities is up only marginally since the pandemic, the pile at large firms is going from strength to strength and is on a strong upward trend. The biggest 50 companies in the S&P hold 53% of the index’s total corporate cash, compared to only 8% for the smallest 250.

Having cash is essentially being long volatility. If anything unexpected happens, you are in a better position to deal with it. A financial shock causes margins to rise? That cash is there to cover it. A rival goes bust? The cash can be used to acquire it on the cheap. Smaller firms are increasingly short volatility and are vulnerable to or are unable to capitalize from unexpected shocks.

This cycle has been dominated by rising rates, so it’s no surprise interest expenses have increased across the board. The largest and the smallest firms have seen their quarterly interest costs climbing by about $7-8 billion since the pandemic.

Yet once again, the largest firms come out on top. If we look at interest coverage, i.e. the ratio of Ebit to interest expense, the biggest companies’ coverage has been pretty stable, while the ratio for the smallest has been falling. In level terms, the difference is even more stark, with the biggest companies’ earnings covering their interest 25 times, versus only six times for their smaller counterparts. Even taking into account the extra interest received by corporates, the largest companies still come out on top.

Furthermore, both small and large firms have taken on more debt in recent years, but bigger companies are less vulnerable to debt downgrades as their cash position has risen even more relatively.

If all that is not enough to make the largest companies’ shares more attractive, they are also diverting more of their accelerating earnings to buying back their stock, mechanically helping to boost their price through reducing the share count. Smaller companies have not had the wherewithal to match them, even though in the years before the pandemic total buybacks were similar for small and large firms alike.

Like a camel train in the desert, smaller firms are at the back and falling further behind. This has implications for the bull market. The current one is mild compared to previous episodes, consistently lagging the average bull market over the last 35 years.

But a look under the hood shows why. The biggest stocks are now cleanly outperforming the average bull advance.

However, the smallest S&P stocks are heavily lagging behind their average bull performance.

Without any significant change, the bull market is likely to continue to pale next to the more virile examples in recent decades.

That’s not to say the largest stocks are immune to a correction or periods of underperformance.

It certainly doesn’t help that they are viewed as the most crowded and consensus trades among US fund managers (according to BofA’s Global Fund Manager Survey).

Source: BofA

But it’s difficult to see — other than through their own unforced errors, or a complete reappraisal in attitudes to the near-term capabilities of AI and other new tech — how small companies can catch up on their larger rivals. Big is beautiful — and most probably now unassailable.

What goes up, must come down.

Cocoa prices turned lower on Thursday, extending a weekly decline that is slated to be the largest on record due to the evaporation of liquidity from large traders. 

Futures in New York plunged as much as 9.3% to the lowest level since mid-March and have tumbled 37.5% from the peak of a little more than $12,000 a ton in mid-April. 

If losses are sustained through Friday, then this week’s decline of about 30% will be the largest on record. 

“Price moves have also been more erratic as a liquidity crunch upended the market after it became more expensive for traders to maintain their positions,” according to Bloomberg. 

Jack Scoville, vice president at Price Futures Group, said the downward swings were happening “in a rather dramatic way” because of dwindling liquidity. He noted prices could still be “mostly a correction” and bulls still could push prices to near record highs. 

This week’s Hightower Report report showed that “commercial firms are delaying some of their purchases of West African cocoa until next season, which has pressured the cocoa market.” 

Judy Ganes, president at J. Ganes Consulting, said bulls need a “new spark” of bad weather reports in West Africa to bottom out prices. 

“Bull markets need to be constantly fed to be sustained,” and the multi-month price spike has created a “vacuum” from a lack of new buyers, Ganes said. 

Despite the market turmoil this week, Oil trader Pierre Andurand still has a $20,000 price target for later this year. 

Rep Jim Jordan (R-OH) has released several new pieces of previously unseen information revealing what Elon Musk called a “smoking gun” in regards White House pressure on Facebook to censor the lab leak theory of Covid-19.

First, Jordan shares a text message from Mark Zuckerberg to Sheryl Sandberg, Nick Clegg and Joel Kaplan – the company’s highest-ranking executives at the time, in which he asks if Facebook can tell the world that “the [Biden] WH put pressure on us to censor the lab leak theory?” – hours after Biden accused Facebook of “killing people.”

On July 16, 2021, Mark Zuckerberg texted Sheryl Sandberg, Nick Clegg, and Joel Kaplan.

Three of the highest ranking executives at Facebook.

Could Facebook tell the world that “the [Biden] WH put pressure on us to censor the lab leak theory?” pic.twitter.com/B1Wno3ayTW

— Rep. Jim Jordan (@Jim_Jordan) May 1, 2024

 Clegg responded that the Biden White house is “highly cynical and dishonest,” while Sandberg said that they were being scapegoated because the White House wasn’t hitting its vaccination numbers.

Facebook felt that they had been combatting alleged misinformation—aka censoring Americans—all year! pic.twitter.com/HQxQKrwX5z

— Rep. Jim Jordan (@Jim_Jordan) May 1, 2024

Facebook felt, in fact, that they had been ‘combating misinformation,’ (aka censoring Americans) all year.

Since February 2021, the company had been censoring the “Wuhan lab leak theory” “in response to … tense conversations with the new [Biden] Administration.” pic.twitter.com/lB9wg7tlDe

— Rep. Jim Jordan (@Jim_Jordan) May 1, 2024

Then in late May of 2021, Facebook finally stopped removing content regarding the lab leak theory – though they did demote it. When employees told Zuckerberg about the reversal and explained why they censored the lab leak theory in the first place, Zuckerberg replied that this is what happens when Facebook “compromises [its] standards due to pressure from an administration.”

These documents show the CHILLING EFFECT government coercion has on free expression.

Facebook knew the White House wanted them to censor, but they didn’t exactly know what or how much.

— Rep. Jim Jordan (@Jim_Jordan) May 1, 2024

According to Elon Musk, this is a “Smoking gun First Amendment violation.”

Smoking gun First Amendment violation

— Elon Musk (@elonmusk) May 2, 2024

We know the feeling!

Oh yeah, that https://t.co/w1mYccdhLK pic.twitter.com/Y6v64yAy6J

— zerohedge (@zerohedge) May 2, 2024

 

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A top scientist said in newly disclosed testimony that a lab origin for the virus that causes COVID-19 is possible, citing how Chinese scientists operated in less-than-ideal conditions.

“You can’t rule that out,” Ralph [‘humanized mice for testing bat Covid‘] Baric, a University of North Carolina professor and member of the U.S. National Academy of Sciences, said in the testimony.

Mr. Baric pointed to how researchers at the Wuhan Institute of Virology, located near where the first cases of COVID-19 were detected, conducted experiments on viruses under biosafety level two conditions, rather than the biosafety level three conditions typically employed elsewhere.

Mr. Baric has for years worked with Shi Zhengli and other Wuhan scientists, testing enhanced viruses in work they say helps prepare for outbreaks by making it easier to develop countermeasures such as vaccines.

Ms. Zhengli and other scientists in Wuhan were doing culturing work under biosafety level two conditions into 2020, “which I thought was irresponsible,” Mr. Baric said. That was “one of the main reasons why I felt that the potential laboratory escape hypothesis shouldn’t be, in essence, put under the rug.”

He was speaking on Jan. 22 to the U.S. House of Representatives Select Subcommittee on the Coronavirus Pandemic. The panel released the transcript on May 1.

Mr. Baric, who holds a doctorate in microbiology, told the subcommittee that he favored the theory that SARS-CoV-2, the virus that causes COVID-19, has a natural origin due in part to the odds being tilted that way.

“What’s more likely, is it a lab leak or is it natural processes? You’re looking at … a million exposures [between nature and humans] occurring over 17 years versus what happens in a laboratory setting,” Mr. Baric testified. He said that the diversity in nature ran hundreds of millions of times larger than the viruses in the Wuhan Institute of Virology. “If you consider that, it’s more likely to be a natural event than it is to come out of the laboratory,” he said.

Experts around the world remain divided on the origins of the pandemic. Some believe the available evidence supports a lab origin, highlighting how Chinese authorities destroyed evidence from the Wuhan Institute of Virology and the lower safety standards there. Others say data from a wet market in Wuhan suggest a natural origin.

Mr. Baric said he reviewed the data from the market and described it as showing the market was a “site of amplification.” But he noted that the studies suggest cases there didn’t appear until December 2019, while other papers have indicated cases started earlier in China.

“Clearly, the market was a conduit for expansion,” he said. “Is that where it started? I don’t think so.”

Peter Daszak, president of the EcoHealth Alliance organization—which for years sent U.S. taxpayer money to the WIV—signed an open letter published by The Lancet in 2020 that said, “We stand together to strongly condemn conspiracy theories suggesting that COVID-19 does not have a natural origin.”

Questioned about the definitive statement, Mr. Daszak told the panel on Wednesday that “we take all theories seriously” and that a lab origin for SARS-CoV-2 remains “possible but extremely unlikely, based on the evidence we have.”

“I just don’t think the data are there to support that. And I think that the evidence that this came from a natural spillover is huge and growing every week,” he added.

Mr. Baric said he was asked to sign the Lancet letter but declined because of his work with WIV. Mr. Daszak did not disclose his work with WIV in the conflicts of interest section. Mr. Baric instead signed a letter calling for an investigation into the origins that said “theories of accidental release from a lab and zoonotic spillover both remain viable.”

John Ratcliffe, a former director of national intelligence, told the subcommittee in 2023 that the lab leak theory “is the only explanation credibly supported by our intelligence, by science, and by common sense.” A declassified assessment that year said five intelligence agencies assess natural origin as more likely while two others lean towards a lab origin. Most agencies say the virus was not genetically engineered and all believe it was not developed as a biological weapon.

Xavier Becerra, the U.S. health secretary, said at a summit in April that any ideas about the origin are “speculation” because China has withheld some data. “We’re never going to quite know unless China opens up some more,” he said.

With most of the megatechs having already released earnings, all eyes were on the last Mag7 to report during the heart of earnings season (there is still Nvidia, but due to a calendar quirk that’s not for a month) which is also the company which until recently was the undisputed market cap world champion until it was overtaken by the mAIcrosoft juggernaut: Apple. Having failed to enjoy the same AI-driven euphoria some of its giga cap peers, Apple stock had languished for months and was in fact relegated by Goldman recently to the Meh 3 (AAPL, GOOGL, TSLA) and away from the Fab 4 (META, NVDA, MSFT, AMZN). But much of that was recovered after hours when AAPL not only reported blowout earnings but unveiled a massive, record-breaking $110 billion stock buyback program (because when your best product is the 5 pound neck brace known as the Vision Pro you have no choice but to buy your own stock since nobody else will do it for you) which sent the stock soaring after hours.

Here is what AAPL reported for the quarter ended March 31:

• EPS $1.53 vs. $1.52 y/y, and beating the estimate $1.50
• Revenue $90.75 billion, down 4.3% y/y primarily on China weakness, but beating the recently lowered estimate of $90.33 billion
  • Products revenue $66.89 billion, -9.5% y/y, just missing the estimate $66.95 billion
    • IPhone revenue $45.96 billion, -10% y/y, beating estimate $45.76 billion
    • Mac revenue $7.45 billion, +3.9% y/y, beating the estimate $6.79 billion
    • IPad revenue $5.56 billion, -17% y/y, missing estimate of $5.91 billion
    • Wearables, home and accessories $7.91 billion, down 9.6% y/y, and badly missing estimate $8.29 billion now that the Vision Pro is a confirmed flop
  • Service revenue $23.87 billion, +14% y/y, beating the estimate $23.28 billion
  • Greater China rev. $16.37 billion, -8.1% y/y, beating the estimate $15.87 billion. This was probably the one item everyone was closely watching due to the big swing impact the recent plunge in China sales would have on the company. It ended up being not as bad as feared.

Going down the line:

• Total operating expenses $14.37 billion, higher than the estimate $14.33 billion
• Gross margin $42.27 billion, +0.7% y/y, higher than the estimate $42.01 billion
• Cash and cash equivalents $32.70 billion, below the estimate $36.83 billion

And so on.

Looking at a breakdown of sales by product category we find that, as expected, iphone sales dropped 10% in a quarter which most knew would be ugly for the iphone maker, but at $46bn they just barely beat expectations of $45.8 billion. The rest of the product suite was mixed with Macs surprisingly beating estimates while both iPads and wearables missed. In any case the trend is clear: while sales may not be plunging, they have certainly topped out and the only ting that is still rising is Services.

Looking at a geographic breakdown we find that while sales declined across almost every region, with the notable exception of Europe…

… the 8.1% drop in China sales was not nearly as bad as consensus expected, which fear a double digit drop was coming.

CFO Maestri said that the China concerns were overblown. “We were happy with our results in China,” he said. “The reality is different from maybe what you read at times.”

CEO Cook also pushed back on the idea that the iPhone was suffering in the country, saying that revenue from the device actually grew in mainland China. The weakness stemmed from other parts of the business, he said.

“Other products didn’t fare as well,” he said on a conference call. “And so we clearly have work there to do.”

At the same time, Bloomberg notes that Apple hasn’t shown that new product categories can reinvigorate growth. It canceled work on a self-driving car in February, eliminating a project that some had hoped could become one of its famous “next big things.”

Services were a relative bright spot, growing 14% to $23.9 billion in revenue. That topped Wall Street expectations of $23.3 billion: the category includes Apple Music, the TV+ streaming platform and iCloud subscriptions, but its revenue primarily comes from the App Store. But that business is under pressure from regulators, with Apple being forced to allow third-party marketplaces and payment services in the European Union. Depending on how Apple fares in a legal battle with the Justice Department, it may have to make changes in the US as well.

The company did push into the mixed-reality headset market this year, with the Feb. 2 debut of the Vision Pro. But that product is off to a slow start and could take years before it adds meaningfully to Apple’s revenue. Apple didn’t disclose Vision Pro sales figures on Thursday, but said that the device is generating interest among corporate customers.

But while the results were solid, and beat reduced estimates it’s what was not part of the income statement that stunned investors: the company announced a mind-blowing new stock buyback program, of $110 billion, beating the previous record set by – who else – Apple, and which itself is bigger than the market cap of Boeing (although now that all Boeing whistleblowers have died, expect BA to soar), and also bigger than both GM and Ford combined!

If that wasn’t enough, AAPL also predicted a return to growth in the current period, sparking optimism that a slowdown is easing. A lack of innovative new devices has contributed to slow sales at Apple, but the company looks to begin fixing that on May 7. That’s when it plans to unveil new iPads — the first updates to its tablet line in 1 1/2 years.

The results came as a relief to investors, who have been waiting for the iPhone maker to pull out of a long slump. Apple has posted sales declines in five of the past six quarters, hurt by a sluggish smartphone market and headwinds in China. The company had warned analysts in February that revenue in the latest period would be down about 5% from a year earlier.

In the current period, Apple expects sales to climb by a percentage in the low single digits. The company predicted that both its iPad and services business would grow by a rate in the double digits, but declined to give a forecast for the iPhone — its flagship product.

But wait there’s more: the iphone maker also is planning a long-awaited push into generative artificial intelligence. In June, Chief Executive Officer Tim Cook is expected to lay out Apple’s AI strategy at its annual Worldwide Developers Conference.

“We are making significant investments in the space,” Chief Financial Officer Luca Maestri told Bloomberg Television’s Emily Chang. “We believe we are well-positioned.” Cook said Thursday that Apple will stand out from its AI rivals by tightly integrating hardware and software, using in-house chips, and making privacy and security a priority.

AAPL shares soared as much as 7.9% in extended trading Thursday before easing back a bit. Apple had been down 10% to $173.03 this year through the close, and is now still down modestly for the year.

Hamas is praising the government of Colombia and its leftist president Gustavo Petro for on Thursday formally cutting diplomatic ties with Israel after accusing its military of genocide against the Palestinian people. 

A Hamas statement the same day hailed it as a “recognition of the suffering of Palestinian people” and further urged more Latin American countries to follow suit. Bolivia was the first to do so earlier in the nearly 7-month long conflict.

The Hamas statement said countries around the globe must cut ties with “a rogue and fascist entity that is continuing its crimes against our people.” Interestingly the language seems geared toward appealing to Global South countries who have long struggled against colonial powers.

Petro was elected in 2022, and that’s when the country’s relations to Israel dramatically shifted. He is Colombia’s first Left-wing president in its history, and before that Tel Aviv and Bogota enjoyed strong, positive relations.

In a Wednesday speech before a May Day rally in the capital, Petro said,”Tomorrow (Thursday) diplomatic relations with the state of Israel will be severed… for having a genocidal president.” 

“If Palestine dies, humanity dies, and we will not let it die,” he said at one point in the speech. He proclaimed that “democratic peoples cannot allow Nazism to reestablish itself in international politics.”

However, Bloomberg has noted that his motives could partly be to distract from the ongoing economic crisis in the country:

Petro is looking to counter large anti-government rallies that took place on April 21 and said his administration will send a package of bills to congress meant to boost economic growth.

The package will include measures that force the financial sector to provide cheap financing to productive sectors, Petro said.

“It will consist of bills that generate forced investment in the Colombian private financial system aimed at credits for small, medium, and large industries, agriculture, and tourism in Colombia, to reactivate the country,” he said.

Petro has for months been a fiery vocal critic of Israel, having first threatened to sever relations with Israel back in March. Late last year he also announced plans to open an embassy in the Palestinian West Bank city of Ramallah. Israel’s foreign ministry has slammed the “antisemitic” move to sever official relations.

“if Palestine dies, humanity dies.”

Colombia’s President Gustavo Petro says the country is cutting diplomatic ties with Israel over its war on Gaza. pic.twitter.com/XZxpHE0rTy

— Al Jazeera English (@AJEnglish) May 2, 2024

“Relations between Israel and Colombia always were warm and no antisemitic and hate-filled president will succeed in changing that,” Katz wrote on X. “The state of Israel will continue to defend its citizens without worry and without fear.”

It remains to be seen whether other Left-leaning governments in the region follow Colombia and Bolivia. Already Chile has recalled its ambassador from Israel. 

Authored by Matt Taibbi via Racket News,

Last week, in “It’s Not Me, It’s You,’” I wrote about a booming new op-ed genre, the editorial that bashes hick voters for their incorrect “Perception of the Economy.” Pundits attack voters’ “stubbornly low” assessments, producing poll numbers that leave experts “baffled” and wondering when people will catch up to “reality.”

In a bit of Racket malpractice, the article didn’t mention Paul Krugman of the New York Times, who’s written a collection of those articles and become the unofficial tribune of the “Perception of the Economy” movement. As scientists in classical times believed the sun revolved around the earth, Krugman believes all things revolve around Donald Trump, the subject of this recent piece of wizardry:

Krugman’s “quack economics” fears are prompted by a Wall Street Journal report claiming Trump advisers are “quietly drafting proposals that would attempt to erode the Federal Reserve’s independence” if Trump wins in November. As the Times “Dealbook” page surmised, “The overall goal is to give Trump what he wants: more say on interest rates,” with those unnamed sources claiming Trump aides discussed requiring Fed officials to consult with the president before raising or lowering rates.

Krugman spins a series of elaborate nightmare hypotheticals on the basis of this one piece of information, concluding:

How would Trump respond if things went wrong? Remember, he suggested we look into fighting Covid by injecting disinfectant. Why expect him to be any less inclined to magical thinking in dealing with, say, a new surge in inflation?

Paul Krugman, worried about a magical thinking response to a “surge in inflation.” Why would that be funny? Let’s review:

Six months ago, Krugman made an announcement on Twitter. “The war on inflation is over,” he declared. “We won, at very little cost.” The pronouncement stood like the Colossus of Rhodes over a heroic graph:

This was the economic equivalent of George Bush’s “Mission Accomplished” stunt. Krugman graphed the Consumer Price Index excluding “shelter, food, and used cars.” The CPI, which ostensibly tracks changes in the price of consumer goods, is already a quasi-bogus number whose quirky methodology allows government to make prices seem lower. That wasn’t enough for Krugman, who simply removed three of the biggest household spending variables to take the real CPI of 3.7% and jam it below 2%, creating his own bespoke inflation monitor.

Krugman was instantly mocked, even by other mainstream outlets. “Nobel Economist Paul Krugman Mocked For Saying Inflation is Over if You Exclude Most of What People Buy,” was the take in Business Insider. “Inflation is not a problem if you don’t buy anything,” added TalkMarkets. The funniest response showed Krugman had zoomed past The Onion and become a Babylon Bee headline:

Krugman backpedaled slightly, but couldn’t help himself and went back month after month to argue the numbers were better than they seemed. In January, he posted the “NY Fed measure of underlying inflation” to confirm “the war is over, and we won.” In February, for instance, he posted a chart reminding us that “if it weren’t for owners’ equivalent rent, a price nobody pays, nobody would be talking about inflation.”

All this came a year after he had to write a column called “I Was Wrong About Inflation,” admitting to being on “Team Relaxed” when it came to the potential downside impact of a massive monetary rescue plan. One of the reasons for his miscalculation? “A big piece of the plan was one-time checks to taxpayers, which we argued would be largely saved rather than spent.”

Krugman calculates consumer prices without housing or food and assumes people in the middle of an economic crisis won’t spend six hundred bucks, but thinks other people are guilty of magical thinking on inflation?

Putting a bow on all this, in the “magical thinking” piece Krugman indulged in a catastrophic fantasy about Trump potentially devaluing the dollar to stimulate exports, an idea he ripped as “clearly inflationary — raising import prices and overheating a U.S. economy that is already running hot.” One can only assume he means hot in the Goldilocks sense, i.e. not too much inflation, and not too little, but just hot enough.

One last note. Krugman rails against Trump’s reported plans to expand tariffs. This is interesting because when Joe Biden told the World Trade Organization to shove it a year and a half ago after the WTO declared Trump’s last tariff regime (which Biden was continuing) illegitimate, Krugman declared, “It’s up to America to determine whether its trade actions are necessary for national security,” and “an international organization has no right to second-guess that judgment.” This came in an article showing Biden speaking sternly into a microphone with a big ‘Murican flag in the background, titled, “Why America is Getting Tough on Trade.”

I’m not endorsing any of Trump’s economic ideas, but the issue here is the naked partisanship of Krugman’s act. When Trump was in office, he was writing articles like “Why is Trump a Tariff man?” and declaring that his tariffs were about “rewarding his friends,” “power,” and “cronyism,” rather than any kind of populist policy (because Trump voters are “driven more by animosity toward immigrants and the sense that snooty liberals look down on them than by trade policy”). When Biden’s in office, extending the exact same tariffs, Krugman waves the flag and hums Lee Greenwood for his “tough America” columns. Now we’re back to worrying about Trump’s “magical thinking” and “petty strongman” tendencies.

This is worth pointing out only because partisan pettiness has become the default explanation for those “perception of the economy” pieces I wrote about last week. Krugman has hit this theme countless times, most recently in early April:

Quoting the Wall Street Journal in saying, “When it comes to the economy, the vibes are at war with the facts,” Krugman adds:

The elephant in the room — and it is mainly an elephant, although there’s a bit of donkey too — is partisanship. These days, Americans’ views of the economy tend to be determined by political affiliation rather than the other way around… Republican politicians and media are united in trashing the Biden economy… Democrats, on the other hand, are divided, with some progressives talking down the economy because they fear that acknowledging the good news might undermine the case for strengthening that weak social safety net.

Got that? Ordinary people don’t have honest opinions about the economy, just partisan reactions, and when progressives say negative things, it’s only because they’re lying for a good cause, i.e. stumping for a wider safety net. Everybody is dishonest except the experts like Krugman, who have facts where the volk only have vibes, and wrong ones at that.

What’s so irritating about the “partisan divide in economic perceptions” becoming the reigning explanation for negative public attitudes about the economy is that they’re such obvious projection. With Trump on the ballot this November, no mainstream pundit will dare speak ill of Joe Biden’s economy, whether it deserves it or not, which is both confusing and galling to audiences, and almost certainly adds to the hesitancy reflected in the polls. How can anyone feel good about things if they sense the “experts” wouldn’t tell them even if they saw a crash coming?

It’s one thing to be called stupid and partisan, but having Paul Krugman do it is almost a compliment. Almost.

Authored By Kyle Anzalone via The Libertarian Institute,

The Biden administration’s plan to restore order to Haiti by sending an armed international force has hit another snag: the base that will house the soldiers will not be ready by the date they are set to arrive in the Caribbean nation. 

Jake Johnston from the Center for Economic and Policy Research told POLITICO that the Kenyan-led forces will arrive in Haiti on May 23; however, the US-constructed base they will be stationed at will not be completed by that time.

Washington and Nairobi are eyeing that date to begin the operations in Port-au-Prince as Kenyan President William Ruto is scheduled to be in the US on that day, officials confirmed to POLITICO. 

Johnston said that a second issue is the deployment will be far smaller than initially discussed. While the US plan called for 1,000 Kenyan armed men to be joined by thousands of soldiers from several other countries, Johnston told POLITICO that only 200 Kenyans are scheduled to deploy to Haiti. 

It is unclear if the force will be able to carry out its mission to restore order and hand control of Haiti to a new US-backed transitional government. In 2021, Haitian President Jovenal Moise was assassinated, creating a power vacuum. Washington facilitated Ariel Henry’s rise to power. 

After taking control of Haiti, Henry proved to be an ineffective leader. He lost an increasing amount of Port-au-Prince to paramilitary organizations, leading him to appeal to the US and UN for support. For over a year, Washington lobbied the UN Security Council to approve an armed force to be sent to Port-au-Prince to hand power back to Henry. 

The US struggled to find a partner to lead the mission before it was able to incentivize Kenya with financial and military assistance last year. The deployment met significant opposition in Nairobi, leading to a court battle that delayed the deployment for several months. 

The proposed Kenyan mission to Haiti has also faced opposition by many locals. Once Henry began backing the plan he was met with dissent from Haitian citizens. UN Peacekeepers deployed to Haiti between 2004 and 2017 were notorious for committing sexual violence against women. Additionally, 10,000 Haitians died from a cholera outbreak caused by the UN force. 

Earlier this year, when Henry was traveling to Nairobi to ink the agreement for Kenyan troops to deploy to Haiti, paramilitary organizations seized swaths of Port-au-Price and prevented Henry’s return to Haiti. 

Haiti’s newly installed transitional council has chosen Fritz Bélizaire, a little known former sports minister, as the Caribbean country’s prime minister, as it tries to establish a stable new government amid stifling violence.https://t.co/pR512UkU2g

— Stars and Stripes (@starsandstripes) May 2, 2024

Once Henry was unable to even set foot in Haiti, he lost favor with Washinton, and Secretary of State Antony Blinken pushed him to resign. Rather than allow Haitians to select a new leader, the US set up a transitional council for Haiti led by Edgard Leblanc Fils. 

The Washington-led process to appoint a new head of state iced out leaders of the paramilitary groups. Vitel’homme Innocent, the head of one faction, told CNN that if the militias did not have a seat at the table they would gain influence by other means.

US equities ended their two-day slide as tech companies surged late in the session. The trading day has been choppy, with Wall Street now turning its attention to Apple’s earnings after the bell. Some analysts anticipate Apple will reveal a major buyback program to offset potentially disappointing earnings amid countless reports from research firms in recent months about slumping iPhone sales overseas. 

Let’s begin with the choppy session in main equity index futures. Futs tumbled at the start of the cash session and caught a bid about 30 minutes later, or around 1000 ET. Since then, price action has been mostly higher into the late afternoon trade. 

Despite the chop, Goldman’s Most Shorted index (GSCBMAL) surged higher, up 4% on the session. Names like Carvana Co. were up 32% late in the session after a better-than-expected first-quarter earnings release. The company is heavily shorted, with about 27.6% of the float short, contributing to the surge in price. 

Within the S&P500, consumer discretionary and technology stocks were up 1.49% and 1.39%, respectively. Almost green across the board. 

Regarding the chop, most S&P500 sectors are still below levels after Wednesday’s late session pump and dump. 

NYSE TICK data shows that most buy programs were out ahead of Apple’s earnings. 

Again, more chop with individual names in the tech sector & Mag7. 

Ahead of Apple earnings, here’s Goldman’s preview: 

All eyes on AAPL tonight. We have positioning at a 7 out of 10, with a recent uptick in interest in the name (altho remains a BM underweight). Focus commentary 1) China trends in March qtr (cons has China revs -11% y/y in March vs the -13% y/y last qtr) .. 2) commentary on AI.. 3) Services visibility (including TAC + App Store)

In the macro world, Wall Street traders are preparing for Friday’s announcement of March non-farm payrolls data. The median estimate tracked by Bloomberg is 240k. 

22V Research polled investors and found that 30% of respondents believe Friday’s jobs report will be “risk-on,” 27% expect a “risk-off” reaction, and 43% said “mixed/negligible.”

Meanwhile, the S&P500 is wedged between the 100-day Simple Moving Average (4979) and the 50-day Simple Moving Average (5129). A combination of Apple earnings (after the bell) and jobs data (Friday) could determine the next direction in price action. 

One day after the Federal Reserve kept the target range for the benchmark rate at 5.25% to 5.5%—after serious concern that the US is headed for stagflation—bond yields across the curve leaked lower late in the session. 

In FX, the greenback is on pace for its biggest drop this year as yields continue sliding. Cryptos, such as Bitcoin and Ethereum, trade mainly in chop. BTC/USD is trying to recover the $60k handle late in the cash session. 

We noted early that BlackRock’s ETF saw around $37 million in outflows for the first time, while the remaining spot Bitcoin ETFs collectively notched over $526.8 million in outflows.

Rate traders have priced in about 1.6 cuts this year—up from 1.15 yesterday—but down from nearly 7 earlier this year. There has been dramatic repricing in Fed cuts due to sticky inflation. 

On inflation, using Bloomberg data, the number of mentions in earnings calls for “sticky inflation” surged to record highs in this earnings season. Several mega-corporations like Starbucks and McDonald’s have warned about struggling working poor consumers. 

Here’s the recap of some of today’s top corporate news (courtesy of Bloomberg): 

• Peloton Interactive Inc. said Chief Executive Officer Barry McCarthy is stepping down as the company undergoes a major restructuring that will reduce its global workforce by 15% in an effort to slash costs.

• MGM Resorts International reported first-quarter sales and earnings that beat analysts’ projections, benefiting from the post-pandemic recovery in Macau and a new partnership with Marriott International Inc. that helped fill hotel rooms.

• Carvana Co. reported stronger earnings with revenue topping expectations as the company digs into its restructuring plan and regains sales momentum.

• DoorDash Inc., the largest food delivery service in the US, offered a disappointing profit forecast for the current quarter as the company invests in expanding its list of non-restaurant partners and improving efficiency.

• Moderna Inc. reported a narrower first-quarter loss than Wall Street had expected, as the biotech giant’s cost-cutting helped offset a steep decline in its Covid business.

• Apollo Global Management Inc. reported higher first-quarter profit as the firm raked in more management fees and originated a record $40 billion of private credit, a key area of growth.

By the way, Boeing shares continued to surge even after another Boeing whistleblower died. 

no whistleblowers left. buy buy buy pic.twitter.com/BMOFzsvOi8

— BuccoCapital Bloke (@buccocapital) May 2, 2024

A recap of this morning’s macro data:

• Thursday Humor: Jobless Claims

• Unit Labor Costs Soar In Q1 As ‘AI Productivity Boom’ Fails To Show Up

• US Factory Orders Rise In March… But February Saw Yet Another Downward Revision

…. and it’s an election year – remember that… We cited a note from Goldman’s Adam Crook that points out the Fed and US Treasury are in ‘full-blown stock support mode’… Powell can’t let Biden’s stock market crash… Pro subs read here.  

Anyways, all eyes are on Apple after the bell.