Individual Economists

US To Back Nevada Lithium Project With $2.26 Billion Loan

Zero Hedge -

US To Back Nevada Lithium Project With $2.26 Billion Loan

By Tsvetana Paraskova of OilPrice.com

Lithium Americas Corp has received a conditional commitment for a $2.26-billion loan from the U.S. Department of Energy to help it build lithium processing facilities in Nevada, as the Biden Administration looks to support America-produced lithium and reduce dependence on Chinese supply.  

Lithium Americas’ Thacker Pass project in Humboldt County, Nevada, is located next to a mine site that contains the largest-proven lithium reserves in North America, DOE said.

The U.S. Administration plans to extend the $2.26 billion loan under the Advanced Technology Vehicles Manufacturing Loan Program. The government funding is intended to help finance the construction of Thacker Pass, targeted to produce an initial 40,000 tonnes per year of battery-grade lithium carbonate, Vancouver-based Lithium Americas Corp said in a statement.

Lithium Americas targets mechanical completion of Thacker Pass Phase 1 for 2027. Major construction is expected to start in the second half of this year, following the anticipated closing of the DOE Loan and issuance of full notice to proceed (FNTP), which is expected in the second half of 2024.  

“The United States has an incredible opportunity to lead the next chapter of global electrification in a way that both strengthens our battery supply chains and ensures that the economic benefits are directed toward American workers, companies and communities,” Lithium Americas’ president and CEO Jonathan Evans said.

The lithium price crash over the past year is holding back reinvestment in new supply, the world’s top lithium producer Albemarle has said recently.  

While major lithium suppliers continue to see a surge in long-term demand as the energy transition gathers momentum, the current low price environment is "unstainable," Kent Masters, Albemarle's chairman, president, and CEO, said on the company's earnings call last month.

The current lithium prices are not in a range allowing projects, especially in the West, to get off the ground, Masters added.

 The deferral of new supply developments amid the low prices is setting the stage for the next lithium supply crunch later this decade, executives and analysts say.

Tyler Durden Fri, 03/15/2024 - 18:20

"I Can't Even Save": Americans Are Getting Absolutely Crushed Under Enormous Debt Load

Zero Hedge -

"I Can't Even Save": Americans Are Getting Absolutely Crushed Under Enormous Debt Load

While Joe Biden insists that Americans are doing great - suggesting in his State of the Union Address last week that "our economy is the envy of the world," Americans are being absolutely crushed by inflation (which the Biden admin blames on 'shrinkflation' and 'corporate greed'), and of course - crippling debt.

The signs are obvious. Last week we noted that banks' charge-offs are accelerating, and are now above pre-pandemic levels.

...and leading this increase are credit card loans - with delinquencies that haven't been this high since Q3 2011.

On top of that, while credit cards and nonfarm, nonresidential commercial real estate loans drove the quarterly increase in the noncurrent rate, residential mortgages drove the quarterly increase in the share of loans 30-89 days past due.

And while Biden and crew can spin all they want, an average of polls from RealClear Politics shows that just 40% of people approve of Biden's handling of the economy.

Crushed

On Friday, Bloomberg dug deeper into the effects of Biden's "envious" economy on Americans - specifically, how massive debt loads (credit cards and auto loans especially) are absolutely crushing people.

Two years after the Federal Reserve began hiking interest rates to tame prices, delinquency rates on credit cards and auto loans are the highest in more than a decade. For the first time on record, interest payments on those and other non-mortgage debts are as big a financial burden for US households as mortgage interest payments.

According to the report, this presents a difficult reality for millions of consumers who drive the US economy - "The era of high borrowing costs — however necessary to slow price increases — has a sting of its own that many families may feel for years to come, especially the ones that haven’t locked in cheap home loans."

The Fed, meanwhile, doesn't appear poised to cut rates until later this year.

According to a February paper from IMF and Harvard, the recent high cost of borrowing - something which isn't reflected in inflation figures, is at the heart of lackluster consumer sentiment despite inflation having moderated and a job market which has recovered (thanks to job gains almost entirely enjoyed by immigrants).

In short, the debt burden has made life under President Biden a constant struggle throughout America.

"I’m making the most money I've ever made, and I’m still living paycheck to paycheck," 40-year-old Denver resident Nikki Cimino told Bloomberg. Cimino is carrying a monthly mortgage of $1,650, and has $4,000 in credit card debt following a 2020 divorce.

Nikki CiminoPhotographer: Rachel Woolf/Bloomberg

"There's this wild disconnect between what people are experiencing and what economists are experiencing."

What's more, according to Wells Fargo, families have taken on debt at a comparatively fast rate - no doubt to sustain the same lifestyle as low rates and pandemic-era stimmies provided. In fact, it only took four years for households to set a record new debt level after paying down borrowings in 2021 when interest rates were near zero. 

Meanwhile, that increased debt load is exacerbated by credit card interest rates that have climbed to a record 22%, according to the Fed.

[P]art of the reason some Americans were able to take on a substantial load of non-mortgage debt is because they’d locked in home loans at ultra-low rates, leaving room on their balance sheets for other types of borrowing. The effective rate of interest on US mortgage debt was just 3.8% at the end of last year.

Yet the loans and interest payments can be a significant strain that shapes families’ spending choices. -Bloomberg

And of course, the highest-interest debt (credit cards) is hurting lower-income households the most, as tends to be the case.

The lowest earners also understandably had the biggest increase in credit card delinquencies.

"Many consumers are levered to the hilt — maxed out on debt and barely keeping their heads above water," Allan Schweitzer, a portfolio manager at credit-focused investment firm Beach Point Capital Management told Bloomberg. "They can dog paddle, if you will, but any uptick in unemployment or worsening of the economy could drive a pretty significant spike in defaults."

"We had more money when Trump was president," said Denise Nierzwicki, 69. She and her 72-year-old husband Paul have around $20,000 in debt spread across multiple cards - all of which have interest rates above 20%.

Denise and Paul Nierzwicki blame Biden for what they see as a gloomy economy and plan to vote for the Republican candidate in November.
Photographer: Jon Cherry/Bloomberg

During the pandemic, Denise lost her job and a business deal for a bar they owned in their hometown of Lexington, Kentucky. While they applied for Social Security to ease the pain, Denise is now working 50 hours a week at a restaurant. Despite this, they're barely scraping enough money together to service their debt.

The couple blames Biden for what they see as a gloomy economy and plans to vote for the Republican candidate in November. Denise routinely voted for Democrats up until about 2010, when she grew dissatisfied with Barack Obama’s economic stances, she said. Now, she supports Donald Trump because he lowered taxes and because of his policies on immigration. -Bloomberg

Meanwhile there's student loans - which are not able to be discharged in bankruptcy.

"I can't even save, I don't have a savings account," said 29-year-old in Columbus, Ohio resident Brittany Walling - who has around $80,000 in federal student loans, $20,000 in private debt from her undergraduate and graduate degrees, and $6,000 in credit card debt she accumulated over a six-month stretch in 2022 while she was unemployed.

"I just know that a lot of people are struggling, and things need to change," she told the outlet.

The only silver lining of note, according to Bloomberg, is that broad wage gains resulting in large paychecks has made it easier for people to throw money at credit card bills.

Yet, according to Wells Fargo economist Shannon Grein, "As rates rose in 2023, we avoided a slowdown due to spending that was very much tied to easy access to credit ... Now, credit has become harder to come by and more expensive."

According to Grein, the change has posed "a significant headwind to consumption."

Then there's the election

"Maybe the Fed is done hiking, but as long as rates stay on hold, you still have a passive tightening effect flowing down to the consumer and being exerted on the economy," she continued. "Those household dynamics are going to be a factor in the election this year."

Meanwhile, swing-state voters in a February Bloomberg/Morning Consult poll said they trust Trump more than Biden on interest rates and personal debt.

Reverberations

These 'headwinds' have M3 Partners' Moshin Meghji concerned.

"Any tightening there immediately hits the top line of companies," he said, noting that for heavily indebted companies that took on debt during years of easy borrowing, "there's no easy fix."

Tyler Durden Fri, 03/15/2024 - 18:00

The 10 Senate Seats Most Likely To Flip

Zero Hedge -

The 10 Senate Seats Most Likely To Flip

Authored by Sean Trende via The Epoch Times (emphasis ours),

The 2024 presidential election has grabbed most of the headlines recently, but the Senate races are taking shape under the radar. Here is a preview of the 10 most likely to flip.

  1. West Virginia – Open (D): It’s not that often that every elections analyst in the country concurs on something, but I suspect you will get unanimous agreement that this seat is far and away the most likely Senate seat to flip. Joe Manchin is a Democrat who has basically been swimming against a Republican tide since he won the seat in a 2010 special election. Two years prior, John McCain carried the state by 12 points over Barack Obama. Donald Trump won it by almost 40 points in 2020. It’s unlikely that even the popular Manchin, who won narrowly in the good Democratic year of 2018, could emerge victorious, but with his retirement, the seat is just gone.

  2. Montana – Jon Tester (D): Reasonable minds can disagree about whether Montana or Ohio is the more vulnerable seat. Tester is probably a better ideological match for his state than Sen. Sherrod Brown is for Ohio, but Montana will probably go for Donald Trump by 20 points rather than the 10 or so points by which he seems likely to carry Ohio. Tester’s preferred opponent, Matt Rosendale, dropped out of the race, giving Tester a more mainstream opponent. Even Rosendale had made a race out of it in the bad GOP year of 2018, but this time, Tester will likely have to convince one out of every six Trump voters to cross over for him. That’s no easy task.

  3. Ohio – Sherrod Brown (D): Brown is probably too liberal for the modern Buckeye State, and he’ll have to convince around one in 10 Trump voters to split their tickets. This is within tolerance – Susan Collins pulled this off in reverse in 2020 – but it is still rare. Brown only won by seven points against an underfunded opponent in 2018, but whoever the GOP candidate is will probably not have to worry about money. Trump endorsed businessman Bernie Moreno, much to the state GOP’s dismay, but this is a state that voted for a similarly untested, controversial candidate in 2022 over Brown’s political heir. Brown can win, but he’s in trouble.

  4. Michigan – Open (D): I have to make at least one controversial call, so why not here? To be clear, all of the remaining races at least lean toward the party that currently holds them. Why put this above more popular picks like Nevada, Arizona, or Wisconsin? The reason has less to do with this race than with the dynamics of the other races (discussed below). The Democratic Party has coalesced around Rep. Elissa Slotkin, which is good for the party. But there is a bit of schism within the Democratic Party right now over the Biden administration’s support of Israel in its war in Gaza. Trump has also been polling well in the state. A lot will depend on who emerges from the state’s crowded GOP primary, but remember, Trump nearly pulled now-Rep. John James across the finish line in 2020.

  5. Texas – Ted Cruz (R): Another controversial call, I suspect. I’ve gone into this in greater detail elsewhere, but this is a state that is swinging leftward, and it wouldn’t take a particularly bad showing by Donald Trump nationally for it to flip. Not only that, but Cruz is, well, Cruz, and is not particularly well-liked. He almost lost in 2018, and while the environment is better for him this year, the state is worse. Again, this isn’t a tossup, but his edge is less pronounced than the remaining Democrats on this list.

  6. Arizona – Open (D): Given Kari Lake’s post-election behavior and the presence of an abortion-rights referendum on the ballot, I’m skeptical that she is well-positioned to make this race competitive. It’s also why I’m somewhat skeptical about Donald Trump’s current polling lead against President Biden.

  7. Nevada – Jacky Rosen (D): It’s not that the incumbent is particularly weak. Nor is the GOP field particularly strong. And the presence of an abortion-rights referendum will probably help Rosen. We’re starting to get into genuine long-shot territory here, but this is a state Donald Trump really might carry handily. We’ll see what comes out of the GOP primary.

  8. Wisconsin – Baldwin (D): I don’t really think Tammy Baldwin is likely to lose. The danger to her comes if Donald Trump breaks out in the state and turns out to have coattails. But I promised 10 seats, and I aim to deliver 10.

  9. Pennsylvania – Bob Casey (D): The GOP has its preferred candidate here, Dave McCormick (which it didn’t in 2022 when Oz Mehmet edged McCormick out in the primary), and Casey has never really had a tough challenge before. But he’s got a famous last name, and I think Trump has less chance of winning here than in Wisconsin. If Trump does pull ahead strongly, however, he probably has a better chance of bringing McCormick with him than he does in Wisconsin – whomever Republicans nominate in the Badger State.

  10. Maryland – Open (D): I had to pick a race here. It was either this or New Jersey or Florida. I chose this one because GOP candidate Larry Hogan was a popular governor, is still well regarded in the state, and is probably the strongest challenger in the bunch. But Maryland is exceedingly blue and is really, really unlikely to flip.

Sean Trende is senior elections analyst for RealClearPolitics. He is a co-author of the 2014 Almanac of American Politics and author of The Lost Majority. He can be reached at strende@realclearpolitics.com. Follow him on Twitter @SeanTrende.

Tyler Durden Fri, 03/15/2024 - 17:40

Nathan Wade Pulls Out Of Fani Case After Fulton Fiasco

Zero Hedge -

Nathan Wade Pulls Out Of Fani Case After Fulton Fiasco

 

Update (1615ET): Hours after the judge in Trump's Georgia election interference case issued an ultimatum to DA Fani Willis, her (ex) lover Nathan Wade has quit the case.

As they say, the show must go on...

*  *  *

An Atlanta judge, who donated to Fani Willis when she was running for office, ruled on Friday that the highly conflicted Fulton County DA simply has to break up with her lover, Nathan Wade, who she hired to the tune of $600,000 to work on the Trump election interference case.

If Willis dumps Wade the case can continue, according to Judge Scott McAfee of Fulton Superior Court, who also had the option of removing Willis over the giant conflict of interest which included lavish vacations with Wade that were effectively at the taxpayer's expense.

According to McAfee, while he found the "appearance of impropriety," no "disqualification of a constitutional officer necessary when a less drastic and sufficiently remedial option is available," adding "that the prosecution of this case cannot proceed until the State selects one of two options."

Either "the District Attorney may choose to step aside, along with the whole of her office," or "Wade can withdraw."

McAfee also found that there was no "actual conflict" brought about due to the relationship, a finding that would have required him to disqualify Willis.

"This finding is by no means an indication that the Court condones this tremendous lapse in judgment or the unprofessional manner of the District Attorney’s testimony during the evidentiary hearing. Rather, it is the undersigned’s opinion that Georgia law does not permit the finding of an actual conflict for simply making bad choices — even repeatedly — and it is the trial court’s duty to confine itself to the relevant issues and applicable law properly brought before it."

"Without sufficient evidence that the District Attorney acquired a personal stake in the prosecution, or that her financial arrangements had any impact on the case, the Defendants’ claims of an actual conflict must be denied," he wrote.

"As the case moves forward, reasonable members of the public could easily be left to wonder whether the financial exchanges have continued resulting in some form of benefit to the District Attorney, or even whether the romantic relationship has resumed."

Willis and Wade - whose divorce from his wife has yet to be finalized, admitted to the affair, but were caught lying about when it started.

Update (1050ET): Trump's lead defense counsel in the case, Steve Sadow, slammed the ruling.

"While respecting the Court’s decision, we believe that the Court did not afford appropriate significance to the prosecutorial misconduct of Willis and Wade, including the financial benefits, testifying untruthfully about when their personal relationship began, as well as Willis’ extrajudicial MLK ‘church speech,’ where she played the race card and falsely accused the defendants and their counsel of racism," he said in a statement.

While the decision is a blow to Trump and his co-defendants, this leaves Willis tainted by weeks of embarrassing hearings and national headlines that could influence the views of a jury.

Fani Willis donor Scott McAfee

Trump and his co-defendants could also appeal McAfee's ruling, as could Willis, which would further delay the case into the election - leaving the matter unresolved (and of course, leaving the question of Trump's guilt an open question that the media would push daily during his 2nd term, should he win in November).

McAfee's decision comes two days after he quashed six charges in the case, three of which directly applied to Trump.

Tyler Durden Fri, 03/15/2024 - 17:16

Does Big Tech Have The Right Talent To Win Our Confidence With Its AI Creation?

Zero Hedge -

Does Big Tech Have The Right Talent To Win Our Confidence With Its AI Creation?

Authored by Shannon Edwards via The Epoch Times,

The biggest generative AI gaffes of late, including Google Gemini’s text-to-image portrayal of “a Pope” as a woman, our Founding Fathers as Asian and black, and text responses suggesting false equivalencies between high-profile individuals such as Elon Musk and the Nazis, make for click-worthy headlines decrying Big Tech’s “clear bias,” but those don’t even begin to address the larger, and more nuanced, issue at hand.

The reason is that these hiccups resulting from an “over-correction” of Gemini’s output by its maker could be considered, in Silicon Valley parlance, a “feature” and not a “bug” of generative AI. And unless Big Tech rethinks its talent base and what constitutes “fair” and “equitable” in designing the rules around AI, we can only expect the problem to persist, and to be far harder to identify and root out in the future.

It’s important to acknowledge, though, that the development of “rules” in the creation of generative AI is not at its core scandalous, nor a secret. The entire industry, from nascent AI startups to behemoths such as Google, has been open about the more philosophical and nuanced work required to create AI innovation. Often referred to more specifically and functionally as “Responsible AI,” this work determines the “problems” that need to be addressed before the work of machine learning even begins. It’s a process and a competency that is arguably new to all tech companies playing in this space.

For Google, the work to create responsible AI “principles” began years ago, and the heads of this area share the details of their work freely. What we should take note of is that Google has solidified its “AI principles” and began training employees in the concepts as early as 2019. You can even find details about approaches and activities, such as “Moral Imagination workshops,” to see the depths of their commitment to this work. The relevance here, of course, is that Google is not the United Nations, nor even a good representative of the United States. With nearly 190,000 employees worldwide, 75 percent of Google’s employees are estimated to be younger than 30 and are self-reported as about half white and hovering around 33 percent female.

Just the fact that 7 percent of Google’s employers are older than 40 seems an exceptional disconnect when you consider that a large percentage of their demographic also identifies as Democrat, a party steadfast in its defense of President Joe Biden’s age and mental acuity at 81.

You’ll also see stated on page 11 of Google’s recent diversity report that 7 percent of employees are self-identified as “LGBQ+ and/or Trans+,” but nowhere in the 115-page document will you find mention of age or diversity outside of the standard few we’ve come to accept: race, gender, LGBTQ+, and sometimes disability or veteran status. It does raise the question: Whose eyes are we seeing this new world of AI innovation through? And what are the bigger implications for what is fair and “true”?

An even stickier is question whether these companies have the capacity or interest to change. We have all heartily bought into the mythology of the hoodie-wearing tech “bro” made famous by Mark Zuckerberg—and forever embedded in our cultural anthology via the film “The Social Network”—and the rigid framework for hiring that has been a point of pride for Silicon Valley companies for decades now.

Many of us worked within a rigid hiring framework that screens for “approved” schools or includes having employees partake in mental gymnastics no matter the job for which they are being hired. Recently, former Google employee and Silicon Valley marketing veteran Luanne Calvert shared in her TEDx Berlin talk an anecdote about barely “getting through” the hiring process herself. As a graduate of a less-prestigious college, it was only her unique skills and deep marketing experience that allowed her to be categorized as an “exception”—or, as she describes it, “an experiment.”

And although the hiring practices have changed (a bit), as Ms. Calvert notes in her talk and I’ve seen via my former colleagues in Silicon Valley, you won’t find a recruitment push anytime soon for, say, an over-60 conservative. But I hope that what we will find is that without the broadest subset of thinking represented, AI won’t meet its potential; the unpredictability of these tools will continue to foster discussion, and an inability to fully commercialize if the audience is narrow will force a reckoning.

Perhaps, in the end, it will be capitalism that ultimately saves Google from itself.

*  *  *

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Fri, 03/15/2024 - 17:00

US Banks See Large Deposit Inflows As Bailout Fund Expires, RRP Liquidity Plunges

Zero Hedge -

US Banks See Large Deposit Inflows As Bailout Fund Expires, RRP Liquidity Plunges

With The Fed's bank bailout facility now expired (and the one-year term loans starting to mature), it is perhaps not surprising that we saw a very large liquidity drain from The Fed's Reverse Repo facility in the last two days - over $107BN pulled out to fresh cycle lows...

Source: Bloomberg

Total deposits - on a seasonally-adjusted basis - rose by $54BN last week...

Source: Bloomberg

On a non-seasonally-adjusted basis - remind us again how actual deposits are seasonally-adjusted - banks saw and even larger $82BN deposit inflow...

Source: Bloomberg

Excluding foreign bank deposits, domestic banks saw seasonally-adjusted deposits rise $60BN (Large Banks +$59BN, Small Banks +$0.9BN), and non-seasonally-adjusted deposits rose $94BN (Large Banks +$73BN, Small Banks +$21BN)...

Source: Bloomberg

However, rather oddly, on the other side of the ledger, loan volumes plunged despite the surge in deposits (Large bank loan volumes tumbled $15BN while Small bank loan volumes rose by $0.3BN)....

Source: Bloomberg

And finally, as if you needed a reminder after the recent NYCB debacle-and-bailout - the regional bank crisis is still very much alive as evidenced by the red line below (without The Fed's expired BTFP facility)...

Source: Bloomberg

...what else are big banks (green line) going to do with all that cash burning a hole in their pockets (although we do note a big cash drop at large banks - which includes NYCB). Regional bank shares took a tumble this week, erasing all the post-NYCB bailout gains...

As one veteran Fed watcher remarked "this is such a clusterfuck... deposits should be $500BN lower"

Source: Bloomberg

The bottom line is - this looks a lot like a 'Small Bank' crisis. The last time this happened, the crisis sparked a sudden $300BN 'run' in small bank deposits (this time it's bigger!).

Is The Fed 'hoping' for a controlled bank-run this time - so as many small bank deposits are drained voluntarily, before they are drained all at once in a panic (and the Reverse Repo facility is empty, unable to provide any cushion)?

Tyler Durden Fri, 03/15/2024 - 16:40

Taibbi: Why The TikTok Ban Is So Dangerous

Zero Hedge -

Taibbi: Why The TikTok Ban Is So Dangerous

Authored by Matt Taibbi via Racket News,

Did they tell you the part about giving the president sweeping new powers?

It’s funny how things work.

Last year at this time, Americans overwhelmingly supported a ban on TikTok.

Polls showed a 50-22% overall margin in support of a ban and 70-14% among conservatives. But Congress couldn’t get the RESTRICT Act passed.

As the public learned more about provisions in the bill, and particularly since the outbreak of hostilities in Gaza, the legislative plan grew less popular. Polls dropped to 38-27% in favor by December, and they’re at 35-31% against now.

Yet the House just passed the “Protecting Americans from Foreign Adversary Controlled Applications Act” by a ridiculous 352-64 margin, with an even more absurd 50-0 unanimous push from the House Energy and Commerce Committee.

What gives?

As discussed on the new America This Week, passage of the TikTok ban represents a perfect storm of unpleasant political developments, putting congress back fully in line with the national security establishment on speech. After years of public championing of the First Amendment, congressional Republicans have suddenly and dramatically been brought back into the fold. Meanwhile Democrats, who stand to lose a lot from the bill politically — it’s opposed by 73% of TikTok users, precisely the young voters whose defections since October put Joe Biden’s campaign into a tailspin — are spinning passage of the legislation to its base by suggesting it’s not really happening.

“This is not an attempt to ban TikTok, it’s an attempt to make TikTok better,” is how Nancy Pelosi put it. Congress, the theory goes, will force TikTok to divest, some kindly Wall Street consortium will gobble it up (“It’s a great business and I’m going to put together a group to buy TikTok,” Steve Mnuchin told CNBC), and life will go on. All good, right?

Not exactly. The bill passed in the House that’s likely to win the Senate and be swiftly signed into law by the White House’s dynamic Biden hologram is at best tangentially about TikTok.

You’ll find the real issue in the fine print. There, the “technical assistance” the drafters of the bill reportedly received from the White House shines through, Look particularly at the first highlighted portion, and sections (i) and (ii) of (3)B:

As written, any “website, desktop application, mobile application, or augmented or immersive technology application” that is “determined by the President to present a significant threat to the National Security of the United States” is covered.

Currently, the definition of “foreign adversary” includes Russia, Iran, North Korea, and China.

The definition of “controlled,” meanwhile, turns out to be a word salad, applying to:

(A) a foreign person that is domiciled in, is headquartered in, has its principal place of business in, or is organized under the laws of a foreign adversary country;

(B) an entity with respect to which a foreign person or combination of foreign persons described in subparagraph (A) directly or indirectly own at least a 20 percent stake; or

(C) a person subject to the direction or control of a foreign person or entity described in subparagraph (A) or (B).

A “foreign adversary controlled application,” in other words, can be any company founded or run by someone living at the wrong foreign address, or containing a small minority ownership stake. Or it can be any company run by someone “subject to the direction” of either of those entities. Or, it’s anything the president says it is. Vague enough?

As Newsweek reported, the bill was fast-tracked after a secret “intelligence community briefing” of Congress led by the FBIDepartment of Justice, and the Office of the Director of National Intelligence (ODNI). The magazine noted that if everything goes as planned, the bill will give Biden the authority to shut down an app used by 150 million Americans just in time for the November elections.

Say you’re a Democrat, however, and that scenario doesn’t worry you. As America This Week co-host Walter Kirn notes, the bill would give a potential future President Donald Trump “unprecedented powers to censor and control the internet.” If that still doesn’t bother you, you’re either not worried about the election, or you’ve been overstating your fear of “dictatorial” Trump.

We have two decades of data showing how national security measures in the 9-11 era evolve. In 2004 the George W. Bush administration defined “enemy combatant” as “an individual who was part of or supporting Taliban or al Qaeda forces, or associated forces that are engaged in hostilities against the United States.” Yet in oral arguments of Rosul et al v Bush later that year, the government conceded an enemy combatant could be a “little old lady in Switzerland” who “wrote a check” to what she thought was an orphanage.

Eventually, every element of the requirement that an enemy combatant be connected to “hostilities against the United States” was dropped, including the United States part. Though Barack Obama eliminated the term “enemy combatant” in 2009, the government retained (and retains) a claim of authority to do basically whatever it wants, when it comes to capturing and detaining people deemed national security threats. You can expect a similar progression with speech controls.

Just ahead of Monday’s oral arguments in Murtha v. Missouri, formerly Missouri v. Biden — the case so many of us hoped would see the First Amendment reinvigorated by the Supreme Court — this TikTok bill has allowed the intelligence community to re-capture the legislative branch. Just a few principled speech defenders are left now. Fifty Democrats voted against the bill, which is heartening, although virtually none argued against it on First Amendment grounds, whis is infurating. Pramila Jayapal had a typical take, saying the ban would “harm users who rely on TikTok for their livelihoods, many of whom are people of color.”

Contrast that with Kentucky Senator Rand Paul, who went after members of his own party, singling out Republicans encouraging a governmental power grab after years of fighting big tech abuses not just at TikTok but other platforms. These people claim to be horrified, he said, but actions speak louder than words.

“Look at their legislative proposals,” he said, noting many want to “set up government agencies and panels” on speech, effectively saying “If you’re not putting enough conservatives on there, by golly we’re going to have a government commission that’s going to determine what kind of content gets on there.”

These, he said, are “scary ideas.”

He’s right, and shame on papers like the New York Post that are going after Paul for having donors connected to TikTok. Paul has been consistent in his defense of speech throughout his career, so the idea that his opinion on this matter is bought is ludicrous. It’s a relief to be able to expect at least some adherence to principle on this topic from him or fellow Kentuckian Thomas Massie, just as we once could expect it from Democrats like Paul Wellstone or Dennis Kucinich.

I don’t often do this, but as Walter pointed out in today’s podcast, this bill is so dangerous, the moment so suddenly and unexpectedly grave, that we both recommend anyone who can find the time to call or write their Senators to express opposition to any coming Senate vote. It might help. Yes, collection of personal information and content manipulation by the Chinese government (or Russia’s, or ours) are serious problems, but the wider view is the speech emergency. As the cliché goes, forget the furniture. The house is on fire. Let’s hope we’re not too late.

Subscribe to Matt Taibbi's Racket News substack here...

Tyler Durden Fri, 03/15/2024 - 16:20

Lawler: Early Read on Existing Home Sales in February

Calculated Risk -

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.40 million in February, up 10% from January’s preliminary pace but down 2.9% from last February’s seasonally adjusted pace. Unadjusted sales should show a small YOY gain, with the SA/NSA difference reflecting the higher business day count this February compared with last February.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 6.5% from last February.

CR Note: The National Association of Realtors (NAR) is scheduled to release February existing home sales on Thursday, March 21st, at 10:00 AM ET. The consensus is for 3.94 million SAAR.

Thinking About Moving? These Five States Just Recorded Largest Housing Inventory Surges 

Zero Hedge -

Thinking About Moving? These Five States Just Recorded Largest Housing Inventory Surges 

Can't find a house to buy? The underlying problem remains a persistent housing shortage and elevated mortgage rates that have paralyzed the housing market nationwide. 

However, don't fear ahead of the spring housing season. New housing data from industry researcher ResiClub reveals pockets of housing markets with increasing inventory (i.e., active listings), which means weaker home price growth and, thus, better affordability for homebuyers. 

Last week, ResiClub reported that the number of active US homes for sale in February 2024 (664,716) was up +15% year-over-year from February 2023 (579,264). However, active inventory for sale is still 40% lower than its pre-Covid levels of 1,102,660.  

The good news is that regionally speaking, taking a look at a 12-month inventory shift, these are the five states with the largest supplies coming onto the market in February: 

  • Florida: +45.8%

  • Mississippi: +28.0%

  • Louisiana: +28.0%

  • Alabama: +27.0%

  • Arkansas: +23.2%

If you're a homebuyer, avoid these five states, as inventory remains extremely tight. 

  • Nevada: -32.0%

  • Illinois: -9.8%

  • New Jersey: -9.1%

  • Idaho: -9.0%

  • Rhode Island: -7.8%

Here's a 12-month inventory shift of the nation between Feb. 2023 and Feb. 2024. 

In summary, the best deals this spring could be in southern states.

Tyler Durden Fri, 03/15/2024 - 16:06

'Bad News' Battered Bonds, Big-Tech, & Banks On The Week; Copper & Crude Rip

Zero Hedge -

'Bad News' Battered Bonds, Big-Tech, & Banks On The Week; Copper & Crude Rip

An ugly week on the macro side - hotter than expected inflation, slower than expected growth, weaker than expected labor market data...

Source: Bloomberg

...but the inflation issues sent rate-cut expectations reeling (now less than 3 cuts priced in for 2024)...

Source: Bloomberg

And as rate-cut expectations fell, Treasury yields rose... non-stop... all week with the belly of the curve underperforming (5Y yields up 28bps on the week)...

Source: Bloomberg

Yields all ended back up near their year-to-date highs...

Source: Bloomberg

Higher yields were initially shrugged off by stocks but as they kept rising, there was no arguing...

Source: Bloomberg

Small-Caps and Big-Tech were the week's biggest losers...

Banks were not pretty this week as The Fed's BTFP facility expired...

...and liquidity was sucked hard out of the RRP. $108BN drawn down in the last two days to fresh cycle lows...

Source: Bloomberg

Anti-Obesity drug stocks dared to end red...

Source: Bloomberg

AI stocks also pumped and dumped on the week...

Source: Bloomberg

The dollar surged this week - as BoJ chatter picked up - with its best week since mid-Jan (rebounding some from last week's dollar-plungefest)....

Source: Bloomberg

The dollar's gains were gold's losses as the precious metal ended the week down 1%...

Source: Bloomberg

Despite big net inflows this week...

Source: Bloomberg

...bitcoin ended the week only marginally higher (up around 3%), with choppy moves (day-session dips bought overnight), but ened back above $70,000...

Source: Bloomberg

...and ethereum was a little worse, down around 3%, on the week (thanks to Democrats' letter overnight pressuring the SEC on ETH ETFs)...

Source: Bloomberg

NatGas erased most of last week's gains...

Source: Bloomberg

Still there were some bright spots...

Crude surged on the week, breaking out of its range to its highest since early November...

Source: Bloomberg

And as goes crude, so goes wholesale gasoline... and then goes pump prices...

Source: Bloomberg

..but it was copper that really regained its legs, surging up to its highest since Feb 2023...

Source: Bloomberg

Finally, was this week's 'stalling' in NVDA 'the top'?

Source: Bloomberg

How ironic would it be if we saw peak AI just as Jensen unveils his latest and greatest at GTC on Monday?

Tyler Durden Fri, 03/15/2024 - 16:00

3rd Look at Local Housing Markets in February

Calculated Risk -

Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in February

A brief excerpt:
NOTE: The tables for active listings, new listings and closed sales all include a comparison to February 2019 for each local market (some 2019 data is not available).

This is the third look at several local markets in February. I’m tracking about 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in February were mostly for contracts signed in December and January when 30-year mortgage rates averaged 6.82% and 6.64%, respectively. This is down from the 7%+ mortgage rates in the August through November period.
...
Closed Existing Home SalesIn February, sales in these markets were up 1.4% YoY. In January, these same markets were up 2.4% year-over-year Not Seasonally Adjusted (NSA).

Sales in most of these markets are down compared to January 2019.
...
More local markets to come!
There is much more in the article.

Watch: Joe Rogan Mocks Neil Young Over 'Return' To Spotify

Zero Hedge -

Watch: Joe Rogan Mocks Neil Young Over 'Return' To Spotify

Authored by Steve Watson via Modernity.news,

Podcast King Joe Rogan took a swipe at Rock Grandpa Neil Young Thursday after Young announced earlier this week that he was returning his music to Spotify following a two year hiatus in protest of ‘COVID disinformation’ on Rogan’s output.

Here’s the backstory if you’re unfamiliar:

Young, who reportedly took a 60% revenue hit from the move, while Spotify did not, initially published a post on his website Tuesday begrudgingly announcing he was returning to the ‘Low Res’ platform.

Rather than admit he may have been wrong, or that he can’t realistically stay off the world’s biggest music platform, Young claimed that because all the other platforms like Apple and Amazon also allow content from Joe Rogan and other so called ‘disinformation’ peddlers, he may as well just go back on Spotify.

Rogan addressed Young’s actions during a conversation about COVID vaccines, stating “By the way, Neil Young came back to Spotify. Congratulations, Neil.”

Rogan added, “His excuse was he said that because all of the platforms are now allowing my disinformation, he should just go back on Spotify too.”

“Great to know you got some ethics,” Rogan added, in an open swipe at the Canadian rocker.

Watch:

News articles have surfaced in their thousands about how Young is returning to Spotify, and many on social media have labeled him a hypocrite or worse.

Now, Young has deleted the initial announcement post from his website, and his music has still not appeared on Spotify, indicating that he has changed his mind again.

When previously asked by a fan in a letter (below) if he would ever go back to Spotify, Young responded “Why would I? It sounds like shit.”

Young also revealed that he asked Spotify to put disclaimers on Rogan’s content, but they initially refused to do so. Then he advised that such warnings could be difficult to find and follow.

Spotify did put disclaimers on Rogan’s content after the furore, but they do not appear to be doing it anymore.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Fri, 03/15/2024 - 13:10

Netanyahu Greenlights Rafah Offensive, Rejects 'Still Absurd' Hamas Ceasefire Plan

Zero Hedge -

Netanyahu Greenlights Rafah Offensive, Rejects 'Still Absurd' Hamas Ceasefire Plan

Israeli Prime Minister Benjamin Netanyahu has issued formal approval for the Israel Defense Forces (IDF) to go into Rafah while announcing the rejection of the "still absurd" Hamas demands which were presented this week in ceasefire talks.

"The IDF is prepared for the operation and to evacuate the [civilian] population," the prime minister's office said in a statement. "He also approves an IDF plan of operation to enter the southern Gaza city of Rafah," the PM's office affirmed to the Times of Israel.

Fleeing from Rafah toward other parts of Gaza, Getty Images

Axios' Barak Ravid has reported that Hamas presented its plan Thursday, which lays out a first phase of a six week ceasefire that includes the release of about 40 Israeli hostages, but Israel would have to free some 400 Palestinian prisoners, among these many who have killed Israelis.

Crucially, the Hamas proposal has also included the "return of displaced Palestinians to their homes and a withdrawal of Israeli forces from the enclave."

Israel has repeatedly said that the demand to withdraw all Israeli forces from the Strip remains a non-starter, given also Netanyahu has vowed to not halt the military operation until Hamas is eradicated.

Netanyahu had initially stated Thursday: "Hamas continues with its preposterous demands. The war cabinet will be updated tomorrow."

Given the IDF ground offensive on Rafah looks to imminently proceed (though Israeli officials last month had initially offered a start date of March 10, which has come and gone), Israel still has a problem concerning the increasing condemnations coming out of Washington.

On Thursday Senate majority leader Chuck Schumer, who was prior to this week seen as someone staunchly in Netanyahu's corner, in a blistering speech called the Israeli PM a "pariah" and said he has "lost his way"

As we detailed earlier, the surprise rebuke followed on the heels of an annual "threat assessment" compiled by US intelligence agencies, which was released Monday and questioned Netanyahu’s hold on power. Below is what it said:

"Netanyahu’s viability as leader as well as his governing coalition of far-right and ultraorthodox parties that pursued hardline policies on Palestinian and security issues may be in jeopardy."

It continues, "Distrust of Netanyahu’s ability to rule has deepened and broadened across the public from its already high levels before the war, and we expect large protests demanding his resignation and new elections. A different, more moderate government is a possibility."

Israeli war cabinet meets

According to Axios, Israel has been making some limited strides to try and calm US concerns over the humanitarian situation and the soaring death toll. 

"Israeli Minister of Defense Yoav Gallant signed on Thursday a letter to the Biden administration assuring Israel will use U.S. weapons according to international law and allow U.S.-supported humanitarian aid into Gaza, two Israeli and U.S. officials told Axios," the report indicated.

Tyler Durden Fri, 03/15/2024 - 12:50

Markets Are Still Waiting For Godot In China's Money Data

Zero Hedge -

Markets Are Still Waiting For Godot In China's Money Data

Authored by Simon White, Bloomberg macro strategist,

China’s money growth data for February released overnight modestly disappointed to the downside.

Real M1 growth, which is one of the best cyclical leading indicators in China, has dipped lower again, driven by the rise in CPI from -0.7% to 0.8% in February.

Markets are still waiting for a decisive turn in the data, although on a three-month smoothed basis the trend is gingerly picking up.

Tyler Durden Fri, 03/15/2024 - 12:30

Oil Set For Strong Weekly Gains On Demand Revisions As Gas Price Surge To Accelerate

Zero Hedge -

Oil Set For Strong Weekly Gains On Demand Revisions As Gas Price Surge To Accelerate

Crude oil prices were set for a weekly gain of about 4% after the International Energy Agency became the latest forecaster to suggest oil demand might turn out to be stronger than previously expected this year.

The IEA said Thursday that it now expects oil demand this year to grow by 1.3 million bpd, up from 1.2 million bpd last month. The agency cited maritime transport disruptions due to the Houthi attacks in the Red Sea that are adding demand for fuels.

The IEA also revised its supply forecast, but downwards, according to Irina Slav of OilPrice. It now expects additional supply this year at 800,000 bpd. As a result, the forecast, which last month said the oil market would.

The agency noted, however, that lukewarm economic growth would continue to act as a headwind for prices even as other agencies such as the IMF revised their global GDP growth outlook upwards.

A series of fresh drone attacks by Ukraine on Russian refineries also contributed to the price rally this week, especially after the energy ministry said these attacks had led to a 1.5% decline in fuel exports in February. There were drone attacks on refineries in Russia last month as well.

The latest weekly inventory figures from the United States were also bullish for prices, featuring sizeable drawdowns in fuel inventories that suggested stronger demand.

"Demand is staying high, while supplies are getting tighter, particularly on the fuel side. The refining margins are also very strong and a positive for crude demand," Reuters quoted BOK Financial senior VP of trading Dennis Kissler as saying.

As a result of the rally, which brought Brent crude to over $85 per barrel on Thursday, traders started taking profits, eventually bringing prices lower. Even so, the international benchmark was trading above $85 per barrel in midmorning trade in Asia today. West Texas Intermediate crossed the $80 threshold earlier in the week and was trading at over $81 per barrel in mid-morning trade in Asia.

Meanwhile, gasoline is now trading at $3.44, the highest price since Octover and effectively unchanged on the year, and in the a ominous development for the Biden admin, wholesale gasoline prices suggest a big jump in retail gasoline is imminent.

 

 

Tyler Durden Fri, 03/15/2024 - 12:10

Oh Canada: Parliament Moves To Impose Potential Life Imprisonment For Speech Crimes

Zero Hedge -

Oh Canada: Parliament Moves To Impose Potential Life Imprisonment For Speech Crimes

Authored by Jonathan Turley,

We have previously discussed the unrelenting attacks by Canadian Prime Minister Justin Trudeau and his allies on free speech. There has been a steady criminalization of speech, including even jokes and religious speech, in Canada. Now, the Canadian parliament is moving toward a new change that would allow the imposition of life imprisonment on those who post views deemed supportive of genocide. With a growing movement calling Israel’s war in Gaza “genocide,” the potential scope of such a law is readily apparent. That appears to be its very draw for anti-free speech advocates in the country.

The Online Harms Act, or Bill C-63 increases the potential penalties from five years to life imprisonment. It also increases the penalty for the willful promotion of hatred (a dangerously ill-defined crime) from two years to five years. The proposed changes constitute a doubling down on Canada’s commitment to reducing free speech for citizens despite criticism from many in the civil liberties community.

There is also a chilling option for house arrest if a judge believes a defendant “will commit” an offense. In other words, if a judge thinks that a citizen will be undeterred and try to speak freely again.

Justice Minister Arif Virani employed the same hysteria to convince citizens to surrender their freedoms to the government. He expressed how terrified he was with the potential of free speech, stating that he is “terrified of the dangers that lurk on the internet for our children.”

It is not likely to end there.

Today the rationale is genocide. However, once the new penalties are in place, a host of other groups will demand similar treatment for those with opposing views on their own causes. 

This law already increased the penalties for anything deemed hateful speech.

The law comes after Canada blocked a Russian dissident from becoming a citizen because of her violation of Russian anti-free speech laws.

In a telling act, the government said that the same conduct (i.e., free speech) could be a crime in Canada. 

Indeed, it may now be punished even more harshly.

Tyler Durden Fri, 03/15/2024 - 11:50

GDP Tracking: Around 2%

Calculated Risk -

From BofA:
Since our update last week, 1Q GDP tracking is up one-tenth to 2.4% q/q saar; 4Q tracking is up three-tenths to 3.6% q/q saar. [Mar 15th estimate]
emphasis added
From Goldman:
We lowered our Q1 GDP tracking estimate by 0.1pp to +1.6% (qoq ar) and our Q1 domestic final sales forecast by 0.2pp to +2.0% (qoq ar), mainly reflecting the normalization of utilities output in February. [Mar 15th estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 2.3 percent on March 14, down from 2.5 percent from March 7. After recent releases from the US Department of the Treasury's Bureau of the Fiscal Service, the US Bureau of Labor Statistics, and the US Census Bureau, a decrease in the nowcast of first-quarter real personal consumption expenditures growth from 2.9 percent to 2.2 percent was slightly offset by increases in the nowcasts of first-quarter real gross private domestic investment growth and first-quarter real government spending growth from 1.7 and 2.4 percent, respectively, to 3.0 and 2.7 percent. [March 14th estimate]

South American Gangs Target Mansions In Baltimore As Biden's Border Crisis Spreads Chaos

Zero Hedge -

South American Gangs Target Mansions In Baltimore As Biden's Border Crisis Spreads Chaos

The Biden administration's disastrous open southern border policies have sparked a catastrophic wave of violent crime committed by illegal immigrants. This comes amid the ten million migrants that have invaded the nation, alongside recent calls from radical progressive lawmakers across crime-ridden metro areas to defund the police and limit criminal prosecution. As a result, many law-abiding Americans express growing concern about insecurity amid a new era of explosive crime and chaos.

Let's begin with a series of news headlines that show Chilean crime gangs have been on a nationwide burglary spree, targeting wealthy neighborhoods from coast to coast: 

  • NBC7 San Diego: "Chilean break-in crew is back, and burglaries are on the rise in La Jolla"

  • Fox 2 Detroit: "High-end Michigan burglaries tied to Chilean crime ring, prompts police task force" 

  • NBC 10 Philadelphia: "Another Chilean man arrested as Montco targeted by 'South American Theft Groups'" 

  • ABC 7 Los Angeles: "OC judge throws out plea deal in case involving alleged Chilean burglary ring" 

  • NBC 12 Scottsdale: "'These are professionals': Latest arrests in East Valley burglary cases tied to Chilean crime ring" 

  • Oklahoma News 4: "Million-dollar OKC homes burglarized, possibly connected to Chilean crime ring" 

  • ZeroHedge: "South American Gangs Target Dozens Of Mansions In Detroit" 

  • AP News: "3 Chilean nationals accused of burglarizing high-end Michigan homes" 

  • Vanity Fair: "Thieves in the Night: A Vast Burglary Ring From Chile Has Been Targeting Wealthy U.S. Households" 

The latest crime spree these Chilean gangs went on was in wealthy neighborhoods in upper Baltimore County, Maryland. 

Local media outlet The Baltimore Banner says a Chilean crime gang burglarized a number of mansions, including one on Tufton Springs Lane in Reisterstown. 

On Feb. 3, Baltimore County Police arrested five suspects whom Border Patrol identified as members of a criminal organization known as the South American Theft Group. They all had Chile identification cards. 

The group "targets large homes in wealthy areas of often Asian business owners. Detectives know the group to be a traveling, unsettled group who do not reside in the area where they commit their crimes. The group travels around the country committing thefts/burglaries then leave the area before they are identified or apprehended," police wrote in charging documents.

According to charging documents, one gang member had a phone with an internet search of where to find "millionaire neighborhoods in various cities." 

Investigators also said the gang was responsible for burglaries across North Carolina, Alabama, and Oklahoma. 

The unprecedented flood of illegals threatens the safety of communities across this nation. Americans overwhelmingly agree with Trump-era border policies that kept the country safe. 

"Once again, honest, law-abiding citizens are being victimized by criminals who should not be in our country.  It was great work by the Baltimore County Police Department to apprehend them. Our country is overrun by groups like the South American Theft Group, and it is largely a failure of our border security. We must do all we can to keep people like this out of our country. And I am pleased that ICE has placed detainers on these 5," Del. Nino Mangione, R-Baltimore County, said in a statement. 

At the same time, Democrats are waging war on the Second Amendment by actively trying to ban guns, which will only leave law-abiding people defenseless. 

Americans are demanding law and order - something Democrats and the radical progressives in the White House could not care less. 

Tyler Durden Fri, 03/15/2024 - 11:30

Household Equity Allocations Suggests Caution

Zero Hedge -

Household Equity Allocations Suggests Caution

Authored by Lance Roberts via RealInvestmentAdvice.com,

Household equity allocations are again sharply rising, as the “Fear Of Missing Out” or “F.O.M.O.” fuels a near panic mentality to chase markets higher. As Michael Hartnett from Bank of America recently noted:

“Stocks are up a ferocious +25% in 5 months, which has happened just 10 times since the 1930s. Normally, such surges occur from recession lows (1938, 1975, 1982, 2009, 2020), but, of course, we did not have a recession in 2023, according to the Biden administration. These surges also occur at the start of bubbles (Jan’99).”

As discussed in the recent Bull Bear Report, we can only identify bubbles in hindsight. Such is the problem with trying to “time” a market top, as they can last much longer than logic would predict. George Soros explained this well in his theory of reflexivity.

Financial markets, far from accurately reflecting all the available knowledge, always provide a distorted view of reality. The degree of distortion may vary from time to time. Sometimes it’s quite insignificant, at other times it is quite pronounced. When there is a significant divergence between market prices and the underlying reality, the markets are far from equilibrium conditions.

Every bubble has two components:

  1. An underlying trend that prevails in reality and; 

  2. A misconception relating to that trend.

When positive feedback develops between the trend and the misconception, a boom-bust process gets set into motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception get reinforced. Eventually, market expectations become so far removed from reality that people get forced to recognize that a misconception is involved. A twilight period ensues during which doubts grow, and more people lose faith, but the prevailing trend gets sustained by inertia.” – George Soros

In simplistic terms, Soros says that once the bubble inflates, it will remain inflated until some unexpected, exogenous event causes a reversal in the underlying psychology. That reversal then reverses psychology from “exuberance” to “fear.”

What will cause that reversion in psychology? No one knows.

However, the important lesson is that market tops and bubbles are a function of “psychology.” The manifestation of that “psychology” manifests itself in asset prices and valuations that exceed economic growth rates.

Once again, investors are piling into equities and “writing checks that the economy can’t cash.”

An Economic Underpinning

To understand the problem, we must first realize from which capital gains are derived.

Capital gains from markets are primarily a function of market capitalization, nominal economic growth, plus dividend yield. Using John Hussman’s formula, we can mathematically calculate returns over the next 10-year period as follows:

(1+nominal GDP growth)*(normal market cap to GDP ratio / actual market cap to GDP ratio)^(1/10)-1

Therefore, IF we assume that GDP could maintain 2% annualized growth in the future, with no recessions ever, AND IF current market cap/GDP stays flat at 2.0, AND IF the dividend yield remains at roughly 2%, we get forward returns of:

(1.02)*(1.2/1.5)^(1/10)-1+.02 = -(1.08%)

But there are a “whole lotta ifs” in that assumption. Most importantly, we must also assume the Fed can get inflation to its 2% target, reduce current interest rates, and, as stated, avoid a recession over the next decade.

Yet, despite these essential fundamental factors, retail investors again throw caution to the wind. As shown, the current levels of household equity ownership have reverted to near-record levels. Historically, such exuberance has been the mark of more important market cycle peaks.

If economic growth is reversed, the valuation reduction will be quite detrimental. Again, such has been the case at previous peaks where expectations exceed economic realities.

Bob Farrell once quipped investors tend to buy the most at the top and the least at the bottom. Such is simply the embodiment of investor behavior over time. Our colleague, Jim Colquitt, previously made an important observation.

The graph below compares the average investor allocation to equities to S&P 500 future 10-year returns. As we see, the data is very well correlated, lending credence to Bob Farrell’s Rule #5. Note the correlation statistics at the top left of the graph.”

The 10-year forward returns are inverted on the right scale. This suggests that future returns will revert toward zero over the next decade from current levels of household equity allocations by investors.

The reason is that when investor sentiment is extremely bullish or bearish, such is the point where reversals have occurred. As Sam Stovall, the investment strategist for Standard & Poor’s, once stated:

“If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

Everyone is very optimistic about the market. Bank of America, one of the world’s largest asset custodians, monitors risk positioning across equities. Currently, “risk love” is in the 83rd percentile and at levels that have generally preceded short-term corrective actions.

The only question is what eventually reverses that psychology.

A Disappointment Of Hopes

In January 2022, Jeremy Grantham made headlines with his market outlook titled “Let The Wild Rumpus Begin.” The crux of the article is summed up in the following paragraph.

“All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.

Today in the U.S. we are in the fourth superbubble of the last hundred years.”

While the market corrected in 2022, the reversion needed to reverse the excess deviation from the long-term growth trends was not achieved. Therefore, unless the Federal Reverse is committed to a never-ending program of zero interest rates and quantitative easing, the eventual reversion of returns to their long-term means remains inevitable.

Such will result in profit margins and earnings returning to levels that align with actual economic activity. As Jeremy Grantham once noted:

Profit margins are probably the most mean-reverting series in finance. And if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” – Jeremy Grantham

Historically, real profits have always eventually reverted to underlying economic realities.

Many things can go wrong in the months and quarters ahead. Such is particularly the case at a time when deficit spending is running amok, and economic growth is slowing.

While investors cling to the “hope” that the Fed has everything under control, there is a reasonable chance they don’t.

The reality is that the next decade could be a disappointment to overly optimistic expectations.

Tyler Durden Fri, 03/15/2024 - 11:10

Bernie Sanders Introduces Bill To Reduce Workweek To Just 4 Days

Zero Hedge -

Bernie Sanders Introduces Bill To Reduce Workweek To Just 4 Days

Socialist Senator Bernie Sanders (I-VT) introduced legislation this week which would standardize a 32-hour workweek for the same pay.

"Today, American workers are over 400 percent more productive than they were in the 1940s. And yet, millions of Americans are working longer hours for lower wages than they were decades ago. That has got to change," Sanders said in a Wednesday press release.

"The financial gains from the major advancements in artificial intelligence, automation, and new technology must benefit the working class, not just corporate CEOs and wealthy stockholders on Wall Street," the statement continues. "It is time to reduce the stress level in our country and allow Americans to enjoy a better quality of life. It is time for a 32-hour workweek with no loss in pay."

Sanders was joined by Sen. Laphonza Butler (D-CA) in introducing the "Thirty-Two Hour Workweek Act."

Companion legislation in the House was introduced by Rep. Mark Tekano (D-CA).

Sanders defended the bill in a Friday op-ed in CounterPunch:

Today in America, 28.5 million Americans – 18% of our workforce – now work over 60 hours a week and 40 percent of employees in America now work at least 50 hours a week. We were talking about a 40-hour workweek 80 years ago, and that is what people today, despite the explosion of technology, are working.

The sad reality is, Americans now work more hours than the people of most other wealthy nations. And we’re going to talk about what that means to the lives of ordinary people.

In 2022, employees in the United States, and I hope people hear this, logged 204 more hours a year than employees in Japan, and they’re hardworking people in Japan. 279 more hours than workers in the United Kingdom, and 470 more hours than workers in Germany.

Despite these long hours, the average worker in America makes almost $50 a week less than he or she did 50 years ago, after adjusting for inflation.

...

The question that we are asking today is a pretty simple question – do we continue the trend that technology only benefits the people on top, or that we demand that these transformational changes also benefits working people? And one of these benefits must be a 32-hour workweek.

And this is not a radical idea.

France, the seventh-largest economy in the world, has a 35-hour work week and is considering reducing it to 32.

Norway and Denmark, their workweek is about 37 hours and Belgium has already adopted a 4-day workweek.

Yet, as the American Thinker's Olivia Murray notes:

HuffPost reports that while running for a special election senate seat in 1974, Sanders drew unemployment benefits. He would rack up a number of other political office losses until 1981, at which point he became the mayor of Burlington, Vermont. A leftwing “fact-checker” outlet revealed that this was the first time in Sanders’s life that he had ever had a steady paycheck; if that’s true, Sanders would have been 39 years old before he actually had a steady job… but not even in the private sector actually producing anything!

This, this is the man trying to use government to force his manure ideas on all businesses; here are the specifics of the Sanders’s proposal, from The Hill:

The bill, over a four-year period, would lower the threshold required for overtime pay, from 40 hours to 32 hours. It would require overtime pay at a rate of 1.5 times a worker’s regular salary for workdays longer than 8 hours, and it would require overtime pay at double a worker’s regular salary for workdays longer than 12 hours.

I mean, if we’re just throwing our preposterous and pie-in-the-sky ideas, why not eliminate work altogether Bernie? When it’s “government-funded” that means it’s “free” right? Why don’t we all just get on Universal Basic Income, starting at a million dollars a year—or heck, why not a billion? We could all be on the government payroll like you! “Free” healthcare, “free” Peloton memberships, “free” retirement plans, etc. It will be a perfect socialist utopia!

A Marxist has absolutely no clue how wealth is actually produced, because they don’t produce anything beneficial for anyone (that’s not hyperbole), and they seem incapable of realizing the obvious: the more the government intervenes in the market, the more expensive everything becomes.

It’s a philosophy from the deadbeat of deadbeats; here’s this, from FEE:

On some days, Marx could not even leave his house because his wife Jenny had to pawn his pants to buy food. His friend and collaborator, Friedrich Engels, frequently sent Marx money (between 1865 and 1869 alone Engels gave Marx the equivalent of $36,000). In a letter written on his fiftieth birthday to Engels, Marx recalled his mother’s words: ‘if only Karl made capital instead of just writing about it.’

LOSER. (I mean, this man walked around pantsless instead of getting a job and feeding his family.)
If only Bernie stuck to stealing our capital, instead of trying to legislate it out of existence.

Tyler Durden Fri, 03/15/2024 - 10:50

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