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Record Highs And Raging Risks – The Mother Of All Head-Scratchers

Record Highs And Raging Risks – The Mother Of All Head-Scratchers Excerpted from Doug Noland’s Credit Bubble Bulletin blog, Confirmed coronavirus cases almost doubled over the past week to 67,000. Part of the spike was the result of including a group diagnosed through CT imaging scans rather than with typical coronavirus testing. The ballooning number of patients with viral symptoms has overwhelmed the capacity for normal testing. Troubling news came Friday of 1,700 Chinese healthcare workers having been infected (with 25,000 deployed to Hubei Province). Also, quarantines were further tightened in Wuhan and Beijing. Returning Beijing residents are to remain isolated in their homes for 14 days. As the NYT put it, “It was the latest sign that China’s leaders were still struggling to set the right balance between restarting the economy and continuing to fight the coronavirus outbreak.” Staring at a rapidly unfolding economic and financial crisis, Beijing has made the decision to move forward with efforts to get their faltering economy up and running. This comes with significant risk. Global markets, by now fully enamored with aggressive monetary and fiscal stimulus, are predisposed to fixate on potential reward (keen to disregard risk). That future students of this era will be more than a little confounded has been a long-standing theme of my contemporaneous weekly chronicle. Booming market optimism in the face of what has been unfolding in...

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Sino-US Trade Flows Reveal The Next Market Crash Could Be NearingĀ 

Sino-US Trade Flows Reveal The Next Market Crash Could Be Nearing  China and the US have enjoyed two decades of increasing trade flows that have jumped from $61 billion a year in 2000 to $540 billion in 2019. But the ugly end of globalization is starting to be realized, as trade flows have plunged from Nov 2018 of $635 billion to $540 billion in Dec 2019, or about a 15% drop.  The end of the cycle, or the end of decades of globalization, started around the time, President Trump’s protectionist trade policies went into effect against China. Capital Economics published a fascinating piece last Nov, detailing how the third wave of globalization began in the late 1980s, mostly driven by technological advancements and shifting labor and capital around the world to the most cost-effective regions (i.e., out of the US and into China).  Capital Economics indicates that the third wave of globalization has recently transformed into a corrective fourth wave, which has produced a period of de-globalization.  Trump’s trade war with China was one of the drivers behind de-globalization, as supply chains were moved out of China, to other Asia Pacific countries, along with a few factories returning to the US.  De-globalization looked chaotic under the trade war and certainly gained momentum in disrupting supply chains in 2018 through the end of 2019. Still, it has been the Covid-19 outbreak, that has sent...

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Dark Towers: Deutsche Bank, Donald Trump, And An Epic Trail Of Destruction

Dark Towers: Deutsche Bank, Donald Trump, And An Epic Trail Of Destruction Submitted by Chris Whalen of Institutional Risk Analyst This week in The Institutional Risk Analyst, we review the new book by David Enrich, “Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction.” Enrich is currently financial editor at The New York Times and was previously an editor at The Wall Street Journal covering financial institutions. This important book puts in perspective the history of Deutsche Bank AG (NYSE:DB), one of the most mismanaged and politically tainted global banks in modern history. “Dark Towers” also tells the story of how Deutsche Bank provided $2 billion in financing to President Donald Trump, cash that enabled the former real estate developer to continue in business despite his many poor business decisions and credit defaults. As the book makes clear, the only reason that Donald Trump was able to win the American presidency was due to the financial support of Deutsche Bank over more than two decades. Reading “Dark Towers,” one is left with the impression that Deutsche Bank is less a financial institution and more an ongoing criminal enterprise. We published a negative credit profile of DB earlier this year, but frankly our assessment was far too generous. Deutsche Bank cut a swath of destruction “and is about the consequences—dead people, doomed companies, broken economies,” Enrich writes,...

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President Xi Insists He Gave Orders To Contain Coronavirus Outbreak Weeks Before It Went Global

President Xi Insists He Gave Orders To Contain Coronavirus Outbreak Weeks Before It Went Global As the WHO expresses skepticism about China’s response to the virus following earlier praise, President Xi is apparently trying to rewrite history and make it look like the Politburo Standing Committee was more on top of things than they really were. Like George Orwell once wrote: “Who controls the past controls the future: who controls the present controls the past…” According to leaks to China’s state-controlled press over the weekend, President Xi Jinping issued orders to contain the deadly coronavirus outbreak almost two weeks earlier than the public had previously known, according to leaked details from a “secret speech” Xi gave to national leaders commanding them to suppress the virus by any means necessary. Earlier reports, which we picked up yesterday, have since been confirmed by a report in Communist party magazine Qiushi, showing that this wasn’t some kind of mistake but a deliberate decision by the party’s media strategists. According to the reports, Xi met with the Politburo Standing Committee and gave instructions about how to repress the virus on Jan. 7, 13 days before China revealed that it had confirmed human-to-human transmission, and warned the public about the dangers of the outbreak. Prior reports put the beginning of Xi’s direct involvement on Jan 20, and had previously left local authorities to supervise...

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1 In 3 American Workers Runs Out Of Money Before Payday

1 In 3 American Workers Runs Out Of Money Before Payday A new study has found that at least 32% of people making over $100,000, run out of money between paychecks and can’t make ends meet in the “greatest economy ever.” Something is amiss here considering President Trump touts all-time highs in the stock market, record low unemployment, “greatest economy ever,” rising wages, and a manufacturing renaissance. This shows us that there’s a significant gap between Trump’s election-year propaganda and what is happening on the ground.  The study notes that many of these financially stressed-out folks are resorting to payday loans, credit cards, and have been slammed by overdraft fees as their economic well-being quickly deteriorates. The survey was conducted by Salary Finance, who interviewed 2,700 working adults at companies with over 500 employees. Amy is one of those Americans who are all too familiar with her household running short on cash as her husband makes about $50,000 per year. “Tax time hurts for us because we don’t get a refund, we get a bill,” she tells CNBC.  And which respondees are running out of money in between paychecks?  Well, it’s widespread according to the data – at least a third on average across all salary ranges. Dan Macklin, Salary Finance’s U.S. CEO and co-founder of SoFi, told CNBC that it’s not just people on the lower end of the salary...

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Hedge Fund CIO: Guys Text Me All Day, The Dumbest Of The Dumb Are Making Hundreds Of Thousands Daytrading Tesla Right Now

Hedge Fund CIO: Guys Text Me All Day, The Dumbest Of The Dumb Are Making Hundreds Of Thousands Daytrading Tesla Right Now Submitted by Eric Peters, CIO of One River Asset Management “You always knew you’d know it when you saw it,” said Roadrunner. “But you could never be sure what it would look like until you saw it,” continued the market’s biggest equity vol trader. “This is it – now we know. We’re in this cycle’s euphoria stage,” said Roadrunner. “The Tesla move we just saw is unlike anything I’ve experienced.” Amazon trades 2.5-3.0mm shares on a busy day. Tesla traded 60mm. “1.4mm Tesla options traded. And vol was 170. I’m guessing that in notional terms it was the busiest day for a single stock in history.” “The Tesla flows are mostly retail,” continued Roadrunner. “And most of the flow is in one-week options.” Which tells you it’s pure speculation. “Guys text me all day. And the dumbest of the dumb are making hundreds of thousands in their personal accounts right now.” Animal spirits have been unleashed. The shift by brokers to offer zero-commission equity-trading added to the market’s energy. “This is Millennial kind of action. It’s like it was in 1999. It’s a race to the top, fear of missing out kind of move,” said Roadrunner, glancing left, right, up. “This year is set to be wild,”...

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JPMorgan Spots Another Market Paradox: If Everyone Is ‘All-In’, Why Is The Market “Trading Short”?

JPMorgan Spots Another Market Paradox: If Everyone Is ‘All-In’, Why Is The Market “Trading Short”? Earlier today we noted that when commenting on the latest positioning in hedge fund land, the Morgan Stanley prime brokerage/quant strategy team calculated gross leverage for long/short hedge funds is near historical highs (much more in the full note), which confirms our previous observations that virtually all investor classes, from retail, to institutional, to hedge funds, to systematics (CTAs, Risk Parity, vol targeting), are all “all in” stocks to never before seen levels. Picking up where MS quants’ left off, JPMorgan’s own quant guru, Nikolas Panigirtzoglou, focuses on the “rather tight” relationship between the performance of hedge funds and global equities for most of the past three months, which confirms the hedge funds’ “overall elevated exposure to equities”, i.e., excess leverage, which helped them them benefit from the rebound in global equities over the past two weeks. And as the chart below shows, this tight relationship continued in February with little signs of abating. According to JPM, this extreme sensitivity of hedge funds to global equities suggests that little de-risking happened in  response to coronavirus, and hedge fund exposure to equities remains near record high. This leads us to yet another perplexing market observation: If, as the case clearly is that equity investors’ exposures are high, why is the equity market not trading long...

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Lifelong Dem Laments: “After Attending A Trump Rally, I Realized Democrats Are Not Ready For 2020”

Lifelong Dem Laments: “After Attending A Trump Rally, I Realized Democrats Are Not Ready For 2020” Authored by Karlyn Borysenko via Medium.com, I’ve been a Democrat for 20 years. But this experience made me realize how out-of-touch my party is with the country at large. I think those of us on the left need to take a long look in the mirror and have an honest conversation about what’s going on. If you had told me three years ago that I would ever attend a Donald Trump rally, I would have laughed and assured you that was never going to happen. Heck, if you had told me I would do it three months ago, I probably would have done the same thing. So, how did I find myself among 11,000-plus Trump supporters in Manchester, New Hampshire? Believe it or not, it all started with knitting. You might not think of the knitting world as a particularly political community, but you’d be wrong. Many knitters are active in social justice communities and love to discuss the revolutionary role knitters have played in our culture. I started noticing this about a year ago, particularly on Instagram. I knit as a way to relax and escape the drama of real life, not to further engage with it. But it was impossible to ignore after roving gangs of online social justice warriors started going...

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China’s Coronavirus Numbers Don’t Add Up, And The White House Doesn’t Believe Them

China’s Coronavirus Numbers Don’t Add Up, And The White House Doesn’t Believe Them As we’ve been highlighting for weeks, China’s official coronavirus numbers aren’t adding up. The evidence is overwhelming; overloaded crematoriums in Hubei province, to the official death rate maintaining an improbable 2.1% (within + / – 0.1%) for weeks, to coronavirus deaths counted as pneumonia before they were able to test positive – and finally, all the bodies currently decomposing in apartments (government-sealed or not). Officially, there are currently 69,289 confirmed cases, and 1,670 fatalities, with 95% of those coming from China. To that end, Barron’s notes that China’s coronavirus numbers are “too perfect to mean much.” A statistical analysis of China’s coronavirus casualty data shows a near-perfect prediction model that data analysts say isn’t likely to naturally occur, casting doubt over the reliability of the numbers being reported to the World Health Organization. That’s aside from news on Thursday that health officials in the epicenter of the outbreak reported a surge in new infections after changing how they diagnose the illness. –Barron’s This week, the Trump administration said that it does “not have high confidence in the information coming out of China,” while CNBC notes that Beijing has been reluctant to accept help from the Centers for Disease Control and Prevention (CDC), and has been suppressing information about the outbreak from scientists that run counter to...

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