Bearish Bill Blain

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“The consequence of the Pandemic has been to deepen the existing distortions. The result has been the extraordinary apparent “resilience” of the stock and bond markets. It doesn’t feel remotely real:

“- We can see it in the widening disconnect between the real economy of defaults, job losses, food banks and crashing educational achievement versus massively inflated financial asset values in stock and bonds.

“- We can feel it in the way markets demand further stimulus and are being driven primarily by the massive amounts of money sloshing around financial markets (rather than the real economy).

“- Our sense of financial reality feels battered. Investors act on the basis of ongoing distortions fuelling prices are permanent and irreversible. Fundamentals are out the door. Its spawned and reinforced the dangerous belief that this time is somehow different and prices will go up for ever.”

“Markets are going up on retail and ill-informed bluster.

“- The consequences multiply: while everyone talks about how the Pandemic is accelerating the adoption of new technologies, capitalism is failing to discipline failing unprofitable zombie companies which linger too long and block new niches.

“- The consequences of an economy split between a very small number of haves and rising number of have nots, and rising inequality, has fuelled political populism – although Trump has come undone in the States he has massively destabilised the political consensus and rocked democracy for decades to come. Next year we have Germany and France, either of which could rock Europe.

“- The reality next year won’t suddenly change. Stocks will likely remain massively inflated. Bond yields will remain frighteningly low with $18 Trillion of debt now trading at negative yields. Sentiment and expectations will be lifted by the improving vaccination news – but the fundamentals of markets versus the economy are unlikely to be addressed.

“My view is financial assets will remain fundamentally distorted and increasingly vulnerable to correction. I’m sticking with a healthy weight of gold and looking for alternatives.”

https://morningporridge.com/the-morning-porridge/f/blain%E2%80%99s-morning-porridge-15-dec-2020-%E2%80%93-bearishly-pragmatic

The Insurrection Act

Members of the California National Guard in Los Angeles in 1992. 

Amidst the leftist insurrections that exploded on cue 6 months ago, President Trump observed:

“If a city or state refuses to take the actions necessary to defend the life and property of their residents, then I will deploy the United States military and quickly solve the problem for them.”

The Insurrection Act of 1807 is a United States federal law (10 U.S.C. §§ 251–255; prior to 2016, 10 U.S.C. §§ 331–335; amended 2006, 2007) that empowers the President of the United States to deploy U.S. military and federalized National Guard troops within the United States in particular circumstances, such as to suppress civil disorder, insurrection and rebellion.

The act provides a “statutory exception” to the Posse Comitatus Act of 1878, which limits the use of military personnel under federal command for law enforcement purposes within the United States.

Before invoking the powers under the Act, 10 U.S.C. § 254 requires the President to first publish a proclamation ordering the insurgents to disperse. As part of the Posse Comitatus Act of 1878, these provisions are now codified as amended.

There are Constitutional exceptions to Posse Comitatus restrictions rooted in the President’s own constitutional authority. Defense Department guidelines describe “homeland defense” as a “constitutional exception” to Posse Comitatus restriction, meaning that measures necessary to guarantee National Security from external threats are not subject to the same limitations.

The Act has been invoked more than 30 times in our nation’s history.

The Epoch Times published an editorial today that observed:

“The degree and scale of voter fraud was unprecedented. In swing states, President Donald Trump had large leads on election night. Then, late at night counting was stopped, while election observers were ushered out. And then, huge, statistically impossible vote dumps occurred, giving Biden the lead.

“This pattern, which occurred only in the states where Biden had to reverse the results, and hadn’t occurred in previous elections, points to a coordinated effort to steal the election.

“This effort likely involved manipulation of the vote by Dominion Voting System, and various forms of ballot harvesting and election irregularities attested to in a thousand affidavits.

“There are reports—needing confirmation—of foreign influence helping to undermine our election.

“President Trump has referred to our election system as being under ‘coordinated assault and siege.'”

On September 17, 1861, Abraham Lincoln ordered the arrest and jailing of twenty-seven Maryland state legislators (one-third of the Maryland General Assembly) using Lincoln’s suspension of habeas corpus and in defiance of the US Supreme Court’s ex-parte Merryman ruling.

The Epoch Times advocates:

“Trump should use those powers as President to safeguard the future of our Republic and arrest those who have conspired to deprive people of their rights through election fraud. The Insurrection Act enables Trump to use the military to seize the key electoral evidence in contested states and deliver a transparent, accurate accounting of the vote.”

Interesting times.

https://www.theepochtimes.com/at-this-critical-time-president-trump-should-take-action_3617674.html?utm_source=share-btn-copylink

Vitamin D and Covid

In a comment reported in The Lancet, Adrian R Martineau and Nita G Forouhi observe:

“The striking overlap between risk factors for severe COVID-19 and vitamin D deficiency, including obesity, older age, and Black or Asian ethnic origin, has led some researchers to hypothesise that vitamin D supplementation could hold promise as a preventive or therapeutic agent for COVID-19.”

…

“Two ecological studies have reported inverse correlations between national estimates
of vitamin D status and COVID-19 incidence and mortality in European countries.4,5 Lower circulating 25(OH)D concentrations have also been reported to associate with susceptibility to SARS-CoV-2 infection6 and COVID-19 severity. Recently, we have shown that airway diseases are associated with dysregulated vitamin D metabolism, raising the possibility that vitamin D deficiency might arise as a consequence of pulmonary inflammation.”

After reviewing the literature and trials to date, they observe:

“Pending results of such trials, it would seem uncontroversial to enthusiastically promote efforts to achieve reference nutrient intakes of vitamin D, which range from 400 IU/day in the UK to 600–800 IU/day in the USA. These are predicated on benefits of vitamin D
for bone and muscle health, but there is a chance that their implementation might also reduce the impact of COVID-19 in populations where vitamin D deficiency
is prevalent; there is nothing to lose from their implementation, and potentially much to gain.”

Indeed

https://www.sciencedirect.com/science/article/pii/S2213858720302680

Banana Republic News: Kamela warming up in the Bullpen

According to AP, subpoenaed for “…information related to more than two dozen entities, including Ukraine gas company Burisma, according to a person familiar with a Justice Department tax investigation of President-elect Joe Biden’s son.”

Reportedly includes tax evasion, money laundering, Chinese dealings, and racketeering.

Alleged co-conspirator Jim “The Bagman” also under investigation.

Which, of course, leaves us with “The Big Guy.”

Probe was launched in 2018 but, of course, had nothing to do in the 2019 coup atte… I mean, “impeachment”.

As Tyler Durden observes: “We’re sure Kamala Harris is genuinely concerned over the outcome of this investigation and hopes it doesn’t result in Joe Biden’s unceremonious exit from the teleprompter scene.”

https://www.zerohedge.com/political/hunter-biden-subpoenaed-over-burisma-two-dozen-other-entities

The Supremes’ Texas Decision – Cole Porter had it decades ago

Here’s the text of the decision:

“Times have changed
And we’ve often rewound the clock
Since the Puritans got the shock
When they landed on Plymouth Rock
If today
Any shock they should try to stem
‘Stead of landing on Plymouth Rock
Plymouth Rock would land on them.”

Opinion written by Cole Porter.

Great footwork by the Supremes, don’t you think?

Banana Republic: Allan West on the Texas Punt by the Supremes

Allen West walks into Trump Tower on December 12, 2016 in New York City.

“The Supreme Court, in tossing the Texas lawsuit that was joined by seventeen states and 106 US congressman, has decreed that a state can take unconstitutional actions and violate its own election law. Resulting in damaging effects on other states that abide by the law, while the guilty state suffers no consequences. This decision establishes a precedent that says states can violate the US constitution and not be held accountable. This decision will have far-reaching ramifications for the future of our constitutional republic. Perhaps law-abiding states should bond together and form a Union of states that will abide by the constitution.”

Perhaps indeed.

ENSO and Climate Temperature

There are a lot of ways physics can explain climate warming. But the best explanations are those that successfully backtest – where the physics can reliably hindcast the past from the present.

Two issues, in particular, plague the IPCC CMIPx model series: (1) cloud formation and (2) the role of el Nino and the Southern Oscillation (ENSO).

Dr. Roy Spencer: “Since El Nino produces global average warmth, and La Nina produces global average coolness, I have been using our 1D forcing feedback model of ocean temperatures (published by Spencer & Braswell, 2014) to examine how the historical record of ENSO variations can be included, by using the CERES satellite-observed co-variations of top-of-atmosphere (TOA) radiative flux with ENSO.”

Spencer’s one dimensional model of mid-latitude climate dynamics generates the requisite net radiative feedback parameter corresponding to an equilibrium climate sensitivity of 1.91 degree C, matches the sea surface temperature (SST) observations during 1979-2020, and corresponds to IPCC HadSST1 or HadSST4 data.

As Dr. Spencer explains:

“ENSO can then be turned off in the model to see how it affects our interpretation of (and causes of) temperature trends over various time periods. Or, one can examine the affect of assuming some level of non-equilibrium of the climate system at the model initialization time.

“If nothing else, the results in Fig. 3 might give us some idea of the ENSO-related SST variations for 300-400 years before anthropogenic forcings became significant, and how those variations affected temperature trends on various time scales. For if those naturally-induced temperature trend variations existed before, then they still exist today.”

So which is the dominant driver of climate – natural variation or anthropogenic GHG emissions?

500 Years of Global SST Variations from a 1D Forcing-Feedback Model

Escape from New York

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NYC commercial real estate on increasingly shaky ground?

Well, as Kathy Wylde (Partnership for New York City) told Bloomberg: “All the banks, insurance companies, and hedge funds are considering options.”

NYC office space available for rent are now at levels not seen since 2003.

Where is everyone going?

Florida for starters. Just like Goldman.

As Tyler Duren (ZeroHedge) might say: “Money never sleeps.”

https://www.zerohedge.com/personal-finance/nyc-office-space-rent-hits-highest-level-2003-goldman-flees-florida

Bill Blain on Bonker Markets

“It’s been truly extraordinary. DoorDash, a food delivery company that’s never made a penny profit is worth $70bln? It exists in a no-barriers-to-entry, highly price competitive, and ultimate risk sector – where if Micky D makes a bad burger they get the blame. It’s also a concept that’s shifting on the value curve. Money ain’t made on deliveries, but in the manufacture of meals:  you probably aren’t getting your Kentucky Fried Rat from the Colonel, but from some Dark Kitchen on an industrial site. Costs are slashed, but they can still charge extra by slapping a posh restaurant’s name on a 50 pence burger from Iceland.

“Yesterday’s Airbnb IPO was just completely hat-stand. 

“This was a company IPO that analysts were struggling to justify a $40 dollar price last week, and it finally opened at $163 y’day. It’s a very, very mildly profitable company, but is its really worth more than the global hotel industry or a multiple of the package sector? As some wag noted it values each Airbnb property around $13k, so all any competitor needs to do is clone the software and marketing, then pay Airbnb owners $10K to switch to their new firm to become instant billionaires. “

Indeed – all this from the Monetary Politburo also known as the Federal Reserve

As Bill explains:

“Ultimately, every investor wants to invest in something that is a monopoly and will reap monopoly profits. So they buy into things like Standard Oil, Microsoft, Apple, and Facebook and pretenders like Tesla, Snowflake, AirBnb and the petfood delivery company that is now worth more than the land value of the Emperor’s Palace in Tokyo. Some are safe monopolies – like no one else can make an iPhone. Some are risk-monopolies where regulation to break oil giants, control social media and calls to break up Facebook or deter Amazon are tangible risks. The pretenders might have first mover advantage, but they are vulnerable to competition as they progress. 

“If you are Elon Musk you can make lots of noise about the company and extend the illusion it’s a monopoly by controlling the narrative – its not a car company, it’s an energy, self-driving, taxi monopoly. Eventually it bursts. (Credit where credit is due. Even though the spaceship crashed earlier this week, SpaceX is brilliant. It could have become a valid monopoly/duopoly in space launch if Musk hadn’t decided to use it to create his Starlink satellite internet monopoly – which will compete with every other provider of same.)

“At the moment the market is being deluged by the money governments and central banks have injected in to stimulate recovery. Oh, you thought that money was being used to create jobs and companies? Wrong. All that free money is pushing up financial asset prices, making the rich richer. Everyone wants to be rich, so everyone (bear with me here) is investing in stocks – which pushes them yet higher confirming what these new investors believe.. stocks can only go higher.

“Remember Blain’s Market Mantra No 1: The Market Has But One Objective: To Inflict The Maximum Amount of Pain on the Maximum Number of Participants. “

“Shave and a haircut – 2 bits!”

https://morningporridge.com/the-morning-porridge/f/blain%E2%80%99s-morning-porridge-%E2%80%93-dec-11-2020-how-bonkers-is-that-then