When
a new source of taxation is found it never means, in practice, that the old
source is abandoned. It merely means that the politicians have two ways of
milking the taxpayer where they had one before.
H. L. Mencken.
With stocks priced to
perfection, thanks mostly to governments and central banksters everywhere flooding
the global economy with mountains of unearned Magic Money Tree cash, it looks
more and more likely that a new commodity Supercycle is underway.
With Money Wizard in
Chief, President Biden, promising at least another three trillion new Magic
Money Tree US dollars for “infrastructure” and new social engineering programs
later this year, plus a world in misguided transition to a more electric but
green economy, I can see no obvious impediment to a long term new commodity Supercycle.
Given that commodity
prices are input prices to most of what makes up inflation in everyday G-20 life,
I suspect that we are just in the early stage of five years to a decade of
rising real life inflation, no matter what spin comes out of the Fed and the US
Treasury.
But will priced to
perfection stocks first have a summer of sideways churn and burn?
U.S. Futures Drop, Dollar Gains;
Asia Stocks Mixed: Markets Wrap
Yields fell
after Fed Chair Powell flagged patchy recoveryCommodity gauge at highest since 2012 on demand
hopes
U.S. equity futures retreated and Asian stocks
were mixed Tuesday following weakness among the technology giants on Wall
Street. The dollar rallied.
Taiwan’s benchmark bore the brunt of a sell-off, shedding
as much as 3.3%, after beating
all other major gauges globally in April. South Korean shares edged down while
Hong Kong and Australia rose modestly. Trading will be limited with Japan and
China among markets closed for holidays. U.S. contracts fell after the S&P
500 ended near session lows and shares such as Tesla
Inc. and Amazon.com Inc. weighed on the
Nasdaq 100.
Ten-year Treasury yields dropped back to around 1.6% in U.S.
trade amid comments from Federal Reserve Chair Jerome Powell that the economic
recovery is patchy.
A gauge of commodity prices is at the highest level since
2012. Silver is among the precious
metals that have rallied as the prospect of near-zero rates for
longer boosts demand. Oil was steady after climbing over 1%. Digital token
Ether extended its surge
to set another record.
Why
Sell in May?
Data showed growth among U.S. manufacturers cooled in April,
while a gauge of prices paid for materials jumped to the highest since 2008.
The figures were a reminder that the rebound from the pandemic still faces
risks, such as faster inflation. Powell reiterated progress in the recovery has
been uneven across racial and income divides. New York Fed President John
Williams said current conditions are “not nearly enough” for a shift in the
monetary policy stance.
----Markets
seem to be looking through the persistent threat of the pandemic, focusing
instead on the relative success of the vaccine rollouts in much of the
developed world. Meanwhile, fierce new Covid-19
waves are enveloping India and parts of Southeast Asia, placing
severe strain on their health-care systems and prompting appeals for help.
In Australia, the central bank kept its cash rate unchanged,
as expected, and said it doesn’t see conditions for rates to rise until 2024.
It also raised its growth forecast and said it would consider further bond
purchases.
Here are some key events to watch this week:
U.S. trade
balance, factory orders, durable goods are due Tuesday
Chicago
Fed President Charles Evans gives a virtual speech at an event hosted by
Bard College on Wednesday. Cleveland Fed President Loretta Mester gives a
virtual speech to the Boston Economic Club
Bank of
England rate decision Thursday
The April
U.S. employment report is released on Friday
U.S. stocks have risen to
all-time highs this year. Should you ‘sell in May and go away’?
Last Updated: May
1, 2021 at 10:26 a.m. ET
Stocks have been on a tear this
year, leaving investors to question whether to “sell in May and go away.”
“With stocks at record highs, some
investors may be tempted to follow the old adage,” a team of strategists at UBS
Group’s global wealth management division, wrote in a note Friday.
The hypothesis is that equities tend
to underperform in the six months through October, so investors should sell
stocks at the start of May, invest in cash and then re-enter the market in late
autumn, the strategists said. Historically, the approach has worked for Europe,
but not as well in the U.S., according to their note.
“In the U.S., a stay invested
strategy has tended to outperform, particularly in recent years,” the
strategists said. “Market composition, with the U.S. market more tilted towards
growth stocks, partly explains the outperformance.”
The technology sector now accounts
for 27% of the S&P 500, or much higher than the 8% weighting for the MSCI
Europe index, according to UBS. For that reason, investors who tried timing the
U.S. equity benchmark for “seasonal reasons” would have missed the
outperformance of growth stocks in the bull market since the global financial
crisis of 2008-09.
Using the past as a guide, the UBS
team recommends staying invested, even through they also point to historical
evidence in Europe that supported a sell-in-May strategy.
Over the past 15 years, returns in
Europe have been negative in June 80% of the time, according to the report. “This
has contributed to a sell-in-May strategy outperforming a stay invested
strategy during those years,” the strategists said.
“We are now entering a time of year
when stocks have historically found it more challenging to advance,” according
to the UBS report. “With many equity indexes making new highs, some measures of
sentiment looking extended, and ongoing concerns about the spread of new
COVID-19 variants,” some investors may be contemplating selling.
David
Rosenberg: You know a market is all priced in when …
Not
even blockbuster earnings beats are getting a rise these days
May 03, 2021
How do you know when the markets are
all priced in? When good news fails to incite a positive price reaction.
That has become a major story,
because the market is sputtering a little even though a record 87 per cent of
S&P 500 companies that have reported thus far have smashed through their
earnings estimates (and 95 per cent for tech stocks). Yet, for the companies
that “beat,” the average price move in their shares the following session has
been -0.2 per cent; and try -1.6 per cent for the tech sector (Apple Inc.,
Microsoft Corp. and Amazon.com Inc. all sharing that fate last week).
It’s a classic case of selling the
fact after buying the rumour, and of selling strength instead of buying the
dips. Declining stocks outnumbered advancers by two to one on the Nasdaq and
NYSE on Friday. Losses were broad, but defensive sectors such as utilities,
consumer staples and real estate did not succumb.
The plain fact of the matter is that
expectations have run well ahead of what earnings are delivering … the analysts
were already bullish, but the market pricing went far and beyond the bottom-up
estimates, which is how we get a forward P/E multiple of 22x to 23x (or 40 per
cent above the norm).
Bubbles in sentiment are showing up
everywhere. For example, the put-call volume ratio has been below 0.6x nearly
every day since Nov. 20, the longest stretch in at least eight years (this
contrarian indicator has often flagged at least minor market declines when the
ratio dipped below 0.6x). Within the Investors Intelligence poll, we have 59.2
per cent bulls and 16.5 per cent bears, a 43-percentage-point spread that is in
the “danger zone” and not far off at all where we were in the fall of 2018
ahead of a near-20 per cent drawdown. And the Ned Davis Research Crowd
Sentiment poll recently went to its highest level since prior to the February
2020 market peak.
There are some notable divergences
going on between the price action and the narrative. The yield on the 10-year
T-note has not made a new closing high (1.74 per cent) since March 31. The
stock market tends to lead the commodity price, so, with that in mind, it is
fascinating to see the S&P 500 energy sector slide 2.7 per cent on Friday,
and fall 7.2 per cent from the nearby March 12 high and is no higher today than
it was back on Feb. 14. That would make 35-year finance veteran Grant Williams
say “Hmmm” to be sure. And shouldn’t the PHLX Semiconductor Sector Index (SOX)
be blowing out to new highs with all the semiconductor shortage talk? But here
we see the sector slumping 2.9 per cent on Friday and is now off 5.9 per cent
from the April 5 high and actually lower today than was the case back on Feb.
11. And look at the pro-cyclical Dow Jones transport-to-utility ratio, putting
in a classic double-top and a classic topping formation since the middle of
February.
Finally, self-driving
UK cars get closer. But is it really an improvement and what about the
insurance when things go awry?
“Essentially, in
its current form, it'll be a traffic jam handler.”
Well maybe. But
to me in its current form, it will be a motorway traffic jam builder. At 37 mph
on a 70 mph motorway, some big rig in a hurry is very likely to bump you off
the motorway.
UK prepares to conditionally
legalize self-driving cars
The
UK's Department of Transport has announced that it's moving to conditionally
legalize self-driving cars in which the driver doesn't have to pay attention to
the road or keep their hands on the wheel, in a move that it expects will save
lives.
This
is a distinction from what's currently legal – level two driver
assistance in which drivers are expected to keep their eyes on the road even
while the car is driving itself. The new laws, set to come in by the end of the
year, will bring the UK into line with Automated Lane Keeping Systems (ALKS) policies
being enacted across the EU and parts of Asia, enabling hands-off, eyes-off,
level-three driving up to speeds of 60 km/h (37 mph), and only on motorways
where pedestrians and cyclists aren't allowed.
Drivers will still need to be ready
to take over; when the system requests a driver takeover, you'll have 10
seconds to get your act together, work out what's going on around you and take
the wheel, or else the vehicle will put its hazard lights on, then slow to a
halt.
It's a conservative step forward,
with a speed limit well below what you'd expect on a motorway, and the initial
laws won't allow the car to change lanes by itself. Essentially, in its current
form, it'll be a traffic jam handler. Cars will need to achieve GB type
approval for ALKS technology, and there will have to be "no evidence to
challenge the vehicle's ability to self-drive."
It's unclear at this stage what liberties drivers will be
able to take once they hand over control. In a report commissioned by the DoT, it was found that 80
percent of drivers would like to use their smartphones while the car was
self-driving – a figure that would come as no surprise to anyone that's looked
sideways in traffic lately. But it was also found that highly visually engaging
activities like smartphone use had a high impact on both the time it took for
drivers to take over the wheel when requested, and the number of times the
takeover event caused them to swerve out of their lane.
"Automated driving systems could prevent 47,000
serious accidents and save 3,900 lives over the next decade," says SMMT Chief
Executive Mike Hawes, "through their ability to reduce the single largest
cause of road accidents – human error. Technologies such as Automated Lane
Keeping Systems will pave the way for higher levels of automation in
future."
The prices of raw materials used to make almost everything
are skyrocketing, and the upward trajectory looks set to continue as the world
economy roars back to life.
From steel and copper to corn and lumber, commodities
started 2021 with a bang, surging to levels not seen for years. The rally
threatens to raise the cost of goods from the lunchtime sandwich to
gleaming skyscrapers. It’s also lit the fuse on the massive
reflation trade that’s gripped markets this year and pushed up inflation
expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s
economy starting to reopen as its vaccination rollout gets into gear, there’s
little reason to expect a change in direction.
One Direction
JPMorgan Chase & Co. said this week it sees a continued
rally in commodities and that the “reflation and reopening trade will
continue.” On top of that, the Federal Reserve and other central
banks seem calm about inflation, meaning economies could be left to run hot,
which will rev up demand even more.
“The most important drivers supporting commodity prices are
the global economic recovery and acceleration in the reopening phase,” said
Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects
commodities as a whole to rise about 10% in the next year.
China, a crucial source of supply and demand for raw
materials, is playing a big role, particularly as the government tries
to reduce
production of key metals like steel and aluminum. It’s also buying up
massive amounts of grains. Food prices are also being affected as poor
weather in key growing nations like Brazil and France hits harvests.
As just about every basic material gets rapidly more
expensive, here’s some ways the rally is rippling across the globe to create
winners and losers.
Going Green
Copper has enjoyed an unstoppable rally for more than a
year thanks to pledges by governments to boost renewable energy and electric
vehicle use. That’ll make all the various forms of green technology that rely
on it a bit
more expensive.
Bigger power grids is one such case. About 1.9 million tons
of copper was used to build electricity networks in 2020, according to
BloombergNEF, and the price of the red metal is up more than 90% in the past
year. Usage will almost double by 2050, BNEF forecasts, while demand from other
low carbon technologies like electric vehicles and solar panels will also
balloon.
Buyers and
Sellers
For countries, the impact of the commodity rally depends on
whether they’re an exporter or importer. For those relying heavily on exporting
raw materials, the huge upswings can only be good news for public finances,
especially when they’ve just been stricken by a once-in-a-century pandemic. The
likes of Australia (iron ore), Chile (copper) and Indonesia (palm oil) all make
huge sums from commodities.
Meanwhile, countries looking to rebuild infrastructure may
find their budgets buy less than they used to. President Joe Biden’s $2.3
trillion plan is one such case. Electricity grids, railways and
refurbishing buildings are among the items on the shopping list that will use
large amounts of metal.
Consultancy CRU Group estimates the program will add 5
million tons of steel to the 80 million the U.S. uses each year, with similar
boosts to aluminum and copper demand.
Meat
It’s been a tough year to be in the meat business, from
devastating Covid outbreaks to the deadly pig disease that hit Germany and is
roaring back in China.
And as crop prices surge, farmers rearing poultry, pigs and cattle are among the first to get
squeezed by the eye-watering run-up in grains. Costs for corn fed to livestock
have doubled in the past year, and soybean meal is more than 40% higher.
While there’s a delay before that hits the burger chain or steakhouse, there
are already signs of prices creeping higher.
Old Steel Mills
Steel producers in Europe and America have suffered for
years from low prices caused by global overcapacity. Plants struggled to make
money and job security became a growing worry. Over 85,000 steel jobs were lost
in the European Union between 2008 and 2019, according to industry association Eurofer.
That’s all changed dramatically thanks to booming steel
prices. Futures in China, by far the biggest producer, have smashed records
— even outpacing gains in key ingredient iron ore — as the government
took
measures to curb output. That’s supercharged rallies of benchmark prices in
Europe and America, where mills were already running at maximum capacity as
they try to meet unexpectedly high demand.
Breakfast Tables
Whether you prefer latte or espresso, sweetened or plain,
the key ingredients of a cup of coffee have surged. Arabica coffee futures have
risen about 33% in the past year, while raw sugar has also advanced. Fancy a
slice of toast? Benchmark wheat prices have hit the highest since 2013.
Of course, rising commodities don’t immediately show up on
grocery shelves and cafe menus. They make up just a part of the costs for
retailers, which often absorb the initial increase to keep customers coming
back. But there’s a limit to that margin hit, and high prices could ultimately
feed through to consumers.
Lumber
Prices Break New Records, Adding Heat to Home Prices - WSJ
These firms have emerged as the biggest beneficiaries of the wood boom. They are feasting on
a glut of cheap pine trees in the U.S. South while
their finished products like lumber and plywood are flying off hardware-store
shelves and being bid up by home builders.
Lumber futures for May delivery
ended Friday at $1,500.50 per thousand board feet, an all-time high and roughly
four times the typical price this time of year. Futures have risen by the daily
maximum allowed by the Chicago Mercantile Exchange during nine of the last
17 trading sessions.
Feds Arrest an Alleged $336M
Bitcoin-Laundering Kingpin
The alleged administrator of Bitcoin Fog
kept the dark web service running for 10 years before the IRS caught up with
him.
04.27.2021 06:20 PM
For a decade, Bitcoin Fog has offered to obscure the source and destination of
its customers' cryptocurrency, making it one of the most venerable institutions
in the dark web economy. Now
the IRS says it has finally identified the Russian-Swedish administrator behind
that long-running anonymizing system and charged him with laundering hundreds
of millions of dollars worth of bitcoins, much of which was sent to or from
dark web drug markets. What gave him away? The trail of his own decade-old
digital transactions.
US authorities on Tuesday arrested Roman Sterlingov in Los
Angeles, according to court records, and charged him with laundering more than
1.2 million bitcoins—worth $336 million at the times of the payments—over the
10 years that he allegedly ran Bitcoin Fog. According to the IRS criminal
investigations division, Sterlingov, a citizen of Russia and Sweden, allowed
users to blend their transactions with those of others to prevent anyone
examining the Bitcoin blockchain from tracing any individual's payments. He
took commissions on those transactions of 2 to 2.5 percent. In total, the IRS
calculates, Sterlingov allegedly took home roughly $8 million worth of bitcoin
through the service, based on exchange rates at the times of each transaction.
That's before factoring in Bitcoin's massive appreciation over the past decade.
Ironically, it appears that the 2011 transactions Sterlingov allegedly used to
set up Bitcoin Fog's server hosting are what put the IRS on his trail.
“This is yet another example of how investigators with the
right tools can leverage the transparency of cryptocurrency to follow the flow
of illicit funds,” says Jonathan Levin, cofounder of blockchain analysis
company Chainalysis.
This
section will continue until it becomes unneeded.
Tokyo Games need 500 nurses;
nurses say needs are elsewhere
By
YURI KAGEYAMA and STEPHEN WADE May 3, 2021
TOKYO (AP) — Some nurses in Japan
are incensed at a request from Tokyo Olympic organizers to have 500 of them
dispatched to help out with the games. They say they’re already near the
breaking point dealing with the coronavirus pandemic.
Olympic officials have said they
will need 10,000 medical workers to staff the games, and the request for more
nurses comes amid a new spike in the virus with Tokyo and Osaka under a state
of emergency.
“Beyond feeling anger, I was stunned
at the insensitivity,” Mikito Ikeda, a nurse in Nagoya in central Japan, told
the Associated Press. “It shows how human life is being taken lightly.”
The appeal for more nurses is
typical of the impromptu changes coming almost daily as organizers and the
International Olympic Committee try to pull off the games in the midst of a
pandemic.
The Olympics are set to open in just
under three months, entailing the entry into Japan — where international
borders have been virtually sealed for a year — of 15,000 Olympic and
Paralympic athletes and thousands of other officials, judges, sponsors, media
and broadcasters.
In a statement from the Japan Federation of
Medical Workers’ Unions, secretary general Susumu Morita said the focus should
be on the pandemic, not the Olympics.
“We must definitely stop the proposal to send as
Olympic volunteers those nurses, tasked with protecting the fight against the
serious coronavirus pandemic,” Morita said.
“I am extremely infuriated by the insistence of
pursuing the Olympics despite the risk to patients’ and nurses’ health and
lives.”
A protest message saying that nurses were
opposed to holding the Olympics went viral on Japanese Twitter recently, being
retweeted hundreds of thousands of times.
Even before the pandemic, Japanese nurses were
overworked and poorly paid compared with their counterparts in the United
States or Britain.
---- “It’s hard for any hospital to go without
even one nurse, and they want 500,” Ikeda said. “Why do they think that’s even
possible?”
Deaths attributed to COVID-19 in Japan have just
passed 10,000.
The British Medical
Journal last month said that Japan should “reconsider” holding the
Olympics, arguing that “international mass gathering events ... are still neither
safe nor secure.”
India’s Covid Calamity Has Sick
Caring for the Sicker: ‘Alone to Save My Family’
Instead of a
wedding, a bride-to-be scours a hard-hit city for oxygen and hospital beds to
rescue her father and grandfather before it is too late
May 2, 2021 4:44 pm ET
NEW DELHI—Days before Nikita Goel had planned to get
married, she and five family members tested positive for the coronavirus,
including her parents and 86-year-old grandfather. “I felt like a roof had
fallen,” she said.
Her father and grandfather were soon fighting for every
breath, and Ms. Goel, suffering fever and coughing fits, was the one sent to
find help from an overwhelmed healthcare system collapsing around her. “I
suddenly felt I was left alone in the world, alone to save my family,” said Ms.
Goel, 28 years old.
The wave of Covid-19 sweeping India has hit hard and
suddenly, swallowing entire families and neighborhoods and, in many cases, leaving
the sick to care for the sicker. Those still healthy risk infection in crowded
pharmacies, clinics and hospitals trying to find medicine and medical help for
loved ones.
Ms. Goel and her family live in Bareilly, a city in India’s
most populous state, Uttar Pradesh, which has among the highest numbers of
Covid-19 cases of any state in India. The nation has a 1.9% vaccination rate
and on Sunday reported more than 3,600 deaths and 390,000 new cases, numbers
that public-health experts say likely undercount the toll because so many
people are dying outside overfilled hospitals.
After beating back a virus surge last year, India was
unprepared for the magnitude of the current outbreak, particularly in such
states as Uttar Pradesh, which has a population of 237 million.
World Health Organization lists
Moderna for emergency use
May 1, 2021 / 12:38 PM
May 1 (UPI) -- The Switzerland-based
World Health Organization has listed the two-dose Moderna vaccine for emergency
use.
The mRNA vaccine is the fifth
vaccine to receive emergency validation from the U.N. body. It already gave
approval to two from Oxford/AstraZeneca and one each from Johnson & Johnson
and Pfizer/BioNTech.
The Moderna, Pfizer/BioNTech and Johnson & Johnson have
all also received emergency use authorization from the U.S. Food and Drug Administration.
The WHO's approval on Friday makes the vaccines available
for the COVAX supply, an initiative to make vaccine supplies available
worldwide. It also allows countries to speed up their own regulatory approval
of vaccines.
The WHO's Strategic Advisory Group of Experts on
Immunization evaluated the Moderna vaccine in January and gave its approval for
everyone 18 years old and older.
Moderna released the results of a study last month indicating its COVID-19 vaccine
protects recipients from the virus for up to six months with a 90% efficacy
rate after the second dose. The Massachusetts-based biotech company said the
vaccine also was more than 95% effective against severe cases of the disease
after six months.
Next, some vaccine links
kindly sent along from a LIR reader in Canada. The links come from a most
informative update from Stanford Hospital in California.
For about a decade now, Kaman's
K-Max intermeshing rotor helicopter has been flying unmanned cargo missions for
US forces in Afghanistan. Now, the K-Max Titan is becoming the world's first
heavy-lift unmanned helicopter for the commercial market, having taken its
first flight last week.
The
K-Max is a heavy hauler in the sky, starting life back in 1994 as a logging
helicopter and carrying up to 6,000 lb (2,722 kg) of cargo on the end of a
cable and cargo hook. Its design is all about efficient lift; instead of a tail
rotor, it rocks two large top rotors side by side, each counteracting the
other's torque, timed to miss each other as they spin like the blades of an egg
beater. The small cabin seats one, and it's designed to automate as much as
possible, so the pilot can keep their hands and feet on the controls at all
times.
Crew requirements are minimum – one
pilot, one mechanic – but with the Titan system in place, you won't even be
needing the former. Unmanned operations can keep pilots out of danger in risky
environments, like firefighting situations, difficult locations and poor
weather. They can keep the chopper in the air longer, running repetitive routes
at all hours, and it stands to reason there's money to be saved on personnel
costs as well.
“We are excited to reach this major
milestone on K-MAX TITAN™," said Roger Wassmuth, Senior Director of
Business Development for Kaman's Air Vehicles division. "Watching this
capability take to the skies and knowing that we are going to solve some of the
toughest challenges for our commercial and military customers.”
With
more than a thousand unmanned missions flown in military deployment, Kaman's
system is certainly well-tested. The US Marine Corps, for its part, is looking
to push its two K-Max choppers further, adding the ability to operate fully
autonomously with the addition of a sensor-based self-piloting suite from Near Earth
Autonomy. Testing on that platform is expected to start in the
next couple of months.
Following the markets on both sides of the Atlantic since 1968. A dinosaur, who evolved with the financial system as it was perverted from capitalism to banksterism after the great Nixonian error of abandoning the dollar's link to gold instead of simply revaluing gold. Our money is too important to be left to probity challenged central banksters and crooked politicians.
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