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“Break The Glass” – Guggenheim’s Minerd Warns Fed May Start Buying Gold To Support Dollar Hegemony

"Break The Glass" – Guggenheim’s Minerd Warns Fed May Start Buying Gold To Support Dollar Hegemony

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"Break The Glass" - Guggenheim's Minerd Warns Fed May Start Buying Gold To Support Dollar Hegemony Tyler Durden Mon, 06/08/2020 - 15:30

"Don't fight The Fed" may soon have a very different meaning for the long-time asset-gatherers and commission-rakers who spew this age-old phrase to justify buying stocks at the first sign of any easing by central banks.

If Guggenheim Investments' Global CIO, Scott Minerd, is right, not fighting The Fed may soon mean buying gold alongside them...as he explores The Fed's increasingly unorthodox policy options ahead if the economy remains mired in a protracted downturn.

Minerd's line of reasoning is straightforward and logical: as numerous challenges for the Fed, including the need to make large-scale asset purchases to keep credit available at attractive rates in the face of multi-trillion-dollar budget deficits; The Fed may be forced to buy gold to maintain the appearance of responsibility for the world's reserve currency.

This is not the first time we have heard such 'blasphemy' - remember, in the eyes of the establishment (as far as their public-facing narrative is concerned, as opposed to their own personal actions) owning gold is an affront to the omnipotence of central planners: an admission that all is not well.

In 2016, Pimco's strategist Harley Bassman suggested that instead of buying bonds, or stocks, or crude oil,  "the Fed should unleash a massive Fed gold purchase program that could echo a Depression-era effort that effectively boosted the U.S. economy."

At the time, Bassman said that the Fed should "emulate a past success by making a public offer to purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? It would be operationally simple as holders could transact directly at regional Federal offices or via authorized precious metal assayers."

What would the outcome of such as "QE for the goldbugs" look like? His summary assessment:

A massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits.

The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.

In fact, since the end of 2018, the dollar has been drastically losing value against gold while maintaining some semblance of stability against its fiat peers...

 

Here's Minerd's full note, explaining his somewhat shocking view of the future...

The Fed's Roadmap

The Federal Reserve (Fed) will face numerous challenges in the months and years ahead. Economic output will remain below potential for years to come as we deal with the pandemic and its long-term scarring effects. An additional challenge will be a U.S. federal government budget deficit that will exceed $3 trillion this year with significant likelihood that it could be larger. Absent further action by the Fed, this deluge of Treasury securities will likely start pushing interest rates higher, threatening the overall economic expansion. The Fed cannot allow this to happen.  As I gaze into my crystal ball, the Fed’s roadmap is likely to include the following progression of policy tools as the economy remains mired in a protracted downturn:

Extended forward guidance: 

The first and most likely policy option will be to announce a lengthy period of forward guidance. Forward guidance is nothing more than the Fed saying it does not expect to raise interest rates for a period of time. Given the current situation, forward guidance will have to be aggressive. With the market already pricing rates staying very close to the zero bound for the next five years, there is not going to be very much shock and awe if the Fed announces that it will keep interest rates at zero for two or three years. Currently the two-year Treasury note is yielding 21 basis points (and got as low as 11 points on May 8), and the five-year note is at 46 basis points. Pegging the overnight rate at zero would have a limited effect on reducing rates at the front end of the yield curve.

To make sure that longer-term interest rates stay in a range that provides greater support to the U.S. economy and financing the U.S. Treasury, the Fed will have to provide forward guidance that zero interest rates will be necessary for a protracted period. Extended forward guidance will keep a substantial part of the yield curve well-anchored, so the prospect of long-term rates rising dramatically will be limited even as the economy strengthens and inflation picks up.

The Fed is going to want to establish the shortest minimum time it thinks it can get away with, yet still have the impact of shocking the market. The minimum period of time for keeping rates at the zero bound would be something like five years, but a longer time period may be necessary. The Fed will most likely establish a second condition of  an inflation rate target. In this scenario, the Fed could commit to maintaining rates at the zero bound for at least five years, and possibly longer, subject to the average inflation rate needing to exceed 2 percent on average over a five-year period. Only upon meeting the inflation target condition would the Fed begin a lift off in rates. Such an approach would have the benefit of automatically extending the expected period at the zero lower bound if economic conditions worsen or the recovery falters.

Swap Market is Beginning to Price in Higher Rates Within 5 Years

Source: Guggenheim Investments, Bloomberg. Data as of 6.5.2020.

Formal QE Program: The likelihood that the Fed will have to continue to engage in sizable purchases of Treasury securities is very high. The ability to attract enough capital to finance a multi trillion-dollar deficit at current interest rates is limited.

The dirty little secret about quantitative easing during the financial crisis is that it was used to finance the U.S. Treasury and keep interest rates from skyrocketing and crowding out the private sector. The Fed wants to make sure credit is available at attractive rates, which means a formal quantitative easing (QE) program, or large-scale asset purchases, must be on the horizon.

Currently the pace of the Fed’s purchases is determined weekly based on market functioning metrics monitored by the Open Market Desk. In the next QE program, the FOMC will outline the composition, size, frequency, and duration of its asset purchases. Given the government’s financing needs, I expect that the next QE program will be larger than any previous rounds of QE in terms of monthly purchases. The current pace of Fed purchases ($6 billion per day, or roughly $125 billion per month) is insufficient to absorb the $170 billion in net monthly Treasury coupon issuance we forecast for the rest of the year, let alone the hundreds of billions of monthly net T-bill issuance we expect. The duration of the next QE program could also be tied to achieving specific dual mandate outcomes, given the high amount of uncertainty around how long the purchases will be needed.

It will likely take at least $2 trillion in asset purchases per year just to fund the Treasury. The commitment to large-scale asset purchases should allow the Fed to at least take a first step in trying to contain any increase in long-term rates. The trade-off here is that committing to the zero bound for a period of time through forward guidance could raise inflationary expectations, which means that longer-term rates could rise. The rate sensitivity of the mortgage market, and the importance of the housing sector to the overall economy, means the Fed is not going to want to see long-term rates skyrocket. The announcement of a QE program would let the market know that the Fed is prepared to absorb some of the supply that is driven by federal deficits, while increasing the money supply to support nominal economic growth.

Yield Curves Show the Need for Fed Forward Guidance to Extend Beyond 5 Years and for QE to Support Treasury Securities

Source: Guggenheim Investments, Bloomberg. Data as of 6.5.2020.

Yield Curve Control: 

The first two items I’ve mentioned—extended forward guidance and a formal QE program—are very likely to occur within the next several months, perhaps in part as early as this Wednesday. If these programs fail to adequately support markets and the economy, the Fed will do more to support the economy and maintain satisfactory conditions for financing the government and corporations. The next option would be yield curve control. Very simply, yield curve control would require the central bank to announce that it will not allow interest rates across a portion of the curve to rise above a certain rate. For example, the Fed would announce a rate—say 50 basis points—and state that it stands ready to purchase all Treasury bonds of a certain tenor that trade above this level.

There is precedent for this policy tool. The Japanese government is currently engaged in yield curve control, and we did it here in the United States in the 1940s to help finance the war. The experience of yield curve control here and in Japan demonstrates that once the Fed announces that there is a put to the central bank at a certain interest rate level, it will not buy many securities. This has been the case with the Bank of Japan over the last year or so during their exercise in yield curve control and was the case for the Fed in the 1940s and early 1950s. It may not deliver as much incremental stimulus as outright QE, but it’s been used before, and it would effectively limit the rise in long-term rates and help ensure the effective transmission of forward guidance. The associated reduction in interest rate volatility would also help to lower mortgage rates and corporate bond yields.

It is worth noting that establishing a policy for yield curve control is fundamentally at odds with setting a quantitative target for QE purchases. Once the Fed transitions to yield curve control, the quantitative purchase target becomes somewhat meaningless. This has been the experience of the Bank of Japan which, after implementing yield curve control, continued to have a purchase target of 80 trillion yen per annum. But in reality, it has bought much less, totaling just 18 trillion yen in the past year.  

Yield curve control could prove an interesting tool to limit money supply growth while keeping interest rates low in the event of a sudden surge of inflation.

Negative Interest Rates: 

The fourth option—and now we are getting into the land of more remote possibilities—is a negative interest rate policy (NIRP). Fed Chairman Jay Powell has gone out of his way to dispel any notion that negative interest rates are under consideration, but the one thing he does not do is affirmatively close the door to using them. He raises doubts about their efficacy and says they would not be appropriate in the U.S. economy. NIRP could also wreak havoc with the banking sector and money market funds. Nevertheless, if all other tools fail up to this point, negative interest rates have to be left on the table.

The Fed and virtually everybody else in the market thinks that negative interest rates are something that will be decided by the Fed, but it’s not like the Fed provides a permit in order to allow bonds to trade at negative yields. The reality is that the market can do it. In Europe the ECB policy rate is -50 basis points and German bunds have traded below -80basis points, meaning the bund yield curve has been inverted. Even if the Fed keeps the fed funds rate trading at 5 basis points, the bund relationship shows that the U.S. Treasury yield curve could invert and trade at negative rates.

Negative market rates can happen in the U.S., and most likely will happen at some point. The only question is whether the Fed endorses a negative interest rate policy. The central bankers would be loath to do it, but they cannot rule it out if the market forces their hand and other policy tools prove inadequate.

Equity Purchases: 

And then there are what I’ll call the more exotic destinations on the Fed’s roadmap. Equity market purchases might not necessarily follow negative interest rates, but they might come instead of NIRP if it is just too unpalatable. Either of these two policies would be highly politically charged.

There is a strong correlation between stock prices and corporate credit spreads. If stock prices were to begin to slide, this would mean that corporate credit spreads could widen. If that began to happen in a disorderly manner, the Fed would become more actively involved in purchasing corporate bonds. Ultimately the scale of the bond-buying program would probably not be large enough to contain a dramatic spread widening of the type that would come about from a slide in stocks of 30 percent or more.

Equities and Credit Spreads Are Highly Correlated

Source: Guggenheim Investments, Bloomberg. Data as of 6.5.2020.

If the Fed needs to tame a severe credit crisis, it will have to find a way to prop up stocks and thereby maintain access to capital in a market other than the bond market. The Federal Reserve charter does not allow for the purchase of stocks, but the U.S. Treasury could establish a special purpose vehicle to buy stocks that the Federal Reserve could fund. That artifice would be similar to that which is used for the purchase of corporate bonds and ETFs. If credit spreads should start to widen significantly again, perhaps if we see a second spike in COVID activity as the lockdowns are unwound, the Fed would not rule out a program to prop up equity prices and provide financing to the Treasury to do it.

Break the Glass: 

As long as we are looking at the possible roadmap for the Fed, we cannot avoid discussing one other tool. Central banks around the world, including the Fed, hold almost 35 thousand tonnes of gold reserves. A central bank owns gold to buttress its reserves with an asset that becomes increasingly valuable in a severe crisis.

There are no signs the world is questioning the value of the U.S. dollar, but it is clear that it has been slowly losing market share as the world’s reserve currency.

With the Fed going all-in on financing the government deficit, the U.S. dollar could be at risk to negative speculation of its status as the dominant global reserve currency. Investing  in gold may help offset this trend. The accumulation of gold as a reserve asset historically has been seen as a responsible policy response in periods of crisis.

This may very well become the policy option of choice in the future.

Shifting Market Share of Global FX Reserves

Currency Composition of Official Foreign Exchange Reserves (COFER)

Source: Guggenheim Investments, Haver. Data as of 12.31.2019.

A decade ago, I spoke about unorthodox monetary policies such as QE and forward guidance. Today, these have become acceptable and permanent policy tools of the Fed. To conceive that these policies are now considered sound monetary orthodoxy would have been practically unthinkable. Fast-forward a decade into the future and I foresee that we may be shocked at what is considered sound central bank policy.

*  *  *

As Bassman explained in 2016, massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits.

The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.

In coda I would respond to the argument that a central bank cannot willfully create inflation – I disagree; it just depends upon how hard one tries. There are plenty of examples ranging from Weimar Germany to Zimbabwe where central banks have unleashed uncontrolled hyperinflations.

The more interesting question is not whether the Fed can create a 15% to 20% price spiral, but rather can they implement policies that will result in a somewhat gentle and controlled 2% to 3% inflation rate that will slowly deleverage the U.S. debt load while simultaneously increasing middle class nominal wages.

Many people will rightfully dismiss the gold idea as absurd, as just another fanciful strategy to print money; why not just buy oil, houses or some other hard asset? In fact, why fool around with gold; why not just execute helicopter money as originally advertised? I would answer the former by noting that only gold qualifies as money; and as for the latter, fiscal compromise on that order seems like a daydream in Washington today – don’t expect a helicopter liftoff anytime soon.

Let’s be honest; most people thought NIRP was just as nonsensical a few years ago, yet it has now been implemented by six central banks with little evidence it is effective. And while a gold purchase program should qualify as a fairy tale, what is unique here is that it actually occurred with a confirmed positive effect on the U.S. economy.

So when the next seat for a Fed governor becomes available, I would nominate Rumpelstiltskin … just a thought.

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TDR’s U.S. Stock Market Preview For The Week Of August 8, 2022

A weekly stock market preview and the data that will impact the tape. Sunday Evening Futures Open – Stock Market Preview Weekend News And Developments…

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A weekly stock market preview and the data that will impact the tape.

Sunday Evening Futures Open – Stock Market Preview

Weekend News And Developments

Berkshire Hathaway dramatically slowed new investment in the second quarter after setting a blistering pace at the start of the year, as the US stock market sell-off pushed the insurance-to-railroad conglomerate to a $43.8bn loss.

China’s southern island province of Hainan started mass Covid-19 testing on Sunday, locking down more parts of the province of over 10 million residents, as authorities scramble to contain multiple Omicron-driven outbreaks, including the worst in capital Sanya, often called “China’s Hawaii”.

Cuba: 17 missing, 121 injured as fire rages in oil tank farm in Matanzas City

Equity positioning for both discretionary and systematic investors remains in the 12th percentile of its range since January 2010, according to Deutsche Bank published last week.

Fisker Inc. (NYSE:FSR) unveils a process for qualifying US-based reservation holders of the Fisker Ocean all-electric SUV to retain access to the existing federal tax credit. The current $7,500 tax credit would be unavailable should Congress pass the Inflation Reduction Act of 2022 and President Biden signs the legislation into law.

Former Labour prime minister Gordon Brown has called for an emergency budget before the UK hits a “financial timebomb” this autumn. Mr. Brown said millions would be pushed “over the edge” if the government does not address the cost of living crisis.

Israel said Sunday it killed a senior Islamic Jihad commander in a crowded Gaza refugee camp, the second such targeted attack since launching its high-stakes military offensive against the militant group just before the weekend. The Iran-backed militant group has fired hundreds of rockets at Israel in response, raising the risk of the cross-border fighting turning into a full-fledged war.

NexJ Systems (TSX: NXJ) announced financial results for its second quarter ended June 30, 2022.

Rhine river hit by drought conditions, hampers German cargo shipping. According to reports, transport prices have shot up as drought and hot weather have affected water levels in the river Rhine in Germany leading cargo vessels to reduce loads during transportation.

Taiwan’s defense ministry said it had detected 66 Chinese air force planes and 14 Chinese warships conducting activities in and around the Taiwan Strait on Sunday, Reuters reports. Thursday’s drills involved the live firing of 11 missiles.

Unifor: 1,800 members from across the country arrive in Toronto this weekend before Monday’s start to the union’s 4th Constitutional Convention, where delegates will elect a new National President and vote on key priorities and initiatives. Unifor is Canada’s largest union in the private sector, representing 315,000 workers in every major area of the economy. 

U.S. rate futures have priced in a 69% chance of a 75 bps hike at its September meeting, up from about 41% before the payrolls data. Futures traders have also factored in a fed funds rate of 3.57% by the end of the year.

What The Analysts Are Saying…

Anybody that jumped on the ‘Fed is going to pivot next year and start cutting rates’ is going to have to get off at the next station, because that’s not in the cards. It is clearly a situation where the economy is not screeching or heading into a recession here and now.” — Art Hogan, chief market strategist at B. Riley Financial

“It is not a market bottom, things are not going to go up consistently from here because we are going to be buying low tech products for a while, so everyone has something to make up as COVID demand = pre-COVID​, there are fewer units for this. Reality check – unlike ‘Big Tech’, consumer discretionary related companies are offering more cautious guidance.”Morgan Stanley analyst commentary on a potential market bottom

The fact of the matter is this (Aug. 5 nonfarm payroll report) gives the Fed additional room to continue to tighten, even if it raises the probability of pushing the economy into recession. It’s not going to be an easy task to continue to tighten without negative repercussions for the consumer and the economy”. — Jim Baird, chief investment officer at Plante Moran Financial Advisors

“We are surprised to not see investors start to chase upside calls in fear of underperforming the market. People are just watching.” — Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald

What We’re Watching

Psychedelic Sector Gaining Momentum: What started out as bottoming action after a protracted multi-quarter decline has now morphed into a tangible bullish impulse. We believe Netflix new docuseries How To Change Your Mind has played an important roll in the creation of critical mass awareness for the sector—and a rebound in broad market risk assets hasn’t hurt. At the tip of the spear for this sentiment shift is COMPASS Pathways plc (CMPS), which has risen 62.64% since  the docuseries debuted on July 12. Price on the benchmark Horizons Psychedelic Stock Index ETF has now breached the 20-day MA/EMA.

We are watching to see if investor sentiment shifts into laggard names such as Cybin Inc. and MindMed, which has continued to fall following a proposed 15-1 reverse stock split initiative announced this year. Many Tier-2/3 names still 90%+ off their highs…

Revive Therapeutics (RVV:CSE, RVVTF:OTC): This has been on our radar for the last couple of weeks, and remains on our watch list. The company has already confirmed that their statistician is in possession of 210 unblinded patient data for its Phase 3 clinical trial to evaluate Bucillamine to treat COVID-19. The company is currently attempting to revise endpoint data from a hospitalization/death focus to a symptoms focus. If they are to achieve this, it will mark a material event in the course of the trial.

YTD performance (+33.09%), Revive Therapeutics (RVVTF); Red line = 7day EMA

We believe an endpoint decision, either positive or negative, is imminent and will have cause a material price action event.

Consumer Price Index, August 10: Consumer inflation expectations for July are released by the New York Fed, while the University of Michigan’s preliminary survey of consumers for August is on tap. Taken together, these should give investors a better picture of how consumers are feeling about current economic conditions. 

As of June, it’s running at 9.1% on an annual basis. Investors, economists and consumers will be watching to see if price increases are easing as everything from gasoline to food is elevated.

Given the mixed signals on the overall state of the economy (i.e. indications of recession vs. this week’s strong nonfarm payrolls number), CPI will be in-focus by market participants. Scotiabank expects 8.9% y/y (9.1% prior) and 0.4% m/m for headline CPI; ex-food-and-energy: 6.1% y/y led by a 0.6% m/m gain.

Pot stocks earnings continue, with several Tier-1/Teri-2 names reporting including Curaleaf Holdings, Trulieve Cannabis, Marimed Inc., Cronos Group, TerrAscend Corp. and more. Last Wednesday, Green Thumb Industries allayed fears somewhat that this earnings season would be a write-off, producing solid numbers which beat expectations on several key metrics. An additional strong report or two will go a long way to help improve sentiment for a sector that’s been decimated over the past six quarters.

U.S. Economic Calendar

TIME (ET)REPORTPERIODMEDIAN FORECASTPREVIOUS
Monday, August 8
11:00 AMNY Fed 3-year inflation expectationsJuly3.60%
Tuesday, Aug. 9
6:00 AMNFIB small-business indexJuly89.589.5
8:30 AMProductivityQ2-4.30%-7.30%
8:30 AMUnit labor costsQ29.30%12.60%
Wednesday, August 10
8:30 AMConsumer price indexJuly0.30%1.30%
8:30 AMCore CPIJuly0.60%0.70%
8:30 AMCPI (year-over-year)July-8.70%9.10%
8:30 AMCore CPI (year-over-year)July6.10%5.90%
10:00 AMWholesale inventories (revision)June1.90%1.70%
2:00 PMFederal budget (compared with year earlier)July-$302 billion
Thursday, August 11
8:30 AMInitial jobless claimsAug. 6265,000260,000
8:30 AMContinuing jobless claimsJuly 301.42 million
8:30 AMProducer price indexJuly0.20%1.10%
Friday, Aug. 12
8:30 AMImport price indexJuly-0.80%0.20%
10:00 AMUMich consumer sentiment index (preliminary)Aug.5352
10:00 AMUMich 5-year inflation expectations (preliminary)Aug.2.90%

Meme Of The Week

Key Earnings (US Markets)

DateCompanySymbolEarnings estimate
Monday, August 83D SystemsDDD$0.00 per share
BarrickGOLD$0.22
BioNTechBNTX$7.08
EnergizerENR$0.76
News Corp.NWSA$0.08
NovavaxNVAX$5.18
Palantir TechnologiesPLTR$0.03
Take-Two Interactive SoftwareTTWO$0.86
Tyson FoodsTSN$1.97
UpstartUPST$0.08
Tuesday, Aug. 9Akamai TechnologiesAKAM$1.31
AramarkARMK$0.24
Bausch HealthBHC$0.91
Carlyle GroupCG$1.07
CoindeskCOIN-$2.68
Cronos GroupCRON-$0.07
EbixEBIX$0.58
EmersonEMR$1.29
GlobalFoundriesGFS$0.45
Grocery OutletGO$0.24
H & R BlockHRB$1.24
Hilton Grand VacationsHGV$0.88
Hyatt HotelsH$0.03
IAC/InterActiveCorpIAC-$2.35
iRobotIRBT-$1.55
Maxar TechnologiesMAXR$0.12
Norwegian Cruise LineNCLH-$0.83
Plug PowerPLUG-$0.20
Rackspace TechnologyRXT$0.16
Ralph LaurenRL$1.71
RobloxRBLX-$0.26
Spirit AirlinesSAVE-$0.46
Super Micro ComputerSMCI$2.35
SyscoSYY$1.11
The Trade DeskTTD$0.20
TTEC HoldingsTTEC$0.85
Unity SoftwareU-$0.21
Warner Music GroupWMG$0.20
World Wrestling EntertainmentWWE$0.55
Wynn ResortsWYNN-$0.97
Wednesday, August 10AppLovinAPP$0.50
CoherentCOHR$2.13
CoupangCPNG-$0.10
CyberArk SoftwareCYBR$0.01
Dutch BrosBROS$0.07
Fox Corp.FOXA$0.77
Franco-NevadaFNV$0.98
Jack in the BoxJACK$1.42
Manulife FinancialMFC$0.76
MatterportMTTR-$0.14
Pan Am SilverPAAS$0.14
Red Robin GourmetRRGB-$0.16
SonosSONO$0.21
TraegerCOOK$0.04
Wendy’sWEN$0.22
Wolverine World WideWWW$0.65
Thursday, August 11AerCapAER$1.42
BaiduBIDU$10.92
Brookfield Asset ManagementBAM$0.69
Canada GooseGOOS$2.98
Cardinal HealthCAH$1.18
Dillard’sDDS$2.88
Flower FoodsFLO$0.27
IlluminaILMN$0.64
LegalZoomLZ$0.02
Melco Resorts & EntertainmentMLCO-$0.44
NioNIO-$1.36
PoshmarkPOSH-$0.25
Rivian AutomotiveRIVN-$1.63
Ryan Specialty GroupRYAN$0.35
Six FlagsSIX$1.04
Solo BrandsSOLO$0.28
ToastTOST-$0.12
Utz BrandsUTZ$0.12
Warby ParkerWRBY-$0.02
W&T OffshoreWTI$0.37
Wheaton Precious MetalsWPM$0.32
Friday, Aug. 12Broadridge FinancialBR$2.65
Honest CompanyHNST$-$0.09
Spectrum BrandsSPB$1.42

FDA Calendar

None

Source: CNN Business – TDR’s stock market preview sentiment indicator

Past Week What’s Hot… and What’s Not

Source: TradingView – TDR’ stock market preview what’s hot this past week

Top 12 High Short Interest Stocks

TickerCompanyExchangeShortIntFloatShares O/SIndustry
BBBYBed Bath & Beyond Inc.Nasdaq46.38%61.57M79.96MRetail (Specialty Non-Apparel)
ICPTIntercept Pharmaceuticals IncNasdaq43.76%23.62M29.71MBiotechnology & Medical Research
MSTRMicroStrategy IncNasdaq39.29%9.32M9.33MSoftware & Programming
BYNDBeyond Meat IncNasdaq37.91%56.79M63.54MFood Processing
SWTXSpringWorks Therapeutics IncNasdaq37.51%31.64M49.41MBiotechnology & Medical Research
BIGBig Lots, Inc.NYSE37.37%26.49M28.92MRetailers – Discount Stores
EVGOEvgo IncNasdaq35.65%67.76M69.00MUtilities – Electric
UPSTUpstart Holdings IncNasdaq35.60%72.32M84.77MConsumer Lending
BGFVBig 5 Sporting Goods CorpNasdaq34.65%20.85M22.33MRetailers – Miscellaneous Specialty
SRGSeritage Growth PropertiesNYSE34.38%23.58M43.68MReal Estate Operations
NKLANikola CorporationNasdaq32.77%265.95M421.14MAuto & Truck Manufacturers
BLNKBlink Charging CoNasdaq32.54%33.98M50.20MUtilities – Electric

Tags: stock market preview, stock market preview August 8, 2022.

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Senate Passes $740 Billion Tax, Climate Package — Will Go To House Next

Senate Passes $740 Billion Tax, Climate Package — Will Go To House Next

Update (1532ET): After much wrangling, the Democrats finally passed…

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Senate Passes $740 Billion Tax, Climate Package -- Will Go To House Next

Update (1532ET): After much wrangling, the Democrats finally passed their sweeping economic package through the Senate on Sunday.

The estimated $740 billion "Inflation Reduction Act" - far less ambitious than their original $3.5 trillion vision - next heads to the House, where its passage is a foregone conclusion. According to Axios, a vote could come as early as Friday before it heads to President Biden's desk.

The package includes provisions to address climate change, pharmaceutical costs, and a supercharged IRS.

"It’s been a long, tough and winding road, but at last, at last we have arrived," said Senate Majority Leader Chuck Schumer (D-NY). "The Senate is making history. I am confident the Inflation Reduction Act will endure as one of the defining legislative measures of the 21st century."

As the Washington Post notes, "Senators engaged in a round-the-clock marathon of voting that began Saturday and stretched late into Sunday afternoon. Democrats swatted down some three dozen Republican amendments designed to torpedo the legislation. Confronting unanimous GOP opposition, Democratic unity in the 50-50 chamber held, keeping the party on track for a morale-boosting victory three months from elections when congressional control is at stake."

And as Axios reports,

The Senate returned to the Capitol Saturday afternoon, and began voting late Saturday night and into Sunday on a series of amendments — part of the process known as "vote-a-rama."

  • Senate Republicans offered dozens of amendments aimed at minimizing the bill, including stripping out funding for the Internal Revenue Service and eliminating COVID-19-related school mandates.
  • Democrats held firm in their unity, with the help of Harris, of preserving the core elements of the package and voting down each GOP amendment.

.  .  .

The bill includes:

  • $370 billion for climate change - the largest investment in clean energy and emissions cuts the Senate has ever passed.
  • Allows the federal health secretary to negotiate the prices of certain expensive drugs for Medicare.
  • Three-year extension on healthcare subsidies in the Affordable Care Act.
  • 15% minimum tax on corporations making $1 billion or more in income. The provision offers more than $300 billion in revenue.
  • IRS tax enforcement.
  • 1% excise tax on stock buybacks.

Drilling down on the climate portion - Axios' Andrew Freedman writes:

  • This includes tax incentives to manufacture and purchase electric vehicles, generate more wind and solar electricity and support fledgling technology such as direct air capture and hydrogen production. 
  • Independent analyses show the bill, combined with other ongoing emissions reductions, would cut as much as 40% of U.S. greenhouse gas emissions by 2030, short of the White House's 50% reduction target. However, if enacted into law, it would reestablish U.S. credibility in international climate talks, which had been flagging due in part to congressional gridlock. 
  • As part of Democrats' concessions to Sen. Manchin, the bill also contains provisions calling for offshore oil lease sales in the Gulf of Mexico and off the coast of Alaska, and a commitment to take up a separate measure to ease the permitting of new energy projects. 

*  *  *

Senate Democrats late on Aug. 6 advanced a mammoth spending bill on climate and energy, health care, and taxes, after overcoming unanimous Republican opposition in the evenly divided chamber.

The procedural vote to advance the Democratic bill - which authorizes over $400 billion in new spending - was 51–50 after Vice President Kamala Harris arrived at the Capitol to cast a vote, breaking the deadlock in the Senate over the measure that Democrats say would reform the tax code, lower the cost of prescription drugs, invest in energy and climate change programs, all while lowering the federal deficit.

The vote means that senators will have 20 hours to debate on the measure, followed by a vote-a-rama, a marathon open-ended series of amendment votes that has no time limit. After that, the bill will head to a final vote. The measure is anticipated to pass the chamber as early as this weekend.

The House, where Democrats have a majority, could give the legislation final approval on Aug. 12, when lawmakers are scheduled to return to Washington.

The vote came after the Senate parliamentarian - the chamber’s nonpartisan rules arbiter - gave a thumbs-up to most of the Democrats’ revised 755-page bill.

But Democrats had to drop a significant part of their plan for lowering prescription drug prices, Parliamentarian Elizabeth MacDonough said.

The provision would have essentially forced companies not to raise prices higher than inflation. MacDonough said Democrats violated Senate budget rules with language in the bill imposing hefty penalties on drugmakers who raise their prices beyond inflation in the private insurance market.

As Mimi Nguyen Ly details at The Epoch Times, while the bill’s final costs are still being determined, it includes about $370 billion on energy and climate programs over the next 10 years, and about $64 billion to extend subsidies for Affordable Care Act program for federal subsidies of health insurance for three years through 2025.

It also seeks generate about $700 billion in new revenue over the next 10 years, which would leave roughly $300 billion in deficit reduction over the coming decade, which would represent just a tiny proportion of the next 10 year’s projected $16 trillion in budget shortfalls.

A large portion of the $700 billion—an estimated $313 billion—is expected to be generated by increasing the corporate minimum tax to 15 percent, while the remaining amounts include $288 billion in prescription drug pricing reform and $124 billion in Internal Revenue Service tax enforcement.

According to the current version of the bill, the new 15 percent minimum tax would be imposed on some corporations that earn over $1 billion annually but pay far less than the current 21 percent corporate tax. Companies buying back their own stock would be taxed 1 percent for those transactions, swapped in after Sinema refused to support higher taxes on private equity firm executives and hedge fund managers. The IRS budget would be increased to strengthen its tax collections.

The White House said in a statement of administrative policy on Aug. 6 that it “strongly supports passage” of the bill.

“This legislation would lower health care, prescription drug, and energy costs, invest in energy security, and make our tax code fairer—all while fighting inflation and reducing the deficit,” the statement reads.

“This historic legislation would help tackle today’s most pressing economic challenges, make our economy stronger for decades to come, and position the United States to be the world’s leader in clean energy.”

Republicans say the legislation is simply an alternate, dwindled version to the Democrat’s earlier Build Back Better bill—a multitrillion-dollar social spending package that was a major agenda of President Joe Biden—that Democrats have now dubbed the “Inflation Reduction Act of 2022.”

Senate Minority Leader Mitch McConnell (R-Ky.) said Democrats “are misreading the American people’s outrage as a mandate for yet another reckless taxing and spending spree.” He said Democrats “have already robbed American families once through inflation and now their solution is to rob American families yet a second time.”

“There is no working family in America whose top priorities are doubling the size of the IRS and giving rich people money to buy $80,000 electric cars,” McConnell said in a separate statement on Twitter.

“Americans want Washington to address inflation, crime, and the border—not another reckless liberal taxing and spending spree.”

Democrats have said the measure would “address record inflation by paying down our national debt, lowering energy costs, and lowering healthcare costs,” but Republicans have criticized the measure as having no potential other than to make matters worse, nicknaming the legislation “Build Back Broke,” in part because the bill would fulfill many parts of Biden’s Build Back Better agenda.

“The time is now to move forward with a big, bold package for the American people,” said Senate Majority Leader Chuck Schumer (D-N.Y.).

“This historic bill will reduce inflation, lower costs, fight climate change. It’s time to move this nation forward.”

But not every Democrat is buying what Chuck is selling...

As John Solomon reports at JustTheNews.com, Sen. Bernie Sanders, the former presidential candidate and proud socialist, on Saturday attacked President Joe Biden‘s Inflation Reduction Act for failing to live up to its name, after the non-partisan Congressional Budget Office declared it would have a minimal impact on surging prices.

“I want to take a moment to say a few words about the so-called Inflation Reduction Act that we are debating this evening," Sanders said just after voting with Democrats to advance the bill to debate on the Senate floor.

"I say so-called because according to the CBO and other economic organizations that have studied this bill, it will in fact have a minimal impact on inflation."

CBO declared this week that the $740 billion piece of legislation would only affect inflation by 0.1% in either direction.

"I don't find myself saying this very often. But on that point, I agree with Bernie," Sen. John Thune, R-S.D., told Insider.

Overall, economic analysts are divided on the measure, with some having predicted that the bill will worsen inflation and lead to stagnation in growth.

As Will Cain explained in an excellent monologue reality check, "look at the name of the bill, whatever it is, you can be sure the legislation will do the opposite."

Finally, as Goldman details in a new notes, the net fiscal impact of these policies continues to look very modest, likely less than 0.1% of GDP for the next several years...

While the final outcome may still yet differ in details, the fiscal impact is likely to be similar.

Tyler Durden Sun, 08/07/2022 - 15:32

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UN Warns Of ‘Worrying And Dangerous’ Conspiracy Theories

UN Warns Of ‘Worrying And Dangerous’ Conspiracy Theories

The United Nations would like everyone to be on the lookout for ‘worrying and dangerous’…

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UN Warns Of 'Worrying And Dangerous' Conspiracy Theories

The United Nations would like everyone to be on the lookout for 'worrying and dangerous' conspiracy theories - especially those that might lead people to the conclusion that COVID-19 escaped from a lab in Wuhan, China... you know, the thing the WHO just admitted could very well be the case, and which Sen. Rand Paul (R-KY) has launched recent investigations into.

Some background

Before we get into the UN's latest salvo in the war over narratives (feel free to scroll down if you're a regular reader); We know from government contracts, FOIA records, and leaked emails that the US government was conducting risky gain-of-function research on US soil until former President Obama banned it in 2014 over ethical questions raised by the scientific community. The 'research' included manipulating bat Covid to be more transmissible to humans, and following Obama's ban, was funneled overseas to the Wuhan Institute of Virology through New York nonprofit, EcoHealth Alliance - whose CEO Peter Daszak secured lucrative contracts to study and manipulate bat coronaviruses in Wuhan China four months before Obama's ban.

Daszak was the guy behind The Lancet's "it couldn't have come from a lab" Natural Origin statement - for which he reportedly engaged in a "bullying campaign" - before generating significant controversy over conflicts of interest involving many of its authors and co-signatories, to which the Lancet later admitted.

The first $666,442 installment of EcoHealth's $3.7 million NIH grant was paid in June 2014, with similar annual payments through May 2019 under the "Understanding The Risk Of Bat Coronavirus Emergence" project.

Then, in 2017, a subagency of the National Institutes of Health (NIH) - headed by Dr. Anthony Fauci - resumed funding a controversial grant to genetically modify bat coronaviruses in Wuhan, China without the approval of a government oversight body.

Notably, the WIV "had openly participated in gain-of-function research in partnership with U.S. universities and institutions" for years under the leadership of Dr. Shi 'Batwoman' Zhengli, according to the Washington Post's Josh Rogin.

We also know (thanks to a FOIA lawsuit by The Intercept) that Daszak wanted to release 'Chimeric Covid Spike Proteins' Into Bat Populations Using 'Skin-Penetrating Nanoparticles,' only for the 'DEFUSE' proposal to be denied by DARPA on the grounds that it was too risky.

Further reading:

We challenge the UN to 'debunk' any of the above.

Now that you're up to speed

Enter the UN's new #ThinkBeforeSharing campaign, which helps people "learn how to identify, debunk, react to and report on conspiracy theories to prevent their spread."

To aid gullable individuals navigate the information highway without hitting any conspiracy potholes, UNESCO provides some helpful infographics - one of which thanks Stephen Lewandowsky - Australian psychologist and co-author of a March 2022 Scientific American report complaining about how "The Lab-Leak Hypothesis Made It Harder for Scientists to Seek the Truth."

So the default position of those behind the UN's "watch out for conspiracy theories" campaign is that the lab leak is a conspiracy theory. Right.

They recommend taking action when you've "identified a conspiracy theory," but that you don't get lured into an argument with a conspiracy theorist.

"Any argument may be taken as proof that you are part of the conspiracy and reinforce that belief," which will cause the conspiracy theorist to "argue hard to defend their beliefs."

So what to do? Show "empathy," and avoid "ridiculing them."

"If you are certain you have encountered a conspiracy theory," you must "react" immediately and post a link to a "fact-checking website" in the comments.

In short - this (from 2020):

Stay safe out there citizen!

Tyler Durden Sun, 08/07/2022 - 14:00

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