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Futures Soar On Stimulus Hopes, Fed Bond Buying, Ignore Geopolitical Clashes

Futures Soar On Stimulus Hopes, Fed Bond Buying, Ignore Geopolitical Clashes



Futures Soar On Stimulus Hopes, Fed Bond Buying, Ignore Geopolitical Clashes Tyler Durden Tue, 06/16/2020 - 08:11

After Monday's dramatic intraday reversal which saw the S&P500 surge more than 100 points from session lows and closing above its 200-day moving average, ES futures continued their levitation overnight and were trading at 3,110 last, propelled both by Monday's Fed announcement it would start to buy corporate bonds on Tuesday, and a late Bloomberg report that Trump was seeking a $1 trillion infrastructure proposal to stimulate the economy which would focus on 5G and rural broadband, although reports added it would still under discussion and would need the backing of Congress.

As Bloomberg notes, government stimulus has been a key feature of the global equities rally, despite soaring unemployment and signs that a second wave of the virus has started to emerge. Now there are signals that more economic support is on the way. "The size and the pace of Fed balance sheet expansion is something that will put a floor under global equity markets,” Stephen Gallo, BMO Capital Markets head of European FX strategy, said on Bloomberg TV.

At the same time, investors mostly ignored news of a sharp escalation in Korean tensions, as well as a deadly clash between Indian and Chinese border troops, while expecting a record rebound in May retail sales. Investors will be keeping a close watch on a live telecast of Fed Chair Jerome Powell’s two-day testimony before the Congress which is expected to begin at 10 a.m. ET. Powell’s remarks follow the grim outlook from the U.S. central bank last week that brought back volatility into stock markets after bets of a swift economic rebound helped the Nasdaq confirm a bull market.

As a result of more stimulus hopes, S&P futures rose 1.2% overnight, lifting the S&P 500 index to 9% below its record high hit four months earlier after coming within 5% of that level early last week. U.S. stocks ended a volatile session higher on Monday with the S&P 500 closing above its 200-day moving average, a key technical indicator of long-term momentum.

Travel-related stocks, also known as the "Robinhood darlings", jumped with Delta Air Lines, United Airlines, Carnival Corp, Norwegian Cruise Lines and Royal Caribbean jumping between 8% and 10% in premarket trading.

In Europe, the Stoxx 600 Index rallied the most in a month lef by construction stocks following a Bloomberg report that the Trump administration is weighing a $1t infrastructure program as part of plans to boost the economy. Stoxx 600 Construction & Materials index gains as much as 4.2%, the most since May 18, led by gains for CRH, HeidelbergCement and LafargeHolcim
Ashtead jumps as much as 19%, touching a record high, boosted by the U.S. plans and 4Q results that Jefferies said were slightly ahead of guidance. Ground engineering specialist Keller up as much as 15% after update.

Asian stocks gained, led by materials and industrials, after falling in the last session. All markets in the region were up, with South Korea's Kospi Index gaining 5.3% and Japan's Topix Index rising 4.1%. The Topix gained 4.1%, with TEMONA and Furukawa Battery rising the most. The Shanghai Composite Index rose 1.4%, with Nanjing Iron & Steel and Shanghai Yimin Commerce Group posting the biggest advances.

In geopolitical news, there was a sharp escalation out of North Korea which said it was mulling plan to enter demilitarized zones and its army is preparing to implement government orders. Subsequently, North Korea demolished the inter-Korean joint liaison office. South Korea's Blue House said Seoul will "strongly respond" if North Korea further worsens the situation, with traders now looking at a US response.

Separately, an Indian Army Colonel and 2 Army soldiers were killed in action during a clash with Chinese troops at one of the standoff points in the Galwan Valley, Ladakh, India Today Senior Editor Aroor; after reports of fresh tensions at standoff points in Easter Ladakh at Pangong Tso/Galwan, according to The Hindu's Peri. Some reports note that Indian soldiers attacked Chinese soldiers at the border. Thereafter, the Global Times reported that the Chinese Foreign Ministry said that China and India have agreed to resolve bilateral issues through dialogue to ease the border situation and maintain peace and tranquillity in border areas. More recently, the Chinese Global Times editor tweeted “China also suffered casualties in the Galwan Valley in the physical clashes with Indian soldiers, China doesn’t want to have a clash with India, but we don’t fear it”.

In rates, ttreasuries were off the lowest levels of the day although yields remain cheaper by up to 5bp at long end of the curve in a bear-steepening move. Plans for more U.S. stimulus via a $1 trillion infrastructure proposal lifted stocks, weighed on Treasuries as it implied far more issuance to come. Yields cheaper by 0.5bp to 5bp across the curve with front-end out to 7-year sector outperforming, steepening 2s10s by 1.7bp, 5s30s by ~5bp; 30-year yields topped at 1.542%, highest since June 10

In FX, the dollar fell versus most of its Group-of-10 peers following the U.S. infrastructure proposal to revive the virus-hit economy. "Dollar de-basement risks are mounting again and Treasury yields going much higher because of the expected infrastructure spending,” said Mizuho head of strategy Vishnu Varathan. "Markets are anticipating a lot more money flooding into the market with this spending and that the U.S. will have to sell a lot more bonds." The pound led G-10 gains after talks between U.K. Prime Minister Boris Johnson and the EU’s top officials. Bunds slipped while Italian bonds led outperformance by euro peripheral debt.

Elsewhere, WTI climbed toward $38 a barrel in New York, with Brent trading at $40.58 last amid signs of improving demand and declining production.

Looking at the day ahead, there are a number of data highlights from the US, including May’s retail sales, industrial production and capacity utilization, and finally June’s NAHB housing market index. Elsewhere, Fed Chair Powell will be speaking before the Senate Banking Committee, while we’ll also hear from Fed Vice Chair Clarida, the ECB’s Visco and Bank of Canada Governor Macklem. Oracle is reporting earnings.

Market Snapshot

  • S&P 500 futures up 1.2% to 3,102.50
  • STOXX Europe 600 up 2% to 360.21
  • MXAP up 3.2% to 158.26
  • MXAPJ up 2.6% to 507.74
  • Nikkei up 4.9% to 22,582.21
  • Topix up 4.1% to 1,593.45
  • Hang Seng Index up 2.4% to 24,344.09
  • Shanghai Composite up 1.4% to 2,931.75
  • Sensex up 0.6% to 33,412.76
  • Australia S&P/ASX 200 up 3.9% to 5,942.30
  • Kospi up 5.3% to 2,138.05
  • German 10Y yield rose 1.7 bps to -0.429%
  • Euro up 0.09% to $1.1333
  • Brent Futures up 1.6% to $40.36/bbl
  • Italian 10Y yield rose 1.2 bps to 1.33%
  • Spanish 10Y yield fell 3.2 bps to 0.529%
  • Brent futures up 2% to $40.50/bbl
  • Gold spot up 0.2% to $1,729.35
  • U.S. Dollar Index down 0.1% to 96.60

Top Overnight News

  • The Federal Reserve said Monday that it will begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds
  • Stocks rose globally alongside U.S. equity futures after news about American monetary and fiscal stimulus plans bucked up investor sentiment in face of worries over a second virus wave
  • The U.K. and European Union moved a step closer to reaching a deal over their future relationship, with the bloc’s top officials confident Boris Johnson is willing to compromise and the prime minister saying the prospects for an accord are “very good”
  • U.K. jobless claims more than doubled to almost 3 million during the virus lockdown, adding urgency to Bank of England and government efforts to cushion the blow
  • The Bank of Japan increased its lending support aimed at struggling companies while leaving its main monetary policy settings untouched as it continues to monitor the economic fallout from the coronavirus pandemic
  • Japanese fund managers sold the most U.S. agency bonds in six years in April after buying an unprecedented amount the previous month, according to data from the Treasury Department

Asia-Pac bourses notched considerable gains as the region took impetus from Wall Street's recovery after the pace of infections slowed in key US states and the Fed announced its Secondary Market Corporate Credit Facility will begin purchasing corporate bonds. ASX 200 (+3.9%) and Nikkei 225 (+4.9%) surged from the open with energy and tech leading the firms gains in Australia and Viva Energy the biggest gaining stock following its guidance, while stocks in Tokyo also rallied as they coat-tailed on the recent favourable currency moves and with focus on the BoJ announcement in which the central bank kept policy settings unchanged as expected but noted the size of market operations and lending facilities to address the pandemic is likely to increase to around JPY 110tln from the current JPY 75tln. Hang Seng (+2.4%) and Shanghai Comp. (+1.4%) were also positive amid some moderation in the US-China related headlines with the US to permit Chinese carriers to continue to operate 4 flights from China per week and with the US to also allow companies to work with Huawei to develop 5G standards despite its blacklisting, although gains for the mainland were relatively reserved compared to its peers after the PBoC’s net liquidity drain. Finally, 10yr JGBs were lower in which they briefly fell below the 152.00 level amid spill over selling from USTs and as stock markets surged, while the losses in bonds also followed the BoJ decision to maintain its monetary policy settings as expected.

Top Asia News

  • Rupee Declines With Stocks on India-China Border Face-Off

European equities drift lower as trade is underway, but the region remains in firm positive territory [Euro Stoxx 50 +2.4%] despite the slew of geopolitical developments in early EU hours including further souring in inter-Korean relations alongside clashes between nuclear powers India and China. Some participants point yesterday’s recovery to the recent Fed decision to directly purchase corporate bonds, but scepticism remains regarding the stock market “shrugging off” stacking negative fundamentals and rising uncertainty – with the latest BofA June Fund Manager survey also noting that a record 98% of investors say the stock market is the most overvalued since 1998. Nonetheless, broad-based gains are seen across Europe of some 2%, whilst sectors also point to risk appetite in the market as cyclicals outpace defensives. In sectoral breakdown mimics the “risk-on” sentiment as Material, Banks and Travel & Leisure stand as the top performers, whilst Health, Retail and Media lag. In terms of individual movers, the strong performance in the Travel sector sees Carnival (+8.8%), easyJet (+7.3%), IAG (+7.7%) and Tui (+6.7%)  leading the gains – with the latter also noting that the easing of travel restrictions allows the group to partially restart its summer 2020 programme. Ashtead (+7.0%) trimmed earlier gains but holds a spot among the leaders following its trading update. Commerzbank (+2.5%) is unfazed by the spat with its second largest shareholder Cerberus, who recently stated the German bank has not executed or embraced any actions put forward by Cerberus.

Top European News

  • U.K. and EU See Brexit Deal a Step Closer After Johnson Call
  • U.K. Jobless Claims Double to Almost 3 Million Amid Lockdown
  • European Construction Stocks Bounce on U.S. Infrastructure Plan

In FX, the DXY is trying to form a base around 96.500 following its late reversal through the 97.000 level on Monday when flagging risk sentiment due to heighted 2nd wave coronavirus fears was given a double boost by the Fed announcing individual corporate bond buying under the SMCCF program and US President Trump’s admin working on a draft proposal for a Usd 1tn infrastructure bill. However, subsequent flare ups on the Korean border, between China and India, Saudi Arabia and the Houthis, Iran and the US, have sapped momentum from riskier assets like stocks and the Dollar has reclaimed some of its losses as a result along with similar rebounds in fellow safe havens. Ahead, US retail sales and ip data before Fed chair Powell’s Senate testimony.

  • GBP - Aside from the broader upturn in risk appetite, Sterling has received an independent boost via latest Brexit news as the Times reports that the EU may be ready to back down on fishing rights rather than somewhat inconclusive UK labour and earnings data. Indeed, Cable is holding relatively firmly above 1.2600 and Eur/Gbp is back down below 0.9000, albeit the former off best levels close to 1.2690 and the 200 DMA (1.2692) and the latter rebounding from a dip under 0.8950.
  • EUR/AUD/CHF/CAD - All moderately firmer against the Greenback, with the Euro reclaiming 1.1300+ status and eclipsing a couple of HMAs (100 and 200) on the way up to around 1.1350, and maintaining gains after an encouraging ZEW survey, while the Aussie has retained a grip on the 0.6900 handle in wake of RBA minutes reaffirming an on hold stance with a bias to do more if needed. Elsewhere, the Franc remains above 0.9500, but flattish vs the Euro either side of 1.0750 following a modest Swiss Government GDP forecast upgrade, though still predicting a deep 2020 contraction and the trough in Q2, while the Loonie is meandering between 1.3510-1.3600 parameters amidst consolidation in oil prices off recent lows as the IEA raises its global demand estimate by nearly 500k bpd for this year.
  • JPY/NZD/SEK - Marginal G10 underperformers with the Yen pivoting 107.50 vs the Buck after the BoJ left key policy metrics unchanged as expected, but increased COVID-19 lending by Jpy 35 tln, the Kiwi relinquishing 0.6500 ahead of NZ Q1 current account balances and the Swedish Crown ruffled by the Swedish Labour Board lifting its 2020 jobless forecast appreciably and the Riksbank reporting a deterioration in bond market functioning to leave Eur/Sek elevated above 10.5000.
  • EM - No surprise to see pressure on the Krw beyond 1210 vs the Usd in light of North Korea destroying the Inter-Korean joint liaison office, according to South Korea’s Ministry of Unification, but regional currencies in general are jittery, bar the Zar and Mxn that have reversed some of Monday’s declines to revisit resistance ahead of psychological/round number levels at 17.0000 and 22.0000 respectively.
  • RBA Minutes from June 2nd Meeting affirmed the target for 3yr yields would be maintained and the central bank will also not increase the cash rate until progress was made on its employment and inflation targets. The minutes stated that members recognized the global economy was in a severe downturn and that the Australian economy was experiencing its largest contraction since the 1930s, while it is prepared to scale up bond purchases if needed but also noted it had only purchased government bonds only on one occasion since the prior meeting. Furthermore, members noted yields on bonds with 1-2 years to maturity had risen to be a few basis points higher than the yields on 3-year bonds and if this should continue, they would consider purchasing bonds in the secondary market to ensure that these short-term yields are consistent with the target for three-year yields. (Newswires)

In commodities, WTI and Brent front month futures continue to grind higher since the European cash open as participants digest a string of geopolitical headlines alongside the IEA monthly oil market report. Firstly, tensions ramped up in the Korean Peninsula after North Korea destroyed the inter-Korean liaison office, as well as a standoff between nuclear powers India and China in which a number of soldiers lost their lives in the clash – which China blames India for instigating. Meanwhile, the IEA raised its 2020 global oil demand growth forecast by 500k BPD amid demand from China and India. 2021 oil demand is forecast to rise by 5.7mln BPD, which remains below 2019 levels. Furthermore, the agency does not expect demand to return to pre-crisis levels until at least 2022. This is in stark contrast to the EIA STEO report last week which downgraded its respective 2020 global demand forecast by 120k BPD. The two reports, however, synchronise on the view that US crude is set to fall this year: the IEA expects a decline of 900k BPD and the EIA a fall of 670k BPD.  WTI July gains a firmer footing above USD 37/bbl (vs. 36.38/bbl low) whilst its Brent Aug prices extends above USD 40/bbl (vs. 38.95/bbl low). Next up in terms of scheduled events, traders will be eyeing the weekly Private Inventory data for a glimpse at crude stocks over the last week. Further head, the JTC will be convening tomorrow ahead of the JMMC meeting on Thursday. Spot gold meanwhile retains an underlying bid above USD 1730/oz amid the aforementioned developments in the geopolitical sphere ahead of Fed Chair Powell’s testimony, albeit the statement is unlikely to divert much from the FOMC script, but the Q&A section of the event will garner attention. Copper prices meanwhile track stocks higher but found resistance at USD 2.625/lb as the red metal remains within Friday’s range.

US Event Calendar

  • 8:30am: Retail Sales Advance MoM, est. 8.35%, prior -16.4%
  • 8:30am: Retail Sales Ex Auto MoM, est. 5.5%, prior -17.2%
  • 8:30am: Retail Sales Control Group, est. 5.2%, prior -15.3%
  • 9:15am: Industrial Production MoM, est. 3.0%, prior -11.2%; Manufacturing (SIC) Production, est. 5.0%, prior -13.7%
  • 10am: Business Inventories, est. -1.0%, prior -0.2%
  • 10am: NAHB Housing Market Index, est. 45, prior 37

DB's Jim Reid concludes the overnight wrap

Sorry to go back to last week’s meanderings, but Chill Acoustic - the radio station I’ve very happily listened to while working from home for the last three months - is still stuck on the same track it was 6 days ago. This has ruined my flow and is starting to hit my productivity as I have to keep going back to check if it’s been fixed. So if anyone knows how on earth I can get them to fix this I’m all ears. I’m not sure if anyone actually controls this radio station. It has 19 twitter followers, hasn’t posted a tweet or a Facebook post for a couple of years and has a seemingly unmanned email address. I suspect I was the only global listener for most of the last three months. It was great while it lasted.

Unlike “Chill Acoustic”, the mood music for markets at the end of yesterday was very different to that at the start. Indeed, a day that started with fears of a second wave ended with waves of liquidity completely reversing the session from the London open. At roughly 7am London time, S&P futures were down -3.29% from Friday’s close but rallied around +4.7% from these lows as the day progressed. The actual S&P 500 closed +0.83% with tech outperforming (NASDAQ +1.43%). The market was slowly recovering from the lows prior to the US open but in the second half of the session a pair of headlines saw the index push higher into the close. First was a report that the US may allow domestic companies to work with China’s Huawei to develop new 5G standards, which could be seen as ameliorating some of the recent tension. The S&P rose around 0.6% on this, but then the real move came in the early afternoon when headlines flashed through that the Federal Reserve would start purchasing a broad portfolio of US corporate bonds. The index rose over 1.3% on that news even if it was hard to find something new in that announcement. Overall it was a remarkable turnaround, given where futures had been earlier in the day. News overnight suggesting that the White House is considering $1tn in infrastructure spending has propelled futures further too (more on that shortly).

As another way to look at the switch in sentiment, at around noon (NY time), 80% of S&P 500 stocks were down on the day, and all sectors except Consumer Staples were in the red, however by the end of the day 77.6% of the index was higher and every sector was up. Furthermore, when S&P futures hit their overnight low, the VIX volatility index hit its highest intraday level (44.37) since April 22, before actually closing down -1.7pts at 34.4pts. While in Europe the STOXX 600 also recovered from its opening lows to close down only -0.27%, but the index missed the real late surge in risk.

Asian markets have made strong headway this morning also. The Nikkei (+3.93%), Hang Seng (+2.95%), Kospi (+4.34%) and Asx (+3.64%) have all posted big gains, while the Shanghai Comp has advanced a more modest +0.87%. As mentioned above, news that the White House is considering a $1tn infrastructure proposal has seemingly also given risk assets a boost. The prospect of further stimulus was already known however the size and timing was more up in the air. According to a Bloomberg story, the preliminary version of the proposal would see funding reserved for traditional infrastructure work like roads and bridges as well as 5G wireless infrastructure and rural broadband. The current infrastructure funding law is due for renewal by the end of September and the House Democrats have already proposed their own $500bn proposal over five years. For now there is no detail on how long the administration’s draft would authorize spending. Nevertheless, long-end Treasuries are up 6bps post the news, while the short-end is little changed.

In other news, the BoJ left rates and asset purchases unchanged this morning while revising up the estimated size of its virus-response measures and pledged to do more to help the economy if needed. The central bank now estimates the size of its overall package of virus measures at JPY 110tn ($1tn), up from JPY 75tn as the government had expanded its aid for businesses in measures linked to one of the BoJ’s lending programs. Elsewhere, North Korea’s state media is reporting that the regime is reviewing a plan to send its army into some areas of the demilitarized zone separating the country from South Korea.

Moving on. As mentioned above, a big part of the late day rally yesterday was the expected news that the Fed was about to start buying corporate debt. This should not be seen as new as this was already lined up as part of the Secondary Market Corporate Credit Facility (SMCCF). Up to this point the central bank has been just purchasing ETFs, but they are now making it official that they'll start buying individual securities this week. What was new information, is that the Fed will be essentially creating its own index against which it will manage its SMCCF bond portfolio. To remind readers the criteria of the bonds that are purchasable remain the same – less than 5yrs to maturity, a US company, IG rated or a fallen angel as of March 22 or later.

The other main story bubbling in the background are the rise in cases across various US states. Cases in the US are slowing overall, but the hot spots we have highlighted in recent days continue to remain the main focus – namely Florida, Texas, Arizona and California. Florida cases were up 2.3% yesterday, compared with a 7-day average of 2.4%, while Texan cases rose 1.9% for the second day in a row. Texas also set a record with most daily hospitalizations for a fourth day in a row with over 2300 people admitted. The governor of California came out yesterday to say that the rate of positive tests continues to fall, and that they would continue to stay ahead of new problem areas. See the full run down in the full report today where we show the usual case and fatality tables including the four current in-focus US states. Elsewhere, India continues to see case growth at just under 4% per day, even as the country gets ready to reopen. India and South America remain the big risks outside the US while China reported 40 new cases on Monday and locked down more residential compounds around the area close to a market where a case had been found.

Back to markets yesterday and sovereign bond yields tracked equity prices yesterday, recovering from overnight lows throughout both the European and US sessions. By the close, yields on 10yr US Treasuries had risen +1.8bps and bunds finished down -0.7bps.There was a slight narrowing in peripheral spreads in Europe, with yields on 10yr Spanish (-2.6bps), Portuguese (-1.8bps) and Greek (-5.7bps) debt all falling over bunds. BTPs were the exception though, with 10yr yields up +1.8bps.

Onto Brexit, and there were a few headlines following the high-level meeting that took place yesterday between UK Prime Minister Johnson and the Presidents of the European Commission, Council and Parliament. Most notably, Prime Minister Johnson said afterwards to Sky News that “What we all really said today is the faster we can do this the better, we see no reason why you shouldn’t get that done in July”, and that “I don’t want to see it going on until the autumn, winter, as perhaps in Brussels they would like.” So a clear aim to conclude matters in the next few weeks, during which intensified negotiations are due to take place, with talks each week between the two sides from the week commencing 29 June to the week commencing 27 July. The press are generally reporting the fact that Mr Johnson was upbeat and keen to accelerate talks as a positive even if lots of areas of disagreements need to be sorted.

In terms of yesterday’s data, the Empire State manufacturing survey from the US beat expectations, with a -0.2 reading in June for the general business conditions indicator (vs. -29.6 expected). Although much better than expected, it’s worth bearing in mind (as with the PMIs) that this is a diffusion index, so a negative reading still means that slightly more respondents said that conditions had worsened in June compared with the previous month, rather than improved. So we shouldn’t get too carried away by the outperformance relative to expectations. It was a similar story for the new orders component, which rose to -0.6 from -42.4 the previous month.

To the day ahead now, and there are a number of data highlights from the US, including May’s retail sales, industrial production and capacity utilisation. Meanwhile there’s also June’s NAHB housing market index, along with UK unemployment data for April and the ZEW survey for June from Germany. Elsewhere, Fed Chair Powell will be speaking before the Senate Banking Committee, while we’ll also hear from Fed Vice Chair Clarida, the ECB’s Visco and Bank of Canada Governor Macklem.

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‘The Official Truth’: The End Of Free Speech That Will End America

‘The Official Truth’: The End Of Free Speech That Will End America

Authored by J.B.Shurk via The Gatestone Institute,

If legacy news corporations…



'The Official Truth': The End Of Free Speech That Will End America

Authored by J.B.Shurk via The Gatestone Institute,

If legacy news corporations fail to report that large majorities of the American public now view their journalistic product as straight-up propaganda, does that make it any less true?

According to a survey by Rasmussen Reports, 59% of likely voters in the United States view the corporate news media as "truly the enemy of the people." This is a majority view, held regardless of race: "58% of whites, 51% of black voters, and 68% of other minorities" — all agree that the mainstream media has become their "enemy."

This scorching indictment of the Fourth Estate piggybacks similar polling from Harvard-Harris showing that Americans hold almost diametrically opposing viewpoints from those that news corporations predominantly broadcast as the official "truth."

Drawing attention to the divergence between the public's perceived reality and the news media's prevailing "narratives," independent journalist Glenn Greenwald dissected the Harvard-Harris poll to highlight just how differently some of the most important issues of the last few years have been understood. While corporate news fixated on purported Trump-Russia collusion since 2016, majorities of Americans now see this story "as a hoax and a fraud."

While the news media hid behind the Intelligence Community's claims that Hunter Biden's potentially incriminating laptop (allegedly containing evidence of his family's influence-peddling) was a product of "Russian disinformation" and consequently enforced an information blackout on the explosive story during the final weeks of the 2020 presidential election, strong majorities of Americans currently believe the laptop's contents are "real." In other words, Americans have correctly concluded that journalists and spies advanced a "fraud" on voters as part of an effort to censor a damaging story and "help Biden win." Nevertheless, The New York Times and The Washington Post have yet to return the Pulitzer Prizes they received for reporting totally discredited "fake news."

Similarly, majorities of Americans suspect that President Joe Biden has used the powers of his various offices to profit from influence-peddling schemes and that the FBI has intentionally refrained from investigating any possible Biden crimes. Huge majorities of Americans, in fact, seem not at all surprised to learn that the FBI has been caught abusing its own powers to influence elections, and are strongly convinced that "sweeping reform" is needed. Likewise, large majorities of Americans have "serious doubts about Biden's mental fitness to be president" and suspect that others behind the scenes are "puppeteers" running the nation.

Few, if any, of these poll results have been widely reported. In a seemingly-authoritarian disconnect with the American people, corporate news media continue to ignore the public's majority opinion and instead "relentlessly advocate" those viewpoints that Americans "reject." When journalists fail to investigate facts and deliberately distort stories so that they fit snugly within preconceived worldviews, reporters act as propagandists.

Constitutional law scholar Jonathan Turley recently asked, "Do we have a de facto state media?" In answering his own question, he notes that the news blackout surrounding congressional investigations into Biden family members who have allegedly received more than ten million dollars in suspicious payments from foreign entities "fits the past standards used to denounce Russian propaganda patterns and practices." After Republican members of Congress traced funds to nine Biden family members "from corrupt figures in Romania, China, and other countries," Turley writes, "The New Republic quickly ran a story headlined 'Republicans Finally Admit They Have No Incriminating Evidence on Joe Biden.'"

Excoriating the news media's penchant for mindlessly embracing stories that hurt former President Donald Trump while simultaneously ignoring stories that might damage President Biden, Turley concludes:

"Under the current approach to journalism, it is the New York Times that receives a Pulitzer for a now debunked Russian collusion story rather than the New York Post for a now proven Hunter Biden laptop story."

Americans now evidently view the major sources for their news and information as part of a larger political machine pushing particular points of view, unconstrained by any ethical obligation to report facts objectively or dispassionately seek truth. That Americans now see the news media in their country as serving a similar role as Pravda did for the Soviet Union's Communist Party is a significant departure from the country's historic embrace of free speech and traditional fondness for a skeptical, adversarial press.

Rather than taking a step back to consider the implications such a shift in public perception will have for America's future stability, some officials appear even more committed to expanding government control over what can be said and debated online. After the Department of Homeland Security (DHS), in the wake of public backlash over First Amendment concerns, halted its efforts to construct an official "disinformation governance board" last year, the question remained whether other government attempts to silence or shape online information would rear their head. The wait for that answer did not take long.

The government apparently took the public's censorship concerns so seriously that it quietly moved on from the collapse of its plans for a "disinformation governance board" within the DHS and proceeded within the space of a month to create a new "disinformation" office known as the Foreign Malign Influence Center, which now operates from within the Office of the Director of National Intelligence. Although ostensibly geared toward countering information warfare arising from "foreign" threats, one of its principal objectives is to monitor and control "public opinion and behaviors."

As independent journalist Matt Taibbi concludes of the government's resurrected Ministry of Truth:

"It's the basic rhetorical trick of the censorship age: raise a fuss about a foreign threat, using it as a battering ram to get everyone from Congress to the tech companies to submit to increased regulation and surveillance. Then, slowly, adjust your aim to domestic targets."

If it were not jarring enough to learn that the Office of the Director of National Intelligence has picked up the government's speech police baton right where the DHS set it down, there is ample evidence to suggest that officials are eager to go much further in the near future. Democrat Senator Michael Bennet has already proposed a bill that would create a Federal Digital Platform Commission with "the authority to promulgate rules, impose civil penalties, hold hearings, conduct investigations, and support research."

Filled with "disinformation" specialists empowered to create "enforceable behavioral codes" for online communication — and generously paid for by the Biden Administration with taxpayers' money — the special commission would also "designate 'systemically important digital platforms' subject to extra oversight, reporting, and regulation" requirements. Effectively, a small number of unelected commissioners would have de facto power to monitor and police online communication.

Should any particular website or platform run afoul of the government's First Amendment Star Chamber, it would immediately place itself within the commission's crosshairs for greater oversight, regulation, and punishment.

Will this new creation become an American KGB, Stasi or CCP — empowered to target half the population for disagreeing with current government policies, promoting "wrongthink," or merely going to church? Will a small secretive body decide which Americans are actually "domestic terrorists" in the making? US Attorney General Merrick Garland has gone after traditional Catholics who attend Latin mass, but why would government suspicions end with the Latin language? When small commissions exist to decide which Americans are the "enemy," there is no telling who will be designated as a "threat" and punished next.

It is not difficult to see the dangers that lie ahead. Now that the government has fully inserted itself into the news and information industry, the criminalization of free speech is a very real threat. This has always been a chief complaint against international institutions such as the World Economic Forum that spend a great deal of time, power, and money promoting the thoughts and opinions of an insular cabal of global leaders, while showing negligible respect for the personal rights and liberties of the billions of ordinary citizens they claim to represent.

WEF Chairman Klaus Schwab has gone so far as to hire hundreds of thousands of "information warriors" whose mission is to "control the Internet" by "policing social media," eliminating dissent, disrupting the public square, and "covertly seed[ing] support" for the WEF's "Great Reset." If Schwab's online army were not execrable enough, advocates for free speech must also gird themselves for the repercussions of Elon Musk's appointment of Linda Yaccarino, reportedly a "neo-liberal wokeist" with strong WEF affiliations, as the new CEO of Twitter.

Throughout much of the West, unfortunately, free speech has been only weakly protected when those with power find its defense inconvenient or messages a nuisance. It is therefore of little surprise to learn that French authorities are now prosecuting government protesters for "flipping-off" President Emmanuel Macron. It does not seem particularly astonishing that a German man has been sentenced to three years in prison for engaging in "pro-Russian" political speech regarding the war in Ukraine. It also no longer appears shocking to read that UK Technology and Science Secretary Michelle Donelan reportedly seeks to imprison social media executives who fail to censor online speech that the government might subjectively adjudge "harmful." Sadly, as Ireland continues to find new ways to punish citizens for expressing certain points of view, its movement toward criminalizing not just speech but also "hateful" thoughts should have been predictable.

From an American's perspective, these overseas encroachments against free speech — especially within the borders of closely-allied lands — have seemed sinister yet entirely foreign. Now, however, what was once observed from some distance has made its way home; it feels as if a faraway communist enemy has finally stormed America's beaches and come ashore in force.

Not a day seems to go by without some new battlefront opening up in the war on free speech and free thought. The Richard Stengel of the Council on Foreign Relations has been increasingly vocal about the importance of journalists and think tanks to act as "primary provocateurs" and "propagandists" who "have to" manipulate the American population and shape the public's perception of world events. Senator Rand Paul has alleged that the DHS uses at least 12 separate programs to "track what Americans say online," as well as to engage in social media censorship.

As part of its efforts to silence dissenting arguments, the Biden administration is pursuing a policy that would make it unlawful to use data and datasets that reflect accurate information yet lead to "discriminatory outcomes" for "protected classes." In other words, if the data is perceived to be "racist," it must be expunged. At the same time, the Department of Justice has indicted four radical black leftists for having somehow "weaponized" their free speech rights in support of Russian "disinformation." So, objective datasets can be deemed "discriminatory" against minorities, while actual discrimination against minorities' free speech is excused when that speech contradicts official government policy.

Meanwhile, the DHS has been exposed for paying tens of millions of dollars to third-party "anti-terrorism" programs that have not so coincidentally equated Christians, Republicans, and philosophical conservatives to Germany's Nazi Party. Similarly, California Governor Gavin Newsom has set up a Soviet-style "snitch line" that encourages neighbors to report on each other's public or private displays of "hate."

Finally, ABC News proudly admits that it has censored parts of Robert F. Kennedy Jr.'s interviews because some of his answers include "false claims about the COVID-19 vaccines." Essentially, the corporate news media have deemed Kennedy's viewpoints unworthy of being transmitted and heard, even though the 2024 presidential candidate is running a strong second behind Joe Biden in the Democrat primary, with around 20% support from the electorate.

Taken all together, it is clear that not only has the war on free speech come to America, but also that it is clobbering Americans in a relentless campaign of "shock and awe." And why not? In a litigation battle presently being waged over the federal government's extensive censorship programs, the Biden administration has defended its inherent authority to control Americans' thoughts as an instrumental component of "government infrastructure." What Americans think and believe is openly referred to as part of the nation's "cognitive infrastructure" — as if the Matrix movies were simply reflecting real life.

Today, America's mainstream news corporations are already viewed as processing plants that manufacture political propaganda. That is an unbelievably searing indictment of a once-vibrant free press in the United States. It is also, unfortunately, only the first heavy shoe to drop in the war against free speech. Many Chinese-Americans who survived the Cultural Revolution look around the country today and see similarities everywhere. During that totalitarian "reign of terror," everything a person did was monitored, including what was said while asleep.

In an America now plagued with the stench of official "snitch lines," censorship of certain presidential candidates, widespread online surveillance, a resurrected "disinformation governance board," and increasingly frequent criminal prosecutions targeting Americans who exercise their free speech, the question is not whether what we inaudibly think or say in our sleep will someday be used against us, but rather how soon that day will come unless we stop it. After all, with smartphones, smart TVs, "smart" appliances, video-recording doorbells, and the rise of artificial intelligence, somebody, somewhere is always listening.

Tyler Durden Sun, 05/28/2023 - 23:00

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Never Short a Dull Market; AI is Sexy, But Everyone Hates Oil

There’s an old adage of Wall Street, which says: "never short a dull market." And while AI is getting all the press these days, the oil market is about…



There's an old adage of Wall Street, which says: "never short a dull market." And while AI is getting all the press these days, the oil market is about as dull as it gets. This, of course, brings the energy sector to the top of my contrarian alert list.

This is not to say that I'm buying oil-related assets with both hands. It just means that, at this point, it makes more sense to look at energy as a value asset, as it is oversold and ripe for a move up whenever the right set of variables required to deliver such a move line up just right.

In the current world, the variables could line up just right as early as today.

There are No Oil Bulls Left

Nobody loves oil.

The level of bearishness expressed by futures traders is at least equal to where it was during the pandemic, and after the Silicon Valley Bank (SIVB) collapse. The International Energy Agency (IEA), forecasts that, of the expected $2.8 trillion in energy investments for 2023, roughly $1.7 trillion will be allocated to low carbon energy sources, including nuclear, solar, and other potential sources. Only $1.1 trillion will be invested in fossil fuels.

And according to the Financial Times, auctioneers in Texas are trying to unload two brand new fracking rigs, which together cost $70 million, for a starting combined bid of just below $17 million.

Supply is the Primary Influence on Oil Prices

Meanwhile, oil companies are quietly merging with competitors, and exploration outside the United States is continuing aggressively, with new discoveries being frequently announced. 

Simultaneously, the U.S. active rig count is slowly falling, led by natural gas. The price of gasoline is steadily rising, as the market begins to price in future supply reductions. Just in my neck of the woods, regular unleaded is up some $0.32 in the last week alone.

That doesn't sound like an industry that's planning on fading away. It sounds like an industry that's hunkering down and waiting for better times and preparing to squeeze supply in order to boost prices.

Charting the Oil Sector

The price chart for West Texas Intermediate Crude, the U.S. benchmark (WTIC), shows the depressed price picture which has led investors to walk away. And, until proven otherwise, there are plenty of sellers at the $75-$80 price area, where a sizeable Volume by Price bar highlights the point of resistance.

At first glance, there little difference in the general price behavior for Brent Crude, the European benchmark. (BRENT) where there is a resistance band defined by VBP bars between $80 and $90. A closer look reveals an uptick in Accumulation Distribution (ADI) and the semblance of some nibbling in On Balance Volume (OBV). It's subtle, but it's there.

The oil stocks are far from a bull trend. The Energy Select Sector SPDR ETF (XLE) is trading below its 200-day moving average, facing resistance put from $78 to $90 (VBP bars).

So why bother? Simply stated, OPEC has an upcoming meeting on June 3-4. The cartel is not happy about the prices and the way things are evolving. The Saudi oil minister recently warned bearish speculators to "watch out." And my gut is doing flips when I think about oil, as I see gasoline prices creep up when I drive to work.

But mostly, it's because there are no oil bulls left. This is what we saw in the technology sector a few months ago before its current rally. In early 2023, the tech sector was pronounced dead. The stories were all about the technology sector shuddering as the economy slowed. How about this one, from March 2023, which breathlessly announced a 5.2% decrease in semiconductor sales on a month to month basis and an 18.5% year to year drop?

Yet, as validated by the recent AI-fueled rally, the bad news first marked a bottom, while preceding a significant move up in tech shares.

Never short a dull market.

I've recently recommended several energy sector picks. You can have a look at them with a free trial to my service. In addition, I've posted a Special Report on the oil market which you can gain access to here.

Bond and Mortgage Roller Coaster Reverses Course

Expect negative news about the effect of rising mortgage rates on the homebuilder industry. That's because, as the chart below illustrates, there is a tight and very close correlation between rising bond yields, mortgage rates, and the homebuilder stocks (SPHB).

Moreover, the rise above 3.75% on the U.S. Ten Year Note yield (TNX) has triggered headlines about mortgage rates climbing above 7%. What the news isn't reporting is that, once bond yields roll over, which they are likely to do at some point in the future when the economy shows more signs of slowing and the Fed finally admits that they must pause, is that mortgage rates will drop and demand for new homes will once again pick up. Thus, we will see the homebuilders pick up where they left off.

As things stood last week, SPHB seems to have made a short term bottom.

For now, expect a continuation of the backing and filling in the homebuilder stocks. But, if I'm right and bond yields reverse course, the homebuilders are likely to rally again.

For an in-depth comprehensive outlook on the homebuilder sector click here.

NYAD Holds Above 200-Day Moving Average. SPX Joins NDX in Breaking Out. Liquidity is Shrinking.

The New York Stock Exchange Advance Decline line (NYAD) tested its 200-day moving average on an intra-week basis but did not break below the key technical level. On the other hand, NYAD remained below its 50-day moving average, which is still an intermediate-term negative.

Moreover, with the major indexes (see below) breaking out to new highs, we remain in a technical divergence as the market's breadth is lagging the action in the indexes. This is of some concern, given the fade in the market's liquidity, as I point out below.

The Nasdaq 100 Index (NDX) extended its recent breakout, closing the week well above 14,200. The current move is unsustainable, so some sort of pullback and consolidation are likely over the next few days to weeks. Both ADI and OBV remain encouraging.

What's more bullish is that the S&P 500 (SPX) finally broke out above the 4100–4200 trading range on 5/24/23. On Balance Volume (OBV) is perking up while the Accumulation Distribution (ADI) indicator is very encouraging.

We may be seeing a shift from a short-covering rally to a fear-of-missing-out buyer's rally.

VIX Holds Steady

The CBOE Volatility Index (VIX) remained below 20, as it has since March 2023. This remains a positive for the markets, as it shows short sellers are staying away at the moment.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity is Getting Squeezed

The market's liquidity is now in a downtrend. The Eurodollar Index (XED) is now below 94.5, and looks weak. A move above 95 will be a bullish development. Usually, a stable or rising XED is very bullish for stocks.

To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I've made my NYAD-Complexity - Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe's exclusive stock, option and ETF recommendations, in your mailbox every week visit

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Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.



Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

DON'T MISS: Why You May Not Want to Fly Southwest Airlines

That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.


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