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Is It 1999 or 2007? Retail Investors Flood The Market.

Is It 1999 or 2007? Retail Investors Flood The Market.

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3 years ago

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Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?

Do you remember this commercial?

The Etrade commercial aired during Super Bowl XLI in 2007. The following year, the financial crisis set in, markets plunged, and investors lost 50%, or more, of their wealth.

However, this wasn’t the first time it happened.

The same thing happened in late 1999. This commercial was aired 2-months shy of the beginning of the “Dot.com” bust as investors once again believed “investing was as easy as 1-2-3.”

Why this trip down memory lane? (Other than the fact the commercials are hilarious to watch.) Because this is typical of the exuberance seen at the peaks of bull market cycles.

So, what are the signs we are seeing today.

  • Retail investors are chasing bankrupt companies like Hertz and Chesapeake Energy
  • Hertz, a company in bankruptcy, is issuing stock with a disclaimer the shares are likely worthless.
  • Investors chasing companies with extremely poor fundamentals.
  • Investing tips coming from individuals with no experience.

Investing is simple. Just pick some letters out of a Srabble bag, buy it, and it goes up.

Its so easy a “baby can do it.”

Or in this case, it like “stealing from the rich to give to the poor.” 

Retail Investors Go Robinhood

As Barron’s recently noted:

“Free trading app Robinhood has added more than three million retail accounts in 2020, and now has over 13 million. The median age of its retail customer is 31. The Covid-19 lockdowns and the plunge in markets in March persuaded millions of new investors to open accounts. Some of the action appears to be from people who would otherwise be gambling or betting on sports—both of which were shut down.”

Just like we saw in 1999 and 2008, “day trading” has had a resurgence from “message boards” on AOL to live blogs and video feeds on social media.

“The new generation tends to convene on social media. Beyond TikTok, retail investors chat on forums like Reddit and Twitter, sharing internet memes and jokes about stocks, and even posting self-deprecating charts showing their worst losses. 

A former Goldman Sachs partner, Joseph Mauro, joked on Twitter that his son’s friends are never free anymore to play videogames during the day because they’re too busy trading stocks. “He is 10,” Mauro added.”

The irony is that Robinhood really isn’t “stealing from the rich.” In reality, they are “getting rich by stealing from the poor.” As is always the case, there is no “free lunch,” as Robinhood bundles orders and then“sells” the flows to major hedge funds for profit. Those hedge funds then “front run” the “Robinhooders” taking advantage of their trading. (If this wasn’t massively profitable for hedge funds they wouldn’t pay millions for the data.)

Retail Discovers A New “Toy”

These “newbie” retail investors are not trading based on fundamentals, earnings, estimates, products or market values, but rather talking up stocks driven by pure momentum. Robinhood makes the “research” even easier buy posting the top holdings of its users.

They are then leveraging what cash they have through option contracts and margin debt to boost their buying power.

The problem with options is that when you are wrong, you can lose 100% of your investment.

The problem with margin is that when you are wrong, you can lose more than 100% of your investment.

However, given the current belief by “daytraders”  that there is no downside risk, then why not leverage up and “get rich quick?”

After all, in this “new paradigm” of “no risk” investing there are only two rules:

But this is the nature of what happens in a late-stage bull market cycle.

Still In A Bull Market

“But we had a 35% selloff in March, how can we be in a late stage bull market?”

This was a point I discussed in “Was March A Bear Market?”

“Such brings up an interesting question. After a decade-long bull market, which stretched prices to extremes above long-term trends, is the 20% measure still valid?

To answer that question, let’s clarify the premise.

  • A bull market is when the price of the market is trending higher over a long-term period.
  • A bear market is when the previous advance breaks, and prices begin to trend lower.

Fed Liquidity, Technically Speaking: Too Fast, Too Furious As Fed Liquidity Slows

This distinction is important.

  • “Corrections” generally occur over very short time frames, do not break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs.
  • “Bear Markets” tend to be long-term affairs where prices grind sideways or lower over several months as valuations are reverted.

Given the trend was never broken, valuations were never reversed, and “speculative greed” wasn’t extinguished, the “bull market” remains intact.

Topping Process

The markets quick recovery from the March lows further bolstered the “speculative greed” in the market which has now manifested itself in current behaviors.

The risk, however, is the economic recession which will impair the fundamentals of the markets over the next several quarters making it harder to justify current valuations. As I noted in the chart above, the current rally could be part of a bigger “topping” process which may take young traders by surprise.

I have noted the market may be in the process of a topping pattern. The 2018 and 2020 peaks are currently forming the “left shoulder” and “head” of the topping process. Such would also suggest the “neckline” is the running bull trend from the 2009 lows. 

A market peak without setting a new high that violates the bull trend line would define a “bear market.”

What Could Cause The Market To Break?

As noted by Mish Shedlock recently, the Federal Reserve itself has noted six downside risks to the markets and the economy.

“In its semiannual monetary report to the Senate Finance Committee the Fed warns of six downside risks. The risks are not spread evenly. Low wage earners and small businesses are particularly vulnerable.

Please consider the Fed’s Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services. The report is 66 pages long and is full of interesting charts and comments. 

Let’s start with Powell’s statement on risk: ‘Despite aggressive fiscal and monetary policy actions, risks abroad are skewed to the downside.’

Six Downside Risks 

  1. The future progression of the pandemic remains highly uncertain.
  2. The collapse in demand may ultimately bankrupt many businesses.
  3. Unlike past recessions, services activity has dropped more sharply than manufacturing—with restrictions on movement severely curtailing expenditures on travel, tourism, restaurants, and recreation and social-distancing requirements and attitudes may further weigh on the recovery in these sectors. 
  4. Disruptions to global trade may result in a costly reconfiguration of global supply chains. 
  5. Persistently weak consumer and firm demand may push medium- and longer-term inflation expectations well below central bank targets.
  6. Additional expansionary fiscal policies— possibly in response to future large-scale outbreaks of COVID-19—could significantly increase government debt and add to sovereign risk.”

The biggest risk, is the 6th point where massive increases in debts and deficits retard long-term economic growth.

“Before the “Financial Crisis,” the economy had a linear growth trend of real GDP of 3.2%. Following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Instead of reducing the debt problems, unproductive debt, and leverage increased.”

stocks economy, #MacroView: The Great Divide Between Stocks & The Economy

 Retail “Investor” Or “Speculator?”

In today’s market the majority of investors are simply chasing performance.

But, this isn’t “investing,” it’s “speculation.”

Think about it this way.

If you were playing a hand of poker, and were dealt a “pair of deuces,” would you push all your chips to the center of the table?

Of course, not.

The reason is you intuitively understand the other factors “at play.” Even a cursory understanding of the game of poker suggests other players at the table are probably holding better hands which will lead to a rapid reduction of your wealth.

Investing, ultimately, is about managing the risks which will substantially reduce your ability to “stay in the game long enough” to “win.”

Robert Hagstrom, CFA penned a piece discussing the differences between investing and speculation:

“Philip Carret, who wrote The Art of Speculation (1930), believed “motive” was the test for determining the difference between investment and speculation. Carret connected the investor to the economics of the business and the speculator to price. ‘Speculation,’ wrote Carret, ‘may be defined as the purchase or sale of securities or commodities in expectation of profiting by fluctuations in their prices.’”

Chasing markets is the purest form of speculation. It is simply a bet on prices going higher rather than determining if the price being paid for those assets are selling at a discount to fair value.

Graham & Dodd

Benjamin Graham, along with David Dodd, attempted a precise definition of investing and speculation in their seminal work Security Analysis (1934).

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

There is also very important passage in Graham’s The Intelligent Investor:

“The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize it in all its dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against.”

Surviving The Game

Regardless of whether you believe fundamentals will ever matter again is largely irrelevant. What is important is that periods of excess speculation always end the same way.

For now, Dave Portnoy has garnered a legion of followers. However, Dave’s financial future is quite secure after he sold his company to Penn National for $450 million. So, when things go wrong in the market, he will be just fine financially. However, for the host of inexperienced, over-confident, millennials who follow him, many have the financial livelihoods on the line.

I get it. If you are one of our younger readers, who have never been through an actual “bear market,” I wouldn’t believe what I am telling you either.

However, after living through the Crash of ’87, managing money through 2000 and 2008, and navigating the “Great Crash of 2020,” I can tell you the signs are all there.

A real bear market will happen. When? I don’t have a clue. But it will be an unexpected, exogenous event that triggers the selling.

It always appears easiest at the top.

More importantly, at bottoms, retail investors will not be wanting to buy stocks.

The post Is It 1999 or 2007? Retail Investors Flood The Market. appeared first on RIA.

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Escobar: Russia-China Partnership Defangs US Empire

Escobar: Russia-China Partnership Defangs US Empire

Authored by Pepe Escobar,

China’s State Council has released a crucial policy paper…

Published

5 hours ago

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October 1, 2023

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Escobar: Russia-China Partnership Defangs US Empire

Authored by Pepe Escobar,

China’s State Council has released a crucial policy paper titled 'A Global Community of Shared Future: China’s Proposals and Actions' that should be read as a detailed, comprehensive road map for a peaceful, multipolar future.

That is if the hegemon - of course faithful to its configuration as War Inc. - does not drag the world into the abyss of a hybrid-turned-hot war with incandescent consequences.

In sync with the ever-evolving Russia-China strategic partnership, the white paper notes how “President Xi Jinping first raised the vision of a global community of shared future when addressing the Moscow State Institute of International Relations in 2013.”

That was ten years ago, when the New Silk Roads – or Belt and Road Initiative (BRI) - was launched: that became the overarching foreign policy concept of the Xi era. The Belt and Road Forum next month in Beijing will celebrate the 10th anniversary of BRI, and relaunch a series of BRI projects.

“Community of Shared Future” is a concept virtually ignored across the collective West – and in several cases lost in translation across the East. The white paper’s ambition is to introduce “the theoretical base, practice and development of a global community of shared future.”

The five key points include building partnerships “in which countries treat each other as equals”; a fair and just security environment; “inclusive development”; inter-civilization exchanges; and “an ecosystem that puts Mother Nature and green development first," as Xi detailed at the 2015 UN General Assembly.

The white paper forcefully debunks the “Thucydides Trap” fallacy: “There is no iron law that dictates that a rising power will inevitably seek hegemony. This assumption represents typical hegemonic thinking and is grounded in memories of catastrophic wars between hegemonic powers in the past.”

While criticizing the “zero-sum game” to which “certain countries” still cling to, China completely aligns with the Global South/global majority, as in “the common interests of all peoples around the world. When the world thrives, China thrives, and vice versa.”

Well, that’s not exactly the “rules-based international order” in play.

It’s All About Harmony

When it comes to building a new system of international relations, China prioritizes “extensive consultation” among equals and “the principle of sovereign equality” that “runs through the UN Charter.” History and realpolitik, though, dictate that some countries are more equal than others.

This white paper comes from the political leadership of a civilization-state. Thus it naturally promotes the “increase of inter-civilization exchanges to promote harmony” while elegantly remarking how a “fine traditional culture epitomizes the essence of the Chinese civilization.”

Here we see a delicate blend of Taoism and Confucianism, where harmony – praised as “the core concept of Chinese culture” - is extrapolated to the concept of “harmony within diversity”: and that is exactly the basis for embracing cultural diversity.

In terms of promoting a dialogue of civilizations, these paragraphs are particularly relevant:

“The concept of a global community of shared future reflects the common interests of all civilizations – peace, development, unity, coexistence, and win-win cooperation. A Russian proverb holds, 'Together we can weather the storm.'

"The Swiss-German writer Hermann Hesse proposed, 'Serve not war and destruction, but peace and reconciliation.' A German proverb reads, 'An individual’s effort is addition; a team’s effort is multiplication.' An African proverb states, 'One single pillar is not sufficient to build a house.' An Arabian proverb asserts, 'If you want to walk fast, walk alone; if you want to walk far, walk together.'

"Mexican poet Alfonso Reyes wrote, 'The only way to be profitably national is to be generously universal.' An Indonesian proverb says, 'Sugarcane and lemongrass grow in dense clumps.' A Mongolian proverb concludes, 'Neighbors are connected at heart and share a common destiny.' All the above narratives manifest the profound cultural and intellectual essence of the world.”

BRI Caravan Rolls On

Chinese diplomacy has been very vocal on the need to develop a “new type of economic globalization” and engage in “peaceful development” and true multilateralism.

And that brings us inevitably to the BRI, which the white paper defines as “a vivid example of building a global community of shared future, and a global public good and cooperation platform provided by China to the world.”

Of course, for the hegemon and its collective West vassals, BRI is nothing but a massive debt trap mechanism unleashed by “autocrat China”.

The white paper notes, factually, how “more than three-quarters of countries in the world and over 30 international organizations” had joined the BRI, and refers to the sprawling, ever-expanding connectivity framework of six corridors, six routes, an array of ports, pipelines and cyberspace connectivity, among others via the New Eurasian Land Bridge, the China-Europe Railway Express (a “steel camel fleet”) and the New Land-Sea Trade Corridor crisscrossing Eurasia.

A serious problem may involve China’s Global Development Initiative, whose fundamental aim, according to Beijing, is “to accelerate the implementation of the UN’s 2030 Agenda for Sustainable Development.”

Well, this agenda has been designed by the self-described Davos elites and conceptualized way back in 1992 by Rockefeller protégé Maurice Strong. Its inbuilt wet dream is to enforce the Great Reset – complete with a nonsensical zero-carbon green agenda.

Better Listen to Medvedev’s Warning

The hegemon is already preparing the next stages of its hybrid war against China – even as it remains buried deep down into a de facto proxy hot war against Russia in Ukraine.

Russian strategic policy, in essence, completely aligns with the Chinese white paper, proposing a Greater Eurasian Partnership, a concerted drive towards multipolarity, and the primacy of the Global South/global majority in forging a new system of international relations.

But the Straussian neocon psychos in charge of the hegemon’s foreign policy keep raising the stakes. So it’s no wonder that after the recent attack on the HQ of the Black Sea Fleet in Sevastopol, a new National Security Council report leads to an ominous warning by Security Council Deputy Chairman Dmitry Medvedev:

“NATO has turned into an openly fascist bloc similar to Hitler’s Axis, only bigger (...) It looks like Russia is being left with little choice other than a direct conflict with NATO (...) The result would be much heavier losses for humanity than in 1945."

The Russian Ministry of Defense, meanwhile, has revealed that Ukraine has suffered a staggering 83,000 battlefield deaths since the start of the - failed - counteroffensive four months ago.

And Defense Minister Shoigu all but gave away the game in terms of the long-term strategy, when he said, “the consistent implementation of measures and activity plans until 2025 will allow us to achieve our goals."

So the SMO will not be rounded up before 2025 – incidentally, much later than the next US presidential election. After all, Moscow’s ultimate aim is de-NATOization.

Faced with a cosmic NATO humiliation on the battlefield, the Biden combo has no way out: even if it declared a unilateral ceasefire to re-weaponize Kiev’s forces for a new counteroffensive in the spring/summer of 2024, the war would keep rumbling on all the way to the presidential election.

There’s absolutely no way some sharp intellect in the Beltway would read the Chinese white paper and be “infected” by the concept of harmony. Under the yoke of Straussian neocon psychos, there are zero prospects for a détente with Russia – not to mention Russia-China.

Both the Chinese and Russian leaderships know quite well how the Ray McGovern-defined MICIMATT (military-industrial-congressional-intelligence-media-academia-think tank complex) works.

The kinetic aspect of MICIMATT is all about protection of the global interests of big US banks, investment/hedge funds and multinational corporations. It’s not a coincidence that MICIMATT monster Lockheed-Martin is mostly owned by Vanguard, BlackRock and State Street. NATO is essentially a mafia protection racket controlled by the US and the UK that has nothing to do with “defending” Europe from the “Russian threat."

The actual MICIMATT and its NATO extension’s wet dream is to weaken and dismember Russia to control its immense natural resources.

War Against the New 'Axis of Evil'

NATO’s incoming graphic humiliation in Ukraine is now compounded with the inexorable rise of BRICS 11 – which embodies a lethal threat to the hegemon’s geoeconomics. There’s next to nothing the MICIMATT can do about that short of nuclear war – except turbo-charging multiple instances of Hybrid War, color revolutions and assorted divide-and-rule schemes. What’s at stake is no less than a complete implosion of neoliberalism.

The Russia-China strategic partnership of true sovereigns has been coordinating full-time.

Strategic patience is the norm. The white paper reveals the magnanimous facet of the number one economy in the world by PPP: that’s China’s response to the infantile notion of “de-risking”.

China is “de-risking” geopolitically when it comes to not falling for serial provocations by the Hegemon, while Russia exercises Taoist-style control to not risk a kinetic war.

Still, what Medvedev just said carries the implication that the hegemon on desperation row could even be tempted to launch WWIII against, in fact, a new “axis of evil” of three BRICS nations – Russia, China and Iran.

Secretary of the [Russian] National Security Council Nikolai Patrushev could not have been more crystal clear:

“In its attempts to maintain its dominance, the West itself destroyed the tools that worked better for it than the military machine. These are freedom of movement of goods and services, transport and logistics corridors, a unified system of payments, global division of labor and value chains. As a result, Westerners are shutting themselves off from the rest of the world at a rapid pace.”

If only they could join the community of shared future – hopefully on a later, non-nuclear, date.

Tyler Durden Sat, 09/30/2023 - 23:30

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“More Deceit”: Gaetz Rages Over McCarthy-Ukraine Side Deal To Pass Stopgap

"More Deceit": Gaetz Rages Over McCarthy-Ukraine Side Deal To Pass Stopgap

Update (2155ET): Following the Senate’s passage of the Continuing…

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6 hours ago

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September 30, 2023

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"More Deceit": Gaetz Rages Over McCarthy-Ukraine Side Deal To Pass Stopgap

Update (2155ET): Following the Senate's passage of the Continuing Resolution, Rep. Matt Gaetz took to Twitter, where he was enraged over a side deal made between Speaker Kevin McCarthy and the Democrats for Ukraine funding, which Gaetz says he "didn't tell House Republicans" about until after the vote. 

Gaetz was responding to Punchbowl News' Jake Sherman, who related a message from House Democratic leadership.

"When the House returns, we expect Speaker McCarthy to advance a bill to the House Floor for an up-or-down vote that supports Ukraine, consistent with his commitment to making sure that Vladimir Putin, Russia and authoritarianism are defeated. We must stand with the Ukrainian people until victory is won."

Nine Senate Republicans voted against the bill; Marsha Blackburn (R-Tenn.), Mike Braun (R-Ind.), Ted Cruz (R-Texas), Bill Hagerty (R-Tenn.), Mike Lee (R-Utah), Roger Marshall (R-Kan.), Rand Paul (R-Ky.), Eric Schmitt (R-Mo.) and J.D Vance (R-Ohio).

*  *  *

Update (2109ET):  The Senate has voted 88-9 to pass the House's Continuing Resolution stopgap funding bill, which stripped out funds for Ukraine, includes $16 billion for disaster relief, and will keep the US government running for another 45 days.

Among the Senate "Yea" votes was Michael Bennet (D-CO), who was absolutely flipping his lid over the lack of Ukraine funding earlier in the day.

The bill, which passed the House earlier in the day by a bipartisan vote of 335-91, was passed with just three hours to go before a shutdown.

Just before the vote, Sen. Majority Leader Chuck Schumer (D-NY) vowed to keep fighting for more US taxpayer dollars for Ukraine, saying that he and Senate Minority Leader Mitch McConnell (R-KY) have "agreed to continue fighting for more economic and security aid for Ukraine."

"We support Ukraine’s efforts to defend its sovereignty against Putin’s aggression," said Schumer - to which McConnell said he's "confident" that the Senate can pass more "urgent assistance to Ukraine later this year. But let's be clear," that the "alternative," a shutdown, "would not just pause our progress on these important priorities, it would actually set them back."

*  *  *

Update (1755ET): After an afternoon of theatrics from Rep. Jamal Bowman (D-NY), it appears that the stopgap legislation to keep the government running through November 17 will now pass at the 11th hour.

According to the Wall Street Journal, the bill to keep the government funded past 12:01 Sunday includes $16 billion in disaster relief, but does not include Ukraine funds.

The House voted 335-91 for the funding measure, which includes $16 billion in disaster relief but omits aid for Ukraine. It also excludes border-security measures sought by Republicans. The margin exceeded the two-thirds majority needed to clear the bill through the House, which considered the legislation under special procedures requiring a supermajority of votes. All but one Democrat voted in favor of the measure, while nearly half of Republicans voted against it. -WSJ

While White House officials say President Biden supports the measure, the Senate has reportedly been lax in quickly taking up the measure late Saturday, raising the possibility of further malarkey.

Developing...

*  *  *

(Update 1655ET): So let's get this straight. In the home stretch of negotiations over the House's GOP stopgap bill - while Democrats were actively trying to stall the vote so they could actually read it - a widely reported phenomenon, Rep. Jamal Bowman (D-NY) pulls the fire extinguisher.

His excuse is that he wasn't actually trying to stall the the vote, and that he's essentially an idiot...

"Congressman Bowman did not realize he would trigger a building alarm as he was rushing to make an urgent vote. The Congressman regrets any confusion," said a spokesperson.

Yes. Because this happens all the time.

MSNBC breathlessly repeats the Simple Jack defense.

House Speaker Kevin McCarthy capitalized on the incident, comparing Bowman to a January 6th insurrectionist.

As we noted below... Bowman used to be a public school principal before he was elected to Congress, who rallied against standardized testing, at a private school he founded that has a 27% literacy rate, so... maybe?

Then again, he would be no stranger to fire drills, no?

*  *  *

House before the House finally approved a 'clean' stopgap funding bill to avert a government shutdown (which has since been sent to the Senate for consideration before the midnight funding deadline), Socialist Rep. Jamaal Bowman (D-NY) was caught pulling the fire alarm in a House office building Saturday in order to try and delay a vote on ta House GOP stopgap spending bill.

The incident in the Cannon Building was caught on camera and confirmed by several witnesses, Politico reports.

"This is the United States Congress, not a New York City high school. To pull the fire alarm to disrupt proceedings when we are trying to draft legislation to AVERT A SHUTDOWN is pathetic…even for members of the socialist squad," Staten Island GOP Rep. Nicole Malliotakis wrote on X, formerly Twitter.

"Rep Jamaal Bowman pulled a fire alarm in Cannon this morning," House Administration Committee Chairman Bryan Steil wrote on X. "An investigation into why it was pulled is underway."

According to Bowman spox Emma Simon, "Congressman Bowman did not realize he would trigger a building alarm as he was rushing to make an urgent vote. The Congressman regrets any confusion."

In other words, he's claiming to be too stupid to have known what he did - and don't believe your lying eyes!

Granted, Bowman used to be a public school principal before he was elected to Congress, who rallied against standardized testing, at a private school he founded that has a 27% literacy rate, so...

Needless to say, the memes are already flying.

.

Meanwhile, the House cleared the 'clean' stopgap bill without funding for Ukraine or the border, by a vote of 335-91. One Democrat and 90 Republicans voted against the measure.

*  *  *

Update: (1335ET): With a government shutdown just hours away, House Speaker Kevin McCarthy has turned to Democrats for help passing a temporary bill, after House Freedom Caucus members dug their heels in over no funds for Ukraine.

"What I am asking, Republicans and Democrats alike, put your partisanship away," said McCarthy. "Focus on the American public."

McCarthy needs a two-thirds majority to pass their Continuing Resolution (CR), which would require a significant number of Democrats - who have strongly supported more Ukraine aid - to cross the aisle.

The House GOP bill would be a 'clean' Continuing Resolution, which won't include Ukraine funding or border assistance.

"We will put a clean funding stopgap on the floor to keep government open for 45 days for the House and Senate to get their work done," said McCarthy following a meeting. "We will also, knowing what had transpired through the summer, the disasters in Florida, the horrendous fire in Hawaii, and also the disasters in California and Vermont. We will put the supplemental portion that the president asked for in disaster there too."

"Keeping the government open while we continue to do our work to end the wasteful spending and the wokeism and most important, secure our border," McCarthy said.

If the bill does not pass, Republicans plan to bring up several measures to mitigate the effects of a government shutdown, multiple members said. 

Those include bills to continue paying service members and extending authorization of the Federal Aviation Administration and National Flood Insurance Program, both of which are also set to expire at midnight unless Congress takes action. Republicans are also examining measures to continue pay for border patrol agents. -The Hill

The Democrats, meanwhile, have been using parliamentary tactics to slow down the vote so they can more carefully read the GOP proposal.

Rep. Matt Gaetz (R-FL), one of the key holdouts in the House, called McCarthy's bipartisan appeal "disappointing," and said that McCarthy's speakership is "on tenuous ground."

When asked what his next move will be, Gaetz said "I guess we'll have to see how the vote goes."

What's next?

According to Goldman, there's a 90% probability of a shutdown before the Oct. 1 deadline.

That said, there will be three upcoming catalysts in the next few weeks that may result in passage.

1) All members of the US military are due to be paid on Oct. 13, and a missed pay date would have serious political ramifications; there is a good chance the House will vote to reopen before or shortly after that date; 

2) A few House Republicans have said they might bring a “motion to vacate” that would remove McCarthy as Speaker unless a majority of the House supports him. Whatever the outcome of such a vote, getting past it could set the stage for a reopening; 

3) There are procedural moves (a “discharge petition” is the most frequently discussed) that Democrats can make to pass an extension of spending authority in the House over Speaker McCarthy’s objections. However, this would require support from at least 5 House Republicans (assuming that all Democrats sign on). This will not help avoid a shutdown, but could come into play over the next two weeks, as political pressure to reopen grows (particularly when combined with the first point on military pay). 

In light of the above, Goldman doesn't expect this to last more than 2-3 weeks, and that the Oct. 13 military pay date will become a focal point in the timeline.

*  *  *

Update (2157ET): It looks like the Senate isn't willing to strip Ukraine funds from the continuing resolution. In a Friday night tweet, House Speaker Kevin McCarthy (R-CA) said that the "misguided Senate bill has no path forward and is dead on arrival."

Meanwhile, according to Punchbowl News' Jake Sherman and Josh Bresnahan, McCarthy is floating a CR that would last until Nov. 17 at FY2023 funding levels, which would not include border funds or Ukraine funding.

*  *  *

In an 11th hour Hail Mary in the hopes of averting a government shutdown, House Speaker Kevin McCarthy (R-CA) announced that the only way the House will pass a Continuing Resolution (CR) to fund the government through October is to drop Ukraine funding.

"I think if we had a clean one without Ukraine on it, we could probably be able to move that through," McCarthy told CNN's Manu Raju.

The comment comes hours after McCarthy lost a game of chicken with the House Freedom Caucus, failing to pass a CR which left McCarthy will few options to try and avert a shutdown in less than 36 hours. McCarthy was hoping that the House bill's border security provisions would win over enough holdouts to pass.

Meanwhile, the White House slammed the failed bill over the 'elimination of 12,000 FBI agents,' and 'almost 1,000 ATF agents.'

Of note, House Republicans on Thursday narrowly passed the annual defense spending bill, but only after they removed $300 million in Ukraine aid from the legislation (which then cleared in a separate vote because a bunch of Democrats then voted).

Speaker Kevin McCarthy, who failed twice last week to advance the bill to the floor, finally locked down enough Republican votes to pass the bill after the House stripped $300 million to arm Ukraine from the text.

The separate bill carved out to allocate those funds for Kyiv passed Thursday in a 311-117 blowout bipartisan vote. Republicans had won a close procedural vote earlier in the day to separate the Ukraine money from the Pentagon bill, a move meant to flip a handful of GOP holdouts. -Politico

Democrats framed the optics as Kremlin-friendly, with House Armed Services ranking Democrat Adam Smith saying "The Russians are good at propaganda... It will be played as America backing off of its commitment for Ukraine."

Republicans responded that by carving Ukraine out of the defense bill, it allows opponents of either measure (Ukraine aid or the defense bill) to voice their opinions on each independently.

"Why don’t we make sure this gets through? I mean, I’m just mystified that this is somehow a problem," said House Rules Chair Tom Cole (R-OK), according to Politico. "We guarantee you something you want is going to pass the House and you’re upset about it."

And now, McCarthy says there's no way to avert a government shutdown unless the House, and the Senate, agree to nix Ukraine aid from the 30-day stopgap.

Fire and Brimstone...

On Friday, White House top economic adviser Lael Brainard said that a shutdown would pose an "unnecessary risk" to what he described as a resilient economy with moderating inflation.

Treasury Secretary Janet Yellen then chimed in, warning that all of Bidenomics could be negatively impacted.

"The failure of House Republicans to act responsibly would hurt American families and cause economic headwinds that could undermine the progress we’re making," Yellen said from Port of Savannah, Georgia, adding "A shutdown would impact many key government functions from loans to farmers and small businesses, to food and workplace safety inspections, to Head Start programs for children.

"And it could delay major infrastructure improvements."

Goldman has predicted that a shutdown will last 2-3 weeks, and that a 'quick reopening looks unlikely as political positions become more deeply entrenched.' Instead, as political pressure to reopen the government builds, pay dates for active-duty military (Oct. 13 and Nov. 1) will become key dates to pay attention to.

In addition, they think a shutdown could subtract 0.2pp from Q4 GDP growth for each week it lasts (adding the same to 1Q2024, assuming it's over by then).

What's more, all data releases from federal agencies would be postponed until after the government reopens.

More via Goldman:

What are the odds the government shuts down?

A shutdown this year has looked likely for several months, and we now think the odds have risen to 90%. The most likely scenario in our view is that funding will lapse after Sep. 30, leading to a shutdown starting Oct. 1. That said, a short-term extension cannot be entirely ruled out. In the event that Congress avoids a shutdown starting Oct. 1, we would still expect a shutdown at some point later in Q4.

While there is likely sufficient support in both chambers of Congress to pass a short-term extension of funding—this is known as a “continuing resolution” (CR)—that is “clean” with no other provisions attached, the majority of that support would come from Democrats. The Senate is considering a CR that includes aid for disaster relief and Ukraine. House Republican leaders are under political pressure to pass a CR that includes Republican policy priorities that can pass with mainly or exclusively Republican support. At the moment, neither chamber looks likely to pass the other chamber's CR.

The outlook seemed bleak ahead of the debt limit deadline earlier this year, but Congress resolved it in time; why shouldn’t we expect a last-minute deal once again?

The smaller economic hit from a shutdown puts less pressure on Republican leaders to override the objections of some in their party to reach a deal. Ahead of the debt limit deadline earlier this year, Republican leaders reached a deal over the objections of some in their party because the potential hit to the economy from an impasse would have been unpredictable and severe, and even lawmakers most strongly opposed to a compromise agreed that the debt limit must be raised. By contrast, the economic hit from a shutdown would be smaller and more predictable, as there have already been two protracted shutdowns over the last decade. While most lawmakers on both sides of the aisle would prefer to avoid a shutdown, both sides appear more willing to take the chance it occurs.

*  *  *

Stay tuned...

Tyler Durden Sat, 09/30/2023 - 17:57

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A Climate Of Fear

A Climate Of Fear

Authored by James Gorrie via The Epoch Times,

The medical, media, and political elites’ focus has shifted from facts…

Published

8 hours ago

on

September 30, 2023

By

A Climate Of Fear

Authored by James Gorrie via The Epoch Times,

The medical, media, and political elites’ focus has shifted from facts to fomenting and magnifying fear.

In Franklin D. Roosevelt’s first inaugural address in 1933, the new president told a nation in the depths of the Great Depression that “the only thing we have to fear is fear itself.”

Those words were true and rightfully spoken at that time. Roosevelt knew that fear is a powerful emotion that limits our ability to reason, act wisely, and work together. It’s also an emotion that’s contagious and not easily diminished or dissipated.

The Power of Fear to Fragment Society

Unfortunately, Roosevelt’s words are even more applicable today.

On a personal level, decisions made under the emotional duress of fear are rarely the best ones and often the worst. Fear can bring out the best in us, but can often bring out the worst. That’s more likely to occur the more fragmented a society becomes. Fear among different groups of people creates an us-versus-them context in the minds of individuals, or even an “every-man-for-himself” attitude, which pits one group against another or even each of us against each other.

Now elevate that sense of fear to the level of the national electorate. A people or a nation that's paralyzed with fear makes rash decisions based on their fears of what could happen, not necessarily what the current situation truly is. When that happens, a society can quickly degenerate, where our base instincts determine our behavior in a law-of-the-jungle social environment.

Roosevelt knew this, as do our leaders today. The difference is that today, rather than seeking to dispel fear, our political and media elites create it, expand it, and revel in it. Rather than promote hope and strength of character in us, in a Roosevelt- or even a Reagan-like fashion, they traffic in fear and its fellow traveler social division in order to fragment our society.

It’s the old but effective divide-and-conquer strategy, and sadly, it works far too well. The mechanism for divide and conquer is the constant drumbeat of the Big Lie, which is also a tried and true method for controlling society. It was first practiced and perfected by Joseph Goebbels in Nazi Germany using the mass media, but has been successfully used by the USSR and every other communist and dictatorial regime in the world since the 1930s.

Social Media Is Magnitudes More Powerful Than Legacy Media

The difference today is the massive and pervasive presence of social media. Its reach and social saturation throughout society are magnitudes greater than have ever been possible before. What’s more, our political and media elites create and exaggerate fear without even mentioning the word. “Fear” is driven into our collective psyches under the guise of our government keeping us “safe,” while demonizing anyone who challenges that narrative.

The repetition by the media and the pharmaceutical industry of how to stay safe from COVID-19 always involves more drugs and less freedom. That’s by design. The elites that run society know that once enough of our friends, neighbors, coworkers, and others with whom we interact become more fearful than rational, they’re easily manipulated and divided into confrontational groups.

Does that sound like a conspiracy theory?

Yes, it probably does, but it’s also how the Stasi, the East German security agency, turned virtually every neighbor into an informant. The result was that people were fearful of doing anything that could be construed as being against the communist East German government. In light of what we’ve been through the last three years—and what looks to be on the horizon—the conspiracy theory accusation has lost its sting.

From Conspiracy Theory to Fact

Recall, for example, how those who received the COVID-19 vaccine turned against those who remained unvaccinated. The contrast and social division couldn’t have been clearer or more deliberate. Vaccinated people were characterized by the media and government agency spokespeople as selfless, smarter, and better human beings than those who refused the vaccine.

On the flip side, the “anti-vaxxers,” as they came to be called, were publicly derided by the medical, pharmaceutical, media, and government elites. They were accused of being low-intelligence conspiracy theory nuts who wouldn’t or couldn’t “follow the science,” even when they followed the science from experts such as Robert Malone, one of the inventors of the mRNA technology, and other medical doctors in Europe and Asia, including former Pfizer Vice President Dr. Michael Yeadon, all of whom were de-platformed from mainstream media and social media.

In fact, any “alternative” remedy to the experimental and highly dangerous mRNA vaccines, such as ivermectin, was summarily dismissed, even though nations that used ivermectin had the lowest mortality rates. As noted above, many media personalities and even medical experts with contrary opinions were silenced, shamed, and shunted into professional oblivion, being substituted by compliant replacements. That practice continues to this day, with Russell Brand being the latest example of being de-monetized by YouTube.

In light of vaccine injuries and deaths, and the staggering profits that vaccines have delivered to the pharmaceutical industry, the number of people who believe the mainstream media, the government, and in the vaccines, is much smaller today than three years ago.

Conspiracy theory narratives have become conspiracy facts.

The Endgame of Fear

So, what’s the endgame of promoting and enforcing a climate of fear throughout society?

It’s simple. Fearful people are far more compliant and, therefore, are easily controlled, pacified, monitored, and dehumanized. Next thing you know, we’ll all be eating bugs and liking it.

The antidote to fear, of course, is freedom and access to real and contrary information so that each person can make up his or her own mind. The encouragement, enablement, and empowerment of private individuals to exercise informed judgment about their health and their livelihoods are also part of the solution. A vibrant, thinking, and active society of informed individuals isn't nearly as vulnerable to the polarizing climate of fear our elites are foisting upon us.

In short, to live in fear is to live in bondage.

Tyler Durden Sat, 09/30/2023 - 20:50

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