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Oil Drilled Below Zero, Equity Rally Stalls, Greenback Advances

Oil Drilled Below Zero, Equity Rally Stalls, Greenback Advances

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Overview:   Oil's wild ride has been joined by two other developments that are keeping investors off-balance.  First, reports suggest that North Korea's Kim Jong-Un  
maybe in critical condition after surgery.  He apparently was absent from last week's events celebrating his grandfather.  The concern is about a potential power vacuum and the command and control of North Korea's weapons.  Second, in a tweet late yesterday, US President Trump said he would sign an executive order suspending immigration, ostensibly to fight the virus and protect jobs.  No details were provided.  Trump has also renewed his threat to stop imports of Saudi and Russian oil.   These disruptions have seen global equities fall.  Following yesterday's 1.8% decline of the S&P 500, most of Asia Pacific's major bourses (including Japan, Australia, Hong Kong, Taiwan, and India) fell 2% or more.  Europe's Dow Jones Stoxx 600's three-day advance is ending, and the benchmark is off about 2% in late morning turnover.  US shares are lower, with the S&P off by almost 1.0%.  Bond markets are firm, with core yields off 3-4 bp, which puts the US 10-year near 57 bp.  Italian bonds are under-performing.  The dollar is well bid against nearly all the major and emerging market currencies.  The yen is also benefiting from the risk-off.  The dollar-bloc and Norwegian krone are the weakest of the majors, while the Russian rouble, South African rand, and Hungarian forint are leading the EM complex lower.  Gold is heavy, near two-week lows (~$1670), and oil remains on the defensive.  The May WTI jumped in early Asia above $2 but is back below zero, while the June contract has collapsed to nearly $11 from $20 yesterday and is around $16.50 as this is written.     

Asia Pacific

Fitch downgraded Hong Kong's credit to AA- yesterday from AA, noting that it has been hit with two shocks--the demonstrations and now the virus.  It warns that growth may contract 5% this year after falling 1.2% last year.  Nevertheless, the relatively wide interest rate differential over the US has sent the Hong Kong dollar to the strong part of the band for the first time in nearly four years.  The LIBOR spread was its widest in 20 years.  The key spot level is HKD7.75.  The Hong Kong Monetary Authority intervened, selling HKD for the first time in four years.  

South Korea reported exports fell 27% in the first 20-days of April compared with a year ago.  Exports to China were off 17%, while shipments to the US fell 18%, and to Japan, down 20%.  In terms of products, semiconductor shipments were off 15%, and autos, nearly 30% lower.  The data was poor but likely overstated.  The period had two fewer working days than a year ago.   Adjusted for this, exports were off about 17% on an average daily basis.

The dollar is trading at three-day lows against the Japanese yen near JPY107.25.  There are a couple of option expirations today that may slow the dollar's descent.  There is a $730 option at JPY107.05 and another for $645 mln at JPY106.80.  The greenback dipped a little below JPY107 last week but has not been below JPY106.80 since mid-March.  The Australian dollar failed to resurface above $0.6400 yesterday and has been sold below $0.6300 today.  Last week's low was set near $0.6265, and a break signals a test on $0.6200 and possibly $0.6100 in the near-term.  The US dollar is trading near two-week highs against the Chinese yuan, near CNY7.09.  

Europe


German Chancellor Merkel showed the first sign that the European Council (heads of state) could take new measures on top of the compromise struck by Eurogroup (finance ministers).  Without committing, Merkel seemed a bit more sympathetic to increasing the EU budget and a possible EU bond.  A joint bond where each member is individually and collectively responsible is difficult to fathom. Still, a bond where the obligation is limited to a country's share of the EU budget seems more politically realistic.  However, the EU does not have the power to tax, so how it would service the debt would need to be worked out, especially if it is not to count toward the debt of the members.  It is also noteworthy that Merkel may be trying to position it as an EU rather than an EMU issue. 


Germany's April ZEW survey appears to have captured the moment.  The current assessment is dismal.  At -91.5, it is the worst in a decade (from -43.1 in March).  However, the expectations component defied expectations.  It surged from -49.5 in March to 28.2 in April.  This is the strongest reading in five years. Small shops are re-opening in Germany this week, and there is hope that an economic recovery begins in earnest in Q3.  

The UK's employment figures were better than expected.  The claimant count in March edged up to 3.5% from a revised 3.4% in February.  Jobless claims rose by a mild 12.2k after a 5.9k increase in February.  It had originally reported a 17.3k rise in February.  On the other hand, earnings data, which is lagged by another month, disappointed.  Average weekly earnings slowed to 2.8% from 3.1% (three-month, year-over-year).  The ILO employment rate ticked up to 4.0% from 3.9%.  The UK reports March CPI tomorrow.  Price pressures are expected to have continued to moderate.  

The euro is softer, but it held above last week's low (~$1.0810) in early European turnover.  It seems unlikely to be able to overcome resistance in the $1.0860-$1.0880 area today.  A break of $1.08 would spur a test on the $1.0770 area seen earlier this month.   Sterling, on the other hand, has broken down to nearly two-week lows around $1.2350.  Yesterday, it had briefly poked above $1.2500.  The 20-day moving average is found near $1.2380, and sterling has not closed below it since late March.  Chart support is seen in the $1.2180-$1.2200 area.  

America


The collapse of the May WTI contract was epic.  Perhaps lost on many, unlikely many financial futures that are cash-settled, the oil futures contract calls for physical settlement.  Some participants had waited for the last day of trading to roll their position from May to June.  When they went to sell their May contract, no one wanted to take delivery in Cushing, which is running out of unencumbered storage. The market imploded, and the May contract at one pointed traded lower than minus $40 a barrel.  Participants are likely to make one of two mistakes.  The first is to exaggerate the negative price of the May contract.  It applies to a small and nearly inconsequential part of the oil market.  It is due to oil specific considerations, and extrapolations to other markets may not be particularly helpful.    The second mistake is not to appreciate the implications.   A significant imbalance of supply and demand will last a while. Looking at the futures strip, light sweet crude is below $35 a barrel through October 2021.  The collapse in the June contract warns that despite expectations of sharp drops in output (OPEC+ agreement and market-forced) will not be sufficient to alleviate the storage shortage. 


It is hard to imagine a repeat of yesterday's action as the June contract nears expiry, even if a negative price is seen again.  Speculators will be more nimble in rolling to the next contract earlier.  Others, caught off-guard by the developments, will be better prepared next time to take advantage of low if not negative oil prices. The pace of accumulation of inventories may slow as US production is pinched. Recall that the OPEC+ output cut agreement does not take effect until May 1.  Saudi Arabia had already ramped up production this month and cut prices to Asia next month.  US oil rig count has fallen by more than a third in the past five weeks.  Low oil prices dampen headline inflation measures, just as some observers begin fretting about the inflation implications of either the federal government or the Federal Reserve policies.  A reduction of US shale output may boost the price of some of the byproducts, like gas.  If oil prices remain low for an extended period, as the futures market implies, it risks weakening the shift to non-carbon fuels and materials.

The US Senate is expected to vote today on another emergency stimulus bill for around $500 bln.  Most of the funds will be earmarked for the Payroll Protection Progam that turns business loans into grants if employment is maintained through September (begs the question of what happens in Q4).  The House Democrats were looking for $100 bln for hospitals, but the compromise seems to be around $75 bln.  They were also looking for aid to the state governments. Still, it appears the White House wants it separately, and instead, a compromise for funds to the Economic Injury Disaster Loan program, which includes grants, has been offered.  It might pass the Senate without objection, which would allow the Senators not to return to Washington.  The House may vote on the bill Wednesday.  It is unlikely to be unanimous, which means the Representative would have to return to vote. 

Three creditors groups rejected Argentina's proposal to delay interest rate payments until 2023 and principal payments until 2026 on about $83 bln of foreign debt, which covers past restructured bonds as well as the more recent issues.  Unless a compromise can be found, Argentina is headed for its ninth default.  Even before the crisis hit, Argentina's debt seemed unsustainable.  The dollar has risen for 14 consecutive weeks.  Through yesterday, the Argentine peso is off about 9.25% against the dollar year-to-date.  In comparison, the Mexican peso is off about 21%, and the Brazilian real has depreciated almost 24%.  The costs of insuring (five year CDS) against Mexico and Brazilian sovereign default are trading a little below 300 bp. In early March both were near 100 bp.

The combination of weaker equities and the continued drop in oil prices is weighing on the Canadian dollar.  The US dollar is near CAD1.4260, its highest since April 6, and is near the (50%) retracement of the decline since reaching almost CAD1.4670 on March 19.  The next target is near CAD1.4360, but the intraday technicals suggest scope for a pullback, and the upper Bollinger Band (two standard deviations above the 20-day moving average) is found near CAD1.4270.   Initial support is seen around CAD1.4200.   The greenback is bid against the Mexican peso, but it is below last week's high (~MXN24.43).  A move above the MXN24.50 area risks a return toward the spike high seen to the record set earlier this month near MXN25.78.  





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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

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The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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