Very Informative Update On Coronavirus

 

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What Is Coronavirus?

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Paul Tudor Jones Interview

I worked for one of the greatest global macro traders of all-time and almost went to work for this one.  PTJ is the best.

 

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QOTD: Did Boomers Burn Down The House?

QOTD = Quote of the Day

It’s kind of stunning how Time Magazine’s Person of the Year, a “very angry” 17-year old Swedish teenage girl diagnosed with Asperger syndrome, obsessive-compulsive disorder (OCD), and selective mutism, can trigger the President of the United States,  many of my old white male friends,  and much of the Twitterati.  

How low must we go?

She embodies the growing anger of the younger generation, which could culminate in a huge 2020 surprise,  toward baby boomers for bequeathing them a burning, white-hot world full of carbon and, among others, a $300 trillion-plus in global debt.   I would be pissed-off at that kind of inheritance.

Good luck, by the way,  having Greta & Co. bailout and pay your public pensions.

“act as if you loved your children above all else.”  – Greta Thunberg

 

Greta

Read the cover story at Time here.

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The Happiest Places On Earth

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The Black Swan Chart Of 2020

CNN_Voter Turnout Poll

 

The surprising outcome of the 2020 presidential election may be,

OK, Boomer.  It’s time to pass the torch of leadership to a new generation.   

The younger generations dwarf the boomers in terms of sheer numbers but they have a habit of not voting.   They may be changing, however, as it did in the 2018 midterm.

If the CNN chart holds and plays out, the 2020 presidential election is going to be nothing less than stunning.    The pollsters are going to be way off the mark once again.

The national polls were pretty much spot on in 2016 with Clinton taking around 2-3 percent of the national vote.   Their models blew it by underestimating the state-level turnout rates of certain voting groups.  They hadn’t modeled such a rush of first-time voters coming out of Appalachia, for example.

79 Percent Increase In 18-29-Year-Olds In 2018 Midterm

Look at the charts that follow, which show younger voters, such as the 18-29-year-old cohort group increasing their turnout by 79 percent in 2018 versus the 2014 midterm, which, no doubt, helped contribute to the Blue Wave and the Democrats taking back the House in a big way.

Voter_Turnout_By Age

Source:  USEP

The 2016 election was also the first election where the younger generations eclipsed the number of boomer voters.

Pew_voters

If the CNN chart is even close to reality in November, there is going to be another huge surprise on the first Tuesday night in November.

America’s Two Roads Diverged 

It doesn’t take a Ph.D. in political science to figure out which way it will break.  We believe it’s pretty safe to say the governing class in Washington will have a lot less old white males at the same time next year.

Even The Russians Are Concerned 

The last time the U.S. had a 70 percent voter turnout rate in a presidential election was in 1900 when William McKinley beat William Jennings Bryan by 51.6 to 45.5 percent in the popular vote and 292-155 in the electoral college.

The Russian military, who interfered attacked the 2016 presidential election appears concerned about a large turnout and is gearing up.

Russia

The federal government warned state election officials Thursday it suspects Russia my focus on voter suppression as a means to interfere in the 2020 presidential election. 

The joint FBI and Department of Homeland Security document, obtained by CNN and marked For Official Use Only, is titled “Russia May Try to Discourage Voter Turnout and Suppressing Votes in 2020 US Election.”

It warns of three potential ways the Russian government “might seek to covertly discourage or suppress US voters from participating in next year’s election.”

Russia may try to recruit Americans to protests and intimidate voters, sow discord online within political parties and try to hack voter registration sites or knock them offline, the report warns.  –  CNN, Oct 2019

 

Voter Turnout Poll_1

Voter Turnout Poll_2

 

Brext_3

 

 

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Howard Marks, Oaktree Capital

Howard is always worth a listen.  Note the interview took place in October, so a bit dated.

We found a true gem from his latest memo, however.

This experience produced two of my most important observations:

  • Success in investing doesn’t come from buying good things, but from buying things well, and it’s essential to know the difference.
  • It’s not a matter of what you buy, but what you pay for it.  – Howard Marks

Got that, folks?   It’s not a matter of what you buy it’s where you buy it.   Just as those who paid up for the Nasdaq in 2000 and have held, are up only a CAAG of 3 percent in price terms, barely outpacing rolling 6-month CDs.

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The Best MLK Weekend Of All-Time

We are reposting this in honor of Dr. King, a truly great American.

Originally Posted on 

During my Lehman days as a bond strategist, the firm’s research group would do a January roadshow in many of America’s major cities to present our ideas to institutional investors.   One particular year, we were in Atlanta at the end of the week and scheduled for another “greatest show on earth” in Chicago the next Tuesday.

A Weekend In The Peachtree Hyatt

Rather than flying home to New York, I decided to stay over in Atlanta and migrate north on Monday evening.   It was MLK weekend and I wanted to attend services at the Ebenezer Baptist Church, where Martin Luther King, Jr. was baptized as a child and gave his first sermon. If my memory is correct, I believe his father also pastored the church.   His mother was shot and killed while she played the organ in that church in 1974.

Dr. King’s tomb is located just outside the side door of the church in the middle of a reflecting pool.

dr. king

 

Three Memories Of Ebenezer

I recall three of my main takeaways from that Sunday morning.

First,  I was maybe one of ten whites out of 600-700 people sitting in the pews.  Sadly, as Dr. King said almost 60 years ago.

I think it is one of the tragedies of our nation, one of the shameful tragedies, at 11 o’clock on Sunday morning is one of the most segregated hours, if not the most segregated hour in Christian America.  – MLK, Jr  Meet the Press, April 17, 1960

Nevertheless, I felt incredibly welcome and never — not for one nanosecond —  was conscious about such a silly thing as the difference of the color of my skin.  During the greeting time, the Ebenezers made me feel so welcome and a part of their family.

Second, not to contradict Dr. King, but I believe the service started at 9:30 AM and went to almost 1:00 PM!  Maybe it was a special MLK weekend service.  The pastors in the mostly white churches I have attended have trouble keeping the attention of the congregation for more than 20 minutes.

Third, the sermon was entirely different from those I had experienced in middle-class white churches.  Less doctrine, though similar theology, and more real life.  The struggles of raising children in poverty.  Grandparents raising their grandchildren. Troubles with children with drug addiction. The struggles of being black in white America.   No pretense of being sinless and perfect, no holier than thou vibe, no judgment, no condemnation, no guilt, no shaming.  All love, compassion, kindness, and forgiveness.  Just like the real Jesus.

Also, the sharing of the same joys and blessings.  New babies, college graduates, marriages, medical recoveries, and others.

Daddy King” was referred to several times.

It truly echoed the genius and saintliness of Dr. King.

I walked away convinced the Church for the African-American community was much more — that is a considerable part of their life — than what I had experienced in white evangelical America.

Yes, maybe some of us attend more than just Sunday services, but many, such as yours truly, often do so with the dubious motive of seeking the blessings of personal peace and personal prosperity.  The community of the Church, as it for the African-Americans, though not always, is secondary.

The next day, Martin Luther King Jr Day, I spent across the street at the King Center.

More Empathy, Less “Being A Dick

What great memories from that unforgettable MLK weekend.

I grew up lower-middle class in the white suburbs of Los Angeles, attending an all-white high school.  Fortunately, I had a father, who was politically left of the salad fork (out of a rebellion,  I became a conservative in college),  and also spent my first 25 years playing sports, fighting in the baseball trenches with, pulling for, breaking bread, and downing brewskies with my teammates of color; or as I grew to learn colorless.

I am very thankful for those experiences.  It helped me integrate into and see the real greatness of America.

I feel sad for my many brothers and sisters who have not had the same privilege and are stuck still watching black and white television:  unable or unwilling to embrace and enjoy the tremendous diversity of this great country.

Ditto for the similar ignoramuses from other races and ethnic groups.

 

tv

I can’t imagine eating steak and potatoes every day and every night.

Ignorance And Racism Know No Boundaries

Let me finish by qualifying all of the above.

Racism is such a prominent feature of so many human societies that some evolutionary psychologists have concluded it is “natural” or “innate.”  We don’t know about that but are certain it is not just a “white thing”, a “black thing, or a “brown thing,” etc.

I have shared the story of my brother who was murdered by an undocumented worker, who stated, after stabbing him, “all anglos need to be exterminated.”   This sociopathic asshole killed my brother not because he was brown, or undocumented, but because he was one sick and crazy mother f$@ker.

Now, more than ever it is time to commit to expanding our menu.  Let’s make it a point to understand and enjoy the perspectives and various cultures of all the different races and ethnic groups.

Allegorically, and literally, let’s eat more balaedas, falafel, babaghanoush, borscht, moussaka, and bouilli, among others.  The steak and potatoes will taste sooo much better.

Sorry to end on a note that violates the spirit of Dr. King but I can’t help myself.

Any white man (probably less so for a white woman) who think they know what it is like to be an African-American growing up and living in America, has their head…well…you know where.

 

head

Bring on the hate mail.

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The Secular Decline in U.S. Manufacturing Employment

Manufacturing_Payrolls

The title of the post is a bit of a misnomer.

Though the number of manufacturing jobs in the United States is 40 plus percent higher than in 1939, the proportion of total private payrolls hit its lowest level in December at 9.91 percent.

That is there are almost 4m more manufacturing payroll jobs in December 2019 than in January 1939, which at the time — just four months before Germany invaded Poland to start WWII, BTW — made up 35 percent of American nonfarm payroll jobs.  It’s relative, however, as there are also 104m more private-sector payrolls.

Manufacturing peaked as a percentage of private payrolls in the U.S. at 45.30 percent in November 1943 at the height of World War II, when everyone and their mother not in uniform were building tanks and ships. Anybody hear of, or remember Rosie The Riveter?

The absolute number of manufacturing jobs peaked at 19.6m in June 1979.  We do have our suspicions the 53 percent real increase in the value of the trade-weighted dollar from October 1978 to March 1985 inflicted a staggering and potentially fatal blow to the U.S. manufacturing sector.  Think hysteresis, folks.

Durable Manufacturing Employment

Because the above chart includes both durable and nondurable manufacturing, we have broken out durables.   Nondurables make up 37.3 percent of manufacturing payrolls, with food production about  35 percent of nondurable employment.  It’s our perception most do not think that making cupcakes and craft beer constitute a robust manufacturing sector.  Not surprisingly,  the production of craft beer has been one of the highest growth subsectors in manufacturing payrolls.

Manufacturing_Payrolls_2

The data show that only 6.21 percent of all private-sector payrolls in December 2019 is in the durable goods manufacturing sector, also a historic low.

Golden Age Of Manufacturing Employment 

As the data show, the U.S. labor market has been in a secular relative decline moving away from manufacturing jobs.  Believing some minor tweaks to a few trade deals here and there will reverse the trend is Fantasyland and fairy tale thinking.   If anything, robotics and automation are going to take the proportion of manufacturing jobs down to similar levels as those in the agricultural sector, in our opinion.

The chart also clearly illustrates trade is not the only issue affecting the relative decline in manufacturing payrolls and the promised renaissance of manufacturing jobs just ain’t gonna happen.   Policymakers better prepare the public for a high-tech future or there will be more hell to pay, and then some.

The Greatest Economy Ever

President Trump was out again today pounding the table about the “greatest economy ever.”  Man, the B.S. is getting old.

We thought we would let the data speak by juxtaposing the key economic digits in his first three years in office with President Obama’s last three years.   You decide.

Table_Jan20

Dollar

Note the huge headwind caused by the dollar strength in Obama’s last three years.  No doubt it had a major impact on manufacturing payrolls.   Recall our analysis from last July,  which included the following table of the correlation of manufacturing payrolls with the year-on-year change in the trade-weighted dollar.

For example, the correlation between the 3-month moving average of the monthly change in machinery payrolls and the year-on-year change in the value of the trade-weighted dollar index lagged six months, is -0.877 for the period.  That is a stunningly high number, folks, and makes all the economic sense in the world.

Man_4

President Trump would have dropped the hammer and sickle big-time on the Fed if the dollar increased in value just a quarter of the move under Obama.

Wait…doesn’t POTUS hammer the Fed almost on a daily basis and saves his sickle for tariffs?

That’s clearly heavy-handed socialismo, in our book, folks.

Appendix

AG_Payrolls

Dollar_Trade_weighted

 

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How Is That Austrian Century Bond Doing?

I guess it depends on your entry price.   The Austrian 2117 bond chart now looks like a broken stock.

We did notice during summer feeding frenzy and August highs, our bond trading buddies in Europe were pounding the table the loudest that every bond yield in the world was going to zero and beyond.   It’s always loudest at tops.

The whole negative-yielding debt fiasco was generated by a ginormous momentum trade or a greater fool theory, coupled with momentum-driven algos with no context, a dearth of low-risk fixed income securities, and ambiguity of how a new round of QE would unfold in Europe.

We wonder out loud if the proliferation of negative-yielding debt — $16 trillion and counting — would be taking place if humans and not the bots and algos were still in control of the markets?

Machines can go places where humans have never dared to venture as they have no context.  Algos in self-driving cars, for example, have no context and thus no ability to recognize a graffiti-ridden stop sign as a stop sign.

For all its impressive progress in mastering human tasks, artificial intelligence has an embarrassing secret: It’s surprisingly easy to fool. This could be a big problem as it takes on greater responsibility for people’s lives and livelihoods…

Indistinguishable changes to a stop sign could make computers in a self-driving car read it as “speed limit 80.”   – Bloomberg

 

Treasury_Distortion_7

No problem for a human driver even if the stop sign has more tags than a 95-year-old’s armpit.  – GMM, Aug ’19

Was the ECB going to be there to take you out of 10-year bunds yielding -2.0 percent?  That was the bet.

Keep in context the stock of negative-yielding debt is so much greater than the actual number of trades, which took place with negative yields.   Furthermore, negative yields are not equivalent to negative coupons.

Institutional investors may hold a large stock of negative-yielding bonds but how many negative-yielding bonds have they actually purchased?  Some, but probably not a whole helluva lot.

Austrian_Bond

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