Summary
Commentary: Not much this week. Markets reflecting strong U.S. economy. It’s a mug’s game trying to predict short-term stock moves (frickin’ futile), especially in our QE distorted, supply-side restricted world. We can’t help ourselves.
Don’t say we didn’t warn you,
“Deep fakes could become a potent tool for hostile powers seeking to spread misinformation,” wrote Representative Adam Schiff, the ranking Democrat on the House Intelligence Committee, in a letter to Dan Coats, the director of national intelligence.
“As deep fake technology becomes more advanced and more accessible, it could pose a threat to United States public discourse and national security, with broad and concerning implications for offensive active measures campaigns targeting the United States,” said the letter, co-signed by Representatives Stephanie Murphy (D-FL) and Carlos Curbelo (R-FL).
If you guessed that the government is more likely than not going to use this as an excuse to continue to kill free speech, you’d most likely be correct. – SHTFplan.com
You heard it here first,
Midterm “Deep Fake” Oppo Research
It’s coming.
We expect “deep fakes” (probably not just porn) to proliferate as we approach the 2018 midterm election. Most likely peaking a few days or week before election day leaving little time for a candidate’s rebuttal
Thomas Jefferson must be rolling over in his grave,
“An educated citizenry is a vital requisite for our survival as a free people.” – Thomas Jefferson (paraphrased?)
Get ready for a wild frickin’ ride, folks. The complete weaponization of social media.
Reality is blending with the virtual, the real with the fake, and fewer and fewer can, and are finding it increasingly difficult to distinguish the difference. –
Global Macro Monitor, July 25th
Prepare for the Techlash to accelerate.
Even we were “faked out” this morning with a tweet showing a shark swimming on a submerged freeway in “Flo” ravished North Carolina.
Thanks to our friend for pointing out it was a fake. We took it down.
During the dot.com bubble, I used to joke around with my friend, Bill Fleckenstein, “…if its on Reuters, it’s true…” Now, we really have a problem.
Catch a wave and your sittin’ on top of the world – Beach Boys
No political statement here, no wishful thinking, just inference from the data and our sense of the political mood of the country.
Recall, we did predict on the eve of the November 2016 election, Trump would win the electoral college and HRC the popular vote, based on analysis and not our personal partisan politics.
The biggest gender gap in American electoral history is also taking shape, with women saying they prefer Democrats by 58 percent to 33 percent, an eye-popping 25-point margin. – Vanity Fair, Semptember 12th
You did hear it here first,
Massive Lavender Wave Coming In November
We believe there will be a massive “lavender wave,” in the November midterms. Lavender is the color combination of pink and blue.
…In elections, women are also more likely to vote in higher numbers and have done so for decades. Women have cast between four and seven million more votes than men in recent elections.
Moreover, the revulsion toward the president among women has not only made them more likely to vote but has turned them into activists. Women are running for office this year in record numbers.
Recall it was the African-American women who put Doug Jones over the top in Alabama’s special U.S. Senate election against Roy Moore last year. Exit polls showed that 98 percent of black women supported Jones.
…Do the math, folks. Listen to the water cooler talk, read the cartoons. — Global Macro Monitor, August 5th
We suggest you give a careful read to yesterday’s Vanity Fair piece, GET OVER YOUR ELECTION-NEEDLE P.T.S.D.: THE BLUE WAVE IS REAL, AND IT’S A MONSTER.
It’s Not The Economy, Stupid
No level of the S&P or GDP growth is going to change the women’s vote from here until November. The die is cast, folks.
Trade Negotiations
The Canadians and Chinese surely have very astute political analysts. Why in the world would either government cut a deal with an administration that will effectively end on November 6th?
We expect nothing of substance to come out of the trade negotiations from now until election day. Unless, that is, President Trump caves on everything in order to declare victory, no matter how Potemkin or meaningless the deal is, just as his Korean and Mexican deals are.
Wearing it as I post!
“What is the yield-to-death?”
Those words spoken by the legendary hedge fund king, and new owner of the Carolina Panthers, David Tepper, to my salesperson in 1993 when we were trying to convince him to buy a chunk of Peruvian busted bank loans at around 8 cents on the dollar.
Due Diligence
Tepper was half joking of course but he was covering all the bases as his fledgling hedge fund, Appaloosa Management, began to venture into the new emerging asset class of LDC debt.
He was, as any good trader and investor, skeptical and concerned about the country’s political stability. The Shining Path, the Maoist guerrilla group terrorizing the country; the risk of a military coup d’etat, and all the uncertainties, which come with investing in an emerging market country.
I recall he did pull the trigger, and if my memory serves me correct, it was, or one of, his first investments in the emerging markets. If he held the position, and I am sure he did, the loans appreciated close to 1,000 percent over the next few years.
Tepper is one smart and tough dude, and a helluva a good guy.
NFL Owner With Courage
I like, and totally agree, with what he said today on CNBC. This took some courage.
Billionaire hedge fund manager and new Carolina Panthers owner David Tepper lashed out at critics of NFL players, in particular President Donald Trump.
The Appaloosa Management head said more focus should be on the good his players and others do in their communities and not on the headline-grabbing protests staged during the national anthem.
“These are some of the most patriotic people and best people. These are great young men,” Tepper told CNBC’s Scott Wapner in a “Halftime Report” interview from Carnegie Mellon University. “So to say that [they aren’t patriotic] makes me so aggravated and angry. It’s just wrong, it’s dead wrong.” – CNBC
Do you think he cares about the backlash from those who disagree, including POTUS?
Brass Balls
Tepper truly has brass balls. I have read he keeps a pair on his desk.
During the good old days of extreme volatility in emerging markets debt, there were periods when some sovereign bonds would sell-off 20 points in one day due to contagion from, say, the 1997 Asian Crisis and the 1998 Russian Debt Default.
When it always felt the worse, when the world was coming to an end, Tepper was in buying. Not always picking the bottom but he smartly knew nobody can pick bottoms.
He did get caught in Russian local currency bonds in 1998, however, betting wrongly the Yeltsin government would choose inflation over default. He says it was his worst trade and investment ever.
Go Panthers
David Tepper makes me wanna become a Panther fan.
Strike that, I am now a Panther fan because of David Tepper.
You have to own assets to make it in the New Economy. Pity the younger generations.
Check out the growing wealth disparity in the below chart, which is clearly the result of monetary policy.
The Fed’s increasing reliance on the asset price channel of the monetary transmission mechanism over the past decade has been to “jack up” or inflate assets, hoping the “wealth effect” stimulates aggregate demand. Household net worth is now at a record level and the economy is purring.
The asset price channel of monetary policy relative importance has increased as households have been deleveraging after the GFC, rendering the credit channel of monetary policy almost completely ineffective, at least, until recently.
The result is asset bubbles everywhere.
Political Backlash
The political consequences are also far from benign.
Conservative savers who have kept their money in bank CDs, witnessed their interest income go to zero, while the highly levered and risk takers were bailed out. Many, who have done all the right things — worked hard, saved, paid their bills on time — feel they have been screwed in a big way.
We know of one person, who owned three houses on our street, and didn’t pay his mortgages for over four years, yet still collected rent from his tenants. The banks didn’t foreclose because they worried that flooding the neighborhood market with homes would drive down the price of their collateral. Not the case anymore, however.
He was only one of several hundred thousand deadbeats, who gamed the system, did all the wrong things and were rewarded. The stand up borrower and citizen got hosed.
Do you wonder then why populism is on the rise — The Tea Party and Donald Trump?
We understand and feel the anger, but do hope and pray the backsliding toward tribalism will be reversed sometime soon.
People’s QE Is Coming
Because the wealth disparity is so vast, as it has become in the past seven years, the efficacy of asset inflating or, what we call “jack asset” monetary policy diminishes, and more and more Fed stimulus is needed; as are higher, and higher asset prices.
That is why we believe that during the next recession, the Fed will be forced to roll out some sort of “people’s QE.” That is, the direct financing of consumption, possibly in the form of financing a universal basic income, the direct bailout of public pensions, and the funding a massive jobs facility, for example.
Ray Dalio seems to agree that such policies are only a few years away.
Of course, the new QE will likely be executed through the direct purchase of Treasury securities earmarked for such programs.
Smells Like Argentina
Wow, this smells a lot like late 1980’s Argentina. I was there and witnessed very similar policies. The major difference is the Argentine austral was not a reserve currency.
A “people’s QE” will supposedly ensure the new liquidity is injected directly into the hands of those who will spend it, generating the demand to lift the economy out of its morass.
Sticking with the old QE policy, or just augmenting it with the Fed’s direct purchase of equities and corporate bonds, will prove ineffective due to the growing wealth disparity. The marginal propensities to consume of high net worth groups approach zero as wealth increases.
End Game
The result will most likely be a disaster. The dollar will tank and its role as the world’s reserve currency will be over.
Yes, there will be another deflation scare but it will sow the seeds of inflation as the policies mentioned above are ushered in. Are you listening, deflationistas?
Maybe the Fed should have never have ventured down this road, transforming the economy into the asset driven beast that it now is, but we are way beyond the Rubicon Crossing, folks.
Until then, let’s focus on making money. Everything is awesome.
WIRED’s Lauren Goode takes a first look at Apple’s three new phones — the XS, the XS Max, and the XR. Still haven’t subscribed to WIRED on YouTube?
