Update (1242ET):

The Wall Street Journal cited Italian Coast Guard officials who said British tech entrepreneur Mike Lynch, Morgan Stanley International Chairman Jonathan Bloomer, and Clifford Chance lawyer Chris Morvillo are presumed dead after a superyacht they were chartering was hit by a waterspout before capsizing off the coast of Sicily early Monday. 

Here’s more from WSJ:

One of Lynch’s daughters, Bloomer’s wife, Judy, and Morvillo’s wife, Neda, also were among the missing.

Authorities confirmed the body of the yacht’s cook had been recovered.

The coast guard said the bodies of the missing are likely trapped in the yacht. Rescuers were reassessing how to access the wreckage, after the first inspection by cave divers was blocked by debris, the coast guard said.

“The space is very tight, because everything fell when she capsized,” Luca Cari, the head of Italy’s national firefighters’ corps told reporters. “Divers are trying to remove furnishings, wires and other debris to clear the passageways.”

Italian daily newspaper La Stampa posted on X:

Bayesian Sinks, Cameras in Homes and Shops Under Review. Video Shows Sinking Vessel: “Disappeared in 60 Seconds”

Naufragio del Bayesian, al vaglio le telecamere di case e negozi. In un video il veliero che affonda: “Scomparso in 60 secondi” https://t.co/IiyXDAfiOo

— La Stampa (@LaStampa) August 20, 2024

BBC notes a waterspout likely caused the superyacht to capsize:

“There are separate reports the boat’s mast snapped during the freak storm and other factors in the boat’s sinking include water entering through hatches and doors which had been left open because of warm weather off the Italian coast.” 

*   *   * 

An unexpected violent storm, which some EU media outlets described as a ‘tornado,’ sank the British-flagged superyacht “Bayesian” early Monday morning off the coast of Sicily. Local authorities confirmed one dead, and six people are missing, including British tech entrepreneur Mike Lynch and Morgan Stanley International chairman Jonathan Bloomer. Bayesian was carrying 22 people during what appears to be a ‘weather-related’ incident.

Superyacht BAYESIAN sank off Palermo after a tornado hit early this morning. 15 rescued, 6 missing, including tech tycoon Mike Lynch.

MarineTraffic data shows its last signal received via AIS at 2:06 UTC before sinking.

Read more on the story: https://t.co/WOL75loP7I pic.twitter.com/vxzVraSrIF

— MarineTraffic (@MarineTraffic) August 19, 2024

Let’s take a step back because the plot thickens here. Just days before the Bayesian sank to the ocean floor, off the coast of Porticello – a small fishing village nestled between Palermo and Cefalu on Sicily’s western shore – Lynch’s co-defendant in the US Autonomy-Hewlett-Packard fraud trial was struck and killed by a car while out for a run near his home in England on Saturday. 

Here’s more from The Independent:

Stephen Chamberlain, Autonomy’s former vice president of finance, who worked alongside chief executive Mr Lynch, was killed after being hit by a vehicle while out running on Saturday, his lawyer, Gary Lincenberg said.

…

In a statement, Mr Lincenberg said: “Our dear client and friend Steve Chamberlain was fatally struck by a car on Saturday while out running.

“He was a courageous man with unparalleled integrity. We deeply miss him. Steve fought successfully to clear his good name at trial earlier this year, and his good name now lives on through his wonderful family.”

Chamberlain faced similar fraud and conspiracy charges as his former boss, Lynch, for allegedly conspiring to inflate their company Autonomy before it was sold to Hewlett-Packard for $11 billion in 2011. 

On June 6, a federal court jury in San Francisco found Lynch and Chamberlain not guilty following an 11-week criminal trial. 

According to the Pew Research Center analysis, only 0.4% of federal criminal cases in 2022 ended in acquittal, which means the two executives were extremely lucky with the positive outcome. 

However, not so much in the last several days, with Chamberlain killed by a vehicle while on a jog and Lynch missing after a tornado hit the superyacht he was on. 

Also on the vessel was Bloomer from Morgan Stanley, who has been confirmed missing by Italian authorities. 

Here’s more from Bloomberg about Bloomer… 

Bloomer, 70, has worked in the finance industry for five decades. He’s been chairman of Morgan Stanley’s European business since 2018, and was named to lead British insurer Hiscox Ltd.’s board last year. He is a friend of Lynch and was a witness for the defense in the long-running legal battle with Hewlett Packard.

The real mystery is how Lynch and Chamberlain went from being the luckiest men—acquitted in a federal criminal fraud case—to the unlikeliest in separate, unexpected incidents just days apart. 

Authored by John Robson via The Epoch Times (emphasis ours),

A friend’s mother was fond of saying there’s no good way to do a bad thing, and no bad time to do a good one. It’s true of public policy as of life generally, which is why both the public and politicians should talk more about principles and less about motives or tactics. And just as I was wrestling with applying this maxim to the current fiscal mess, someone Xed the classic Milton Friedman line to “Keep your eye on how much the Government is spending, because that is the true tax.”

I’m not sure when Friedman said it. But he died in 2006 aged 94, and the clip shows him in middle age, so it was around half a century back. We should have listened, because it has applied consistently since and still does.

In fact, I’d just read a column by my former colleague Randall Denley about an administration of ostensibly conservative inclinations touting its “prudent, responsible” fiscal management while “tracking a clear path” back to a balanced budget from its current massive scary deficit. As Denley added tartly, “As it turns out, tracking a balanced budget is like tracking a unicorn. The tracking is easy, but finding one is hard.”

Indeed. Or at least indeed re the finding. The tracking isn’t as easy as it ought to be, because government budgets are infamously tangled forests of accounting conventions, focus-grouped prose, economic projections, and jiggery-pokery regarding long-term liabilities. And because neither the authors nor most of the audience adhere to Friedman’s wise words about what exactly we should be keeping an eye on as we navigate these deep dark woods.

As was his wont, Friedman compressed much potentially complex truth into short, clear, vivid words, immediately adding, “There is no such thing as an unbalanced budget.” Which is not addled but Chestertonian in its paradoxical brilliance because, Friedman went on, “You pay for it either in the form of taxes, or indirectly in the form of inflation or debt.”

Exactly. The budget is, by definition, balanced by one of those proper accounting conventions that says for every dollar of assets in the ledger there must be a corresponding dollar in liabilities, and vice versa. Thus, what looks like cash the state dropped from heaven as we wandered the desert beyond the Red Ink seeking the promised land of social justice, is actually offset somewhere by something. It must be. There’s no magic money tree in Ottawa, in Washington, in Toronto, in Victoria, or for that matter in Moscow, Beijing, Pyongyang or Teheran. Whatever governments spend, they must take in somehow.

This maxim does not, of course, necessarily mandate my own preferred minimal “night watchman” state that defends the realm, suppresses force and fraud, and otherwise leaves adults to work out their own salvation in fear and trembling or whatever décor and mood seems best to them. But it does require that we discuss what the government is doing, and weigh its costs against its benefits, with a clear sense of what both entail.

The benefits of public spending, or especially regulation, which takes and uses property in ways harder even to track than, say, the long-term debt of Ontario Hydro, now lurking in the books of the Ontario Electricity Financial Corporation that I doubt one voter in 100 has heard of, are rarely as great as proponents claim. And they are especially hard to measure when expressed in vague “The return on that investment in terms of what that will do and what it will pay for will be tremendous” decades later verbiage or “those are where the jobs are going to be, not just a couple of years from now, but a decade from now, a generation from now” rhetoric. How politicians know where jobs will be a generation hence is not obvious. But I digress.

The point is, there is a fairly clear way of measuring the cost. At least there would be if we were straightforward in our accounting and in our approach to funding, and put all spending into the on-book budget and all liabilities into the on-book debt. As Friedman also said, and this one I know was in 1977, “The true cost of government is what government spends, not what is labeled as ‘taxes.’” Shifting it to borrowing, the central bank printing press, or some “Crown corporation” doesn’t make it less burdensome. It just makes it harder to grasp and discuss, which makes it more burdensome partly because we can be persuaded, or can persuade ourselves, to ignore it longer.

So here’s my plea. In debating what government should attempt, and how big it should be, let’s agree that its real size, its real cost, is what it spends, and keep that side of the ledger as clean and clear as humanly possible.

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

Everything is awesome, right?

Well something just hit the wall in the Philly Fed’s region… and the timing is awkward for Kamala’s economic plan.

Remember in June, when The Philly Fed General Business Activity Index surged up into expansion at two year highs and there was much celebrating that ‘soft’ data was going to lead us out of a ‘hard’ data slump?

Well, that’s all over now as the index crashed to -25.1 in August – its weakest since the COVID lockdowns…

Source: Bloomberg

On a non-seasonally-adjusted basis (what exactly is a seasonally-adjusted ‘sentiment’?), it was an even bigger collapse…

Source: Bloomberg

Under the covers, it was even uglier with future activity expectations plunging into negativity, capex expectations tumbling, and full-time employees crashing to their lowest since COVID lockdowns…

Source: Bloomberg

Oh, and about that price-gouging stuff… for the last three years, businesses (at least in the Philly Fed region) have seen nothing but margin compression and pain as the prices paid for goods dominated the prices received for goods…

Source: Bloomberg

…but hey, that ruins the Democratic narrative that greedy mom-and-op store-owners are stealing your hard-earned real income losses.

Finally, today’s Philly Fed survey joins a recent rash of ‘soft’ sentiment surveys that has reversed the rebound we saw in Q2…

Source: Bloomberg

It seems that ‘hard’ data’s reality check is just too much for the always-optimism-biased adjustments in the surveys.

Now, what changed in August to prompt such a collapse in sentiment?

Authored by Charles Kennedy via OilPrice.com,

• Donald Trump has pledged to reduce energy costs by half within his first year in office if elected.

• Trump plans to achieve this by canceling electric car mandates and reversing green energy policies.

• Trump’s energy plan focuses on boosting U.S. oil and gas production, while criticizing wind and solar power.

GOP presidential candidate Donald Trump has promised to reduce energy costs by half by reversing current federal government policies in his first year in office if he gets elected.

Trump was speaking at an event at a defense manufacturing facility in Pennsylvania and said that if he enters the White House, during his first year he would remove future mandates for electric cars and cancel “green energy” policies, according to a report by UPI.

Trump went on to warn those in attendance that if Harris wins the presidential vote, energy costs would triple and quadruple, and the U.S. “won’t be producing a drop of oil.”

He also accused the Biden administration of a “regulatory jihad to shut down power plants.”

The Biden administration indeed has a very different energy policies agenda than Trump and Harris has indicated she would stay in the transition lane if she enters the White House as president.

Trump, on the other hand, has remained a staunch supporter of what he calls U.S. energy dominance, encouraging as much oil and gas production as possible to turn the country into a self-sufficient one in terms of energy and extend its international influence through energy exports.

Last month, in an interview with Bloomberg, Trump said that if he wins he would boost U.S. oil production, calling the commodity liquid gold.

“We have more liquid gold than anybody,” Trump told the publication, adding “We need energy at low prices. The advantage we have all over almost every country including the very large ones is that we have more energy than anybody. We have more of the real energy, the energy that works,” the former president vying for another term in office said.

“Wind does not work. It’s too expensive,” said Trump, claiming that solar and wind farms are neither too good for the environment, nor too suitable to provide energy at low costs and prices.

The official Democratic party platform calls for the passage of the US Citizenship Act – which the Trump campaign on Monday called ‘a radical amnesty bill that would give automatic citizenship and social security numbers to the millions of illegal aliens that invaded our country, including criminals, human traffickers, and gang members.‘

The DNC platform calls for the passage of the U.S. Citizenship Act, a radical amnesty bill that would give automatic citizenship and social security numbers to the millions of illegal aliens that invaded our country, including criminals, human traffickers, and gang members. pic.twitter.com/6cAB2NrM7B

— Trump War Room (@TrumpWarRoom) August 19, 2024

 According to the DNC platform:

America is a nation of immigrants. The legal immigration framework was last updated in 1990 and does not reflect the needs of our country in the 21st century. Many immigrants today are forced to wait years, and often decades, to immigrate lawfully to the United States.

A robust immigration system with accessible lawful pathways and penalties for illegal immigration alleviates pressure at the border and upholds our values. The U.S. Citizenship Act would permanently increase family-sponsored and employment-based immigration.

This is in sharp contrast to Trump’s platform, which calls for sealing the border and carrying out the largest deportation operation in US history.

“This was the plan all along”

Some are suggesting that the Biden-Harris administration allowed the country to be flooded with illegal immigrants in order to eventually grant mass amnesty.

This is exactly why Kamala Harris and the Democrats permitted our country to be overrun with illegal migrants, this was the plan all along.

There is no denying this fact any longer.

This is why for the sake of all Americans we can not let her win in November. https://t.co/6EHCO4aYak

— Old School Eddie (@Old_SchoolEddie) August 19, 2024

The DNC’s pushing for automatic citizenship for millions of illegal aliens?

That’s not a policy, it’s a slap in the face to every law-abiding citizen. Rewarding those who broke the law sends a dangerous message.

It’s chaos disguised as compassion

— John (@johnEiid) August 19, 2024

They need new voters. The current ones they have are marching against them in Chicago right now.

— Thomas Musket ⓒ (@ThomasMusket) August 19, 2024

Democrats are feeding illegals and starving citizens! pic.twitter.com/HVVTDMwa6B

— For The Alamo Heroes (@Alamo1836Alamo) August 19, 2024

The founder of the main outside spending group backing Kamala Harris for president says their own internal opinion polling is “much less rosy” than public polls – and has warned Democrats that they face much closer races in key states.

“Our numbers are much less rosy than what you’re seeing in the public,” said Future Forward super PAC president Chauncey McLean said during a Monday event hosted by the University of Chicago Institute of Politics.

According to public polls – which, as you’ll see below, are largely bullshit – Harris is leading Donald Trump in several national polls by FiveThirtyEight; 46.6% to 43.8%, and has allegedly pulled ahead in several battleground states, Reuters reports.

Except that’s not what Future Forward is seeing…

The PAC has created a ‘massive polling operation’ and tested some 500 digital television ads for Biden and 200 for Harris, along with polling some 375,000 Americans in the weeks after Biden was forced out of the 2024 race and Harris became the presumptive Democratic nominee on July 22.

According to McLean, the majority of Harris’ momentum after she took over for Biden was from young voters of color – opening up Sunbelt states such as Nevada, Arizona, Georgia and North Carolina. That said, Pennsylvania – the most consequential state in the group’s analysis, is a ‘coin flip’ based on Future Forward polls.

He says Harris must win one of three states – Pennsylvania, North Carolina or Georgia – to win the White House.

He warned that Harris has yet to fully rebuild the Biden coalition of Blacks, Hispanics and young voters that brought him the White House in 2020.

McLean said polling shows the public wants more detailed policy positions from Harris.

He says they don’t want “white papers,” but they also don’t want platitudes. He says they need more concrete examples of how she may differ from Biden and make their lives easier economically. Trump allies have called on Harris to do the same in recent days, hoping to pin her down on controversial issues. -Reuters

According to McLean, the race is tight as ever.

“We have it tight as a tick, and pretty much across the board,” he said.

About those bullshit polls…

Mark Davin Harris of political consulting firm ColdSpark says they’re seeing a “historic response bias on surveys that is setting the table for a large polling miss this fall.”

Diving right in, Harris says pollsters are essentially injecting unreported bias into polls by targeting subgroups more likely to answer the way they want.

For example, “In the meta data from the call centers college educated Dems are 3-4x more likely to answer than non-college. While weighting can help minimize the bias if done correctly it won’t totally eliminate the problem. For example even if you quota’ed for party (something I have very mixed feelings about) AND for education at the topline you can have the college Dems consume such a big chunk of Democrats that you miss the downscale Dems that are MUCH less partisan loyal.”

Harris is set to release an analysis that show “historically liberal” bias even when they “weight back to party.”

Cherry picking cross tabs is almost always fools gold but this is a critique of the methodological approach people are using to try to adjust for this issue.

— Mark Davin Harris (@markdharris) August 16, 2024

Gauging by turnout?

According to Harris, one possible solution would be to focus on a person’s past voting history – as those who ‘always’ vote are being oversampled vs. the ‘low turnout’ voters, who are more likely to vote for Trump.

“We’re seeing a lot of surveys WAY oversampling the ‘always voters’ and not getting enough of the infrequent voters that are so important in a Presidential race and Trump does better with low turnout folks,” he said.

I don’t blame the public pollsters for not fixing the response bias issue they are operating on really tight budgets but I do think they are herding results with weighting as well which I do blame them for.

— Mark Davin Harris (@markdharris) August 16, 2024

Authored by Alex Wu via The Epoch Times (emphasis ours),

In recent months, local health authorities have conducted emergency infection disease response drills across China.

On Aug. 15, Dingxi City in Gansu Province, a district in Yancheng City in Jiangsu Province, and Lingchuan County in Shanxi Province carried out emergency drills for the outbreak of “pneumonia of unknown cause,” according to an official notice.

A staff member of the Gansu provincial government’s health hotline told the media on Aug. 15 that the national-level authorities had ordered officials in 10 provinces to conduct emergent infectious disease drills by the end of August.

The ruling Chinese Communist Party (CCP) first used the term “pneumonia of unknown cause” in 2003 to describe the SARS outbreak in China before it was officially named; it was also used when COVID-19 first broke out in Wuhan, Hubei Province, in late 2019.

Drills have been conducted since June in more than a dozen provinces and regions, including the nation’s capital, Beijing, according to notices issued by local health departments and Chinese media reports. This is the first official annual infectious disease emergency drill since the COVID-19 pandemic.

Notices across China said the responses are based on the “Notice from the National Disease Prevention and Control Bureau on Preparing for Emergency Drills for Infectious Diseases in 2024” issued in April, following the ”2024 National Infectious Disease Emergency Response Conference” held in Chengdu, Sichuan, on April 17.

The CCP’s sudden abandonment of the three-year COVID-19 lockdown and all restrictions in December 2022 caused a massive outbreak and countless deaths in China. Despite international concerns and criticism from the World Health Organization, the communist regime proceeded to declare COVID-19 defeated in February 2023.

COVID-19 Cases Surge

In its latest update, China’s CDC reported on Aug. 8 that the number of COVID-19 cases in China spiked from 8.9 percent in the first week of July to 18.7 percent in the last week of July. The main prevalent strains were JN.1 series variants and XDV series variants.

Meanwhile, Guangdong Province’s Health Commission reported that there were 18,384 COVID-19 infection cases in the province in July, an increase of more than 10,000 cases from June’s 8,246 cases.

The international community has suspected the CCP of downplaying and covering up the true scale of COVID-19 infections and deaths in China since late 2019, when it first broke out in Wuhan, Hubei Province, because of its lack of transparency.

Dr. Jonathan Liu, a professor at the College of Traditional Chinese Medicine in Canada and the director of Kangmei Traditional Chinese Medicine Clinic, told The Epoch Times on Aug. 15 that the drills across China in recent months are aimed at another COVID-19 outbreak.

“The CCP already declared victory over COVID-19, so if there is another wave of infections, it must be [labeled] ‘pneumonia of unknown cause,’” he said.

Liu added that there shouldn’t be so many cases of infections during the summer, as it doesn’t conform to the known pattern of COVID-19.

Dr. Tang Jingyuan, a U.S.-based China affairs observer, told The Epoch Times on Aug. 15 that the emergency response drills conducted across China show that COVID-19 is still prevalent in the country and that its severity has fluctuated over time.

“Each wave of recurrence of COVID-19 has different characteristics. Right now, it seems to mainly target young people,” he said.

Sean Lin, a microbiologist and assistant professor in the biomedical science department at Feitian College, said that in the context of the sluggish economy and high unemployment rate, “this kind of drill may be a special political signal,“ and that ”the authorities are trying to achieve more control over society on the grounds of health.”

Luo Ya contributed to this report.

Day one of the Democratic National Convention (DNC) kicked off with excitement as delegates and attendees listened to speeches from major lawmakers and leaders from the Democratic Party.

Amid embittered remarks from Hillary Clinton, protesters gathered outside the perimeter of the United Center to demonstrate against the Biden-Harris administration’s military support for Israel during the Israel–Hamas war.

But all eyes were really on the last speaker of the night – the outgoing president – who spoke late, very late (well past his prescribed bedtime) in a speech that attempted to revive Dark Brandon but just sounded like an angry old man yelling at the moon (of lies he has conjured in his mind about the ‘others’).

Prior to Biden’s speech at the convention, Harris made a surprise appearance on the convention stage on Monday night to honor Biden.

“Joe, thank you for your historic leadership, for your lifetime of service to our nation and for all you will continue to do. We are forever grateful to you,” she said in brief remarks.

As LibertyNation’s Tim Donner wrote:

Since Joe Biden was willing to accept the humiliation of being forced out of his campaign for reelection, perhaps it follows that he would be amenable to accepting the final indignity of delivering his farewell address at his party’s convention on a night usually reserved for second- and third-tier speakers.

Indeed, the unconventional decision to have the sitting president speak on the first night of the 2024 Democratic National Convention (DNC)  – as opposed to either not speaking at all or being placed in a prominent slot on a succeeding night – was undoubtedly the product of a tortured compromise.

To add to the indignity, the DNC ran so far behind schedule on its opening night that the president did not even appear until 36 minutes after his scheduled start time of 10:50 pm ET, which by itself was something of an insult, and led some to question if the delay was deliberate, or effectively an attempt to drive Biden out of view to the primetime audience.

Making the sitting president of the United States wait until after 11:30 P.M. Eastern – well after prime time – to give the final big speech after 52 years in public office was the final signal that they were done and dusted with old Joe.

“This is awful. He literally set up a campaign and handed it over to them — do they have to cut him out of prime time?” one longtime Biden aide texted Axios reporter Alex Thompson.

We’re 90 minutes behind schedule.

It’s unconscionable to have President Biden’s address occur at midnight ET.

We should postpone some upcoming folks and put the president up there soon.

— Christopher Hale (@chrisjollyhale) August 20, 2024

“The media is very East Coast focused though, you’ve gotta be pretty naive to think the prolonged DNC tonight is for any reason other than diminishing Biden’s visibility,” Silver tweeted.

The media is very East Coast focused though, you’ve gotta be pretty naive to think the prolonged DNC tonight is for any reason other than diminishing Biden’s visibility. https://t.co/LSd5DJzrON

— Nate Silver (@NateSilver538) August 20, 2024

Joe received the required ovation, and as PJMedia’s Victoria Taft details below, the party’s cheerleaders held signs reading “We (heart) Joe.”

The crowd chanted “We love Joe!” but nothing can quite make up for how Biden was treated by his party in the days leading up to night one of the Chicago convention.

An angry looking and glassy-eyed Joe gave nothing more than a typical stump speech to the crowd with check list State of the Union overtones.

Joe attempted to summon Dark Brandon, but just looked like an angry old man.

And then came the whoppers.

Biden lied about his reason getting into the 2020 race, claiming Donald Trump embraced neo-Nazis.

Obviously, that “nice people on both sides” trope has been obliterated by simply looking at the record, but Joe doesn’t care.

Ironically, Biden gave everyone a spit-take moment when he later said that “both sides” of the Gaza war protests, including pro-Hamas—literal pro-Nazi– protesters outside the convention hall, “have a point.”

You can’t make this up.

The president told the crowd that Donald Trump scuttled a border deal that would have legalized all the people Biden allowed into the country.

Even his own crowd wasn’t buying it.

He claimed billionaires pay fewer taxes than most taxpayers.

Embarrassing.

The man who tyrannically used COVID emergency powers to keep America shut down and businesses on ventilators claimed he stood for “freedom, democracy, and America.”

“Democracy must be preserved!” thundered glassy-eyed Joe to a crowd that was looking for a little inspiration.

Joe bungled a few lines of the speech when he lost his way on the teleprompter, and at one point the crowd guffawed at the bumbling.

Toward the end of his speech, a meandering President Sundowning began slurring and rushing his sentences and then told the biggest whopper of the night:

“And all this talk about how I’m angry at all those people that said I should step down—that’s not true.”

We “believe” you, angry guy.

He told the dwindling and less enthusiastic hangers on in the room that he had given the country his best. Was anyone listening?

Joe got around to talking nicely about Kamala Harris and America after midnight Eastern time. And that’s not hyperbole! Not a joke. I give you my word as a Biden.

Reflecting on the farce that was last night, LibertyNation’s Tim Donner concludes, like the outsized stakes of this election itself, the outcome will be either a triumph or catastrophe for Joe Biden.

If Harris wins, it will affirm his presidency and his legacy as the man who saved the country from Trump.

But if Trump wins, Biden will forever be blamed for seeing the handwriting of his demise on the wall and stubbornly refusing to step aside until it was too late, ultimately handing the country back to the 45th president.

In a career marked by sustained power but constant disappointments –  two badly failed presidential campaigns, an unserious image, and rejection by Barack Obama in 2016 in favor of Hillary Clinton – the end is nigh for Joe Biden. He cashed in on extraordinary circumstances to finally reach the promised land, only to be betrayed by the irreversible indignity of his own cognitive decline. His half-century as the quintessential Washington insider was marked by bookends of success and failure, centrism and progressivism, and, in the end, youth and age.

“For the longest time, I was too damn young because I only was 29 when I got elected,” Biden playfully lamented at a recent rally for his VP in Maryland. “Now I’m too damn old.”

Was last night setting the scene for the ‘October Surprise’ we hinted at?

Authored by Lance Roberts via RealInvestmentAdvioce.com,

The market’s 8.5% decline during August sent shockwaves through the media and investors. The drop raised concerns about whether this was the start of a larger correction or a temporary pullback. However, a powerful reversal, driven by investor buying and corporate share repurchases, halted the decline, leading many to wonder if the worst is behind us.

However, the picture becomes more nuanced as we examine the technical levels and broader market conditions. While the recent bounce suggests the market decline may be over, risks remain—particularly with the November election looming. Let’s dive into the details.

The August Decline: What Caused It?

August has historically been volatile for markets; this year was no exception. A combination of factors drove the S&P 500’s 8.5% drop:

1. Elevated Interest Rates: The Federal Reserve’s continued commitment to fighting inflation led to increased concerns about economic growth slowing. That spooked investors betting on a soft landing for the economy when recent economic data deteriorated.

2. Weak Economic Data: A string of weaker-than-expected economic reports fueled the fire, including slowing job growth and declining consumer confidence. Concerns about a potential recession started the sell-off in equities.

3. The Yen Carry Trade: A significant rise in the Japanese Yen led to a rapid unwinding of leverage used by institutions to increase portfolio returns. For more information on the carry trade, read the linked article.

4. Technically Overbought: As we discussed repeatedly in June and July, the markets were technically overbought and extended from long-term means. Only an appropriate catalyst was needed for a 5-10% market decline.

The correction, however, was unsurprising and something we repeatedly discussed in June and July.

“Reversals of overbought conditions tend to be shallow in a momentum-driven bullish market. These corrections often find support at the 20 and 50-day moving averages (DMA), but the 100 and 200-DMAs are not outside regular corrective periods.

If you remember, in March, we discussed the potential for a 5 to 10% correction due to many of the same concerns noted above. That correction of 5.5% came in April. We are again at a juncture where a 5-10% is likely. The only issue is it could come anytime between now and October.“ – June 22nd

With that 5-10% correction complete, many investors wonder what caused the rapid reversal last week, given that many factors leading up to the market decline remain.

The Reversal: Investor Buying and Share Repurchases

Despite the sharp decline, the market found support as a wave of investor buying and corporate share repurchases helped stem the losses. Here’s how these factors played out:

1. Investor Buying at Key Support Levels: The S&P 500 found support at the 5153 level, which coincides with the lows of the trading range back in April. Buyers stepped in as the market declined 3% during the “Yen Carry” blowup. From there, buying volume began to accelerate.

2. The chart shows that the S&P 500’s bounce off that support was pivotal. With the markets oversold, the reversal of the decline began. As the market low held, it provided the confidence needed for investors to step back into the market.

3. Corporate Share Repurchases: August also saw a significant increase in corporate share buybacks. With stock prices down, many companies took the opportunity to repurchase shares at a lower cost as the “blackout window” reopened, providing additional support to the market. This corporate activity helped absorb some of the selling pressure and stabilized the market.

As we noted last week, we expected the “Mega-cap” stocks to lead the way higher, and we were not disappointed.

Notably, the market leadership, primarily growth stocks, has regained its footing, suggesting that the recent correction is complete and the bull market has resumed.

However, the recent rally has been very sharp and likely needs a breather before further gains can be made.

Technical Levels to Watch

With the market rebounding, it’s crucial to identify the key technical levels that will determine the following potential entry points to increase equity exposures.

1. Resistance at 5673: The first significant resistance level for the S&P 500 is at 5673, which coincides with the recent all-time highs. If the index can break above this level, it would signal a continuation of the recovery and potentially set the stage for a continuation of the rally. However, if the S&P 500 fails to break through this resistance, it could lead to another market decline to retest current support at the 50-DMA.

2. Support at 5330: On the downside, the 5,330 level remains a critical support zone. That number will continue to adjust higher as that is the 100-DMA. However, if that level fails to hold, there is only minor support at the recent lows before a test of the 200-DMA near 5100. Investors should watch the 100-DMA level closely, as a failure to hold here could signal that the market’s recent bounce was just a temporary relief rally.

While a pullback to support levels to increase equity exposure is likely, are there more substantial risks that investors should be aware of?

The Risks Ahead: November Election and Economic Uncertainty

While the market’s recent recovery is encouraging, several risks could derail the rally over the next few months.

1. November Election: The upcoming election adds another layer of uncertainty to the market. Historically, elections tend to increase volatility as investors react to potential policy changes. We could see sharp moves in sectors like healthcare, energy, and technology depending on the outcome. That uncertainty may lead to increased selling pressure, particularly if the election results are contested or lead to a significant shift in policy.

2. Economic Data: The market will remain highly sensitive to economic data releases. Any signs of further economic weakness could reignite fears of a recession, leading to another wave of selling. In particular, investors will watch for updates on inflation, employment, and consumer spending. If weakening economic data impairs earnings estimates, the risk of market revaluation increases.

3. Federal Reserve Policy: The Fed’s decisions will also shape market sentiment. If the Fed is willing to start cutting rates, the market may temporarily see that optimistically. However, historically, a Fed rate-cutting cycle has not benefited higher asset prices, as rate cuts tend to coincide with slower economic growth.

Risk management is always crucial when managing portfolios, as “no one” knows with certainty what markets will do over the next week, much less over the next month or quarter.

Conclusion: Is the Decline Over?

The market decline in August and subsequent reversal highlight the market’s volatility and the importance of critical technical levels. While the bounce off minor support and the surge in corporate buybacks suggest that the worst may be over, significant risks remain.

With the polls now very tight between Trump and Harris, the potential for managers to “de-risk” portfolios remains elevated, given the uncertainty of outcomes. Furthermore, that potential “de-risking” process will coincide with the October blackout period for share repurchases, removing another supportive buyer of equities. That combination could set up a likely “flash point” for volatility before the November election.

We remain underweight equities and overweight cash in the near term with our core Treasury bond holdings intact to hedge against a sharp increase in volatility. That positioning is unlikely to change over the next two months, and we are willing to sacrifice some performance in exchange for control over risk.

While we have discussed these simplistic rules over the last several weeks, we continue to reiterate the need to rebalance risk if you have an allocation to equities.

1. Tighten up stop-loss levels to current support levels for each position.

2. Hedge portfolios against significant market declines.

3. Take profits in positions that have been big winners

4. Sell laggards and losers

5. Raise cash and rebalance portfolios to target weightings.

If a further correction occurs, the preparation allows you to survive the impact. Protecting capital will mean less time spent getting back to breakeven afterward. Alternatively, it is relatively easy to reallocate funds to equity risk if the market reverses and resumes its bullish trend.

Investing during periods of market uncertainty can be difficult. However, you can take steps to ensure that increased volatility is survivable.

An unexpected violent storm, which some EU media outlets described as a ‘tornado,’ sank the British-flagged superyacht “Bayesian” early Monday morning off the coast of Sicily. Local authorities confirmed one dead, and six people are missing, including British tech entrepreneur Mike Lynch and Morgan Stanley International chairman Jonathan Bloomer. Bayesian was carrying 22 people during what appears to be a ‘weather-related’ incident.

Superyacht BAYESIAN sank off Palermo after a tornado hit early this morning. 15 rescued, 6 missing, including tech tycoon Mike Lynch.

MarineTraffic data shows its last signal received via AIS at 2:06 UTC before sinking.

Read more on the story: https://t.co/WOL75loP7I pic.twitter.com/vxzVraSrIF

— MarineTraffic (@MarineTraffic) August 19, 2024

Let’s take a step back because the plot thickens here. Just days before the Bayesian sank to the ocean floor, off the coast of Porticello – a small fishing village nestled between Palermo and Cefalu on Sicily’s western shore – Lynch’s co-defendant in the US Autonomy-Hewlett-Packard fraud trial was struck and killed by a car while out for a run near his home in England on Saturday. 

Here’s more from The Independent:

Stephen Chamberlain, Autonomy’s former vice president of finance, who worked alongside chief executive Mr Lynch, was killed after being hit by a vehicle while out running on Saturday, his lawyer, Gary Lincenberg said.

…

In a statement, Mr Lincenberg said: “Our dear client and friend Steve Chamberlain was fatally struck by a car on Saturday while out running.

“He was a courageous man with unparalleled integrity. We deeply miss him. Steve fought successfully to clear his good name at trial earlier this year, and his good name now lives on through his wonderful family.”

Chamberlain faced similar fraud and conspiracy charges as his former boss, Lynch, for allegedly conspiring to inflate their company Autonomy before it was sold to Hewlett-Packard for $11 billion in 2011. 

On June 6, a federal court jury in San Francisco found Lynch and Chamberlain not guilty following an 11-week criminal trial. 

According to the Pew Research Center analysis, only 0.4% of federal criminal cases in 2022 ended in acquittal, which means the two executives were extremely lucky with the positive outcome. 

However, not so much in the last several days, with Chamberlain killed by a vehicle while on a jog and Lynch missing after a tornado hit the superyacht he was on. 

Also on the vessel was Bloomer from Morgan Stanley, who has been confirmed missing by Italian authorities. 

Here’s more from Bloomberg about Bloomer… 

Bloomer, 70, has worked in the finance industry for five decades. He’s been chairman of Morgan Stanley’s European business since 2018, and was named to lead British insurer Hiscox Ltd.’s board last year. He is a friend of Lynch and was a witness for the defense in the long-running legal battle with Hewlett Packard.

The real mystery is how Lynch and Chamberlain went from being the luckiest men—acquitted in a federal criminal fraud case—to the unlikeliest in separate, unexpected incidents just days apart.