Authored by Jill McLaughlin via The Epoch Times,

Californians might have to choose between higher gas prices or scaling back its climate agenda, state regulators told legislators last week at a special state Senate hearing on a proposed oil industry windfall profits penalty.

Gov. Gavin Newsom called the special session of the Legislature Feb. 22 to consider imposing penalties on oil companies to restrict them from making excessive profits in the state.

During the hearing, state regulators were not able to explain why gas prices spiked last year, which caused some residents to pay up to $8 a gallon, but said the state’s environmental laws contributed to the high prices.

“It may be California’s aggressive take on environmental protection and other things,” said Nicolas Maduros, director of the California Department of Tax and Fee Administration.

“You all have to make some tough decisions about what direction the state goes and there are trade-offs.”

State Sen. Steven Bradford, a Democrat from Gardena and chair of the Committee on Energy, Utilities, and Communications, said many factors were to blame.

“There’s been a lot of finger-pointing among stakeholders,” he said.

“Some say its standards for refineries, or raising prices. Others say it’s the gas retailers. Others are blaming the state’s taxes and environmental policies. I believe that it’s all of the above.”

The committee must be strong advocates for every Californian who still needs reliable and affordable gasoline and ensure greater transparency in the marketplace, he said.

“Any proposal must shine more light on the process, bring relief at the pump, and, most importantly, not make the situation worse,” Bradford said.

To stop gas prices from spiking, the governor wants to set a maximum margin of profit for refiners and impose a price-gouging penalty if it’s exceeded.

The penalty would encourage refiners to produce more gasoline instead, to boost profits, according to the California Energy Commission.

California’s supply of gasoline dropped dramatically last year as some refiners were shut down for maintenance, adding to the price spike. The state’s gas production in 2022 was reduced by 88,000 barrels per day—equal to a midsized refinery’s output—compared to the prior year, according to David Hackett of Stillwater Associates, a transportation fuels consulting firm in Irvine.

The war in the Ukraine and COVID-19 shutdowns also contributed to higher prices, Hackett said.

The Western States Petroleum Association’s president Catherine Reheis-Boyd said the penalty would have severe consequences on market prices.

“The bill is unnecessary,” she said.

“It puts further strain on the fuel markets. The amount of gasoline may be reduced.”

It would also cut union jobs and tax revenue for schools and local government, she said.

The California Chamber of Commerce also opposed the bill.

“We are particularly concerned about the precedent that the windfall profits penalty will set for the larger business community,” Chamber Chair Gregory Bielli said.

“There’s a genuine concern that this basically establishes a playbook that the Legislature will use to determine what the reasonable profit to do business in California.”

During the hearing, it became clear that state senators on both sides of the aisle were concerned about how such a penalty could ultimately impact lower-income residents.

“As outraged as we all are about what’s happened to the lowest in our respective districts, what the hell are the unintended consequences?” asked state Sen. Bill Dodd, a Democrat from Napa.

“They could hurt those very people to a greater extent.”

Other market conditions in the state could also have contributed to last year’s price spikes, according to Severin Borenstein, an economics professor and energy expert at the University of California–Berkeley.

Often referred to as a “gasoline island,” California is cut off from oil supplies east of the Rockies because of a lack of pipelines. Most of the oil used by residents is produced by five companies operating 11 in-state refineries.

This creates a less-competitive market, and fewer gas stations, he said. Some cities also banned construction of new gas stations last year.

“The problem is real scarcity,” Borenstein said.

“The penalty or tax can allow the government to claw back some profits from high prices, but it can also disrupt the market. And for that reason, I think we have to be cautious in our use of it.”

Some legislators also said they were also concerned about creating higher prices with the penalty.

Other attempts to curb oil industry profits in the past have failed.

In 1980, President Jimmy Carter imposed a windfall profits tax after Congress lifted price controls on domestically produced oil. The tax was economically devastating and increased dependency on foreign oil before it was repealed in 1988.

Alaska also tried implementing a similar tax in 2006 that brought in billions for the state but oil drilling and investment decreased.

“The Governor’s faulty policy experiment, while vague in details, has been tried before and failed,” said Assemblyman Vine Fong, a Republican from the Central Valley. “It didn’t work then, and it won’t work now. Governor Newsom’s flawed proposal will actually lead to higher prices and energy supply shortages.”

…

The price per gallon for gas in California continued to tick up this week, reaching an average of $4.76 Feb. 26, according to the Automobile Club of Southern California. That was about $1.39 more than the national average and about 3 cents more than last week.

Read more here…

The Securities and Exchange Commission’s crackdown on SPACs, top investment banks scaling back activity in the space, and mounting macroeconomic headwinds have led to a continued freeze and the start of a possible de-SPAC bankruptcy wave. 

The latest figures about the SPAC market collapse come from a recent note via Water Tower Research’s chief analyst Robert Sassoon, who told clients, “depleted SPAC trust funds, along with reduced availability of PIPE financing, have left many de-SPACs underfunded.” 

“Coincident with prevailing economic headwinds, many de-SPACs are facing financial challenges that have forced some into bankruptcy,” Sassoon wrote. He continued:

With about one-fifth of companies (55) de-SPACed since the start of 2021 currently trading at distressed levels below $1, there are strong expectations that there will be an addition to this total in the coming months. We would point out that the number of de-SPACs trading below $1 is larger in Figure 7, which includes five companies that have executed reverse stock splits that we have adjusted back to a pre-split basis in order to provide a more accurate picture of performance.

Financial lifelines are running out for companies that went public via a SPAC. Bloomberg listed eight companies that went public via mergers with “blank-check” companies only to file for bankruptcy less than a year after debuting on capital markets. 

“The value destruction has been spectacular,” Dan Zwirn, co-founder of Arena Investors LP, a debt-focused investment firm, said. 

What Zwirn sees next for the de-SPAC universe is a possible bankruptcy wave. He said some of these companies would be wound down or sold for pennies on the dollar. Bloomberg data shows at least 12 that completed SPAC mergers have agreed to buyouts for much less than they were worth. 

“A lot of the problems with the de-SPAC’d companies is that they’re relatively early-stage, capital-intensive companies that are more risky in general,” Usha Rodrigues, a law professor at the University of Georgia and one of the leading academic experts on SPACs, said. 

With 20% of de-SPAC’d companies trading sub-dollar, delisting from major exchanges is set to soar in the coming months, making it even harder for companies to raise money. 

The good news is, as Sassoon pointed out: “The de-SPAC universe is being compressed by a raft of buyout and go-private transactions, which have been gathering momentum since last year as acquirers identify gems in the de-SPAC value wreckage.” 

Still, a de-SPAC bankruptcy wave lurks as funding pipelines freeze. 

Authored by Steve Watson via Summit News,

Senator Ted Cruz blasted Anthony Fauci in a fresh interview Monday as new documents came to light highlighting yet another U.S. government agency’s belief that the coronavirus pandemic was caused by a lab leak.

“Dr. Fauci’s behavior on this has been abominable,” Cruz said in an appearance on Fox Business.

“I think he has done more damage than any bureaucrat in the history of the United States,” Cruz continued, adding “He has championed policies that have hurt millions of Americans, hurt millions of school kids in particular.”

“And he has also done more to damage the credibility of the United States government when it comes to medical and scientific advice because Dr. Fauci allowed his advice to be politicized,” Cruz further urged.

“We know Dr. Fauci in writing asked Mark Zuckerberg at Facebook to suppress references to the origin of COVID being from a Chinese government lab,” the Senator continued, adding he did so because “there’s a very real possibility that Fauci himself bears culpability.”

“I believe Dr. Fauci has lied to Congress, which is a felony, when he has stated that the federal government did not fund gain of function research in in the Wuhan Institute of Virology,” Cruz asserted.

“Since then, the National Institutes for Health in writing has contradicted that. And if the Biden Justice Department were enforcing the law, they ought to be investigating Dr. Fauci for lying to Congress, which is a federal crime. To date, the Biden DOJ has been too political to hold Dr. Fauci accountable,” Cruz charged.

Watch:

Dr. Fauci’s behavior has been abominable!

He’s championed policies that have hurt millions of Americans and he has destroyed the government’s credibility to give medical and scientific advice. pic.twitter.com/68fLJlzr1f

— Ted Cruz (@tedcruz) February 28, 2023

It emerged earlier this month that Fauci is now profiting handsomely from  speaking engagements months after leaving his position in the Biden administration, to the tune of up to $100,000 per appearance.

Follow The Science

Starting at 50k an hour

— Jordan Schachtel (@JordanSchachtel) February 5, 2023

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here.

It was only in late January that Ukraine’s military General Staff emphasized that any potential forces withdrawal from the strategic city of Bakhmut in the east was “out of the question” as the situation was said to be under control. 

But a month later, the narrative has dramatically shifted amid reports that the Russians are shelling Ukrainian positions around the clock, and as complaints from Ukrainian front lines oersist of not enough ammo supplies to keep pace with the Russians. President Zelensky in fresh remarks on the situation has admitted that besieged Bakhut is running out of options. 

Within the past days he also said for the first time that he won’t seek to hold the city “at any cost” – strongly suggesting Ukraine has suffered a staggering loss in manpower.

He said Tuesday: 

“The situation is getting more and more difficult“…

“The enemy is gradually destroying everything which can be used to protect our positions,” Zelenskiy said in his address, stopping short of announcing a pullout.

There have been emerging repots of gun battles deep within the city itself, which is a new development, also as Russian forces have it nearly fully encircled, as the NY Times also confirms: 

The commander of Ukraine’s ground forces, Col. Gen. Oleksandr Syrsky, on Tuesday described the situation around the city as “extremely tense” in a post on the Telegram messaging app.

And Reuters too for the first time presented a headline Tuesday which put the situation for the Ukrainian side in stark terms: “Russians tighten noose on Ukraine’s Bakhmut,” the news service reported.

On Monday Zelensky had described that “The enemy is constantly destroying everything that can be used to protect our positions for fortification and defense. Our soldiers defending the area around Bakhmut are true heroes.” Some soldiers cited in local reports are vowing to fight till the end, as military reports get more and more desperate.

🎥Ukrainian forces supporting encircled Ukrainian soldier in the north-eastern outskirts of #Bakhmut. #UkraineRussiaWar pic.twitter.com/mq3d3qVJ9C

— MilitaryLand.net (@Militarylandnet) February 28, 2023

Meanwhile the Biden administration is still resisting demands to give Kiev F-16 fighter jets… “for now” that is. John Kirby had described in a Monday interview that “At no time have the Russians ever achieved air superiority over Ukraine” – though by many military observer accounts, this is a highly dubious statement. 

Russian forces are fast closing in on months-long efforts to have the sizeable city completely surrounded and cut off…

Bakhmut Frontline 28/02/2023
North
Heavy fighting rages north of Bakhmut assaults in the directions of Bohdanivka, Orikhovo-Vasylivka and Zaliznyans’ke also assaults south from the northern road.
East:
Heavy fighting towards the Bakhmutovka river in the residential areas. pic.twitter.com/ReaqbHzv44

— WarMonitor🇺🇦 (@WarMonitor3) February 28, 2023

He emphasized that “we do want Ukraine to win” – speaking of the United States, however, he qualified that Ukraine’s leaders will determine what ‘winning’ looks like, which could be seen as a sign of creeping openness to negotiated settlement. 

Authored by Jeffrey Tucker via The Epoch Times,

Twitter watchers were stunned yesterday when Elon Musk canned another 10 percent of the Twitter workforce. He has now fired 3 of 4 employees that worked there before he took over. Imagine a thriving business tossing out 75 percent of a staff of 7,500! That alone should indicate that something had gone very wrong in the hiring process.

Is the site and service suffering? Not so far as users can tell. It seems like it works better than ever. The manipulative throttles are largely gone, though some still exist by deference to European rules. As a service overall, it has never been better. And there are new features being continually rolled out.

One feature that fascinates me is “Twitter Spaces.” Truly you can spend most any evening of the week listening and engaging with people based on topics in what is a very agile radio call-in show that works in real time. It’s startling to encounter simply because it’s self-policing: complete free speech but with a culture of civility and intelligence.

It’s truly addictive. To be sure, ad revenue is still behind and the idea of paid check marks and benefits for upgrades didn’t plug all the holes in the boat. But one can sense that the platform is inching its way toward profitability. There has been more in the way of development since Elon took over than in the three years prior.

Crucial to getting there finally is to cut ridiculous labor costs. That’s what this is about.

Among the terminations was the high-profile executive Esther Crawford, who famously slept on the floor as she worked after the first round of cuts.

How do we know she slept on the floor? Because she Tweeted out the picture. “Hey, get a picture of me sleeping on the floor and I’ll tweet it” ~ that’s a pretty weird way to go about gaining job security.

When your team is pushing round the clock to make deadlines sometimes you #SleepWhereYouWork https://t.co/UBGKYPilbD

— Esther Crawford ✨ (@esthercrawford) November 2, 2022

A much better way would be to prove your value to the firm. Along with 200 others, she apparently hasn’t done this, at least not in a way that justifies what are surely very high salaries. I don’t know for sure but one suspects that she isn’t unlike many people in her position, better at performing work than actually doing it.

Everyone knows the type. It might be typical of most workers in these sectors. They specialize in appearances rather than value creation. They rely mainly on their resumes and educational credentials and extract huge salaries with an implicit blackmail to their bosses that unless they earn top dollar, they’ll go to the competition.

It worked for many years. But the game seems to be up. A whole generation of the haut bourgeois professional class is being introduced to the cold waters of the capitalistic work ethic.

They never learned about this in school and the workplace heretofore hasn’t taught them.

Elon isn’t a ruthless man. Nor is he cruel. He’s a person who’s dealing with economic realities. Twitter was blown up wildly out of proportion with labor costs. So too with many of these tech companies that thrived so much in lockdowns. Even before the lockdowns, thanks to zero-interest rate policies by the Fed, it seemed to many in these sectors that there was truly no limit to the boom. They made the decision to hire their friends and friends of friends, seemingly without limit.

It was this period in which we saw the invention of a slew of management theories that we had never seen in the history of capitalism. We were told that the point of a company isn’t to sell stuff, do excellent work, and serve its stockholders. The point was to bolster highly politicized ideals that went under fancy-sounding acronyms like ESG and DEI.

It was also in this period that every job came with an endless slew of benefits, like unlimited time off for mental health. The idea of a Human Resources department with vast powers and budget was also invented, as a kind of courtroom of the workplace to which everyone could carry their grievances.

Workers in these low-show jobs began to tout their devotion to “work/life balance.” In case you don’t know, that means that the person doesn’t like work.

Then, there was the claim that young people aren’t seeking high salaries as such but rather experiences, and so employers had better comply and give plenty of both.

When the lockdowns came, for them it was just more of the same. Instead of goofing off at work—always preserving that balance!—they could goof off at home. That went on for two years.

To be sure, the life of Riley didn’t actually lead to happiness. We saw a slew of books appearing about the misery of corporate life, about bad bosses, and the lawsuits against anyone and everyone began to pile up. The corporate workplace became a cesspool of discontent and anger.

Why might this be? Because there’s something about knowing you’re useless that eats away at the human spirit. Laziness and subterfuge are actually not good for us, mentally or morally. Idle hands do the devil’s work, as they say. Indeed, it’s true for vast numbers of the overpaid millions who lost self-respect, skills, and even basic regard for others during this period.

Now, these companies inhabit a new economic environment. The Fed started working to cool inflation. But there was and is a problem. It isn’t as if they could take rates from 5 percent to 10 percent and thereby soak up some of the trillions in excess money floating around. They had to start at near-0 percent and get rates ahead of the pace at which the dollar was depreciating.

This has required engaging in the fastest rate of change in the history of modern interest-rate policy. And we are still not where we need to be with the terminal rate. But consider what this change did to the trajectory of capital in a macroeconomic sense. It drained it from the bloated capital goods industries promising profits in the very long term and rekindled interest in actual profits on the left side of the yield curve.

Everyone in the tech sector is today looking for the way forward on cost-cutting.

The labor sector is nowhere near purged enough. Elon’s strategy of firing 3 in 4 overpaid and spoiled people on the payroll has the attention of the world.

The costs of the lockdown period are truly astronomical in terms of lost productivity and talent. They set us far back as a civilization. But something similar can be said of zero-interest rate policies that began in 2008. They massively distorted production structures and turned an entire generation of otherwise intelligent workers into lazy drones for whom kvetching became their only skill.

This isn’t easily fixed. It will be many years before the work ethic comes back as a norm, if it ever does.

Final advice for workers in these sectors: Don’t expect that posting performative pictures of dedication on social media platforms is going to give you job security. The best job security now and in the future might be via the old-fashioned way: actual hard work that creates value for the firm and its owners and customers.

Read more here…

Amazon employees will soon be able to pledge company shares when purchasing a home, under a new deal with digital lender Better.com, according to WSJ. 

Better announced a new program for Amazon employees called “Equity Locker,” allowing them to use stock as collateral for a down payment without selling. Previously, Amazon employees had to sell their equity to purchase a home. 

“At Better, our mission is to make homeownership cheaper, faster and easier for all Americans.

“Today, we are very excited to announce that we have created Equity Unlocker to help Amazon employees unlock their equity, their homes and their futures,” Better CEO and founder Vishal Garg said in a statement. 

Equity Locker is open to current and former Amazon employees in Florida, New York, and Washington state.

Garg said the homeownership process is “opaque and stressful.” Homeownership is challenging for many people with student debt, maxed-out credit cards, and limited savings. He said many companies provide their employees with equity over cash, adding to this problem.

“The status quo is broken.

 “Even though equity is a valuable asset, it is considered ineligible by most banks and financial institutions when calculating the necessary down payment on a home,” Garg said.

Better said, Equity Unlocker is non-mark-to-market and non-recourse, meaning the loan terms aren’t impacted by stock market volatility.

To account for the risk of the Amazon stock price falling, Better is going to charge between 25 and 250 basis points over the market rate for mortgages, depending on how a person’s down payment is structured. 

Nick Taylor, head of real estate at Better, said: 

“What we then do is we look at that pledge and we value the equity at 50% of the current share price. We look at the date that an offer is made on the home and we calculate what the share price is for Amazon that day.” 

… and what does this remind us of? Well, the return of “creative financing.” 

Recall high-net-worth individuals leveraging their stocks for personal loans when interest rates were at the zero lower bound. And in some cases, that was a bad idea. 

Take, for example, John Foley, the co-founder and former CEO of Peloton, who pledged his stock as collateral for personal loans during the Covid stock mania. As soon as the Federal Reserve lifted rates last year, growth stocks crashed, and Foley was slapped with repeated margin calls by Goldman Sachs. 

Lenders accepting stock as collateral for purchasing a home isn’t exactly what the Fed wants to see while trying to cool the housing market. 

Authored by Steve Watson via Summit News,

Senator Rand Paul has demanded that the Biden Administration declassify documents purporting to show that The Energy Department concluded that the likely cause of the coronavirus pandemic was a lab leak in Wuhan.

“Classified documents leaked (they should be declassified!) showing scientists at DOE believe COVID leaked from Wuhan Lab,” Paul, who is now the ranking member of Senate Homeland Security Committee, tweeted along with a link to the Wall Street Journal story on the documents.

Classified documents leaked (they should be declassified!) showing scientists at DOE believe COVID leaked from Wuhan Lab https://t.co/glETIVPe5z

— Rand Paul (@RandPaul) February 27, 2023

The revelation came in an update to a 2021 document by Director of National Intelligence Avril Haines’s office.

The Energy Department conclusion adds to the State Department, the National Intelligence Council, and the FBI’s apparent agreement that the bio lab in Wuhan was the likeliest source of the outbreak.

Senator Josh Hawley also said Sunday that he intends to introduce legislation to declassify intelligence findings about the likely origin of the outbreak.

“The American people deserve the full truth about #COVID origins. No more whitewash. I will again introduce legislation to make the U.S. government’s intelligence reports on COVID more open to the public,” Hawley tweeted.  

The American people deserve the full truth about #covid origins. No more whitewash. I will again introduce legislation to make the US government’s intelligence reports on covid open to the people https://t.co/6rKqPzPKO2

— Josh Hawley (@HawleyMO) February 26, 2023

Other Republicans have also called for a renewed focus on the origins of the pandemic.

Re. China’s lab leak, being proven right doesn’t matter.

What matters is holding the Chinese Communist Party accountable so this doesn’t happen again.

— Tom Cotton (@TomCottonAR) February 26, 2023

The Senate already passed my bill with @HawleyMO to make every bit of evidence we know about the COVID lab leak declassified for the American people to see the facts without corporate or government censors. President Biden needs to declassify everything we know today.

— Senator Mike Braun (@SenatorBraun) February 27, 2023

Big Tech censored the truth.

Legacy media denied the truth.

Government officials hid the truth.

Americans deserve accountability. pic.twitter.com/uKb4UGithk

— Rep. Andrew Clyde (@Rep_Clyde) February 26, 2023

We were right.

🦠COVID origins
🔒lockdowns
😷mask effectiveness
💉vaccine mandates.

Accountability is coming… pic.twitter.com/sUjwlmm7NM

— Congressman Nick Langworthy (@RepLangworthy) February 27, 2023

The Administration is finally admitting what Republicans said 2 years ago👇 Chinese Communist Party’s Wuhan Lab is likely COVID source. Fauci called theory a “shiny object” & the scientist who funneled our tax dollars to lab called it a “conspiracy theory”https://t.co/R1EI2pOgA6

— Office of Rep. Nicole Malliotakis (@RepMalliotakis) February 27, 2023

Meanwhile, White House Press Secretary Karine Jean-Pierre on Monday refused to say if the Biden administration will release an “unclassified version” of the Chinese lab leak assessment:

NSC spokesman John Kirby also refused to give direct answers:

JACQUI TIME: “On the Dept of Energy’s findings the lab leak mostly likely caused the pandemic, how should Americans understand China’s response…swatting down this information?”

Kirby insists COVID origins is “a priority” for Biden, but there’s “not a consensus” in the U.S. yet pic.twitter.com/dVnXBaBOvw

— Curtis Houck (@CurtisHouck) February 27, 2023

AP’s @ChrisMegerian: What caused the DOE assessment and was the President himself briefed on that?

John Kirby: Again, I’m not going to confirm the press reporting.” pic.twitter.com/Ve6fYYCJxw

— Curtis Houck (@CurtisHouck) February 27, 2023

After Philly’s Fed business outlook survey collapsed, the string of regional ‘soft data’ has continued to weaken.

Chicago’s PMI disappointed, printing 43.6 (weakest since Nov), down from 44.3, and below expectations of a rebound to 45.5 with employment falling at a faster rate, new orders contracting, production’s slowdown accelerating, and prices still rising.

This is the 6th straight month of contraction (sub-50) for the Chicago PMI.

The Richmond Fed Manufacturing survey notably missed expectations, tumbling from -11 to -16 (vs expectations of a rebound to -5) with shipments tumbling, new orders deep in contraction, number of employees and wages weakened, and capacity utilization weakening.

Additionally prices paid were flat while prices received slowed, signaling margin pressures and/or an inability pass on costs to consumers. We do note that Richmond Fed Services did pick up in Feb but remains in contraction for the 12th straight month.

Finally, The Dallas Fed Services Sector outlook improved modestly but remains in contraction for a 10th straight month.

Perceptions of broader business conditions continued to worsen in January, though pessimism waned. The general business activity index posted an eighth consecutive negative reading but moved up six points to -15.0. The company outlook index also improved from -11.0 to -8.3, while the outlook uncertainty index remained elevated at 20.0, above its series average of 13.4.

Price and wage pressures remained elevated, though there was some moderation in input price growth.

Respondents had some interesting things to say…

• “The constant speculation of a recession is becoming a psychologically self-fulfilling prophecy.”

• “The labor market is still very tight.”

• “With the rising interest rates, cost of goods and inflation, our business has experienced a fall in revenue.”

• “Interest rates and inflation are killing us.”

• “The feckless leadership from the White House, the damaging energy policies and the electrical vehicle push are causing unneeded chaos in all parts of the economy. What will happen to the automobile manufacturers that have totally remade themselves if electrical vehicles are proven not to be the answer? And what about all the battery-making facilities that won’t be needed?”

• “[We are] not really seeing any business activity pickup.”

• “All our costs have increased significantly. Yet, selling prices have dropped significantly.”

• “Retail activity is slowing at an accelerated pace.”

Mission Accomplished, Mr.Powell?

By Peter Tchir, head of strategy at Academy Securities

I was created or “born” this morning! I will expire or “die” at 4:00pm ET today. My lifespan isn’t quite as long as your mayfly (and they’ve been following this schedule for 100 million years), so I can’t complain. As opposed to the mayfly, it’s unlikely that procreation is in my future (but one can dream), and I still have a lot to do in my 8 hours!

I was lucky to be born as the February 27, 401 SPY Call.

It is too early for trading to begin, but S&P futures are higher and SPY is trading around 398.5 in the pre-market, up from Friday’s close of 396.4. Additionally, I am hearing throughout the ward that Mondays are typically good for calls! I’m excited because I should be very popular today!

Maybe that is why one of my siblings (the SPY 390 Put) looks so despondent. But, I think I’d prefer spending the time ahead of the open (when they unleash us on the world) with 390P (I’ll use our code names, since saying the expiration date over and over is redundant, and quite frankly, a bit depressing). Anyways, let’s move on.

BTW, I’m already annoyed by 400C. Literally it is out there strutting around knowing that it will probably be the most popular one of us right out of the gates. It’s almost embarrassing, at least to me, that there is literally an entourage of 0DTE hanging around 400C sharing in its spotlight!

The waiting for the open is getting a bit tedious!

Also, I’ve got to admit, I’m getting a little freaked out by some of the noises coming from the next room. We don’t know for sure, but supposedly there are some things called “weekly” options being born over there! I’m more scared than jealous because who wants to live a week in obscurity, which most of them will do, when you can have it all in one glorious day! I’m really getting excited for my potential today!

There are rumblings that something called a TSLA March 3rd 200 Call is a real bully! Pushing and shoving the rest of the weekly’s out of the way along with their little gang of 200 Puts/210 Calls (which apparently hang out in every new generation). The only group over there that even seems willing to stand up to the TSLA gang, at least consistently, is the VIX Call group. I’m not even sure what a VIX Call is or does (it isn’t a stock ticker that I know of), but supposedly it could provide some stiff competition for me – though mostly on down days and today looks like an up day!

Ding, ding, ding!

There is the bell, we are off and running!

Hmmm, a disappointing start for me. Seeing a bunch of puts crop up in the “most active” section to start the day. 390P is actually the second most active contract out there. Wow, good thing I was friendly before the open! It is also very early and I am seeing things like XLE and even HYG high on the list. Whatever you think about the high yield bond market, HYG is NOT likely to stay that active (especially since it contains longer-dated options) and the 0DTE family will rule the day!

Take that!

I’m up to the number 10 most traded! Yeehaw, I’m POPULAR!

Yeah, yeah, “Mr. Fancy Pants” 400C is number one, but what can I do about that! You know what seems crazy is that option, which started this morning around 50 cents, is already worth $1.3! What a return! And open interest is only 13,500 contracts compared to a traded volume of 77,000. On Bloomberg you can find vega, delta, and other “Greeks” for this option, which is cute, but largely irrelevant! Theta, or “time decay” is 0, since we expire today! Kind of funny to see N.A. beside such an important option metric, but we are more like betting chits than options!

Ugh, don’t look now, but looks like someone just bought a lot of 0DTE puts!

The 390P is now trading at 1 cent, down from 23 cents! But, let’s be honest, who is buying or selling that here? Yet it is now the 2nd most active contract.

Are the put buyers going to drag down the market or is an upside gamma squeeze still in the cards?

It’s 11am ET, right around the time everyone gets excited about how the market will behave when “Europe goes home”.
The top 8 options traded, by volume, are all SPY Puts and Calls. I’m sitting at number 4, and anything could happen. The “leaderboard” is 399P, 400P, 400C (it would be better for markets if this was leading, but I really don’t like this 0DTE for some reason – must have been the pre-market arrogance), 401C (yours truly!), 402C, 398P, 403C, and 397P.

Yawn.

Things have stagnated (bouncing back and forth) so let’s do a “family portrait”!

My nemesis is at the top of the leader board, but I’m 5th and am convinced that I can make a run for it. If anything, I’d watch that sneaky little 401C because something tells me that one is a “gamer” and could make a strong charge at the end. Also, poor little 390P has all but disappeared.

Personally, I’m a little miffed that AMC, QQQ, and a couple of “tomorrow options” are in there! Seriously, “tomorrow” options, are they just showing off? Ooh, look at me, you are gone today, but I’ll still be here tomorrow and might even move overnight! Ugh, such jerks.

Rumor Has It

Apparently, there are a lot of questions about us and our impact.

• Did it make the spike starting at 9:45am ET bigger than it should have been?

• Did we help drag the market down after that spike (whether or not the spike had anything to do with us)?

• Are we leading the market? Are we following the market? Are we coinciding with it?

• Do we drive stock market volumes?

The answer to any and all of these questions seems to be yes, no, or maybe, depending on who you talk to (except for the volume question which seems to be an unequivocal yes). Maybe if we stuck around for a few days, we’d have a better sense, but that defeats the purpose!

I’ll let you in on a little secret. There is a club right next door that plays Sweet Dreams on a perma-loop:

Some of them want to use you.

Some of them want to get used by you.

Some of them want to abuse you.

Some of them want to be abused.

Maybe that should be our theme song? Or maybe our “walk on” song! Right as the bell rings and we start our lives, they should play that chorus! If nothing else, it should add some intrigue to our lives!

Fade into the Close?

Just a few minutes ago it looked like the 3pm ET ramp was in play. Now I fade into the close?

Poof I’m Gone

Well, looks like I (and most of my brothers and sisters) expired worthless, as usual.

Have no fear, an entire new clan of 0DTE will be created tomorrow, and we can do it all again

Authored by Simon White, Bloomberg macro strategist,

The US stock market continues to be overvalued on several measures, exposing equities to further downside.

Stock pickers love bear markets. Suddenly many companies on their watch lists begin to look attractive. But despite the protracted equity market downturn, valuations – almost no matter how you slice or dice them – continue to look rich.

It’s true the S&P’s P/E ratio has fallen precipitously over the last two years, but that was from nosebleed levels, and it is now only back to its long-term mean. Valuations cannot be said to be unambiguously cheap at an index level. The Nasdaq’s P/E fell sharply too, but it is only just below its long-term average.

Long-term returns are what that matters to most investors, and on that basis disappointment is likely to await anyone buying stocks. The most popular measure of long-term valuation is the cyclically-adjusted P/E (CAPE). Buying the index when this is historically cheap typically leads to well above-average 10-year returns, and vice-versa.

The CAPE has fallen, but still remains in the top 90% of all its readings. This is the same for other measures of long-term value, such as Tobin’s Q (the ratio between a firm’s market cap and the replacement cost of its assets), and the price-to-sales ratio. Buffet’s famed, favorite measure – the market cap of US equities versus GDP – also remains elevated.

Even with the equity market down over 17% from its highs, these measures remain in the top 85-90% of all their readings. This is a market far from screaming “buying opportunity of a lifetime”.

As a stock picker, you are less interested in the index averages, which can be overly influenced by the valuations of a few mega-cap stocks. As long as there are plenty of lower-valued stocks to choose from you should be happy. But that has distinctly failed to transpire so far in this bear market.

If it had, we would have seen a pronounced shift in the distribution of the P/Es of S&P500 stocks. But it is little changed to that seen at the 2022 peak. This stands in stark contrast to the 2009 bottom, when there was an unequivocal and significant shift lower in companies’ valuations, leading to a bonanza for stock pickers.

It’s hard to make the case that the stock market has bottomed until we see a broad-based and noteworthy decline in P/E ratios. And stocks are unlikely to cheapen significantly until they adequately price two major risks: inflation (and therefore rates), and earnings.

We can think about how these relate to equity prices by looking at the “Rule of 20”, which states that over the long term, the P/E ratio and the inflation rate should sum to 20. When that sum is over 20, the market is said to be overvalued, and undervalued when it is below 20.

When inflation is high, as it was in the 1970s, nominal earnings rise, so P/Es should adjust lower to take account of this. Today the Rule of 20 implies an S&P 25% lower than its current price.

That implied value is destined to fall further as inflation begins to rise again, as it looks set to do, and also as earnings fall. It bears repeating that earnings are a lagging indicator, and they will only begin to decline after the recession – which continues to look odds on, even as early as the summer – has begun.

This is not supposed to be a hard forecast for the S&P, but when the gap between the rule-implied and the actual index level is as large as it is today, it gives a strong indication of the market’s direction of travel.

Despite risks from inflation and recession, investors are being offered scant margin to hold stocks, with the equity risk premium near the lows it reached in the aftermath of the GFC.

Still, the value sector has had one its best runs for fifteen years, outperforming the hitherto go-go growth sector for most of the last two-and-a-half years.

It should continue to do well, especially due to the generally low duration of value stocks, a sine qua non in an inflationary world. But until there is a re-rating lower in stocks across the board, it will be tougher to build portfolios of cheap, quality companies that have the potential to post strong, long-term returns. Stock pickers should bide their time for cheaper valuations ahead.