One week ago, when previewing the three events that are about to slam US GDP in the tail end of the 3rd and the 3th quarter (including the return of student loan payments, the UAW strike and the government shutdown), Goldman calculated that reduced auto production from a potential UAW strike would reduce quarterly annualized growth by 0.05-0.10% for each week it lasted, if all three companies currently undergoing contract negotiations are impacted. “Those three companies—Ford, GM, and Stellantis—produce almost half of domestically-assembled cars. Auto production would likely fall sharply—we assume to roughly zero—at any company impacted by a strike”, Goldman said in its 30,000 approximation of the impact..

Fast forward to today when Morgan Stanley’s auto strategist, Adam Jonas, takes a closer look at the impact of the UAW strikes, which are now in their 5th day.

According to Jonas, investors have expressed a degree of trepidation over the strike outcome in a recent survey and now that it’s here, the path to resolution does appear to have matched investor fears.

Here is his quick calculation: “the value of N. American light production of the D3 (F, GM, STLA collectively) is approximately $750mm per day (approx. 15k units per day). Applying slightly more than a 30% decremental (yes, mix is that high) implies around $250mm of lost profit per day (assuming 100% of production impacted).”

Extrapolating to a full month of lost output (adjusted for production days) could be worth $7 to $8bn of lost profit for the D3, collectively.

According to Jonas, some of the lost production would be made back as some customers may be tempted to buy an import brand – or Tesla – with lack of availability.

But beyond the 1-time losses, Jonas says he is much more concerned about the potential for 30 to 40% labor inflation over the life of the next 4-year contract and how the domestic auto companies may recalibrate their ROIC and payback math for EV onshoring. The MS strategist thinks the outcome will be greater austerity and focus on the ICE run-off (that, however, would make many more workers redundant as EV require far less mechanical intervention than ICEs).

One must also consider that new car purchases account for roughly 5% of US CPI and soon car companies will have to raise prices (structurally) to compensate for higher labor input cost. Put simply, a 3% increase in new car prices could be worth 15bps to CPI over 4 years.

Finally, some thoughts on the UAW strike from One River CIO Eric Peters:

“The money is there. The cause is righteous. The world is watching, and the UAW is ready to stand up,” declared United Auto Workers boss Shawn Fain to his union members on a Facebook livestream. “This is our defining moment.”

Detroit automaker unionized labor costs, including wages and benefits, are estimated at an average of $66/hour. That compares with $45 at Tesla, which isn’t unionized, and $55 for Asian automakers.

Meeting all of Fain’s initial demands would boost average hourly labor costs to an estimated $136/hour.

Fein claims to be matching the roughly 40% compensation gains automaker CEOs have realized in the past decade. Ford’s CEO made $22mm last year. Stellantis’s $24.8mm. GM’s nearly $29mm.

“Competition is code word for race to the bottom, and I’m not concerned about Elon Musk building more rocket ships so he can fly in outer space and stuff,” Fain told CNBC, defending his demands. “Our concern is working-class people need their share of economic justice in this world.”

The secular trend toward ever rising inequality is turning. In August, UPS settled its labor dispute with the Teamsters 340k drivers who on average now make $170k in wages and benefits. That same month, Yellow failed to come to agreement with the Teamsters and ceased operations after nearly a century of trucking delivery — it awarded ten executives $4.6mm in special retention bonuses, laid off all 30k drivers and went into liquidation.

A secular trend reversal to how society divides its economic spoils is not all that different from revolution. Bitterly fought, treacherous for all involved. And this latest episode promises to be particularly so.

Because in the timeless conflict between capital and labor, it is extremely rare for the imbalance to be so extreme. The wider the gap, the bigger the stakes. And the last time the chasm was so great was at the height of the Roaring 1920s.  

At a moment the US is pushing hard for normalization between Saudi Arabia and Israel, President Joe Biden has finally and much belatedly issued a formal invitation for Prime Minister Benjamin Netanyahu to visit the White House before the end of the year.

This means a White House trip for the Israeli PM will happen nearly a full year after his reelection to office, which has been seen in Tel Aviv as a bit of an insult. 

Biden reportedly issued the invitation on the sidelines of the UN General Assembly in New York on Wednesday.

He told the press, “Today, we’re going to discuss some of the hard issues, that is upholding democratic values that lie at the heart of our partnership, including the checks and balances in our systems and preserving the path to a negotiated two-state solution, and ensuring that Iran never, never acquires a nuclear weapon.”

Netanyahu responded positively in the UN meeting with Biden: “I think that under your leadership, Mr President, we can forge a historic peace between Israel and Saudi Arabia,” he said.

“Such a peace would go a long way first to advance the end of the Arab-Israeli conflict, achieve reconciliation between the Islamic world and the Jewish state and advance a genuine peace between Israel and the Palestinians,” the Israeli leader added.

Typically new Israeli leaders make an official trip to the White House within a mere weeks of being reelected, but Biden’s “snub” is being seen in reaction to the Netanyahu ruling coalition’s ultra-controversial judicial overhaul agenda, which will greatly weaken the independence of Israel’s judiciary. Biden addressed this in the meeting:

President Joe Biden raised “hard issues,” including protecting the “checks and balances” in a democracy, in a Wednesday meeting with Prime Minister Benjamin Netanyahu, pushing the Israeli leader to find a compromise on a judicial overhaul that has set off months of mass protests in Israel and concerns in Washington.

Biden also raised concerns about the far-right Israeli government’s treatment of the Palestinians, urging Netanyahu to take steps to improve conditions in the West Bank at a time of heightened violence in the occupied territory.

As for Saudi-Israeli normalization, in an interview published by Fox this week, Crown Prince Mohammed bin Salman (MbS) said of ties with the Jewish state, “Every day we get closer.”

In exchange for pursuing a peace deal along the lines of the Abraham Accords, Riyadh is demanding Washington’s help in creating a Saudi civilian nuclear program. Importantly, it appears the Netanyahu government is willing to bless this…

“Netanyahu directed top Israeli nuclear and security specialists to cooperate with US negotiators… the clearest sign yet that the Israeli prime minister is willing to allow Saudi Arabia to advance its nuclear ambitions.” https://t.co/PD0BMBSLNT

— Gregg Carlstrom (@glcarlstrom) September 21, 2023

Interestingly, MbS also said in the Fox interview that Saudi Arabia will obtain a nuclear weapon if its number one regional rival Iran does so first. “If they get one, we have to get one,” MbS told Fox’s ‘Special Report’ anchor Bret Baier when asked what the kingdom would do if Iran builds a nuclear weapon.

Of course, that would greatly complicate the question of peace and normalization with Israel, which remains the region’s sole nuclear-armed power, though not officially and on a publicly disclosed level.

Authored by Dave DeCamp via AntiWar.com,

President Biden’s expected new weapons package being announced when Ukrainian President Volodymyr Zelensky visits Washington on Thursday is expected to have more internationally-banned munitions, Reuters reported on Wednesday.

Sources told Reuters that the package will be worth $325 million and is expected to include the second tranche of widely-banned cluster bombs in the form of 155mm artillery shells. The US began providing Ukraine with cluster munitions in July despite their history of killing and maiming civilians.

The cluster munitions the US is providing Ukraine are packed with 72 submunitions, known as bomblets, that are scattered over a large area.

Cluster bombs are so hazardous to civilians because many of the submunitions do not explode on impact, and can be found years or decades later. Due to their indiscriminate nature, cluster bombs are banned by over 100 countries by the Convention on Cluster Munitions, but the US, Ukraine, and Russia are not signatories to the treaty.

A US official also told Reuters that the new weapons package will not include Army Tactical Missile Systems (ATACMS), which can be fired from the HIMARS rocket systems and have a range of up to 190 miles.

ATACMS have been long sought by Ukraine, and recent media reports said they could be soon on their way, but the White House said this week no decision has been made.

Providing ATACMS would mark a significant escalation of US support for Ukraine as they could potentially hit targets inside Russia. When asked earlier this month about Ukraine using ATACMS to target Russian territory, Secretary of State Antony Blinken said targeting decisions are up to Ukraine.

Other weapons expected to be in the new arms package include Avenger short-range air defense systems, HIMARS ammunition, TOW and AT-4 anti-tank weapons, and Javelin anti-tank missiles.

Canada says it is still investigating “credible allegations” linking Indian government agents with the killing of a Sikh separatist leader outside of Vancouver in June. Sikh leader and Canadian citizen Hardeep Singh Nijjar was shot dead in a parking lot by two masked gunmen outside a Sikh temple on June 18.

The accusation which was made public Monday by Canada’s prime minister Justin Trudeau has sent relations with India to their lowest point in history. But India had formally designated Nijjar a terrorist starting in 2020, and while rejecting the accusation it has also said Canada is playing host to terror organizations. 

After a mutual expelling of top diplomats from either country, as of Wednesday India is warning its citizens to exercise caution when traveling in Canada in a new advisory.

India’s External Ministry published the warning which tells citizens and students in Canada that “growing anti-India activities and politically condoned hate-crimes” are one the rise.

The statement also tells Indians to stay away from venues and events where “threats have particularly targeted Indian diplomats and sections of the Indian community who oppose anti-India agenda,” the ministry said.

Canada is simultaneously circulating its own updated advisory which requests that its citizens exercise “high degree of caution” when traveling in India. The message highlights the potential for “terrorist attacks” – in what’s clearly intended as a punitive measure against New Delhi. 

“Exercise a high degree of caution in India due to the threat of terrorist attacks throughout the country,” it states.

Trudeau is meanwhile attempting what looks like damage control amid the escalating diplomatic war. He says it’s not his aim to “provoke” India in fresh statements:

“Canada is not trying to provoke India by suggesting its agents were linked to the murder of a Sikh separatist leader but Ottawa wants New Delhi to address the issue properly,” Reuters quoted him as saying on Tuesday.

“The government of India needs to take this matter with utmost seriousness. We are doing that, we are not looking to provoke or escalate,” he reportedly said. 

Trudeau had raised the issue with PM Modi during the G20 hosted in New Delhi. But it was also his efforts to convince Washington to stand by Canada’s side which also got rebuffed, according to reporting in The Washington Post…

“Some of these allied nations, including the United States, however, declined to join Canada in jointly announcing the findings of the ongoing probe, underscoring the lengths the Biden administration has gone to avoid antagonizing India and court the Asian power as a strategic counterweight to China,” WaPo wrote.

According to more from the Post, the Biden administration was not willing to go all-in on the accusation so as not to risk deepening the US relationship with India:

On Monday, Trudeau did not give specific evidence linking Indian operatives to the shooting but said Canada was looking into the killing with allied nations. The controversy comes at an awkward moment when Western nations, led by the White House, are looking to woo India as a geopolitical and trade partner and have refrained from criticizing Prime Minister Narendra Modi over India’s authoritarian backsliding.

HUGE TURNAROUND AFTER MEGA SNUB? TRUDEAU ON BACKFOOT AFTER ABSURD CLAIM?

Canadian PM Justin Trudeau says ‘ We are not looking to provoke or escalate matters with India.’ #JustinTrudeau #CanadaIndiaRelations #Canada pic.twitter.com/RC4UHcLtHZ

— Jan Ki Baat (@jankibaat1) September 20, 2023

Canada was strongly lobbying other allies as well, particularly among the “Five Eyes”:

In recent months, Canada began pushing its closest allies, the members of the Five Eyes intelligence-sharing network – the United States, Canada, Britain, Australia and New Zealand – to raise Nijjar’s killing with India at the highest levels of government and issue a joint statement condemning the act as contravening international norms, said a Western official who spoke on the condition of anonymity because of diplomatic sensitivities.

But several countries, including the United States, demurred, fearing a diplomatic backlash from the Modi government at a moment when India was due to hold a lavish coming-out party on the international stage, the G-20 Summit in New Delhi, the Western official said. Instead, the alleged assassination was privately raised by several senior officials from the Five Eyes countries in the weeks before the summit, which took place on Sept. 9 and 10.

Trudeau had in his Monday televised announcement before the House of Commons asserted that “Any involvement of a foreign government in the killing of a Canadian citizen on Canadian soil is an unacceptable violation of our sovereignty.” Some pro-Indian commentators and media are questioning whether Nijjar is a Canadian citizen at all.

There remains the possibility the whole row could push India further away from the West when it comes to the Ukraine war, and into closer trade and economic cooperation with Russia and China.

Authored by Catherine Yang via The Epoch Times (emphasis ours),

A judge ruled that Hunter Biden will need to be arraigned in person, denying his request this week to attend his hearing virtually.

Special counsel David Weiss had argued that Hunter Biden should be required to make in-person court appearances, opposing Mr. Biden’s request.

“Hunter Biden does not contend he is injured or indigent,” Mr. Weiss wrote in a response to Mr. Biden’s request.

Mr. Biden has been indicted in federal court on felony gun charges, including two counts that he allegedly made false and deceptive statements when he purchased a gun and submitted a statement that he wasn’t an unlawful user of drugs, and one count related to his possession of the gun while addicted to drugs.

“An in-person hearing is important to promote the public’s confidence that the defendant is being treated consistently with other defendants,” Mr. Weiss wrote.

Hours later, the court sided with Mr. Weiss, denying Mr. Biden’s request to attend through video conference.

United States Magistrate Judge Christopher Burke wrote that he understood Mr. Biden’s arguments that the hearing would likely be short and the travel and logistics a burden, but the event was significant.

“Although initial appearances in criminal matters are often short in duration, our Court has always considered them to be important,” he wrote.

“The hearing is one of the few occasions in a criminal case when a defendant physically appears in our Court, before a judge—in a setting that helps to emphasize the ‘integrity and solemnity of a federal criminal proceeding.'”

Judge Burke pointed out that the matters to be discussed in this arraignment were not discussed in Mr. Biden’s previous arraignment in July, during which his plea bargain fell apart. He is expecting to address Mr. Biden’s pre-trial release conditions as well.

Mr. Biden’s arraignment is scheduled for Oct. 3 at 10 a.m.

He argued that making his client “travel across the country for what should be a rather short proceeding” would put a financial burden on the government, which provides Mr. Hunter with secret service protection, and put a logistical burden on downtown Wilmington, Delaware, where the court is.

“If ‘convenience’ was a legitimate basis to warrant virtual proceedings, every defendant would ask for them in every case,” Mr. Weiss wrote.

He argued that much could be “lost” with a virtual hearing, such as an opportunity for the judge to “accurately assess the physical, emotional, and mental condition of a defendant—a factor that may weigh on pretrial decisions, such as release from detention.”

He noted that the previous arraignment with Mr. Biden already resulted in “anything but routine” outcomes, and that an in-person arraignment should occur again this time in case the court needs to address “any unforeseen issues that arise.”

On July 26, Mr. Biden appeared in federal court in Delaware, reportedly ready to plead guilty to two tax misdemeanor charges in a deal that would allow him to avoid a felony gun charge. During the hearing, the plea bargain appeared to fall apart when the judge asked additional questions about the rationale for details of the agreement.

“The defendant and his previous attorney were not prepared to answer the Court’s questions,” Mr. Weiss wrote in his new response.

“The defendant provided contradictory testimony and his previous attorney apologized to the court for the way the defendant and his counsel chose to answer the Court’s questions. The confusion they caused resulted in the Court twice recessing the proceedings only to ultimately defer a decision.”

Mr. Biden’s previous attorney, Christopher Clark, had stepped down from his case with the reason that he may need to appear as a witness in Mr. Biden’s trial should the plea bargain itself be part of the case. Later, three more attorneys on the team stepped down without citing a reason, with Mr. Lowell remaining as lead counsel.

Mr. Weiss wrote in his letter that he will be asking the court to order certain conditions for pretrial release of Mr. Biden, and thus he should be present.

“Given the serious felony gun charges at issue in this case, this Court should have an opportunity to assess the defendant in a live setting when discharging … recommendations for conditions of release,” he wrote.

Mr. Lowell said on “Good Morning America” that he believes the charges against Mr. Biden will be “dismissed before trial.”

“First as to the political pressure, I want to make sure that everybody understands that after five years of investigation that the prosecutors knew all the facts, and the only change as to when they investigated and today is that the law changed. But the law didn’t change in favor of a prosecution, the law changed against it,” Mr. Lowell said. “A couple of federal courts have found this gun charge unconstitutional.”

House Oversight Committee Chairman James Comer (R-Ky.) has alleged that political pressure is why the charges weren’t brought earlier, having heard from IRS whistleblowers who allege the Biden administration “slow-walked” the investigation against Mr. Biden.

Mr. Lowell maintains that the government entered into a plea bargain with his client which meant the charges should never have been brought, while Mr. Weiss argues the plea bargain never took effect.

Mr. Lowell is also arguing that the gun form in question is unconstitutional and has already successfully been challenged, and that “on the facts,” he has a successful defense.

Rep. Jim Jordan (R-OH) has issued a second subpoena to FBI Special Agent Elvis Chan, after a scheduled Sept. 15 interview ‘fell through,’ (the FBI sent him somewhere) according to the Daily Caller, which obtained a letter from Jordan.

Chan, the primary conduit between the FBI’s Foreign Influence Task Force (FITF) and social mediua platforms leading up to the 2020 US election (aka the Hunter Biden damage control operation), appears to have lied under oath about his meetings with tech companies regarding the laptop story.

FBI Special Agent Elvis Chan is the main conduit between the FBI’s Foreign Influence Task Force and Big Tech.

Agent Chan was in the meeting between the FBI and Facebook on Oct. 14, 2020—the day the @nypost published its story on the Hunter Biden laptop.

— Rep. Jim Jordan (@Jim_Jordan) August 7, 2023

Now, Jordan is demanding that Chan sit for an Oct. 5 deposition to discuss his role in the FITF.

Jordan shared internal Facebook documents showing Chan had more meetings with Facebook than he appeared to let on during his testimony. Chan and FITF Section Chief Laura Dehmlow met with Facebook on Oct. 14 and told the platform “no comment” on whether Biden’s laptop was real, Dehmlow testified to House Judiciary.

IRS whistleblower Gary Shapley testified to the House Ways and Means Committee in May and confirmed the FBI knew Hunter Biden’s laptop was real in early 2020.

Chan testified that he was “confident” he did not participate in any other meetings with tech companies besides the one disclosed by Dehmlow. The internal Facebook documents shared by Jordan indicate Chan had a “follow up” meeting with Facebook officials Oct. 15 to discuss the Hunter Biden laptop story. -Daily Caller

“Based on representations that the date of your deposition conflicts with the dates of your official travel, as an accommodation, the Committee is issuing you a new deposition subpoena that compels your appearance on October 5, 2023,” reads the letter.

House Judiciary notified Chan before his scheduled interview that he was allowed to be legally represented by either his personal counsel or an attorney from the Department of Justice (DOJ), according to emails shared Thursday on Twitter by the committee. The DOJ brought a staff attorney to the scheduled interview, even though Chan agreed to be represented by his personal attorney, and the interview fell apart as a result. -Daily Caller

“Today, after an FBI employee traveled across the country to voluntarily participate in a scheduled interview, he was denied the right to have his chosen legal counsel accompany him,” the FBI told the Caller. “Upon arrival at the Capitol, Committee staff directed agency counsel to leave the premises, and the interview was unable to proceed.”

Authored by Raul Ilragi Meijer via The Automatic Earth blog,

A short comment on an all too familiar sort of MSM article about US politics these days. This article, a few days old, comes from Gary O’Donoghue, Washington correspondent, BBC News.

The MSM must concede that Hunter Biden is under investigation.

Now that it’s official, they can no longer hide it. Time for plan B.

This is the BBC, more MSM than anyone.

The new narrative is that both political sides are being probed now, supposed to make us think there’s a sort of balance, a neutrality.

And the DOJ is some kind of impartial office (just like the FBI and CIA).

Even though the entire alphabet soup has been directed squarely against Trump for 8 years now.

The result is that they list the charges against the two sides as follows: 91 against Trump, one -small one- against Hunter, and zero against Joe Biden (he’s not even mentioned here).

Not one word about Joe Biden’s own involvement in what Hunter is accused of. Not one word about the laptop. Or about the tens of millions of dollars the House Commitee says the Biden family received from foreign sources.

Ergo: Trump is much worse than Hunter. And Joe never put a single finger wrong.

What Hunter Biden Charges Mean For The President

Politically speaking, there are currently two Americas. One is outraged and horrified that the former president, Donald Trump, is facing 91 federal and state criminal charges in what they see as a deep state conspiracy orchestrated in part by Joe Biden’s Department of Justice. The other believes that very same justice department has spent five years unfairly pursuing Mr Biden’s son, Hunter, over his tax affairs and behaviour while a self-declared and repentant drug addict. In other words, both Americas believe the department responsible for enforcing the laws of the land has been taken captive by the other side and is hopelessly politicised.

“..improper and partisan interference..” but not from the Democrats…

Hunter Biden’s lawyer responded to the news that his client had been indicted on three federal gun charges by accusing the prosecutor of bending to “improper and partisan interference” from Trump-supporting Republicans. Meanwhile, Andy Biggs, one of those conservatives in Congress, suggested the charges were simply a manoeuvre to make it look like the justice department was fair. “Don’t fall for it. They’re trying to protect him from way more serious charges coming his way!”, he wrote on X, formerly Twitter.

Republicans only focus on Hunter because of Trump’s “legal jeopardies”. Not because of the laptop contents. Which the FBI sat on for 5 years, and we would never have known about if the repair shop owner had not given a copy to Rudy Giuliani. The FBI were busy targeting Trump, after all. Hunter’s “legal woes” are only “a blow in a personal sense to his father”. Surely not because his father pops up a thousand times in the laptop in comprimising ways,

Hunter Biden’s legal woes will of course be a blow in a personal sense to his father and his family. But the ramifications go much further than that. Republicans have for some time known that the president’s son is a vulnerability. Exploiting that has the power not just to significantly rile up Joe Biden, but also to help distract from their own problems with Mr Trump’s legal jeopardies. Add to that the fact that most Democrats, when asked, are far from happy that Mr Biden is running for the White House again in 2024. Hunter seems like just another reason for some continuing to press for the 80-year-old president to step aside for the next generation.

But wait, this is not about Hunter, it’s about Trump. And it’s certainly not about Joe. Nothing Hunter did could possible be as grave as Trump’s actions. Why else would there be 91 charges against him?

All this means that the outcome of Hunter Biden’s case will play a significant part in what promises to be a turbulent election year. But Republicans face something of a dilemma. It’s true that the three gun-related charges are felonies rather than misdemeanours; and it’s true that further charges could come relating to Hunter Biden’s tax affairs and foreign dealings. But none of it currently quite rises to the scale and quantity of Donald Trump’s alleged crimes. So any attempt to weaponise Hunter Biden’s problems could simply invite the American people to compare and contrast. Also, as Democrats will no doubt continue to point out, Hunter Biden is not running for dog catcher, let alone to be President of the United States.

“After all, there is nothing in the Constitution about drug addicts being unable to bear arms.” Gotta love that line.

One intriguing aspect of Hunter Biden’s case is that his lawyers clearly believe the plea deal that broke down in July could still be resurrected – and that the recent expansion of Second Amendment rights by various courts could be an element in his defence. After all, there is nothing in the Constitution about drug addicts being unable to bear arms. That would be an extraordinary irony given where most Democrats stand on gun control.

“..seven months of existing investigations into Hunter Biden..” Again, the FBI has had the laptop for 5 years. What more can you say? Jim Jordan just yesterday in the House: “We have an investigation run by Mr. Weiss that not only had a sweetheart deal rejected, but according to The New York Times, there was an even sweeter earlier deal with Mr. Biden where he would not have to plead guilty to anything. Four and a half years and all that..”

Thursday’s indictment came just days after Kevin McCarthy, the Republican Speaker of the House of Representatives, announced an impeachment inquiry into President Biden – a move dismissed as a political stunt by the White House. Mr McCarthy said there were “serious and credible allegations” into the family’s business dealings and President Biden’s conduct. And Republicans will hope this new inquiry implicates the president in the peddling of power and corruption. So far, however, seven months of existing investigations into Hunter Biden have produced snippets from former business partners, an FBI informant and a couple of IRS agents, but nothing that comes close to a real smoking gun.

The reason for the impeachment inquiry vs Joe Biden is not to get rid of him, or even “win a vote”, it’s to establish a record. The Senate would never agree to impeach him, just like it didn’t Donald Trump when the GOP had a majority. But the record is crucial. Pelosi and Schiff knew it, and now so does the GOP.

That may change when the subpoenas begin to fly, but the Republican majority in the House is so slim, that it is far from certain that Republicans would win an impeachment vote on the House floor, if it got that far. What is certain, is that the once-clear distinction between the political and legal systems has become increasingly blurred. And that’s a major problem, according to Randy Zelin, adjunct professor of law at Cornell Law School. “Somebody woke up one day and said, boy I have a new toy and that is called the federal criminal justice system, where I’m going to use the criminal system to punish people who don’t agree with my politics,” Prof Zelin told the BBC. “I think the sole influence here is that this country is being torn apart by this never-ending battle.”

This is how the media today wants you to see it. But where were they during the Steele dossier days? Or any of the other anti-Trump shenanigans? Remember, they never proved a single thing against him. They just “won” some votes in theaters where they had a majority. And now they’ve come up with 91 new charges in the theaters that the DOJ and FBI have been turned into. Vs zero for Joe Biden. And one puny one for Hunter. Hey, we have an election coming up.

I suggested recently that there wouldn’t be a US election in 2024.

But trying to imagine what would happen if they attempted to have one, replete with Dominion machines and mail-in ballots, I’m starting to wonder if there will be a country left next year to hold an election in.

The two sides are so far apart (not really of course, they’re still neighbors, it’s all in the head), that they may as well live in different countries.

And then one day they actually might. 1861 is not that long ago.

*  *  *

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A central bank smorgasbord started the day off with a bang of confusing cross-currents (SNB/BOE unch; Riksbank/Norges hiked and hawkisher; and Turkey hiked in line) – all sending the dollar higher further. Domestically, just as much confusion: a hot labor market (claims plunging), and inflation fears rising (Philly Fed prices paid), along with housing getting hammered (existing home sales slump).

But it was still The Fed that was on everyone’s mind, and the market’s expectations for rate-cuts next year are quickly be reduced from over 6 rates cuts implied in July to around 3 cuts in 2024 now…

Source: Bloomberg

We suspect it may need to go lower than that (fewer cuts still).

Treasuries were mixed (basically some giveback to yesterday’s moves with the short-end outperforming – 2Y -3bps, 30Y +11bps), but combining the two days, all yields are still significantly higher…

Source: Bloomberg

…leaving the yield curve (2s30s) steeper (less inverted)…

Source: Bloomberg

For context:

• 2Y yields hit their highest since July 2006

• 5Y yields highest since Aug 2007

• 10Y highest since Nov 2007

• 30Y highest since April 2011

Source: Bloomberg

All of which weighed on stonks with the longest-duration (tech) hit hardest. Nasdaq is down over 3% post-FOMC. The Dow was the least ugly horse in the glue factory and is down almost 2% post-Powell…

As we detailed earlier, the key level to watch is the medium-term momentum threshold of 4353, below which the CTA community will start to flip negative and selling will accelerate…

The S&P is back at 3-month lows (and we note that Small Caps are up just 1% year-to-date).

All the majors are back below their 100DMAs with Small Caps back below their 200DMA…

And VIX broke back above 17…

Banks broke down to initial SVB-puke lows…

The dollar extended gains intraday to its highest since March 2023 before giving some back…

Source: Bloomberg

Bitcoin broke back below $27,000 as stocks started to sink…

Source: Bloomberg

Despite plenty of intraday vol, oil prices ended around unch with WTI sliding back below $90 from its midday bounce highs…

Gold chopped around but ended notably lower (despite heavy call demand)…

Finally, NVDA losing the battle?

Source: Bloomberg

A new cycle high for real rates… and S&P valuations starting to crack…

Source: Bloomberg

Can The Fed stand pat if the S&P loses 5 turns of fwd P/E? Do you feel lucky?

Authored by Christopher Wilcox via The American Institute for Economic Research,

I’ve been a truck driver for over 20 years. I suppose I always knew I would be, ever since that career day in the third grade when among all the kids dressed like doctors and baseball players, there I stood dressed like Jerry Reed from Smokey and the Bandit. Pop culture in the 80s painted the picture of truckers as rugged men, wild and free, burdened by nothing except their own wanderlust. That romanticized version of the American truck driver still lingers in the back of my mind, but in recent years the burden of government regulation has proven to be greater than my desire to see what’s over the next hill.

Oppressive regulation in the trucking industry has been around almost as long as the iconic chrome bulldog on the hood of Mack trucks. Franklin Delano Roosevelt signed the Federal Motor Carrier Act (FMCA) of 1935 during his first term. This gave the Interstate Commerce Commission (ICC), an agency originally formed to regulate railroads, the authority to regulate the burgeoning business of moving goods by tractor-trailer. The ICC ultimately decided which companies could haul certain goods, for whom, where, and what they could charge. The ICC even decided if new transportation companies could enter the market by requiring eager upstarts to prove their services were “needed.”

The only exemptions to these laws were in the agricultural sector. FDR and his horde of central planners did not want to cause an increase in food prices during a time when many Americans were already struggling to put food on the table. Nevermind the tacit admission that the FMCA would raise prices on all other goods. This exemption had its own unintended consequences. While independent drivers, commonly referred to as wildcatters in driver slang, were not subject to the price floors previously mentioned, they were limited to hauling only agricultural goods. This limitation caused a significant logistical dilemma for wildcatters delivering in industrialized parts of the country, and is largely responsible for the mythos of the outlaw trucker we all know today from music and film. Whether in an old country song from Red Sovine or Kurt Russell’s character in Big Trouble in Little China, such renegades are almost always hauling agricultural goods.

Thankfully, a trend towards deregulation began in the 1970s, and the cesspool of cronyism and perverse incentives created by FDR was substantially reined in with the FMCA of 1980. This is why we now see hundreds, if not not thousands of company names sprawled along the sides of 53-foot trailers. Granted, we still have the ICC, though today it is known as the Department of Transportation, and any truck driver that has had to spend 10 hours at a scale house without a shower or a hot meal over a minor infraction of hours of service rules (another specter of the FMCA of 1935) will tell you it remains quite burdensome. But things are still better than they used to be.

Unfortunately, the federal government continues its misguided attempts to control an industry regulators know little to nothing about. But today’s attempts tend to focus more on something they understand even less than trucking: technology.

The electronic logging device (ELD) has been around since the late 1980s. The devices were first adopted by large nationwide fleets to simplify managing their plethora of drivers, and eventually became a way to lower insurance costs. Manufacturers and employers claimed the devices prevented drivers from driving longer than legally allowed, therefore reducing the number of tractor-trailer-related crashes. It was under the latter premise that the DOT mandated that all trucks be equipped with ELDs no later than the end of 2017. Unfortunately, fatal accidents involving tractor-trailers have seen a recent increase following a sharp decline. This correlation suggests that mandating ELDs has not had the promised or intended safety improvements.

More recently, environmental regulations requiring manufacturers to reduce emissions gave us the diesel particulate filter (DPF), an exhaust treatment system that replaces a standard muffler. While there is no current federal mandate requiring a DPF, the filters are required by the 2008 California Statewide Truck and Bus Rule, which has incentivized many nationwide fleets to adopt them. The problem with DPFs is the filter system clogs. A lot.

When DPFs go down, trucks roll to a stop. Truckers report having to have a DPF serviced as often as every 5,000 miles, which means lots of lost productivity and stranded cargo. I’ve had four breakdowns over the past two years, and three were due to my DPF. A tow truck driver I spoke to on one of those occasions told me half of his business comes from malfunctioning DPFs. Repairs are a specialized affair, and replacements can cost up to $2,000. When my truck isn’t moving, I’m not earning. And these regulators have required that my truck stand still far too often.

Next up on the government’s list of ways to make truckers’ lives miserable are proposed speed limiters. Pete Buttigieg, the Secretary of Transportation, wants to limit all tractor-trailers to the same speed. Imagine being stuck behind a pair of tractor trailers side by side, who can’t speed up to pass each other. It’s relatively rare right now, but it will become the norm. Every single interstate nationwide will be populated by moving roadblocks, inspiring road rage and blocking critical services. What happens when the fire truck or ambulance is stuck behind these unbreakable pairs?

However well-intentioned these rules and regulations might be, it’s clear that no one is consulting with the long haul truckers about the totally foreseeable bad outcomes. The great problem with all central planning is that regulators lack local knowledge, and are not inclined to speak to the people living with the consequences of their decrees. Probably because we would tell them what idiots they are.

The last two decades I’ve spent traversing this beautiful nation have, by and large, been a wonderful experience. I have countless stories to share with other drivers over a cup of coffee at my favorite fuel stops or with my more stationary friends over a cold beer. I wouldn’t trade the things I’ve seen, the binds I’ve been in, or the successes I enjoyed, for anything.

But the burden that has been laid on these old tired shoulders by bureaucrats and central planners has become more than I’m willing to bear.  I’ll always yearn for the open road, but now I’ll have to satisfy that wanderlust in my pick-up truck. I’m pulling the parking brake on this Peterbilt for the last time. 

Authored by Charles Kennedy via OilPrice.com,

• Missile attacks overnight caused damage to power facilities in the western and central parts of Ukraine.

• The biggest attack on Ukraine’s energy infrastructure comes as the country is preparing for the winter.

• The most damage was caused in western and central Ukraine, and mostly energy infrastructure was hit.

Russia launched missile attacks on Ukrainian energy facilities on Thursday, in one of the biggest attacks on Ukraine’s energy infrastructure in months.

Missile attacks overnight caused damage to power facilities in the western and central parts of Ukraine, CNN’s Fred Pleitgen reported from Zaporizhzhia.

The biggest attack on Ukraine’s energy infrastructure comes as the country is preparing for the winter.

Ukraine said that the latest attacks were the largest massive aerial strikes on energy facilities in six months. Russia launched several cruise missiles from strategic bombers from western Russia. The Ukrainian general staff said 43 cruise missiles were launched, while Ukraine’s air defense shot down 36 out of those.

The most damage was caused in western and central Ukraine, and mostly energy infrastructure was hit. Ukraine says many people were injured in one town where a hotel was hit.  

At least 18 people, including a child, were injured in air strikes, Ukrainian officials told Reuters. 

There are townships and cities without power and the authorities are trying to restore electricity supply as fast as they can.

“Winter is coming. Tonight russia renew missile attacks on Ukrainian energy infrastructure,” Andrii Osadchuk, Member of the Parliament of Ukraine, wrote on Twitter on Thursday.

The attack occurred weeks before the winter heating season in Ukraine begins.

Earlier this week, Gas Transmission System Operator of Ukraine (GTSOU) said it is conducting large-scale preparation for the upcoming heating season.

“In close coordination with the Ministry of Energy, companies and enterprises of the oil and gas, electricity and coal industries are conducting restoration and repair works and preparing the relevant infrastructure for this winter in the conditions of constant military challenges,” GTSOU said on Tuesday.

“Special attention is paid to the reliability of gas transportation on the border with European countries in addition to the usual preparatory measures,” the system operator said.