Authored by Jonathan Turley,

There is a deepening division on the J6 Committee as staffers turn on Liz Cheney over the final report on the January 6th riot. Angry rhetoric is flying with staffers accusing the Committee of becoming a “Cheney 2024 campaign” while both the Cheney spokesperson and Committee spokesperson lashed out at the staff members as “disgruntled” and producing shoddy or biased work. The underlying issue, however, is important and revealing. The Committee’s color coated teams include a “Blue Team” on the failure to prepare adequately for the riot. That part of the investigation is reportedly being dumped or reduced.  Members of the “Green” and “Purple” teams are also reportedly irate.

Cheney was soundly defeated in her primary in Wyoming and will soon leave Congress. She is being pushed by some Democrats as a possible surprise candidate for House Speaker if they could get a few Republican votes. That seems highly unlikely. The Republicans are likely to end up with the identical margin held by the Democrats for the past two years. Alternatively, some Democrats want Cheney to run for president either to dog Donald Trump in the primary debates or to run as an independent to siphon off votes in the general election.

That seems to be the suspicion for some staffers in the Washington Post story.

Fifteen former and current staffers, who spoke on the condition of anonymity to discuss internal deliberations, expressed concerns that important findings unrelated to Trump will not become available to the American public…

Several committee staff members were floored earlier this month when they were told that a draft report would focus almost entirely on Trump and the work of the committee’s “Gold Team,” excluding reams of other investigative work.

Potentially left on the cutting room floor, or relegated to an appendix, were many revelations from the “Blue Team” — the group that dug into the law enforcement and intelligence community’s failure to assess the looming threat and prepare for the well-forecast attack on the Capitol. The proposed report would also cut back on much of the work of the Green Team, which looked at financing for the Jan. 6 attack, and the Purple Team, which examined militia groups and extremism.

“We all came from prestigious jobs, dropping what we were doing because we were told this would be an important fact-finding investigation that would inform the public,” said one former committee staffer. “But when [the committee] became a Cheney 2024 campaign, many of us became discouraged.”

If true, the report will largely track the virtual exclusive focus of the hearings with open references to the 2024 election as an overriding concern.

Some of us have lamented that the J6 Committee could have been so much more than a one-sided, highly partisan investigation. House Democrats barred two Republican members originally selected by GOP leaders, who then boycotted the panel in response.

Even with the GOP boycott, the Committee could have followed the type of balanced inquiry that pursued allegations tied to the Pearl Harbor attack or Watergate. It could have insisted on balanced hearings with witnesses and dissenting views.

Nevertheless, the committee revealed important, often disturbing details. It was important for Americans to hear from figures like former attorney general Bill Barr and White House lawyers who struggled to counter unfounded advice given to Trump by outside lawyers on challenging the 2020 election. There were painful scenes of Capitol police overwhelmed at barricades and members of Congress hunkered down in offices.

Yet, the focus on a single approved narrative gave the hearings the feel of an infomercial selling a product that most of us bought two years earlier.

Now, staffers are turning on Cheney who appears to have objected to parts of the final report and wants the report to focus on Trump. Cheney’s spokesman Jeremy Adler said that the staffers in the other teams produced “subpar material” full of “liberal biases.”

Tim Mulvey, the spokesperson for the committee, criticized the staffers speaking to the media as “disgruntled” and added that “they’ve forgotten their duties as public servants and their cowardice is helping Donald Trump and others responsible for the violence of January 6th.”

It is obviously hard to address the alleged shoddy work on these other teams or claims of liberal bias. However, the “Blue Team” was a particular interest for some of us. The J6 Committee virtually ignored the issue despite ample questions over decisions by Congress leading to the riot.

The Democrats in the final hearing hammered away at documents showing that the agency knew about violent threats in the days leading up to Jan. 6th. However, the Democrats have refused to pursue the lack of preparations on Capitol Hill as a focus of the hearing. On the day of the riot, many of us noted (before the breach of security) that there was a relatively light police presence around the Capitol despite the obvious risk of a riot. Once the crowd surged, they quickly were able to gain access to the building. Conservative media have featured a video showing an officer standing by as crowds poured into the building.

That obviously does not mean that there was not violence or that Capitol police did not bravely fight to protect the building. Most of us have denounced the riot as a desecration of our constitutional process.

Moreover, at some point, officers may have shifted to deescalating as crowds surged into the building. The question is why there were not more substantial barriers, like those used at the White House. Instead, some barriers were composed of a few officers using their bikes.

The available evidence indicates that the House was warned and that the need for National Guard deployments were discussed.

There is a concern that, after criticizing such deployment and fencing around the White House in the earlier riots, the Democrats did not want to be seen following the same course.

An Inspector General report indicated that police were restricted by Congress in what they could use on that day. Previously, it was disclosed that offers of National Guard support were not accepted prior to the protests. The D.C. government under Mayor Muriel Bowser used only a small number of guardsmen in traffic positions.

That focus was rejected by the Committee members and there were no dissenting views voiced on the Committee as well as a virtual bar on opposing explanations or interpretations of evidence.

The GOP is now expected to fully investigate what the Congress knew and what it did in the days leading to the breach of the Capitol. Clearly, Cheney and others did not believe that the Blue Team full findings were ready to be released. However, those findings could be reviewed by the new GOP majority as it seeks full disclosure on why the Capitol was so quickly overrun on January 6th.

In the grand scheme of the post-FTX collapse, millions of depositors in the exchange will suffer terminal losses and countless other investors will see much if not all of their crypto gains wiped out. But we doubt anyone will shed a tear for the Miami nightclubs which made an absolute killing for much of 2022 only to see their crypto spoils evaporate as the bitcoin bubble burst.

As the FT recalls, it was the spring of 2021, and Miami’s hottest night clubs were inundated with phone calls from cryptocurrency entrepreneurs that no one had heard of. They wanted to reserve lots of tables, or rent the entire venue for a whole evening at a cost of half a million dollars or more.

As bitcoin hit a then-record high of $60,000 and as crypto became mainstream, the biggest beneficiaries descended on the Florida city to flaunt their wealth at lavish parties.

“Out of the blue, all these kids from crypto started coming down and spending a lot of money — like, an insane amount of money,” said Andrea Vimercati, director of food and beverage at Moxy Hotel group.

“They were booking tables for $50,000, and it was like, who the hell are these people,” added Vimercati, former director of Groot Hospitality, which operates some of the hottest night clubs in Miami including Liv, Story and Swan.

The new partygoers were “95 per cent men, young . . . with a kind of nerdy style,” he said. “You couldn’t tell they had a lot of money if they were just walking around.”

A little more than a year later, the phones have stopped ringing with the value of the crypto universe tumbling over 70% from its all time highs, culminating with the collapse of Sam Bankman-Fried’s fraudulent FTX exchange which has cast a pall over the industry. As a result, the FT reports that according to Vimercati, the crypto revellers frequenting Miami’s clubs have “completely disappeared”,

Those on the dance floor had behaved as though there was no tomorrow. In the event, it turns out they might have been right. “They wanted to show that they didn’t have any limits,” recalled Vimercati. “They were ordering 12 or 24 bottles of the most expensive champagne and just showering themselves without even drinking.”

In June last year, one group who claimed to have just sold their cryptocurrency company celebrated the windfall at E11even, a neon-lit night spot with troupes of trapeze dancers and burlesque shows. “50 Cent was performing, and their spend was more than a million dollars,” said Gino LoPinto, operating partner at the club. “They paid in crypto.”

LoPinto recalled: “They had bathtubs of champagne brought out, and gave 50 Cent a bunch of cash to throw.”

E11even started accepting payment in cryptocurrency in April 2021. The club processed more than $6mn worth of transactions last year. But in the past three months, the club has processed less than $10,000 — “a monster, huge fall”, he said.

Not surprisingly, the crypto nouveau riche were keen to boast about their newfound wealth, said LoPinto, who described how clientele would prove how rich they were by opening up the crypto wallets on their smartphones.

“You wouldn’t normally show your bank account, but people do show their crypto wallets,” he said. “I’ve seen more crypto wallets in a year than I’ve seen bank accounts in a lifetime.”

Surely the IRS will be delighted. As for Miami, the never-ending parties only underscored the city’s status as the epicenter of the US cryptocurrency industry. Florida’s low taxes were a big draw, as were less-onerous Covid-19 restrictions that turned the city into a magnet for revellers. In March 2021, FTX paid $135 million to secure 19 years of naming rights for the arena where basketball team Miami Heat play. In June 2021, the Bitcoin Conference was held in Miami after relocating from Los Angeles.

To be sure, Miami’s club operators have always been able to rely on a few big weekends, such as Art Basel, music festival Ultra and New Years Eve. But for the past two years, it was a never-ending cryptofest as attendees at bitcoin events demanded as many tables and in some instances have bought out entire venues to throw private parties.

“On the bigger crypto weekends, the groups coming in for private buyouts were these young tech guys,” said Alan Roth, owner of Rosa Sky rooftop lounge. “A buyout costs anywhere from 20 per cent to 50 per cent more than we would make on a normal night.”

Crypto money had flooded into other parts of Miami’s luxury scene too. “They bought big houses for $25 million plus, they rented big yachts . . . they had money and were spending it lavishly,” said Brett Harris executive director of luxury sales at real estate firm Douglas Elliman. “They were buying big houses in cash, no financing — converting Bitcoin into cash to buy.”

“It was revenge of the nerds,” said Harris, adding that crypto entrepreneurs wanted to buy properties for entertaining with home movie cinemas and water features.

Michael Simkins, chief executive of E11even’s cryptocurrency operation in Miami said: “The money came rather quickly for a lot of them, and it’s easier to spend it when it comes quickly.”

Roth is hopeful that the latest source of demand for Miami’s luxury lifestyle will return. “I don’t think the crypto market is going to fold and be done. It’s like the regular market — it goes up and down. I don’t get the sense that they’re afraid.”

Not everyone agrees. “We don’t think they’re coming back,” Vimercati said.

Oh yeah? Just watch how quickly the narrative changes the moment cryptos 2X, 3X and more-X from here after the Fed folds and unleashes the next monetary firehose, and how fast all those who vow they will never again touch a (fraction of a) bitcoin ever again park their life savings in the digital token all over again…

Authored by Sundance via TheConservativeTreehouse.com,

“Crowds? I see nothing. I’m surprised,” retail worker Jeremy Pritchett told FOX 2.

“Normally, it’s wrapped all the way around the building. Today: no one.”

That’s the typical ground report from areas all over the country.  No one, literally almost no one, is doing any holiday shopping and the traditional Black Friday rush to get deals and discounts just didn’t happen.  Financial media are scratching their puzzlers, perplexed with furrowed brows.

Interestingly, almost every financial media outlet is using the same Retail Federation talking point about anticipating an 8% increase in holiday sales this year.  Apparently, pretenses must be maintained.  Meanwhile, news crews and camera crews are having a desperate time finding any holiday shopping to use as background footage for the claims that sales are strong.

“Look, over there. There’s a person buying something. Oh, wait, no, that’s just an employee dusting the empty cash register.”  At a certain point, one would have to believe reality would run head-first into the mass delusional pretending.  Maybe this holiday season will be it, maybe not.

Reuters – […] About 166 million people were planning to shop from Thursday’s Thanksgiving holiday through this coming “Cyber Monday,” according to the National Retail Federation, almost 8 million more than last year. But with sporadic rain in some parts of the country, stores were less busy than usual on Black Friday.

“Usually at this time of the year you struggle to find parking. This year, I haven’t had an issue getting a parking spot,” said Marshal Cohen, chief industry adviser of the NPD Group Inc.

Black Friday Has Gotten Out Of Control pic.twitter.com/AzhL3rFnas

— Steve Inman (@SteveInmanUIC) November 26, 2022

“It’s a lot of social shopping, everybody is only looking to get what they need. There is no sense of urgency,” Cohen added, based on his store checks in New York, New Jersey, Maryland and Virginia.

At the American Dream mall in East Rutherford, New Jersey, there were no lines outside stores. A Toys ‘R’ Us employee was handing out flyers with a list of the Black Friday “door buster” promotions. (read more)

It’s almost Kafkaesque to see how the media are continuing to maintain economic pretenses, yet the reality of a completely collapsed consumer economy is physically staring them in the face.

(Bloomberg) – Activity Light at One San Francisco Mall (4:40 p.m.) – At the Stonestown mall in San Francisco, shoppers were few and far between. The Target and Zara stores were mostly empty, and there was no line for the mall’s Santa Claus. Uniqlo and Apple were the busiest locations, but they still weren’t crowded. 

[…]

Crowds were thin in the late morning at the Stamford Town Center mall. Kay Jeweler, empty. Safavieh, empty. Only a couple of people waited at the checkout line at Forever 21 and just a few were in line for a purchase at Barnes & Noble.

[…]

At a Target store on Chicago’s North Side, the parking lot was barely half full at about 9 a.m. local time. Shoppers were greeted with $3 ornaments and discounted Christmas trees when entering, and the store seemed calm and relatively quiet.

[…]

The Macy’s in Stamford, Connecticut, was neat and orderly — maybe a little too neat and orderly on a day associated with shopping chaos. The furniture section was nearly deserted, though there were more shoppers looking at shoes. (read more)

Ever so often, the polar vortex dips south over North America from its usual perch in the Arctic and brings a blast of cold air. The next arrival appears imminent, potentially as early as the first week of December, over the eastern half of the US. 

According to freelance meteorologist Mike Masco, a “monster negative NAO [North Atlantic Oscillation] signal showing the pattern will reload the cold FAST as the atmospheric chess pieces align to produce major cold & potential polar vortex into the eastern/northern USA Dec. 5 & Beyond.”

MONSTER NEGATIVE “NAO” SIGNAL SHOWING
The pattern will reload the cold FAST as the atmospheric chess pieces align to produce major cold & potential #PolarVortex into the eastern/northern USA Dec 5 & Beyond..Consider topping off Oil/propane tanks soon if that’s your heating mode pic.twitter.com/AaGvLCeiHH

— Mike Masco (@MikeMasco) November 27, 2022

Masco said, “consider topping off Oil/propane tanks soon if that’s your heating mode.” 

Others say a polar vortex will plunge temperatures below freezing across the Deep South, mainly in Alabama, Louisiana, and South Carolina, by Dec. 13. 

Average temperatures in Washington, DC, will peak around 60 degrees Fahrenheit on Dec. 6 and begin to slide to about 26 degrees by Dec. 12. 

Temperatures across North Carolina will plunge from the low 60s to sub-freezing by Dec. 12. 

The same for South Carolina. 

As well as Georgia. 

The cold air will even pour into Florida. 

On a regional basis, Midwest temperatures will average around 20 degrees by Dec. 12. 

Southeast temperatures will plunge to freezing conditions. 

The cold blast will be so severe that temperatures across the country, on average, will be driven down to around 35 degrees. 

And look at heating degree days for the South East …. the cold blast will send heating demand through the roof. 

However, Phil Flynn, senior analyst at Price Futures Group in Chicago, told Reuters that even though “the forecast seems to suggest we are going to see this polar vortex… (traders are) pulling back some of their positions on the anticipation, the cold blast might not be as far-reaching as originally feared.”

Last week, Houston-based energy firm Criterion Research explained that the US “officially flipped over to withdrawal season” as heating demand begins to rise. 

What appears to be an upcoming cold blast may only suggest US natural gas prices could rise even higher. 

Enjoy the warm weather while it lasts — because if forecasts hold up, a polar vortex could plunge a large swath of the US into a deep freeze. 

By Peter Tchir of Academy Securities

Positioning & Key Drivers

As we head into what in theory should be a quiet period for markets (though it certainly wasn’t in December 2018), we try to address positioning (very difficult to get a good read) and what our drivers for the next few weeks will be.

Positioning

There are reports circulating that everyone is bearish. Those reports seem to focus on words (there is a lot of airtime being given to the bears) and on things like equity put/call ratios. The argument against looking at put/call ratios is that they have been oscillating back and forth (almost wildly) and they may not do a good job of capturing the weekly and daily expiration options markets. It is truly fascinating to watch (and to understand) the implications of the rise of daily expiration options. I cannot think of a more leveraged bet than daily and weekly options. Most (not surprisingly) expire out of the money, but the lottery ticket nature seems to encourage the large swings (in either direction) to become even larger (see “What’s Behind The Explosion In 0DTE Option Trading“).

This is an added dose of gamma to an already illiquid market – which is a recipe for large moves.

Measures like the CNN Fear & Greed index remain firmly in “Greed” territory. Certainly not “Extreme Greed” but not indicative that “everyone” is bearish. On AAII we pulled back from last week’s more bullish reading, but it is still more neutral than anything else.

Looking at QQQ RSI (relative strength indicator) it is by and large in the middle which indicates neutral positioning. Nothing in the “technical charts” I look at (not my area of expertise, but not something I ignore completely) was jumping out at me as bullish or bearish except for the VIX.

VIX has drifted back to just over 20, which has been problematic for equities this year.

Will VIX, QT, weakening economic data, and abysmal liquidity set up a December 2018 type of scenario?

Stock buybacks (which may be loosely interpreted as company positioning) influence markets and it seems like we have developed a pattern where we hold our breath during earnings season and breathe a sigh of relief as earnings are done and cannot undo any of the good that the buybacks have done. Unfortunately, this is a three-month cycle and by late December we go back to holding our breath again!

On the fund flows, ARKK hit a record for shares outstanding two weeks ago and has seen a slight pullback. TQQQ hit the record three weeks ago but has also seen small but steady outflows. I use those two ETFs as they capture the zeitgeist of the moment, and they seem to support the fact that markets actually got bullish and are now more neutral.

I see little evidence to support the “everyone is bearish” camp (at least not in equities). If anything, we could be setting up for selling pressure into year-end as the “Fed is slowing down on hikes” story is getting largely priced in. Additionally, the “need to chase seasonality” trade has been put on and quantitative tightening will (over time) give investors the opportunity to take less risk for similarly expected returns.

On the bond side, you could convince me that people are still too bearish (because that’s what I’d like to believe) and it may be true here, but with the recent move stopping out a lot of short positions, I suspect that bonds are more neutrally positioned.

Key Drivers

With positioning likely neutral, markets will be influenced by data and important narratives. For the coming weeks and months  these are the drivers that we will be keeping a close eye on. They are what we will be examining closely to see if we need to adjust our opinions and outlooks on the economy and markets!

• The Wealth Effect. The wealth effect isn’t getting the attention it deserves.
  • Housing is down. For most, home values are higher today than a couple of years ago, but the psychological impact of having home values decline (in response to much higher mortgage rates) is problematic.
  • Bonds have been hit hard. Anyone hoping bonds would zig when stocks zagged is having a tough year. The so-called 60/40 funds (funds that invest in stocks and bonds specifically to capture the typically negative correlation) have had one of their worst years on record.
  • Stocks have been hit hard. While the S&P 500 is “only” down 15% this year, the Nasdaq is down 28%, and “disruptive” companies (I will use the ARKK ETF as a proxy) are down 62%. It isn’t just the wealth effect of the average investor that is problematic, but it is also the destruction of what was “paper” wealth for many employees of these companies.
  • Crypto was hit hard. Many seem to ignore crypto, but in a little over a year, the value of cryptocurrencies has gone from $3 trillion to maybe $0.7 trillion. The entities involved in the space have also seen their valuations plunge.
  • The Growth Company “Wealth Effect.” If you go back to early 2021, growth was everywhere. Raising equity (publicly or privately) was relatively easy even at large valuations. That money was raised and was spent because showing growth was the key objective. Now, with valuations low (and more of an emphasis on cashflow) these companies which were big engines of growth will be much more careful with their spending.
• Inventory, Demand, and Supply Chains. These factors could just as easily drag inflation down.
  • Demand seemed high, but was it sustainable? Consumers had wealth (see above), stimulus, and responded to potential supply shortages by buying more last year than they needed and effectively pulled demand forward. There is evidence (in inventory data) that companies didn’t see this.
  • Supply chain overcompensation. Companies responded to supply chain risks by ordering more. Demand seemed robust and it also seemed “safer” to have more inventory than less. As supply chains are normalizing (lots of evidence that this is occurring, even with China still enforcing a zero-COVID policy), we can see more inventory build-up.
• Russia, Ukraine, and Energy Prices. The base case is for the status quo to continue, which will keep upward pressure on energy and commodity prices, but much has been priced in and global supply chains are shifting to adapt to this new universe.
  • If anything, the “surprise” would be some sort of truce. The expense of military equipment is weighing on many NATO nations. Ukraine cannot really “win” and Russia cannot afford to lose, so trying to avert further infrastructure damage (and permanently displacing citizens) is a reasonable goal. Sanctions seem to hurt us as much as Russia, which is yet another reason to try to come to the table. One of the outcomes of the sanctions is that moving oil by tanker has become difficult and expensive because  shipping routes have lengthened to adjust for “who can buy or sell oil to whom.”
• China continues its re-assertion of the communist party and is extending its “client” state relationships. I do not expect much help from China in the global economy.
  • Xi is re-asserting the authority of the communist party. It was always in charge, but even internally the perception of the party’s power relative to successful businesspeople (as one example) is being clamped down on.
  • Expecting China to do what we wish they would do has been and will continue to be a flawed strategy. There remains a “hope” that China really wants to be like us, and they will come around to that way of thinking. This is highly unlikely to happen.
  • Shifting economic ties. China and Russia, in many ways, make better trading partners than the U.S. and Russia (Russia wants high tech from China and has a trade surplus from selling commodities). This relationship exists with many countries, especially the autocratic/resource rich nations of the world. The Belt and Road Initiative has been an extremely effective way (from the Chinese perspective) of solidifying relationships with countries that China wants resources, access, or other things from.
  • Taiwan. The GIG sees a military invasion as unlikely, but look for political and economic pressure to be ratcheted up, while maintaining an intimidating military presence.
• Jobs. The job data has been strong and could be one area that continues to show strength, which would be a threat to our rate outlook as we are less sanguine about that market.
  • Jobs (always a lagging indicator) will be even more lagging this time. After a year or more where it was extremely difficult to hire, companies will not fire people any time soon! Firing will be a last resort (even more than usual). You will see cutbacks in services used (legal, consulting, cloud, advertising, etc.) first and there is evidence we are seeing some of that.
  • What sort of jobs will be lost? This time around, it seems like many job cuts (at least in the early rounds of layoffs) will be higher paying jobs. This won’t be a job market that hits low-income earners hard because it will hit high income jobs more than usual. That will matter as it will take fewer jobs lost to tilt the economy down.
  • Not all jobs data passes the “smell” test. The Household Survey shows 2 million fewer jobs created than the Establishment Survey. The JOLTs data has been showing more and more jobs relative to hiring since more job searches went online. There are also some “wonky” but realistic questions about various metrics in the jobs data.
• The Service Sector. This is another area that has held in there and this might bode well for the future. However, there is a risk that similar to inventory (where supply chain fears overstated demand), a similar phenomenon could be occurring in the services space. The contention is that after an extended period where travel or seeing your family was difficult, there is a “catch up” effect that may not be as robust once we make it through this year’s holiday season.
• Inflation. I expect deflation to be as much of a topic of conversation next year as inflation.

Longer-term factors. While these drivers are unlikely to cause major market moves in the coming weeks, they will shape next year, and it is important to keep an eye on how they are developing as getting these right will be a key component of successfully navigating 2023.

Supply Chain Management. Companies will create simpler and “safer” or more “secure” supply chains. That will create jobs domestically, in Mexico, and in other areas. That will create opportunity and will be somewhat inflationary. It will create more “middle” class jobs, not just in manufacturing, but in the logistics around these new supply chains. This will be good for American jobs, but not great for inflation.

Sustainable AND Traditional Energy build-out. We need to build out sustainable energy faster and more aggressively than previously thought. We need to ensure that the backbone of our energy system is big enough (for long enough) to let that transformation occur smoothly. This will eventually be deflationary, but it will be inflationary in the near-term as immense amounts of money will need to be spent on the materials and people needed to create the world for which we are striving.

India. This is my “outlier” and doesn’t get enough attention. India is set to surpass China in terms of total population with a much better demographic mix! India is also set to gain China’s “losses” on the supply chain side. India was growing rapidly before Covid and seems to be back on that trajectory. There are many obstacles (some of which are their own making), but if there was one outlier that I’d be looking for it would be an “early 2000s like” China commodity boom! Let’s not forget that India is buying Russian commodities because cheap resources are critical for India. They work with Venezuela too and seem to be mimicking China’s playbook for resource accumulation in many ways. It seems shocking how seldom India comes up in conversations, yet this could be the shock to the global system for which we aren’t prepared.

Bottom Line

I still like bonds, though less than I did a few weeks ago! The rally has been intense, and we are nearing levels that seem difficult to justify without much worse data coming through. From our key drivers section, I expect the data to be weaker than consensus, but if the bearish positioning has been reduced in bonds, it will take a lot more to propel them to much lower yields.

Skew positioning to the 2-to-5-year range as they should benefit the most as data comes in that compels the Fed to stop hiking sooner and the markets can price in a lower terminal rate. As of now, though there is more data to come, we can expect a 50bps hike in December, but that could be it (and might be too much). The market is pricing in a 5% terminal rate in May.  However, sub 4.5% appeals to me.

Commodities may continue to struggle here, led by energy prices. Recent price declines have not impacted stocks significantly, but that commodity weakness could translate into commodity stock weakness (XLE and XLM have been resilient, near the highs in XLE’s case, but look for some profit taking to weigh on these stocks as markets struggle to see growth into 2023).

I wouldn’t touch crypto with a ten-foot pole here. Maybe we see some of the various “exchange” and “custodial” entities and companies in the headline sort out their alleged issues and the market rebounds, but I don’t see that happening. Bitcoin should drift lower and sub $10,000 is my target (given everything that is going on and the number of questions institutional investors are facing).

Which leaves the question – will there be an “everything rally” or will it actually be “risk-off” into year- end for equities?

A week or so ago, I would have expected an “everything rally” into year-end. However:

• Treasury yields are quite low and stocks didn’t lift much. The S&P 500 is close to its mid-September closing high (4,110) which should function as resistance.
• The minutes should have helped stocks more than they did. Markets got less than a 0.5% rally in the S&P on Wednesday and the Nasdaq 100 is closer to Tuesday’s closing price than Wednesday’s price (not the sort of price action that bodes well for a sustained rally into year-end).
• The PMI data was abysmal. It wasn’t just bad, it was abysmal. Services, the alleged backbone of the economy, growth, and inflation, hit 46.1 (down from 48.2). That is disturbing.
• QT doesn’t help and if the “seasonality” trade has already been embraced, that could unwind.

So, weighing all the evidence, I am slightly bearish on equities for now. Weirdly, the bearishness has little to do with the Fed trying to jawbone things down (because the market has moved beyond that). The bearishness is because we have shifted from a “bad news is good news” world to a “bad news is bad news” world for risky assets.

Credit will outperform equities and there is a path to further spread tightening even if equities don’t rally. There are signs that some of the “hung” deals the banks have on the high yield side are working themselves out, so they won’t continue to be an overhang on the high yield and leveraged loan market. Maybe the pop, ironically, is more likely to occur in that space than in investment grade.

In any case, on an all-in yield basis credit looks good, but on a spread basis it is time to opportunistically reduce risk, even in the face of a light calendar. Hope you had a great Thanksgiving!

Authored by Joseph Lord via The Epoch Times (emphasis ours),

As part of a gargantuan 1,050-page report detailing whistleblower findings from the FBI and Department of Justice (DOJ), Republicans found that the FBI waited over a year to begin a comprehensive investigation into the pipe bombs that were planted in front of both major parties’ headquarters on Jan. 5, 2021.

In the Nov. 5 report, Republicans argued that the FBI and DOJ have undergone “weaponization” during the course of President Joe Biden’s first term in office.

Specifically, the report focuses on the Department of Justice (DOJ) under Attorney General Merrick Garland and the FBI under Director Christopher Wray (pdf).

Garland, Republicans said, has been “a willing participant of the Biden Administration’s weaponization of law enforcement.” The FBI too, Republicans assert, “has abused its law-enforcement authorities for apparently political purposes.”

Republicans listed a series of seemingly-partisan decisions and top-down efforts by Garland’s DOJ to mislead or deceive the American people.

For instance, the bombshell report found that the FBI has been incentivizing and pushing its field agents to classify certain crimes as incidents of domestic violence extremism (“DVEs”) even when the facts do not align with such a classification. Republicans contended that this is part of an effort to bolster Biden and other Democrats’ contested claims that right-wing DVEs are one of the greatest threats Americans face.

The report also noted a bizarre incident in which the FBI went a step further, and actually manufactured a DVE.

The event occurred in Michigan, where several men were arrested for a planned plot to kidnap Gov. Gretchen Whitmer. At their trial, defense attorneys revealed that no less than 12 FBI assets had participated in and pushed the men toward the plot.

Republicans also cited Garland’s controversial Oct. 4, 2021 “school board memo,” in which he offered federal resources and guidance for municipalities seeking to punish parents voicing opposition to their children being taught radically left-wing ideas like critical race and gender theory.

Additionally, Judiciary Republicans cited Garland’s unprecedented authorization of a raid on President Donald Trump’s Mar-a-Lago home. Purportedly, Trump had taken classified documents from the White House that posed a national security threat. It was only after the midterms that the DOJ backtracked, and admitted that, contrary to their earlier allegations, Trump had no documents that posed any national security threat.

A deeper dive into the report reveals that the FBI and DOJ, while actively targeting conservatives, inexplicably dragged their feet in investigating pipe bombs that were planted by an unknown man ahead of the Jan. 6 “Stop the Steal” rally.

Specifically, security footage captured a still-unidentified man planting pipe bombs in front of both the Republican National Committee (RNC) and Democratic National

At one point, then-Vice President-Elect Kamala Harris was even in the DNC building, meaning her life was imminently at risk.

Still, Judiciary Republicans ruled, “The FBI appears to not be aggressively investigating pipe bombs placed by political party headquarters on January 6, 2021, while prioritizing other January 6, 2021-related investigations.”

Specifically, Republicans learned from a whistleblower that it took over one year for the FBI to mount a full-scale investigation into the pipe bombs.

According to the whistleblower, it was not until Feb. 7, 2022—more than a month and a year after the incident—that the Washington Field Office of the FBI asked its national field offices to investigate and try to identify the man.

In that directive, the FBI warned agents that the suspect’s “motive and ideology remain unknown.”

Speaking to The Epoch Times about the snail’s pace of the investigation, Ed Martin, an attorney for some Jan. 6 defendants, ruled “the judgment of the Department of Justice is clearly biased against certain types of people and certain types of conduct.”

“It appears that the executive branch, the law enforcement branch, has been operating to facilitate a political vision of the article one branch,” Martin said later.

He explained: “The Pelosi select committee [the House January 6 Committee] had a vision of what they wanted to highlight. The conduct of the executive branch, the law enforcement branch has not been to pursue truth and safety. It’s been to pursue the political agenda that’s been driven hand in glove with the select committee.”

Martin, who used to work with the RNC, said that he was pleased that Republicans were giving the issue attention but said that “what we need now is to get to the bottom of what happened.”

He added, “We need to know who said pipe bombs against the American leadership, right?”

“We are living with a bomber, who successfully planted bombs—didn’t go off, thankfully—and who has never been caught,” Martin emphasized. “Shouldn’t that be a worry?”

The FBI did not return a request for comment.

Possible FBI Involvement

The FBI’s slowness in investigating the pipe bombs comes amid a backdrop of suspicion that the FBI played a role in the events of Jan. 6.

Suspicion that the FBI was involved in the events of that day only ramped up after Jill Sanborn, the executive assistant director for the National Security Branch of the FBI, refused to disavow agency involvement at the rally.

During a Jan. 11, 2022, Senate hearing, Sen. Ted Cruz (R-Texas) questioned Sanborn about potential FBI involvement. These questions were met with deflection by Sanborn, who avoided giving a definitive answer to the yes or no questions posed by Cruz.

“How many FBI agents or confidential informants actively participated in the events of Jan. 6?” Cruz asked.

“So I’m sure you can appreciate that I can’t go into the specifics of sources and methods,” Sanborn replied.

“Did any FBI agents or confidential informants actively participate in the events of Jan. 6, yes or no?” Cruz asked.

“Sir, I can’t—I can’t answer that,” Sanborn said.

“Did any FBI agents or confidential informants commit crimes of violence on Jan. 6?” Cruz asked.

“I can’t answer that, sir,” Sanborn replied.

“Did any FBI agents or FBI informants actively encourage and incite crimes of violence on Jan. 6?”

“Sir, I can’t answer that.”

Questions about the FBI’s involvement have also been raised by the mystery of Ray Epps, a man who was caught on video on Jan. 5, 2021, encouraging protestors to go into the Capitol building the next day.

“Tomorrow, we need to get to into the Capitol,” Epps was caught saying. “Into the Capitol,” he reiterated.

Epps was immediately shouted down by cries of “Fed! Fed! Fed!,” common internet slang describing someone who works with federal law enforcement, particularly the FBI.

The next day, additional video caught Epps whispering into the ear of a protestor, who proceeded to begin tearing down one of the first barricades around the Capitol.

Initially, Epps was identified as the FBI’s number 16 most wanted person for their involvement in the events of Jan. 6, with the agency offering a cash reward for information that led to his arrest. But Epps was later mysteriously removed from the list—a fact that further attracted suspicion amid the largest manhunt in the history of the Department of Justice (DOJ), which saw dozens of nonviolent offenders who entered the Capitol rounded up.

“Ms. Sanborn, who is Ray Epps?” Cruz asked during the Jan. 11 hearing.

“I’m aware of the individual sir,” Sanborn said. “I don’t have the specific background on him.”

“Well, there are a lot of people who are understandably concerned about this,” Cruz said before describing the videos captured showing Epps attempting to incite violence.

“On the night of Jan. 5, 2021, Epps wandered around the crowd that had gathered, and there’s video out there of him chanting ‘Tomorrow, we need to get into the Capitol, into the Capitol.’

“This was strange behavior, so strange that the crowd began chanting, ‘Fed, fed, fed, fed, fed, fed.’

“Ms. Sanborn, was Ray Epps a fed?”

“Sir, I cannot answer that question,” Sanborn replied.

Cruz then cited the other incident caught on tape involving Epps.

“The next day, on Jan. 6, Mr. Epps was seen whispering to a person and five seconds later—five seconds after he’s whispering to a person—that same person begins to forcibly tear down the barricades,” Cruz said. “Did Mr. Epps urge them to tear down the barricades?”

“Sir, similar to the other answers, I cannot answer that,” Sanborn repeated.

Cruz noted that for a brief period, Epps was given a relatively high spot on the FBI’s wanted list before being “magically” removed.

The wanted ad “was posted and then sometime later, magically, Mr. Epps disappeared from the public posting,” Cruz said.

The role played by the FBI, as well as possible ties between Epps and federal law enforcement, are one of a plethora of questions left unanswered and unaddressed by the Jan. 6 panel.

Read more here…

The latest sign South Florida’s high-end single-family luxury market continues to defy gravity is a condominium project on Fisher Island, an exclusive island only accessible by ferry, located off the southern tip of Miami Beach.

WSJ reported that Miami-based real-estate firm Related Group is asking a whopping $90 million for a condo on the island, considered one of the wealthiest ZIP Codes in the country. 

In September, Related purchased a 6.5-acre plot of land on the island for $122.6 million with its partners Teddy Sagi, BH Group, and Wanxiang America RE Group. The developers are planning to begin construction in the third quarter of 2023. 

The $90 million asking price for the 15,000-square-foot penthouse would exceed the current record sale, held by billionaire hedge fund manager Ken Griffen who paid $60 million for a Miami Beach condo in 2015. 

WSJ noted more than 20 high-net-wealth families had shown interest in purchasing units at the future building — all buyers are expected to pay cash:

“These are people who don’t deal with mortgages or interest rates.

“We haven’t seen the economy have an effect on this group,” Jon Paul Perez, president of Related Group, said. 

Even if the South Florida real estate market cools next year as recession risks mount, and home prices could drop as much as 20%, the Dallas Federal Reserve recently warned — a markdown of the asking price would still exceed Griffin’s record. 

Perez said the penthouse was initially set for a $60 million ask, but his firm increased the price by 50% after crunching the numbers. He said a second penthouse at the building, with 10,000 square feet of space, would command an asking price of $60 million. 

“The highest price paid for a condo in Fisher Island was $40 million late last year at Palazzo della Luna, by Kayak co-founder and chief executive Steve Hafner,” WSJ said. 

And just miles away in Miami, a new supertall tower measuring more than 1,000 feet tall, able to withstand hurricane-force winds, will be built, forever changing the skyline of the tropical city.

High demand for South Florida real estate has continued since the pandemic began. Average Americans to financial moguls have been heading south, abandoning liberal-controlled metro areas in the Northeast and elsewhere that are imploding with out-of-control violent crime and high taxes. 

Protests in China over President Xi Jinping’s zero-tolerance Covid-19 measures have intensified – expanding from Beijing and the far western Xinjiang region to several other major cities, including Wuhan, Shanghai, and the eastern city of Nanjing, according to video and photos circulating on social media.

The weekend protests followed Friday demonstrations in Urumqi, the capitol of Xinjiang, after a deadly fire killed residents who were locked inside following lockdowns which have lasted more than 100 days. Officials have reported 10 deaths in the fire, however citizens have reported up to 40 who perished.

The protests are a rare display from a typically compliant citizenry, who know that crackdowns on dissent have intensified over the past decade. As the Wall Street Journal notes, ” Having protests over the same issue break out in multiple Chinese cities is almost unheard of, outside of nationalist outpourings, such as anti-Japanese protests.”

Since the Tiananmen Square protests in 1989, the ruling party has allowed some local demonstrations, but made it a priority to prevent nationwide protests.

On Saturday, videos circulating on social media showed crowds gathering on a street in central Shanghai calling for a lifting of lockdowns. The videos were verified by Storyful, a social-media research company owned by News Corp, parent company of The Wall Street Journal. -WSJ

WATCH: Large protest at Beijing’s Tsinghua University in China over Covid lockdowns pic.twitter.com/BjoEcFKN2I

— Insider Paper (@TheInsiderPaper) November 27, 2022

Protests are calling for Xi Jinping to step down

During Saturday evening demonstrations in Shanghai – the largest city in the country, people were openly heard shouting anti-government slogans such as “Xi Jinping, step down!” and “Communist party, step down!” the BBC reports.

‘Down with the party! Down with Xi Jinping!’ Free Xinjiang!’ pic.twitter.com/q5jwUQrz5Z

— Eva Rammeloo (@eefjerammeloo) November 26, 2022

Demonstrators held blank white banners and lit candles to honor the victims in the Urumqi fire.

One Shanghai protester told the BBC that he felt “shocked and a bit excited” at so many people in the streets – saying it was the first such large-scale demonstration of dissent. A woman told the BBC that police said they feel “the same as you” about the protests, but “they wear their uniforms so they’re doing their job.”

I’ve lived in China for 30 years, and I’ve never seen such a brazenly open and sustained expression of rage against the PRC govt. WeChat is exploding with protest videos and furious vitriol, and civil disobedience is becoming rampant. This is a serious test of CCP governance.

— David Moser (@david__moser) November 26, 2022

As the Epoch Times notes; At Beijing’s prestigious Tsinghua University, dozens of people held a peaceful protest against COVID-19 restrictions, according to images and videos posted on social media.

More from protesters who participated in #Shanghai‘s protest: “The main demand was to put an end to the zero-Covid measures. Some people expressed their dissatisfaction with the Communist Party, while others mourned the death of those in the fire in Urumqi.”

— William Yang (@WilliamYang120) November 27, 2022

In one video, which Reuters was unable to verify, a Tsinghua university student called on a cheering crowd to speak out. “If we don’t dare to speak out because we are scared of being smeared, our people will be disappointed in us. As a Tsinghua university student, I will regret it for all my life.”

Protests in China are not rare. What *is* rare, are multiple protests over the same issue, at the same time, across the country. The protest below, apparently in central Beijing’s liangmaqiao, is astounding #China #protests pic.twitter.com/UHJCqqF1YG

— Tom Mackenzie (@TomMackenzieTV) November 27, 2022

One student who saw the Tsinghua protest described to Reuters feeling taken aback by the protest at one of China’s most elite universities, and Xi’s alma mater.

“People there were very passionate, the sight of it was impressive,” the student said, declining to be named given the sensitivity of the matter.

Tsinghua university right now👇🏼 city after city seeing protests small and large against Zero Covid policies and against excesses of Communist Party rule – every hour there seems to be a new one pic.twitter.com/7CbUtzNmjR

— Emily Feng 冯哲芸 (@EmilyZFeng) November 27, 2022

One good thing this site actually facilitates: in the past 48 hrs, numerous mini-protests took place across various Chinese college campus against zero COVID policy. Many are censored but they ended up on Twitter, then ppl get to smuggle them back behind GFW, even just briefly pic.twitter.com/dvew9r5dik

— Tony Lin 林東尼 (@tony_zy) November 26, 2022

According to the report, “analysts say the government appears to have drastically underestimated growing discontent towards the zero-Covid approach, a policy inextricably linked to Xi Jinping who recently pledged there would be no swerving from it.”.

NOW – People tear down barricades in #Wuhan. Anti-lockdown protests are spreading to more and more cities in China.pic.twitter.com/BpIfRCZ07Q

— Disclose.tv (@disclosetv) November 27, 2022

In other areas of the country witnesses gave accounts of police violence, with one protesters telling AP (so who knows if it’s true) that one of his friends had been beaten by police, while two others were pepper sprayed.

The BBC saw police officers, private security guards and plain-clothed police officers on the streets, confronting protesters who assembled for a second day.

Demonstrators who led anti-government chants were taken away, and punched or pushed up against a police car in some cases.

Photos and videos have also emerged online that showed students launching their own protests at universities in Beijing and Nanjing on Saturday. -BBC

Flower vs. Police: A protestor in Shanghai, #China, gets taken by security as he was preparing to give a speech. Residents try to grab him back… pic.twitter.com/py9y3iIjEY

— Joyce Karam (@Joyce_Karam) November 27, 2022

On Sunday, hundreds of people were seen demonstrating in Wuhan, where the Covid-19 pandemic began. 

Meanwhile…

New isolation camp just dropped. https://t.co/tpvcaVynuu

— J (@1000Steps) November 26, 2022

And of course, Taylor Lorenz is cheering China’s zero-covid policy.

Lorenz just out here cheerleading China’s welding people in their apartments lockdown zero covid policy and it’s all good I guess. pic.twitter.com/cXLInJAEmP

— Stephen L. Miller (@redsteeze) November 27, 2022

These people would murder us if they thought they could get away with it. That sounds crazy and wacky, or it did until the last couple years. Tell me it’s false. https://t.co/oZ4ptWNKs3

— Kurt Schlichter (@KurtSchlichter) November 27, 2022

By Garfield Reynolds, Bloomberg Markets Live reporter and analyst

China’s economy reached extraordinary peaks before Covid struck and investors still expect big things from the Asian behemoth. That’s a misconception that will leave risk assets vulnerable to pressure well into 2023, given the likelihood that global growth will be weaker than expected.

The country faces a sustained slowdown both as the industrial and property booms have left it weighed down, but also because the demographic picture has shifted markedly against it

This point bears underlining because there are no quick, ready fixes. China’s population has stopped expanding, and the country is both too large, and too instinctively insular for mass immigration to offer a solution.

That skews toward a lower growth profile, save some extraordinary transformations in services and hi-tech. China itself has stated these are key goals for the economy, but there are major hurdles that need to be overcome.

The two most salient are that it faces global competition in this sphere – hence the tensions with Washington over chips – and the potential for the Communist Party’s command-and-control bias to stymie its own goals.

Slower growth and more opaque outcomes are the most likely paths forward. A look at the MSCI China index and its performance relative to the world gauge is very telling. The ratio is sitting right back where it was before China took off in the lead-up to 2008 — it would stay elevated for years as the Asian nation led the way out of the financial crisis with the sort of spend-big, infrastructure-led expansion that’s no longer on the menu.

We can expect the yuan to stay weaker as a result, something that will lessen the potential for the dollar to drop too far from its recent peak, especially if a more lethargic China economy ends up contributing to a stagflationary global environment.

That also makes the case for a gloomier outlook as regards equities in China and beyond, as well as underpinning the potential that global bonds are likely to at least stabilize.

The Covid outlook helps to bring home the dynamics at play for China. Fueled partly by demographic concerns, it has stuck with the Covid Zero policies abandoned by many. And the way investors overreacted to the pronouncements delivered straight after Xi Jinping rejigged his government is a classic illustration of the difficulties.

A barrage of fresh-sounding guidelines have so far failed to make a major difference to actual policy, with investors mistaking the activity of new officials for active reforms. Any reopening will be gradual, especially given the potential flagged by Bloomberg Intelligence for 360 million new infections.

China is a juggernaut indeed, but the market is failing to account for all of the heft and momentum that implies, and the clear signs that it is set on a path radically different from the historic booms of previous eras.

As DB’s Jim Reid writes in his latest Chart of the Day note, it may come as a surprise to many that it was semiconductors, and not crude oil of computers, that were the most traded good in 2020.

Semiconductor chips are used in most electronic devices, from consumer electronics like dish washers to more advanced frontier technologies like AI and supercomputers. Since 2015, semiconductors have taken the top rank for the most traded good, representing 15% of total global goods trade (link here for pro subs).

Earlier this week Jim Reid’s team published a note on the chip conflict between the US and China (link here for pro subs), following a recent US ban on American companies from exporting the technology, software, and supercomputers to specific advanced semiconductor companies in China.

The new rules prevent any US citizen, factory or green card holder from assisting Chinese advanced chip-making without a license, as well as expanding US control over non-US companies that use American technology. The new controls reflect growing US concern over China’s use of advanced chips in AI and military technology.

As the DB Chart of the Day below shows, China has become an increasingly important source of revenue for semiconductor firms across the entire supply chain. Although much of China’s comparative advantage has remained restricted to lower value-added stages of chip production such as assembly, packaging and testing, China has made efforts to deepen its indigenous semiconductor capacity. Under its current 5-year plan, China aimed to achieve 70% self-sufficiency in chips by 2025.

It is likely that the US policy shift has also come as the concentration risk in the semiconductor industry becomes increasingly relevant under shifting geopolitical tensions between the US and China. Although Intel in the US is developing its advanced chip capacity, Taiwan’s TSMC dominates advanced chip production. 54% of semiconductors are manufactured by TSMC, and 90% of the most advanced chips. 97% of TSMC’s long-term assets, such as fabrication facilities, are located in Taiwan. If TSMC’s facilities were compromised – perhaps by geopolitical tensions or even by a natural disaster – no question the impact would be felt for years.

Although tensions between the two superpowers seemed to ease at the G20 earlier this month, this report highlights the huge potential global event risk concerning the chips sector and the associated geopolitical battleground.

(More in the linked reports available to pro subs here, here and here)