Apple could be sourcing US semiconductors for its devices in the next few years, signaling the company’s move to rejigger complex and now unreliable supply chains across Asia. 

CEO Tim Cook spoke with engineers in Germany during an internal meeting about sourcing chips from a plant in Arizona in 2024, according to Bloomberg. 

“We’ve already made a decision to be buying out of a plant in Arizona, and this plant in Arizona starts up in ’24, so we’ve got about two years ahead of us on that one, maybe a little less,” Cook said. 

Cook explained Apple could broaden its sourcing in the Western world to purchase chips from Europe: 

“And in Europe, I’m sure that we will also source from Europe as those plans become more apparent.”

The meeting included Apple services chief Eddy Cue and Deirdre O’Brien, the head of retail and human resources. 

Bloomberg pointed out that the Arizona factory Cook was referencing is likely the one being built by Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker. Last week, there was news that TSMC was expanding its US footprint by constructing another advanced semiconductor plant.

Apple currently sources its chips from TSMC plants in Taiwan, which Cook said produces about 60% of the world’s processor supply. 

“Regardless of what you may feel and think, 60% coming out of anywhere is probably not a strategic position,” he warned.

The security of Taiwan has been a significant issue as China considers the self-ruled island part of its territory. Any invasion would cut TSMC’s supply chain and trigger global economic turmoil overnight. 

Cook realizes the current geopolitical risk in the region will only worsen and is driven to revive the US semiconductor industry with help from the US government’s $50 billion legislation known as the Chips and Science Act.

Bloomberg had some concerns about TMSC’s new factory: 

A lingering question is whether the factory as planned is suited to Apple’s needs. 

The Taiwanese company has said that the plant will initially have a capacity of 20,000 chips per month and use a 5-nanometer production process. That wouldn’t satisfy Apple’s near-future desire for more advanced, 3-nanometer chips.

However, Bloomberg said TSMC could “theoretically introduce advanced production more quickly than it has so far announced. Apple also could potentially use the Arizona production for less complex components in its devices.”

And this news comes as Apple has sustained about a $1 billion hit due to recent zero Covid lockdowns in China at its factory in Zhengzhou, according to analysts at Jefferies. 

Apple has also shifted some iPhone 14 production from China to India to diversify supply chains. 

Apple is reducing its reliance on China and beefing up its supply chain management strategy in response to the ongoing de-globalization trend. 

Ming-Chi Kuo, an analyst for TF International Securities, said the US market could be entirely supplied with Apple products made outside of China within 3-5 years. 

A recent Rabobank analysis of ‘friendshoring’ showed US companies shifting production outside of China could end up in countries like Vietnam, India, Brazil, Bangladesh, Indonesia, Mexico, Turkey, Egypt, and South Africa.

If Apple wants to simplify its supply chain, perhaps chip production in the US and assembly in Mexico, this scenario could take years to execute. 

Authored by Simon White, Bloomberg macro strategist,

Retail stocks face becoming the poorest-performing sector as the cumulative impact from higher rates causes consumption to weaken further.

Tuesday was a reminder that markets remain vulnerable to geopolitical risks. Still, the inflation backdrop remains the market’s primary driver, and the interplay between real growth and rates will continue to be paramount.

The S&P is down almost 17% on the year, but this masks some big underlying sectoral differences. Energy and Oil and Gas are up on the year, yet almost every other sector is down. The worst-affected are some of the most interest-rate sensitive — tech, real-estate and homebuilders, and retail.

We get October retail sales data today, with expectations for a robust 1% m/m rise after a flat move last month. But retail sales and consumption face two strong headwinds.

First, credit is tightening as rates rise. Consumption is heavily reliant on credit, and banks’ willingness to make consumer loans is falling. As the chart below shows, this tends to lead to weaker retail sales.

Credit card debt has risen to new all-time highs in the US. But anecdotally, this is being used to fund the purchase of essentials as the cost of living rises, and thus does not represent a broad-based bulwark to consumer spending.

Second, housing costs are rocketing higher. Mortgage rates are at a 20-year high, weighing on affordability. As affordability falls, more disposable income will be channeled into mortgage repayments and less into consumption. The chart below shows this will be a significant headwind for retail sales over the next year at least.

Both Walmart and Home Depot announced earnings this week (Target is later today) that exceeded expectations. But the headwinds from higher rates are formidable. They operate with a lag, meaning their cumulative impact should have an increasingly negative impact on the economy.

Further, retailers still face a huge surplus in inventory after the pandemic that has led to the highest inventory-to-sales ratios in 15 years. Walmart noted its inventory position has significantly improved, but there are other retailers who will be faced with taking losses to clear up excess stock.

Retail is already one of the worst performing sectors this year, but it looks especially exposed to the twin blows of higher inflation and higher rates.

The changing of the guard at Twitter is officially complete.

For snowflake employees at the company that weren’t ready to grasp that fact, Elon Musk likely made it abundantly clear this week when he released an ultimatum to employees, demanding they commit to a new “hardcore” version of Twitter or leave the company with severance pay, WaPo reported. 

“If you are sure that you want to be part of the new Twitter, please click yes on the link below,” an email to employees said. Employees were also made to “sign a pledge” to stay on and work for the company, the report says.

The pledge was to be signed by 5PM eastern on Thursday, or else employees would be terminated and receive 3 months of severance pay. 

Twitter “will need to be extremely hardcore,” Musk said in his email, adding: “This will mean working long hours at high intensity. Only exceptional performance will constitute a passing grade.”

The ultimatum is expected to lead to more attrition at the company, WaPo reported. “Those writing great code will constitute the majority of our team and have the greatest sway,” Musk had said about the new era he is ushering in. 

The notice comes just days after Musk demanded a return to the office for all employees. Last Wednesday evening, Musk sent out his first email to employees about “difficult times ahead” and the end of remote working unless he approved it, according to Bloomberg. The new rules were enacted immediately, requiring employees to be in the office for at least 40 hours per week. 

Musk’s leadership is now in its third week. On week one, he fired half the workforce, or about 3,700 jobs, to drive down costs following his $44 billion acquisition. The billionaire has launched an $8 subscription for Twitter Blue and attached user verification to it to drive higher revenues. He told employees his goal is for subscriptions to make up at least half of Twitter’s revenue. 

Update (1417ET): 

NASA’s Artemis I uncrewed Orion capsule is headed to the moon. The first view of Earth from the spacecraft was posted on Twitter. 

As @NASA_Orion begins the #Artemis I mission to the Moon, the spacecraft captured these stunning views of our home planet. pic.twitter.com/Pzk3PDt7sd

— NASA Artemis (@NASAArtemis) November 16, 2022

Here’s another breathtaking view from the spacecraft. 

New views of planet Earth from @NASA_Orion as #Artemis I journeys to the Moon. Orion is 9.5 hours into a 25.5-day test flight. pic.twitter.com/CBaA4ZOK4X

— NASA (@NASA) November 16, 2022

NASA placed a manikin named “Commander Moonikin Campos” in the Orion capsule for the 26-day mission around the moon. The space agency released a video inside the capsule. 

While #Artemis I is uncrewed, a manikin named “Commander Moonikin Campos” is among the test devices flying aboard @NASA_Orion. The name honors NASA engineer Arturo Campos, who helped bring the Apollo 13 crew safely home to Earth. https://t.co/B5x3fSQQ74 pic.twitter.com/2gs2eC7pWi

— NASA (@NASA) November 16, 2022

More on the mission. 

*  *  *

Update (0715ET):

Two hurricanes, several technical issues, and two months later, NASA launched the Artemis I mission early Wednesday from its  Kennedy Space Center in Cape Canaveral, Florida. 

“[F]or the Artemis generation, this is for you,” NASA’s launch director Charlie Blackwell-Thompson said as she gave the go-ahead for liftoff at 0148 ET. 

We are going.

For the first time, the @NASA_SLS rocket and @NASA_Orion fly together. #Artemis I begins a new chapter in human lunar exploration. pic.twitter.com/vmC64Qgft9

— NASA (@NASA) November 16, 2022

NASA’s Space Launch System, or SLS, the most powerful rocket in the world, has catapulted the uncrewed Orion capsule into space and embarked on a 26-day mission around the moon before returning to Earth. 

If Artemis 1 mission is successful, which would end with the Orion capsule splashing down in the Pacific Ocean on Dec. 11, then Artemis 2 and 3 flights will follow. Artemis 2 is scheduled sometime in 2024. That mission will propel four astronauts around the moon. Then in 2025, Artemis 3 could include a return of humans back to the lunar surface. 

* * *

After three delays, NASA confirmed a new launch window for the Space Launch System (SLS) rocket, an uncrewed Orion spacecraft, for Wednesday morning. 

The Artemis 1 rocket launch was scrubbed in late August (read: here) and early September (read: here) due to a liquid hydrogen leak at an interface between the SLS and mobile launcher at the agency’s Kennedy Space Center in Florida. 

NASA appears comfortable with the next launch attempt, with a two-hour window beginning at 0104 ET Wednesday. 

The @NASAKennedy clock is counting down to #Artemis I launch. It started with call to stations at 1:24 a.m. this morning. The two-hour @NASA_SLS launch window opens at 1:04 a.m. ET on Nov. 16.

Learn more: https://t.co/Hzdf440SBc pic.twitter.com/u8s1QzQrQf

— Boeing Space (@BoeingSpace) November 14, 2022

If the launch goes to plan, it will be the first flight of the SLS and send the unmanned Orion Spacecraft around the moon. 

“I feel good headed into this attempt on the 16th,” Mike Sarafin, Artemis mission manager at NASA headquarters in Washington, said during a press briefing on Sunday. 

“The team is moving forward as one unit,” Sarafin added. “We’ve just got some work to do.”

Besides prior leak mishaps, NASA outlined Hurricane Ian also delayed timelines. 

“Engineers previously rolled the rocket back to the Vehicle Assembly Building (VAB) Sept. 26 ahead of Hurricane Ian and after waving off two previous launch attempts Aug. 29 due to a faulty temperature sensor, and Sept. 4 due to a liquid hydrogen leak at an interface between the rocket and mobile launcher. Prior to rolling back to the VAB, teams successfully repaired the leak and demonstrated updated tanking procedures. While in the VAB, teams performed standard maintenance to repair minor damage to the foam and cork on the thermal protection system and recharge or replace batteries throughout the system.”

If all goes well, the Artemis 2 mission could propel four astronauts on a flyby mission around the moon in 2024. Then by 2025, Artemis 3 mission would allow for the first crewed moon landing on the moon. 

Watch Launch Live Here:

Authored by Steve Watson via Summit News,

Two prominent Republican Senators have called for the leadership of the party to be overhauled following the midterm election failure, with one describing it as a “funeral” for the GOP as we know it.

Texas Senator Ted Cruz told Fox Business viewers that it would be “insane” for the party to continue as it was with the same leadership.

“Leadership elections need to focus on how actually we’re going to lead. The pattern of our current leadership has been to give into the Democrats,” Cruz declared, adding “Just about every big, bad thing that was passed in the last couple of years was passed with all the Democrats and 10 or more Republicans.”

“The Democrats never do this. When we had Republican majorities, got nothing passed with all the Republicans and a few Democrats,” Cruz continued.

“And yet, for some reason our current leadership thinks it’s a good idea to facilitate the destruction that Chuck Schumer and the Democrats are doing,” Cruz continued, further proclaiming “I don’t think our voters want that.”

When asked if he was “taking aim at Mitch McConnell,” Cruz responded “Well, in the next 24 hours Senate Republicans will decide whether or not we have leadership elections. Leadership elections right now are scheduled for tomorrow morning. Personally, I think it is insane. It would be nuts for us to have leadership elections now and simply reelect the exact same leadership.”

Senator Josh Hawley, who earlier in the week said it’s time to “bury” the old Republican Party and “build something new,” continued that theme Tuesday, stating “I think that this election was the funeral for the Republican Party as we know it. The Republican Party is, as we have known it, is dead. And voters have made that clear.”

Sen. Hawley: “I think that this election was the funeral for the Republican Party as we know it. The Republican Party is, as we have known it, is dead. And voters have made that clear.” pic.twitter.com/wmyOCSYFuz

— Becker News (@NewsBecker) November 15, 2022

The old party is dead. Time to bury it. Build something new

— Josh Hawley (@HawleyMO) November 13, 2022

McConnell appeared to blame ‘MAGA’ Republicans for the failures of the elections, rather than taking any blame himself, further stating “I never predicted a red wave.”

Referring to the party leadership, McConnell stated “I don’t own this job. Anybody in the conference is certainly entitled to challenge me, and I welcome the contest.”

McConnell: “We underperformed among independents and moderates because their impression of many of the people in our party is that they’re involved in chaos, negative, excessive attacks and it frightened independent and moderate Republican voters.” pic.twitter.com/vgcP02OZtT

— Greg Price (@greg_price11) November 15, 2022

*  *  *

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Authored by Charles Hugh Smith via OfTwoMinds blog,

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.

Let’s start by stipulating my perspective on cryptocurrencies is neither positive nor negative in the usual context of “to the moon” or “worthless,” nor does it track any of the conventional narratives (decentralized finance will conquer the world, etc.)

I’ve thought a lot about “money” and its role in the economic-social order, and its role in the extreme asymmetries of wealth-power-income inequalities that are dismantling the social order in broad daylight. I’ve also thought a lot about work and its role in social cohesion, individual fulfillment and a productive, level-playing-field economy.

I’ve written two books on “money” and the potential utility of cryptocurrencies in reversing the extremes of wealth-power inequality that are destabilizing the social order. I invite you to read both books if these topics interest you:

Money and Work Unchained (2017)

A Radically Beneficial World: Automation, Technology and Creating Jobs for All: The Future Belongs to Work That Is Meaningful (2016)

Once you grasp the potential of community-based labor-backed cryptos, you realize cryptos took the greed-soaked path to the Dark Side of a destructive asymmetry of wealth and power: those who issued blockchain cryptos (in all their forms) would become the new Extractive Elite, the new Power Elite, the New Parasitic Elite, buying the wealth generated by the labor of others for peanuts.

Scrape away the high-falutin rhetoric, and blockchain/crypto distills down to the same old greed and avarice that powers traditional finance: those who own the mines gain wealth from the issuance of “money” and its proxy, credit, and those who control the spigots of “money” and credit then buy control of governance, labor and the productive assets that generate real-world wealth.

Whether the “money” is metals that labor extracts to the benefit of the mine owners, cryptos issued to the benefit of miners and insiders, or fiat currencies issued (or borrowed into existence) by central banks and private banks, the principle is the same: the few who control the “money” issuance spigots benefit at the expense of the laboring many.

This is why I say if you don’t change the way money is issued and distributed, you change nothing. Cryptocurrencies–and not necessarily blockchain-based cryptos–have the potential to play a role in fundamentally changing the way “money” is issued and distributed, but this potential has been squandered in the Gold-Rush Greed of speculative schemes which depend on a greater fool volunteering to be the bagholder for an intrinsically utility-free (i.e. of no productive utility) speculative vehicle.

Swapping one set of extractive billionaires for another set of extractive billionaires doesn’t improve the world. Swapping billionaires changes nothing.

As for the much-touted institutional participation: It’s just another greed-driven rush to front-run the next gold rush. The tech bubbles have shown that early adopters mint billions, and so Pavlov’s Institutional Managers all piled into blockchain and crypto schemes, no matter how flimsy and lacking in real-world utility, desperate to secure early equity rounds in what the institutions see as the next gold rush.

The early mine claims got rich, everyone who came later got the shaft. As Mark Twain so entertainingly described, fortunes were made and lost with no relation to the actual prospects of the mining claims being traded.

As for the claims of widespread utility of blockchain and crypto, all the claims are strained. Compare the rapid global distribution of mass produced spectacles lenses from Venice in the 1400s (glasses quickly reached Imperial China) with the supposed utility of blockchain and crypto: truly world-changing innovations that improve human life spread quickly. Where are the blockchain and crypto “innovations” that so improve human life that they’ve spread globally in a few years? There aren’t any.

Scrape away the speculative frenzy, the search for greater fools and the gold-rush mob of greed-driven Pavlovian Institutions, and what’s left? If anything was truly world-changing in terms of improving human life, it would already be tracking the World Wide Web’s expansion, and several billion people would already be using blockchain and crypto utilities due to their vast practical advantages over previous utilities.

The truly world-changing opportunities to improve human life with cryptos don’t enrich the issuers of the currencies or the early investors: they are distributed to those who are performing useful work in their communities rather than speculating.

There are three false assumptions at the heart of blockchain/crypto:

1. We can all get stupidly rich while changing the world for the better. (The Internet model)

2. Blockchain/crypto is “open to everyone” because anyone earning fiat currency can use that to buy crypto.

Getting stupidly rich from being an early investor and front-running speculative bubbles doesn’t change the world. Confusing getting rich with “changing the world” doesn’t change the world.

As for “democratizing finance:” those without capital and no way to save up appreciable capital are left out of speculative assets. The already-wealthy have the means to jump on the bandwagon and so they end up owning the lion’s share of the new hot asset.

In this way, cryptos are no different from all the other asset classes dominated by the already-wealthy. A relative handful of early investors and issuers of cryptos became billionaires, the already-wealthy piled in and the bottom 90% were left to trade high-priced crumbs.

3. Fixing finance will fix the world. Just as those holding hammers see nails that can be pounded down, those steeped in the abstract world of speculation and finance think their expertise in making “money” is all that’s needed to fix whatever is broken in the world.

The reality is that finance has broken the world’s ability to adapt by pushing wealth-power inequality to extremes that are breaking down economies and societies. Finance looks at scarcities–artificially created by cartels and monopolies, or the real-world scarcities of depletion–as “opportunities” for profiteering. Governance and regulation are “opportunities” to distort public policy to benefit the few at the expense of the public good.

This is the ultimate fantasy of financiers of any stripe: I’m gonna do good while getting stupidly rich. But “doing good” quickly slides into the swamp of good intentions and glossy fantasies. The reality is greed and the desire for unearned wealth drives people to arrive to do good and stay to do well.

The reality is financiers hope to “change their world” by getting rich, and it’s easy to cloak this self-interest with noble-sounding goals and claims and persuade oneself that getting rich via speculation will magically ennoble the world. It won’t.

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.

*  *  *

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Target is battling what’s being called an organized retail crime wave, resulting in a massive hit on profits this year. The company has employed theft-deterrent merchandising strategies, but still, that’s not enough to stop criminals from running off with everything on the shelves. 

Earlier today, the company reported dismal earnings, slashed guidance, and warned consumers are pulling back on spending amid the worst inflationary environment in decades. The retailer also revealed gross profit margins were reduced by $400 million so far this year due to shrink, the industry term for theft and other product loss.

“There’s a handful of things that can drive shrink in our business and theft is certainly a key driver. 

“We know we’re not alone across retail in seeing a trend that I think has gotten increasingly worse over the last 12 to 18 months.

“So we’re taking the right actions in our stores to help curb that trend where we can, but that becomes an increasing headwind on our business and we know the business of other,” Target CFO Michael Fiddelke said. 

Yahoo Finance spoke with the Target spokesperson, who said the problem is primarily due to “organized retail crime.” 

Organized retail crime has increased under the Biden administration while progressive-run cities implement social justice reform. Criminals are taking advantage of relaxed penalties for shoplifting, fueling a nationwide crime wave. 

Shoplifting is a behavior not just in response to backfiring social justice reforms but also has its roots deep in poverty as high inflation crushes millions of Americans into poverty. Wage growth has been negative for 19 consecutive months, while food, energy, and shelter prices remain elevated. Working poor have drained personal savings and racked up insurmountable credit card debt to buy essential items, while some folks have resorted to stealing to survive. 

Target blamed most of the thefts on organized crime gangs. 

The thefts are so bad at the Target in Minneapolis downtown that everyday toiletries are locked behind shatterproof glass cabinets. 

Target and many other retailers have demanded Congress do something. The US Chamber of Commerce has called the looting of retail stores a “national crisis.” 

According to the latest National Retail Federation report, goods stolen from retailers increased to $94.5 billion in 2021, up from $90.8 billion in 2020. Figures for 2022 are expected to top $100 billion. 

Authored by Steve Watson via Summit News,

As winter looms, NBC News has some top tips for parents who are concerned about their children catching respiratory viruses… keep them away from the dirty unvaccinated people.

In a recent segment, an infographic advised that those who want to “protect” their children should wash hands, stay home, get vaccines and “avoid physical interaction with unvaccinated individuals.”

There is no actual evidence that unvaccinated individuals are more at risk of transmitting COVID or that the vaccines prevent the spread of the virus, but never mind that inconvenient distraction.

The anchors then asked medical correspondent Dr. John Torres why more children are now so susceptible to RSV (respiratory syncytial virus), to which he responded “we don’t exactly know why.”

That is also not true, given that the CDC recently issued a report highlighting how a record number of children are now being hospitalised with common colds due to weakened immune systems.

Commenting on the findings, Dr Scott Roberts, a medical director at Yale University stated that lockdowns impacted the ability of children to build up immunity to common illnesses.

“There are two implications to this,” the doctor said, explaining “First, the gap gives time for the viruses to mutate even further to cause more severe disease.”

“And second, whatever immunity was built up to those viruses’ it will have waned making the immune response now much less potent,” Roberts added.

The doctor also noted that children, including his own son are now getting “constant infections.”

The CDC data is consistent with research by scientists at Yale who warned that it is not normal to see children with combinations of seven common viruses, including adenovirus, rhinovirus, respiratory syncytial virus (RSV), human metapneumovirus, influenza and parainfluenza, as well as COVID-19.

But whatever, keeping your kids safely locked away at home and away from the unvaccinated is the smart move.

*  *  *

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While Europe has been keeping a generally optimistic facade ahead of the coming cold winter, signaling that it has more than enough gas in storage to make up for loss of Russian supply even in a “coldest-case” scenario, behind the scenes Europe’s largest economy is quietly preparing for a worst case scenario which include angry mobs and bankruns should blackouts prevent the population from accessing cash.

As Reuters reports citing four sources, German authorities have stepped up preparations for emergency cash deliveries in case of a blackout (or rather blackouts) to keep the economy running, as the nation braces for possible power cuts arising from the war in Ukraine. The plans include the Bundesbank hoarding extra billions to cope with a surge in demand, as well as “possible limits on withdrawals”, one of the people said. And if you think crypto investors are angry when they can’t access their digital tokens in a bankrupt exchange, just wait until you see a German whose cash has just been locked out.

Officials and banks are looking not only at origination (i.e., money-printing) but also at distribution, discussing for example priority fuel access for cash transporters, according to other sources commenting on preparations that accelerated in recent weeks after Russia throttled gas supplies.

The planning discussions involve the central bank, its financial market regulator BaFin, and multiple financial industry associations, said the Reuters sources most of whom spoke on condition of anonymity about plans that are private and in flux.

Although German authorities have publicly played down the likelihood of a blackout and bank runs – for obvious reasons  – the discussions show both how seriously they take the threat and how they struggle to prepare for potential crippling power outages caused by soaring energy costs or even sabotage. They also underscore the widening ramifications of the Ukraine war for Germany, which has for decades relied on affordable Russian energy and now faces double-digit inflation and a threat of disruption from fuel and energy shortages.

As everyone familiar with the recent history of the Wimar Republic Germany knows, access to cash is of special concern for Germans, who value the security and anonymity it offers, and who tend to use it more than other Europeans, with some still hoarding Deutschmarks replaced by euros more than two decades ago.

According to a recent Bundesbank study, roughly 60% of everyday German purchases are paid in cash, and Germans, on average, withdrew more than 6,600 euros annually chiefly from cash machines.

And here is the punchline: a parliamentary report a decade ago warned of “discontent” and “aggressive altercations” in case citizens were unable to get their hands on cash in a blackout. Translation: in case of cash withdrawal halts, German society may very well tear itself apart.

Indeed, there was a rush for cash at the beginning of the pandemic in March 2020, when Germans withdrew 20 billion more euros than they deposited. That was a record, and it worked generally without a hitch.  But a potential blackout raises new questions about possible scenarios, and officials are intensively revisiting the issue as the energy crisis in Europe’s largest economy deepens and winter nears.

If a blackout struck, one option for policymakers could be to limit the amount of cash individuals withdraw, said one of the people. Needless to say, that would be a very bad option for Germany, and for fiat in general (after all, if the FTX bankruptcy is a black eye for crypto, what can one say about fiat if one of the world’s most advanced economies limits access to cash). The Bundesbank processes cash moving through Germany’s shops and economy, removing fakes and keeping circulation orderly. Its massive stocks make it ready for any spike in demand, that person said.

One weakness that planning exposed involves security firms that transport money from the central bank to ATMs and banks. The industry, which includes Brinks and Loomis is not fully covered by law guiding priority access to fuel and telecommunications during a blackout, according to the industry organization BDGW.

“There are big loopholes,” said Andreas Paulick, BDGW director. Armoured vehicles would have to line up at petrol stations like everyone else, he said. The organization hosted a meeting last week with central bank officials and lawmakers to press its case.

“We must preventively tackle the realistic scenario of a blackout,” Paulick said. “It would be totally naive to not talk about this at a time like now.”

How bad could it get? Well, more than 40% of Germans fear a blackout in the next six months, according to a survey last week published by Funke Mediengruppe. And since at least one blackout is virtually assured in the coming months, that means a stampede for the nearest ATM, something the local financial infrastructure will unlikely be able to handle.

As a result, Germany’s disaster office said it recommended people keep cash at home for such emergencies (surely this will inspire confidence).

Meanwhile, another Reuters source notes that German financial regulators worry that banks are not fully prepared for major power outages and view it as a new, previously unforeseen risk. Banks consider a full-scale blackout “improbable”, according to Deutsche Kreditwirtschaft, the financial sector’s umbrella organization. But banks nevertheless are “in contact with the relevant ministries and authorities” to plan for such a scenario, especially since anything banks say is “improbable” tends to happen rather regularly. It said finance should be considered as critical infrastructure if energy is rationed.

At times politics can get in the way of blackout planning. In Frankfurt, Germany’s banking capital, one city council member proposed requiring it to present a blackout plan by Nov. 17. The politician, Markus Fuchs of the right-wing AfD party, told the council it would be irresponsible not to plan for one. But the other parties rejected the proposal, accusing Fuchs and his party of inciting panic.

Fuchs later said in a phone interview: “If we found a solution for world peace, it would be rejected.” The issue also underscores the dependence of commerce on technology, with transactions increasingly electronic, and where most cash machines have no emergency power source.

Cash would be the only official payment method that would still work, said Thomas Leitert, chief of KomRe, a company that advises cities on planning for blackouts and other catastrophes.

“How else will the ravioli cans and candles be paid for?” Leitert said. Well, there is that whole crypto thing, but the 2nd biggest Democratic donor did a bang up job there…

Authored by Lance Roberts via RealInvestmentAdvice.com,

With the midterm elections behind us, does the market outlook improves given a now gridlocked Congress? Historically speaking, such is the case. As noted by Michael Cannivet via Forbes:

“Before you hit the panic ‘Sell Everything’ button, though, it’s worth considering at least one bullish catalyst on the horizon—voters head to the ballot box on November 8th.

The data is clear: Midterm elections are historically bullish for the stock market.”

While garnering less attention than a presidential election, midterm elections are important because they could lead to a change in control of the U.S. Senate and House of Representatives. Such can significantly impact policy, laws, and foreign relations. Historically, markets tend to favor “gridlock” in Washington as it dramatically reduces the risk of an adverse policy change regarding taxation, geopolitical conflict, or substantive changes to spending and debt.

Since 1950, there have been 18 midterm election cycles, and in the twelve months following each of those cycles, the stock market has had positive returns. Over the subsequent 12 months, stocks delivered an 18.56% average annualized gain compared to just 10.6% over all other years.

Over a more extended 24-month period, stocks returned an average of 33.7% after a midterm election.

However, while the data above goes back to 1958, the last time the S&P 500 produced a negative return over the 12 months following a midterm election was 1939. Of course, there was a massive economic contraction and uncertainty at that time as the U.S. battled the Great Depression and World War II began in Europe.

Another period of interest is the late 1960s and 1970s, marked by slow economic growth, high unemployment, rising energy prices, and significant inflation. Given the similarities currently, the bearish pre-midterm market returns and an un-accommodative Federal Reserve, the outlook, while bullish, is less clear.

Getting Back To Even Is Not The Same Thing

There are a couple of caveats to this analysis that must be considered. The first is that while returns tend to be positive post-midterm elections, several times, it coincides with when the midterm elections fell. The chart below shows the S&P 500 with the years of midterm elections marked and significant events.

For example, in 1966, 1970, and 1974 the midterm elections coincided with the bottom of the three recessionary bear market cycles. Coincidence? Probably. More importantly, on a longer-term basis, returns on a “buy-and-hold” basis were negative as the secular bear market continued. We see the same effect between 1998 and 2014, midterm elections yielded positive short-term results, but long-term returns were near zero.

The second caveat to the historical data is the difference between making money and getting back to even. While the mainstream analysis suggests investors should buy the midterm elections for positive 12-month returns, most are already invested. In a year where the midterm elections fall in the middle of a bear market, like 1974, 2002, or 2022, most investors used those returns to “get back to even.”

The chart below shows the S&P 500 for 2022, starting at 4796. It will require a return of 26% over the next 12 months for investors to break even. Notably, that does not include the rate of return necessary to meet their financial goals. For example, if your financial plan requires 6% annualized returns, the 26% advance still leaves you another 12% short of your annual return goals (6% for 2022 and 2023). Given the average yearly return post-midterm elections is 18.6%, investors will fall short of their goals.

While I am not discouraging you from taking advantage of a robust post-midterm election rally, there is a vast difference between “getting back to even” and “making money.”

The Difference This Time May Be The Fed

While the history following midterm elections is bullish, there is a difference this time that could produce a less-than-optimistic outcome. That difference is Fed and their current fight against inflation. We have previously discussed the “lag effect” of monetary policy and its impact on economic growth and earnings. To wit:

“As the Fed continues to hike rates, each hike takes roughly 9-months to work its way through the economic system. Therefore, the rate hikes from March 2020 won’t show up in the economic data until December. Likewise, the Fed’s subsequent and more aggressive rate hikes won’t be fully reflected in the economic data until early to mid-2023. As the Fed hikes at subsequent meetings, those hikes will continue to compound their effect on a highly leveraged consumer with little savings through higher living costs.

Given the Fed manages monetary policy in the “rear view” mirror, more real-time economic data suggests the economy is rapidly moving from economic slowdown toward recession.”

Currently, the Fed is still tightening monetary policy to further slow economic growth. As shown, when the Fed has previously stopped hiking rates, forward stock returns tended not to be robust.

Another difference is that previous market lows, which coincided with bear markets and midterm elections, were low valuations. Despite the market decline in 2022, valuations remain elevated relative to historic market bottoms.

Given the more extreme negative market sentiment, a substantial rally is undoubtedly possible through year-end and early 2023.

However, we suspect following that, the market environment will become more challenging. Particularly as the Fed’s monetary tightening becomes more evident in slower economic activity, declining inflation, and slower earnings growth. If that is the case, asset prices, and ultimately valuations, will need to drop before the final market low.

There are no guarantees in the financial market. While history certainly supports the bullish outlook, it should not be considered gospel. Bull markets happen in bear markets. However, many factors could negatively impact returns over the next 12- to 24 months. As such, investors should measure and manage their risk accordingly.

The good news is the negative backdrop will pass, and longer-term returns will become evident. Of course, to participate in the next bull market, you must ensure you survive the bear market.

This returns me to my main point. Spending the next bull cycle “getting back to even” is not the same as making money.