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Quinn: “This War On COVID Will Never End”

Quinn: "This War On COVID Will Never End"

Authored by Jim Quinn via The Burning Platform blog,

“Do not be deceived: God cannot be mocked….

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This article was originally published by Zero Hedge
Quinn: "This War On COVID Will Never End"

Authored by Jim Quinn via The Burning Platform blog,

“Do not be deceived: God cannot be mocked. A man reaps what he sows. The one who sows to please his sinful nature, from that nature will reap destruction; the one who sows to please the Spirit, from the Spirit will reap eternal life. Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up.” 

– Galations 6

Via the CDC

“I have certain rules I live by. My first rule: I don’t believe anything the government tells me. Sooner or later the people in this country are going to realize: the government does not give a fuck about them. The government doesn’t care about you, or your children, or your rights, or your welfare, or your safety. It simply doesn’t give a fuck about you. It’s interested in its own power. That’s the only thing keeping it and expanding it wherever possible.”

– George Carlin

In a previous article – Cascade of Consequences – I attempted to make the case the ruthless billionaire oligarchs and their bought off lackey whores in government, media, academia, corporations, the military industrial complex, sickcare industry, and  Federal Reserve have used this engineered covid pandemia to further consolidate and expand their wealth, power and control over a frightened, willfully ignorant, compliant populace. In the month since that article the “powers that be” have ramped up the fear, increased their coercive mandates, reinstated mask mandates, and instituted vaccine passports in liberal bastion cities across America.

I see these ham-handed authoritarian dictates as a sign of weakness and their false narrative falling apart. A sense of desperation wafts from the halls of power in DC, corporate executive suites, and left-wing media outlets on the coasts who have overplayed their tyrannical hand. Resistance is building among an irate minority of critical thinking individuals who follow George Carlin’s first rule.

Their narrative is unraveling as everything they have avowed to be true is being revealed to be false. No matter how many truth tellers Facebook, Twitter and Youtube censor, de-platform, and suppress, there are many more stepping up and destroying their mendacious provably false plot line. Despite half the country, indoctrinated by the government education system to feel rather than think, still shuddering in fear despite being double jabbed, voluntarily locked down and masked, the global elite game plan is self-destructing under the weight of an avalanche of deceptions.

Despite an all out authoritarian fear campaign, to mandate these unproven dangerous gene therapies disguised as vaccines, orchestrated by our corrupt political class, bought off medical industry, Big Tech censorship media outlets, woke mega-corporations, cowardly universities, and left wing fake news propaganda outlets, more than 40% of the population is resisting this tyrannical medical apartheid.

This past week had a surreal quality as false narrative after false narrative was annihilated by unequivocal facts presented by a minority of truth-seeking bloggers, uncaptured doctors (Robert Malone, Pierre Kory, Martin Kuldorff), and a few remaining real journalists (Glenn Greenwald, Tucker Carlson, Alex Berenson, Joe Rogan). The mainstream media and their social media co-conspirators are nothing but highly compensated mouthpieces for the Deep State, Big Pharma, and the billionaire oligarchs calling the shots.

The resistance is coming from alternative media websites, independent bloggers, and individuals seeking the truth. Online communities of like- minded individuals are the modern-day Committees of Correspondence, as we head towards inevitable conflict. A revolution is in the offing and those trapped in their own cognitive dissonance trance, with a dash of normalcy bias, are going to be shocked out of their self-induced stupor by the suddenness and extreme violence of the push back set in motion by the power elite.

These sociopath global tyrants actually believe they can dictate and control the actions of seven billion human beings through their capture of politicians, the military, universities, corporations, the banking system, the media and now the medical industrial complex. The maniacal determination of those controlling the levers of power behind the scenes to coerce these “experimental” gene therapies upon the populations of the developed world should make any critical thinking person pause and ask why.

This flu has a 99.7% survival rate and has a fatality rate less than the annual flu for those under 21. But universities are mandating vaccination to attend their $60,000 per year woke indoctrination centers to get a degree in gender fluidity studies. Meanwhile, with vaccination rates of 98% on campuses, “cases” from the worthless recalled (as of 12/31) PCR test are surging. The Big Pharma captured vaxx cheerleaders in the medical and media industry do not allow the facts to interfere with their scripted narrative. Their solution – vaxx harder and blame those who choose to let their immune systems do their job for the “surge” in cases. Why not go with the Big Lie – it has worked so well thus far.

The truth is cases peaked in early January at 260,000 per day. Miraculously, with virtually no one vaccinated, daily cases fell by 60% in the next month to 110,000 per day. By early March, with only a 10% national vaccination rate, daily cases fell by another 40% to 64,000, down 75% from the January peak. The vaccine had absolutely nothing to do with this decline in cases. By early summer this pandemic had lost its mojo. The threat of a return to normal was unthinkable to the power elite.

Their master plan called for the vaccination of all. But less than 50% of the adult population had succumbed to the fear propaganda campaign. It was time for Biden and his controllers to turn up the heat on corporations, hospitals and universities to enforce vaccine mandates by either bribing them with Federal funds or threatening to withhold Federal funds. Money talks. The un-Constitutional demand that employees and students inject themselves with an untested chemical concoction to retain their jobs or get an education is legally, morally, and medically unethical, violating the Nuremberg Code.

They invented their new variant – Delta – and rolled out our present-day Mengele, mass murderer Anthony Fauci, to lie, obfuscate, and instill fear in his feeble-minded worshipers. Day after day Fauci appeared on the fake news networks promoting his new variant, which many renowned doctors, including one of the inventors of the mRNA vaccines – Dr. Robert Malone, theorize has been created and made more infectious by the vaccines. Are they that diabolical or just plain stupid? Natural immunity through infection has proven to be 20x as effective as the vaccines.

With a huge surge in testing, they were able to generate an increase in cases, but with 50% less hospitalizations and deaths, than when cases were at the same level in January. And now the cases have peaked on the same timeline as India and the UK experienced in June/July. This explains the desperate nature of their actions, as their window of opportunity is closing, and their fear narrative unravels. There are millions of people beginning to make a stand against the government and employer authoritarian mandates.

This past week has not been a good one for the purveyors of pandemia, as their story line collapses under the weight of their duplicity. The entire case for vaccinations (not the revisionist history case being made today) was they were 96% effective in keeping you from contracting the Covid virus. In January that was what we were told by the “experts” like Fauci and Walensky. They did not tout the vaccines as a way to reduce the symptoms when you still caught it, after being vaccinated.

The surge in cases was declared to be a “pandemic of the unvaccinated” in the shame campaign peddled by the fake news media and government apparatchiks spouting provable falsities. It seems Israel has become ground zero in destroying the globalist narrative. As the first country to mass vaccinate, with over 84% fully vaccinated, how could 86% of all the cases in July be among the vaxxed if the vaccinations work? And the tripe about the cases not being as severe has been destroyed, as the vaxxed are being hospitalized and dying too. Whenever you see the MSM using the term “rare” you can be sure they are lying.

A critical thinking person might wonder which country on this chart is fully vaxxed and which country has very few vaxxed, but distributed ivermectin in mass quantities. The powers that be do not want people to see this chart. If it is posted on Twitter or Facebook, the odds of a permanent ban are high. Facts and truth are treason in an empire of lies.

If you really want to make a vaxx proponent’s head explode, bring up the country that did the opposite of the Soros, Gates, Schwab authoritarian lockdown formula – black sheep Sweden. They never locked down. They never mandated masks. They never closed schools. They never closed businesses. They have not pushed vaccines on those who choose not to vaccinate.

Cases in Israel with mask mandates and vaccine passports are 1,191% higher than Sweden where no one is wearing masks and there are no vaccine passports. How inconvenient to the establishment narrative. Since they can’t deny these facts, they just don’t allow Sweden and India to be discussed. Silence is complicity.

The Joe Rogan saga has again shattered their plot line of the covidian cultists. He had infuriated them previously by telling his young audience they don’t need to be vaccinated. Their survival rate is 99.9975%. The cost/benefit analysis clearly comes down on the side of not getting vaxxed. The fifty-four-year-old un-vaxxed Rogan caught covid and treated himself with monoclonal antibodies, ivermectin, Z-Pak, prednisone, an NAD drip, and a vitamin D drip. He fully recovered in three days.

This was after a full-court press of misinformation from the FDA, Big Pharma media whores, and Silicon Valley censorship police about ivermectin being a dangerous cow and horse medicine. Despite this safe, life saving drug being used by humans for decades and winning a Nobel prize in medicine for its inventor in 2015, it had to be discredited in order to keep the vaccine train chugging along. The 63 studies proving its efficacy in drastically reducing the impact of covid had to be demeaned and derided. When you see this level of vitriol, you know the opposite must be true – time to buy as much ivermectin as you can.

The only thing that infuriates a vaxx disciple more than Sweden or Joe Rogan is the name Ron DeSantis. He has continuously pushed back on the covid fear narrative, telling Fauci and Biden to shove their mandate bullshit and masking of children with no danger from covid. They were cheering on the surge in cases, praying for a mass casualty event in Florida to discredit DeSantis, as he appears to be the front runner in the 2024 presidential race against Kackling Kamala.

Oops. It seems cases in Florida are crashing, down almost 50% in three weeks. There goes the Deathsantis memes on twitter. The lefty control freaks are in a full, frothing at the mouth, frenzy of hate reminiscent of Orwell’s Two Minutes Hate in which they vent their existential anguish and personal hatreds towards their politically expedient enemies – the un-vaxxed. Meanwhile, in the leftist bastions of Oregon and Hawaii, with high vaccination rates and mandatory masking, cases are soaring to all-time highs. You don’t hear that news from Maddow or Acosta.

Now universities are back in session, with 95% or more of their campuses vaccinated, and cases are exploding higher than last year at this same time. How could this be if vaccines work? The vaxx nazis are losing the high ground rapidly. The vaccines do not keep you from contracting covid. They do not keep you from spreading covid. They do not reduce the viral load if you get covid. They don’t keep you from being hospitalized from covid. They don’t even ensure you will not die from covid.

As the narrative police like to say, it is rare that a vaxxed person dies from covid or the vaccine. It is rare to have an adverse reaction to the jab. Of course, there have been more deaths and adverse reactions to these vaccines in eight months than all vaccines combined in the last forty years. So there is that.

The last I checked it was rare to die from covid, unless you are really old and already sick with some other fatal ailment. Only 6% of all the covid deaths were from covid alone. I would classify 40,000 deaths in a population of 330 million to be pretty rare, and by any reasonable assessment should not have invoked a planetary lockdown and mass vaccination of billions of people.

This war on covid is no different than our previous war on poverty, war on drugs, and war on terrorism. All they do is give government more power over our lives, restrict our freedoms, strip our liberties, and abscond with more of our hard-earned dollars. As Orwell foresaw, these wars are never meant to be won, just as Big Pharma never wants to cure any disease.

“The war is not meant to be won; it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance. … The war is waged by the ruling group against its own subjects and its object is not the victory over either Eurasia or East Asia, but to keep the very structure of society intact.” 

– Orwell, 1984

This war on covid will never end. There are a myriad of Greek letters once they have milked Delta dry. Personally, I can’t hear Delta and not be reminded of Animal House and Dean Wormer telling Flounder “Fat, drunk and stupid is no way to go through life, son.” If I could give advice to the millions of people who have been deceived by this eighteen-month exercise in dictatorial government tyranny by paraphrasing Dean Wormer, it would be, “Fearful, deluded and willfully ignorant is no way to go through life, people.”

We are approaching a point of no return. If we don’t resist now, we may never get another chance. As the authorities push the limits of their power and trash what remains of our Constitution, we should heed the words of Aleksandr Solzhenitsyn:

“And how we burned in the camps later, thinking: What would things have been like if every Security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive and had to say good-bye to his family?”

Fauci is already prepping the ignorant masses for the double deadly, extra potent, vaccine resistant Mu variant. They are already doing focus group studies to best scare the bejeezus out of the most people. They must keep the vaccine machine rolling. But why? What is their end game? Australia and New Zealand appear to be the testing ground for turning countries into techno-pharma gulags where you will get your quarterly booster and like it – or else.

This concocted global health scare over a relatively non-lethal virus has been used to destroy our existing economic system and replace it with a Fed created digital currency, universal basic income for the plebs, mandatory bio-surveillance by Big Tech on behalf of the government surveillance state, a Chinese-like social credit system based on your willingness to do as you are told, and a never ending stream of obscene profits for Big Pharma and the oligarchs pulling the levers. You will own nothing, cower in fear, obey, consume and be happy. This is the inconvenient truth, but I already know most will line up for their jabs and the reassuring lies of their masters.

I suppose myself and a few others will stay in the inconvenient truth line until this mass deception and a financial system, built on a foundation of sand as a hurricane approaches, suddenly collapses, because an unsustainable system will not be sustained. I’m not a team player. I don’t follow the crowd. I have a funny thing I do. I think for myself. I invoke Carlin’s first rule and add a second rule.

I don’t believe anything my government says and I never believe anything emanating from the talking heads and vacuous bimbos pretending to be journalists in the legacy corporate media. By disregarding everything these propagandizers spout, I am able to maintain my independence, individuality, and integrity.

“I don’t like ass kissers, flag wavers, or team players. I like people who buck the system. Individualists. I often warn people: Somewhere along the way, someone is going to tell you: ‘There is no I in team.’ What you should tell them is: ‘Maybe not. But there is an I in independence, individuality, and integrity.’” 

– George Carlin

“Political correctness is America’s newest form of intolerance, and it is especially pernicious because it comes disguised as tolerance. It presents itself as fairness yet attempts to restrict and control people’s language with strict codes and rigid rules. I’m not sure that’s the way to fight discrimination. I’m not sure silencing people or forcing them to alter their speech is the best method for solving problems that go much deeper than speech.” 

– George Carlin

Everything that has reared its ugly head in the last two years, from this covid scheme to force injections into every human being, to the woke mantra being forced down our throats by Hollywood weirdos, to BLM and Antifa terrorists being loosed on our streets, to a presidential election being stolen through the collusion of the Deep State and Big Tech, to the anti-racist lies being peddled to school children, to gender misinformation and glorification of the abnormal and freaks of society, to a military purging itself of normal white males, to demolishing nation states and replacing them with globalist rule, has been part of a larger plan.

The Great Reset is real. They want to tear our society apart to build it back into a dystopian techno-gulag where the few rule over the many. We will not vote our way out of this. Saying just wait until 2022 or 2024 elections is delusional thinking.

I’m not sure how these vaccines play into the broader plan, but when a sociopath like Gates, who has pushed for global population control for decades, is the leading proponent and funder of these vaccines, you should be concerned. Several prominent physicians have hypothesized that ADE (Anti-body Dependent Enhancement) will negatively impact the health of the vaxxed this Fall, as they enhance new variants and create stronger respiratory diseases. We shall see. Stay tuned.

With inflation now raging out of control in a “transitory” manner, financial markets stretched to the outer limits, debt being created by the Fed and US Treasury at a rate of $350 million per hour, and Congress about to ramp up spending at hyper-speed, a financial crisis of epic proportions looms like storm clouds on the horizon. I see no way out of the predicament we’ve allowed ourselves to create. I don’t see how this teetering edifice of debt, deceit and delusion holds together until the 2022 mid-term elections.

Yeats Second Coming has arrived. Things are falling apart, the center cannot hold, and anarchy will be loosed upon the world. They have planted seeds of discontent and will reap a whirlwind of unintended consequences. A malevolent darkness envelopes our world. I am haunted by the possible dire outcomes of this Fourth Turning. We can’t let the sociopaths destroy our world.

“As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust. If so, this implosion will strike financial markets—and, with that, the economy.”

“This Fourth Turning could mark the end of man. It could be an omnicidal Armageddon, destroying everything, leaving nothing. If mankind ever extinguishes itself, this will probably happen when its dominant civilization triggers a Fourth Turning that ends horribly. For this Fourth Turning to put an end to all this would require an extremely unlikely blend of social disaster, human malevolence, technological perfection, and bad luck.” – Strauss & Howe – The Fourth Turning

*  *  *

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Tyler Durden Tue, 09/07/2021 - 17:20

Economics

The Fed Has Liquidated Its Entire Corporate Bond Portfolio

The Fed Has Liquidated Its Entire Corporate Bond Portfolio

Last March capital markets as we once knew them ceased to exist: that’s when the…

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The Fed Has Liquidated Its Entire Corporate Bond Portfolio

Last March capital markets as we once knew them ceased to exist: that's when the Powell Fed crossed a Rubicon even Ben Bernanke dared not breach and announced that it would start buying single-name corporate bonds and ETFs under its Secondary Market Corporate Credit Facility (SMCCF) with both IG and HY names eligible for purchases in the process effectively nationalizing the corporate bond market.

Purchases under this facility, which were meant to reassure and stabilize the corporate bond market continued until December, at which point - with stocks at new all time highs - the Fed announced the cessation of its corporate bond purchases and entered the beginning stages of fully winding down the Secondary Market Corporate Credit Facility (SMCCF).

At the time, some market participants worried this might translate into a reduction in liquidity, but with purchases amounting to less than $500 million per week since July 2020 ...

... and an overall portfolio holding of just $14 billion, it was unlikely that any material deterioration in market microstructure would take place.

And after all, the Fed's purchases were merely symbolic: the Fed never wanted to become as BOJ-like whale in the corporate bond market, but merely to signal to the world that it would not allow bonds to drop further and would, if required, buy more. Of course, it was not required as the mere guaranteed backstop by the Fed was sufficient to the get dip buyers out in force.

And sure enough, fast forward to the first week of September, when the Federal Reserve has now been able to sell-off the entirety of its corporate bond portfolio with no effect on the market’s microstructure; curiously this also comes at a time when the latest TIC report showed that in Julye foreign investors were net sellers of corporate bonds for the first time this year.

Yet while the SMCCF has now been closed, we continue to think its legacy will live on as a part of the Fed’s policy toolkit with investors forever expecting its reactivation when another macro shock occurs and sends large gyrations throughout corporate credit markets. Or rather "markets" because a world where corporate bonds have no downside is just as centrally-planned as anything China could come up with, and while stonks continue to ramp up for now, there will come a time when everything will crash again and the Fed will once again remind us just how fake price discovery is in a world where the only thing that matters is the Fed's balance sheet as Citi's Matt King put it so elquqently in his latest report:

Some of the most interesting research of recent months concerns the “price inelasticity” of markets. Interesting, that is, to academic economists and monetary policymakers. For anyone who’s actually tried trading in markets over the past decade, the idea that prices might be determined more by flows and liquidity and certain large, price-insensitive buyers than by a rational discounting of fundamentals sounds less like a revolutionary insight and more like a statement of the blindingly obvious

As one investor put it to us recently, central bankers seem to be the only market participants left who fail to appreciate the stranglehold their policies have over asset prices: everyone else gave up looking at fundamental value in favour of obsessing over the minutiae of central bank balance sheet line items a long time ago.

While we are currently on autopilot, we expect to be reminded quite soon just how critical the Fed's liquidity injections are for a binary world where the alternatives are simple: either the Fed prints hundreds of billions every quarter bringing the fiat system ever closer to its death, or we crash.

Tyler Durden Sun, 09/19/2021 - 19:30
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Economics

Former Lehman Trader On “China’s Lehman Moment”

Former Lehman Trader On "China’s Lehman Moment"

By Larry McDonald, former trader at Lehman Brothers, author of "A Colossal Failure of Common…

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Former Lehman Trader On "China's Lehman Moment"

By Larry McDonald, former trader at Lehman Brothers, author of "A Colossal Failure of Common Sense" and publisher of the Bear Traps Report

My name is Larry McDonald, that is the UK cover above. In the years before the failure of Lehman Brothers, I ran a successful distressed credit business at what was the 4th largest investment bank in the U.S. – becoming one of the most consistently profitable traders in the fixed income division. In late 2008, early 2009 – with Patrick Robinson, we penned “A Colossal Failure of Common Sense” – the Lehman Brothers inside story. At least once a month, I tell my wife while wearing a hopeful smile —“if we sell a million books — we´ll break even on our Lehman stock.” On September 15, 2008 – it all came crashing down in the largest bankruptcy in U.S. history. Known as, “the week that changed the world,” a very painful experience indeed. I was down on the mat looking up at the referee as he delivered the count. It was one of those fateful moments most of us face. Staring into the abyss, drenched in blood-curdling uncertainty, there are times in life when we must get up. Even when it looks like all is lost in a valley of no hope.  Ultimately, the lucky ones learn there are valuable lessons in re-invention. The last 13 years have been a breath of fresh air. 

Life's Lessons

One of the important lessons in our book comes down to how to use leading credit risk indicators? In the 2007-2010 period, the global credit risk epicenter was obviously inside the US. In the 2011-2013 period, Europe´s banks were the focus during the Grexit panic. In recent years, Asia has become far more interesting, a new epicenter has been formed.

As far back as the spring of 2007, U.S. banks began to underperform financial institutions in Asia. By now, everyone knows most of the subprime mortgage credit risk was inside the USA with domestic banks more exposed than other banks around the world. Notice above, Goldman Sachs (purple above) 5 year CDS (the cost of default protection on the bank), began to meaningfully divergence from Standard Chartered. Standard Chartered PLC is an international banking group operating principally in Asia, Africa, and the Middle East. The company has far more credit risk exposure to China – Asia than U.S. banks. It is clear above, more than 12 months prior to Lehman´s failure, banks in the USA were dramatically underperforming from a credit risk perspective. In other words, in 2007 – the cost of purchasing credit default protection on Goldman Sachs was far more expensive than the bank's Asian peers. Indeed, elephants leave footprints – when large hedge funds see credit risk – they start placing bets months if NOT years before a credit event. The credit market sniffed out Lehman´s demise months BEFORE equity investors got the joke.

Now, let us think of Asia in the summer of 2015. The Fed was attempting “liftoff” – their first rate hike since 2004. Finally, in December of 2015, the Fed hiked rates 25bps for the first time in eleven years. In the process, as the central bank prepared the world for the now-infamous rate hike. In just six months the dollar ripped from 80 (July 2014) to 100 (March 2015). Emerging markets were in flames, the Fed had triggered a global dollar crisis. More than $1T left China (the country´s fx reserves were on the run). The world was in a real currency devaluation panic, with Asia wearing the epicenter title this time around.

Credit Risk, the Asia Epicenter 2015-2021

During 2015, the China currency devaluation crisis picked up steam in September and came to risk climax in Q3. But months before, the cost of default protection on Asia´s Standard Chartered began to sharply diverge from Goldman Sachs in the U.S. Once again, credit risk was screaming “there is a problem” in May 2015, by September the S&P 500 lost 16%. In 2007, Goldman’s credit risk was so telling. Then, eight years later – banks in Asia would wear the credit risk epicenter title. Fast forward to 2021, Evergrande headlines are all the media rage, especially with the Lehman, the lucky 13th anniversary this week.

But, what are credit markets telling us this time? As you can see above – far right. Credit risk is calm on Asia banks with exposure to China, no difference to speak of. Central bank liquidity is so abundant, there is NO way Lehman would have failed today. Free markets no more. Adam Smith has one (invisible) hand tied behind his back. We have unintended consequences as far as the eye can see with Uncle Sam’s fingerprints on every street corner.

The Trillion Dollar a Day Gravy Train

The flood of cash in U.S. interest-rate markets pushed the amount of money that investors are parking at a major central bank facility to yet another all-time high – every day a new high indeed. In recent weeks, every day more than Eighty participants have been lining up for nearly $1.2 trillion at the Federal Reserve’s overnight reverse repurchase agreement facility. Large counterparties like money-market funds can place cash with the central bank. This easy money gravy train is hiding the next Lehman Brothers, all embraced in deception. In terms of bond yields, let’s look around the planet. In the U.S., close to 90% of the junk bond market is trading below CPI inflation of 5.3% (highest since the early 90s).

Over the last 50 years, the highest this number ever reached was 7%. China’s high yield credit market is just 8-10% away from its March 2020 lows in bond prices – highs in yields. All of which begs the question – How can the U.S.-centric JNK Junk Bond ETF yield 4.4% while China´s junk bonds are offering 10-12% cash flows?! Always with an important lens – our friend, Jens Nordvig reminds us – “foreign involvement is small in China. It is true that the high-yield bond market has a sizable USD component (mostly foreign). But relative to the US, where subprime exposure was sold around the world, it is a much more local (controllable) system.” It has been clear for months, there is Evergrande credit contagion – it’s just inside China at the moment (as for how Evergrande contagion could spread to the rest of the world, read "This Is How Contagion From Evergrande's Default Will Spread To The Rest Of The World").

Security personnel forming a human chain as they guard Evergrande's headquarters, where people gathered to demand repayment of loans and financial products in Shenzhen on Monday

An Unsustainable Reach for Yield Comes with a Price – It is NOT FREE

Each year that goes by while central banks force investors to reach for yield – any paltry plus return on capital will do these days – complacency builds over time to an extreme – dangerous level.  Mark my words – there were dozens of Bernie Madoffs, Al Dunlaps, and Jeff Skillings sipping mint juleps in the Hamptons and the beaches of the south of France this summer. Central bankers are these guys’ best friends, that is the reality no one wants to admit. As long as central banks do NOT allow the cleansing process of the business cycle to function over longer and longer periods of time – credit risk will continue to build under the surface. Each month, week, and year we allow this charade to move forth – the corners capital flows into are deeper and deeper soaked with moral hazard toxicity. Today´s players on the field make “Dick Fuld” – former Lehman CEO –  look like a choir boy walking out of Sunday mass. The coming event will dwarf what was – “A Colossal Failure of Common Sense.”

Tyler Durden Sun, 09/19/2021 - 19:00
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Economics

Hedge Fund CIO: The 60:40 Portfolio Is Forever Broken, What Happens Now

Hedge Fund CIO: The 60:40 Portfolio Is Forever Broken, What Happens Now

By Eric Peters, CIO of One River Asset Management

Inference

Allocators…

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Hedge Fund CIO: The 60:40 Portfolio Is Forever Broken, What Happens Now

By Eric Peters, CIO of One River Asset Management

Inference

Allocators can no longer depend on bonds to offset the equity risk in their portfolios, said the CIO to his team, stating the obvious. We can debate whether the Fed will normalize interest rates in the coming decade – and I sincerely doubt they can – but we know for sure that they will not be able to do that in coming few years without causing a simultaneous stock and bond market collapse. We should be confident that the Fed won’t do that. So we can lean on that assumption in our portfolio construction. But let’s think about where else this may lead us.

In previous cycles, when equities were at records, bonds offered reasonable returns relative to today, said the CIO, still discussing markets with his team. For allocators who wanted to play it real safe, they could buy short-dated bonds and at least break even after accounting for inflation. But now, hiding at the short end guarantees deeply negative real returns. Some investors are willing to lose money for short periods to mitigate bigger risks elsewhere in their portfolios. But almost none are prepared to lose money in a trade that appears structural. And the starting point is a portfolio overallocated to bonds and cash.

We see increasing interest in diversifying solutions from the world’s largest allocators, continued the CIO. It’s far more demand for such strategies than we’ve ever seen. The common driver is these investors recognize the 60:40 portfolio no longer works. Owning bonds at deeply negative real rates guarantees a loss. And in a crisis, bonds no longer provide material positive convexity. But investors still need to take substantial equity risk to generate their required returns. So they are looking for unique ways to replace their bonds - and there are few.

"If we list every firm in the world that offers diversifying strategies and estimate their combined capacity to deliver the convexity that bonds offered in the past, what would we conclude?" the CIO asked rhetorically. The answer is that there is a small fraction of what is needed to do the job. So what does that tell us about what may happen? A decent number of passive investors will stick with the 60:40 even if its broken. Proactive investors will replace their bonds with more unique diversifiers.

But there’s another possibility.

Some investors may conclude they are unwilling to suffer deeply negative real returns. They will sell their bonds. Instead of buying unique diversifiers, they may instead go all-in and reinvest the proceeds from their bond sales into equities (public, private, venture). This inflow will push stock prices higher. Investors that pursue this strategy will initially outperform their peers, which will in turn pressure their competitors to pursue it lest they be left behind. Such a process holds the potential to be highly reflexive. Prone to wild moves. Unprecedented boom, perhaps. Bust.  

What’s the chance such a process will unfold? asked the CIO. In a world with unprecedented bond supply, negative interest rates, high inflation, and the reluctance of central bankers to normalize monetary policy, I would assign a probability of at least 25%. Possibly higher. Perhaps the process is already underway. If it takes hold, it will first appear as a stable paradigm. Over time it would grow increasingly fragile. The Fed would fear financial instability but would be extremely reluctant to intervene. Eventually, it would be forced to.

Anecdote:

“There are numerous ways to look at current circumstances in an area of change,” said the Chairman. “When analyzing an area, it’s helpful to consider at least a few, and explore how we develop our various opinions,” he continued. “What we often discover is that our perspectives are path dependent. How we got here, dominates how we view the future.” We were discussing blockchain technology, its power to transform finance.

“As a thought experiment, picture a world where applications for blockchain technology were developed at one of our largest banks. They were patented, licensed, and then utilized by the banking system to increase the efficiency of settlement, reporting, operations, value transfer, custody, financial stability, anti-money laundering, crime enforcement, etc.” I nodded. “The industry raced to apply the new technology fully, tokenizing all assets so they could move through the system, comparatively free of friction.” Global financial assets are an estimated $223trln (including non-financial wealth an estimated $418trln).

“Picture that the advance to this tokenized world stripped out market inefficiencies, waste, middlemen, rent seekers in the largest, most liquid financial markets. This created industry disruption, winners, losers, with most of the benefits ultimately accruing to society. And the innovators who brought that world to life were widely celebrated,” said the Chairman.

“That would have been the “incumbent markets first” path. And imagine on that path, all sorts of innovation beyond our core markets inevitably popped up. Private sector creativity was unleashed, and cryptocurrency was one of many novel creations in that world.” I agreed this was easy to visualize. “But that world doesn’t exist. The real journey didn’t end with a novel cryptocurrency, it started with one, and this no doubt shaped opinion in ways that led to a much wider, more emotional spectrum of views, including zealous, often blinkered, pursuit of change as well as stiff, often blunt, public and private sector resistance to so much of what blockchain has to offer,” he said.

“It appears many opinions on this issue were formed not on the merits of the technology, but rather, they were swayed by the path. In my experience the path matters a great deal in the short term but not over decades, those kinds of polar opposite opinions on the future fall away or are moderated by tangible successes and failures,” said the Chairman.

“History tells us that those who best adapt to change have a sense of where various paths converge over time. The more and more quickly incumbent markets adopt blockchain technology the more quickly that convergence.”

Tyler Durden Sun, 09/19/2021 - 18:00
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