World's Most Bearish Hedge Fund Manager: "If It's In Zerohedge, Then Central Banks Have Already Devised A Plan To Stop If From Happening"

From Zero Hedge:

There are two notable highlights in the latest note from the CIO of Horseman Global, Russell Clark, the man we dubbed years ago as the "world's most bearish hedge fund manager" (a name that appears to have stuck) due to his penchant to run a net short book for the past 8 years (see chart below).

The first is that in the same vein as Paul Tudor Jones, Clark - who reports that in April his hedge fund was down 7.1% bringing the YTD gain to 18% - is rotating out of deflation and into inflation: "The conditions for both good and bad inflation are now in place." This may explain why Clark has pushed up the net short position of his hedge fund from -100% as recently as late 2019 to just -39.15%, the lowest in a year and a half.

It also explains why Horseman has turned decidedly bullish on beaten down "value" sectors such as oil exploration and mining & metals, while boosting his short in rate-sensitive sectors such as real estate and utilities. And while still expecting pain for US stocks, Clark is now very bullish on China and Russia.

... with Chinese and Russian companies making up most of his top 10 positions. 

As Clark summarizes it:

So what are we doing? We are shorting winners, and buying losers. China and Russia — buyers. US — sellers. LNG and Cement - buyers. Civil aviation, Utilities and Private Equity — sellers. We still hate the US dollar — but we are now willing to shift into currencies other than Swiss Franc and Yen.

* * *

His second point - which we find notable for various reasons - is his explanation how and why central banks tend to interfere at just the right times to spoil his bearish trades:

The other question I get is about autocallables and clearinghouses. This trade was about to pay off in March, and the central banks bailed them out. Which is their prerogative. But I think the thing I take away from that is that Central Banks read Zerohedge too. If it's in Zerohedge, then they have already devised a plan to stop if from happening. The irony of life is that the existence of Zerohedge make Zerohedge's existence unnecessary, in some sort of strange financial existentialist conundrum. 

Which probably begs the question: can Zerohedge's stay in existence longer than central banks can print money in their pursuit of confidence-inspiring fake markets?

The full April note to investors from Horseman is below:

Your fund lost 7.06% in April. Losses came mainly from the short book.

Due to Covid-19, we had our first ever webcast in April. It was well received and a recording is available via our website. If I had to characterize the calls I got after the webcast, most of them were along the lines of, "Hey Russell, you sound like you expect inflation". And I guess I do.

Many, many years ago, from 2009 to 2010 I tried to fight the inflation story that the market was pricing, as it made no sense to me. Commodity prices were high, supply was coming on line, the US dollar was weak and likely to strengthen, and China was heading for a downturn. It made the years from 2009 to 2011 very difficult for me, but eventually when the cycle turned, we were able to make good money. I remember I used to get a lot of hostility to the deflation views back as late as 2014. But that was then, and this is now.

All the reasons that made me believe in deflation for nearly 10 years, do not really exist anymore. China looks okay to me, and potentially very good. Commodity supply is getting cut at a rate I have never seen before. The US dollar is strong but will likely weaken from here. And it is clear to me Western governments will only ever attempt fiscal austerity as a last resort, not a first. The conditions for both good and bad inflation are now in place. When I look at markets, they are pricing in deflation as far as the eye can see. 10 year UK gilts at 0.2%? That will be a hard NO from me!

The problem for markets is that deflationary trades dominate everything. If you believe in deflation, you hate banks and love private equity. If you think we are on the cusp of depression, then you love gold and hate copper. If you think commodity prices will be weak forever, then you hate Aussie dollar and love Yen. In equities you will pay up for secular growth (10 times sales? Bargain!) and hate old economy stocks (0.3 times book for stocks like Gazprom — not cheap enough!).

"But Russell," I hear you say, "we have so much debt, and China has debt too, and demographics all say deflation". Yes, true now, and true 10 years ago. But as I pointed out in my webcast, data from ASEAN has been strangely good recently, and makes me wonder if China's Belt Road Initiative is starting to bear fruit. Is it possible, that by investing heavily in its near neighbors China has managed to create export markets for itself? Given that it successfully penetrated western markets, and has had good success in building infrastructure at home, it certainly seems possible to me. If my analysis is correct, then in one or two years time every investment bank will be talking about the opportunity of approx., 3.5bn people industrializing (China 1.4bn, India, 1.4bn, Indonesia 0.25bn, Pakistan 0.2bn, Bangladesh 0.15bn, Vietnam 0.lbn, rest of MEAN 0.3bn).

The risk of buying 10 year gilts here versus, say a Gazprom, well it goes without saying which one looks better. But the funny thing is that, most people are now committed to investment strategies that require yields to stay low. Can Private Equity make money in a rising rate environment? Almost certainly not! What happens to equities with rising rates, and the month end rebalance to sell equities to buy bonds? If you started getting a decent yield on bonds, would you pay 10 times sales for a loss-making tech stock? I doubt it...

The other question I get is about autocallables and clearinghouses. This trade was about to pay off in March, and the central banks bailed them out. Which is their prerogative. But I think the thing I take away from that is that Central Banks read Zerohedge too. If it's in Zerohedge, then they have already devised a plan to stop if from happening. The irony of life is that the existence of Zerohedge make Zerohedge's existence unnecessary, in some sort of strange financial existentialist conundrum.

So what are we doing? We are shorting winners, and buying losers. China and Russia — buyers. US — sellers. LNG and Cement - buyers. Civil aviation, Utilities and Private Equity — sellers. We still hate the US dollar — but we are now willing to shift into currencies other than Swiss Franc and Yen. Given the unknowns of coronavirus, and other things, we are still net short. But the changing composition of the short book and long book means we have much less downside risk should economies normalise more quickly. In fact, if commodity prices move higher, and bond yields rise, the fund could do well. I think it would be a stretch to say we are long inflation — but I am definitely short deflation, which makes an awful lot of sense to me!

We wish Horseman Global - whose AUM is now down to just $130MM from $373MM a year ago - the best of luck in trying to outthink what Bank of America last week called a "fake market" in which "government and corporate bond prices have been fixed by central banks" so "why would anyone expect stocks to price rationally?"

"Like It Was Designed To Infect Humans": COVID-19 'Cell Culture' Theory Gains Steam

From Zero Hedge:

A scientific study which found COVID-19 may have been a "cell-culture" uniquely adapted for transmission to humans (more so than any other animal - including bats), is gaining steam.

The paper, currently under peer review, comes from Flinders University Professor Nikolai Petrovsky, who has spent over two decades developing vaccines against influenza, Ebola, and animal Sars. He says his findings allow for the possibility that COVID-19 leaked from a laboratory, according to Sky News.

"The two possibilities which I think are both still open is that it was a chance transmission of a virus from an as yet unidentified animal to human. The other possibility is that it was an accidental release of the virus from a laboratory," said Petrovsky, adding "Certainly we can’t exclude the possibility that this came from a laboratory experiment rather than from an animal. They are both open possibilities."

Professor Petrovsky, who is the Chairman and Research Director of Vaxine Pty Ltd, said COVID-19 has genetic elements similar to bat coronaviruses as well as other coronaviruses.

The way coronavirus enters human cells is by binding to a protein on the surface of lung-cells called ACE2. The study showed the virus bound more tightly to human-ACE2 than to any of the other animals they tested.

“It was like it was designed to infect humans,” he said.

“One of the possibilities is that an animal host was infected by two coronaviruses at the same time and COVID-19 is the progeny of that interaction between the two viruses. -Sky News

"The same process can happen in a petri-dish," added Petrovsky. "If you have cells in culture and you have human cells in that culture which the viruses are infecting, then if there are two viruses in that dish, they can swap genetic information and you can accidentally or deliberately create a whole third new virus out of that system."

"In other words COVID-19 could have been created from that recombination event in an animal host or it could have occurred in a cell-culture experiment."

In January, Petrovsky began modeling the virus to try and create a vaccine candidate. According to the report, he then began to explore "what animal species might have been involved in the transmission to humans" in order to better understand the origins of the virus, when he discovered how well it infects humans over other species.

"We found that the COVID-19 virus was particularly well-adapted to bind to human cells and that was far superior to its ability to bind to the cells of any other animal species which is quite unusual because typically when a virus is well-adapted to an animal and then it by chance crosses to a human, typically, you would expect it to have lower-binding to human cells than to the original host animal. We found the opposite so that was a big surprise," he said.

When asked why mainstream scientists are still clinging to the theory that the virus originated in a Wuhan wet market, he said that scientists "try not to be political" but that that scientists who support the lab escape theory risk negatively impacting their industry with tighter laboratory controls.

"For instance, if it was to turn out that this virus may have come about because of an accidental lab release that would have implications for how we do viral research in laboratories all around the world which could make doing research much harder," he said, adding "So I think the inclination of virus researchers would be to presume that it came from an animal until proven otherwise because that would have less ramifications for how we are able to do research in the future. The alternative obviously has quite major implications for science and science on viruses, not just obviously political ramifications which we’re all well aware of."

Petrovsky has called for immediate investigation now, and not when the pandemic is over - calling any delay in fact finding a "mistake."

"I’m certainly very much in favour of a scientific investigation. It’s only objective should be to get to the bottom of how did this pandemic happen and how do we prevent a future pandemic…. not to have a witch-hunt."

Global tech upgrade with a focus on Crypto happening now

From Zero Hedge:

Based on publicly available evidence, it’s clear a group of tech business leaders got together and hatched a plan to move the world’s system of Capitalism away from the Entrepreneur (risk) and into the hands of a few mega-powerful corporations who know best.

The idea is honorable enough, it’s not like they want to kill people.  But what investors want to know is what does this mean for the markets?  A huge swath of the economy isn’t going to recover.  But the mega-cap companies, they are going to get more mega, and mega, and mega.  What are some of the beneficial technologies that will dominate the next 10 years based on the reaction to COVERT-19 or the Wu Flu?

• Information Technology – All I.T. will benefit, but especially remote work solutions like TransparentBusiness
• Telemedicine – A major tech upgrade is going on to the healthcare system around the world
• Genetic Engineering – companies like Ginkgo Bioworks for example
• Cryptocurrency – The Chinese are sanitizing physical dollars because they can carry viruses and germs – this is the ultimate argument for a cash-less society.

But Bitcoin is not the only Cryptocurrency in the world.  There are other coins, educational projects such as News Crypto with it’s platform provides tools to help you trade other Crypto. According to a press release by the company:

"Our main focus is to solve the problem of finding the right information at the right time while being a trustworthy source and offer our members the best user experience possible. Therefore, we strive to give our members security and confidence at the highest level while providing them the best indicators and analysis on the market."

The question many investors have been asking is what companies are going to be “COVID positive” and what are not.  Many businesses are failing.  But some, such as Zoom and Amazon for example, are thriving.  Cryptocurrency certainly is going to get a boost from the circumstances – but which token or coin will thrive?  That’s what NewCrypto.io can help with – providing information in a fast paced market for those who are not familiar with the market.

Education and tools have always been the foundation to success.  Information is power, they say.  Well, this fits like a hat on a bald head.

So, are you ready for the big global tech upgrade?  Some people are starting to get creative with Coronavirus ‘hacks’ – but what’s really going on is a big upgrade to the global technology system.  That includes things like Microsoft digital hospitals, Amazon delivery systems linking every supply chain on the planet, and digital money (Cryptocurrency). 

So if you aren’t familiar with Cryptocurrency, News Crypto is a great place to start.  Because the future is about using the technology and mastering it.  If people think making stock picks or choosing the next “Bitcoin” is going to solve all your problems you are gravely mistaken.  Users need to embrace technology, understand it, and integrate it into their lives.  Basically, those who don’t participate in this upgrade are going to be societal outcasts.  We have two choices, to embrace transhumanism or to be left alone on the fringe of society.  As we are seeing a total transformation in how we work, live, eat, play, and recover. 

So it’s only logical that the first place to start your knowledge journey is about money, whether it’s using a cryptocurrency tool like News Crypto or reading a book like Splitting Pennies.  Mastery they say takes 10,000 hours – even if you aren’t a student or expert – if you use something like a technology for 10,000 hours you can consider yourself a master.

Last day to file claims and join the ANAB case 

Did The Lockdown Save Lives? No it didn't.

Authored by Jeffrey Tucker via The American Institute for Economic Research,

For two to three months, Americans have suffered the loss of liberty, security, and prosperity in the name of virus control. The psychological impact has been beyond description. We thought we could count on basic rights and freedoms. Then over a few days in March, it all ended in ways hardly anyone could believe possible. 

The manner in which governments dealt with foundational principles of modernity has been shocking. They put half the country under house arrest and managed every movement in disregard for the Bill of Rights and all legal precedent, to say nothing of the Constitution. It felt like a coercive unraveling of civilization itself. It’s like we are all waking up from a bad dream only to look around and see the wreckage that proves it was all real.

So how can we deal with this terror that befell us? One way is to figure out some aspect in which our sacrifice has been worth it, maybe not on net given the consequences, but surely some good has come out of this. If my email and feeds are correct, this is how many people have been justifying this. The psychology here is rooted in the sunk-cost fallacy: when you commit resources to something, even when it is a proven error, you tend to find justifications by doubling down rather than just admitting the mistake. 

Thus have many people written me to say that whether you agree or disagree with the lockdown, we have to admit that it has saved millions of lives. I always write back and ask how they know that. They send me a link to a projection – those very projections that presume all kinds of things about cause and effect that we cannot know and which have proven wrong time and again throughout this crisis. 

So let’s just grant that it is possible that lockdowns can be credited with slowing the spread of the virus, and perhaps preserving hospital capacity (which turned out to be unnecessary). Still, the virus doesn’t then get bored and move by to Wuhan or to another planet. It still sticks around, so at best, these measures only “prolong the pain,” in the words of Knut Wittkowski.

So even if lockdowns slow the spread in the short run, it’s not clear that they have saved lives from the coronavirus, even if it results in more death overall from deferred surgeries and diagnostics, suicides, drug overdoses, and depression. 

The trouble here is that certain features of this experience stand out to contradict the idea that lockdowns are saving lives over the longer term. In New York, two thirds of hospitalized patients with COVID-19 were in fact sheltering in place during the lockdown, essentially living in forced isolation. The lockdown didn’t help them; it might have contributed to making matters worse. 

Meanwhile, despite the media hate poured out against Florida’s youthful spring break revelers, where hundreds of thousands declined to socially distance at the height of the virus risk, I’ve yet to find a credible report of fatalities beyond two that were probably unpreventable. This is because the risks to the younger population are negligible, as we’ve known for a long time now. 

In many countries, 30% to 60% of excess deaths trace to nursing homes. These environments are neither locked down nor open; the virus spread among the most vulnerable population after even just one exposure due to possible negligence and distraction by mass frenzy. In the midst of locking down the whole world, and our politicians were consumed with the desire to enforce stay-at-home orders and forced separation, the population that needed the most care was neglected. Even worse, in New York, California, and New Jersey, nursing homes were forced to take in COVID-19 patients. 

One way we might discern whether and to what extent lockdowns have had any effect on infection and death is to examine the empirical case. Writing in the Wall Street Journal, T.J Rogers examined all the existing studies:

Do quick shutdowns work to fight the spread of Covid-19? Joe Malchow, Yinon Weiss and I wanted to find out. We set out to quantify how many deaths were caused by delayed shutdown orders on a state-by-state basis.

o normalize for an unambiguous comparison of deaths between states at the midpoint of an epidemic, we counted deaths per million population for a fixed 21-day period, measured from when the death rate first hit 1 per million—e.g.,‒three deaths in Iowa or 19 in New York state. A state’s “days to shutdown” was the time after a state crossed the 1 per million threshold until it ordered businesses shut down.

We ran a simple one-variable correlation of deaths per million and days to shutdown, which ranged from minus-10 days (some states shut down before any sign of Covid-19) to 35 days for South Dakota, one of seven states with limited or no shutdown. The correlation coefficient was 5.5%—so low that the engineers I used to employ would have summarized it as “no correlation” and moved on to find the real cause of the problem. (The trendline sloped downward—states that delayed more tended to have lower death rates—but that’s also a meaningless result due to the low correlation coefficient.)

No conclusions can be drawn about the states that sheltered quickly, because their death rates ran the full gamut, from 20 per million in Oregon to 360 in New York. This wide variation means that other variables—like population density or subway use—were more important. Our correlation coefficient for per-capita death rates vs. the population density was 44%. That suggests New York City might have benefited from its shutdown—but blindly copying New York’s policies in places with low Covid-19 death rates, such as my native Wisconsin, doesn’t make sense.

Turning to the international front, consider the work of Isaac Ben-Israel, head of the Security Studies program in Tel Aviv University and the chairman of the National Council for Research and Development. His detailed study from around the world compares locked down countries with those that stayed open. The Times of Israel summarizes his findings as follows. 

A prominent Israeli mathematician, analyst and former general claims simple statistical analysis demonstrates that the spread of COVID-19 peaks after about 40 days and declines to almost zero after 70 days — no matter where it strikes, and no matter what measures governments impose to try to thwart it.

Even a casual look at the open societies of Sweden and Korea – despite going too far in interventions – demonstrate that they experienced lower rates of death than Europe and the U.K. Even the World Health Organization has praised Sweden’s response. 

And a very careful empirical study of counterfactuals in Sweden concluded:

On the basis of the available data, we find that a lockdown in Sweden would not have limited the number of infections or the number of COVID-19 deaths. Theory suggests that this may be the result of people maintaining a larger social distance even in the absence of a lockdown—there could be, in other words, voluntary social restraint. Krueger et al. (2020), in particular, show this in the context of a formal model and suggest that this may be the relevant case for Sweden

Finally, we have a decisive study from Bloomberg that carefully charts lockdowns and death, concluding:

There’s little correlation between the severity of a nation’s restrictions and whether it managed to curb excess fatalities — a measure that looks at the overall number of deaths compared with normal trends.

Cause and effect are notoriously difficult to discern in human affairs on a macroscale. Even if it connects somehow to intuition that locking down keeps the virus away, they do not deal with the reality that the virus is still there, even if temporarily contained (which itself is arguable). 

Quarantines, lockdowns, shelter-in-place orders and so on reflect a premodern bias and an unscientific impulse to run away and hide, a method used from the ancient world through selective quarantines in some cities in 1918. Then we got smart, developed a modern theory of viruses (well explained here), and eschewed them in every pandemic since World War II. Then, somehow, and mysteriously, one century flipped to the next and we got dumb again and here we are. 

Did the lockdown save lives? It’s possible but not yet proven, and the evidence so far points to a negative answer. No matter how much we try to spin this in our heads, no matter how much we want to believe that something good has come out of this catastrophe, we are all going to have someday to deal with the terrible but likely reality that it was all for naught. 

I conclude with the words of the great physician who is credited with smallpox eradication, Donald A. Henderson (1928-2016). 

The interest in quarantine reflects the views and conditions prevalent more than 50 years ago, when much less was known about the epidemiology of infectious diseases and when there was far less international and domestic travel in a less densely populated world. It is difficult to identify circumstances in the past half-century when large-scale quarantine has been effectively used in the control of any disease. The negative consequences of large-scale quarantine are so extreme (forced confinement of sick people with the well; complete restriction of movement of large populations; difficulty in getting critical supplies, medicines, and food to people inside the quarantine zone) that this mitigation measure should be eliminated from serious consideration.

HALL Class Action Case 

China's Baidu Considers Delisting From Nasdaq; Stock Tumbles, Drags Chinese Megacaps Lower

From Zero Hedge:

The US can't kick out Chinese companies from US stock exchanges if said Chinese companies delist first.

That is probably what went through the head of Chinese search giant Baidu - metaphorically speaking - one day after the Senate passed a bill on Wednesday that could stop some Chinese companies listing on U.S. exchanges unless they follow standards for U.S. audits and regulations in an escalation of a long-running dispute between Washington and Beijing about giving U.S. regulators access to Chinese audits.

In response, Reuters reports that Chinese search engine giant Baidu is considering delisting from the Nasdaq and moving to an exchange closer to home "to boost its valuation"  amid rising tension between the United States and China over investments, three sources said. It wasn't clear how moving away from the biggest pool of megatech bubbles in the world, the Nasdaq, to some other exchange would "boost its valuation" but whatever: clearly the political feud between Trump and Xi is now translating into soft capital controls, and explains why Baidu stock tumbled on the news, sliding briefly below $100 after dropping first yesterday on news of the Senate bill.

The news also dragged lower other Chinese megatechs such as Alibaba and the broader China internet sector.

As Reuters further reports Baidu - one of China’s first US listings - is reaching out to "trusted advisers" to see how it could best be done if it were to proceed, including looking at issues around funding and any regulatory reaction although the discussions are at an early stage and are subject to change, said the sources, who spoke on condition of anonymity because the matter is not public.

The company pointed to comments by co-founder and CEO Robin Li who told the state-controlled China Daily on Thursday that Baidu was paying close attention to the tighter U.S. scrutiny of Chinese companies listed in the country.

“For a good company, there are many choices of destinations for listing, not limited to the U.S.,” he told the newspaper.

The sources also said that Baidu believed it was undervalued on the Nasdaq exchange in New York; which probably answers our question from above, if not actually "how" it is undervalued. In other words, Baidu wants to be closer to the chronically insane momentum-chasing gamblers that make up the Chinese investing class. 

Baidu’s shares have fallen more than 60% since their peak in May 2018 while the Nasdaq Golden Dragon China Index, which tracks Chinese firms listed on the U.S. exchange, has lost less than 10% over the same period. Baidu’s market cap just below $30 billion is only 5% of the market value of Alibaba, which has shares listed in Hong Kong and American Depository Shares listed in New York.

In January, Reuters reported that Baidu, Ctrip and NetEase have all held preliminary talks with Hong Kong Exchanges and Clearing about a possible secondary listing to follow Alibaba in establishing an investor base closer to China.

Securities Class Action Recover Investment Losses