Friday, December 11, 2020

Weekly Commentary: Unnecessary Head Scratching: Q3 2020 Z.1

Airbnb traded to $165 in early Thursday trading, more than doubling its Wednesday evening $68 IPO price - valuing the company north of $100 billion. After pricing its IPO shares at $102, DoorDash saw its stock price quickly trade up to $184, placing a $59 billion valuation on the food delivery business.

December 11 – Bloomberg (Bailey Lipschultz and Drew Singer): “The first initial public offerings in the wake of Airbnb Inc.’s red-hot debut soared, led by four nascent drug developers. The massive gains for AbCellera Biologics Inc., Certara Inc., Nanobiotix and 4D Molecular Therapeutics Inc. showcased Wall Street’s appetite for both newly public companies as well as blossoming drug developers... AbCell soared more than 200% above its IPO price on Friday, while 4D climbed by 84%. Vivos jumped 71%, Certara by 51% and Nanobiotix is up 25% from its offering price.”

December 11 – Bloomberg (Sonali Basak): “The exuberance is stunning. Airbnb -- valued at $18 billion just seven months ago -- was worth more than $100 billion when it went public on Thursday. It’s still valued at more than Marriott and Hilton combined. The price differential to its IPO had many on Wall Street scratching their heads.”

Note to head scratchers: Unnecessary. The blistering IPO market is but one of the myriad late-cycle manifestations of Acute Monetary Disorder. If Tesla can trade with a market capitalization approaching $600 billion (more than double Toyota!), what’s keeping Airbnb from sporting a snazzy $100 billion valuation? Wall Street should waste no time in bringing scores more IPOs to market – with so many billionaires in the making.

November’s record $121 billion ETF inflow – boosting the y-t-d flow tsunami to a record $659 billion. SPACs and frenetic retail call option buying (one can only imagine current hedge fund derivatives strategies). Friday’s record $18 TN of negative-yielding global bonds (now including over-indebted Portugal and Spain). Bund yields at negative 0.64%. The bottom line: Securities markets – profoundly speculative and unmoored. These darling IPOs – along with the equities market more generally – are dispensing some serious “wealth creation.” Future historians will recognize it much more in the context of Bubble period wealth redistribution and destruction. For now, this fiasco is one hell of party (patrons luxuriating at the endless punchbowl).

It’s a globalized Bubble – notably central bank Credit, Chinese finance, speculative leverage/securities Credit, and sovereign debt across developed and EM economies. And once a quarter we have the opportunity to examine the Fed’s Z.1 “flow of funds” report – data that help illuminate the U.S. financial sector’s contribution to the Great Global Credit Bubble. As the below analysis will highlight, the U.S. system is in the throes of runaway central bank “money” creation; unparalleled system Credit growth; unprecedented government debt expansion; and record “money” supply inflation, along with an attendant powerful inflationary dynamic throughout the bubbling securities markets feeding into inflated Household perceived wealth (Net Worth).

The numbers are so huge as to be numbing; nothing remotely normal about any of this. Total Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 TN. Through the first three quarters of 2020, NFD surged an unprecedented $5.740 TN, or 14.1% annualized. NFD was up $6.181 TN over the past year (11.5%) and $8.817 TN (16.7%) over two years. For perspective, NFD expanded on average $1.830 TN annually over the past decade. NFD has ballooned 71% since the end of 2008.

Washington continues to propel borrowing mayhem. Outstanding Treasury Securities jumped $530 billion during the quarter to a record $22.900 TN. Treasuries were up $3.882 TN over three quarters, with year-over-year growth of a staggering $4.329 TN, or 23.3%. Since the end of 2007, Treasuries outstanding have inflated $16.849 TN, or 278%. Q3 federal Expenditures were up 50% y-o-y, while Receipts were about flat. Borrowings accounted for about half of federal spending during the quarter. Noteworthy as well, at $429 billion the federal deficit for the first two months of the new fiscal year (post Q3) is running 25% ahead of the year ago level.

Yet Treasury is not the only profligate borrower residing within the beltway. GSE (government-sponsored enterprises) Securities jumped $123 billion during Q3 to a record $9.866 TN. GSE Securities increased $437 billion y-t-d, $523 billion y-o-y, and $845 billion over two years. That these thinly (I’m being generous) capitalized financial juggernauts continue to balloon ensures massive future taxpayer bailouts. I suppose there’s some pressure on the GSEs to crank out securities to be conveniently monetized by our overbearing central bank.

Corporate Bonds increased $97 billion during the quarter to a record $14.973 TN, with a one-year increase of $1.016 TN (7.3%). Corporate bonds are on pace for their strongest annual expansion since 2007’s record $1.398 TN.

Total Debt Securities rose $734 billion during the quarter to $52.619 TN, with record one-year growth of $5.851 TN. At 249%, Q3 Total Debt Securities-to-GDP compares to 213% at the end 2008; 158% to end the nineties; 126% to close out the eighties; and 74% to conclude the seventies. Total (Debt and Equities) Securities rose $5.206 TN during Q3 to a record $109.687 TN – with a one-year gain of $11.834 TN, or 12.1%. Total Securities have inflated $63.504 TN, or 138%, since the end of 2008. At 518%, Q3 Total Securities-to-GDP compares to 373% at the end of 2007; 351% to end the nineties; 194% to close the eighties; and 117% to conclude the seventies.

With housing finance the cheapest ever, no surprise that mortgage Credit is now expanding at the strongest pace since 2007. Overall mortgage Credit increased $227 billion during Q3 to a record $16.562 TN. This was up from Q3 ‘19 growth of $193 billion and the largest gain since Q3 2007. Household Mortgage borrowings increased $165 billion (vs. Q3 ‘19’s $98bn) to a record $11.507 TN, also the fastest expansion (5.8% annualized) since Q3 2007.

The Household Balance Sheet remains fundamental to Bubble Analysis. Bolstered by gains in both Financial Assets and Real Estate, Household Assets surged $4.080 TN, or 12.0% annualized, during Q3 to a record $140.310 TN. Household Assets have now almost doubled from year-end 2008’s $76 TN. After declining $6.814 TN during Q1, Household Assets experienced an unparalleled six-month gain of $12.418 TN.

With Household Liabilities rising $262 billion (largest gain since Q2 ’07!) to a record $16.790 TN, Household Net Worth jumped $3.817 TN during the quarter to a record $123.520 TN. Net Worth was up $8.768 TN, or 7.6%, y-o-y, with a three-year gain of $20.541 TN, or 20%. At 584%, Household Net Worth-to-GDP compares to previous cycle peaks 493% during Q1 2007 and 447% during Q1 2000.

Household holdings of Financial Assets surged $3.398 TN during Q3 to a record $98.713 TN. Financial Holdings were up $25.890 TN, or 36%, over five years. At 467%, Q3’s ratio of Financial Assets-to-GDP was up from 328% at the Q1 2009 cycle low - and compares to cycle peaks 377% during Q3 2007 and 356% for Q1 2000.

Household Total Equities (Equities and Mutual Funds) jumped $2.431 TN during the quarter to a record $32.426 TN, with an unprecedented six-month gain of $7.775 TN (more than reversing Q1’s $6.6 TN drop). At 153%, Q3 Total Equities holdings-to-GDP compares to a cycle low 53% during Q1 2009 - and previous cycle peaks 104% during Q2 2007 and 117% for Q1 2000.

Household Real Estate holdings jumped $430 billion during Q3 to a record $34.867 TN. At $1.596 TN, the y-o-y increase in Real Estate holdings is the largest since 2006. And at 165%, Real Estate-to-GDP compares to Q2 2012’s cycle low 125% and the previous cycle peak 190% during Q3 2006.

With Washington and market-based finance dominating system Credit expansion, the banking system was relegated to second class bit player for the quarter. Bank Assets expanded $130 billion during Q3 to a record $22.903 TN. Bank Loans actually contracted $171 billion during the quarter (though Mortgage loans increased $24bn) to $12.160 TN. The Bank Asset “Reserves at the Fed” contracted $43.8 billion during Q3 to $2.743 TN - yet posted an unprecedented year-over-year rise of $1.316 TN.

What has the banking system been doing with much of this central bank (play) “money”? Bank Debt Securities holdings jumped another $280 billion during the quarter to a record $5.509 TN, with an unprecedented one-year gain of $868 billion (18.7%). For comparison, 2019 posted an annual record $347 billion jump in Debt Securities holdings – after averaging $153 billion annually over the previous 20 years. Over the past four quarters, Bank holdings of Treasuries increased $326 billion, Agency Securities $458 billion, and Corporate bonds $43 billion.

On the Bank Liability side, Total Deposits rose another $180 billion to a record $18.217 TN, with an unparalleled one-year gain of $3.018 TN (19.9%). Total Bank Deposits ended the quarter at 86% of GDP, up from 62% to end 2008. Total system Checking and Time Deposits jumped $4.779 TN, or 27.5%, year-over-year to $22.132 TN. For perspective, Total Deposits expanded on average $534 billion annually over the previous 25 years. Contracting $228 billion during Q3 to $4.408 TN, Money Market Fund Assets were nonetheless up $966 billion, or 28.0%, year-over-year.

Federal Reserve Assets expanded $39 billion during Q3 to a record $7.403 TN – or 35% of GDP. Fed Assets inflated $3.024 TN in three quarters and $3.393 TN, or 85%, over five quarters. Fed Assets ended June 2008 at $951 billion, or 6% of GDP. As such, Federal Reserve Assets have inflated 678% in just over 12 years. Quarter-end Fed holdings included $5.056 TN of Treasuries and $2.198 TN of Agency/MBS Securities.

Rest of World (ROW) holdings of U.S. Financial Assets jumped $1.731 TN during Q3 to a record $37.117 TN, or 175% of GDP. ROW holdings ended 2009 at $14.362 TN, or 92% of GDP, and the nineties at $5.621 TN, or 58% of GDP. Holdings of U.S. Debt Securities rose only $45 billion during Q3 to a record $12.768 TN, with a one-year gain of $673 billion. Corporate Bond holdings jumped $94 billion during the quarter to a record $4.302 TN, with a notable one-year expansion of $392 billion. Benefitting from rising stock prices, ROW Total Equities holdings surged $931 billion during the quarter to a record $9.969 TN (one-year gain $1.483 TN). Also buoyed by inflating values, ROW U.S. Direct Foreign Investment surged $731 billion to a record $9.799 TN.

Nothing short of an incredible three quarters of U.S. “money” and Credit growth. Next week China.

For the Week:

The S&P500 declined 1.0% (up 13.4% y-t-d), and the Dow slipped 0.6% (up 5.3%). The Utilities dipped 0.3% (down 2.3%). The Banks fell 1.5% (down 16.9%), and the Broker/Dealers declined 1.4% (up 24.1%). The Transports slipped 0.5% (up 16.2%). The S&P 400 Midcaps declined 0.2% (up 8.6%), while the small cap Russell 2000 rose another 1.0% (up 14.6%). The Nasdaq100 fell 1.2% (up 41.7%). The Semiconductors dropped 3.2% (up 46.2%). The Biotechs dropped 1.4% (up 9.4%). With bullion little changed, the HUI gold index declined 0.3% (up 20.6%).

Three-month Treasury bill rates ended the week at 0.0625%. Two-year government yields declined three bps to 0.12% (down 145bps y-t-d). Five-year T-note yields fell five bps to 0.37% (down 133bps). Ten-year Treasury yields dropped seven bps to 0.90% (down 102bps). Long bond yields sank 11 bps to 1.63% (down 76bps). Benchmark Fannie Mae MBS yields fell six bps to 1.35% (down 136bps).

Greek 10-year yields declined three bps to 0.60% (down 84bps y-t-d). Ten-year Portuguese yields sank eight bps to negative 0.04% (down 48bps). Italian 10-year yields fell seven bps to 0.59% (down 85bps). Spain's 10-year yields dropped eight bps to 0.00% (down 47bps). German bund yields sank nine bps to negative 0.64% (down 45bps). French yields fell seven bps to negative 0.38% (down 50bps). The French to German 10-year bond spread widened two to 26 bps. U.K. 10-year gilt yields sank 18 bps to 0.17% (down 65bps). U.K.'s FTSE equities index was little changed (down 13.2%).

Japan's Nikkei Equities Index declined 0.4% (up 12.7% y-t-d). Japanese 10-year "JGB" yields slipped a basis point to 0.01% (up 3bps y-t-d). France's CAC40 dropped 1.8% (down 7.9%). The German DAX equities index fell 1.4% (down 1.0%). Spain's IBEX 35 equities index sank 3.1% (down 15.6%). Italy's FTSE MIB index lost 2.1% (down 7.7%). EM equities were mixed. Brazil's Bovespa index gained 1.2% (down 0.4%), while Mexico's Bolsa was little changed (up 0.1%). South Korea's Kospi index rose 1.4% (up 26.0%). India's Sensex equities index jumped 2.3% (up 11.7%). China's Shanghai Exchange dropped 2.8% (up 9.7%). Turkey's Borsa Istanbul National 100 index rose 3.0% (up 19.8%). Russia's MICEX equities index jumped 2.9% (up 7.6%).

Investment-grade bond funds saw inflows of $2.898 billion, while junk bond fund flows were only slightly positive (from Lipper).

Freddie Mac 30-year fixed mortgage rates were unchanged at a record low 2.71% (down 102bps y-o-y). Fifteen-year rates were unchanged at an all-time low 2.26% (down 93bps). Five-year hybrid ARM rates dropped seven bps to 2.79% (down 57bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 2.91% (down 107bps).

Federal Reserve Credit last week expanded $15.0bn to $7.192 TN. Over the past year, Fed Credit expanded $3.145 TN, or 77.7%. Fed Credit inflated $4.366 Trillion, or 155%, over the past 422 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week rose $16.2bn to $3.484 TN. "Custody holdings" were up $78.6bn, or 2.3%, y-o-y.

M2 (narrow) "money" supply dropped $123bn last week to $18.998 TN, but with an unprecedented 40-week gain of $3.490 TN. "Narrow money" surged $3.632 TN, or 23.6%, over the past year. For the week, Currency increased $1.8bn. Total Checkable Deposits jumped $310bn, while Savings Deposits contracted $420bn. Small Time deposits declined $7.6bn. Retail Money Funds fell $7.1bn.

Total money market fund assets jumped $22.9bn to $4.343 TN. Total money funds surged $711bn y-o-y, or 20%.

Total Commercial Paper jumped $21.2bn to $990.1bn. CP was down $149bn, or 13.1% year-over-year.

Currency Watch:

For the week, the U.S. dollar index recovered 0.2% to 90.976 (down 5.7% y-t-d). For the week on the upside, the Australian dollar increased 1.5%, the Brazilian real 1.4%, the New Zealand dollar 0.5%, the South African rand 0.4%, the Swiss franc 0.2%, the Japanese yen 0.1%, and the Canadian dollar 0.1%. For the week on the downside, the Mexican peso declined 1.8%, the British pound 1.6%, the South Korean won 0.7%, the Norwegian krone 0.2%, the Singapore dollar 0.1%, and the euro 0.1%. The Chinese renminbi declined 0.23% versus the dollar this week (up 6.37% y-t-d).

Commodities Watch:

December 9 – Bloomberg (Jeffrey Bair): “The U.S. is once again swimming in gasoline as the pandemic worsens, underscoring the uphill battle facing the oil industry in the coming months before a vaccine can be widely distributed. Stockpiles in the week ending December 4 grew about 4 million barrels from the previous week to about 238 million barrels… That’s the highest seasonally since at least the mid-1990s when data on gasoline started being kept and the biggest single-week build since April, when driving had slowed to a halt.”

The Bloomberg Commodities Index gained 0.8% (down 7.4% y-t-d). Spot Gold was little changed at $1,840 (up 21.2%). Silver declined 0.9% to $24.092 (up 34.4%). WTI crude increased 48 cents to $46.57 (down 24%). Gasoline rallied 3.6% (down 23%), and Natural Gas rose 1.5% (up 18%). Copper was about unchanged (up 26%). Wheat surged 6.5% (up 10%). Corn increased 0.8% (up 9%).

Coronavirus Watch:

December 6 – CNBC (Tucker Higgins): “Dr. Deborah Birx warned… that the escalating coronavirus surge is likely to be the most trying event in U.S. history, as hospital systems around the country strain to combat its mounting daily death toll. ‘This is not just the worst public health event. This is the worst event that this country will face, not just from a public health side,’ Birx, the White House coronavirus response coordinator, said…”

December 11 – CNBC (Noah Higgins-Dunn and Will Feuer): “The Food and Drug Administration is ‘rapidly’ working toward clearing Pfizer’s Covid-19 vaccine for emergency use after a key panel overwhelmingly endorsed the shots Thursday evening, Commissioner Stephen Hahn said… ‘Following yesterday’s positive advisory committee meeting outcome regarding the Pfizer-BioNTech COVID-19 vaccine, the U.S. Food and Drug Administration has informed the sponsor that it will rapidly work toward finalization and issuance of an emergency use authorization,’ Hahn said…”

December 10 – Bloomberg (Sarah McGregor): “The latest Los Angeles lockdown is another hammer blow for businesses still struggling through the pandemic -– and it could be a taste of what lies ahead all over the country. Residents of the second-biggest U.S. city have been under state orders to stay home since late Sunday… Officials elsewhere in the U.S. are in a similar spot, forced to consider tapping the brakes on local economies again just when they were coming back. Indoor dining in New York City may be forced to close Monday if hospitalization rates don’t stabilize. For small firms in particular, the fight for survival could be even tougher this time. Further federal aid has been held up by lawmakers. And L.A. business owners lament that they’ve invested in patios, plexiglass dividers or sanitation stations to keep operating under one coronavirus regime, only to be told it’s not safe enough to stop the spread of the virus and they have to close again.”

December 9 – Associated Press (Lauran Neergaard and Hannah Fingerhut): “As states frantically prepare to begin months of vaccinations that could end the pandemic, a new poll finds only about half of Americans are ready to roll up their sleeves when their turn comes. The survey from The Associated Press-NORC Center for Public Affairs Research shows about a quarter of U.S. adults aren’t sure if they want to get vaccinated against the coronavirus. Roughly another quarter say they won’t. Many on the fence have safety concerns and want to watch how the initial rollout fares…”

December 10 – Associated Press (Heather Hollingsworth and Ryan Foley): “Arguments over mask requirements and other restrictions have turned ugly in recent days as the deadly coronavirus surge across the U.S. engulfs small and medium-size cities that once seemed safely removed from the outbreak. In Boise, Idaho, public health officials about to vote on a four-county mask mandate abruptly ended a meeting Tuesday evening because of fears for their safety amid anti-mask protests outside the building and at some of their homes. One health board member tearfully announced she had to rush home to be with her child because of the protesters, who were seen on video banging on buckets, blaring air horns and sirens, and blasting a sound clip of gunfire from the violence-drenched movie ‘Scarface’ outside her front door.”

December 9 – USA Today (Karen Weintraub): “Two British people with severe allergies apparently had allergic reactions to Pfizer/BioNTech's COVID-19 vaccine, raising questions about whether it is safe for people with preexisting allergies. In response, British regulators advised those with severe allergies to avoid the vaccine. It was not immediately clear what triggered the allergic reactions. Unlike some vaccines, in the Pfizer/BioNTech vaccine there are no preservatives or egg products… Allergic reactions were not a significant problem in the U.S. trial in which more than 20,000 people have received both two doses of the vaccine… But a vaccine that triggers dangerous reactions in people with severe allergies poses a major challenge in the U.S., said Dr. Peter Hotez, a pediatrician and dean of the National School of Tropical Medicine at Baylor College of Medicine… Hotez was confused by the allergic reaction, which was not predicted by trials in tens of thousands of people. ‘It's very inconsistent,’ he said. ‘That's why it's really puzzling me.’”

December 7 – Wall Street Journal (Phred Dvorak and Pietro Lombardi): “Governments are accelerating toward approving the first vaccines to contain Covid-19, but public anxiety over the safety of the doses is threatening to undermine those efforts. A survey from the University of Hamburg showed the percentage of people hesitant or unwilling to get a Covid-19 vaccine ticking up in November to around 40% of respondents across seven European countries. An October poll by market researcher Ipsos found that nearly a third of Japanese and almost half of French respondents said they wouldn’t get inoculated… In some places, such as the U.S. and Italy, vaccine skeptics have been stoking those fears, said Heidi Larson, an anthropologist at London School of Hygiene & Tropical Medicine and director of the Vaccine Confidence Project… ‘There’s a lot of anxiety out there,’ she said.”

December 7 – Washington Post (Laurie McGinley, Yasmeen Abutaleb and Carolyn Y. Johnson): “Pfizer has told the Trump administration it cannot provide additional doses of its coronavirus vaccine until late June or early July because other countries have rushed to buy up its supply… That means the U.S. government will have 100 million doses of the two-shot Pfizer vaccine purchased earlier this year — far fewer than it initially planned — raising questions about whether it can keep to its aggressive schedule to vaccinate most Americans by late spring or early summer. Trump administration officials denied there would be availability issues in the second quarter, citing other vaccines in the pipeline, but others said problems are possible.”

December 8 – Wall Street Journal (James Marson, Will Horner and Jared S. Hopkins): “The Covid-19 vaccines that British citizens began receiving on Tuesday had been sitting only days earlier in ultracold freezers across the English Channel. When the British government last Wednesday provisionally authorized the vaccine’s use, it set in motion a logistical test that will define the next stage of how the world tackles the coronavirus pandemic: the delivery of the vaccines. Workers at the Pfizer Inc. plant in Puurs, Belgium, loaded thousands of vials of the liquid, stored at nearly 100 degrees below zero Fahrenheit, into custom-made thermally protected shipping containers and packed with dry ice. Loaded onto anonymous trucks, they crossed 125 miles to the French coast and sped by train under the English Channel. By Thursday evening, three trucks were heading across the U.K. and a fourth was crossing the Irish Sea. Tightly coordinated, this logistics chain is probably one of the world’s easiest.”

Market Instability Watch:

December 8 – Financial Times (Chris Flood): “Exchange traded funds attracted record inflows of $121bn in November, a jump of 14.5% on the previous best month for new business… The huge monthly haul brings net global inflows in the first 11 months of this year to $659.3bn, 15.4% more than the $571.1bn gathered over the same period in 2019, according to ETFGI… ‘The ETF industry is on course for a record year. Investor inflows globally into ETFs have already surpassed the previous full-year record of $654bn registered in 2017,’ said Deborah Fuhr, founder of ETFGI.”

December 10 – Bloomberg (Gregory Calderone): “Patterns in options trading are confirming the suspicion that retail investors are largely behind the shift in how options are being used, which has partially helped the stock market recover from its Covid-19 selloff in March. While traditionally a tool that fund managers have used to hedge their portfolios, it now appears options are being used more for speculative bets on the price of the underlying shares by retail investors. A surge in trading of small lots of options this year has been linked to the growing number of individuals who got involved in the market amid the Covid-19 lockdowns.”

December 7 – Wall Street Journal (Sam Goldfarb): “The average U.S. investment-grade corporate bond now yields less than a key measure of investors’ inflation expectations, a first that highlights how demand for fixed-income assets is reducing their potential returns. As of Friday, the annual expected inflation rate over the next decade—derived from the difference in yield between nominal and inflation-adjusted 10-year U.S. government bonds—stood at 1.89%... The average investment-grade corporate bond yielded just 1.85%... So-called real yields—or the return investors can expect on bonds after adjusting for inflation—have been below zero for months on U.S. government debt. But last week marked the first time in records going back to 2003 that the phenomenon ever extended to a broad index of corporate bonds.”

December 10 – Bloomberg (Joanna Ossinger): “Initial public offerings have been doing extremely well lately, bringing to mind the excesses of the tech bubble in the late 1990s. Shares in Chinese toymaker Pop Mart International Ltd. jumped as much as 112% in their debut Friday, after home-rental platform Airbnb Inc. closed 113% above its IPO price... JD Health International Inc. surged 56% in its debut Tuesday while DoorDash Inc. soared 86% in on Wednesday. The FTSE Renaissance Global IPO Index, which tracks the performance of offerings worldwide, is up 82% this year…”

December 10 – Reuters (Noor Zainab Hussain and Joshua Franklin): “Shares of Airbnb Inc more than doubled in their stock market debut on Thursday, valuing the home rental firm at just over $100 billion in the biggest U.S. initial public offering (IPO) of 2020 and capping a bumper year in which investors flocked to tech stocks.”

December 9 – Reuters (Noor Zainab Hussain and Joshua Franklin): “DoorDash Inc shares popped more than 80% in their debut…, valuing the food delivery company at $71.3 billion or more than four times its worth at a private fundraising round six months ago, underscoring investor appetite for technology companies boosted by the COVID-19 pandemic.”

December 9 – Bloomberg (Tom Maloney): “Stanford University students Tony Xu, Andy Fang and Stanley Tang had a revelation seven years ago in a Palo Alto macaroon store. The shop’s owner showed them pages and pages of delivery orders she hadn’t been able to fulfill. Demand wasn’t high enough to hire a full-time delivery person, but there was no way she could drop off all the orders herself. It was a story the three heard again and again as they worked to understand how they could leverage technology to help small businesses. They decided to build a basic web page with menus from local restaurants to see if there was demand for a delivery business. ‘It was super simple, ugly, and honestly we weren’t really expecting anything,’ Tang said… ‘All of a sudden we got a phone call - someone called! They wanted to order Thai food.’ Now, those three are billionaires as the company they founded -- San Francisco-based DoorDash Inc. -- went public.”

December 6 – Bloomberg (Joanna Ossinger): “There’s strong consensus in markets right now and investors need to position to hedge against crowded trades, according to JPMorgan… The last time such a strong agreement on strategy existed was in late 2017 and early 2018, and that time period serves as a reminder that such a consensus view rarely plays out in its entirety, strategists led by Nikolaos Panigirtzoglou wrote… Global stocks reached records in January 2018 amid massive inflows, but extended positioning in risk assets became a concern and the next month the ‘Volmageddon’ volatility spike crushed trades that many investors had viewed as a sure thing.”

December 9 – Bloomberg (Lananh Nguyen): “Wall Street’s banner year looks like it’ll go out on a high note, even as the global pandemic rages. The heads of the two largest U.S. lenders, JPMorgan… and Bank of America Corp., told investors that their investment-banking and trading divisions would notch a strong performance in the fourth quarter… Bank of America’s global markets business, led by Jim DeMare, ‘is going to have very good earnings this year,’ Chief Executive Officer Brian Moynihan said…”

Global Bubble Watch:

December 11 – Bloomberg (Cormac Mullen and John Ainger): “The world’s stockpile of negative-yielding debt has swelled to a fresh record in a sign that demand for havens is just as intense as that for riskier assets. The market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to $18.04 trillion on Thursday, the highest level ever recorded. Spanish 10-year bonds were the latest to join the club, with rates sliding below 0% for the first time Friday.”

December 8 – Reuters (Yereth Rosen): “The Arctic region has had its second-warmest year since 1900, continuing a pattern of extreme heat, ice melt and environmental transformation at the top of the world, scientists reported… In the 15th annual Arctic Report Card, released by the U.S. National Oceanic and Atmospheric Administration (NOAA), researchers detail the stark ways in which climate change is altering the long-frozen region. ‘Taken as a whole, the story is unambiguous,” Alaska-based climate scientist Rick Thoman, one of the report’s editors, said… ‘The transformation of the Arctic to a warmer, less frozen and biologically changed region is well underway.’”

December 6 – Bloomberg (Stephen Spratt): “Bond investors looking for yield and an effective hedge against a broad downturn in equities are increasingly turning to China. The appeal of that nation’s sovereign debt is on display this year as policy makers across major economies deploy ultra-aggressive stimulus, crushing yields and weakening currencies. With U.S. Treasuries leading the plunge in yields, foreign holdings of China’s debt have surged to a record 1.79 trillion yuan ($274bn), according to… ChinaBond.”

December 8 – Bloomberg (John Ainger): “Portuguese bonds rallied to send benchmark yields below 0% for the first time, a dramatic turnaround from the euro-area crisis a decade ago. The yield on the nation’s 10-year bonds declined to as low as minus 0.014% amid the relentless investor demand for the safety of government bonds in Europe, despite the development of several Covid-19 vaccinations.”

December 10 – Financial Times (Song Jung-a): “South Korea plans to jail and levy hefty fines on traders that illegally bet against the country’s stocks as part of a broader campaign against short selling that has annoyed hedge funds. Investors who break rules that outlaw so-called naked short selling could be imprisoned for at least a year or have to cough up financial penalties of up to five times any profit they make on a trade…”

Trump Administration Watch:

December 10 – Associated Press (Lisa Mascaro and Andrew Taylor): “An emerging $900 billion COVID-19 aid package from a bipartisan group of lawmakers all but collapsed Thursday after Senate Majority Leader Mitch McConnell said Republican senators won’t support $160 billion in state and local funds as part of a potential trade-off in the deal. McConnell’s staff conveyed to top negotiators that the GOP leader sees no path to an agreement on a key aspect of the lawmakers’ existing proposal — a slimmed-down version of the liability shield he is seeking for companies and organizations facing potential COVID-19 lawsuits — in exchange for the state and local funds that Democrats want.”

December 8 – Reuters (Susan Cornwell and David Morgan): “The Trump administration proposed a $916 billion coronavirus relief package…, after congressional Democrats shot down a suggestion for a pared-down plan from the Senate’s leading Republican, Majority Leader Mitch McConnell. Treasury Secretary Steven Mnuchin said he presented the administration’s $916 billion plan in a conversation with House of Representatives Speaker Nancy Pelosi… Writing on Twitter, he said it included money for state and local governments, a Democratic priority, and liability protections for businesses, a Republican priority.”

December 8 – Bloomberg (Erik Wasson and Laura Litvan): “Almost a week after Democratic congressional leaders climbed down from their demand for a multi-trillion dollar stimulus package, Senate Majority Leader Mitch McConnell continued to tout his own plan, dimming prospects for a proposed bipartisan compromise as the basis for a deal. McConnell’s top priority -- federal limits on Covid-19 related lawsuits against businesses -- has emerged as a key potential deal-breaker, along with state and local aid that Democrats want.”

December 7 – Wall Street Journal (Frances Yoon): “Shares of some companies the U.S. government says support China’s military fell Monday, after index compiler FTSE Russell said it would drop the stocks from major indexes. Late Friday, FTSE Russell said it would remove securities of eight Chinese companies from the FTSE Global Equity Index Series, the FTSE China A Inclusion Indexes and other associated benchmarks on Dec. 21.”

Biden Administration Watch:

December 9 – Reuters (David Lawder and Heather Timmons): “President-elect Joe Biden has promised to revive a coronavirus-ravaged economy, repair creaky American infrastructure and put millions back to work, but unless Democrats win Senate run-off elections in Georgia in January, it will all run through one man: Senate Majority Leader Mitch McConnell. If Republicans retain control, McConnell… would be left deciding what bills the Senate considers, as he has since 2015. ‘What we don’t know is ‘What does Mitch McConnell want?’’ said Matt Bennett, co-founder of Third Way, a centrist Democratic consultancy. If McConnell doesn’t want anything except to stand in Biden’s way, ‘then it is going to be a long four years for America,’ he said.”

December 10 – Bloomberg (Jesse Hamilton and Lisa Lee): “For the better part of a decade, Janet Yellen has been issuing a warning: Wall Street is piling a dangerous amount of debt onto the balance sheets of risky U.S. businesses. Time and time again, she has hammered home the point, turning it into a staple of the speeches and interviews she’s given since leaving the top job at the Federal Reserve in 2018. ‘Regulators should sound the alarm,’ she said in one. But now, as Yellen prepares to take over as Treasury secretary, she may find it difficult to do anything quickly to rein in these markets, experts say.”

Federal Reserve Watch:

December 8 – CNBC (Hugh Son and Dawn Giel): “JPMorgan Chase CEO Jamie Dimon said that low-yielding Treasurys are a poor investment right now. ‘I would not be a buyer of Treasurys,’ Dimon said… ‘I think Treasurys at these rates, I wouldn’t touch them with a 10-foot pole.’ …Of course, as the head of a lending institution with $3.2 trillion in assets, JPMorgan has to continually purchase Treasurys and other low-yielding investments to earn a spread, a fact that Dimon acknowledged.”

U.S. Bubble Watch:

December 10 – Associated Press (Martin Crutsinger): “The U.S. government’s deficit in the first two months of the budget year ran 25.1% higher than the same period a year ago as spending to deal with the COVID pandemic soared while tax revenues fell. …With two months gone in the budget year, the deficit totaled $429.3 billion, up from $343.3 billion in last year’s October-November period. The deficit… reflected an 8.9% jump in outlays, to $886.6 billion, and a 2.9% decline in tax revenues, to $457.3 billion.”

December 10 – Bloomberg (Kriston Capps): “Between past due rent, late fees and unpaid utility bills, Americans may collectively owe $70 billion by January, when the current federal eviction moratorium is set to expire. Estimates for the nation’s total rent shortfall on Jan. 1 range in the tens of billions of dollars, potentially exceeding the amount of emergency rental assistance that Congress may or may not deliver over the next few weeks. If lawmakers fail to act, the New Year could trigger a long-feared disaster — an avalanche of evictions during the dead of winter, as the pandemic rages.”

December 7 – Bloomberg (Carolina Gonzalez): “More than 110,000 restaurants have closed permanently or long-term across the country as the industry grapples with the devastating impact of the Covid-19 pandemic. And more pain is ahead, with a potential shutdown of indoor dining in New York City just as the temperatures drop. The nationwide tally -- representing one in six U.S. eateries -- is among the findings of a survey… by the National Restaurant Association. The figure was up from about 100,000 shutdowns in a September survey.”

December 10 – Bloomberg (Olivia Rockeman): “Applications for U.S. unemployment benefits surged last week, topping estimates with the highest level since September, suggesting that widening business shutdowns to curb the pandemic are spurring fresh job losses. Initial jobless claims in regular state programs rose by 137,000 to 853,000… Continuing claims, which reflect Americans on ongoing unemployment benefits, jumped by 230,000 to 5.76 million in the week ended Nov. 28. It was the first increase since August.”

December 9 – CNBC (Diana Olick): “Mortgage rates fell again, falling to a record low for the 14th time this year… And that is sending ever more borrowers to their lenders looking to refinance their home loans. Mortgage applications to refinance rose 2% last week from the previous week, and an eye-popping 89% higher from a year ago… Mortgage applications to purchase a home fell 5% for the week but were a strong 22% higher annually.”

December 10 – Bloomberg (Reade Pickert): “A measure of prices paid by U.S. consumers rose in November by more than forecast as costs of hotel stays, airfares and apparel jumped, though inflationary pressures elsewhere remained subdued… The consumer price index rose 0.2% from the prior month after no change in October… Compared with a year earlier, the gauge rose 1.2%. The core index, which excludes volatile food and energy costs, also advanced 0.2% from the prior month and increased 1.6% from a year earlier.”

December 8 – Bloomberg (Martin Z. Braun): “New York City had its credit rating outlook revised to negative by S&P Global Ratings Inc. as virus cases rise, threatening the economic revival of the nation’s largest city. The negative outlook means New York has a one-in-three chance that its AA rating, the third-highest investment grade, will be lowered within two years, S&P said… The virus uptick may lead to a targeted or widespread economic shutdown, dealing a blow to the city’s already weakened finances. The city’s seven-day positivity rate hit 4.98% Monday.”

December 9 – CNBC (Lauren Feiner and Salvador Rodriguez): “The Federal Trade Commission and a coalition of attorneys general from 48 states and territories filed two separate antitrust lawsuits against Facebook.... The suits target two of Facebook’s major acquisitions: Instagram and WhatsApp. Both are seeking remedies for the alleged anti-competitive conduct that could result in requiring Facebook to divest the two apps.”

December 8 – Bloomberg (Sophie Alexander): “Tech stocks are soaring and high-profile initial public offerings are set to mint millionaires. Yet in San Francisco, the boom times are over. The resurgent coronavirus has thrust the tech hub back into lockdown. Offices sit empty as work-from-home policies stretch indefinitely… Nowhere are the effects more pronounced than in the real estate market, where apartment rents are plunging the most in the country. The median rent for a studio apartment dropped 35% last month from a year earlier, to $2,100, while costs for one-bedrooms were down 27% to $2,716…”

December 10 – Bloomberg (Oshrat Carmiel): “Apartments in Manhattan haven’t been this cheap to rent in 10 years. The median rental price plummeted 22% in November from a year earlier to $2,743 a month, according to… appraiser Miller Samuel Inc. and… Douglas Elliman Real Estate. That’s the lowest in data going back to October 2010.”

December 9 – Reuters (Joshua Franklin and Jessica DiNapoli): “Investors are pressuring some blank-check acquisition companies to scale back wildly lucrative payouts to their bosses that are weighing on shareholder returns, threatening to tamp down Wall Street’s biggest gold rush of recent years. Managers of the biggest so-called special purpose acquisition companies (SPACs), which raise money in initial public offerings (IPOs) to merge with privately-held companies, are awarded stock worth hundreds of millions of dollars by only investing millions of dollars of their own money.”

Fixed Income Watch:

December 7 – Bloomberg (Shahien Nasiripour): “Nearly $4.4 trillion of home mortgages are set to be originated this year in the U.S., according to… Black Knight Inc. That record amount is about $300 billion more than the most optimistic forecast among estimates from Fannie Mae, Freddie Mac, and the Mortgage Bankers Association. The Federal Reserve has helped fuel a housing rally by keeping interest rates low and buying mortgage bonds to stimulate the economy. The previous originations record was set in 2003, when the Fed cut interest rates and spurred a boom in refinancings that led to $3.8 trillion of new mortgages that year. Roughly 6.4 million homeowners have refinanced their mortgages this year through September, a figure that Black Knight experts to top 9 million by year’s end.”

China Watch:

December 7 – Bloomberg (Tian Chen and Tom Hancock): “China is bucking the global trend of greater economic stimulus amid the coronavirus, preferring instead to refocus on controlling its record debt burden. Policy makers are allowing for tighter liquidity in the financial system, a signal that Beijing wants to stabilize the level of debt in the economy. Though not as aggressive as previous deleveraging drives, the shift is pushing up market rates: government-bond yields trade near an 18-month high and interbank borrowing costs last month jumped to the highest since January. China’s big banks have been unwilling to lend to smaller financial firms after a string of defaults at some of the country’s safest borrowers.”

December 10 – Financial Times (Sun Yu): “Chinese government entities responsible for funding hundreds of billions of dollars in infrastructure projects are struggling to raise cash after a series of defaults by state groups rocked the country’s credit markets. Executives from several local government finance vehicles (LGFVs) have told the Financial Times that they have abandoned bond sales or loan applications… Other LGFVs are paying much higher rates of interest to borrow. The credit crunch facing LGFVs, which are responsible for funnelling cash to China’s local governments, has raised concerns that defaults at state-owned enterprises are spilling over into other parts of an economy whose recovery from coronavirus has been supported by infrastructure spending.”

December 10 – Bloomberg (Shen Hong and Rebecca Choong Wilkins): “China will almost certainly let a high-flying chipmaker default on $2.5 billion worth of dollar debt, the strongest signal yet that foreign investors shouldn’t count on Beijing to bail them out. Tsinghua Unigroup Co. said it won’t be able to repay the principal on a $450 million dollar bond due Thursday, which would trigger cross defaults on a further $2 billion of debt. This would be the company’s first dollar bond repayment failure and came after it defaulted on a 1.3 billion yuan ($199 million) local bond last month. While investors weren’t exactly taken by surprise… the default will force them to reassess the creditworthiness of weaker state-linked companies.”

December 8 – Wall Street Journal (Xie Yu): “Investors are cooling on debt from riskier Chinese companies after missed payments by state-backed firms have cast doubt on the reliability of government support. The wariness has helped push new borrowing costs for these businesses to their highest levels in nearly two years, marring what has been a banner year for debt issuance. In November, corporations with below triple-A credit ratings paid an average 5.89% coupon for stock-exchange listed debt…, the highest since January 2019. In contrast, triple-A coupon rates fell to 4.09%. In another sign of rising risk aversion, companies had to scrap or postpone plans to sell bonds worth the equivalent of $14.6 billion last month…, the highest monthly total since early 2017.”

December 10 – Reuters (Colin Qian and Kevin Yao): “China will step up fiscal policy support for a strategy to make its economy mainly rely on domestic demand, supply chains and innovation, Finance Minister Liu Kun said… ‘Fiscal policy has the advantage of optimising resource allocation and promoting structural adjustments… Government finance is duty bound to support and speed up the cultivation of a complete domestic demand system, and there is much to be done,’ Liu said.”

December 8 – Financial Times (Jonathan Wheatley and James Kynge): “China has drastically curtailed the overseas lending programme of its two largest policy banks, after nearly a decade of ambitious growth which at its peak rivalled that of the World Bank… Lending by the China Development Bank and the Export-Import Bank of China collapsed from a peak of $75bn in 2016 to just $4bn last year… The sharp retrenchment comes as Beijing rethinks its Belt and Road Initiative, the signature scheme of China’s leader Xi Jinping that finances and builds roads, railways, ports and other infrastructure in mostly developing countries.”

December 9 – CNBC (Evelyn Cheng): “China’s consumer price index fell in November for the first time in about a decade as food prices dropped. The consumer price index… fell 0.5% in November from a year ago… The decline marked the first drop since October 2009…”

December 6 – Reuters (Gabriel Crossley and Lusha Zhang): “China’s exports rose at the fastest pace in almost three years in November, as strong global demand for goods needed to ride out the pandemic landed the world’s second-largest economy a record trade surplus… Exports in November rose 21.1% from a year earlier…, the fastest growth since February 2018. It also soundly beat analysts’ expectations for a 12.0% increase and quickened from an 11.4% increase in October… Imports rose 4.5% year-on-year in November, slower than October’s 4.7% growth, and underperforming expectations…”

December 8 – Wall Street Journal (Mike Bird): “China’s household debt ballooned in the first half of the year, rising by about $380 billion, according to new Bank for International Settlements data. That increase was almost four times as large as the second-place U.S. And it compounds one of China’s biggest economic vulnerabilities. It has been widely reported that China’s industrial production and exports have helped to power its recovery this year. But the other leg of the recovery is the continued rapid rise of real-estate investment, which is set to outstrip GDP growth again in 2020, as it has in 16 of the past 17 years.”

December 7 – Bloomberg: “China’s foreign exchange reserves rose by more than $50 billion in November to the highest since August 2016, likely boosted by the weaker dollar and a trade surplus at record highs. Reserves gained for the first time in three months, reaching $3.1785 trillion at the end of November…”

December 7 – Reuters (Anne Marie Roantree): “Hong Kong police arrested eight more activists on Tuesday over an anti-government protest in July, the latest move by authorities in a relentless crackdown on opposition forces in the Chinese-ruled city.”

Central Bank Watch:

December 10 – Financial Times (Martin Arnold): “The European Central Bank has launched a fresh burst of stimulus in an attempt to help the eurozone economy recover from the coronavirus pandemic, promising to buy €500bn more bonds over a longer period and providing extra cheap funding for banks. The ECB increased the size of its pandemic emergency purchase programme (PEPP) from €1.35tn to €1.85tn and pushed back the end of its main crisis-fighting tool from next June until at least March 2022… The central bank also launched a series of auctions offering banks financing at deeply negative rates as low as minus 1% — in effect paying them to borrow money — provided they maintain the flow of credit to businesses and households.”

December 9 – Bloomberg (Carolynn Look): “Global central banks are embarking on fresh waves of bond-buying to fight the fallout from the pandemic… The U.S. Federal Reserve, Bank of England, Bank of Japan and the European Central Bank have splurged $5.6 trillion this year alone on quantitative easing, according to Bloomberg Economics. The ECB is expected to increase its own purchase plans by as much as 500 billion euros ($605bn) when it meets on Thursday. Central banks’ own research departments regularly produce work showing QE has stabilized markets, boosted growth and driven faster inflation. Outside though, there’s far less certainty that those benefits will persist after years of monetary stimulus following the global financial crisis more than a decade ago.”

EM Watch:

December 10 – Bloomberg (Mario Sergio Lima): “Brazil’s central bank signaled it may be unable to fulfill its pledge to keep interest rates at a record low for long due to rising inflation expectations. The bank… on Wednesday held the benchmark Selic rate at 2% for the third straight meeting but said inflation expectations for the next two years are rising toward the target. That means conditions for keeping borrowing costs low may soon not be met, it added.”

December 8 – Bloomberg (Andrea Navarro, Julia Leite, and Simone Preissler Iglesias): “One afternoon a couple months ago, hijackers commandeered a truck just east of Mexico City and hauled off its cargo. It wasn’t cash or jewelry but doses of ordinary flu vaccine so scarce in Mexico this year that there’s a black market for it in what many worry is an omen for Covid-19 vaccination. In Brazil, Latin America’s other behemoth, President Jair Bolsonaro, who belittles masks, is vowing not to get a Covid vaccine, causing health officials to worry that his loyal supporters might follow suit. In Bolivia, the government has approved ingesting chlorine dioxide -- bleach -- against the virus… Arguably, no region in the world has been hit as hard by the virus as Latin America. At the best of times, its health systems are wobbly.”

Europe Watch:

December 11 – Reuters (Guy Faulconbridge and Gabriela Baczynska): “Britain is likely to complete its journey out of the European Union in three weeks without a trade deal, British Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen said on Friday… ‘It’s looking very, very likely we’ll have to go for a solution that I think will be wonderful for the UK, we’ll be able to do exactly what we want from January 1, it will obviously be different from what we set out to achieve,’ Johnson told reporters.”

December 8 – Financial Times (Martin Arnold): “Eurozone governments’ borrowing has rocketed to fund their response to the coronavirus pandemic, reigniting longstanding calls for the European Central Bank to ease debt burdens by forgiving sovereign bonds it owns. The proposal was floated by academic economists as an answer to the single currency area’s last debt crisis in 2012. Senior Italian officials have recently stirred up the idea once more, suggesting the ECB could forgive debt bought through its asset purchase programme or swap it for perpetual bonds, which are never repaid. Governments’ responses to the pandemic will rack up €1.5tn of extra debt, pushing the eurozone’s sovereign debt above the size of the bloc’s economy this year for the first time. Many countries are running budget deficits above 10% of gross domestic product, including Italy, France and Spain. Italy’s government debt is expected to rise from 135% of GDP last year to almost 160% in 2021.”

Japan Watch:

December 7 – Reuters (Tetsushi Kajimoto and Leika Kihara): “Japan announced a fresh $708 billion economic stimulus package… to speed up the recovery from the country’s deep coronavirus-driven slump, while targeting investment in new growth areas such as green and digital innovation. The new package will include about 40 trillion yen ($384.54bn) in direct fiscal spending and initiatives targeted at reducing carbon emissions and boosting adoption of digital technology.”

December 6 – Bloomberg (Min Jeong Lee and Toshiro Hasegawa): “The Bank of Japan has taken over as the biggest owner of the nation’s stocks, with the total value of its holdings climbing well above $400 billion. Massive exchange-traded fund purchases by the BOJ to support the market amid the pandemic this year combined with subsequent valuation gains pushed its Japanese equity portfolio to 45.1 trillion yen ($434bn) in November… That marks the first time that the central bank’s holdings have eclipsed those of the Government Pension Investment Fund, which Ide estimates stood at 44.8 trillion yen last month…”

Leveraged Speculation Watch:

December 8 – Bloomberg (Chris Bryant): “Free lunches don’t last long in finance but hedge funds have identified a temporary exception to that rule: the special purpose acquisition company, or SPAC. North American SPACs have raised almost $70 billion this year in initial public offerings…, and a big chunk of that money comes from the hedge fund industry. Some funds hold scores of SPACs and it’s been a lucrative bet. The central role of hedge funds in the SPAC boom is the subject of a new paper by Michael Klausner of Stanford Law School and Michael Ohlrogge of New York University School of Law… In effect, hedge funds are providing bridge loans that have enabled a host of famous names from the world of business, finance and politics to launch their own SPACs this year.”

December 10 – Bloomberg (Lisa Pham): “Short sellers won some high-profile victories this year with the collapse of payments firm Wirecard AG and hospital operator NMC Health Plc. Otherwise, 2020 is shaping up to be the worst year on record for some investors seeking to profit from share price declines. A monthly index of short-selling hedge funds is down 32% this year through October, according to… Hedge Fund Research. The performance is unlikely to have improved in November…”

Geopolitical Watch:

December 10 – Reuters (Yimou Lee, David Lague and Ben Blanchard): “Months after eliminating a popular challenge to its rule in Hong Kong, China is turning to an even higher-stakes target: self-governing Taiwan. The island has been bracing for conflict with China for decades, and in some respects, that battle has now begun. It’s not the final, titanic clash that Taiwan has long feared, with Chinese troops storming the beaches. Instead, the People’s Liberation Army, China’s two-million-strong military, has launched a form of ‘gray zone’ warfare. In this irregular type of conflict, which stops short of an actual shooting war, the aim is to subdue the foe through exhaustion. Beijing is conducting waves of threatening forays from the air while ratcheting up existing pressure tactics to erode Taiwan’s will to resist, say current and former senior Taiwanese and U.S. military officers. The flights, they say, complement amphibious landing exercises, naval patrols, cyber attacks and diplomatic isolation. The risk of conflict is now at its highest level in decades.”

December 7 – Reuters (Ben Blanchard and Gabriel Crossley): “Taiwan faces military threats on a daily basis from ‘authoritarian forces’, President Tsai Ing-wen said…, as the United States announced a new $280 million arms sale package to the Chinese-claimed island, the sixth this year. China expressed anger at the weapons sale, as it always does, threatening unspecified retaliation. The outgoing Trump administration has ramped up support for the island democracy, with 11 arms sale packages in total, and on Monday the U.S. government notified Congress of the sale of a new Field Information Communications System.”

Friday Afternoon Links

[Yahoo/Bloomberg] Stocks Pare Drop as Senate Moves to Avert Shutdown: Markets Wrap

[Reuters] U.S. Senate passes, sends to Trump, one-week extension of government funding

[Yahoo/Bloomberg] Cuomo Says New York City Indoor Dining Will Close Monday

[Reuters] Europe in meltdown as Covid death tolls soar and progress unravels

[AP] Viral spread: Americans paying the price for Thanksgiving