One month after President Joe Biden warned Americans to prepare for cyberattacks from Russia, a US official said that Washington still has yet to detect any.
The US Cybersecurity and Infrastructure Security Agency (CISA) has assessed that Russia has not breached US systems, with agency head Jen Easterly saying the administration has “not seen attacks manifest here.”
“To date, we have not seen specific attacks on the US. What we are concerned about is the fact that Russia’s malicious cyber activity is part of their playbook,” she said in a statement on Thursday.
Easterly did mention that American economic penalties could provoke Russian cyber operations in the future, despite the lack of such breaches to date.
“We are very concerned that as the war drags on, there may, in fact, be retaliatory attacks given the very severe sanctions we have imposed on the Kremlin, the US and our allies,” the agency head continued.
In a March 21 speech, Biden told Americans that “the magnitude of Russia’s cyber capacity is fairly consequential, and it’s coming,” ominous warning of major hacks on the horizon. The Biden administration has issued several similar alerts that have failed to materialize.
The White House has warned for months that Moscow could deploy chemical weapons and has even shipped protective equipment to Kiev’s forces to prepare for such an attack.
WATCH: Biden nonchalantly says Russia is about to conduct a cyberattack against the United States.
On April 6, however, a series of unnamed US officials told NBC News that “there is no evidence Russia has brought any chemical weapons near Ukraine,” adding that Washington hurled the accusation merely to “deter Russia from using the banned munitions.”
Twitter's $17M Per Year Censorship Czar Could Get Axe Under Musk
Twitter's censorship czar Victoria Gadde - who broke down in tears last week during a conference call to discuss Elon Musk's purchase of the company - stands to lose her job which paid $17 million last year, as Musk is reportedly planning to cut jobs and executive pay as part of the takeover.
Musk expressed "no confidence" in Twitter's current management following the announcement of his plans to buy the company.
That said, the 48-year-old Gadde - who was behind decisions such as Zero Hedge's February 2020 ban for peculating that Covid-19 may have emerged from a Wuhan Lab, and former President Trump's ongoing ban, has a reported $12.5 million severance package, according to the NY Post.
Musk shared a flowchart last week based on a 2019 appearance by Gadde on "The Joe Rogan Experience" where journalist Tim Pool absolutely wrecked her over anti-conservative bias.
Musk also called Twitter's decision to block the Hunter Biden laptop story - another 'buck stops with Gadde' decision - "obviously incredibly inappropriate."
The piece was banned by major social media sites in the weeks before the election, with Twitter justifying accusations of censorship by labeling the story “content obtained through hacking that contains private information.”
The only antidote to propaganda dementia is served by sparse voices of reason, which happen to be Russian, thus silenced and/or dismissed.
Especially since the onset of GWOT (Global War on Terror) at the start of the millennium, no one ever lost money betting against the toxic combo of hubris, arrogance and ignorance serially deployed by the Empire of Chaos and Lies.
What passes for “analysis” in the vast intellectual no-fly zone known as U.S. Think Tankland includes wishful thinking babble such as Beijing “believing” that Moscow would play a supporting role in the Chinese century just to see Russia, now, in the geopolitical driver’s seat.
This is a fitting example not only of outright Russophobic/Sinophobic paranoia about the emergence of peer competitors in Eurasia – the primeval Anglo-American nightmare – but also crass ignorance about the finer points of the complex Russia-China comprehensive strategic partnership.
As Operation Z methodically hits Phase 2, the Americans – with a vengeance – have also embarked on their symmetrical Phase 2, which de facto translates as an outright escalation towards Totalen Krieg, from shades of hybrid to incandescent, everything of course by proxy. Notorious Raytheon weapons peddler reconverted into Pentagon head, Lloyd Austin, gave away the game in Kiev:
“We want to see Russia weakened to the degree that it can’t do the kinds of things that it has done in invading Ukraine.”
So this is it: the Empire wants to annihilate Russia. Cue to War Inc.’s frenzy of limitless weapon cargos descending on Ukraine, the overwhelming majority on the road to be duly eviscerated by Russian precision strikes. The Americans are sharing intel 24/7 with Kiev not only on Donbass and Crimea but also Russian territory. Totalen Krieg proceeds in parallel to the engineered controlled demolition of the EU’s economy, with the European Commission merrily acting as a sort of P.R. arm of NATO.
Amidst the propaganda dementia cum acute cognitive dissonance overdrive across the whole NATOstan sphere, the only antidote is served by sparse voices of reason, which happen to be Russian, thus silenced and/or dismissed. The West ignores them at their own collective peril.
Patrushev goes Triple-X unplugged
Let’s start with President Putin’s speech to the Council of Legislators in St. Petersburg celebrating the Day of Russian Parliamentarism.
Putin demonstrated how a hardly new “geopolitical weapon” relying on “Russophobia and neo-Nazis”, coupled with efforts of “economic strangulation”, not only failed to smother Russia, but impregnated in the collective unconscious the feeling this an existential conflict: a “Second Great Patriotic War”.
With off the charts hysteria across the spectrum, a message for an Empire that still refuses to listen, and doesn’t even understand the meaning of “indivisibility of security”, had to be inevitable:
“I would like to emphasize once again that if someone intends to interfere in the events taking place from the outside and creates threats of a strategic nature unacceptable to Russia, they should know that our retaliatory strikes will be lightning fast. We have all the tools for this. Such as no one can boast of now. And we won’t brag. We will use them if necessary. And I want everyone to know about it – we have made all the decisions on this matter.”
Translation: non-stop provocations may lead Mr. Kinzhal, Mr. Zircon and Mr. Sarmat to be forced to present their business cards in select Western latitudes, even without an official invitation.
Arguably for the first time since the start of Operation Z, Putin made a distinction between military operations in Donbass and the rest of Ukraine. This directly relates to the integration in progress of Kherson, Zaporozhye and Kharkov, and implies the Russian Armed Forces will keep going and going, establishing sovereignty not only in the Donetsk and Luhansk People’s Republics but also over Kherson, Zaporozhye, and further on down the road from the Sea of Azov to the Black Sea, all the way to establishing full control of Nikolaev and Odessa.
The formula is crystal clear: “Russia cannot allow the creation of anti-Russian territories around the country.”
Now let’s move to an extremely detailed interview by Secretary of the Security Council Nikolai Patrushev to Rossiyskaya Gazeta, where Patrushev sort of went triple-X unplugged.
The key take away may be here:
“The collapse of the American-centric world is a reality in which one must live and build an optimal line of behavior.” Russia’s “optimal line of behavior” – much to the wrath of the universalist and unilateralist hegemon – features “sovereignty, cultural and spiritual identity and historical memory.”
Patrushev shows how “tragic scenarios of world crises, both in past years and today, are imposed by Washington in its desire to consolidate its hegemony, resisting the collapse of the unipolar world.” The U.S. goes no holds barred “to ensure that other centers of the multipolar world do not even dare to raise their heads, and our country not only dared, but publicly declared that it would not play by the imposed rules.”
Patrushev could not but stress how War Inc. is literally making a killing in Ukraine: “The American and European military-industrial complex is jubilant, because thanks to the crisis in Ukraine, it has no respite from order. It is not surprising that, unlike Russia, which is interested in the speedy completion of a special military operation and minimizing losses on all sides, the West is determined to delay it at least to the last Ukrainian.”
And that mirrors the psyche of American elites:
“You are talking about a country whose elite is not able to appreciate other people’s lives. Americans are used to walking on scorched earth. Since World War II, entire cities have been razed to the ground by bombing, including nuclear bombing. They flooded the Vietnamese jungle with poison, bombed the Serbs with radioactive munitions, burned Iraqis alive with white phosphorus, helped terrorists poison Syrians with chlorine (…) As history shows, NATO has also never been a defensive alliance, only an offensive one.”
Previously, in an interview with the delightfully named The Great Game show on Russian TV, Foreign Minister Sergei Lavrov had once again detailed how the Americans “no longer insist on the implementation of international law, but on respect for the ‘rules-based world order’. These ‘rules’ are not deciphered in any way. They say that now there are few rules. For us, they don’t exist at all. There is international law. We respect it, as does the UN Charter. The key provision, the main principle is the sovereign equality of states. The U.S. flagrantly violates its obligations under the UN Charter when it promotes its ‘rules’”.
Lavrov had to stress, once again, that the current incandescent situation may be compared to the Cuban Missile Crisis: “In those years, there was a channel of communication that both leaders trusted. Now there is no such channel. No one is trying to create it.”
The Empire of Lies, in its current state, does not do diplomacy.
The pace of the game in the new chessboard
In a subtle reference to the work of Sergei Glazyev, as the Minister in Charge of Integration and Macroeconomics of the Eurasia Economic Union explained in our recent interview, Patrushev hit the heart of the current geoeconomic game, with Russia now actively moving towards a gold standard: “Experts are working on a project proposed by the scientific community to create a two-circuit monetary and financial system. In particular, it is proposed to determine the value of the ruble, which should be secured by both gold and a group of goods that are currency values, to put the ruble exchange rate in line with real purchasing power parity.”
That was inevitable after the outright theft of over $300 billion in Russian foreign reserves. It may have taken a few days for Moscow to be fully certified it was facing Totalen Krieg. The corollary is that the collective West has lost any power to influence Russian decisions. The pace of the game in the new chessboard is being set by Russia.
Earlier in the week, in his meeting with the UN secretary-general Antonio Guterres, Putin went as far as stating that he’d be more than willing to negotiate – with only a few conditions: Ukrainian neutrality and autonomy status for Donbass. Yet now everyone knows it’s too late. For a Washington in Totalen Krieg mode negotiation is anathema – and that has been the case since the aftermath of the Russia-Ukraine meeting in Istanbul in late March.
So far, on Operation Z, the Russian Armed forces have used only 12% of its soldiers,10% of its fighter jets, 7% of its tanks, 5% of its missiles, and 4% of its artillery. The pain dial is set to go substantially up – and with the total liberation of Mariupol and the resolution one way or another of the Donbass cauldron there is nothing the hysteria/propaganda/weaponizing combo deployed by the collective West can do to alter facts on the ground.
That includes desperate gambits such as the one uncovered by SVR – Russian foreign intel, which very rarely makes mistakes. SVR found out that the Empire of Lies/War Inc. axis is pushing not only for a de facto Polish invasion to annex Western Ukraine, under the banner of “historical reunification”, but also for a joint Romanian/Ukrainian invasion of Moldova/Transnistria, with Romanian “peacekeepers” already piling up near the Moldova border.
Washington, as the SVR maintains, has been plotting the Polish gambit for over a month now. It would “lead from behind” (remember Libya?), “encouraging” a “group of countries” to occupy Western Ukraine. So partition is already on the cards. Were that ever to materialize, it will be fascinating to bet on which locations Mr. Sarmat would be inclined to distribute his business card.
$2 Billion Hedge Fund Loses Nearly Half After Carvana Plummets 75% In 2022
For a vivid example of a hedge fund that prospered and grew, expanding relentlessly with the blessings of the Fed's ZIRP and QE but now that QE is on idefinite hiatus and the Fed's put is gone and successful "investing" actually requires more skill than just putting cash into high beta names and praying that the Fed will keep BRRRRing, is imploding look no farther than CAS Investment Partners, a Westport-based hedge fund which had "grown" more than 1000% sine its inception in October 2012 yet which has lost nearly half of its assets in just the past four months, thanks to a heavily concentrated portfolio of stocks, but mostly novelty used care dealer Carvana.
CAS - which is based on the initials of its 40-year-old founder, Clifford Sosin - had built up a huge (for a smallish hedge fund) 3.3 million share stake in Carvana in 2019 and early 2020, one which grew to over $1 billion in August 2021 when CVNA stock topped $350 and accounted for a quarter of the fund's AUM as of March 31. However, since then things have gone from bad to worse, and after dropping to $250/share by year-end, Carvana has plunged another 75% in 2022, before tumbling another 10% on Friday as traders grow concerned that the company equity may be worthless and a debt-for-equity swap is inevitable (and there is a lot of debt to be swapped) especially if the used car market is just now starting to crack.
The crash in CVNA shares, and the resulting collapse in the CAS hedge fund, must have prompted a barrage of angry and or concerned investors phone calls, which culminated on Friday in a 25-page letter (attached below) written by Sosin, in which he writes (over and over) that Carvana's troubles are transitory and that all will be well soon: “Carvana’s challenges, especially when coupled with the precipitous decline in its stock price, clearly seem terrifying,” Sosin wrote in the Friday’s letter. However, “I believe that in due time we will look back at them as bumps in the road on the company’s path to success.”
Sosin, who started his career in the Houlihan Lokey restructuring group in 2004, then worked at Silverpoint and UBS before starting off on his own in 2012 - declined to comment to Bloomberg.
Carvana, which was once a pandemic darling, has since fast fallen out of favor. Its first-quarter results revealed a deepening cash burn, stemming from surges in used-vehicle prices and capital spending. Meanwhile, after peaking a few months ago, used car prices appear set to plunge in the coming months now that the US consumer is fully tapped out.
Adding insult to injury, earlier this week Carvana struggled to raise $3.3 billion in the junk bond market and had to revamp a junk-bond offering, adding a bankruptcy-friendly make whole provision.
Those new bonds tumbled to 96 cents on the dollar in their first day of secondary trading even after Apollo Global swooped in to buy roughly half of the sale.... or rather because Apollo swooped in, in a move many speculate is a signal Apollo will control the fulcrum security, and thus the post-reord equity, in the coming Chapter 11 filing.
And while we wait for the (used) wheels to come off the Carvana bullish narrative, we go back to what we said at the top, namely how this story may be indicative of the reversal of fortune for "hedge" funds who never actually had to hedge, or do any work for that matter in a world where the Fed did all the work for them, and how now that the Fed is no longer there holding hands, how everything is imploding. Indeed, as Bloomberg notes, "for CAS, 2022 is a stark contrast to its previous performance. Its fund hasn’t had a down year since launching in October 2012, and in 2020 it returned a record 96.5%."
Desperate to avoid a flood of redemptions, in his 25-page letter Sosin focused entirely on Carvana, and acknowledged its weak unit volume, but said it should accelerate when the industry normalizes (which may take a while since the US economy is only just now entering a recession). He added that the company should generate profits of $100 million annually from its acquisition of Adesa Inc.’s U.S. car-auction business, which was financed with this week’s debt offering. Then again there is the $600 million in interest expense:
"While the company’s $600 million of annual interest expense is largely fixed, and a certain level of fixed/ overhead costs are necessary to run the company, the company’s growth investments are under the management’s control."
Still, Sosin refuses to cut and run, writing that “Carvana has a great deal of latent margin potential,” and adding that “this potential should allow the company to pursue its growth ambitions, albeit at a slower pace of expansion, without meaningfully accessing the capital markets or counting on a significant used-vehicle industry recovery.”
For now, the market clearly disagrees.
But if Sosin fast and furious reversal of fortune is bad, it's nowhere near as bad as the billionaire father-son duo behind the Phoenix-based Carvana. Ernie Garcia II and Ernie Garcia III have lost almost $14 billion combined so far this year, according to the Bloomberg Billionaires Index. The younger Garcia, the company’s chief executive officer, has lost about 73% of his net worth since the start of 2022.
The senior Garcia began selling Carvana shares in late October 2020 as they climbed to around $200 each from their pre-pandemic level of about $90. The stock closed Friday at $57.96.
“If Carvana works out as well as it could, they might be among the richest people on the planet,” Sosin told Bloomberg in a 2019 interview. Three years since that remark, he said the company still has a bright future.
“I am not immune to mistakes, and I promise that when I eventually make a doozy I will put it here at the top of this letter,” Sosin wrote. “In this case, however, I do not believe I have.”
For those who disagree, here is a list of CAS's holdings: if and when the margin calls and forced selling comes, these are the names that Sosin will rush to liquidate to avoid a collapse of his hedge fund. Which is why others may decided to sell them first.
Though OTVI climbed 6.6% over the past week, it faced easy comps as volumes were depressed in the week following Easter Sunday. On a year-over-year (y/y) basis, OTVI is down 16.75%. Comparisons on a y/y basis can be thorny because OTVI can be inflated by an uptick in tender rejections. At this time last year, OTVI was greatly inflated by rising tender rejections, whereas rejection rates have since nosedived to incredible lows.
Looking at accepted tender volumes, which is OTVI adjusted by the Outbound Tender Reject Index (OTRI), we see growth of only 0.3% y/y as well as growth by 8.3% on week-over-week (w/w) basis — the latter w/w growth, again, came against easy comps. The y/y picture for accepted volume may not appear grim, but the overall freight market is historically strong during the run-up to summer. The current limping state of the market, on the other hand, should concern carriers.
The Chinese government appears to be gearing up for extended COVID lockdowns in Shanghai and, given recent school closings, possibly Beijing. The Port of Shanghai is the busiest container port in the world; any disruptions to its operations would have severe ripple effects on global supply chains. At first glance, the Port of Shanghai does not seem to be majorly impacted by the ongoing lockdowns — average dwell times for exports are currently at a little more than two days, well below the average of three days over the past year.
Part of these low dwell times can be explained by the lack of goods flowing into the port, as productivity at manufacturing plants and the movement of truck drivers are both heavily restricted by the lockdowns. There is a likely accumulation of goods that are languishing in nearby warehouses or that have yet to be produced by factories in Shanghai. This accumulation is a ticking time bomb: Once it is able to be delivered to the terminals, the port will be inundated with excess cargo and will then be unable to operate efficiently.
Another cause for concern will be the limited supply of empty containers caused by restricted freight flow at Chinese ports. Shipments from China to Europe are already being delayed, inhibiting the gross number of containers that can be delivered, unloaded and, in turn, reloaded and shipped to the United States. Any curb on trade between Europe and the U.S. is a mixed blessing. On the one hand, a reduction in new vessel arrivals will allow East Coast seaports to tackle the backlog of cargo that is currently congesting them. On the other, this reduction could kick the can further down the line, as exporters on the East Coast would eventually have a limited supply of empty containers themselves. Whatever the case, the lockdowns in China are threatening to extend well into the summer.
Of the 135 total markets, 100 reported weekly increases after volumes recovered from the Easter lull.
Since last week was quite barren, freight demand this week faced favorable comps on a w/w basis. Volumes returned to the ports: Charleston, South Carolina, was up 23.4%; Los Angeles was up 7.77%; and Houston was up 4.96%. Volumes also returned to the largest markets: Atlanta was up 10.2%; Ontario, California, was up 6.63%; and Harrisburg, Pennsylvania, was up 6.41%.
There were, however, a few markets to which this bounty of freight volume was not extended. Lakeland, Florida — the state’s largest market by outbound volume — was the only market in the state to experience contraction this week, with volumes falling nearly 2% w/w. The Indianapolis market, a Midwestern hub for manufacturing, saw volumes decline 2.14% w/w after a recent survey expressed Hoosier manufacturers’ concerns about their ability to overcome supply chain disruptions and to contend with the rising costs of material inputs.
By mode: Reefer volume took a tumble this week as the Reefer Outbound Tender Volume Index (ROTVI) fell 6.7% w/w. Lakeland, Florida — the nation’s largest outbound market for reefer freight — saw its own ROTVI decline 3.1% w/w after a sharp rise and fall early in the week. Dry van volumes, however, bounced back and the Van Outbound Tender Volume Index (VOTVI) rose 6.9% w/w accordingly. In produce-heavy markets, such as those in the Southeast, reefer volumes should be sustained by seasonal patterns — after all, demand for food is fairly inelastic.
Tender rejections finally fall to sub-10% levels and show no signs of slowing
Although treading water above 10% at the beginning of the week, OTRI quickly fell into single-digit percentages before the week’s end. Excepting the onset of the 2020 pandemic, OTRI’s current trend marks both the steepest and longest decline in a non-holiday-affected period.
Over the past week, OTRI, which measures relative capacity in the market, fell to 8.82%, a change of 138 basis points (bps) from the week prior. OTRI is now 1,634 bps below year-ago levels as it is decidedly established in single-digit percentages.
One of the biggest pressures facing carriers is the uninterrupted rise of diesel prices. Carriers playing primarily within the spot market already are exposed to volatile rate swings and reduced demand for spot freight, but to make matters worse, they typically have to eat the cost of fuel as part of their all-in rate. Yet even carriers running contracted loads still face the pressure of diesel hikes, since they normally pay for fuel at the point of sale while fuel surcharges can take months to reimburse them. That period of waiting for reimbursement can be crucial, since other monthly costs cannot be deferred so easily: insurance expenses, maintenance costs and, if the carrier’s equipment is not paid off, debt servicing.
Larger carriers often buy fuel at discount, wholesale prices and then charge elevated retail prices for their surcharges, but the trucking industry as a whole is dominated by smaller carriers. As of February 2021, of all the carriers registered with the FMCSA, a mere 2.6% operated fleets with 20 or more trucking units. Almost 92% had fleets of six or fewer trucks. So, while larger carriers might experience some insularity from diesel price hikes, the truckload market is altogether exposed to these fluctuations.
The map above shows the Weighted Rejection Index (WRI), the product of the Outbound Tender Reject Index — Weekly Change and Outbound Tender Market Share, as a way to prioritize rejection rate changes. As capacity is finding freight, there are currently no blue markets that would normally be objects of attention.
Of the 135 markets, only 24 reported higher rejection rates over the past week as carriers compete for loads amid quieter freight demand.
By and large, capacity came back online during this week with only a few notable exceptions. As volume surged through the East Coast seaports, rejection rates rose as capacity did not meet demand. After a dramatic fall in tender rejections the week prior, Savannah, Georgia, saw rejections rebound by 159 bps to 6.73%. Similarly, the market of Charleston posted a rejection rate of 7.08% this week, up 82 bps from the previous week. These two markets host two of the fastest-growing container ports in the U.S., since they are increasingly an attractive alternative to congested seaports in Southern California.
By mode: Despite falling 315 bps this past week, the Flatbed Outbound Tender Reject Index (FOTRI) shows clearer demand for flatbeds than its dry van and reefer counterparts. FOTRI currently sits at 29.22%, 304 bps higher on a y/y basis. In Illinois (and probably elsewhere), it was commonly joked that there were two seasons: winter and construction. Construction season is already well underway, with new residential and nonresidential construction heating up to levels not seen since 2006. Moreover, high crude prices are driving investment into oil drilling. Accordingly, flatbeds will be in great demand for the foreseeable future.
Rejection rates in the other two modes, dry van and reefer, have continued along a protracted decline that began in early March. The Van Outbound Tender Reject Index (VOTRI) is now at 8.7%, 124 bps lower on a w/w basis and 1,642 bps lower y/y. Following the trend in ROTVI, the Reefer Outbound Tender Reject Index (ROTRI) is down 479 bps this week to 11.43%, a whopping 3,307 bps below year-ago levels.
Contract rates show signs of following spot rate trend, declining rapidly w/w
The spot rate data available in SONAR from Truckstop.com is updated every Tuesday with the previous week’s data.
The bottom has yet to be found on dry van spot rates. To borrow yet another analogy from roller coasters, any carrier wearing a waterproof poncho is painfully dry as it waits for the Splash at the end of the Mountain. Truckstop.com’s national all-in dry van spot rate, which is based on the top 100 lanes from Truckstop.com’s load board, fell 8 cents per mile this week to $2.94 per mile, including fuel surcharges and other accessorials.
This week marks the first time that the rate has fallen below $3 a mile since February 2021. For context, the national rate averaged around $2.10 a mile prior to the pandemic, almost 30% lower than the current rate. While the gap between then and now might seem insurmountable, keep in mind that spot rates have already fallen 23% from their peak in early January. Diesel prices will, however, continue to provide upward pressure on spot rates. In short, spot rates are unlikely to return to $2.10 a mile, but they might soon be moving into the same neighborhood.
Of the 102 lanes from Truckstop.com’s load board, only 19 reported weekly increases, up from last week’s 13 lanes but not up enough to provide relief to carriers. The most drastic increases were found on peripheral lanes in New England: For example, Syracuse, New York, to Hartford, Connecticut, jumped 25 cents per mile to $4.39 a mile, well above the national average.
Ever since the supply chain disruptions early in the pandemic, shippers have been increasingly shifting their contract bid cycles to shorter periods so as to keep better pace with a volatile market. Now that data has come in from the Q2 renegotiations, it is clear that shippers have realized their newfound pricing power. Contract rates, which are the base linehaul rate excluding fuel surcharges and other accessorials that are included in spot rates, fell 9 cents per mile to $2.81 a mile. This decline bodes ill for those carriers hoping that contract rates would insulate them from the rapid decline seen in the spot market. Nevertheless, contract rates are still up 16.1% y/y, so all is not yet lost for those carriers.
There are also the backhaul lanes to consider, many of which have hit their floor on rates and are now steadily increasing. Of these lanes, Dallas to Los Angeles is one of the most interesting, since it shares some characteristics with a backhaul lane but not others. Dallas is currently the third-largest outbound market in the country, yet carriers are covering loads from it to Los Angeles at rates near their operational cost. Because of that razor-thin margin, spot rates (which include fuel surcharges) on this lane are mainly affected by shifting diesel prices.
As a result, FreightWaves’ Trusted Rate Assessment Consortium (TRAC) spot rate from Dallas to Los Angeles has risen only 2 cents per mile over the past week to $1.90 but has spiked by 52 cents per mile over the past six months. These increases translate to a 1.1% gain w/w and a 37.7% gain over a six-month period. Meanwhile, diesel prices have risen by a comparable 1.2% w/w and by 38.4% over a six-month period.
The opposite is true for rates along headhaul lanes, where carriers had a comfortable margin above their operating costs. For example, the FreightWaves TRAC spot rate along the extremely dense lane from Los Angeles to Dallas has fallen 7 cents per mile over the past week to $2.71 a mile and has plummeted a staggering $1.38 per mile over the past six months.
With rejection rates continuing to fall as they have been, shippers have no incentive to keep increasing or even maintaining those contract rates set in previous quarters. Instead, shippers have firm possession of pricing power for the moment and, from the looks of it, will exercise it to the best of their ability. Except on lanes in which fuel cost is a significant factor, neither contract nor spot rates should be expected to reverse course anytime soon.
Buffett Blasts Bankers For Turning Stock Market Into "A Gambling Parlor"
After a tumultuous week of violent lurches higher (but mostly lower), the S&P 500 has ended April with its worst start to a year since the start of World War 2...
Vacation bookings are soaring, car sales are booming and Americans continue to spend with abandon, thanks to higher wages and brisk hiring; and yet, the economy unexpectedly contracted in the first quarter, led by trade deficits and a drop in inventory purchases.
“The market is worried about a very fragile economic outlook, as it should be," said Joe LaVorgna, chief Americas economist at Natixis and former Trump White House economic adviser.
“The economy is fundamentally soft: The Fed is going to hike next week, the situation in Ukraine is not getting better and high inflation is cutting into costs."
All this chaos and divergence appears to have 'triggered' 91-year-old Warren Buffett who lambasted Wall Street for encouraging speculative behavior in the stock market, effectively turning it into a "gambling parlor."
Having announced that Berkshire Hathaway suffered a $1.58 billion loss in the first quarter of 2022 (a huge reversal from the nearly $5 billion gain it saw at the same period of 2021), Buffett spoke at length during his annual shareholder meeting Saturday about one of his favorite targets for criticism: investment banks and brokerages.
“Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism,” Buffett said.
“They don’t make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing.”
Buffett bemoaned that large American companies have “became poker chips” for market speculation. As CNBC reports, he cited soaring use of call options, saying that brokers make more money from these bets than simple investing.
Still, the situation can result in market dislocations that give Berkshire Hathaway an opportunity, he said:
"That's why markets do crazy things, and occasionally Berkshire gets a chance to do something."
98-year-old Charlie Munger also chimed in, warning that “It’s almost a mania of speculation."
“We have people who know nothing about stocks being advised by stock brokers who know even less,” Munger said.
“It’s an incredible, crazy situation. I don’t think any wise country would want this outcome. Why would you want your country’s stock to trade on a casino?”
CNBC noted that an audience member made an inaudible comment while he was talking.
Rightists have spent the last couple of days freaking out and invoking Orwell’s 1984 in response to something their political enemies are doing in America, and for once it’s for a pretty good reason.
The Department of Homeland Security has secretly set up a “Disinformation Governance Board”, only informing the public about its plans for the institution after it had already been established.
The disinformation board, which critics have understandably been calling a “Ministry of Truth”, purportedly exists to fight disinformation coming out of Russia as well as misleading messages about the US-Mexico border. We may be certain that the emphasis in the board’s establishment has been on the Russia angle, however.
White House Press Secretary Jen Psaki, in her patented “You’re such a crazy idiot for questioning me about the White House” manner, dismissed alarmed questions about what specific functions this strange new DHS entity was going to be performing and what its authority will look like.
“It sounds like the objective of the board is to prevent disinformation and misinformation from traveling around the country in a range of communities,” Psaki said.
“I’m not sure who opposes that effort.”
PSAKI: "It sounds like the objective of the board is to prevent disinformation and misinformation from traveling around the country in a range of communities. I'm not sure who opposes that effort." pic.twitter.com/Z4xOv46RLT
The answer to the question of “who opposes that effort” is of course “anyone with functioning gray matter between their ears.” No government entity has any business appointing itself the authority to sort information from disinformation on behalf of the public, because government entities are not impartial and omniscient deities who can be entrusted to serve the public as objective arbiters of absolute reality. They would with absolute certainty wind up drawing distinctions between information, misinformation and disinformation in whatever way serves their interests, regardless of what’s true, exactly as any authoritarian regime would do.
I mean, is anyone honestly more afraid of Russian disinformation than they are of their own government appointing itself the authority to decide what counts as disinformation?
This important point has gotten a bit lost in the shuffle due to the utterly hypnotic ridiculousness of the person who has been appointed to run the Disinformation Governance Board. Nina Jankowicz, a carefully groomed swamp creature who has worked in Kyiv as a communications advisor to the Ukrainian government as part of a Fulbright fellowship, is being widely criticized by pundits and social media users for her virulent Russiagating and whatever the hell this is:
Because of this person’s embarrassing cartoonishness, a lot more commentary lately has been going into discussing the fact that the Department of Homeland Security’s Ministry of Truth is run by a kooky liberal than the fact that the Department of Homeland Security has a fucking Ministry of Truth.
Which is really to miss the forest for the trees, in my opinion. Would it really be any better if the “Disinformation Governance Board” was run by a chill dude you wouldn’t mind having a beer with? Especially when we know the ideological leanings of this department are going to bounce back and forth between elections and will always act in service of US empire narrative control regardless of who is in office? I don’t think so.
The real issue at hand is the fact that this new institution will almost certainly play a role in bridging the ever-narrowing gap between government censorship and Silicon Valley censorship. The creation of the DHS disinformation board is a far more shocking and frightening development than last year’s scandalous revelation that the White House was advising social media platforms about accounts it determined were circulating censorship-worthy Covid misinformation, which was itself a drastic leap in the direction toward direct government censorship from what had previously been considered normal.
White House fact-sheet says part of the mammoth $33 billion spending package it's requesting for Ukraine will be to "support independent media." Because nothing screams "independent" like being directly funded by the US Government as part of its "information warfare" initiative pic.twitter.com/O3JshV1Mg9
We should probably talk more about how as soon as people accepted that it was fine for government, media and Silicon Valley institutions to work together to censor misinformation and rally public support around an Official Narrative about a virus, the ruling power establishment immediately took that as license to do that with a war and a foreign government as well.
Like, immediately immediately. We went from a massive narrative control campaign about a virus, which people accepted because they wanted to contain a deadly pandemic, straight into a massive narrative control campaign about Russia and Ukraine. Without skipping a beat. Like openly manipulating everyone’s understanding of world events is just what we do now. Now we’re seeing increasingly brazen censorship of political dissent about a fucking war that could easily end up getting us all killed in a nuclear holocaust, and a portion of the Biden administration’s whopping $33 billion Ukraine package is going toward funding “independent media” (read: war propaganda).
We should probably talk more about this. We should probably talk more about how insane it is that all mainstream western institutions immediately accepted it as a given that World War II levels of censorship and propaganda must be implemented over a faraway war that our governments are not even officially a part of.
It started as soon as Russia invaded Ukraine, without any public discussion whatsoever. Like the groundwork had already been laid and everyone had already agreed that that’s what would happen. The public had no say in whether we want to be propagandized and censored to help the US win some kind of weird infowar to ensure its continued unipolar domination of the planet. It just happened.
No reason was given to the public as to why this must occur, and there was no public debate as to whether it should. This was by design, because propaganda only works when you don’t know it’s happening to you.
The choice was made for us that information is too important to be left in the hands of the people. It became set in stone that we are to be a propaganda-based society rather than a truth-based society. No discussion was offered, and no debate was allowed.
In the middle of an election campaign, Defence Minister Peter Dutton tells Australians to "prepare for war". He compared China with Nazi Germany in the 1930s. Australia has no enemies, none, zero. But it speaks for its master in Washington. Read on:https://t.co/dSRhu5b23i
And as bad as it is, it’s on track to get much, much worse. They’re already setting up “disinformation” regulation in the government which presides over Silicon Valley, the proxy war between the US and Ukraine is escalating by the day, and aggressions are ramping up against China over both the Solomon Islands and Taiwan. If you think imperial narrative management is intense now, wait until the US empire’s struggle to secure global hegemony really gets going.
Do you consent to this? Do you? It’s something you kind of have to take a position on, because its implications have a direct effect on our lives as individuals and on our trajectory as a society. How much are we willing to sacrifice to help the US win an infowar against Russia?
The question of whether we should abandon all hope of ever becoming a truth-based society and committing instead to winning propaganda wars for a globe-spanning empire is perhaps the most consequential decision we’ve ever had to make as a species. Which is why we weren’t given a choice. It’s just been foisted upon us.
Whoever controls the narrative controls the world. By taking our control of information out of our hands without asking our permission and determining for us that we are to be a propaganda-based civilization for the foreseeable future, they have stolen something sacred from us. Something they had no right to take.
Nothing about the state of the world tells us that the people who run things are doing a good job. Nothing about our current situation suggests they should be given more control, rather than having control taken away from them and given to the people. We are going in exactly the wrong direction.
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Spring Wheat Used In Pizza Crust Nears 14-Year High As Floods Devastate Northern Plains
U.S. spring-wheat futures are nearing the highest level since 2008, as the Northern U.S. Plains are plagued with devastating floods that prevent farmers from planting in the high-producing crop region.
Blizzards, winter storms, high winds, and extreme flooding battered the Dakotas and stalled plantings in April, raising concerns about shrinking crop yields as prevent plant dates for North Dakota are at the end of May.
Because of wet conditions, farmers cannot work their fields, which means yields will decrease everyday wheat isn't planted.
"The spring-wheat crop should continue to see planting delays with heavy rains, and cold weather in the forecast," commodity research firm The Hightower Report said.
The most-active spring wheat futures contract increased more than a 1% to $12.02 a bushel, nearing March's peak and closing in on the highest level since 2008. Prices have more than doubled since the virus pandemic low. $4.90.
Spring wheat is used in specialty items like rolls, croissants, bagels, and pizza crust. Money managers are holding a record net-long position due to supply fears following the Russian invasion of Ukraine, disrupting global wheat production.
Compound the U.S. drought of 2021, the Ukraine crisis, and floods in the Northern U.S. Plains, the world is even more dependent on the Northern hemisphere for major food needs. If the U.S. experiences production woes this crop season, if that's because of weather-related issues or simply not enough fertilizer, then there's an increasing risk a global food crisis could become more pronounced by the end of the year or into the next.
It’s like playing baseball with one side (patients) wearing blindfolds and the other side (hospitals) running up the score at will.
Topline
It was an historic, bipartisan healthcare reform. In 2020, President Donald Trump proposed and the Biden Administration finalized the transparency rule whereby hospitals were forced to open their books and post their prices for healthcare services online and in real time.
Blatantly, though, hospitals are refusing to comply. As of January 1, 86-percent of hospitals were not complying with the transparency rule according to an investigation by the organization Patient Rights Advocate.
One year after the rule went into effect, a staggering 857 out of the 1,000 hospitals surveyed refused to open their pricing books or were non-compliant.
In 2021, three of the largest hospital systems in the country – HCA Healthcare, CommonSpirit Health, and Ascension — made a collective $120 billion. Yet, those systems still weren’t posting their prices online by January 2022.
Even smaller “non-profit” hospital groups, like, UPMC in Pittsburgh, were non-compliant. However, in 2020, their CEO made $9 million; between 2016 and 2020, he was paid $34.7 million.
That’s like playing baseball with one side (patients) wearing blindfolds and the other side (hospitals) running up the score at will.
The Rule
The federal hospital price transparency rule took effect on January 1, 2021 as a part of the Affordable Care Act. It required hospitals to post all their prices online in a way that’s easily accessible to patients, without barriers like requiring that they submit personal identifying information.
Hospitals must provide the clear pricing information online “(a)s a comprehensive machine-readable file with all items and services” and “in a display of shoppable services in a consumer-friendly format,” according to Centers for Medicare & Medicaid Services (CMS).
Big number
There are 361 hospitals owned by the three large hospital systems and only two of those hospitals were posting their prices. According to the report:
HCA Healthcare had $58.8 billion in revenue (2021) — none of 188 hospitals complied.
CommonSpirit Health had $33.3 billion in revenue (2021) – only one of 88 hospitals complied.
Ascension had $27.2 billion in revenue (2021) – only one out of 85 hospitals complied.
CommonSpirit Health and Ascension didn’t respond to requests for comment by our deadline.
Case study – HCA Healthcare
An HCA Healthcare spokesperson responded to our comment request and said the hospitals are compliant – but wouldn’t say exactly when they began posting the required information.
“Over the last year, we have worked diligently and have completed our implementation of these requirements,” the HCA spokesperson said.
“Our hospital websites have a consumer-friendly Patient Payment Estimator tool that provides relevant information to help patients understand what their out-of-pocket costs may be for hospital care, including those that are uninsured. In addition, we have posted contracted rates with third party payers using one of the machine-readable file formats listed in the regulations to provide the five types of ‘standard charges.’”
Certainly, it’s a good first step; however, more work needs to be done.
Our auditors at OpenTheBooks.com reviewed about a dozen of HCA Healthcare hospital’s websites and found information under “patient financial resources” or “patient payment estimator” tabs.
While HCA hospital websites all have downloadable files of standard charges, they all include disclaimers that the prices can vary in several ways from what is stated.
The HCA files all also have shorthand or abbreviated descriptions of the services, making it hard to understand some of the services.
HCA also includes a gross cost and a discounted cost of services but lack the required payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges.
The hospital websites are also required to have a “display of at least 300 shoppable services.” In the absence of the shoppable services list, hospitals can display an internet-based price estimator tool that patients can access without having to submit personal identifying information.
The HCA websites have these patient payment estimators, where patients can search for a service. But the customer must add their information — their full name, date of birth and insurance. This appears to violate the rules.
Case study — UPMC
Susan Manko, vice president of public relations for UPMC and University of Pittsburgh, told OpenTheBooks that the Patient Rights Advocate report is inaccurate.
“The PRA website is (and has been for some time now) wrong,” she said.
“PRA completely missed that the appropriate pricing information has been available to the public on these hospitals’ websites for more than the past year and that these hospitals are compliant with federal regulations regarding pricing transparency.”
She provided the links for UPMC Shadyside and UPMC Magee-Womens, which indeed have a price estimator tool and a machine-readable file of items and services on the websites.
Patient Rights Advocate argues that while UPMC’s machine readable file lists prices for services provided by three dozen insurance companies, it lacks specific plans, like HMO and PPO plans, making the list incomplete. The rule clearly requires that “each list of payer-specific negotiated charges must be clearly associated with the name of the third party payer and plan.”
Big potential penalties
Price transparency can revolutionize U.S. healthcare by introducing price competition in the industry. Price disclosure also helps to prevent gouging and surprise billing.
So, on January 1, CMS increased the penalty for hospitals that don’t comply with the transparency rule. The upper bound penalties for the three large healthcare groups with 361 hospitals could collectively exceed $724 million per year.
Minimum penalties start at $300 per day for smaller hospitals with 30 or fewer beds, and increase to $10 per bed per day for hospitals with more than 30 beds, up to $5,500 per day.
If hospitals aren’t in compliance for a full year, the minimum penalty is $109,500 per hospital, and the maximum penalty is more than $2 million per hospital.
Key background
Patient Rights Advocate reviewed the websites of 1,000 licensed hospitals – out of the 6,000 across America. The group analyzed whether the required pricing information was posted.
Hospitals are required to display the price of the 300 most common shoppable services, either in a standard charges list or a price estimator tool. But the report criticized the latter, saying “price estimator tools” give non-binding estimates (including price ranges) accompanied by disclaimers.
That’s far different from actual price disclosure, the report noted.
The report found most hospitals did not post allpayer-specific and plan-specific negotiated rates.
For instance, there was incomplete or missing data fields, fields with zeros, N/As and asterisks for negotiated rates.
It also found that hospitals often listed many more “accepted insurance plans” on their websites away from where they listed their standard charges, implying that their standard charges didn’t include all accepted plans.
Our organization at OpenTheBooks.com was at the forefront of shaping the federal rule, encouraging the public in the fall of 2019, and beginning of 2020 to comment on the health care price transparency proposal put forth by the Trump Administration.
With that push, about 2,000 comments were sent to Health and Human Services (HHS) and the Biden Administration finalized the rule. A true bipartisan reform that forces transparency from a politically powerful group.
Noncompliant hospitals—a year later and no fines
As of March 2022, CMS, which enforces the rule, has issued approximately 345 warning notices to noncompliant hospitals, a spokesperson told OpenTheBooks.com on April 25.
The agency has also issued 136 corrective action plan requests “to hospitals that previously received warning notices but have not yet corrected deficiencies,” and 145 hospitals “have received case closure notices after having addressed previous citations,” the spokesperson said.
CMS hasn’t issued any penalties because “each hospital that has come under compliance review has resolved its deficiencies, or is in the process of doing so.”
OpenTheBooks.com filed a Freedom of Information Act request earlier in April, asking HHS to divulge which hospitals received noncompliance notices and corrective action plans and whether the general public has notified HHS of noncompliant hospitals.
While HHS has acknowledged the request, it has not yet provided the records.
But the spokesperson said, “specifics surrounding the compliance and status of hospitals are not publicly available. The Hospital Price Transparency final rule indicates that once CMS issues a civil monetary penalty, CMS will make public the name of the hospital on a CMS website; releasing this information prematurely could identify hospitals that have already taken corrective actions and come into compliance after issuance of a warning letter, given the relationship in timing of our reviews and the hospitals being at various stages addressing compliance requests.”
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Crucial quote
Until CMS strongly enforces the rule, there is no reason for the remainder of the hospitals to comply, the Patient Rights Advocate report noted.
“We are now entering the second year since the hospital price transparency rule became law, and compliance remains at very low levels,” the report stated. “The largest hospital systems are effectively ignoring the law, with no consequences.”
Critics
The Wall Street Journal reported in December 2021 that some hospitals have posted pricing data on their websites but they “masked the information from online search results, using special code that blocks pricing data on their websites from the results of search engines,” noting the coding is illegal under new rules that take effect in 2022.
One hospital system, the North Oaks Health System, based in Hammond, La., posted some data early in 2021 but removed it two weeks later, as none of its competing hospitals had posted their rates.
“You get nervous about putting those negotiated rates out there,” the system’s chief financial officer, Mark Anderson, told The Journal. “You don’t know who will look at those rates and say, ‘I want to negotiate to the Medicare rates.’ We didn’t want to put ourselves at a competitive, strategic disadvantage.”
* * *
Additional Reading
An OpenTheBooks.com June 2019 report “Top 82 U.S. Non-Profit Hospitals: Quantifying Government Payments and Financial Assets” showed that hospitals with non-profit tax status and their CEOs are getting richer while the American people are getting healthcare poorer.
Our study published at Forbes showing the top 82 non-profit hospitals added billions of dollars to their bottom line, lavishly compensated their CEOs, and spent millions of dollars lobbying government to defend the status quo.
Adam Andrzejewski (say: And-g-f-ski) is the CEO/Founder of OpenTheBooks.com. Last year we filed 47,000 FOIA requests and captured $12 trillion in government spending (2021). Work featured at The BBC, Good Morning America; ABC World News Tonight; USA Today; The Wall Street Journal; Forbes; and The New York Times. My presentation to the Hillsdale College National Leadership seminar posted on YouTube has 3.7+ million views. Learn more at OpenTheBooks.com.
"Shooting The Generals" - Nomura Says RIPieces To 'Tactical Long' In Stocks
The Put Spread Collar that Nomura's Charlie McElligott mentioned this morning was re-struck around 3pm - so the today-expiring 4270 Puts are deep in the money now, and Dealers have since had to sell ~$3B of futures since yesterday's highs, as we've slipped and then accelerated lower, in order to stay hedged.
VIX lurched higher...
Well, as the Nomura strategist explains in a note shortly after the bell, the new trade is SPX 29Jul 3320 / 3940 / 4385 PS Collar 12,700 x’s (Put Spread over), so the customer bot 4k SPX today 4000 Calls to offset this immediate “negative Delta” impact of the June hedge. BUT...the Call settles into Cash on today’s close, so the Dealer needs to short ~$3B in futures on the bell to replace it (h/t J Pierce and H Homes).
When you add that to the projected ~$10.8B of Leveraged ETF flows for SALE we are currently estimated on their rebalancing into the close, we are talking pound-town.
The flows were ugly everywhere: Major + Sector ETF for sale: -$10,806.4
Major -$8,641.4
SPX -$2,228.7
NDX -$5,637.2
RTY -$449.9
INDU -$294.4
Sector -$2,165.0
Financial (incl. Bank) -$495.0
Tech (incl. Semicon, FANG+) -$1,486.8
Health Care (incl. Biotech) -$12.5
Not surprisingly then, the current netted-out MoC as of 350pm EST is ~$7.5B for sale.
And look, these mechancial flows matter…but as far as helping to get the macro ball rolling, there is no doubt in my mind too that:
1) US Equities market “shooting the Generals” of mega-cap FANG+ lore (AMZN shocker -15%, and mind-you, a top 5 “placeholder Long” position for the entire Global Equities manager universe)…and the
2) “hawkish re-escalation” globally due to data in both US (Employment Cost Index signaling “wage / price spiral” concerns, plus the Personal Spending upside surprise = OVERHEAT) and EU (where Core Inflation jumped +3.5% and forces the ECB’s hand for July, fully priced-in now)
...is also partially behind this latest wave of deleveraging and “Tightening Tantrum” - where this data is so dicey with both CB’s being viewed as “even further behind the curve” that we now see Fed Funds Futs ascribing ~40% odds of a Fed 75bps June (was actually 44% earlier before the Equities total meltdown)…all of this is part of this story today.
Seriously - Nasdaq 5 day rVol is 60 right now, as the mega-cap Tech “generals” are being executed 1-by-1:
And hilariously, after yet another massive “high to low” reversal in US Equities today, the CTA Trend potential “buy / cover” triggers that were in reach, which we spoke about this morning?
Well, we are now a non-zero chance of seeing the S&P 500 position go from the current “+25% Long” signal to FLIPPING “-100% Short” on a close under 4083 in ES today, which would ~$16B estimated for sale.
