Thursday was the fourth ugly finish in five sessions, with the Nasdaq Composite COMP, -1.99%
skidding 2%, and the other major indexes backtracking as well.
Andrea Cicione, head of strategy at independent investment research firm TS Lombard, said excessive leverage in the market really began in earnest in July. Cicione added that was occurring in U.S. stocks wasn’t happening anywhere else in the world.
And while he’s seeing signs of a bubble, he thinks if the selling doesn’t intensify, the bubble may reflate soon.
“The leverage accumulation so far may not be enough to burst the bubble just yet,” he writes. “If the recent selloff does not intensify further, the whole episode may end up simply emboldening the bulls to buy the dip and take even more risk.”
Between 1997 and 1998, the Nasdaq experienced three sell-offs of at least 17%, only to emerge stronger and rise four-fold to the 2000 peak. “Leverage is a key characteristic of all bubbles, and almost invariably it is the mechanism that leads to their collapse. But there may not have been enough leverage for the dot-com 2.0 bubble to burst just yet,” he says.
The reason leverage is important in bursting bubbles is because it uniquely can lead to forced unwinding. “When faced with margin calls they cannot meet, investors may have to liquidate positions against their will. The resulting fall in prices can instil doubts in the mind of others, persuading them to sell,” he said.
Consumer price data for August is due at 8:30 a.m. Eastern.
The quarterly services survey and August budget deficit are also due for release. The Congressional Budget Office, which typically gets the budget picture pretty close to the mark, estimated the August deficit was $198 billion, and said the September-ending fiscal year gap will be the highest relative to the economy since 1945.
Database software giant Oracle ORCL, +0.66% topped earnings and revenue expectations, helped by revenue from key client Zoom Video Communications ZM, -1.32%.
Oracle also declined to discuss whether it will buy the U.S. operations of social-media company TikTok, as U.S. President Donald Trump said Thursday there will be no extension of the Sept. 15 deadline for it to be sold to a U.S. company or shut.
The British pound GBPUSD, +0.18%
continues to reel from its more combative stance taken against the European Union in trade negotiations.
This incredible UBS illustration of Tesla TSLA, +1.38%
shows how shares have performed compared to other tech giants since joining the $100 billion market cap club. It took Apple AAPL, -3.26%,
Alphabet GOOGL, -1.36%
and Facebook FB, -2.05%
between 4 to 11 years to achieve what Tesla did in three quarters. UBS increased its Tesla price target to $325 from $160 ahead of the company’s battery day presentation.
Joe Biden on Wednesday gave a speech in Michigan about what his campaign described as “his plan to ensure the future is Made in America by all of America’s workers,” as the Democratic presidential nominee continued an effort to counter President Donald Trump’s “America First” stance.
Biden talked up his “Made in America” tax policy that his campaign had rolled out earlier in the day, noting features such as a new offshoring tax penalty and a 10% tax credit for companies making investments to create jobs for American workers.
The Democratic challenger also promised executive actions in his first week as president that ensure the federal government isn’t shirking on pledges to “Buy American.”
“I don’t buy for one second that the vitality of American manufacturing is a thing of the past,” he said. Biden also said the Republican incumbent “hasn’t stopped companies from closing plants and sending jobs overseas,” but instead has “rewarded companies that have cut jobs and failed to invest here at home with billions in tax breaks.”
As he spoke in Warren, Biden also blasted Trump in the wake of well-known journalist Bob Woodward’s new book saying that the president knew the coronavirus was “deadly stuff” but wanted to “play it down.” The Democratic challenger said that was “a life-and-death betrayal of the American people.”
The Trump campaign attacked Biden’s latest moves before the Democratic challenger’s speech.
“It’s fascinating to me that Joe Biden is suddenly trying to masquerade as an economic nationalist,” Steve Cortes, a senior adviser for Trump’s re-election campaign, told reporters during a conference call on Wednesday. “Welcome to the party, but unfortunately you have no credibility, because you’ve been acting in exactly the other direction for nearly a half century.”
In a RealClearPolitics moving average of polls focused on top swing states that are likely to decide the election, Biden on Wednesday had an edge of 3.7 percentage points over Trump. Betting markets were giving the former vice president a 53.2% chance of winning vs. Trump’s 45.8%.
It probably won’t take a great deal of persuasion to convince investors that there’s an “age of disorder.”
That’s the title of a new Deutsche Bank research note, which says the world is entering its sixth distinct era of modern times.
So say goodbye to the “era of globalisation” and brace yourself for the “age of disorder” where millennials, firmly established as the generation of ‘have nots’, take their revenge and redistribute wealth from the old to young. Millennials are usually defined as those between the ages of 22 and 38 years old in 2019, according to Nielsen Media Research .
“In fact, an issue that is quickly emerging as a political force is the intergenerational gap,” the report says. “Assuming life does not become more economically favourable for Millennials as they age (many find house prices increasingly out of reach), this could be a potential turning point for society and start to change election results and thus change policy.”
The votes for Brexit in the U.K. and President Donald Trump in the U.S. in 2016 left many younger people feeling angry and alienated by political decisions that a sizable majority of them were against, the report says.
“Such a shift in the balance of power could include a harsher inheritance tax regime, less income protection for pensioners, more property taxes, along with greater income and corporates taxes . . . and all-round more redistributive policies”, the Deutsche Bank report said.
The ‘new’ generation might also be more tolerant of inflation insofar as it will erode the debt burden they are inheriting and put the pain on bond holders which tend to have a bias towards the pensioner generation and the more wealthy.
“The older generation may also have to be content with lower (or even negative) asset price growth if the younger generation does not have a sudden income boost. This will be a big break from the status quo and lead to far more disorder than in the prior era of globalisation.”
The report suggests 2020 may be the start of a new era, as the coronavirus pandemic brings the era of globalization since 1980 to a close.
“The era of globalisation to we are likely waving goodbye saw the best combined asset price growth of any era in history, with equity and bond returns very strong across the board. The Age of Disorder threatens the current high global valuations, especially in real terms,” said the report.
What will this new age bring? • Deteriorating US/China relations and the reversal of unfettered globalisation. • A make-or-break decade for Europe, with muddle-through less likely following the economic shock of COVID-19. • Even higher debt. • Inflation or deflation? As a minimum, it is unlikely it will calibrate as easily as we saw over the last few decades. • Inequality worsening before a backlash and reversal takes place. • The intergenerational divide also widening before millennials and younger voters soon start having the numbers to win elections and, in turn, reverse decades of policy. • Linked to the above, the climate debate will build, with more voters sympathetic and thus creating disorder.
We’re in the midst of a technology revolution with astonishing equity valuations reflecting expectations for a serious disruption to the status quo, the report says, questioning whether this is a revolution or bubble? Much depends on whether working from home becomes more permanent, and if so it predicts it will cause major changes to societies and economies.
“The result of the US election in November is unlikely to change the direction of travel,” the report says. “Over the course of this decade, relations will likely deteriorate into a bipolar standoff as both the US and China seek to prevent encirclement by the other. Companies that have embraced globalisation will be stuck in the middle if relations sour as we fear.”
There have been 16 occasions over the last 500 years, when a rising power has challenged the ruling one, and on 12 occasions it ended with war. One piece of solace is the report notes that military conflict is unlikely.
Watch: Donald Trump suggests ‘decoupling’ US economy from China
Face shields are probably OK to wear to protect against COVID-19, right? Wrong.
That’s according to the latest experiment on the subject showing how respiratory droplets that could carry the virus spread while people wore a face shield and a face mask with exhale valves compared to how droplets spread from a traditional mask. College and high-school students and children in elementary schools are returning to classes — sometimes wearing face shields with a cloth mask, and sometimes without one.
In California, for instance, the Orange County Health Care Agency, the Orange County Department of Education and school districts across that county, have developed a guide to returning to school. It says face coverings are required for third-graders through high school-level students, and “strongly encouraged” for children between two years old and second grade. “A face shield is an acceptable alternative for children in this cohort who cannot wear them properly,” the guide states.
‘No burden of 100% efficacy should be placed on face shields or any containment policy because this level of control is both impossible to achieve.’ ”
— A commentary published by JAMA Network, an open-access medical journal published by the American Medical Association
Vanderbilt University in Nashville, Tenn., among some other colleges, says it’s comfortable allowing faculty members inside classrooms to wear a face shield without a mask. But research suggests that may not be enough to prevent a teacher from spreading coronavirus, especially if he/she is asymptomatic or pre-symptomatic. (Vanderbilt did not return request for comment.)
To reduce the risk of spreading COVID-19, the disease caused by SARS-CoV-2, it may be preferable to use high-quality cloth or surgical masks that are of a plain design instead of face shields and masks equipped with exhale valves, according to an experiment published Wednesday by Physics of Fluids, a monthly peer-reviewed scientific journal covering fluid dynamics.
The journal, which was first established by the American Institute of Physics in 1958, published the study, “Visualizing droplet dispersal for face shields and masks with exhalation valves,” to illustrate how shield or mask with a valve affected the movement of droplets compared to wearing a face mask without valves. Their conclusion: It may be preferable to use high-quality cloth or surgical masks with plain design without valves.
That’s in line with what the U.S. Centers for Disease Control and Prevention has said: it recommends against using masks with valves or vents, because they can “allow virus particles to escape.” The CDC also recommends against using N95 respirators or surgical masks intended for healthcare workers.
“We focused on the smaller droplets, since they can stay suspended for very long times and might contain enough virus particles to transmit COVID-19,” said Siddhartha Verma, one of the paper’s authors and an assistant professor at the Department of Ocean and Mechanical Engineering at Florida Atlantic University in Boca Raton, Fla. “Even the very best masks have some degree of leakage.”
In the experiment, face shields blocked the initial forward motion of a simulated jet of a cough or a sneeze, but the expelled droplets moved around the visor with relative ease and spread out over a large area, the experiment concluded. The experiment also suggested that droplets can pass through a mask’s exhale valve unfiltered, “which significantly reduces its effectiveness as a means of source control.”
“As students return to schools and universities, some have wondered if it is better to use face shields, as they are more comfortable and easier to wear for longer periods of time,” said Verma. “But what if these shields are not as effective? You would be essentially putting everyone in a tight space with droplets accumulating over time, which could potentially lead to infections.”
Other universities won’t let students on campus without a mask and shield. The U.S. Centers for Disease Control and Prevention does not recommend face shields as a substitute for masks: “It is not known what level of protection a face shield provides to people nearby from the spray of respiratory droplets from the wearer. There is currently not enough evidence to support the effectiveness of face shields.”
The CDC has reminded people to distinguish between masks, and surgical masks. “Currently, those are critical supplies that should continue to be reserved for health-care workers and other medical first responders,” it says. “Masks also are not appropriate substitutes for them in workplaces where surgical masks or respirators are recommended or required and available.”
‘What if these shields are not as effective? You would be essentially putting everyone in a tight space with droplets accumulating over time.’ ”
— Siddhartha Verma, assistant professor at the Department of Ocean and Mechanical Engineering at Florida Atlantic University
While face shields and masks with valves may be more comfortable than cloth masks, the CDC calls for wearing a mask that covers both your nose and your mouth, with the mask secured under your chin. It should fit snugly against your face. There should not be large openings or gaps around your nose, mouth and the sides of your face. Do not touch the mask while wearing it.
Some educational institutions are circumspect on the use of face shields. Loma Linda University, a Seventh-day Adventist health-sciences university in California, advises the wearing of face masks as the No. 1 protection against COVID-19. “Prolonged exposure reduces the amount of protection of the shield,” according to this advice from the university’s health and wellness team.
Vanderbilt University’s Public Health Advisory Task Force, in a statement on the college’s website, cited a “preliminary study” as offering sufficient evidence for the efficacy of face shields “in the way Vanderbilt intends to use them, which is coupled with other protective measures (social distancing, less density with classrooms, students wearing face masks/coverings, etc.).”
However, that preliminary study is actually “viewpoint” commentary on face shields that cites other pieces of research on face shields and the influenza virus, which is obviously different from coronaviruses. Nor does the commentary in question published by the JAMA Network offer up enough scientific evidence to show face shields are adequate.
In fact, the “viewpoint” concludes: “It is unlikely that a randomized trial of face shields could be completed in time to verify efficacy. No burden of 100% efficacy should be placed on face shields or any containment policy because this level of control is both impossible to achieve and unnecessary to drive SARS-CoV-2 infection levels into a manageable range.”
In the meantime, cases keep rising in the U.S. with California becoming the first state in the country to surpass 700,000 confirmed cases; infections hit 726,018 there as of Friday with 13,493 COVID-related deaths. New York has recorded 437,107 infections and the highest number of deaths in the U.S. (32,976). COVID has killed 186,984 people in the U.S.
The Dow Jones Industrial Index DJIA, -1.24%,
the S&P 500 SPX, -1.71%
and the Nasdaq Composite COMP, -2.87%
were lower Friday. Doubts about traction for further fiscal stimulus from Washington may be one factor discouraging investors who have been betting on Republicans and Democrats striking a deal to offer additional relief to consumers and businesses.
The Department of Energy on Wednesday took the next step in delivering on Donald Trump’s January pledge to get “rid of the restrictors” on water flow from showerheads, which the president has notoriously said keep him from perfect hair.
“So showerheads — you take a shower, the water doesn’t come out. You want to wash your hands, the water doesn’t come out. So what do you do? You just stand there longer or you take a shower longer? Because my hair — I don’t know about you, but it has to be perfect. Perfect,” Trump said from the White House grounds in July.
Since 1992, federal law has dictated that new showerheads shouldn’t pour more than 2.5 gallons of water per minute (9.5 liters) as the country moved to more efficiency and cost savings. As popularity for multiple nozzles inside a single shower became trendy, the Obama administration defined the showerhead restrictions to apply to what comes out in total. So if there are four nozzles, no more than 2.5 gallons total should flow between all four.
The new proposal Wednesday would allow each nozzle to spray as much as 2.5 gallons, not just the overall shower system.
The Department of Energy’s own database of 12,499 showerheads from a range of manufacturers showed 74% of them use two gallons or less of water per minute, which is 20% less than the federal standard.
“The new plan is a gimmick in search of a problem. Complaints about inadequate showerheads were frequent decades ago, immortalized in a 1996 ‘Seinfeld’ episode,” said Andrew deLaski, executive director of the energy conservation group Appliance Standards Awareness Project. “But for many years now, we’ve had a fix for poorly performing models, one that requires no action by the Trump administration.”
The proposed regulatory rollback is part of a much broader push by the administration to lighten what it argues are prohibitive regulations on business, and apparently, on households. Several Environmental Protection Agency rules, many in place for decades, have been stripped, some, the administration says, because they are unduly confusing or multilayered. In fact, a group of past EPA bosses from both political parties have called for an EPA reset after the November election.
Energy Department spokeswoman Shaylyn Hynes told the Associated Press that the 2013 Obama administration definition of showerhead clashes with what Congress intended and the standards of the American Society of Mechanical Engineers.
Initially, federal law prohibited states from setting stricter requirements, but this state preemption expired when DOE failed to update the national standards. Six states, comprising about one-fourth of the U.S. population, have their own showerhead standards that save at least 20% compared to the national levels.
Wednesday’s proposed rule change also applied to washers and dryers, rolling back their efficiency standards. The changes could be challenged in court.
The current efficiency standards for washing machines, which were set in 2012, save a typical consumer $365 over the life of an appliance, when factoring both utility bills and purchase costs, said the Appliance Standards Awareness project, which is opposed to the administration’s changes. The group also pointed out current severe drought conditions in the western United States as just one major reason that lighter water restrictions could come at a dangerous time.
The federal-level change calls for creating a separate “product class” specifically for washing machines that have a short cycle as their “normal” cycle. Such machines would have no energy efficiency or water use standard, at least until one was developed, which may take years. Most new washing machines already have a short cycle as an option.
Ultimately, the administration’s plan would raise greenhouse gas emissions when more fuel is burned in homes with gas water heaters and at the power plants that supply power to homes with electric water heaters, opponents have said.
Plumbers say shower flow issues may have little to do with available water and rather are specific to a home’s own system. Or, a slow shower may simply require an inexpensive showerhead swap.
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