>>> Weekly Market Update

Weekly Market Update: Higher rates keep markets choppy until late week risk-on surge

US equity market came into the week wobbly and ultimately both stocks and treasury markets finished the month of February in the red. Hotter-than-expected inflation data out of Europe kept upward pressure on EU interest rates, which came alongside generally softer-than-expected US economic readings. Markets continued to price in more central bank policy tightening, while deepening yield curve inversions suggest a heightened risk of a policy mistake.

On Tuesday, China reported significantly stronger than expected PMI data. That was followed by US ISM manufacturing data that missed on the headline, but worryingly the prices paid component unexpectedly rose above 50 for the first time in several months. The next session saw weekly jobless claims print below 200K for the seventh straight week, as well as final Q4 productivity revised lower and labor costs significantly higher. The data forced the US 10-year yield to break above 4% for the first time since November. US terminal rate expectations rose towards ~5.5% while futures markets pushed the ECB’s projected overnight lending rate to go above 4%. The incoming data also kept both Federal Reserve and ECB officials vocal that rates will likely have to move higher and stay there longer than they thought even just a few months ago. Overall US indices remained range bound with the S&P pivoting around its 200-day moving average for most of the week as investors await CPI figures and the Fed announcement later this month. Risk on appetite picked up Thursday afternoon on some dovish commentary from the Fed’s Bostic, who said the central bank could be in position to pause by mid-to-late summer and that momentum carried through to Friday following a solid ISM Services report that noted higher new orders with lower prices paid. With the Friday surge, the S&P gained 1.9% on the week, while the DJIA was up 1.7%, and the Nasdaq rose 2.6%.

In corporate news this week, another batch of earnings reports from big US retailers yielded mixed results. Target beat expectations but provided downbeat guidance for 2023. Kohls missed earnings expectations by a wide margin but eased the blow by affirming long term targets. Macys pleased investors with a strong Q4 earnings beat, though guidance was less than expected for next quarter. First Solar shares soared on a strong earnings report and even stronger guidance for the new fiscal year. Volkswagen led the DAX sharply higher on Friday as the carmaker reported solid numbers for the end of the fiscal year and said EV production was tracking higher as expected.


SUN 2/26
(US) According to revised US Energy Dept report, COVID with 'low confidence' arose from a lab leak - US financial press


MON 2/27
(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -4.5% V -4.0%E; DURABLES (EX-TRANSPORTATION): 0.7% V 0.2%
(US) JAN PENDING HOME SALES M/M: 8.1% V 1.0%E; Y/Y: -22.4% V -34.3% PRIOR
(US) FEB DALLAS FED MANUFACTURING ACTIVITY: -13.5 V -9.3E
(US) Freeport LNG submits FERC request for authorization to progress to full, commercial operations of train 1 and phase 1 of Texas facility
WDAY Reports Q4 $0.99 v $0.89e, Rev $1.65B v $1.63Be; Raises guidance
(JP) JAPAN MOF: DELAYS 2-YEAR JGB AUCTION RESULT ANNOUNCEMENT; cites 'administrative trouble in the procedure'

TUES 2/28
(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.9% V 1.0%E; Y/Y: 6.2% V 6.1%E (annual pace match cycle high)
AAPL Reportedly could face disruptions in supply chain for iPhones as its charging cables supplier Foxlink's India plant said to not be able to resume full operations for two months following fire incident - press
002241.CN Reportedly Apple's AirPods supplier GoerTek invests $280M in a new northern Vietnam plant; Says Apple's Chinese suppliers likely to move capacity out of the country far faster than many expect amid US-China tensions - press
(US) Commerce Sec Raimondo: To prevent companies from using CHIPS act cash for buyback; To limit foreign investments for CHIPS act money recipients; Recipients barred from expanding in China for 10 years - FT
TGT Reports Q4 $1.89 v $1.39e, Rev $31.0B v $30.7Be; Guides Q1 and FY23 EPS weak; Inventories show q/q and y/y improvement
HUAWEI.CN (US) US said to consider revoking all Huawei export licenses - press
(US) Nevada reports Jan casino gaming Rev $1.27B, +18.0% y/y, Las Vegas strip Rev $713.2M, +25.7% y/y
(US) FEB CHICAGO PURCHASE MANAGER’S INDEX (PMI): 43.6 V 45.5E
(US) FEB RICHMOND FED MANUFACTURING INDEX: -16 V -5E (lowest since May 2020)
(US) FEB CONSUMER CONFIDENCE: 102.9 V 108.5E
FSLR Reports Q4 -$0.07 v -$0.18e, Rev $1.00B v $997Me; Guides FY23 strong
HPQ Reports Q1 $0.75 v $0.74e, Rev $13.8B v $14.1Be
RETA Receives US FDA NDA Type 1 approval for Skyclarys (Omavaloxolone) NDA for patients with Friedreich’s Ataxia
(CN) CHINA FEB MANUFACTURING PMI (GOVT OFFICIAL): 52.6 V 50.7E [2nd month of expansion and highest since Apr 2012]; Composite PMI highest since records started in 2017
(CN) CHINA FEB CAIXIN PMI MANUFACTURING: 51.6 V 50.7E [1st expansion in 7 months and highest since Jun 2022]
(HK) Macau Feb Casino Rev (MOP): 10.3B; Y/Y: +33.1% v +82.5% prior (31.0%e)

WED 3/1
(UK) FEB NATIONWIDE HOUSE PRICE INDEX M/M: -0.5% V -0.5%E; Y/Y: -1.1% V -0.9%E (1st annual decline since Jun 2020 and biggest annual drop since Nov 2012)
(ES) SPAIN FEB MANUFACTURING PMI: 50.7 V 49.0E (1st expansion in 8 months)
(IT) ITALY FEB MANUFACTURING PMI: 52.0 V 51.0E (2nd consecutive expansion and highest since Apr 2022)
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.8% V 0.5%E; Y/Y: 8.7% V 8.5%E
(US) FEB FINAL S&P/MARKIT MANUFACTURING PMI: 47.3 V 47.8E (5th straight month of contraction but highest since Nov 2022)
(US) FEB ISM MANUFACTURING: 47.7 V 48.0E; PRICES PAID: 51.3 V 45.0E
US 10-year treasury yield tests 4.00% for first time since mid November
(US) DOE CRUDE: +1.2M V +1ME; GASOLINE: -0.9M V +0.5ME; DISTILLATE: +0.2M V -0.5ME
(CN) US said to have begun lobbying allies to sanction China if they provide military aid to Russia - press
CRM Reports Q4 $1.68 v $1.36e, Rev $8.38B v $7.99Be; increases share purchase program to $20.0B
TSLA Exec: Confirms next Tesla assembly plant will be in Mexico; Planning new assembly line process for cars that will reduce production footprint by 40% and increase efficiency and reduce costs - Investor day

THRS 3/2
(EU) ECB chief Lagarde: Reiterates case for 50bps hike at Mar meeting is still on the table; We will follow this path but it is not certain that rates will rise in the coming months as we depend on data; Not clear how long rates will stay at higher levels
(JP) BOJ said to prefer for now watching impact of earlier tweaks it did earlier [**Note: in line with BOJ Gov Nominee Ueda's neutral stance] - press
(EU) EURO ZONE FEB CPI ESTIMATE Y/Y: 8.5% V 8.3%E; CPI CORE Y/Y: 5.6% V 5.3%E (record Core CPI pace)
(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 6.7% V 6.6%E
HLAG.DE CEO: We believe the shipping market likely to remain fairly soft for a number of months now as consumers' destocking continues - post earnings comments
BBY Reports Q4 $2.61 v $2.09e, Rev $14.7B v $14.7Be; Raises Quarterly dividend 4.5% to $0.92 from $0.88 (indicated yield 4.46%); Guides FY23 short of consensus
(US) Freeport LNG export plant reportedly set to pull in 1.2Bcm of natural gas later on Thurs, Mar 2nd - press
(US) Q4 FINAL NONFARM PRODUCTIVITY: 1.7% V 2.5%E; UNIT LABOR COSTS: 3.2% V 1.6%E
(US) INITIAL JOBLESS CLAIMS: 190K V 195KE; CONTINUING CLAIMS: 1.655M V 1.669ME
KR Reports Q4 $0.99 v $0.90e, Rev $34.8B v $34.8Be; Pauses share buyback to prioritize de-leveraging following proposed merger with Albertson
*(US) Fed's Bostic (non-voter): Fed could be in position to pause by mid-to-late summer
COST Reports Q2 $3.30 v $3.21e, Rev $54.2B v $55.6Be
AVGO Reports Q1 $10.33 v $10.16e, Rev $8.91B v $8.89Be
(US) February preliminary NA Class 8 Net Orders 22.8K, +13% m/m - FTRintel.com
(JP) JAPAN FEB TOKYO CPI Y/Y: 3.4% V 3.3%E; CPI (EX-FRESH FOOD) 3.3% V 3.3%E
(CN) CHINA FEB CAIXIN PMI SERVICES: 55.0 V 54.5E [2nd straight expansion, highest since Aug]
(CN) China PBOC Gov Yi Gang: Reiterates to implement targeted and forceful monetary policy, will keep yuan exchange rate stable
(CN) China PBOC Dep Gov Pan: China property transaction activity has improved; property support measures are gaining traction

FRI 3/3
(HK) Macau Q4 GDP Y/Y: -23.4% v -33.4% prior
ODFL Reports Feb Rev/day -2.9% y/y, LTL -12.4% y/y due to decrease in shipments
VOW3.DE Reports final FY22 Net €15.8B v €15.4B y/y, Op €22.5B v €20.1B y/y, Rev €279.2B v €250.2B y/y
V Reports Feb payment volume +11% y/y, global processed transactions +12% y/y; Notes Feb payments volume growth y/y for several key international markets were moderately stronger than prior quarter
US) FEB ISM SERVICES INDEX: 55.1 V 54.5E

Vice Media : 2 Drug Companies Can Legally Start Selling Cocaine, Heroin, and MDM

2 Drug Companies Can Legally Start Selling Cocaine, Heroin, and MDMA
A Canadian weed company and a psychedelics company have received government licenses to make and distribute the drugs under certain circumstances.

At least two companies in British Columbia, Canada, say they’ve received exemptions from the federal government allowing them to produce and distribute cocaine, heroin, MDMA, or magic mushrooms.

But it’s not clear under what circumstances the companies will be able to sell the drugs, and B.C. Premier David Eby said he was “astonished” to hear the announcement.

On Thursday, Sunshine Earth Labs, a psychedelics manufacturer announced that Health Canada, a federal government agency, is allowing the company to legally produce and distribute the coca leaf and cocaine; MDMA; opium; morphine heroin and psilocybin, the active ingredient in shrooms. The company said it plans to “bring a safer supply of drugs to the global market.”

Meanwhile, cannabis extractions company Adastra announced it’s now legally allowed to both produce and distribute psilocybin and cocaine.

In a statement to CBC News, Health Canada said the companies will not be able to sell the substances to the public and that the licenses are for scientific and medical purposes.

Both companies claim they received amendments under Health Canada’s Dealer’s Licenses, which grant manufacturers, doctors, and researchers exemptions to the Controlled Drugs and Substances Act, allowing them to legally possess and make banned drugs.

In a news conference, Eby said the licenses were granted without consultation from the province.

“It is not part of our provincial plan," he said, noting that he would be following up with Health Canada about the announcements. At the end of January, B.C. started a three-year drug decriminalization pilot program that allows people to possess up to 2.5 grams of drugs like cocaine and heroin without fear of arrest.

Adastra said it’s license allows it to “interact with up to 250 grams of cocaine and to import coca leaves to manufacture and synthesize the substance.”

“We will evaluate how the commercialization of this substance fits in with our business model at Adastra in an effort to position ourselves to support the demand for a safe supply of cocaine,” said chief executive officer Michael Forbes in a news release. The company told VICE News it would not be commenting further.

According to Sunshine Earth Labs’ website, the sale of controlled substances can only take place under certain circumstances, such as to another licensed dealer, pharmacist, doctor, or an individual who has an exemption from Health Canada—like people approved to use shrooms at end-of-life.

Canada already has safe supply programs, through which people with opioid addictions can access pharmaceutical heroin and fentanyl. There are no safe supply programs for cocaine, but activist group the Drug User Liberation Front has repeatedly handed out free cocaine, heroin and meth, as part of safe supply protests in Vancouver.

Since B.C. declared the overdose crisis a public health emergency in 2016, more than 11,000 people in the province had died of overdoses.

The U.S. does not have any safe supply programs. However, a mental health plan released by New York City in March said it plans to “allow for evaluations of innovative approaches such as prescribed opioids to reduce overdose deaths from a contaminated drug supply.”

WSJ : Insider-Trading Cases Once Deemed Too Hard to Crack Are Now Targets of U.S

Insider-Trading Cases Once Deemed Too Hard to Crack Are Now Targets of U.S. Government
New enforcement actions focus on executives who used prearranged trading plans

The Justice Department and the Securities and Exchange Commission are hunting for a new type of insider-trading case, one that once seemed too daunting for regulators and prosecutors to touch.

What distinguishes the new targets is the use of prearranged trading plans, which chief executives and other officers of public companies have historically used to insulate themselves from accusations of insider trading. Executives set up the plans, often with the advice or approval of a company lawyer, and put their often lucrative sales of company stock on autopilot.

The plans provided a shield from regulatory or legal trouble as long as the executive didn’t have material nonpublic information when the plan was implemented. Regulators who wanted to question the trading would need to show that an executive had market-moving, undisclosed information and intended to trade on it at the time he or she set up the plan.

The SEC first permitted such plans through a regulation passed in 2000 and known as Rule 10b5-1. Over the next 20 years—in 2004, 2010 and 2012—regulators brought only three insider-trading cases involving a 10b5-1 plan.

The regulatory agency has now brought two in the past six months, including one on Wednesday accusing Ontrak Inc. chief executive Terren Peizer of trading illegally under 10b5-1 plans in 2021, when he was aware of negative news for his company involving the loss of a major customer, which hadn’t yet been divulged to shareholders. Another public company, Los Angeles-based HyreCar Inc., has disclosed criminal and SEC investigations into stock trades involving 10b5-1 plans.

A lawyer for Mr. Peizer said Wednesday that his client, who remains Ontrak’s largest shareholder, is innocent and that the government “has clearly overreached.” The lawyer, David Willingham of King & Spalding LLP, declined to comment further on Thursday.

The 10b5-1 regulation had loopholes, such as the ability of executives to create plans and immediately start selling, including before earnings announcements, according to academic research.

SEC Chair Gary Gensler has called the measure “antiquated, exposing real gaps in our insider-trading enforcement regime.” However, a lawyer for the company often signs off on a 10b5-1 plan, giving the executive a defense against claims that he or she was aware that trading could be deemed illegal. The lawyer’s involvement creates a hurdle for the SEC or Justice Department to acquire more evidence, since attorney-client privilege doctrine generally shields those communications from the government.

The inquiries “are difficult because there are a lot of thorny privilege issues and other issues that make these investigations more difficult than your typical investigation,” SEC Enforcement Director Gurbir Grewal said in an interview this week.

Mr. Grewal said that regulators had “seen a lot of abuse” of 10b5-1 plans, motivating their decision to update the rules last year. But the new rules, which include restrictions such as a “cooling off” period during which executives can’t trade, won’t stop regulators from looking backward for instances in which executives may have misused trading plans, he said.

The Justice Department also charged Mr. Peizer criminally. Assistant Attorney General Kenneth Polite Jr., head of the DOJ’s criminal division, said in a speech Friday in Miami that prosecutors discovered Mr. Peizer’s trades using data analysis. It is the first time the department has criminally charged an insider-trading defendant who used a 10b5-1 plan, officials said.

“So take note,” Mr. Polite said. “Because I expect other such cases will follow.”

A unit within the fraud section, known as Market Integrity and Major Frauds, has used advanced data analysis in the past to spot and prosecute manipulative trading in other markets, including commodity futures.

The SEC said on Wednesday that it found Mr. Peizer’s trades through its own data-driven initiative that examines executive trading pursuant to 10b5-1 plans.

Mr. Peizer, 63 years old, is a former trader at investment bank Drexel Burnham Lambert Inc., who received immunity from federal prosecutors in the late 1980s for cooperating with their investigation of junk-bond king Michael Milken.

Prosecutors and regulators said Mr. Peizer was aware at the time he set up two trading plans that Cigna Corp. , a customer of Ontrak, was about to end its relationship with the company.

Mr. Peizer’s trading under the plans allowed him to avoid losses of over $12 million, according to the federal grand jury indictment returned against him.

In September, the SEC sued Cheetah Mobile Inc.’s chief executive and its former president, claiming they jointly established a 10b5-1 plan after learning about a significant decline in advertising revenue from the company’s largest advertising partner.

HyreCar, which rents cars to drivers for ride-share and delivery services, said in December that it received a grand jury subpoena stemming from a federal criminal investigation into 10b5-1 plans and 2021 stock trades by company executives, including its then-CEO Joseph Furnari and his brother, Michael Furnari, its then-chief business development officer. HyreCar said it also received a subpoena from the SEC related to stock trades.

According to regulatory filings, the Furnari brothers each sold about $5.2 million of HyreCar stock at roughly $17 per share in July 2021, not long before the company’s stock fell about 50% in one day after it announced poor results for the quarter ended June 30, 2021.

The company said in January that it had terminated both Furnaris. This week it filed for bankruptcy protection. The Furnaris couldn’t be reached for comment. HyreCar said, “We are fully cooperating with the investigations, but we have a policy of not commenting on ongoing investigations.”

The Wall Street Journal in June 2022 published an investigation into stock sales by insiders who used 10b5-1 plans, showing that those who sold within 60 days of adopting such a plan often had good timing, on average selling before a downturn in the company’s stock price.

>>> Mithra Pharm. : Announces promising topline safety results from Donesta® Pha

Mithra Pharmaceutical : Announces promising topline safety results from Donesta® Phase 3 Study in North America
- Phase 3 North American Study topline safety results support overall good safety profile of Donesta®, Mithra's next generation Estetrol (E4)-based product candidate for menopause, as consistently demonstrated in previous E4 studies.
- Topline safety results were demonstrated for the treatment of post-menopausal women aged 40-65 years with moderate to severe vasomotor symptoms with key secondary endpoints achieved, including E4's beneficial effect on cholesterol profile and on bone turnover biomarkers. These highlights will be presented during the webcast dedicated to Mithra's 2022 full year results.
- These results will support the filing with U.S. regulatory agency anticipated by end of H1 2023 for a market authorization in H1 2024, whereas primary safety data are anticipated in H1 2024 for Europe with a market authorization in H1 2025.- Full dataset analysis is still in progress.

TechCrunch : SpaceX’s acquisition of Swarm is paying off with new Starlink thrus

SpaceX’s acquisition of Swarm is paying off with new Starlink thrusters

Earlier this week, SpaceX released more information about the new argon Hall thrusters that will power the Starlink V2 mini satellites, an innovation that likely has much to do with the company’s acquisition of Swarm Technologies in 2021.

The deal, which closed in July 2021, was an extremely rare move for SpaceX. Swarm – which manufactures and operates ultra-small satellites for IoT devices – remains the company’s only acquisition in its 21-year history. It was also notable because, relatively speaking, Swarm was still quite a young company: when the deal closed, the startup had around 30 employees, 120 sandwich-sized satellites in orbit, and had only just gone live with its flagship product earlier that year.

But in the space industry, talent is king, and it seems that SpaceX has benefited enormously from absorbing Swarm’s team.

Swarm’s two cofounders, Sara Spangelo and Benjamin Longmier, were installed as senior directors of satellite engineering at SpaceX. Both are part of Starlink’s direct to cell team – which is aiming to leverage the Starlink constellation to bring satellite connectivity to smartphones around the world. But Longmier also states on his LinkedIn that he leads Starlink’s electric propulsion group – that is, the group responsible for engineering the new argon Hall thrusters announced this week.

Hall thrusters themselves are not new. The name refers to a general propulsion tech that’s decades old. Essentially, Hall thrusters use a magnetic field to ionize a propellant and produce plasma. Satellites employ thrusters throughout their useful life – to adjust attitude, avoid collisions with other objects, or to de-orbit at the end of the lifespan.

The real innovation is in the propellant: argon. Argon is many times cheaper than xenon (the most common, and expensive, propellant used in Hall thrusters) and krypton (the propellant SpaceX used in Starlink V1 and V1.5 satellites), in part because its more plentiful.

“The transition to argon was tricky, but necessary, as krypton is too rare,” SpaceX CEO Elon Musk explained on Twitter. According to specs shared online, these new thrusters will also generate 2.4 times the thrust and 1.5 times the specific impulse (a measure of how efficiently the unit uses propellant, versus the thrust generated) than previous Starlink thrusters.

As early as 2011, Longmier was lead authoring technical papers on electric propulsion systems that use argon gas. He also co-authored other papers on thrusters using argon and xenon as propellant. On Twitter, Longmier said that it was 556 days from thruster clean-sheet to orbit: that would mean SpaceX would’ve started work on the thrust around the end of August, 2021, very shortly after Swarm was acquired. Longmier did not respond to TechCrunch’s request for comment.

TechCrunch : How Scout Motors plans to bring rugged, retro cred to the EV era

How Scout Motors plans to bring rugged, retro cred to the EV era
CEO Scott Keogh gives new details on the VW-backed startup

“We’re operating out of everywhere,” Scott Keogh said with a laugh in his first interview as CEO of Scout Motors, the American EV upstart spun out of VW Group.

While most established automotive players call the shots from sprawling, corporate palaces, Scout bases much of its operations — at least for now — out of a WeWork near Washington, D.C.

Scout Motors’ base of operations will eventually “anchor” near the $2 billion factory in South Carolina that was announced Friday, but Keogh believes remote work will be key to Scout Motors’ success. The company already has critical employees working remotely around the United States and overseas.

“I believe firmly that era is over,” Keogh said of the classic days of centralized organizations. “I don’t think it exists anymore in the spirit of Americans, in the spirit of the company.”

Origins
Capturing the spirit of Americans is a big part of what Keogh hopes and plans to do with Scout Motors, an all-electric brand launched with a $100 million investment from Volkswagen that plans to start shipping its first vehicle, an off-road focused SUV priced around $40,000, by the end of 2026. Scout was the former consumer automotive brand of International Harvester, which ended production in 1980 in the wake of labor disputes and the 1979 energy crisis.

The original International Harvester Scout was a go-anywhere, do-anything utility vehicle, following in the footsteps of the original Jeep but with a more practical, enclosed body five years before the Ford Bronco bolted onto the scene. “In our minds, Scout sort of planted the seed, and if you look at almost every SUV, they’ve basically stolen that name and done some modification of it,” said Keogh, who then fired off familiar nameplates like Trailblazer, Pathfinder, Explorer and Discovery.

Those models may be derivative, but they have one significant advantage over Scout: They’ve all been in production at some point within the past 40 years. Scout, meanwhile, is in the difficult position of trying to honor the past while making up for nearly a half a century of lost time. If that weren’t enough, Scout has to distance itself from Volkswagen, too.

Keogh used the phrase “clean slate” four times during our interview, in reference to everything from software to dealership presence. With its Volkswagen ties, Scout Motors seemingly has a distinct advantage over other EV startups in that it could theoretically piggyback into the hundreds of U.S. VW dealers. However, Keogh says, there are advantages to following the trail blazed by Tesla in defining a way for manufacturers to sell cars directly to consumers.

“We have not decided, but we’re taking a long, hard look at it,” Keogh said about online direct sales. Historically, he said, manufacturers dominated the scene, but lately the dealerships have been calling the shots, often at the expense of everyone else. “It’s always been an industry that played more towards legislation, industrialization, networkization, as opposed to what’s the best consumer experience,” he said. “This is the differentiator: Awesome retail experience focused on the customer, focused on technology.”

Launch target
Scout Motors will launch its first two EVs in quick succession starting in late 2026, Keogh confirmed.

First will be a small, off-road focused SUV that Keogh calls an RUV: a “rugged utility vehicle.” The second is a larger truck, which will “lean a little bit more on-road” in terms of its driving characteristics. Details like range and power aren’t yet set, but pricing for the RUV is meant to start in the $40,000 range, while the truck will be “a bit north of there.”

Neither, though, will be lacking in off-road capability, a brand new focus for the Volkswagen Group.

Both vehicles will be built on a bespoke, body-on-frame platform of the sort historically used by the most capable off-road machines. Manufacturing will take place in the United States, at the company’s newly announced factory in Columbia, South Carolina.

A battery partner has not been announced, but Keogh was adamant about structuring suppliers to take full advantage of the EV incentives offered by the Inflation Reduction Act, which has domestic production requirements.

Scout’s new EV platform will share some components with other Volkswagen Group cars, items like HVAC components, motors and inverters. But that’s where the similarities end. Scout Motors is aiming to offer driving character and capability unlike anything else under VW Group, a behemoth company that includes a long string of EV platforms. VW Group created the MEB that lies beneath the Volkswagen ID.4, its successor MEB+, the J1 Performance platform under both the Porsche Taycan and Audi E-Tron GT, and the upcoming PPE platform for the upcoming Porsche Macan EV.

In addition to a bespoke platform, Scout’s cars will also take radically different approaches to software integration and the overall user experience. Some core aspects of the software will be provided by Cariad, the software arm of Volkswagen. Keogh said the base software architecture is in place. The user experience will be radically different, he added.

Keogh points to physical touchpoints as a main differentiator. VW’s ID.4 has been panned by many for its over-reliance on touch surfaces, for example.

“We really want to keep a lot of the mechanical nature,” Keogh said. “I think if you look at the American buyers, yes, they appreciate software, but they don’t want software to be all-dominating. I think you’ll see a lot more, let’s say old-school physicality, but in a good way.”

So no touchscreen-controlled vents à la the Tesla Model Y, then? “I can pretty much confirm yes,” Keogh told me.

Unveils ahead
Scout’s two models are set for unveiling in early 2024. The company has already had a limited screening at focus groups in California and Texas, where the prototype vehicles were stacked up against traditional offerings like Broncos and newer entries from Rivian. Keogh expected the concepts to do well among more EV-aware and friendly viewers in California, but even the feedback in Texas was strong. “We got some of the best results that we’ve ever had in clinics, period,” he said.

And what about the Scout loyalists, who’re still repping the brand at annual events like Harvester Homecoming? “In fairness, it runs the gamut,” Keogh said of the feedback they received, with some finding the style a bit too progressive. But, Keogh says, they need to move the brand forward. “We would now be on the Scout 8,” he said, if International Harvester had never stopped making the cars after the Scout II. “Certainly you would not want the Scout VIII to be like the Scout II.”

For Keogh, the key to attracting customers is in the name. “It’s a simple line that we’ve been using, but I think it works, this concept that the world does need more Scouts. Scouts can manifest themselves in things like hiking, climbing Everest, let’s say the more extreme side of scouts, or they can be dramatically less extreme as well, to tailgating to someone who knows the latest ideas.”

While Keogh is adamant that the new Scout will honor the past, it won’t be a brand hung up on legacy like some of its gas-burning competition: “I don’t want to make Scout a fossilized retro brand that says: ‘Dear America, it’s 1977. Again.'”

(ZH) Forget "Volmageddon", 0DTE Add Noise To 'Untradable Mess' But Not Driving '

Forget "Volmageddon", 0DTE Add Noise To 'Untradable Mess' But Not Driving 'Downside Risk'

Every market period has a distinct bogeyman for when a trade doesn't go your way. As we recently noted, "8 years ago, every most hated rally was "explained" with HFTs; 4 years ago it was gamma. Now it's 0DTE."
Having previously discussed the issue of zero-day-to-expire options (we profiled 0DTE first in late 2022 in "What's Behind The Explosion In 0DTE Option Trading", and more recently here "Why 0DTE Is So Important, And Why The VIX Is Now Meaningless"), the face of this new fear has recently been JPMorgan's Marko Kolanovic who warned that these ultra-short-term options could lead to 'Volmaggedon 2.0'.
As we noted here, however, Bank of America's derivatives gurus were quick to dismiss this fearmongering, who explained that "a closer study of intraday trade-level data suggests reality is more nuanced" than that laid out by Kolanovic.
Specifically, the performance of intraday momentum strategies has stabilized in recent months, a development that the team attributed to an increase in options selling.
In other words, the market is not the one-sided monolith that will set the stage for an incident such as the rout in February 2018.
“The 0DTE space has likely absorbed the initial demand impulse but has also drawn in more sellers,” BofA strategists wrote.
However, these contracts, with shelf lives shorter than 24 hours, have exploded since mid-2022 to as much as 50% of trading volume, at times causing derivatives to amplify moves in underlying assets.
As Bloomberg reports, that’s unquestionably made the task of figuring out the market’s collective thinking on the economy an especially futile exercise of late.
In a study by JPMorgan Chase & Co. in November, strategists including Peng Cheng found that the market impact from those trades can vary from a drag of as much as 0.6% to a boost of up to 1.1%.
“These big swings like yesterday were a great example,” Jim Bianco, founder of Bianco Research, said in an interview on Bloomberg TV.
“We have to be ready for this idea that, ‘hey, look, the market’s up 1%. What does it mean? Wait an hour, it’s now down on the day. Wait an hour, it’s back up on the day.’ That’s where I think that the 0DTE options are really starting to play. It’s the market that’s confusing a lot of people.”
Despite all this concern, history shows the merit of owning 0DTE “lottery tickets” despite paying inflated vols...
Incidentally, it's the lottery ticket aspect of 0DTE why, as we first revealed last week, 87% of all same-day options traded one Tuesday of last week finished at zero point zero value.
  • 83% of 1 day calls expired at a zero (585k was total volume)
  • 91% of 1 day puts expired at a zero (620k was total volume)
BofA concludes by noting that while 0DTE options could - in theory - be “weaponized” in the future to exacerbate intraday fragility and/or mean reversion, "thus far the evidence presented above suggests that SPX 0DTE option positioning is more balanced/complex than a market that is simply one-way short tails."
Translation: those waiting for 0DTE to spark the next market crash may want to not hold their breath.
But fear remains, as Bloomberg points out that getting a handle on what the craze may mean is complicated by the enormous volume of the options marketplace, the short lifespans of these trades and uncertainty about just who is using them.
“When you get big disruptions like that, you always get people that say, ‘you know, you got to watch out because you’re going to create a big problem,’” said Malcolm Polley, president and chief investment officer at Stewart Capital Advisors LLC.
“I don’t think they really fully understand because we’ve never really seen this phenomenon before.”
But, Brent Kochuba, founder of SpotGamma, does fully understand this 'new phenomenon'.
His view is simple - the explosive rise of 0DTE options has actually acted as a positive market force.
He conducted a study on the impact of the activity via a measure known as delta, or the theoretical value of stock required for market makers to hedge the directional exposure resulting from options transactions.
From the start of 2022 to mid-February this year, positive 0DTE delta was tied to market rallies, a sign that short-dated calls were mainly being used to place wagers on stock rebounds.
“0DTE does not seem to be associated with betting on a large downside movement. Large downside market volatility appears to be driven by larger, longer dated S&P volume,” Kochuba said.
“Where 0DTE is currently most impactful is where it seems 0DTE calls are being used to ‘buy the dips’ after large declines. In a way this suppresses volatility.”
In fact, 0DTE appears to have lowered differences between intraday volatility and close-to-close volatility...
George Patterson, chief investment officer at PGIM Quantitative Solutions, got a whiff of that retail urge recently when some friends’ teenage kids asked him questions about 0DTE options.
“0DTE options trades are yet another fad for retail investors, who view these as lottery tickets,” Patterson said.
There is one other aspect of the market that 0DTE options have impacted. The recent decoupling of VIX from the equity underlying has some market participants questioning the value of the 'Fear Index' given that so much of the options volume is now missing from the index calculation (which is based on only S&P 500 options expiring 23 to 37 days).
Although a look at short-dated VIX (9d - so still notably beyond the 0DTE expirations) suggests little systemic difference...
Nevertheless, as Nomura cross-asset strategist Charlie McElligott, the less controversial issue is that 0DTE options add yet another layer of noise to intraday markets, noting that "US equities are such an untradable mess right now," as the battle between bulls eying a "no landing" and bears warning over "higher for longer" rates pushes more and more into short-dated, highly-levered trend-following 'lottery tickets' via 0DTE.

WSJ : Crypto Companies Behind Tether Used Falsified Documents and Shell Companie

Crypto Companies Behind Tether Used Falsified Documents and Shell Companies to Get Bank Accounts
Tether Holdings and related crypto broker obscured identities, documents show

In late 2018, the companies behind the most widely traded cryptocurrency were struggling to maintain their access to the global banking system. Some of their backers turned to shadowy intermediaries, falsified documents and shell companies to get back in, documents show.

One of those intermediaries, a major tether trader in China, was trying to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal,” Stephen Moore, one of the owners of Tether Holdings Ltd., said in an email viewed by The Wall Street Journal.

Mr. Moore said it was too risky to continue using the fake sales invoices and contracts, which he had signed, and recommended they abandon the efforts to open the accounts, the emails show. “I would not want to argue any of the above in a potential fraud/money laundering case,” he wrote.

Tether runs tether, the $71 billion stablecoin that is the most widely traded cryptocurrency, and a sister company runs Bitfinex, one of the world’s largest crypto exchanges. Losing access to the banking system was “an existential threat” to their business, the companies said in a lawsuit.

A cache of emails and documents reviewed by the Journal show a long-running effort to stay connected to the financial system. The companies often hid their identities behind other businesses or individuals. Using third parties occasionally caused problems, including hundreds of millions of dollars of seized assets and connections to a designated terrorist organization.

Tether didn’t comment on its efforts to open bank accounts. Mr. Moore didn’t reply to requests for comment.

Tether has been under investigation by the U.S. Justice Department, according to a person familiar with the matter. The investigation has been overseen by the Manhattan U.S. attorney’s office.

Last week that office charged Sam Bankman-Fried, the former chief executive officer of bankrupt cryptocurrency exchange FTX, with conspiracy to commit bank fraud for opening a U.S. bank account in the name of a seemingly unrelated business, in addition to 11 other counts. Mr. Bankman-Fried has pleaded not guilty to earlier charges against him and denied committing fraud.

The U.S. Attorney’s office declined to comment. Tether said last year it routinely had open dialogue with law enforcement agencies and that the Justice Department didn’t appear to be actively investigating Tether.

It couldn’t be determined if the investigators are looking at Tether’s efforts to open bank accounts around 2018. The investigation into Tether was previously reported by Bloomberg News.

Access to the banking system is especially important to tether. Unlike many volatile cryptocurrencies, tether’s value is pegged to the U.S. dollar. For many investors tether plays the role of a money-market account at a brokerage.

That role makes tether an important entry and exit point for crypto investing and a crucial source of liquidity in the crypto economy. The cryptocurrency trades more than bitcoin and ether combined on most days, according to CoinMarketCap.

Tether’s efforts to keep bank access grew urgent in March 2017, when Wells Fargo & Co. stopped processing transactions from several Taiwanese accounts that Tether was using.

The move triggered “an existential threat to their business,” according to a lawsuit filed by Tether and its sister companies against the bank. The suit was soon withdrawn.

Phil Potter, Tether’s now-former chief strategy officer, sought to calm anxious users on a conference call a few weeks later, saying Tether and Bitfinex had always found a solution. “There’s been lots of sort of cat-and-mouse tricks that everyone in the industry has to avail themselves of,” Mr. Potter said on a recording of the call.

The companies opened new accounts by using established business executives and tweaking company names, according to the documents. In Taiwan, the accounts were held in trust by Chrise Lee, an executive of Hylab Technology Ltd., which makes television set-top boxes. But the accounts were opened under the name Hylab Holdings Ltd., documents show. Mr. Lee didn’t reply to a request for comment.

Another account on a list of several created for use by Tether and Bitfinex was opened in Turkey in the name of a company called Deniz Royal Dis Ticaret Limited Sirketi, according to one of the documents. That account was allegedly used to launder money raised by Hamas’s armed Izz ad-Din al-Qassam Brigades, according to an affidavit filed by the Justice Department. The al-Qassam Brigades is designated a terrorist organization by the U.S. government.

The account was cited in 2020 when the Justice Department disrupted a terror financing operation that the al-Qassam Brigades used to accept cryptocurrency donations and convert them into fiat currency. The operation allegedly used a black-market money transmitting business that used an account at Bitfinex and carried out more than $80 million in transactions with the Deniz Royal account, according to court documents and people familiar with the matter.

U.S. authorities seized more than $1 million allegedly tied to the al-Qassam Brigades, with most coming from the money transmitting business that transacted with Deniz Royal, according to blockchain analytics firm Chainalysis. The case is currently proceeding under seal.

Bitfinex also moved more than $1 billion into a Panama-based payment processor called Crypto Capital Corp., despite the lack of a written agreement between the companies, court records show. Crypto Capital is now defunct.

Crypto Capital typically used shell companies to open networks of bank accounts that worked as an unlicensed money transmitting business for crypto companies. Federal court documents show that banks in the U.S. were told the accounts would be used primarily for real-estate transactions.

By October 2018, the Crypto Capital plan was backfiring. Around $850 million of the companies’ funds were seized by authorities in the U.S. and Europe as a result of criminal investigations into bank fraud and alleged money laundering. Customers had trouble withdrawing funds, tether lost its peg to the U.S. dollar and Bitfinex borrowed from Tether to cover the hole in its balance sheet.

The following year, Bitfinex said it was defrauded by Crypto Capital and is still fighting the seizures.

Ultimately, the companies were able to open at least nine new bank accounts for shell companies in Asia over nine days in October 2018, according to the documents. That month, Bitfinex announced to customers it had a new “distributed banking solution” to take in traditional currencies.

In communications with customers, the companies took steps to urge them to keep the details of new banking arrangements to themselves. “Divulging this information could damage not just yourself and Bitfinex, but the entire digital token ecosystem,” a client page on the Bitfinex website read.

Tether and Bitfinex executives also tried to expand their bank access with an account at New York’s Signature Bank, which had made a push into crypto. Signature had closed two accounts tied to the companies earlier that year, according to the documents, and rejected another attempt by Bitfinex that fall, according to a person familiar with the matter.

Signature bankers were then introduced to a company called AML Global, an aviation fuel broker that was looking to open an account.

The account would be controlled by Christopher Harborne, according to the application, which said it would be used to trade cryptocurrency primarily on a well-known exchange called Kraken for the purposes of hedging currency exposure. Mr. Harborne is a major backer of Brexit and the U.K.’s Conservative Party and owns AML Global.

The application didn’t say that Mr. Harborne owned roughly 12% of both Tether and Bitfinex under another name, Chakrit Sakunkrit. The Sakunkrit name had earlier been added to a list of names the bank felt were trying to evade anti-money-laundering controls when the companies’ earlier accounts were closed, but Mr. Harborne’s hadn’t.

Compliance executives questioned why an account that was supposed to be trading on Kraken was getting huge inflows from what appeared to them as Bitfinex. “Bitfinex was not mentioned anywhere in the paperwork that was provided,” one Signature executive wrote, according to the documents. “If they are buying/selling with Kraken, why is the money only coming in from Bitfinex?”

The account for AML was provisionally opened but soon closed after the bank realized the account was connected to Bitfinex, according to people familiar with the matter. Mr. Harborne didn’t reply to a request for comment.

WSJ : Saudi Arabia and U.A.E. Clash Over Oil, Yemen as Rift Grows

Saudi Arabia and U.A.E. Clash Over Oil, Yemen as Rift Grows
Once close friends, the two biggest Arab economies are increasingly competing for money and power

DUBAI—When Abu Dhabi hosted a summit of Middle East leaders at a seaside palace in January, there was a glaring absence: Saudi Crown Prince Mohammed bin Salman. A month before, the United Arab Emirates’ top leaders skipped a high-profile China-Arab summit in Riyadh.

Prince Mohammed and U.A.E. President Sheikh Mohamed bin Zayed al Nahyan steered clear of each other’s events intentionally, Gulf officials said, even as the rulers of Jordan, Egypt, Qatar and others attended. The snubs exposed a growing rift between neighboring U.S. security partners that for years marched in lockstep on Middle East foreign policy.

Still formally allies, Saudi Arabia and the U.A.E. have diverged on several fronts, competing for foreign investment and influence in global oil markets and clashing on the direction of the Yemen war. The disagreements once unfolded behind closed doors but are increasingly spilling out into the open, threatening to reorder alliances in the energy-rich Persian Gulf at a time when Iran is trying to exert more sway across the region and Russia’s war in Ukraine has raised crude prices and roiled OPEC decision-making.

U.A.E. national security adviser Sheikh Tahnoun bin Zayed al Nahyan, who is close to Prince Mohammed, has repeatedly traveled to the Saudi kingdom to meet its 37-year-old de facto leader, but that has failed to ease tensions, said people familiar with the trips. On at least one occasion after the January summit in Abu Dhabi, Sheikh Tahnoun couldn’t secure a meeting with the Saudi crown prince, some of the people said.

The U.A.E.’s Sheikh Mohamed, 61 years old, was once the Saudi crown prince’s mentor, bonding a few years ago on an overnight camping trip in the vast Saudi desert, accompanied by trained falcons and a small entourage, The Wall Street Journal has reported. But more recently, the two men have drifted apart as they offer divergent visions of leadership, and with Sheikh Mohamed avoiding the scrutiny faced by Prince Mohammed.

“Up until a few years ago, this sort of division and openly pursuing objectives that are counter to what their brothers are pursuing was unheard of,” said Dina Esfandiary, senior adviser for the Middle East and North Africa at the International Crisis Group. “Now it’s becoming increasingly normal.”

Emirati officials declined to comment. Saudi officials didn’t respond to requests for comment.

In a tweet in February, Anwar Gargash, an Emirati foreign-policy adviser to Sheikh Mohamed, reaffirmed the U.A.E.’s unity with Saudi Arabia and said reports about shifts in Gulf alliances are wrong and create divisions at a time when the region needs solidarity.

The most intense disagreement is over Yemen, where the Saudis and Emiratis led an Arab military coalition that intervened in 2015. The civil war has left the country fractured between Iran-backed Houthi rebels controlling the north and an internationally recognized government in much of the south.

The U.A.E. pulled most of its ground forces from Yemen in 2019 but still fears being sidelined from discussions about its future as Saudi Arabia pursues direct talks with Houthi rebels on ending the war, Gulf officials said. The U.A.E. wants to maintain a strategic foothold on the country’s southern coast and project power into the Red Sea to secure sea routes from its ports to the rest of the world, Gulf officials said.

In December, the U.A.E. signed a security agreement with the Saudi-backed Yemeni government allowing Emirati forces to intervene in the country in the case of an imminent threat, train Yemeni forces in the U.A.E. and deepen intelligence cooperation, according to Saudi, Emirati and Western officials. The U.A.E. is also seeking to build a military base and runway on an island in the Bab al-Mandeb strait at the southern end of the Red Sea, according to Gulf officials.

Saudi officials privately objected to the security agreement and plans for the base, Gulf officials said, and view the Emiratis as working against Riyadh’s main objectives of securing its 800-mile border and stopping Houthi drone and missile attacks.

In response, the Saudis deployed Sudanese forces from the Arab military coalition to areas near Emirati operations, which Emirati officials saw as an intimidation tactic, Gulf officials said.

In December, when Sheikh Mohamed didn’t attend the China summit in Riyadh, Saudi officials say they interpreted it as a sign of Emirati displeasure over the rising competition in Yemen. In Sheikh Mohamed’s place, the ruler of the small emirate of Fujairah attended the summit featuring Chinese leader Xi Jinping.

Two of the biggest oil producers in the world, the Saudis and Emiratis have also had behind-closed-doors arguments over energy issues.

Within the Saudi-led Organization of the Petroleum Exporting Countries, the U.A.E. is obligated to pump much less than it is capable of, hurting its oil revenue. It has long pushed to pump more oil, but the Saudis have said no, OPEC delegates have said.

Emirati officials say the U.A.E. is having an internal debate about leaving OPEC, a decision that would shake the cartel and undermine its power in global oil markets. Departing OPEC has been discussed for years in the U.A.E. leadership without action, but Emirati officials said recent disagreements with Saudi Arabia had rekindled the idea.

The Emiratis clashed with the Saudis last October when OPEC+—a 13-nation group that includes OPEC and 10 other countries, including Russia—decided to dramatically reduce oil production to prop up crude prices.

In public, the U.A.E. supported the production cut. But U.S. officials said the Emiratis told them privately that they wanted to pump more, in line with Washington’s wishes, but faced resistance from Saudi Arabia. Since then, the U.A.E. has privately pushed OPEC+ to let it produce more, Gulf energy officials said.

The Emiratis are “worried about a Saudi that works against their interests,” said Ms. Esfandiary. She said the Saudis are concerned the U.A.E. poses a threat to Saudi dominance in the Gulf.

The Saudi-U.A.E. rift isn’t as serious as Qatar’s dispute with its neighbors, which saw diplomatic, trade and travel ties severed from mid-2017 until early 2021. The Saudis and the Emiratis continue to participate in joint military exercises, but the heyday of their alignment is over, analysts said.

The divergence began after the 2018 killing of Saudi journalist Jamal Khashoggi by Saudi government agents, which made the Emiratis reconsider how close they should be to him, Emirati officials said. In 2019, the Saudis felt abandoned in Yemen when Abu Dhabi began pulling its forces. A U.A.E. deal establishing relations with Israel generated more friction.

Riyadh’s quick reconciliation with Doha after it pushed to end the boycott in early 2021 alarmed Abu Dhabi, which had originally pushed for isolating Qatar and wanted to continue the blockade, officials and diplomats have previously said. The Saudis have leaned on foreign companies to move their regional headquarters to the kingdom, challenging the position of Dubai, the Emirati city-state that is the Middle East’s international business hub.

A potential realignment in the Gulf seemed to take shape in November when the king of Bahrain, long seen as a Saudi client state, appeared at a Formula One race in Abu Dhabi alongside Sheikh Mohamed on the same weekend the Saudi prince attended the soccer World Cup opening ceremony in Doha with the Qatari ruler.

Last month the U.A.E. arranged a phone call between the leaders of Qatar and Bahrain, which have had frosty ties for years. The U.A.E. played the regional power-broker role once reserved for Saudi Arabia.