I had a chance conversation with a Ukrainian scientist today, with whom I shared my reasoning as to why the Ukrainian war is being fought and how it can be resolved. My views are unconventional and quite contrary to the prevailing winds, but as she liked them so much, and as they may be helpful to unwind a dangerous and contentious problem, I made a video to walk you through my ideas. www.macroESG.com @gregbeier @macroesg

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The Australian government initiated a strict two-week lockdown in Sydney this week and its news service laid bare the significant risks of the Delta Variant, implying a much higher risk than is being made clear by governments in Western Europe or the US. We believe the Australian report to be solid as they have a very open, cohesive society.

The exceptionally transmissible Delta Variant is likely to infect everyone until communities hit a population immunity threshold of vaccinated or previously infected. In the United States, 54% of all Americans have had one dose and 46% are fully vaccinated; worryingly, 17 states have first-dose vaccination rates below 50% among 18-year old’s and up. Globally, only 39 countries report having vaccinated more than 40% of their population.

The uneven, slow roll-out of vaccinations in the United States and across the world mean that people are going to have to get sick to achieve herd immunity in their communities or they will have to lockdown and wait to get vaccinated. The result is that large parts of America and entire countries will likely have lock downs from the Delta Variant, surges of illness, or mixes of both. The more people the virus infects in different settings, the greater the chance that dangerous new variants arise which current immunities are not effective against.

Governments, central banks, and markets will find anticipating and managing these rolling crises problematic. These and other risks described in earlier Macro ESG pieces are quite likely to overwhelm monetarily stimulated stock markets.

Consequently, Macro ESG went inordinately short US equities today (June 29th) through large purchases of deep out of the money one-year puts in the Leveraged Aggressive Model Portfolio. www.macroesg.com #macroesg #gregbeier

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We are keen to be short Nasdaq futures mainly because its dominant Big Tech names have been the biggest beneficiaries of price appreciation during the Trump Administration and during the Pandemic. Hence, it’s only logical that when the Fed’s protective bubble is unwound that we should expect the Big Tech sector to also continue falling when the Trump Bubble collapses as well. We call this the Double Bubble - the first, constructive; the second, destructive. www.macroesg.com @gregbeier @macroesg #macroesg

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The decline in US 10 Year yield is a decent confirmation of our bearish US equities view so we are putting on an 84% Nasdaq 100 futures short in the Leveraged Aggressive Model Portfolio.

If we are wrong, then Leveraged Aggressive will lose 69 basis points on a 104% gross short position. www.macroesg.com #macroesg #gregbeier @gregbeier #susarb

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1. COVID Risk Increasing

News of Covid success in the United States and UK is masking much bigger problems. News reports estimate that 30,000 people are dying a day in India. Covid is still spreading out across the developing world and Asia (Tokyo and Melbourne on lockdown).

2. Variant Risk Increasing

The risk of a super variant that current vaccines are ineffective against emerging from these hotspots is a realistic possibility and will drive down risk taking in markets. As 200 countries come together for the Olympics in Japan, a super variant could emerge from the Games, as a chief doctor has warned, begging the government to postpone the games.

3. Republicans

As the Democrats have such a narrow margin of control in the Congress, the Republicans are highly incentivized to harm the economy and be generally disruptive so as to weaken support for President Biden’s policies and push voters to support the Republicans in the mid-term elections and take control of the House and the Senate.

For example, just two days ago former National Security Advisor General Flynn talked up a coup, the Governor of Texas just signed a law that will limit abortions after six weeks, and Republican states across the US are limiting voting access. #macroesg @gregbeier #susarb www.macroesg.com

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NB: This is an update to the January 12, 2021 piece “Social Media is a Solid Short” on MacroESG.com.

When Tim Cook, CEO of Apple, called out Facebook’s business model as being a social liability for humanity, he put a cap on the stock price.

Trade location: Facebook shorts should be made against the high of this day. While the market power is so substantial now, FB is gently listing along.

As the US congress and President Biden are tied up with vaccinating America and getting the stimulus program into law, this has kept the hammer of the government from coming down yet on social media while Australia led the challenge of the social media revenue model. If this were to happen across the world, Facebook’s near 40% profit margin on about $80 billion in revenue would shrink.

Jeff Bezos confirmed the negative outlook for mega-tech when he announced that he is stepping down as CEO to become Executive Chairman of Amazon, in a move almost certainly tied to the fact that the top job will become about managing regulatory risks like anti-trust, labor unions, and consumer privacy. www.macroesg.com #macroesg @gregbeier

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The time has come to short social media which means Facebook and Twitter as they’ve been the engines of the political controversy.

After last week’s attack on Capitol Hill, the Congress has impeached the President for a record second time and will certainly reign in his tool of power - social media.

The Russell 2000 Small Cap index is up ~20% since the election of Joe Biden on November 10th, indicating a change in stock market leadership.

As Facebook has been riding a wave of good will for a long time that has allowed the company to remain exceptionally profitable – that good will is totally over, and the pendulum will swing the other way. Facebook may be broken up on anti-trust grounds and long investigations and hearings will be burdensome to the company. www.macroesg.com #macroesg @gregbeier

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America’s Two Greatest Threats…

The two greatest threats to America’s national security are:

Money influencing policy; and

Polarized politics.

…Creates Global Risk

When money in politics creates a split America – then this is the worst possible path for the United States to follow.

And this endangers free and open societies around the world, as the US still is the cornerstone of the global system. If the US falters, every other country is at increased risk.

Money influencing policy that creates polarized politics in the United States is, therefore, the greatest threat to global security – at least in terms of implementing solutions to all of the obvious global problems and maintaining a strong, vibrant alliance of open societies.

Moreover, it will not be possible to tackle to climate change and the biodiversity crisis – much less deal with nuclear weapons and pandemics - so long as the US is divided. www.macroesg.com #macroesg @gregbeier

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We are at a historic moment in the history of the United States.

As MacroESG has been writing for some time, the Trump administration is fitting the historical analog of the two previous presidencies, Hoover and Carter, that preceded their respective transformational presidencies, FDR and Reagan.

This means that Joe Biden is going to be a transformational president, just like FDR and Reagan, which makes the US a long-term buy. www.macroesg.com #macroesg @gregbeier

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Blue Wave is Complete

The election of Raphael Warnock and Jon Ossoff in the Georgia Senate run-off elections has completed the Blue Wave.

Macro ESG Called It Months Ago

Macro ESG called on July 23 in “Macro ESG Daily: We Are At an Inflection Point” that "...the Senate is going to fall to the Democrats too. It’s going to be a political Armageddon."

And this is exactly what happened today.

Historic Diversity From Georgia

Raphael Warnock is the first African American Senator to win an election in the Deep South without being an incumbent since Reconstruction (the period following the Civil War).

Similarly, Jon Ossoff is the first Jewish Senator from the Deep South to be elected to the Senate since Benjamin Jonas, a Democrat, who was elected in 1879 from Louisiana. www.macroesg.com #macroesg @gregbeier

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