Pablo Picasso Dora Maar 1937
I think it’s not so much the US inverted yield curve that hints at a global recession, but the fact that many countries have such curves.
On Tuesday, equity markets across the globe jumped at the news that the Trump administration would delay some of the new tariffs on China it had announced earlier this month. But just one day later, global stock markets sold off hard due to ever-weakening economic data in Europe and Asia and further yield curve inversions. Call it a major hangover. The reversal in tariffs did not come from a position of strength. It came as a result of global economic reality sinking in and crushing US markets. Turns out trade wars are not easy to win and the global growth picture is not looking good. Last week, the UK announced negative GDP growth for the past quarter.
This week, it’s Germany announcing shrinking GDP with its 10-year bond hitting a record negative 0.62% yield. Then there’s Europe seeing negative industrial production, and China announcing its lowest industrial production growth in 17 years. The collapse in global bond yields has been a theme since October of last year, with 10-year US Treasury bonds dropping to 1.6% from their October 2018 high of 3.23%. Now that the two-year/10-year Treasury yield curve has inverted, the recession alarm bells are ringing. Why? Because every single recession in the past 45 years has seen a yield curve inversion preceding it.
History suggests that on average a recession begins 22 months after a yield curve inversion. It’s not until about 18 months after an inversion that the stock market turns negative. Yet Bank of America Merril Lynch numbers indicate that we have less time. For the 10 yield curve inversions since 1956, the S&P 500 peaked within approximately three months of the inversion six times. Following the other four, the S&P 500 took 11 to 22 months to peak. Twenty-two months of growth vs. three months? That’s quite a big gap. Both of these historical studies suggest there is room for markets to make new highs in the next few months. In fact, one can imagine several scenarios on how these new highs could come about.
Deflation. Aka “a “Japanification” of every major bond market…”
It has been a thesis over 20 years in the making, but with every passing day, SocGen’s Albert Edwards – who first coined the term “Ice Age” to describe the state of the world in which every debt issue ends up with a negative yield as capital markets and economies collapse into a deflationary singularity – is that much closer to having the victory lap of a lifetime. Although, we doubt he is happy about it. Commenting on the interest rate collapse he has been (correctly) predicting ever since he first observed Japan’s great bubble bust of the 1980s and which resulted in both NIRP and QE, and which he (correctly) expected would spread across the rest of the world, leading to a “Japanification” of every major bond market…
… Edwards said that what bond markets are telling us is “that the cycle is ending with the central banks having failed to drive core CPI inflation higher. So Japanese-style outright deflation lies ahead at a time when western economies have piled debt sky high.” Needless to say that’s not good, not least of all because we now live in a world in which the bond universe with negative yields continued to grow at an exponential pace, rising rapidly over the past two weeks and reaching a record $16.4 trillion…
Really? Your pension fund?
The US Gross National Debt has jumped by $363 billion in the two weeks since President Trump signed the law that suspended the debt ceiling. This surge pushed the total debt to $22.39 trillion. That’s up by $1.01 trillion from 12 months ago. And these are the good times. Watch this debt balloon during an economic downturn! Whoopee! Note the technical term at the top right of the chart:
The question, “Who the heck is buying all this debt” – because every dime has to be bought by some entity – is becoming increasingly nerve-wracking, particularly as the trade war with China puts the possibility out there that Chinese entities might dump their US Treasury securities, much like Russia has already done. But Russia was only a small-ish holder. China is – or rather was – the largest one. So we got some answers on Thursday when the Treasury Department disclosed in its TIC data how much of this debt was held, bought, and dumped by foreign investors through June. Foreign investors bought hand-over-fist. But not the Chinese!
All foreign investors combined – so “foreign official” holders, such as central banks, and foreign private-sector investors such as banks and Mexican billionaires – held $6.64 trillion in US Treasury bonds and bills, having raised their holdings in the month of June by $97 billion, and over the 12-month period by $411 billion, all of it driven by frantic buying over the past seven months. In dollar terms, this $6.64 trillion held by foreign investors is a record (blue line). In terms of the percentage share (red line) of total debt, it’s a far cry from the record maintained from July 2012 through May 2015, when it maxed out at 34.1% of total Treasury debt. The share dropped to 28.5% at the end of last year. Under the recent surge in buying, it has ticked up to 30.1%:
The chart below shows [the] three big groups of holders of US Treasury securities through June: US government-administered funds, such as the Social Security Trust Fund and US government pension funds (gray), US individuals and entities other than the government (red), and foreign holders (blue):
They’re not going to take his word for it.
Prime Minister Boris Johnson will tell French President Emmanuel Macron and German Chancellor Angela Merkel that the Westminster parliament cannot stop Brexit and a new deal must be agreed if Britain is to avoid leaving the EU without one. In his first trip abroad as leader, Johnson is due to meet his European counterparts ahead of a G7 summit on Aug. 24-26 in Biarritz, France. He will say that Britain is leaving the European Union on Oct. 31, with or without a deal, and that the British parliament cannot block that, according to a Downing Street source. The United Kingdom is heading towards a constitutional crisis at home and a showdown with the EU as Johnson has repeatedly vowed to leave the bloc on Oct. 31 without a deal unless it agrees to renegotiate the Brexit divorce.
After more than three years of Brexit dominating EU affairs, the bloc has repeatedly refused to reopen the Withdrawal Agreement which includes an Irish border insurance policy that Johnson’s predecessor, Theresa May, agreed in November. The prime minister is coming under pressure from politicians across the political spectrum to prevent a disorderly departure, with opposition leader Jeremy Corbyn vowing to bring down Johnson’s government in early September to delay Brexit. It is, however, unclear if lawmakers have the unity or power to use the British parliament to prevent a no-deal Brexit on Oct. 31 – likely to be the United Kingdom’s most significant move since World War Two.
Apparently older docs, things have improved since. But only to the extent that it’s not “up to 85% of trucks using the main channel crossings “may not be ready“, now it’s ‘just’ 50-60%.
Britain will face shortages of fuel, food and medicine if it leaves the European Union without a transition deal, jamming ports and requiring a hard border in Ireland, official government documents leaked to the Sunday Times show. The Times said the forecasts compiled by the Cabinet Office set out the most likely aftershocks of a no-deal Brexit rather than the worst case scenarios. They said up to 85% of trucks using the main channel crossings “may not be ready” for French customs, meaning disruption at ports would potentially last up to three months before the flow of traffic improves. The government also believes a hard border between the British province of Northern Ireland and the Republic will be likely as current plans to avoid widespread checks will prove unsustainable, the Times said.
“Compiled this month by the Cabinet Office under the codename Operation Yellowhammer, the dossier offers a rare glimpse into the covert planning being carried out by the government to avert a catastrophic collapse in the nation’s infrastructure,” the Times reported. “The file, marked “official-sensitive” — requiring security clearance on a “need to know” basis — is remarkable because it gives the most comprehensive assessment of the UK’s readiness for a no-deal Brexit.” The United Kingdom is heading towards a constitutional crisis at home and a showdown with the EU as Prime Minister Boris Johnson has repeatedly vowed to leave the bloc on Oct. 31 without a deal unless it agrees to renegotiate the Brexit divorce.
“Healing bitter division is one of two great preoccupations haunting politics in the United Kingdom since the 2016 Brexit referendum — the second is hating Jeremy Corbyn. ”
Healing bitter division is one of two great preoccupations haunting politics in the United Kingdom since the 2016 Brexit referendum — the second is hating Jeremy Corbyn. On Wednesday, the Labour leader wrote a letter to the other main opposition parties proposing an alliance to block a No Deal Brexit, a prospect that has now become uncomfortably plausible with Boris Johnson as prime minister. Under the proposal, Corbyn would call a vote of no confidence in Johnson’s government; once the motion is carried he would step in to become a caretaker prime minister for a brief term. Corbyn’s powers would be limited; he couldn’t introduce new legislation. The sole purpose of his tenure as prime minister would be to negotiate a postponement of the Brexit deadline and call a general election.
Labour would then campaign for a new EU referendum with a Remain option on the ballot. The suggestion is calm, serious, and thoughtful. Most importantly, it includes a promise of a campaign for that second vote that so many centrists have loudly rallied for; the election everyone on the Left has longed for; and as mentioned, it severely limits Corbyn’s powers, but importantly, also blocks No Deal. It should bring everyone on board. Sensible parties were furtively positive: Plaid Cymru (the Welsh nationalist party) and the Scottish National Party said they were interested in discussing the idea when they appeared on the BBC Radio 4 Today programme.
But with this proposal, Corbyn has called the bluff of the extreme centrists and the obsessive Remainers. Since his scheme involves an election in which Labour would campaign for a second referendum, with Remain on the ballot, attacking Corbyn now means attacking the very ideas they claim to be fighting for. Sure enough, the Liberal Democrats shot the proposal down immediately, stating they would never countenance backing Jeremy Corbyn as prime minister, even if it meant stopping a No Deal Brexit ..
[..] the hideous truth is now revealed, confirming what many on the Left have long been saying about the Liberal Democrats, the Independent Group, and a huge number of highly vocal centrist ultras on social media: for all their yelling that stopping Brexit is their sole concern, as long as stopping Brexit means Corbyn in a position of power — however minor and effectively powerless — they would prefer economic obliteration. Given the choice between Corbyn spending a few weeks merely acting out a pre-agreed script, on the one hand, and medicine and food shortages, a tanked pound, an economy in ruins, and widespread social panic, many centrists would choose the latter. Their hatred for Corbyn really does expand to fill so much of their mind as to incapacitate them.
Interesting thing here is not the article, but the wider setting of the photo. C’mon Bill Barr, have her picked up. Your credibility melts away while you sleep.
On Thursday afternoon, the New York Post published a picture that, the newspaper reported, was taken at an In-N-Out Burger in the San Fernando Valley, on Monday, and sent in by an anonymous source in Los Angeles. The photo showed Ghislaine Maxwell sipping a shake and munching on fries and a burger while sitting alone at one of the restaurant’s outdoor tables. [..] the central figure of the Epstein affair in the past week has been Maxwell. The youngest of Robert Maxwell’s nine children, and reportedly his favorite, Ghislaine attended Marlborough, a boarding school in England, and Oxford. Her father sent her to New York as his emissary, in 1991, to foster the Daily News, which he had recently purchased.
After his ignominious death, she was left with a mere hundred thousand dollars per year to live on. She began to sell real estate, and soon started dating Epstein, who was well connected. A multitude of pictures from the past three decades in which the socialite is seen beaming, cheek to jowl, wearing gaudy Upper East Side-lady finery, with a variety of bold-faced names at various galas, give the impression that she would have attended the opening of an envelope as long as it was gold-embossed. But, in 2016, not long after Giuffre’s defamation suit, Maxwell abruptly disappeared from public view. On Wednesday, the Daily Mail reported that she was residing in a mansion outside Boston, in Manchester-by-the-Sea. But before the surprise of that revelation had abated, the picture from Los Angeles delivered a new jolt.
Thousands of protesters, most clad in black, gathered under a downpour for an anti-government rally at a Hong Kong park on Sunday, in the eleventh week of what have been often violent demonstrations in the Asian financial hub. The turnout for the rally could show whether the movement still has broad-based support after the ugly scenes witnessed during the past week when protesters occupied the city’s airport, for which some activists apologized. Anger over a now-suspended bill that would allow criminal suspects in Hong Kong to be extradited to mainland China erupted in June, but the rising unrest is fueled by broader worries about the erosion of freedoms guaranteed under the “one country, two systems” formula put in place after Hong Kong’s return from British to Chinese rule in 1997.
“Hong Kongers are tired of protesting, this is really the last thing they want. It’s bloody hot and it’s raining. It’s a torture just to turn up, frankly,” said a 24-year-old student named Jonathan. “But we have to be here because we have no other choice. We have to continue until the government finally shows us the respect that we deserve,” he said. Seated on concrete soccer fields in the sprawling Victoria Park in the city’s bustling Causeway Bay district, protesters held placards with slogans including “Free Hong Kong!” and “Democracy now!”, and umbrellas to shield them from the heavy rain.
Victoria Park almost completely filled up as of 2pm, the official starting time of the rally.
Print your own books.
It seems innocent enough: a map of the US on the inside cover of a young adult novel. The kind that teenagers would use to trace a fictional character’s journey. But a China-based printer told Kiwi publisher One Tree House that there would be a one-month production delay while the map was vetted by Chinese authorities. In order to get Brian Falkland’s Cassie Clark: Outlaw published in time to ship an Australian order, One Tree House had to get the book printed in Auckland at double the cost. It’s one example of several Stuff uncovered of publishers running into hold-ups as Chinese printers get maps checked over to ensure they adhere to Beijing policy – whether they’re textbooks or works of fiction.
Printing books in China is cheaper than in other countries, with quality and service also said to be first-rate. But Chinese printing companies are subject to censorship laws, with books combed for references that might be politically sensitive to Beijing, such as Taiwan and Tibet. One Tree House co-director Jenny Nagle, who’s also the NZ Society of Authors chief executive, said the policy meant her business had to take a cost hit when Cassie Clark: Outlaw was printed late last year. “I was surprised because it’s such an innocuous thing. It’s a simplified map showing a fictional character’s journey across America,” said Nagle. Mary Varnham, editor-in-chief at publisher Awa Press, also met with a one-month production delay during a 2018 re-print of the travel book Antarctica Cruising Guide.
Young adult novel Cassie Clark: Outlaw contains a map of the US that a Chinese printer took exception to.
Again, the offending item was a map. “The book has a map of Antarctica which doesn’t mention China at all, but it still had to go through this vetting process,” Varnham said. “I’m assuming they’re checking references to Taiwan and things, but obviously they want to check all maps.” She said it was “much more expensive” to print books in Australia or New Zealand, but the quality was also much better in China. “It’s obvious that you just wouldn’t send a book to China if it’s highly critical of China in some way, because they would definitely, I imagine, refuse to print it. So there’s a kind of self-censorship there.”
Not bad. But Trump made his offer mostly in jest, and only when he heard Denmark had trouble meeting its obligations (whether that’s true I don’t know). Also, US congress tried to buy Greenland in 1867, and Harry Truman tried again in 1946.
After rebuffing Donald J. Trump’s hypothetical proposal to purchase Greenland, the government of Denmark has announced that it would be interested in buying the United States instead. “As we have stated, Greenland is not for sale,” a spokesperson for the Danish government said on Friday. “We have noted, however, that during the Trump regime pretty much everything in the United States, including its government, has most definitely been for sale.” “Denmark would be interested in purchasing the United States in its entirety, with the exception of its government,” the spokesperson added.
A key provision of the purchase offer, the spokesperson said, would be the relocation of Donald Trump to another country “to be determined,” with Russia and North Korea cited as possible destinations. If Denmark’s bid for the United States is accepted, the Scandinavian nation has ambitious plans for its new acquisition. “We believe that, by giving the U.S. an educational system and national health care, it could be transformed from a vast land mass into a great nation,” the spokesperson said.
Guaranteed failure. The same world’s nations want economic growth.
From giraffes to sharks, the world’s endangered species could gain better protection at an international wildlife conference. The triennial summit of Convention on International Trade in Endangered Species (Cites), that began on Saturday, will tackle disputes over the conservation of great beasts such as elephants and rhinos, as well as cracking down on the exploitation of unheralded but vital species such as sea cucumbers, which clean ocean floors. Extraordinary creatures being driven to extinction by the exotic pet trade, from glass frogs to star tortoises, may win extra protection from the 183-country conference. It may even see an extinct animal, the woolly mammoth, get safeguards, on the grounds that illegal elephant ivory is sometimes laundered by being labelled as antique mammoth tusks.
The glass frog is among the species being driven to extinction by the exotic pet trade. Photograph: Alamy.
Ivonne Higuero, the secretary general of Cites, said: “Cites is a powerful tool for ensuring sustainability and responding to the rapid loss of biodiversity – often called the sixth mass extinction – by preventing and reversing declines in wildlife populations.” The destruction of nature has reduced wildlife populations by 60% since 1970 and plant extinctions are running at a “frightening” rate, according to scientists. In May, the world’s leading researchers warned that humanity was in jeopardy from the accelerating decline of the planet’s natural life-support systems, which provide the food, clean air and water on which society ultimately depends.
Carol Steele “Dancing On Ice – Dalmatian Pelican” 2019. Location: Lake Kerkini, Northern Greece