Jun 142018
 
 June 14, 2018  Posted by at 8:42 am Finance Tagged with: , , , , , , , , , , , , ,  


Wassily Kandinsky Free Curve to the Point – Accompanying Sound of Geometric Curves 1925

 

This Fed Grows Relentlessly More Hawkish (WS)
ECB Gets Ready To Pull The Plug On Stimulus Scheme (R.)
The ECB, Not The Fed, Is The Match That Will Spark Bond Market Volatility (MW)
China Holds Fire On Rates, Posts ‘Shockingly Weak’ Activity Growth (R.)
Riskiest Junk Bonds Completely Blow Off the Fed, Face “Sudden” Reckoning (WS)
Cryptocurrency Bloodbath Continues, Tether Accused Of Manipulating Bitcoin (MW)
The Tories’ Chaotic Brexit Has Lost The Trust Of Business – Jobs Will Go (G.)
The North Korea Summit Through the Looking Glass (Jacobin)
Italy-France Relations Collapse Amid North-African Migrant Spat (ZH)
Apple Steps Up Encrytion To Thwart Police Cracking of iPhones (AFP)
FYROM and Greece Fail To Resolve Bitter Naming Dispute (G.)
Antarctic Ice Melting Faster Than Ever (G.)

 

 

Is there anyone alive who thinks that the US, EU, global economies are strong enough to withstand large scale liquidity withdrawal?

This Fed Grows Relentlessly More Hawkish (WS)

“The economy is in great shape,” Fed Chairman Jerome Powell said today at the press conference after the FOMC meeting. Inflation as measured by the Fed’s preferred low-ball measure “core PCE” has hit the Fed’s target of 2%, and the Fed expects it to hit 2.1% by year-end. Inflation as measured by CPI jumped to 2.8%. “Job gains have been strong,” today’s statement said. The “unemployment rate has declined,” while “growth of household spending has picked up,” and “business fixed investment has continued to grow strongly.” This is no longer the crisis economy of yore. But the interest rates are still low and stimulative, befitting for a crisis economy. So something needs to be done, and it’s getting done, if “gradually.”

There were all kinds of intriguing elements in the FOMC’s increasingly hawkish but “gradual” hoopla today. By unanimous vote, the FOMC raised its target for the federal funds rate by a quarter percentage point to a range between 1.75% and 2.0%. This was expected; what’s intriguing is the unanimous vote, unlike prior rate hikes. Four rate hikes in 2018 (two more this year) are now gradually being baked in, according to the median expectation of the 15 members of the FOMC, per the infamous “dot plot” with which the Fed tries to communicate potential rate moves: One member expects 5 rate hikes in 2018; seven members expect 4 hikes; five members expect 3 hikes, and two members expect no more hikes.

At the March meeting, four rate hikes had appeared in the dot plot as a real but more distant possibility. Two more hikes this year would bring the top end of the target range to 2.5% by year-end. This shows the 2018 section of the dot plot:

Rates are expected to continue to rise, three times in 2019 and once in 2020, nudging the federal funds rate to nearly 3.5%. A presser after every meeting – oh boy. During the press conference, Powell said that, starting next January, there will be a press conference after every FOMC meeting. This idea has been mentioned a couple of times recently to prepare markets for it. Now it’s official. As in every Fed announcement, it’s no biggie, really, trust us. The move is designed to “explain our actions and answer your questions,” Powell said. It was “only about improving communications.” It didn’t mean at all that the Fed would be speeding up its rate hikes, he said.

[..] Interest paid to the banks on excess reserves gets a makeover. Banks have about $1.89 trillion in “excess reserves” on deposit at the Fed. The Fed has been paying banks interest on these excess reserves at a rate that was equal to the top of the Fed’s target range – so 1.75% since the last rate hike, which amounts to an annual rate of $33 billion of easy profits for the banks. In theory with today’s rate hike, the FOMC would also have increased the rate it pays on excess reserves to 2.0%.

Read more …

But the European economy is not ready. What now, accelerate Target2 even more?

ECB Gets Ready To Pull The Plug On Stimulus Scheme (R.)

The ECB will debate on Thursday whether to end its huge asset purchases by year-end, in what would be its biggest step towards dismantling crisis-era stimulus credited with pulling the euro zone economy out of recession. Financial investors are coming to terms with the end of a decade of easy money from the world’s top central banks, with the Federal Reserve on Wednesday raising interest rates for a seventh time in 3-1/2 years in a further shift from policies used to battle the 2007-2009 financial crisis and recession. Meeting as growth is slowing and political populism threatens to set off market turbulence, the ECB is expected to argue that its 2.55 trillion euro bond-buying scheme has done its job in bringing the 19-member currency bloc back from the brink of collapse.

Whether policymakers take the actual decision at their meeting in Riga on Thursday or hold off until July appears secondary as they have long argued that the scheme, commonly known as quantitative easing (QE), should be concluded and the policy focus shift to the expected path of interest rates. The biggest complication could be the increasingly murky economic outlook, weighed down by a developing trade war with the United States, a populist challenge from Italy’s new government and softening export demand. But these factors could actually hasten the ECB’s decision rather than hold it back as the bank has little policy firepower left and a further weakening of the outlook could make a later exit more difficult.

“We believe the ECB may be in a hurry to close the QE chapter,” Bank of America Merrill Lynch said in a note to clients. “We think this is essentially political, as the ECB would not want its monetary policy to be affected by claims of supporting or conversely impairing the new policy course in Italy.”

Read more …

Don’t forget the BOJ and China.

The ECB, Not The Fed, Is The Match That Will Spark Bond Market Volatility (MW)

Rising real interest rates haven’t yet made for a sustained pickup in Treasury volatility, leaving some investors to ask what it would take to spark some turbulence. Danielle DiMartino Booth of Quill Intelligence said the European Central Bank, and not the Federal Reserve, holds the key as it looks to set a timetable for winding down its ultra-accommodative policies. With the Federal Reserve’s shrinking balance sheet unable to offset easy global financial conditions on its own, investors should closely watch the ECB at Thursday’s meeting where the central bank is expected to discuss the end of quantitative easing, though the actual wind-down almost certainly remains several months away at the earliest. “The culmination of ECB QE will remove a bond-volatility governor,” said Booth, in a note published on Tuesday.

Read more …

And there comes China. Xi fighting the shadows is like Don Quixote and the windmills.

China Holds Fire On Rates, Posts ‘Shockingly Weak’ Activity Growth (R.)

China’s economy is finally starting to cool under the weight of a multi-year crackdown on riskier lending that is pushing up borrowing costs for companies and consumers, with data on Thursday pointing to a broad slowdown in activity in May. China’s central bank sparked concerns over the health of the economy earlier in the day when it left short-term interest rates unchanged, surprising markets which had expected it to follow a hike by the Federal Reserve, as it has tended to do. Industrial output, investment and retail sales all grew less than expected, suggesting further weakness ahead if Beijing perseveres with its crackdowns on pollution, questionable local government spending and off-balance sheet “shadow” financing.

The data, which showed the slowest investment growth in over 22 years, “was all shockingly weak by Chinese standards,” economists at Rabobank said, adding that the readings may explain the central bank’s decision to keep rates on hold. “Get ready for headlines talking about Chinese deleveraging hitting the economy – except it isn’t even deleveraging yet! China is walking more of a tightrope than markets believe – and the data underline that issue clearly,” they said. China has been walking a fine line between rolling out measures to curb financial risks and pollution and tapping the brakes so hard that business activity slows sharply.

Much of their effort so far has focused on the banking sector rather than corporate debt reduction or deleveraging – possibly explaining why China’s headline growth has been so surprisingly solid. GDP has expanded at a steady 6.8 percent for three straight quarters. But official and unofficial gauges are now showing the regulatory crackdown is starting to filter through to the broader economy, with companies complaining it is harder to get financing and a growing number of firms defaulting on bonds.

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In a world of their own.

Riskiest Junk Bonds Completely Blow Off the Fed, Face “Sudden” Reckoning (WS)

High-grade corporate bonds are “gradually” – the key word in everything the Fed says – and reluctantly coming to grips with the new era: Yields are rising and bond prices are falling. The Fed has been laboring to accomplish that. With high-grade debt, the Fed’s plan is working “gradually.” But investors in the riskiest corporate junk debt are totally blowing off the Fed. They’re floating around in their own dream world, facing a very rude awakening. In terms of high-grade corporate bonds, the sell-off has been significant, even if it’s just the beginning. The S&P index for AA-rated bonds is down 2.7% so far this year. As prices have declined, yields have surged, with the average AA yield now at 3.51%, up from around 2.2% in mid to late-2016 (data via ICE BofAML US AA Effective Yield Index):

These are the types of bonds that Apple and other large companies hold in their “cash or cash equivalent” accounts that are registered overseas, and that are now being “repatriated” and sold, and the proceeds from the sales are now being plowed into mega-share buyback programs. These corporations, once avid buyers of this high-grade corporate debt, have turned into sellers.

[..] at the riskiest end of the corporate bond spectrum, with bonds rated CCC or below (deep junk), the party that started at the end of the oil bust in February 2016 simply continued. The S&P bond index for CCC-rated bonds has risen 4.5% so far this year (compared to a 2.7% decline for AA-rated index). Since February 2016, when Wall Street decided to plow new money into junk-rated energy companies, the CCC-rated index has skyrocketed 82%. The average yield of bonds rated CCC or lower is now at 9.56%, down from 12.5% in December 2016, when the Fed got serious, and down from 22% during the peak of the oil bust. This is the lowest yield since the bygone era of “QE Infinity” in June 2014:

Read more …

“Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in bitcoin and 64% of other top cryptocurrencies..”

Cryptocurrency Bloodbath Continues, Tether Accused Of Manipulating Bitcoin (MW)

The bloodbath in the digital currency market showed no sign of abating, with all major coins trading in the red Wednesday. In the past 24-hours, a further $25 billion has been wiped off the total value of all cryptocurrencies, led by bitcoin, the world’s biggest digital currency, which reached its lowest level since Feb. 5. A single bitcoin traded to an intraday low of $6,133.31 and has since bounced to $6,280.18, down 3.8%, since Tuesday 5 p.m. Eastern Time on the Kraken Exchange. The total value of all cryptocurrencies dipped below $270 billion in late afternoon New York trading, the lowest level since April 11, according to data from CoinMarketCap. The move lower came after a research report found data that it said suggested the price of bitcoin may have been manipulated in late 2017.

In the University of Texas paper, researchers said they uncovered data that they believe shows Tether, a stable coin that is pegged to the U.S. dollar, was used to artificially push up the price of bitcoin during its late 2017 rally towards $20,000. “Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in bitcoin and 64% of other top cryptocurrencies,” wrote John M. Griffin, a finance professor and Amin Shams, a graduate student. Questions have surrounded Tether and crypto exchange Bitfinex, which were both subpoenaed by the Commodity Futures Trading Commission in 2017 seeking data on Tether and its backing of U.S. dollars. Today’s findings will bring the 11th most traded cryptocurrency back into the spotlight.

“Overall, we find that Tether has a significant impact on the cryptocurrency market. Tether seems to be used both to stabilize and manipulate bitcoin prices,” they said.

Read more …

Losing business support may prove fatal for May.

The Tories’ Chaotic Brexit Has Lost The Trust Of Business – Jobs Will Go (G.)

[..] away from parliament, and far from the tabloid front pages, a serious breach is opening up in British politics. Last week some of the most senior business leaders in Britain came out of a Brexit meeting at No 10, and promptly tore the prime minister to shreds. “We’re playing economics; [the politicians] are playing politics,” said Paul Drechsler, president of the bosses’ organisation, the Confederation of British Industry. “In the world of business, we’re frustrated. We’re angry.” An extraordinary statement, especially from an executive invited to tea and biscuits with May. If supposedly tame industrialists now talk like this, you have to wonder what sounds come out of the feral lot.

Yet the CBI’s impatience is shared by many. Once the long-haul arm of the Tory movement, the Freight Transport Association lashed out at May last week for “playing chicken with crucial parts of the British economy and the livelihoods of … 7 million Britons”. These are close friends of the Conservative party.As one senior representative of a leading business organisation says: “Over the past two years, most company bosses would never risk saying openly that Brexit is turning out to be a disaster, in case it scared off their best staff.” With fewer than 290 days before Britain formally leaves the EU, their caution is running out.

This is a far bigger story than the one on the front pages about who promised which amendment to which band of Tories. One of the fundamental relationships in the establishment is fracturing – and the consequences for government and economy could prove to be historic.

Read more …

“Not Trump” is not an identity.

The North Korea Summit Through the Looking Glass (Jacobin)

On Tuesday, as Donald Trump and Kim Jong-un shook hands for their much-anticipated summit in Singapore, one Korean reporter observed a curious episode. Koreans watching the scene unfold on a TV screen at a railway station in Seoul began applauding. Meanwhile, some nearby Western tourists, perturbed by this development, scratched their heads in confusion. “I am actually baffled to see them clapping here,” said one British tourist. There’s perhaps no better symbol of the gulf in worldwide reactions to the summit than this episode. While South Koreans cautiously celebrated a historic step in the thawing of hostilities that have hung over them for almost seventy years, the Western media seemed to look on with alarm — even anger.

Hostility to the summit, much of it from Democrats and liberals, had been a staple of press coverage in the months leading up to it, often from commentators who just a few months earlier had been panicking about exactly the opposite outcome. But it reached a fever pitch over the last few days. There was, for example, the collective hyperventilation over a symbolic arrangement of North Korean and US flags. There was MSNBC’s Nicole Wallace, who warned that the whole summit was actually a “Trumpian head fake,” a mere artifact of Trump’s “midterm strategy” and his “get out of sitting with Bob Mueller strategy.” Sue Mi Terry of the defense contractor–funded Center for Strategic and International Studies cautioned that “a peace treaty is not okay” and should “come at the end of the process” because it “undermines the justification of our troops staying in South Korea.”

Read more …

Let’s see what happens when the next ship comes.

Italy-France Relations Collapse Amid North-African Migrant Spat (ZH)

Italy has postponed high-level discussions with France on Wednesday after French President Emmanuel Macron criticized Rome for refusing to take in a migrant rescue ship full of 629 shipwrecked North Africans – forcing it to divert to Valencia, Spain. After the ship ran out of supplies, the Italian Navy agreed to escort them across the Mediterranean. “Italy’s new Economy Minister Giovanni Tria said he was cancelling a meeting with his French counterpart Bruno le Maire in Paris. The French economy ministry later said the ministers had “agreed that Mr Tria will come to Paris in the coming days”. -AFP

Italy’s decision to refuse the migrants came after their new Interior Minister, Matteo Salvini, said in early June that “the good times for illegals are over” – writing an urgent letter ordering Malta to accept the 629 migrants picked up by the non-governmental organization (NGO) ship MV Aquarius, run by the group SOS Mediterranee. Salvini called Malta the “safest port” for the passengers, advising that Rome would not offer refuge. After Malta refused leading to several days in limbo, Spain agreed to take the passengers. In response to the ordeal, French President Emmanuel Macron accused Italy of “cynicism and irresponsibility,” adding that their EU neighbor is “playing politics” with the refugees.

Meanwhile Gabriel Attal, the spokesman for Macron’s party, called Italy’s actions “nauseating”. Italian Interior Minister Matteo Salvini responded – saying on Tuesday that he would not “accept hypocritical lessons from countries that have preferred to look the other way on immigration,” and adding on Wednesay that unless France issues an “official apology” for Macron’s inflammatory comments, a Friday meeting between Italian Prime Minister Guiseppe Conte and Macron should be canceled.

Read more …

What will the police do when quantum computing gets involved?

Apple Steps Up Encrytion To Thwart Police Cracking of iPhones (AFP)

Apple said Wednesday it was strengthening encryption on its iPhones to thwart police efforts to unlock handsets without legitimate authorization. The move by Apple, the latest in an ongoing clash with law enforcement, comes amid reports of growing use of a tool known as GrayKey which can enable police to bypass iPhone security features. Apple said the new features are not designed to frustrate law enforcement but prevent any bypassing of encryption by good or bad actors. “At Apple, we put the customer at the center of everything we design,” the company said in a statement.

“We’re constantly strengthening the security protections in every Apple product to help customers defend against hackers, identity thieves and intrusions into their personal data. We have the greatest respect for law enforcement, and we don’t design our security improvements to frustrate their efforts to do their jobs. Apple said it was working a fix to mitigate the possibility of accessing data from GrayKey or similar tools. Apple said that it has a team that responds to law enforcement and national security requests 24 hours a day. But the company has been a target of some in law enforcement for rejecting efforts to allow easy access to iPhones.

Two years ago, Apple went to court to block an FBI effort to force it to weaken iPhone encryption on the device of a mass shooter in San Bernardino, California, but officials dropped the case after finding a tool to unlock the phone.

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As square pegs and round holes go, this one will linger… Greeks don’t want the name Macedonia used in any way, Skopje wants nothing else.

FYROM and Greece Fail To Resolve Bitter Naming Dispute (G.)

Governments in Skopje and Athens have faced a furious backlash as the challenge of solving one of the world’s most bitter diplomatic feuds hit home just a day after Macedonia announced it was willing to change its name. Hours after the two neighbours declaring they had reached a landmark accord that would see the tiny Balkan state rename itself the Republic of North Macedonia, the nation’s president refused point-blank to sign the deal. “My position is final and I will not yield to any pressure, blackmail or threats,” president Gjorge Ivanov, who is backed by the nationalist opposition, told a news conference in Skopje. The agreement had conceded far too much to Greece – even if its ultimate aim was the country’s future membership of Nato and the EU, he said.

The backlash came despite officials in Brussels, London and Washington reacting with unbridled enthusiasm to the breakthrough. Nato secretary general, Jens Stoltenberg welcomed the accord, saying: “This is really an historical agreement by [politicians] who have shown courage and great political leadership.” Greece has long argued that the state’s name – adopted when it broke away from Yugoslavia in 1991 – conveys thinly disguised irredentist claims on its own northern province of Macedonia. The appropriation of figures associated with ancient Greek history – not least Alexander the Great – had reinforced fears in a region prone to shifting borders.

But opposition to the deal was also pronounced in Greece. As in Skopje – where prime minister Zoran Zaev’s leftist coalition was accused of leading the country to national humiliation – prime minister Alexis Tsipras and his leftist Syriza party was also charged with surrendering cherished national rights. One newspaper ran a front-page graphic showing Tsipras, the Greek foreign minister and president being shot by firing squad for treason.

Read more …

84 scientists from 44 international organisations..

Antarctic Ice Melting Faster Than Ever (G.)

Ice in the Antarctic is melting at a record-breaking rate and the subsequent sea rises could have catastrophic consequences for cities around the world, according to two new studies. A report led by scientists in the UK and US found the rate of melting from the Antarctic ice sheet has accelerated threefold in the last five years and is now vanishing faster than at any previously recorded time. A separate study warns that unless urgent action is taken in the next decade the melting ice could contribute more than 25cm to a total global sea level rise of more than a metre by 2070. This could lead eventually to the collapse of the entire west Antarctic ice sheet, and around 3.5m of sea-level rise.

Prof Andrew Shepherd, from Leeds University and a lead author of the study on accelerating ice loss, said: “We have long suspected that changes in Earth’s climate will affect the polar ice sheets. Thanks to our satellites our space agencies have launched, we can now track their ice losses and global sea level contribution with confidence.” He said the rate of melting was “surprising.” “This has to be a cause for concern for the governments we trust to protect our coastal cities and communities,” Shepherd added. The study, published in Nature, involved 84 scientists from 44 international organisations and claims to be the most comprehensive account of the Antarctic ice sheet to date.

It shows that before 2012, the Antarctic lost ice at a steady rate of 76bn tonnes per year – a 0.2mm per year contribution to sea-level rise. However since then there has been a sharp increase, resulting in the loss of 219bn tonnes of ice per year – a 0.6mm per year sea-level contribution. The second study, also published in Nature, warns that time is running out to save the Antarctic and its unique ecosystem – with potentially dire consequences for the world. The scientists assessed the probable state of Antarctica in 2070 under two scenarios. The first in which urgent action on greenhouse gas emissions and environmental protection is taken in the next few years, the second if emissions continue to rise unabated and the Antarctic is exploited for its natural resources.

Read more …

Jun 052018
 
 June 5, 2018  Posted by at 8:40 am Finance Tagged with: , , , , , , , , , , , , ,  


John French Sloan East Entrance, City Hall, Philadelphia 1901

 

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)
The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)
US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)
India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)
China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)
Italy’s Long, Hot Summer (Carmen Reinhart)
Why The Euro Was Created (ZH)
Toronto’s House Price Bubble Not Fun Anymore (WS)
Why Australia’s Great Banking Boom Has Ended (SMH)
Apple Jams Facebook’s Web-Tracking Tools (BBC)
A West Coast State of Mind (Jim Kunstler)
Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)
Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

 

 

Don’t think it will happen without an overall economic collapse.

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)

Trillions of dollars of fossil fuel wealth will be wiped out at some point over the next 17 years even if governments fail to impose binding carbon emissions limits on industry to curb global warming, according to a major new study. Environmentalists and policymakers have long warned of the threat of a “carbon bubble” and “stranded assets” for listed energy companies, based on the possibility they will never be able to realise the value of their vast stores of oil, gas and coal if politicians actually deliver on their decarbonisation promises.

But today a group of scientists and analysts from Cambridge, Nijmegen, Macao and the Open University take that warning a step further by arguing that these assets are destined to be stranded regardless of official policies to discourage the use of fossil fuels because clean energy technologies are now developing so rapidly that those polluting assets will be worthless in any case. “Our analysis suggests that, contrary to investor expectations, the stranding of fossil fuels assets may happen even without new climate policies. This suggests a carbon bubble is forming and it is likely to burst,” said Professor Jorge Viñuales from Cambridge University. If policymakers did deliver on the decarbonisation programmes, the loss for investors would be even more rapid.

The research is at odds with work from the International Energy Agency, which projects steady price rises for fossil fuels until 2040. And Donald Trump’s decision last year to pull the United States out of the Paris Agreement on climate change has also done nothing to persuade most investors to take the stranded assets warning seriously. But the researchers’ new “simulation-based, energy-economy-carbon-cycle climate” model suggests investing in fossil fuel firms today is likely to prove a disastrous bet, suggesting that between $1 trillion and $4 trillion could be wiped off the value of global fossil fuel assets by 2035.

Read more …

Steel and concrete prices better not rise.

The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)

Electricity production is heavily dependent on materials like steel, concrete, copper and aluminum, for both producing electricity and moving it around to where it’s needed (see figure). Solar and Wind energy take more steel than any other energy source. Natural gas and nuclear take the least. Solar needs 1,600 tons of steel per MW, wind energy needs over 400 tons of steel, while gas and nuclear need only 4 and 40 tons, respectively. Wind and solar also require ten times more transmission, also heavily steel-intensive, since they are usually sited far away from where the energy is used.

The average high-voltage transmission tower includes about 30 tons of steel and transmission wire contains about a ton of steel per mile. Going from our biggest solar array, located in the Mohave Desert, to Los Angeles is almost 300 miles, requiring on the order of 10,000 tons of steel depending on specific design. While we tend to think of renewables as associated with Blue States, they are actually growing faster in Red States. Four of the five states with the most installed wind energy are Texas (20,321 MW), Iowa (6,917 MW), Oklahoma (6,645 MW) and Kansas (4,451 MW). The only Blue State in the top five is California (5,662 MW).

Read more …

Prop up your stock some more.

US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)

Money is pouring into the U.S. economy and in turn helping provide support for the otherwise struggling stock market. If current conditions persist, corporations are likely this year to inject more than $2.5 trillion into what UBS strategists term “flow” — the combination of share buybacks, dividends, and mergers and acquisitions activity. The development comes as companies find themselves awash in cash, thanks primarily to years of stashing away profits plus the benefits of a $1.5 trillion tax break this year that slashed corporate rates and encouraged firms to bring back money idling overseas. Companies have nearly $2.5 trillion in cash parked domestically, according to the Federal Reserve, and as much as $3.5 trillion overseas, various estimates have shown.

When all is said and done for 2018, UBS expects dividend issuance to top $500 billion, buybacks to range from $700 billion to $800 billion, and M&A to constitute about $1.3 trillion. If the numbers pan out, they would equate to about 10% of the S&P 500’s market cap and 12.5% of GDP. “Assuming improving growth and stable rates, we expect the positive positioning/flow backdrop to support US equities, which is important as the daily corporate flow slows from mid-June to mid-July,” UBS strategist Keith Parker said in a note. Parker pointed out that the firm has overweight positions in both tech and health care as the two sectors are leading the buyback boom.

Buybacks specifically have been on a torrid pace and are helping provide a floor to a market that for much of 2018 had looked tired and volatile after a 20% S&P 500 gain the year before. Repurchases are up 83% year to date, far ahead of the 9% gain in dividends, while M&A activity involving U.S. companies has surged 130%, according to UBS. [..] UBS estimates that the combination of buybacks, dividends and demand flows account for some 40% in performance this year. The S&P 500 has nudged 2.6% higher and the Dow industrials are just ahead of breakeven.

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The Fed retreats and the Treasury issues new debt.

India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world’s Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed, or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don’t blame the Fed’s rate hike cycle. Instead blame the “double whammy” of the Fed’s shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

That’s the message from the current Reserve Bank of India, Urjit Patel, who writes that “unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner.” But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis? Not at all: according to Patel, the dollar funding shortage “upheaval” stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump’s tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.

As a result, Patel blames a lack a coordination between the Fed and Treasury on the adverse flow through across global funding markets as a result of this decline in dollar liquidity, and writes that “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.” Putting these two parallel processes – which threaten to materially impair dollar funding markets – in context, on one hand there is QT, or the gradual decline in the Fed’s balance sheet which is set to peak at a rate of $50BN/month by October, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.

And in a curious coincidence, the withdrawal of dollar funding by the Fed in monthly terms, as it reduces its reinvestment of income received, is proceeding at roughly the same pace as that of net issuance of debt by the US government. Furthermore, both processes are open ended which means that over the next few years, the government’s net issuance will stabilize, albeit at a high level, whereas the Fed’s balance-sheet reduction will keep rising. Both are terrible news for Emerging Markets, which are in desperate need of reversing the ongoing dollar outflows; however as long as Trump continues to make America great, and funds said stimulus with excess debt issuance, emerging market turmoil is virtually guaranteed.

Read more …

China retreats, too.

China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)

China’s debt crackdown is a key risk to the country’s economic growth and will have significant knock-on effects for the global economy, particularly emerging markets with high commodity dependence or close Chinese trade links, Fitch Ratings said. Beijing’s campaign to put a lid on debt could also lead to a sharp slowdown in business investment, Fitch said late on Sunday, forecasting that growth in the world’s second-biggest economy would slow to around 4.5% over the medium term. Fitch said the implications of this scenario for the global economy would be significant but not dramatic, unlike a full-scale hard landing.

One of the most significant effects would be on commodity prices, with Fitch expecting oil and metal prices to fall 5 to 10% from its baseline scenario, reflecting China’s large role as a commodity consumer. In April, a Reuters poll of 72 institutions showed economists expected China’s economic growth to slow to 6.5% this year and 6.3% next year as Beijing extends its crackdown on riskier lending practices. GDP in 2017 expanded 6.9% in real terms and 11.2% in nominal terms. Beijing’s financial crackdown, now in its third year, has slowly pushed up borrowing costs and is choking off alternative, murkier funding sources for companies such as shadow banking.

The ratio of Chinese corporate debt to GDP is already very high by international standards – at 168% in 2017 – and is expected to start rising again as nominal GDP growth declines towards 8% from the unusually high rate of more than 11% in 2017, Fitch said. If the government aims to stabilize its corporate debt ratio by 2022, Fitch said China’s nominal economic growth rate could fall by 1 percentage point a year over the medium term while business investment growth would drop 5percentage points per year.

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Restructuring Target2. That should be fun.

Italy’s Long, Hot Summer (Carmen Reinhart)

The political upheaval and social unrest fueling the current crisis in Italy should surprise no one. On the contrary, the only uncertainty was when exactly matters would come to a head. Now they have. Italy’s per capita GDP in 2018 is about 8% below its level in 2007, the year before the global financial crisis triggered the Great Recession. And the International Monetary Fund’s projections for 2023 suggest that Italy will still not have fully recovered from the cumulative output losses of the past decade. Among the 11 advanced economies that were hit by severe financial crises in 2007-2009, only Greece has suffered a deeper and more protracted economic depression.

Greece and Italy were the two economies carrying the highest debt burdens at the outset of the crisis (109% and 102% of GDP, respectively), leaving them poorly positioned to cope with major adverse shocks. Since the crisis erupted a decade ago, economic stagnation and costly banking weaknesses have propelled debt burdens higher still, despite a decade of exceptionally low interest rates. Greece has already faced more than one “credit event” and, while Italy has also had a couple of close calls, the spring of 2018 is turning out to be its most tumultuous episode yet. The summer will probably be worse, bringing Italy closer to a sovereign debt crisis. On the surface, general government debt appears to have stabilized since 2013, at around 130% of GDP. However, as I have stressed here and elsewhere, this “stability” is misleading.

General government debt is not the whole story for Italy, even setting aside the private debt loads and the recent renewed upturn in nonperforming bank loans (a daunting legacy of the financial crisis). When evaluating Italy’s sovereign risk, the central bank’s debts (Target2 balances) must be added to those of the general government. As the most recent available data (through March) show, these balances increase the ratio of public-sector debt to GDP by 26%. With many investors pulling out of Italian assets, capital flight in the more recent data is bound to show up as an even bigger Target2 hole. This debt, unlike pre-1999, pre-euro Italian debt, cannot be inflated away. In this regard, it is much like emerging markets’ dollar-denominated debts: it is either repaid or restructured.

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What the euro has meant for Greece and Italy: lower wages, higher unemployment and higher current account deficit.

Why The Euro Was Created (ZH)

[..] we thought it would be a good idea to remind readers why the euro exists in the first place. The briefest possible answer: to make sure the Deutsche Mark does not. As presented in the chart below – which shows the performance for each of the EU12 countries against the German DEM in every decade from the 1950s to the start of the Euro in 1999 – apart from a small revaluation of core countries in the 1990s, every country devalued to Germany in every decade between the 1950s and the start of the Euro. Said otherwise, the Deutsche Mark appreciated in value against all of its European peers for 5 consecutive decades, a condition which if left unchanged, would have led to an economic and trade crisis.

And as a bonus chart, here is same data (with the US and UK added) from the end of the Bretton Woods system in 1971 to the start of the Euro (Lira -82% devaluation to German DM) and during the 1990s (-24% devaluation) – the decade immediately leading up to the Euro start. As can be seen Italy is amongs the weakest performers relative to the German DM over these periods and showed the momentum that existed in the period leading up to the start of the Euro.

And while the fixed exchange of the Euro for European nations allowed the German export industry to go into overdrive, the lack of the possibility for an external, i.e. currency, devaluation, meant that Italy has been forced to do it all by engaging in internal devaluation, i.e., lower wages, higher unemployment and boosting its current account deficit, which however is made virtually impossible given Italy’s deteriorating demographics. This is what DB’s Jim Reid said of Italy’s potential future: Looking forward, Italy will not find it easy to grow out of its problems as its facing one of the worst set of demographics of the G20 countries. Its population size has peaked (according to the UN) and is expected to decline out to 2050. Its working age population (15-64 year olds as a proxy) is set to fall -24% over the same period and is again one of the worst placed in the G20.

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“Home sales plunged 22% in May compared to a year ago..”

Toronto’s House Price Bubble Not Fun Anymore (WS)

Housing in the Greater Toronto Area is, let’s say, retrenching. Canada’s largest housing market has seen an enormous two-decade surge in prices that culminated in utter craziness in April 2017, when the Home Price Index had skyrocketed 32% from a year earlier. But now the hangover has set in and the bubble isn’t fun anymore. Home sales plunged 22% in May compared to a year ago, to 7,834 homes, according to the Toronto Real Estate Board (TREB). It affected all types of homes, even the once red-hot condos: • Detached houses -28.5% • Semi-detached houses -29.4% • Townhouses -13.4% • Condos -15.5%.

It was particularly unpleasant at the higher end: Sales of homes costing C$1.5 million or more plummeted by 46% year-over-year to 508 homes in May 2018, according to TREB data. Compared to the April 2017 peak of 1,362 sales in that price range, sales in May collapsed by 63%. But it’s not just at the high end. At the low end too. In May, sales of homes below C$500,000 – about 68% of them were condos – fell by 36% year-over-year to 5,253 homes. The TREB publishes two types of prices – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home.” Both fell in May compared to a year ago.

The average price in May for the Greater Toronto Area (GTA) fell 6.6% year-over-year to C$805,320, and is now down 12.3%, or an ear-ringing C$113,000, from the crazy peak in April 2017. There are no perfect measures of home prices in a market. Each has its own drawbacks. Average home prices can be impacted by the mix and by a few large outliers – but over the longer term, it gives a good impression of the direction. The chart below shows thepercentage change in average home prices in the GTA compared to a year earlier:

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Because the boom was a bubble.

Why Australia’s Great Banking Boom Has Ended (SMH)

It doesn’t feel all that long ago that Australian banks were the envy of the world. In March 2009, when stress-testing of US financial institutions drove the final spasm of the previous year’s credit crisis, you could have bought all the shares in Citigroup, Royal Bank of Scotland Group and Barclays with their $US8.4 trillion ($11 trillion) of gross assets for less than you’d pay for the equity of Westpac, with $US347 billion of assets. Commonwealth Bank of Australia’s share price peaked six years later just a sliver south of three times the value of its net assets, an extraordinary level in a business where price-book ratios have struggled to break above one times over the past decade.

With the current Royal Commission inquiring into practices in the country’s financial services industry and a slew of court cases, those high-flyers have come to earth with a bump. CBA on Monday agreed to pay $700 million to settle a money laundering case in which it admitted that a software update allowed about 54,000 reportable transactions to go unreported over a period of almost three years. On Friday, ANZ and local units of Deutsche Bank and Citigroup announced they were facing possible criminal cartel charges over their handling of a $2.5 billion placement of ANZ shares in 2015. Having executives hauled up before government inquiries and paying out hundreds of millions in court settlements isn’t great for headlines, but it would be a mistake to see the declines in Australia’s banking sector as purely a result of this.

When your annual net income is in the region of $10 billion, as CBA’s is, a $700 million charge is more than just a rounding error. But the 1.2 per cent jump in the company’s stock after the settlement was announced Monday is an indication that the cost is worth less to shareholders than the benefit of putting the issue firmly in the past. The greater risk to Australia’s banks lurks not in the papers of regulators and inquisitors, but on the streets of the country’s sprawling suburbs. As we’ve argued before, the most ominous indicator to watch is also a favourite one of the Reserve Bank of Australia. Rents, as measured by the Australian Bureau of Statistics, have been increasing at less than 1 per cent for nine consecutive quarters , the worst performance for the measure since the housing crash of the early 1990s.

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The spirit of Steve Jobs?!

Apple Jams Facebook’s Web-Tracking Tools (BBC)

Apple will attempt to frustrate tools used by Facebook to automatically track web users, within the next version of its iOS and Mac operating systems. “We’re shutting that down,” declared Apple’s software chief Craig Federighi, at the firm’s developers conference. He added that the web browser Safari would ask owners’ permission before allowing the social network to monitor their activity. The move is likely to add to tensions between the two companies. Apple’s chief executive Tim Cook had previously described Facebook’s practices as being an “invasion of privacy” – an opinion Facebook’s founder Mark Zuckerberg subsequently denounced as being “glib”.

At the WWDC conference – held in San Jose, California – Mr Federighi said that Facebook keeps watch over people in ways they might not be aware of. “We’ve all seen these – these like buttons, and share buttons and these comment fields. “Well it turns out these can be used to track you, whether you click on them or not.” He then pointed to an onscreen alert that asked: “Do you want to allow Facebook.com to use cookies and available data while browsing?” “You can decide to keep your information private.”

One cyber-security expert applauded the move. “Apple is making changes to the core of how the browser works – surprisingly strong changes that should enable greater privacy,” said Kevin Beaumont. “Quite often the changes companies make around privacy are small, incremental, they don’t shake the market up much. “Here Apple is allowing users to see when tracking is enabled on a website – actually being able to visually see that with a prompt is breaking new ground.”

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Building on the Ring of Fire.

A West Coast State of Mind (Jim Kunstler)

It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?

I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.

Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now.

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Snowden deserves as much support as Assange does.

Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)

Edward Snowden has no regrets five years on from leaking the biggest cache of top-secret documents in history. He is wanted by the US. He is in exile in Russia. But he is satisfied with the way his revelations of mass surveillance have rocked governments, intelligence agencies and major internet companies. In a phone interview to mark the anniversary of the day the Guardian broke the story, he recalled the day his world – and that of many others around the globe – changed for good. He went to sleep in his Hong Kong hotel room and when he woke, the news that the National Security Agency had been vacuuming up the phone data of millions of Americans had been live for several hours.

Snowden knew at that moment his old life was over. “It was scary but it was liberating,” he said. “There was a sense of finality. There was no going back.” What has happened in the five years since? He is one of the most famous fugitives in the world, the subject of an Oscar-winning documentary, a Hollywood movie, and at least a dozen books. The US and UK governments, on the basis of his revelations, have faced court challenges to surveillance laws. New legislation has been passed in both countries. The internet companies, responding to a public backlash over privacy, have made encryption commonplace.

Snowden, weighing up the changes, said some privacy campaigners had expressed disappointment with how things have developed, but he did not share it. “People say nothing has changed: that there is still mass surveillance. That is not how you measure change. Look back before 2013 and look at what has happened since. Everything changed.” The most important change, he said, was public awareness. “The government and corporate sector preyed on our ignorance. But now we know. People are aware now. People are still powerless to stop it but we are trying. The revelations made the fight more even.”

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Bayer-Monsanto: “It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits..”

Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

Unless there is a major hiccup in the next few days, an incredibly powerful company will shortly be given a licence to dominate world farming. Following a nod from Donald Trump, powerful lobbying in Europe and a lot of political arm-twisting on several continents, the path has been cleared for Monsanto, the world’s largest seed company, to be taken over by Bayer, the second-largest pesticide group, for an estimated $66bn (£50bn). The merger has been called both a “marriage made in hell” and “an important development for food security”.

Through its many subsidiary companies and research arms, Bayer-Monsanto will have an indirect impact on every consumer and a direct one on most farmers in Britain, the EU and the US. It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits, as well as much of the data about what farmers grow where, and the yields they get. It will be able to influence what and how most of the world’s food is grown, affecting the price and the method it is grown by. But the takeover is just the last of a trio of huge seed and pesticide company mergers.

Backed by governments, and enabled by world trade rules and intellectual property laws, Bayer-Monsanto, Dow-DuPont and ChemChina-Syngenta have been allowed to control much of the world’s supply of seeds. You might think that these mergers would alert the government, but because political parties in Britain are so inward-looking, and because most farmers in rich countries already buy their seeds from the multinationals, opposition has barely been heard.

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May 122018
 
 May 12, 2018  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , , ,  


Pieter Bruegel the Elder Dulle Griet, also known as Mad Meg 1563

 

If Real Consumer Spending Doesn’t Reverse Course, Look Out Retail Stocks (Street)
Apple Made More Profit In 3 Months Than Amazon In Its Entire Lifetime (CNBC)
Facebook Faces Class Action Lawsuit Over Collecting Texts And Call Logs (G.)
Mark Zuckerberg’s Control Of Facebook Is Like A Dictatorship: CalSTRS (CNBC)
Facebook ‘Very Serious’ About Launching Its Own Cryptocurrency (CNBC)
There Will Be No Trade War With Germany, New US Ambassador Promises (R.)
Turkey Remains A “Priority Market” For British Weapons (MEE)
Erdogan Slams Rating Agencies For Upgrading ‘Bankrupt’ Greece (K.)
PDVSA To Shut Curacao Refinery Amid Fight With Conoco (R.)
Canada Sued Over Years Of Experimentation On Indigenous People (G.)
Maasai Herders Driven Off Land To Make Way For Luxury Safaris (G.)
Plastic Bag Found At The Deepest Point In The Ocean (SA)

 

 

Remember, 70% of US GDP. Coming from a population whose majority are maxed out.

If Real Consumer Spending Doesn’t Reverse Course, Look Out Retail Stocks (Street)

With the Amazon beast breathing down their necks, the last thing struggling retailers need is a cautious U.S. consumer. Yet, that’s exactly what they have gotten in recent months — and if it persists, retail stocks are likely to take it on the chin this summer. Real consumer spending took a nosedive in the first quarter (chart below) as consumers assessed the impact President Trump’s tax reform plan. Not helping matters was a more volatile stock market, rising inflation and a cooling U.S. labor market. In turn, consumer sentiment has remained stuck in a range since February. Retail stocks have followed suit.

The VanEck Vectors Retail ETF (RTH) is down about 7% since hitting a high on Jan. 29. This week has brought bearish notes on department stores like Macy’s from Wall Street shops, citing fears of online competition and challenging first quarter sales conditions. Macy’s CEO Jeff Gennette will be speaking at TheStreet’s sister publication, The Deal’s, big corporate governance in June. “We think that real consumption growth will firm from 1.1% annualized in 1Q to 2.3% in 2Q. We continue to see similarities between this year and last that likely are related to abnormal patterns of tax refunds, and like last year, we expect real consumer spending to firm noticeably between 1Q and 2Q,” says JPMorgan & Chase strategist Daniel Silver. But even Silver doesn’t sound 100% convinced.

“But inflation likely will be much stronger in 2Q18 than it was in 2Q17, and higher prices should dampen real spending and erode some of the benefits associated with lower taxes.”

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But Bezos is the richest of them all.

Apple Made More Profit In 3 Months Than Amazon In Its Entire Lifetime (CNBC)

One word may explain Warren Buffett’s investment decisions on Apple and Amazon: profit. Last week Buffett both lamented on not investing in Amazon shares and revealed how he added massively to Berkshire Hathaway’s stake in Apple. The Oracle of Omaha’s moves may be explained by his philosophy of emphasizing a company’s historical financial track record versus putting credence in aggressive future forecasts from analysts. “I think it’s fair to say, we’ve never looked at a [analyst] projection in connection with either a security we’ve bought or a business we’ve bought,” Buffett said during a Berkshire Hathaway annual shareholder meeting in 1995, according to remarks found using CNBC’s Warren Buffett Archive.

Apple “is an unbelievable company,” Buffett told CNBC on May 3. “If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States.” The smartphone maker generated a $48.35 billion in profit during its fiscal 2017 and made $13.8 billion in net income during the March 2018 quarter. In comparison, Amazon’s total net income since inception is about $9.6 billion. The number was calculated by adding up all of Amazon’s annual net income figures since its inception to the company’s $1.6 billion profit in the March 2018 quarter.

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Will a US court now sanction Facebook’s spying?

Facebook Faces Class Action Lawsuit Over Collecting Texts And Call Logs (G.)

Facebook is facing a class action lawsuit over the revelations that it logged text messages and phone calls via its smartphone apps. In the lawsuit filed in Facebook’s home of the northern district of California, the primary plaintiff, John Condelles III, states that the social network’s actions “presents several wrongs, including a consumer bait-and-switch, an invasion of privacy, wrongful monitoring of minors and potential attacks on privileged communications” such as those between doctor and patient. Facebook collected the logs of text messages and calls, including the recipients and duration of the communications, through its apps for Android including Messenger when users opted into being able to send SMS from the app or give access to their contact lists.

“Facebook has collected and stored information in a scope and manner beyond that which users knowingly authorised. The practice is ongoing,” states the filing first reported by the Register. The extent of the collection was revealed when users began downloading and sifting through the data Facebook held on them following the Cambridge Analytica scandal. The plaintiffs allege that Facebook’s collection of the data from users’ phones breaches California’s Unfair Competition Law on three counts – including fraudulent business practice – in addition to the Consumer Legal Remedies Act and the Electronic Communications Privacy Act. [..] Facebook is also facing a class action lawsuit from both British and US lawyers as part of a case against the social network, Cambridge Analytica and two other companies for allegedly misusing the personal data of 71 million people.

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But they won’t sell their shares.

Mark Zuckerberg’s Control Of Facebook Is Like A Dictatorship: CalSTRS (CNBC)

The capital markets are a democracy, but that’s not how Facebook is being run, said Christopher Ailman, the chief investment officer of the California State Teachers’ Retirement System, known as CalSTRS. “There is something wrong,” he said Thursday on CNBC’s “Closing Bell.” “When Facebook changed its structure to take public money in, they should have changed their structure to a more open board structure, and we think that there’s a problem with having one person in charge of the company,” he added. CEO Mark Zuckerberg owns a majority of the voting rights to the company. That’s because the tech giant has dual-class shares.

Facebook’s Class B shares are controlled by Zuckerberg and a small group of insiders and have 10 votes per share. Class A shares only have one vote per share. The end result is that Zuckerberg and those insiders control almost 70 percent of the voting shares in Facebook. CalSTRS took on the issue in a recent op-ed in the Financial Times. CalSTRS portfolio manager Aeisha Mastagni wrote, “Why does Mr. Zuckerberg need the entrenchment factor of a dual-class structure? Is it because he does not want governance to evolve with the rest of his company? If so, this American dream is now akin to a dictatorship.”

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A long way from Satoshi.

Facebook ‘Very Serious’ About Launching Its Own Cryptocurrency (CNBC)

Facebook is “very serious” about launching its own cryptocurrency, according to a report from Cheddar. It’s not the first time the idea of a Facebook coin has been floated, but the plans take on some greater meaning in light of Facebook’s recently reshuffled executive structure and newly formed blockchain group. Blockchain, the decentralized record-keeping system, could help tackle some of Facebook’s most bothersome problems, like identity verification or advertising sales. It’s also the technology behind most cryptocurrencies, logging ownership and transfers of the digital tokens.

“Like many other companies Facebook is exploring ways to leverage the power of blockchain technology. This new small team will be exploring many different applications,” a Facebook spokesperson told CNBC in a statement. It would likely be years before Facebook’s work on blockchain and cryptocurrency became anything material, Cheddar reports, citing anonymous sources. The business news site also reports Facebook has no plans to hold an ICO, or initial coin offering.

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The cover of the new Der Spiegel doesn’t seem convinced.

There Will Be No Trade War With Germany, New US Ambassador Promises (R.)

The new U.S. ambassador to Germany said the row over Washington’s planned imposition of punitive tariffs on European goods would not trigger a trade war, adding that U.S. President Donald Trump only wanted “a level playing field”. In an interview with the Funke newspaper group, Richard Grenell insisted that the United States was awaiting proposals on how punitive tariffs could be averted. “Germans are doing a phenomenal job on trade,” he said. “There will be no trade war … We are talking with our friends to solve a problem.” The United States wanted to see Europe’s proposals before deciding what would follow the expiry of an already extended June 1 deadline to impose tariffs, he added.

Less than a week into the job, Grenell has already triggered headlines with his demand in a tweet that German companies in Iran should “wind down operations” immediately after Trump withdrew the United States from an international nuclear deal. In the interview, Grenell maintained the hard line on Iran that has caused dismay in Europe’s capitals, restating the U.S. government’s position that Europe must re-impose sanctions on Iran. “We expect our friends and allies to help us to bring Iran back to the negotiating table,” he said, adding that the United States had proof Iran had violated its commitment not to enrich uranium.

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Who’s going to protest Erdogan’s visit?

Turkey Remains A “Priority Market” For British Weapons (MEE)

Theresa May is set to roll out the red carpet for Turkish President Recep Tayyip Erdogan this weekend, as new figures reveal that Britain has sold more than $1bn of weapons to Ankara since the failed 2016 coup and subsequent crackdown under emergency powers, Middle East Eye can reveal. Turkey remains a “priority market” for British weapons, despite concerns from human rights groups and EU officials over the erosion of the country’s rule of law. Turkey is a fellow member of NATO and has cooperated with the EU in tackling the refugee crisis, but critics say that Erdogan’s government has arrested or sacked more than 100,000 state workers and members of the military in the wake of the coup attempt.

Unlike many other Western allies, London spoke out quickly after the coup, in which fighter jets bombed the Turkish parliament and troops opened fire on civilians. But the UK has remained largely silent as Turkey targeted not only the alleged plotters but also political dissidents, journalists and members of pro-Kurdish parties for “supporting terrorism”. Erdogan will meet the Queen and the prime minister during his three-day visit to the UK, starting on Sunday. It comes as the UK is making a Brexit push to boost trade with Ankara, but also in the middle of a snap Turkish parliamentary and presidential campaigns conducted under a state of emergency.

UK weapons sales since the attempted coup include a $667m deal for military electronic data, armoured vehicles, small arms, ammunition, missiles, drones, aircraft and helicopters. It also includes a $135m deal for BAE Systems to fulfil Erdogan’s plan to build a Turkish-made fighter jet. The jet deal was signed by May in January 2017 under an “open licence” to ease the transfer of military technology, and UK officials now reportedly wish to expand the deal by pushing for Rolls-Royce to win the engine contract. Lloyd Russell-Moyle, a Labour MP who recently travelled to northern Syria, where Turkey is involved in operations against the Kurdish YPG militia, told MEE: “The government has been increasing arms sales to Turkey as it has fallen into authoritarianism at home and warmongering abroad.

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When under fire…

Erdogan Slams Rating Agencies For Upgrading ‘Bankrupt’ Greece (K.)

Turkish President Recep Tayyip Erdogan took a fresh swipe at rating agencies on Friday over the recent downgrade and the negative outlook they have assigned for the Turkish economy, using “bankrupt” Greece as an example. “Don’t pay attention to them [the rating agencies]. They upgraded a neighbour [of Turkey] that has gone bankrupt by four points. They receive new debts and live with them,” he reportedly told the Turkish Union of Chambers and Commodity Exchanges (TOBB) Conference Hall. “Excuse me, but we are talking about a country that cannot pay its civil servants. How is this possible? I am talking about Greece”, he said.

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And the Dutch government is just standing by?!

PDVSA To Shut Curacao Refinery Amid Fight With Conoco (R.)

Venezuela’s state-run oil company PDVSA is preparing to shut a Caribbean refinery that is running out of crude amid threats by ConocoPhillips to seize cargoes sent to resupply the facility, according to two sources with knowledge of the situation. Conoco of the United States last week began legal actions in the Caribbean to enforce a $2 billion arbitration award by the International Chamber of Commerce (ICC) over the 2007 nationalization of its projects in Venezuela. The moves have disrupted fuel deliveries throughout the Caribbean, much of which depends on PDVSA. The PDVSA-operated 335,000 barrel-per-day Isla refinery in Curacao, which has not received new shipments from PDVSA since last week, plans to exhaust existing inventories in the coming days, the two sources said.

PDVSA is seeking ways to sidestep legal orders to hand over assets. The Venezuelan firm has transferred custody over the fuel produced at the refinery to the Curacao government, the owner of the facility, the sources said. In another legal move to avoid oil being seized, PDVSA transferred ownership of crude to be refined at Isla to its U.S. unit, Citgo Petroleum, one of the sources added. “The seizure in Curacao was enforced on Thursday, so the inventories’ custody was transferred. The refinery will eventually stop (operations),” the source said.

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Until the 1980s.

Canada Sued Over Years Of Experimentation On Indigenous People (G.)

A class action lawsuit has been filed in a Canadian court on behalf of the thousands of indigenous people alleged to have been unwittingly subjected to medical experiments without their consent. Filed this month in a courtroom in the province of Saskatchewan, the lawsuit holds the federal government responsible for experiments allegedly carried out on reserves and in residential schools between the 1930s and 1950s. The suit also accuses the Canadian government of a long history of “discriminatory and inadequate medical care” at Indian hospitals and sanatoriums – key components of a segregated healthcare system that operated across the country from 1945 into the early 1980s.

“This strikes me as so atrocious that there ought to be punitive and exemplary damages awarded, in addition to compensation,” said Tony Merchant, whose Merchant Law Group filed the class action. The lawsuit, which has not yet been tested in court, alleges that residential schools – where more than 150,000 aboriginal children were carted off in an attempt to forcibly assimilate them into Canadian society – were used as sites for nutritional experiments, where researchers tested out their theories about vitamins and certain foods. “The wrong here is that nobody knew it was happening. Their families didn’t know it was happening,” Merchant said. As the diet at the schools was known to be nutritionally deficient, the children were considered “ideal experimental subjects”, according to court documents.

It cites six schools, stretching from Nova Scotia to British Columbia, and links them to experiments carried out from 1948 to 1953. At times, researchers would carry out what Merchant described as trials aimed at depriving the children of nutrients that researchers suspected were beneficial. “So what they did on a systemic basis … they would identify a group of indigenous children in schools where they were being compulsorily held and they would not give them the same treatment,” said Merchant. “They used them as a control against experiments that they were doing in other places and they also used them to test certain kinds of foods and drugs.”

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Ban all hunting in Africa. Just stop it.

Maasai Herders Driven Off Land To Make Way For Luxury Safaris (G.)

The Tanzanian government is putting foreign safari companies ahead of Maasai herding communities as environmental tensions grow on the fringes of the Serengeti national park, according to a new investigation. Hundreds of homes have been burned and tens of thousands of people driven from ancestral land in Loliondo in the Ngorongoro district in recent years to benefit high-end tourists and a Middle Eastern royal family, says the report by the California-based thinktank the Oakland Institute. Although carried out in the name of conservation, these measures enable wealthy foreigners to watch or hunt lions, zebra, wildebeest, giraffes and other wildlife, while the authorities exclude local people and their cattle from watering holes and arable land, the institute says.

The report, released on Thursday highlights the famine and fear caused by biodiversity loss, climate change, inequality and discrimination towards indigenous groups. “Losing the Serengeti: The Maasai Land that was to Run Forever” uses previously unpublished correspondence, official documents, court testimonies and first-person testimony to examine the impact of two firms: Thomson Safaris based in the United States, and Otterlo Business Corporation based in the United Arab Emirates. It says Thomson’s sister company, Tanzania Conservation Limited, is in a court battle with three Maasai villages over the ownership of 12,617 acres (5,106 hectares) of land in Loliondo which the company uses for safaris.

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20 years ago already. Imagine today.

Plastic Bag Found At The Deepest Point In The Ocean (SA)

Humanity’s toxic addiction to plastic has reached stunning depths, and we only wish we were speaking figuratively. A new study analysing over 30 years’ worth of data on human-made trash found in the deepest parts of the ocean reveals almost 3,500 pieces of plastic and other debris have been discovered littering these remote, fragile ecosystems. If proof were ever needed that there are no more untouched places left on our poor, polluted planet, we now have it in one perfect, twisted symbol: amongst this litany of garbage, the deepest-lurking refuse was a fragmented single-use plastic bag, discarded at a depth of 10,898 metres (35,754 ft) in the Mariana Trench.

The Mariana Trench is the deepest part of the entire ocean, home to distant, alien forms of marine life we know next to nothing about, but its remote, almost unreachable location doesn’t mean we haven’t found ways to carelessly spoil it [..] In the thousands of debris images and videos the researchers compiled in their database, deep-sea organisms were observed in 17% – damning evidence that our throwaway culture entangles, intermingles, and generally affects ocean life in ways we’re not aware of. Because the team’s dataset only includes a visual record of what’s on the sea floor – not what’s drifting and sinking above it – the researchers say they’ve only scratched the (deep) surface of the problem here, although simple physics suggests more garbage is headed this way.

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May 022018
 


Brassaï The Sun King 1930

 

There’s a New Curve in Town and It’s Flashing Red (BBG)
Trump Says Kim Summit Details To Be Unveiled Within Days (AFP)
Apple Delivers Best-Ever Second Quarter Despite Sales Worries (G.)
More Evidence Emerges That Apple Is Killing iPhone X – Analyst (CNBC)
Nissan Shocks With 28% Sales Plunge (BBG)
The Biggest Player in the History of the World (Alistair Crooke)
Debt Is The Great Threat To China’s Development (Michael Hudson)
China’s Petro-Yuan Isn’t Dislodging the Dollar Yet (Barron’s)
China Weakens Its Currency Before US Trade Talks Begin (BBG)
Europeans Cast Doubt On Israel’s Claims About Iran Nuclear Breaches (G.)
Inside Theresa May’s Brexit War Cabinet, Tory Battles Rage (BBG)
UK Home Office ‘Mistakenly Deported 7,000 Foreign Students’ (Ind.)
Theresa May Vetoed Cabinet Pleas Over Visas For NHS Doctors (St.)
OECD Calls For Even Tighter Greek Fiscal Policy To Bolster Growth (K.)
Greece’s Debt Deal To Show How Europe Treats Its Less Fortunate Nations (CNBC)
Facebook’s Dating App Finally Makes Privacy Invasion Sexy (G.)
More Than 90% Of Air Pollution Deaths Occur In Poorer Countries (Ind.)

 

 

The trouble is in corporate bonds.

There’s a New Curve in Town and It’s Flashing Red (BBG)

The private sector may hold the real clues to recession risk. While the flattening U.S. yield curve – the difference between short- and longer-dated Treasuries – has been closely-watched as a potential indicator of a looming contraction, investors might do better to watch a measure of the cost of private credit, according to Charles Gave of Gavekal Capital. An inverted yield curve is thought to signal the “market rate of interest,” (shorter-term rates) exceeding the “natural rate of interest” (longer government rates), but may not be a good proxy for economic activity given that the government can always borrow, Gave said.

Instead, he suggests looking at the corporate credit market. Here, the U.S. economy’s natural rate could be represented by the yield of a longer-dated, seasoned industrial bond rated Baa by Moody’s, and the market rate by the prime lending rate charged by U.S. banks. “The private sector yield curve reading stands at zero, or right on the threshold where trouble can be expected to begin,” Gave wrote in a note published on Tuesday. “Should this spread move into negative territory, I would expect a financial accident to occur outside of the U.S., a U.S. recession, or possibly both.” Either a U.S. recession has taken place within a year of the private sector yield curve inverting, or a “financial accident” has occurred in other economies with currency links to the greenback, according to Gave’s data.

Prime rates below the natural rate of corporate credit have allowed banks to generate “artificial” money, kept “zombie” companies alive, and enabled other corporates to engage in “financial engineering” predicated on cheap borrowing costs that risk toppling over if the curve inverts, Gave said.

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Trump wants to meet in the DMZ. Reportedly, White House officials want Singapore or Mongolia.

Trump Says Kim Summit Details To Be Unveiled Within Days (AFP)

US President Donald Trump seemed pleased Tuesday by a suggestion he should get the Nobel Peace Prize for his upcoming summit with North Korean leader Kim Jong Un, promising that a time and place for the historic meeting will soon be announced. “Nobel Peace Prize? I think President Moon was very nice when he suggested it,” Trump said, referring to South Korean President Moon Jae-in. “The main thing, I want to get peace. It was a big problem and I think it’s going to work out well,” he told reporters in the Oval Office. Trump has proposed holding the summit at the truce village in the Demilitarized Zone separating the two Koreas, adding that two or three locations were under consideration.

“We’re setting up meetings right now and I think it’s probably going to be announced over the next couple of days, location and date,” Trump said. The summit, which has come together rapidly after months of tense saber-rattling over the North’s nuclear and missile programs, would be the first ever between a US president and a leader of North Korea. On Monday, Moon had demurred when asked about the prospect of winning the Nobel Peace Prize, suggesting Trump should get it instead. “President Trump can take the Nobel prize. All we need to take is peace,” he said. Trump said it was “very generous of President Moon of South Korea to make that statement and I appreciate it but the main thing is to get it done.” “I want to get it done,” he added.

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Apple has become a capital allocation venture.

Apple Delivers Best-Ever Second Quarter Despite Sales Worries (G.)

Apple on Tuesday shook off worries that its $1,000 iPhone had failed to live up to the hype – but sales of the world’s most valuable company’s most valuable product are slowing, and Apple has announced a plan to buy its way out of trouble. Releasing its latest quarterly report, Apple announced it had sold 52.2m iPhones in the quarter ending 31 March, at an average price of $728.54. Sales were up 3% compared to last year and slightly lower than analysts had expected, but numbers beat the gloomiest forecasts and were enough to deliver Apple its best second quarter ever, with revenues of over $61bn. That beat the record of $58bn set in 2015.

“We’re thrilled to report our best March quarter ever, with strong revenue growth in iPhone, services and wearables,” said Tim Cook, Apple’s chief executive officer. “We are very bullish on Apple’s future,” Cook told analysts after the news broke. Apple sold 9.11m iPads and 4.08m Macs over the quarter. Analysts had worried that the high-priced iPhone X would dent sales. The results came after Apple suppliers including AMS and Taiwan Semiconductors have reported slowing revenues in a sign seen by analysts as proof of shaky demand for iPhone X.

The company announced it would be adding $100bn to its stock buyback programme, plus a 16% increase in its quarterly dividend. Taking advantage of the Trump administration’s new tax laws, Apple is in the process of repatriating the majority of the $252bn in profits it currently holds overseas. The buyback helped Apple’s shares rise over 5% in after-hours trading. The company’s stock has risen by about 80% in the past two years, setting it on course to battle Amazon to become the first company to be valued at $1tn. But Apple’s share price has stumbled recently as fears about slowing iPhone sales took their toll.

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These reports about the ‘second tier’ just won’t stop.

More Evidence Emerges That Apple Is Killing iPhone X – Analyst (CNBC)

More earnings reports from companies linked to Apple have resulted in further evidence that the technology giant could be winding down or stopping production of the iPhone X. Nasdaq-listed Cognex is the latest company to provide clues that Apple may be going down this path. It reported first quarter earnings on Monday that were up 22% year-on-year, a slowdown from the 40% growth seen in the first quarter of 2017. On top of that, guidance for second quarter revenue of between $200 million and $210 million was below Wall Street expectations, according to Neil Campling, co-head of the global thematic group at Mirabaud Securities.

Cognex sells technology that assists factories that assemble the iPhone. Apple’s supply chain relies on this technology to get the OLED screen on the iPhone X fitted perfectly. Campling told CNBC on Tuesday that Apple accounts for about 20% of Cognex revenues, so the slowdown can be attributed to Apple killing off the iPhone X. “Cognex results provide further evidence that the smartphone cycle has turned south, the OLED overcapacity bites and Apple’s iPhone X is over,” Campling wrote in a note Tuesday. “If Apple is stepping back from the iPhone X production cycle, then Cognex is lead indicator of when that is taking place,” the analyst said in a follow-up phone call with CNBC.

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Remember Japanese cars?

Nissan Shocks With 28% Sales Plunge (BBG)

Nissan’s U.S. sales plunged last month, shocking some analysts and dragging on what was otherwise a strong April for auto demand. The Japanese automaker’s deliveries declined 28% in April, with almost every model in the Nissan and Infiniti lineups falling. Nissan shares fell as much as 1.8% in Tokyo trading Wednesday. While Ford and Fiat Chrysler beat analysts’ estimates, their shares reversed gains after Nissan’s report. “Our eyes are bugging out here,” Michelle Krebs, senior analyst for researcher Autotrader, said of the Nissan’s numbers. “They’ve been very heavy with rental-car sales and rich incentives. It looks like they’re pulling back.”

Automakers were going to have a difficult time reporting sales gains in April due to a quirk of the calendar. There were two fewer selling days – which excludes Sundays and holidays – last month than a year ago. So while almost all major carmakers posted declining deliveries, as analysts expected, the annualized sales rate accelerated to 17.1 million, according to researcher Autodata. Calculating the annualized sales pace, which topped last April’s 17 million, is becoming more difficult. General Motors announced last month that it would report U.S. sales only on a quarterly basis, complicating efforts to gauge the health of the world’s most lucrative auto market.

Sales of the Altima sedan, usually Nissan’s top car, dropped by almost half compared with a year ago. And the company’s leading sport utility vehicle, the Rogue, dropped 15%. While deliveries to both retail and fleet customers declined, the automaker expects that its results will improve when the new Kicks crossover and redesigned Altima reach dealers, spokesman Chris Keeffe said.

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Perhaps.

The Biggest Player in the History of the World (Alistair Crooke)

Xi Jinping lies at the apex of the Chinese political system. His influence now permeates at every level. He is the most powerful leader since Chairman Mao. Kevin Rudd (former PM of Australia and longtime student of China) notes, “none of this is for the faint-hearted … Xi has grown up in Chinese party politics as conducted at the highest levels. Through his father, Xi Zhongxun … he has been through a “masterclass” of not only how to survive it, but also on how to prevail within it. For these reasons, he has proven himself to be the most formidable politician of his age. He has succeeded in pre-empting, outflanking, outmanoeuvring, and then removing each of his political adversaries. The polite term for this is power consolidation. In that, he has certainly succeeded”.

And here is the rub: the world which Xi envisions is wholly incompatible with Washington’s priorities. Xi is not only more powerful than any predecessor other than Mao, he knows it, and intends to make his mark on world history. One that equates, or even surpasses, that of Mao. Lee Kuan Yew, who before his death in 2015, was the world’s premier China-watcher, had a pointed answer about China’s stunning trajectory over the past 40 years: “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”

[..] Made in China 2025 is a broad industrial policy that is receiving massive state R & D funding ($232 billion in 2016), including an explicit potential dual-use integration into military innovation. Its main aim, besides improving productivity, is to make China the world’s ‘tech leader’, and for China to become 70% self-sufficient in key materials and components. This may be well-known in theory, but perhaps the move towards self-sufficiency by both China and Russia suggests something more stark. These states are moving away from the classic liberal trade model to an economic model based on autonomy, and a state-led economy (such as advocated by economists like Friedrich List, before becoming eclipsed by the prevalence of Adam Smith-ian thinking).

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Very long essay from Hudson. Always good.

Debt Is The Great Threat To China’s Development (Michael Hudson)

Subjecting economies to austerity, economic shrinkage, emigration, shorter life spans and hence depopulation, it is at the root of the 2008 debt legacy and the fate of the Baltic states, Ireland, Greece and the rest of southern Europe, as it was earlier the financial dynamic of Third World countries in the 1960s through 1990s under IMF austerity programs. When public policy is turned over to creditors, they use their power for is asset stripping, insisting that all debts must be paid without regard for how this destroys the economy at large. China has managed to avoid this dynamic. But to the extent that it sends its students to study in U.S. and European business schools, they are taught the tactics of asset stripping instead of capital formation – how to be extractive, not productive.

They are taught that privatization is more desirable than public ownership, and that financialization creates wealth faster than it creates a debt burden. The product of such education therefore is not knowledge but ignorance and a distortion of good policy analysis. Baltic austerity is applauded as the “Baltic Miracle,” not as demographic collapse and economic shrinkage. The experience of post-Soviet economies when neoliberals were given a free hand after 1991 provides an object lesson. Much the same fate has befallen Greece, along with the rising indebtedness of other economies to foreign bondholders and to their own rentierclass operating out of capital-flight centers. Economies are obliged to suspend democratic government policy in favor of emergency creditor control.

The slow economic crash and debt deflation of these economies is depicted as a result of “market choice.” It turns out to be a “choice” for economic stagnation. All this is rationalized by the economic theory taught in Western economics departments and business schools. Such education is an indoctrination in stupidity – the kind of tunnel vision that Thorstein Veblen called the “trained incapacity” to understand how economies really work.

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“The trade in renminbi is still a minuscule part of the world currency market..”

China’s Petro-Yuan Isn’t Dislodging the Dollar Yet (Barron’s)

The timing seemed perfect. On March 26, four days after the Trump administration called for new tariffs on $50 billion worth of Chinese imports, Beijing launched an oil-futures contract denominated in yuan. The move seemed logical enough. China surpassed the U.S. as the world’s top oil importer last year, so why not start paying in its own currency? But against the backdrop of a brewing trade war, the newly born “petro-yuan” took on the aspect of a nuclear option, at least to Washington’s many ill-wishers around the globe. China’s initiative would put an end to dollar dominance of the $2 trillion annual oil trade, and thus its hegemony as a global reserve currency, so the argument ran. “Petro-Yuan to Kneecap Petro-Dollar,” crowed a headline from Russian state news service RT.

In fact, the petro-yuan is off to a slow start, and the greenback looks destined to remain almighty for a while yet. The reason is contradictions within China, which wants to play a new global role that is co-equal with the U.S. but maintain the old economic controls that got it there. Chinese exchanges have already co-opted much of the global trade in copper and other basic metals. But China is itself a leading copper producer, and volumes in the metal are one-twentieth the size of oil markets. To grab serious real estate from the petrodollar, the yuan would have to be freely convertible on the order of the greenback, euro, or yen—which it assuredly is not. “The trade in renminbi is still a minuscule part of the world currency market,” says Prakash Sharma, China research director for commodities consultant Wood Mackenzie, using an alternative name for the national coin.

“Paying for oil in Chinese currency looks nearly impossible at this stage.” Beijing authorities seemed bent on convertibility until 2015, when a stock market panic in China spurred some $700 billion in capital flight—from families pouring into Western real estate to corporations snapping up overseas acquisitions. The nation’s reserves shrank to a mere $3.3 trillion, and the yuan fell 10% against the dollar over 18 months. President Xi Jinping’s bureaucrats reacted decisively, limiting individuals to $50,000 a year in currency exchange and informally reeling in corporate globalization. “The events of 2015-16 were quite a surprise to the authorities,” says Jens Nordvig, CEO of FX consultant Exante Data. “They nearly lost control of the currency.”

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Because the US will demand it strengthen it.

China Weakens Its Currency Before US Trade Talks Begin (BBG)

China weakened its daily currency fixing by more than traders and analysts had expected before high-ranking U.S. officials arrive in the country to discuss trade issues. The People’s Bank of China cut the reference level to 6.3670 per dollar, weaker than the average estimate of 6.3610 in Bloomberg survey of 21 traders and analysts. The deviation is the biggest since Feb. 7 and continues a pattern set in April when the fixing was weaker than expected on all but one day, according to Bloomberg calculations. “The move in the fixing today is aggressive,” said Ken Cheung at Mizuho Bank in Hong Kong. “China may want to weaken the yuan pre-emptively before the trade talks with the U.S., so that they have room to strengthen the currency” if needed, Cheung said, adding that policy makers may also be keen to arrest the yuan’s advance against a basket of peers.

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Netanyahu plays games with his credibility.

Europeans Cast Doubt On Israel’s Claims About Iran Nuclear Breaches (G.)

European leaders have pushed back against Israel’s claims that it has new evidence showing that Iran is breaching the nuclear deal with the west which was signed in 2015. The US secretary of state, Mike Pompeo, hailed the Israeli claims as significant, as the 12 May deadline approached for the US president, Donald Trump, to decide whether to pull out of the deal. But Pompeo declined to say whether they represented proof that Iran was violating the deal. The overall initial view in European capitals was that the documents did reveal new material about the scale of Iran’s programme prior to 2015 but that there was nothing showing a subsequent breach of the deal.

The French foreign ministry said that the details needed to be “studied and evaluated” but that the Israeli claims reinforced the need for continuation of the deal – which entails Iran accepting nuclear inspections in return for a loosening of economic sanctions. “The pertinence of the deal is reinforced by the details presented by Israel,” a statement said. “All activity linked to the development of a nuclear weapon is permanently forbidden by the deal.” [..] In a bid to push back against Israel, the EU’s foreign affairs chief, Federica Mogherini, said Netanyahu’s allegations had “not put into question” Tehran’s compliance with the deal and that the International Atomic Energy Authority (IAEA) had produced 10 reports saying Iran had met its commitments.

“The International Atomic Energy Authority is the only impartial international organisation in charge of monitoring Iran’s nuclear commitments,” Mogherini said. “If any country has information of non compliance of any kind it should address this information to the proper legitimate and recognised mechanism.” The IAEA said a report by its director in 2015 “stated that the agency had no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009”, and that the IAEA’s board of governors “declared that its consideration of this issue was closed”. A German government spokesman said it would analyse the Israeli documents, but added that the JCPOA had unprecedentedly strong monitoring mechanisms. The spokesman said: “It is clear that the international community had doubts that Iran was pursuing an exclusively peaceful nuclear programme. That is why the nuclear agreement was reached in 2015.”

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Britain better get rid of all these people.

Inside Theresa May’s Brexit War Cabinet, Tory Battles Rage (BBG)

The prime minister and her inner circle refer to it simply as “The SN.” To everyone else it is Theresa May’s “Brexit war cabinet,” the group of senior ministers who set the U.K.’s course out of the European Union. These eleven Cabinet members meet regularly in closely-guarded privacy to decide the detail of Brexit policies. On Wednesday afternoon, they convene once again to address an explosive question that could blow up May’s government. What to do about the Irish border and the future customs arrangements between the U.K. and the EU? Unless a satisfactory answer can be found soon, it could be enough to derail the negotiations entirely, forcing Britain out of the bloc with no meaningful deal at all.

The key to understanding the dynamic in the room had been that half of them campaigned to stay in the EU during the 2016 referendum, while the other five voted to leave — with the premier herself having the deciding vote. All that changed this week. Until she resigned as Home Secretary on Sunday, Amber Rudd was among the loudest voices in favor of keeping close ties to the EU. She’s been replaced by Sajid Javid, who is far closer to the pro-Brexit lobby, although he did – reluctantly – campaign for Remain two years ago.

Also on the pro-EU side are Chancellor of the Exchequer Philip Hammond and Business Secretary Greg Clark — both have been keeping low profiles of late. Pro-Brexit ministers are led by Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, both figureheads of the Leave campaign.

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They deported tens of thousands of students. On the basis of a questionable test.

UK Home Office ‘Mistakenly Deported 7,000 Foreign Students’ (Ind.)

The government may have mistakenly deported more than 7,000 foreign students after falsely accusing them of cheating in English language tests. Most of the students were not allowed to appeal the Home Office decision; nor were theyt able to obtain evidence against them, or given the opportunity to prove the proficiency in English Some were detained by immigration officials, lost their jobs, and were left homeless as a result, despite being in the UK legally, the Financial Times reported. The students’ treatment has been blamed on the “hostile environment” policy introduced by Theresa May during her time as home secretary.

The approach, which aims to push illegal immigrants to leave Britain by making their lives difficult, led to the Windrush scandal that forced Ms May’s successor Amber Rudd to resign. The foreign students were targeted by the Home Office after an investigation by the BBC’s Panorama in 2014 exposed systematic cheating at some colleges where candidates sat the Test of English for International Communication (TOEIC). The test is one of several that overseas students can sit to prove their English language proficiency, a visa requirement. After the Panorama broadcast, the government asked the US-based company which runs the test to analyse sound files to investigate whether studies had been enlisting proxies to sit the tests for them.

The firm, English Testing Services, identified 33,725 “invalid” tests taken by students it was confident confident had cheated. The students’ visas were revoked and they were told to leave the country. Another 22,694 test results were classed as “questionable”, meaning the students who sat them were invited for an interview before any action was taken against them.

By the end of 2016, the Home Office had revoked the visas of nearly 36,000 students who took the test. However, when ETS’s automated voice analysis was checked against human analysis, its computer programme was found to be wrong in 20% of cases, meaning that more than 7,000 students were likely to have been wrongly accused of cheating. [..] Immigration barrister Patrick Lewis, who represented several students in successfully appealing their deportation, told the Financial Times: “The highly questionable quality of the evidence upon which these accusations have been based and the lack of any effective judicial oversight have given rise to some of the greatest injustices that I have encountered in over 20 years of practice.”

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NHS is 10,000 doctors short, patients dying on trolleys in hallways.

Theresa May Vetoed Cabinet Pleas Over Visas For NHS Doctors (St.)

Theresa May faces a new immigration crisis after it emerged that she overruled Cabinet ministers pleading for more doctors from overseas to fill empty NHS posts. At least three government departments lobbied for a relaxation of visa rules to let in desperately needed doctors as well as specialist staff sought by businesses, the Evening Standard has learned. The issue erupted on Friday when several NHS trusts went public about fears that patient safety was being put at risk by doctor shortages. The crisis came as then home secretary Amber Rudd was fighting for her political life over the Windrush scandal — but No 10’s hard line meant her hands were tied.

Sources have disclosed that Downing Street was lobbied for several months before the NHS went public to allow a relaxation of the rules. Health Secretary Jeremy Hunt and Ms Rudd are understood to be among those urging No 10 to lift the quota for special cases such as NHS doctors. At the same time Business Secretary Greg Clark was pressing for more exceptions to help firms cope with specialist skills shortages. A Whitehall source said Mrs May “absolutely refused to budge” when asked to lift the cap in recent months. “I think Jeremy and Amber were on the same page on this but No 10 were in a different place entirely,” said a separate source.

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No, really, these people DO understand the effect will be the opposite of what they claim.

OECD Calls For Even Tighter Greek Fiscal Policy To Bolster Growth (K.)

Greece needs to further extend its real age of retirement and to abolish all kinds of tax exemptions, the Organization for Economic Cooperation and Development (OECD) has recommended in a report published on Monday, so that the growth rate accelerates, fiscal revenues expand and the national debt becomes sustainable. Although the report, presented in Athens on the occasion of OECD Secretary-General Angel Gurria’s visit, does speak of a return to growth, it undercuts the official forecast for a 2.3% economic expansion this year, pointing instead to a 2% increase. It adds that a series of reforms could considerably strengthen gross domestic product in the future.

According to the OECD, a four-year rise in the real age of retirement up to 2030 (instead of the already scheduled three-year rise to the age of 65 by the same year) will boost GDP by 10.4 percent points (against 7.5 points with the scheduled extension). The modernization of the public administration and the improvement of the justice system up to OECD standards by 2030 would have an even greater impact, the report says. That would signify a GDP impact of 25.6 percent points, compared to the current plans for a 14.7 percent-point increase.

The organization further recommends new reforms in the commodity markets so that they reach up to Belgium’s level by 2020, and an increase in family benefits to meet the European Union average by 2025. In total, the reforms the OECD has proposed would bolster GDP by 46.1 percent points or almost 100 billion euros per year, against 25.4 percent points projected by the currently planned reforms. Those proposed reforms would also cut the national debt to just 100% of GDP by 2060, the report projects.

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It’s about political control, not finance.

Greece’s Debt Deal To Show How Europe Treats Its Less Fortunate Nations (CNBC)

Speaking in the Bulgarian capital of Sofia last week, European Commissioner for Economic and Financial Affairs Pierre Moscovici told me the EU believes its models may be more accurate, but argued that the best way to win an IMF buy-in would be to agree on a debt repayment mechanism first proposed by his countrymen — and one of his successors as French finance minister — Bruno Le Maire. Macron’s finance chief told me separately that he hoped to win over opponents to his plan, a “growth adjustment mechanism” that would automatically link future debt repayments to Greece’s relative economic success: Athens would repay larger installments if its economy expands quickly, and reduce payments if it slows, a process that its proponents claim provides market participants with greater clarity and transparency.

Arrayed against the French plan is the desire on the part of authorities in countries like Germany, the Netherlands, Finland and Austria to maintain a degree of political control over Greece’s required repayments. This might mean the size and scope of future repayments could be assessed by national parliaments, rather than automatically calculated based on factors like GDP growth. The publicly espoused view in Berlin is that such an approach would force the Greeks to continue with their structural reforms and austerity measures that have helped transform what was a 15% budget deficit in 2009 into a recent surplus.

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“Who better to entrust with the most intimate parts of our lives than Mark Zuckerberg, the king of privacy?”

Facebook’s Dating App Finally Makes Privacy Invasion Sexy (G.)

Thank God Facebook is finally offering a dating app. Who better to entrust with the most intimate parts of our lives than Mark Zuckerberg, the king of privacy? I assume Zuck will be building it off of one of the early projects that established him as a wunderkind: FaceMash. You may remember it – it’s the one where he hacked into campus websites, collecting pictures that allowed Harvard students to rank each other by hotness. With Facebook dating, the FaceMash dream is at last becoming reality. This should make it easy for Facebook’s hottest people – if there are any left; my understanding is most hot people have migrated to Instagram – to match with equally attractive people, leaving the rest of us trolls and gnomes to mingle with each other.

And after a few months, you can bet the data will leak, offering us all an opportunity to find out, based on rigorous computer analyses, how hot we are. I’m a four at best, you’re a seven. But those numbers won’t be based just on looks. What this app has over Tinder is its existing knowledge of every facet of our lives. Romance is, of course, transactional, and Zuckerberg can finally determine a precise formula based on the value each person brings to a potential match. How much money does it take to compensate for suboptimal physical attractiveness? How often do I have to post about working out to balance out my penchant for Ben and Jerry’s? How often do you have to donate to charities to make up for the fact that you bought an alarming amount of toilet paper on Amazon last month?

Then there’s the possibility that Facebook engagement could come into play. Will active users get more profile views than those of us who have largely abandoned the site? Would that mean we’re more likely to end up on dates with the kind of person who posts constantly on Facebook? Sign me up.

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7 million per year. That’s just a start.

More Than 90% Of Air Pollution Deaths Occur In Poorer Countries (Ind.)

Air pollution is involved in the deaths of around seven million people every year, with the vast majority of fatalities taking place in poorer countries. The latest figures released by the World Health Organisation (WHO) show that nine out of 10 people are breathing air containing dangerous levels of pollutants. These results largely echo those released in another global air pollution report in April, and experts have once again pointed to the particular burden falling on the world’s most vulnerable people. “Air pollution threatens us all, but the poorest and most marginalised people bear the brunt of the burden,” said Dr Tedros Adhanom Ghebreyesus, director-general of WHO.

The new figures come as reports emerge concerning residents of Mongolia’s capital, Ulaanbaatar, drinking “oxygen cocktails” in an effort to ward off the harmful effects of air pollution. Ranked by Unicef as the most polluted capital city in the world, Ulaanbaatar is one of the many Asian and African cities highlighted as particularly susceptible to the toxic effects of air pollution by WHO. According to Dr Maria Neira, who leads public health efforts at WHO, many of the world’s megacities – such as Beijing, Delhi and Jakarta – exceed guideline levels for air quality by more than five times.

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Apr 052018
 
 April 5, 2018  Posted by at 12:11 pm Finance Tagged with: , , , , , , , , , , , , ,  


Herbert Ponting Scott’s Terra Nova Expedition, Antarctica 1911

 

Something must be terribly wrong with the world. A few days ago Elizabeth Warren agreed with Trump on China, now Bernie Sanders agrees with him about Amazon. What’s happening?

 

Bernie Sanders Agrees With Trump: Amazon Has Too Much Power

Independent Vermont senator and 2016 presidential hopeful Bernie Sanders echoed President Donald Trump in expressing concern about retail giant Amazon. Sanders said that he felt Amazon had gotten too big on CNN’s “State of the Union” Sunday, and added that Amazon’s place in society should be examined.

“And I think this is, look, this is an issue that has got to be looked at. What we are seeing all over this country is the decline in retail. We’re seeing this incredibly large company getting involved in almost every area of commerce. And I think it is important to take a look at the power and influence that Amazon has,” said Sanders.

A backlash against Facebook, a backlash against Amazon. Are these things connected? Actually, yes, they are connected. But not in a way that either Trump or Sanders has clued in to. Someone who has, a for now lone voice, is David Stockman. Here’s what he wrote last week.

 

The Donald’s Blind Squirrel Nails An Acorn

It is said that even a blind squirrel occasionally finds an acorn, and so it goes with the Donald. Banging on his Twitter keyboard in the morning darkness, he drilled Jeff Bezos a new one – or at least that’s what most people would call having their net worth lightened by about $2 billion:

“I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” You can’t get more accurate than that. Amazon is a monstrous predator enabled by the state, but Amazon’s outrageous postal subsidy – a $1.46 gift card from the USPS stabled on each box – isn’t the half of it.

The real crime here is that Amazon has been exempted from making a profit, and the culprit is the Federal Reserve’s malignant regime of Bubble Finance. The latter has destroyed financial discipline entirely and turned the stock market into the greatest den of speculation in human history. That’s why Bezos can kill established businesses with impunity.

The casino allows him to run a pernicious business model based on “price to destroy”, rather than price for profit and a return on capital. Needless to say, under a regime of sound money and honest capital markets Amazon would be a far more benign economic creature. That’s because no real investors would value AMZN’s money-loosing e-Commerce business at $540 billion – nor even a small fraction of that after 25-years of profitless growth.

The bubble economy, the everything bubble, that we have been forced into, with QE, ultra-low rates, central banks buying trillions in what at least used to be assets, and massive buybacks that allow companies to raise their ‘value’ into the stratosphere, has enabled a company like Amazon to kill off its competition, which consists of many thousands of retailers, that do have to run a profit.

It’s a money scheme that allows many of the most ‘valuable’ tech companies to elbow their way into our lives, in ways that may seem beneficial to us at first, but in reality will only leave us behind with much less choice, far less competition, and many, many fewer jobs. Once it’s done someone will mention ‘scorched earth’. But for now they are everybody’s darlings; they are, don’t you know, the tech giants, the brainchildren of the best that the best among us have to offer.

They don’t all work the exact same way, which may make it harder to recognize what they have in common. For some it’s easier to see than for others. It’s also difficult to list them all. Here’s a few: Apple, Amazon, Facebook, Google (Alphabet), Tesla, Uber, Airbnb, Monsanto. Let’s go through the list.

 

Apple ? Yes, Apple too. But they make real things! Yes, but just as Apple CEO Tim Cook seeks to distance his company from the likes of Facebook on morals and ethics, he can’t deny that Apple sells a zillion phones to a large extent because everybody uses them to look at Facebook and Alphabet apps until their faces are blue. If data ethics are the only problem Cook sees, he’s in trouble.

Silicon Valley infighting shows that the industry does have an idea what is going wrong, in ways that should have already led to many more pronounced worries and investigations.

 

Silicon Valley Rivals Take Shots At Facebook

Mr. Cook, who has long sought to differentiate Apple on privacy matters, contrasted its focus on selling devices with Facebook and Google’s ad-based businesses that are built on user data. Asked what he would do if he were Facebook CEO Mark Zuckerberg, Mr. Cook replied: “I wouldn’t be in this situation.”

[..] Days earlier, François Chollet, an artificial intelligence engineer at Google, sought to draw a line between his company and Facebook. He tweeted that Google products like search and Gmail help users “to do more, to know more.” Facebook’s newsfeed, he wrote, “manipulates your worldview and seeks to maximally waste your time.”

[..] In January, Salesforce.com CEO Marc Benioff, whose company sells business software services, said that the addictive nature of social media means it should be regulated like a health issue.“I think that you do it exactly the same way that you regulated the cigarette industry,” Mr. Benioff told CNBC when asked how Facebook should be regulated. Some of the most cutting rebukes have come from people who know Facebook well.

In November, Sean Parker, the founding president of Facebook, said that Facebook executives, including himself, were “exploiting a vulnerability in human psychology” by designing a platform built on social validation. Mr. Parker didn’t respond to a request for comment.

Facebook generally hasn’t responded to the criticism, but it did after sharp comments from its former vice president of growth, Chamath Palihapitiya. “The short-term, dopamine-driven feedback loops that we have created are destroying how society works,” Mr. Palihapitiya said at a talk at Stanford University in November.

I would expect to hear a lot more of that sort of thing. Big Tech is changing the world in more ways than one. And spying on people Facebook-style is merely one of a long list of them. So yes, Apple certainly also belongs in that list. Facebook doesn’t build the devices people use to see what their friends had for breakfast, Apple does that. Moreover, Apple profits hugely from stock buybacks, so it fits in Stockman’s bubble finance definition of Amazon, too.

The failure of politics to investigate, and act against, those dopamine-driven feedback loops which exploit a vulnerability in human psychology in order to maximally waste your time and sell you product after product that you never (knew you) wanted is downright bizarre. Politicians only started talking about Facebook when a topic connected to Trump and Russia was linked to it.

 

Amazon: Trump can’t act fast enough on the tax situation and the US Postal deal. Not that that will solve the issue. Amazon, like all the companies on my list, can only be cut down to size if and when the everything bubble is. They are, after all, its children.

The most pernicious aspect of the Amazon ‘business model’, which all these firms share, and all are able to live by thanks to the central banks and the “greatest den of speculation in human history” they have created, is the prospect of world domination in their respective fields. They all hold in front of speculators the promise that they can crush all competition, or nearly all. Scorched earth, flat earth.

 

Facebook: their place in the list is obvious. What is it, 2.5 billion users? And what they don’t have is divvied up between them and Google when they buy up apps like Instagram. Officially competitors, but they have the exact same goals. And, like me, you may think: what’s the problem, just ban them from collecting all that data. Facebook has no reason to know, at least not one that serves us, where you were last Friday, and with whom. And just in case you missed that bit, they do.

But there their connection to the intelligence world comes in. Their platforms are better than anything the NSA has ever been able to develop. So we can say we don’t want Zuckerberg and Alphabet spying on us, but our own spies do want to do just that. That makes any kind of backlash much harder to succeed. And it doesn’t matter if you delete your Facebook account, they’ll find you anyway. Friend of a friend. We all have friends who are on Facebook, rinse and repeat.

The only hope there is, with Facebook as with the other companies, is for investors and speculators to dump their holdings in massive numbers. And that will only happen when the central bank Ponzi collapses. And it will, but by then we have a whole new set of problems.

 

Google: largely the same set of issues that Facebook has. Its tentacles are everywhere. Former CEO Eric Schmidt’s connections to the Pentagon should be really all you need to know. The EU may have issued all sorts of complaints and fines on competition grounds, but that makes no difference.

The one country with an effective response to Google and Facebook is China, that has largely banned both and built its own versions of their products. Which allows Beijing to ban people from boarding planes, buying homes etc., if their ‘social credit’ is deemed too low. If you want to be scared about where Big Tech’s powers can lead, look no further.

 

Tesla: Elon Musk has built a fantasy (and maybe I should put Paypal in this list too) on what everyone thinks must be done to ‘save the planet’ (yeah, build cars…) by grossly overstating the number of cars he can build, and financing his growth on not only speculation, but also on spectacular amounts of government subsidies (politicians want to save the planet, too).

And now he needs additional financing again. He will probably get it, again, but the Amazon backlash might have people take another look. One fine day… Fits David Stockman’s complaint to a t(ee), doesn’t have to make a profit. Musk has perfected that model.

 

Uber and Airbnb: why anyone anywhere would want to send money generated in their community, by renting out cars and apartments in that same community, to a bunch of people in Silicon Valley, is beyond me. Someone should set this up as an international effort that makes it easy for a community, a city etc., to provide this kind of service and make the profits benefit their own cities.

But like Amazon, they are free to run any competition into the ground because no profits are required until they have conquered the world. And then they can go nuts. It may look like a business model, but it isn’t. It’s a soon to be orphaned bubble child..

 

Monsanto: less obvious perhaps as an entry in the Big Tech list, but very much warranting a spot. And of course it stands for the entire chemical-seeds field. From Agent Orange to your children’s dinner plate. Monsanto has more lawyers and lobbyists on its payroll than it has scientists, but then its lofty goals outdo even those of Google or Amazon.

Facebook may focus on your addiction to human contact, but Bayer, DuPont, Syngenta et al have decided to make your food so addicted to their chemicals that they will in the future profit from every bite served on your table. How they will grow that food long term without any insects, bees or birds left is unclear, but they don’t seem to care much. As for profits? Monsanto seeks to rule the world, and for now care as little about profits as they do about insects.

 

Zuckerberg may claim that he only wants to improve Facebook’s service, but when that is done through for instance the 2012 so-called Transmission of Anger experiment in which the company tried to alter their users’ emotional states -and succeeded-, by manipulating their friends’ postings, that claim becomes pure ridicule. Selling off user data to scores of developers doesn’t help either. But do you see Congress tackling him in any serious way next week? Neither do I.

Because there’s one huge catch to the scenario that David Stockman -and I- painted, of the whole tech bubble collapsing when the financial bubble does. It is the links tech companies have built to intelligence. A group of Google employees wrote a letter to their CEO Sundar Pichai to protest the company’s involvement in “weaponized AI”, in the shape of Project Maven, a military surveillance engine to-be.

These people undoubtedly mean well, but they’re far too late. They will have to leave the “don’t be evil” company to actually not be evil. Because it’s not a big step from weaponized AI to killer robots. Microsoft is also part of the project, and Amazon is. If you work there and don’t want to be evil, you know what to do.

Yeah, it’s about our safety, and security, and political and military and economic power. But it’s also about spying on people, in even worse ways than Facebook does. So even as the central bank bubble, and the tech bubble, go poof, some of these companies may be saved by their military ties.

That sound you hear is George Orwell turning in his grave.

 

 

Mar 192018
 
 March 19, 2018  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , , ,  


Ernest R. Ashton Evening near the Pyramids 1898

 

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)
Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)
Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)
How Seriously is the Treasury Market Taking the Fed? (WS)
65% of Americans Save Little or Nothing (CNBC)
Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)
Rising US Interest Rates May Damage Gulf Economies (MEE)
Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)
Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)
Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)
Apple Is Secretly Developing Its Own Screens for the First Time (BBG)
Canadian Household Debt Hits Record $1.8 Trillion (CP)
German Interior Minister Wants More Internal EU Border Controls (DW)
Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

 

 

Facebook knows more about you than your friends and family do. No, really. But it can’t figure out -for years- that its data are being downloaded and used?! Yeah, I’ll buy that.

The real issue here should be what Facebook itself uses its -or should that be ‘your’- data for, and what intelligence services do with it.

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)

Facebook and that worked with Donald Trump’s election team have come under mounting pressure, with calls for investigations and hearings to explain a vast data breach that affected tens of millions of people. In Britain, the head of the parliamentary committee investigating fake news accused Cambridge Analytica and Facebook of misleading MPs after revelations in the Observer that more than 50m Facebook profiles were harvested and used to build a system that may have influenced voters in the 2016 presidential campaign. The Conservative MP Damian Collins said he would call the heads of both companies, Alexander Nix and Mark Zuckerberg, to give further testimony.

His intervention came after a whistleblower spoke to the Observer and described how the profiles, mostly of US voters, were harvested for Cambridge Analytica, in one of Facebook’s biggest ever data breaches. The disclosures caused outrage on both sides of the Atlantic; in the US, a state attorney general has called for investigations and greater accountability and regulation. There have been reports that Cambridge Analytica is trying to stop the broadcast of a Channel 4 News exposé in which Nix is said to talk unguardedly about the company’s practices. According to the Financial Times, reporters posed as prospective clients and secretly filmed a series of meetings, including one with the chief executive. The report is due to air this week.

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Very little credibility so far. From descriptions of the nerve agent, it would seem impossible that “..at least 38 people in Salisbury had been identified as having been affected by it..” and all lived to tell it. Is the whole Novichok story a fabrication? Know what, Boris? Why not show the proof you claim to have?!

Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)

Boris Johnson will today seek to convince the EU foreign affairs council to join him in fresh condemnation of Russia after his explosive claims that Moscow has been creating and stockpiling nerve agent novichok and working out how to use it for assassinations. Scientists from the UN-backed Organisation for the Prohibition of Chemical Weapons arrive today to analyse samples of the agent used to poison the former spy Sergei Skripal and his daughter Yulia. The foreign secretary made his claims after Russian EU ambassador Vladimir Chizhov issued blanket denials and said British agents might have used their stockpiles at Porton Down.

As the row enters its third week, Johnson dismissed Chizhov’s comments, saying they were “not the response of a country that really believes it’s innocent”. On Sunday, Vladimir Putin, fresh from a profoundly unsurprising electoral victory, denied any such nerve agents existed and said the idea of carrying out such a killing during an election campaign would be “rubbish, drivel, nonsense”. The latest theory to gain prominence is that the Skripals were poisoned via his car’s ventilation system. The report, from ABC news in the US, came as counter-terrorism police renewed their appeal for sightings of Skripal’s burgundy BMW 320D saloon car on 4 March. ABC also reported that at least 38 people in Salisbury had been identified as having been affected by the nerve agent.

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Zero interest rates?!

Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)

U.S. corporate debt levels stand above crisis highs even as default rates among the most leveraged firms remain subdued. With an economy hitting its stride, it’s perhaps no surprise that the high-yield bond market is placid. The extent of the divergence between debt levels and defaults, however, is worrying to some analysts who feel rising corporate indebtedness will eventually catch out unwary investors and deflate the junk-bond market. But beyond complacency John Lonski at Moody’s Capital Market Research, argued that globalization and the tendency of U.S. businesses to hoard cash as reasons why corporate debt levels may no longer move in sync with default rates and credit spreads.

The high-yield default rate in the fourth-quarter of 2017 fell to 3.3%, even as U.S. nonfinancial-corporate debt ended in 2017 at 45.4% of GDP. This compares with a much higher default rate of 11.1% in the second quarter of 2009, with corporate debt levels at 45% of GDP. Granted, the current levels come with the economy in the eighth year of an expansion, while the second quarter of 2009 marked the final quarter of the longest and deepest U.S. recession since the Great Depression. The yield spread between high-yield bonds and safe government paper, as represented by the 10-year Treasury note narrowed to an average 3.63 percentage points in the fourth quarter of 2017, from an average 12.02 percentage points in the second quarter of 2009.

The tight credit spreads reflects that borrowing costs are still close to historic lows, and that investors are demanding minimum compensation for holding arguably the riskiest debt in the bond market. One answer “might be supplied by the ever increasing globalization of U.S. businesses where the more relevant denominator is not U.S. GDP, but world GDP” said Lonski. The fortunes of U.S. companies are now wove into the broader global economy. When commodity prices took a hit in 2015 and early 2016, crimping growth in China and other emerging markets, high-yield bonds were also slammed.

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If they keep up the forward guidance, everyone will sleep on. But will the yield spread sleep too?

How Seriously is the Treasury Market Taking the Fed? (WS)

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that the Fed could never unload the securities it had acquired during QE. How things have changed! On Friday, the three-month Treasury yield closed at 1.78%, the highest since August 19, 2008. When yields rise, by definition bond prices fall:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that The Fed’s target range for the federal funds rate has been 1.25% to 1.50% since its last rate hike at the December FOMC meeting. In other words, the three-month yield is already above the upper limit of the Fed’s target range after the next rate hike. So the market has fully priced in a rate hike at the FOMC meeting ending March 21. And it’s also starting to price in another rate hike in June. In this rate-hike cycle, the Fed has engaged in policy action only at meetings that are followed by a press conference.

There are four of these press-conference meetings per year. The next two are this week and June. If, in this cycle, the Fed hike rates at an FOMC meeting that is not followed by a press conference – there are also four of them this year – it would be considered a “monetary shock” that the Fed decided to administer to the markets. It would be like a rate hike of 50 basis points instead of the expected 25 basis points. There would be a hue and cry in the markets around the world. But I think the Fed isn’t ready to spring that on the markets just yet. Maybe later. The two-year yield rose to 2.31% on Friday, the highest since August 29, 2008:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that In past rate hike cycles, the two-year yield reacted faster to rate-hike expectations than the 10-year yield. This is happening now as well. The 10-year yield has its own dynamics that are not in lockstep with the Fed’s rate-hike scenario. On Friday, the 10-year yield closed at 2.85%, within the same range where it had been since late February, tantalizingly close to 3%:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that [..] After the surge of the two-year yield, the difference between the two-year and the 10-year yield – the “two-10 spread” – has narrowed again. On Friday, it was at 54 basis points. In the chart below, note the narrowing at the end of last year to 50 basis points, then the mini-spike, as the 10-year yield surged faster than the two-year yield, and the recent fallback:

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Always the same braindead question: “What’s keeping Americans from saving?” We still don’t know?!

65% of Americans Save Little or Nothing (CNBC)

Despite a low unemployment rate and increasing wage growth, Americans still aren’t saving much. That’s according to a new survey from Bankrate.com, which found that 20% of Americans don’t save any of their annual income at all and even those who do save aren’t putting away a lot. Only 16% of survey respondents say that they save more than 15% of what they make, which is what experts generally recommend. A quarter of respondents report saving between 6 and 10% of their income and 21% say they sock away 5% or less.

At this rate, many people could be setting themselves up to fall short in retirement, Bankrate warns. “With a steady, significant share of the working population saving nothing or relatively little, it’s virtually guaranteed that they’ll be unable to afford a modest emergency expense or finance retirement,” says Mark Hamrick, senior economic analyst at Bankrate. “That amounts to a financial fail.” The economy might be prospering now, but that won’t last forever: “The party has to stop sometime, and when it does, employers will lay off workers,” the study says. In fact, Bankrate estimates that half of the American population won’t be able to maintain their standard of living once they stop working.

A report from GoBankingRates found similar results: Over 40% of Americans have less than $10,000 saved for when they retire. What’s keeping Americans from saving? “Expenses” was the No. 1 answer of 39% of respondents. Another 16% say they don’t have a “good enough job” to be able to save, which presumably means they aren’t earning enough. “The average American has less than $5,000 in a financial account, a quarter to a fifth of what you should have, and those aged 55 to 64 who have retirement savings only carry $120,000 — which won’t last long in the absence of paychecks,” the survey reports.

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How strong will this make the dollar?

Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)

The expected rise in US interest rates will increase financial pressures on developing countries already struggling with a 60% jump in their debt repayments since 2014, a leading charity has warned. The Jubilee Debt Campaign said a study of 126 developing nations showed that they were devoting more than 10% of their revenues on average to paying the interest on money borrowed – the highest level since before the G7 agreement to write off the debts of the world’s poorest nations at Gleneagles, Scotland, in 2005. Five of the countries on the charity’s list – Angola, Lebanon, Ghana, Chad and Bhutan – were spending more than a third of government revenues on servicing debts.

Developing country debt moved down the international agenda following the Gleneagles agreement in which the G7 industrial countries agreed to spend £30bn writing off the debts owed to the International Monetary Fund and the World Bank by the 18 poor countries. But developing country debt is now once again being closely monitored by the IMF, which says 30 of the 67 poor countries it assesses are in debt distress or at risk of being so. Lending to developing countries almost doubled between 2008 and 2014 as low interest rates in the west led to a search for higher-yielding investments. A boom in commodity prices meant many poor countries borrowed in anticipation of tax receipts that have not materialised.

But the Jubilee Debt Campaign said the boom–bust in commodity prices was only one factor behind rising debt, pointing out that some countries were paying back money owed by former dictators, while others had been struggling with high debts for many years but had not been eligible for help. The campaign said developing countries were also vulnerable to a rise in global interest rates as central banks withdrew the support they have been providing since 2008. [..] The US Federal Reserve is expected to raise interest rates this week – with the financial markets expecting two or three further upward moves during 2018.

Tim Jones, an economist at the Jubilee Debt Campaign, said: “Debt payments for many countries have risen rapidly as a result of a lending boom and fall in commodity prices. The situation may worsen further as US dollar interest rates rise, and as other central banks reduce monetary stimulus. Debt payments are reducing government budgets when more spending is needed to meet the sustainable development goals.”

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A few economies that have not done well.

Rising US Interest Rates May Damage Gulf Economies (MEE)

[..]The latest available data shows that Oman, for instance, has a debt equivalent to 31.4% of their GDP for 2016, which is up from 4.9% in 2014, according to TradingEconomics.com. That jump in debt coincided with a fall in oil prices from more than $100 a barrel in mid-2014 to a low of $26 in early 2016. Rising rates also tend to increase costs for businesses, says Rosso. And the higher costs of borrowing ultimately means that fewer businesses that request loans from banks will receive the money they need. In short, growth in the available credit in the economy will slow. If we learned nothing else from the financial crisis of 2008-2009, it is that the world of business runs on credit. Slower credit growth usually means slower economic growth.

The base case is that among the countries with the dollar peg such as Saudi Arabia, UAE and Oman, the increased interest rates will likely drag on growth for their economies. The timing is really pretty bad for some of the countries involved. For instance, the Saudi economy shrank by 0.43% in the quarter ending September 2017, according to TradingEconomics.com. The prior quarter was worse; the economy sank 1.03%. Two quarters of negative growth is generally seen as a recession. Will the impact of rising rates push Saudi’s economy back into another recession? It’s hard to tell so far, but there is a risk. Similar problems seem likely for some other countries in the dollar-peg group.

The latest data from Oman is awful as well, although not as recent as that on Saudi Arabia. That economy contracted 14.1% in 2015, followed by another 5.1% decline in 2016. Likewise, the UAE has seen its growth steadily decline in each of the five years through 2016 from 6.9% to 3% most recently. That would not be bad for economic growth, but it is going in the wrong direction.

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That’s quite the statement.

Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)

South Korea’s foreign minister has said that North Korea’s leader has “given his word” that he is committed to denuclearization, a prime condition for a potential summit with President Donald Trump in May. Trump has agreed to what would be historic talks after South Korean officials relayed that Kim Jong-un was committed to ridding the Korean Peninsula of nuclear weapons and was willing to halt nuclear and missile tests. North Korea hasn’t publicly confirmed the summit plans, and a meeting place isn’t known. South Korea’s Kang Kyung-wha said Seoul has asked the North “to indicate in clear terms the commitment to denuclearization” and she says Kim’s “conveyed that commitment.” She told the CBS programme Face the Nation that “he’s given his word” and it’s “the first time that the words came directly” from the North’s leader.

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Only include this because it’s exactly what I said last week. Kim still hasn’t publicly agreed to meet.

Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)

U.S. President Donald Trump’s immediate willingness to meet Kim Jong Un for nuclear talks likely caught the North Korean leader by surprise, forcing him to consider his position before responding publicly, the South Korean foreign minister said. “We were all quite surprised by the readiness of that decision,” South Korea’s Kang Kyung-wha said on CBS’s “Face the Nation” Sunday. “It was an extremely courageous decision on the part of President Trump. We believe the North Korean leader is now taking stock.” Trump agreed to meet with Kim on March 8 after a briefing from South Korean officials.

The summit, expected to take place in a few months, would represent the first time a U.S. president has met a North Korean leader – either Kim or his father or grandfather – and is part of an overall strategy to dismantle that nation’s rapidly advancing nuclear weapons program. Pyongyang has already detonated what it described as a hydrogen bomb capable of riding an intercontinental ballistic missile to cities across the U.S., and Kim has threatened to use nuclear arms against Americans. The summit, if it occurs, will likely follow an already-scheduled meeting between Kim and South Korean President Moon Jae-in to take place in South Korea, at which denuclearization will also be discussed, Kang said.

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Yeah, Shinzo, the Russians did it.

Tyler earlier: “82% of Asahi poll respondents said Abe bears responsibility for the doctored documents relating to the Moritomo scandal”

Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)

Japan’s embattled prime minister has hit back at critics over a favouritism and cover-up scandal that has seen his popularity plunge and loosened his grip on power. In a statement in parliament, Shinzo Abe stressed he had not ordered bureaucrats to alter documents relating to a controversial land sale. “I have never ordered changes,” he said. The scandal surrounds the 2016 sale of state-owned land to a nationalist operator of schools who claims ties to Abe and his wife Akie. The sale was clinched at a price well below market value amid allegations that the high-level connections helped grease the deal. The affair first emerged early last year, but resurfaced after the revelation that official documents related to the sale had been changed.

Versions of the original and doctored documents made public by opposition lawmakers appeared to show passing references to Abe were scrubbed, along with several references to his wife Akie and Finance Minister Taro Aso. Aso has blamed the alterations on “some staff members” at the ministry. But Jiro Yamaguchi, a politics professor at Hosei University in Tokyo, said the public was “not at all convinced” by this explanation. “Why was the land sold at a discount price? Without any political pressure, this could never happen, and voters are angry about it,” said Yamaguchi. The prime minister repeated an apology, saying he “keenly felt” his responsibility over the scandal that has “shaken people’s confidence in government administration.”

The affair is hitting Abe’s ratings hard, with a new poll in the Asahi Shimbun showing public support nosediving by 13 percentage points from the previous month to 31%. The figure is the lowest approval rating for Abe in the poll since his return to power at the end of 2012.

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A different kind of protectionism.

Apple Is Secretly Developing Its Own Screens for the First Time (BBG)

Apple is designing and producing its own device displays for the first time, using a secret manufacturing facility near its California headquarters to make small numbers of the screens for testing purposes, according to people familiar with the situation. The technology giant is making a significant investment in the development of next-generation MicroLED screens, say the people, who requested anonymity to discuss internal planning. MicroLED screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry. The screens are far more difficult to produce than OLED displays, and the company almost killed the project a year or so ago, the people say.

Engineers have since been making progress and the technology is now at an advanced stage, they say, though consumers will probably have to wait a few years before seeing the results. The ambitious undertaking is the latest example of Apple bringing the design of key components in-house. The company has designed chips powering its mobile devices for several years. Its move into displays has the long-term potential to hurt a range of suppliers, from screen makers like Samsung, Japan Display, Sharp and LG to companies like Synaptics that produce chip-screen interfaces. It may also hurt Universal Display, a leading developer of OLED technology. Display makers in Asia fell after Bloomberg News reported the plans. Japan Display dropped as much as 4.4%, Sharp tumbled as much as 3.3% and Samsung slid 1.4%.

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“$22,837 per person, not including mortgages…”

Canadian Household Debt Hits Record $1.8 Trillion (CP)

Canadians’ collective household debt has climbed to $1.8 trillion as an international financial group sounds an early warning that the country’s banking system is at risk from rising debt levels. Equifax Canada says consumers now owe $1.821 trillion including mortgages as of the fourth-quarter of 2017, marking a 6% increase from a year earlier. Although nearly half of Canadians reduced their personal liabilities, roughly 37% added to their debt to push the average amount up 3.3% to $22,837 per person, not including mortgages.

The fresh numbers come as an international financial group owned by the world’s central banks says Canada’s credit-to-GDP and debt-service ratios show early warning signs of potential risk to the banking system in the coming years. The latest report by the Bank for International Settlements says Canada’s credit-to-GDP gap and debt-service ratios have surpassed critical thresholds and are signalling red, pointing to vulnerabilities. The group, however, cautions that these indicators should not be treated as a formal stress test, but as a first step in a broader analysis.

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From Merkel’s own camp.

German Interior Minister Wants More Internal EU Border Controls (DW)

Germany should consider stepping up its border controls, German Interior Minister Horst Seehofer said on Sunday. “Not that many border points in Germany are permanently occupied,” Seehofer told German weekly newspaper Die Welt am Sonntag, adding: “We will now discuss whether that needs to change.” Seehofer also appealed for the suspension of the Schengen Agreement, which allows free movement within the EU bloc. “Internal border checks [between EU member states] must be in place so long as the EU fails to effectively control the external border,” he said, adding: “I don’t see it being able to do this in the near future.” The reintroduction of border controls is a prerogative of EU member states. Under EU rules they must remain an exception and respect the principle of proportionality.

Germany’s temporarily reintroduced border controls continue until May 12 and have been imposed on the land border with Austria and on flight connections from Greece because of the “security situation in Europe and threats resulting from the continuous secondary movements,” according to the European Commission. Seehofer’s comments follow EU demands in February that Germany and four other Schengen members – Austria, Denmark, Sweden and Norway – lift their border controls when the current agreed terms run out in May. [..] Seehofer is a member of the Christian Social Union (CSU), the Bavarian sister party of German Chancellor Angela Merkel’s conservative Christian Democrats (CDU).

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Waterwars in waterworld.

Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

More than 5 billion people could suffer water shortages by 2050 due to climate change, increased demand and polluted supplies, according to a UN report on the state of the world’s water. The comprehensive annual study warns of conflict and civilisational threats unless actions are taken to reduce the stress on rivers, lakes, aquifers, wetlands and reservoirs. The World Water Development Report – released in drought-hit Brasília – says positive change is possible, particularly in the key agricultural sector, but only if there is a move towards nature-based solutions that rely more on soil and trees than steel and concrete.

“For too long, the world has turned first to human-built, or ‘grey’, infrastructure to improve water management. In doing so, it has often brushed aside traditional and indigenous knowledge that embraces greener approaches,” says Gilbert Houngbo, the chair of UN Water, in the preface of the 100-page assessment. “In the face of accelerated consumption, increasing environmental degradation and the multi-faceted impacts of climate change, we clearly need new ways of manage competing demands on our freshwater resources.” Humans use about 4,600 cubic km of water every year, of which 70% goes to agriculture, 20% to industry and 10% to households, says the report, which was launched at the start of the triennial World Water Forum.

Global demand has increased sixfold over the past 100 years and continues to grow at the rate of 1% each year. This is already creating strains that will grow by 2050, when the world population is forecast to reach between 9.4 billion and 10.2 billion (up from 7.7 billion today), with two in every three people living in cities. [..] By 2050, the report predicts, between 4.8 billion and 5.7 billion people will live in areas that are water-scarce for at least one month each year, up from 3.6 billion today, while the number of people at risk of floods will increase to 1.6 billion, from 1.2 billion.

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Jan 222018
 
 January 22, 2018  Posted by at 10:38 am Finance Tagged with: , , , , , , , , , , ,  


Joan Miró Personnages Rythmiques 1934

 

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)
42 People Hold Same Wealth As 3.7 Billion Poorest (G.)
Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)
Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)
20 Senators Support Bipartisan Plan To Reopen Government (ZH)
US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)
FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)
Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)
Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)
Apple Leak Reveals Sudden iPhone X Cancellation (F.)
Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)
Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

 

 

Either we stop this, or it’s pitchforks and guillotines.

Richest 1% Took 82% Of New Global Wealth Last Year (Ind.)

Growing inequality resulted in 82% of new global wealth going to the richest 1% last year, while the poorest half of the world saw their prosperity flatline, a report by Oxfam has shown. It means that of the $9.2tn increase in global wealth between July 2016 and June 2017, around $7.6tn (£6tn) went to 75 million people, while the bottom 3.7 billion saw no increase. It helped spark the sharpest increase in the number of billionaires ever recorded, to 2,043, with one created every two days, according to Oxfam’s report, published ahead of the annual World Economic Forum of global political and business leaders in Swiss ski resort Davos. The wealth of those billionaires increased by $762bn over 12 months, it added.

Mark Goldring, chief executive of Oxfam GB, said the statistics signal that “something is very wrong with the global economy”. “The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food.” He said a living wage, “decent conditions” and equality for women were essential if work was to be a “genuine route out of poverty”. “If that means less for the already wealthy then that is a price that we – and they – should be willing to pay,” Mr Goldring added, as he pushed for a crackdown on tax avoidance and a revamp of business models that prioritise social benefit over shareholder returns.

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After everything western workers fought hard and often bloody fights for, how did we end up back in the Middle Ages again?

42 People Hold Same Wealth As 3.7 Billion Poorest (G.)

The development charity Oxfam has called for action to tackle the growing gap between rich and poor as it launched a new report showing that 42 people hold as much wealth as the 3.7 billion who make up the poorest half of the world’s population. In a report published on Monday to coincide with the gathering of some of the world’s richest people at the World Economic Forum in Davos, Oxfam said billionaires had been created at a record rate of one every two days over the past 12 months, at a time when the bottom 50% of the world’s population had seen no increase in wealth. It added that 82% of the global wealth generated in 2017 went to the most wealthy 1%.

The charity said it was “unacceptable and unsustainable” for a tiny minority to accumulate so much wealth while hundreds of millions of people struggled on poverty pay. It called on world leaders to turn rhetoric about inequality into policies to tackle tax evasion and boost the pay of workers. Mark Goldring, Oxfam GB chief executive, said: “The concentration of extreme wealth at the top is not a sign of a thriving economy, but a symptom of a system that is failing the millions of hardworking people on poverty wages who make our clothes and grow our food.” Booming global stock markets have been the main reason for the increase in wealth of those holding financial assets during 2017. The founder of Amazon, Jeff Bezos, saw his wealth rise by $6bn in the first 10 days of 2017 as a result of a bull market on Wall Street, making him the world’s richest man.

Oxfam said it had made changes to its wealth calculations as a result of new data from the bank Credit Suisse. Under the revised figures, 42 people hold as much wealth as the 3.7 billion people who make up the poorer half of the world’s population, compared with 61 people last year and 380 in 2009. At the time of last year’s report, Oxfam said that eight billionaires held the same wealth as half the world’s population. The charity added that the wealth of billionaires had risen by 13% a year on average in the decade from 2006 to 2015, with the increase of $762bn (£550bn) in 2017 enough to end extreme poverty seven times over. It said nine out of 10 of the world’s 2,043 dollar billionaires were men.

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What happens when price discovery is murdered.

Three Charts To Consider Ahead Of Monday’s Post-Government-Shutdown Open (ZH)

VALUE: The S&P 500 is trading at a Price-to-Sales ratio of 2.35x… a new record high for valuation…

GREED: The S&P 500 is up 8 of the last 9 weeks, 16 of the last 19 weeks, and 15 of the last 15 months (and 22 of the last 23 months – since The Shanghai Accord). This has pushed The S&P 500 to an RSI of 88.4… a new record high for overbought…

FEAR: The S&P 500 has averaged about four 5% declines – from peak to trough – annually since 1927, but volatility in US stocks has evaporated in recent years. Amid a reportedly robust global economy and still supportive global monetary policy, Friday’s 0.4% gain meant that the S&P 500 extended its streak to 395 days without a 5% reversal… a new a new record for tranquillity…

As The FT notes, the last time the S&P 500 suffered a 5% setback was in the global market carnage that followed the UK’s shock vote in June 2016 to leave the EU, which constitutes the last significant, if brief, bout of volatility in markets. The last time the US stock market suffered an actual correction – typically defined as a drop of over 10% from the recent peak — was in early 2016, when investors’ anxiety grew over the state of China’s economy. Some investors and analysts fear that the tranquillity is encouraging investors to stop buying protection against declines, or to making aggressive “short” bets on volatility staying low through complicated derivatives – which could exacerbate any turbulence that might erupt.

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Who’s going to blink first?

Republicans Float Minor Immigration Deal In Bid To End Deadlock (G.)

The US government shutdown edged closer to a resolution on Sunday night after a minor concession from the Senate majority leader, Mitch McConnell, who said he would allow a vote on immigration reform in February if Democrats agree to fund the government. However, one Democratic source cautioned that no deal had been reached. McConnell’s proposal represented the fruit of a bipartisan effort among moderates in both parties to resolve the shutdown, which began at midnight on Saturday. The shutdown was spurred by the inability of Congress to reach a deal to resolve the status of “Dreamers” – undocumented migrants brought into the United States as children. They had been protected from deportation until September 2017 when the Trump administration ended the Daca program, which had been created by Barack Obama.

Trump allowed a six-month grace period for Congress to give Dreamers permanent legal status through legislation. However, with that expiring in early March, Democrats, facing heavy pressure from immigration advocates, had pledged not to fund the government until a deal was reached. McConnell’s proposal would allow the Senate to debate and vote on an immigration deal if a broader bipartisan compromise was not reached in the next three weeks. Speaking on the floor, the top Senate Republican said he would push for a Monday vote on a short-term deal to fund the government through 8 February, as well as extend a popular health insurance program called Chip that provides healthcare coverage to nine million children for six years.

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Let’s keep it shut till summer, see what happens.

20 Senators Support Bipartisan Plan To Reopen Government (ZH)

With Senate Majority Leader Mitch McConnell calling for a procedural vote on a senate measure that would keep the federal government running through Feb. 8 to begin at 1 am Monday, a bipartisan group of senators signaled that they’re nearing an agreement to reopen the government following a Sunday afternoon meeting, the Hill reported. Georgia Senator Johnny Isakson said the group had reached a “consensus of understanding” – essentially agreeing to the broad strokes of a plan to satisfy recalcitrant Democrats and Republicans, per the Hill. As they left the meeting in Maine senator Susan Collins’s office, some members expressed optimism that they will reach an understanding, if not a final agreement, that would let them move forward. South Carolina Senator Lindsey Graham predicted that the group could cobble together a deal before the 1 am vote.

“Yeah because if it doesn’t happen tonight it’s going to be a lot harder,” he said, alluding to the fact that most federal agencies have elected to wait until Monday before implementing the terms of the shutdown (here’s a quick guide to what departments and services will be impacted by the shutdown)… As the BBC pointed out, the closure of many federal services will be felt around the country and hundreds of thousands of federal staff face unpaid leave. According to Politico, the senators took their proposal to McConnell and Senate Minority Leader Chuck Schumer after the 90-minute meeting. The plan would reopen the government through Feb. 8 and have McConnell commit on the Senate floor to holding an immigration vote before that date.

[..] this is the first time a government shutdown has happened while one party in this case, the Republicans – controls both Congress and the White House And according to the Associated Press, the 2013 shutdown left 800,000 government workers on temporary leave. The bipartisan group isn’t crafting separate legislation. Instead, senators say the bulk of their talks were about how to get 60 votes for the bill to fund the government through Feb. 8, paired with a commitment that will satisfy Democrats on bringing up an immigration bill. Since before the shutdown even began at 12:01 am ET on Saturday morning, Republicans and Democrats have traded accusations of blame. House Speaker Paul Ryan has said he would bring such a bill up for a vote in the House if it passes the Senate.

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Easy pickings.

US Shutdown Exposes ‘Chaotic Political System’ – China News Agency (R.)

The shutdown of the US government exposes “chronic flaws” in the country’s political system, China’s official news agency said on Sunday. Funding for federal agencies ran out at midnight on Friday in Washington after members of Congress failed to agree on a stopgap funding bill. “What’s so ironic is that it came on the first anniversary of Donald Trump’s presidency on Saturday, a slap in the face for the leadership in Washington,” the Xinhua news agency’s Liu Chang said in a commentary piece. The article said that the Trump administration had “backtracked” on policies supported by his predecessor, Barack Obama, including the Trans-Pacific Partnership trade agreement and US participation in the Paris climate agreement.

“If there was any legacy that has survived the transfer of power, it was the spirit of non-cooperation across party lines,” the commentary said. While Xinhua commentaries are not official statements, they offer a reflection of Beijing’s thinking. “The western democratic system is hailed by the developed world as near perfect and the most superior political system to run a country,” it said. “However, what’s happening in the United States today will make more people worldwide reflect on the viability and legitimacy of such a chaotic political system.”

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First the NSA a few days ago, now the FBI. Both should be under investigation, but who’s going to do the investigating?

Look, you and I have back-ups of our files. So do NSA and FBI. The only way to lose the info is to deliberately delete it, multiple times.

US intelligence is flipping the country the bird’s middle finger.

FBI “Loses” Five Months Of Text Messages Between Anti-Trump Agents (AP)

The Justice Department has turned over to Congress additional text messages involving an FBI agent who was removed from special counsel Robert Mueller’s investigative team following the discovery of derogatory comments about President Donald Trump. But the department also said in a letter to lawmakers that its record of messages sent to and from the agent, Peter Strzok, was incomplete because the FBI, for technical reasons, had been unable to preserve and retrieve about five months’ worth of communications. New text messages highlighted in a letter to FBI Director Christopher Wray by Sen. Ron Johnson, the Republican chairman of the Senate’s Homeland Security and Governmental Affairs Committee, are from the spring and summer of 2016 and involve discussion of the investigation into Hillary Clinton’s use of a private email server.

They reference Attorney General Loretta Lynch’s decision to accept the FBI’s conclusion in that case and a draft statement that former FBI Director James Comey had prepared in anticipation of closing out the Clinton investigation without criminal charges. Strzok, a veteran counterintelligence agent who also worked the Clinton email case, was reassigned last summer from the team investigating ties between Russia and Trump’s Republican presidential campaign after Mueller learned he had exchanged politically charged text messages — many anti-Trump in nature — with an FBI lawyer also detailed to the group. The lawyer, Lisa Page, left Mueller’s team before the text messages were discovered.

The Justice Department last month produced for reporters and Congress hundreds of text messages that the two had traded before becoming part of the Mueller investigation. Many focused on their observations of the 2016 election and included discussions in often colorful language of their personal feelings about Trump, Clinton and other public figures. Some Republican lawmakers have contended the communication reveals the FBI and the Mueller team to be politically tainted and biased against Trump — assertions Wray has flatly rejected. In addition to the communications already made public, the Justice Department on Friday provided Johnson’s committee with 384 pages of text messages, according to a letter from the Wisconsin lawmaker that was obtained by The Associated Press.

But, according to the letter, the FBI told the department that its system for retaining text messages sent and received on bureau phones had failed to preserve communications between Strzok and Page over a five-month period between Dec. 14, 2016, and May 17, 2017. May 17 was the date that Mueller was appointed as special counsel to oversee the Russia investigation. The explanation for the gap was “misconfiguration issues related to rollouts, provisioning, and software upgrades that conflicted with the FBI’s collection capabilities.”

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Are they really? You don’t think they may have seen this coming, and prepared for it?

Fed Scared to Death of Causing Global Financial Crash – Nomi Prins (USAW)

Two time, best-selling author Nomi Prins says central bankers have no idea how to stop the easy money policies that they started after the financial meltdown of 2008. Prins explains, “So, when the Fed says they are going to remove assets from their $4.5 trillion book by not reinvesting the interest payment . . . the reality is they haven’t really done that. They have reduced their book by about $10 billion off of $4.5 trillion since they mentioned they were going to start ‘tapering.” The media discusses this as a major tightening move. Somehow all of our economies have finally worked because of central bank activity. Growth is real. It’s all positive. The markets are evidence of that because of the levels they are at; and, therefore, these central banks, starting with the Fed, are going to reverse course of these last 10 years.

The reality is if you look at the actual activity of the central banks, beyond the Fed raising rates by a little bit, there hasn’t been and there isn’t being a reversal of course because they are scared to death that too much of a reversal is going to cause a major crash throughout the financial system. Everything is connected. All the banks are connected. Money flows around the world in less than nanoseconds, and all of it has the propensity to collapse if that carpet the central banks have created is dragged from beneath the floor of all this activity.”Prins, who just finished traveling the globe to research her upcoming book, thinks there is one big thing that can take the entire system down. Prins contends, “There hasn’t been any real growth in the real economy. That is an indication of the misfire of this entire plan.

There has been tremendous growth in stock markets and bond markets. If you look at localities or states or governments whose debt to GDP levels are well over 100%, in Japan it’s over 200%, in the United States it over 100%, and this is the same throughout the world. These are levels that they have never been, and they are all at their historic highs. That’s why debt will ultimately be the destructor of the system. In order for that to happen, the cheapness of money that allow states, municipalities and corporations to continue to borrow at these cheap levels has to go away. . . At some point, there will be a mistake. There might be a tiny smidge of an interest rate hike at some central bank, probably the Fed, which ripples throughout the system as a mistake, not because real growth has happened, and that’s why interest rates have been raised. That will incur defaults throughout the system.

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Macron defines European democracy. Straight faced.

Macron Admits France Would Vote To Leave EU If Referendum Held (ZH)

When Marine Le Pen lost last year’s French presidential election to Emmanuel Macron in what appeared to be a landslide, the establishment breathed a sigh of relief because not only was the notorious Eurosceptic populist defeated, but also the wind appeared to be turning, and after a tumultuous 2016, 2017 started off with a bang for the unelected Eurocrats in Brussels. After all, the people had spoken and they wanted more Europe (and Euro), not less. Or maybe not. The French president sent shockwaves across Europe after he conceded that French voters would quit the EU if France held an in/out referendum on continued membership in the Brussels-led bloc. Not surprisingly no other EU country has risked putting membership of the bloc to a public vote since Britain shocked member-states by voting to leave the bloc in 2016, despite polls which showed virtually no possibility of such an outcome.

In an interview with BBC’s Andrew Marr, Emmanuel Macron admitted that he would lose a French referendum on EU membership. Asked about the Brexit vote, the candid president told Marr: “I am not the one to judge or comment on the decision of your people.” But, he added “my interpretation is that a lot of the losers of globalisation suddenly decided it was no more for them.” Marr then pushed the French president, regarded by many as the EU’s new leader, on whether Britain’s decision was a one-off. Quoted by Express, the BBC journalist asked: “If France had had the same referendum, it might have had the same result?” Macron responded: “Yes, probably, probably. Yes. In a similar context. But we have a very different context in France” although he said he would not make it easy: “I wouldn’t take any bet though – I would have fought very hard to win.

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Got to admire the efforts to turn this into a positive story.

Apple Leak Reveals Sudden iPhone X Cancellation (F.)

It may be the smartphone of the moment, but a new leak reveals Apple AAPL -0.45% will soon cancel the iPhone X. And the source could not be more credible… In a new report obtained by AppleInsider, acclaimed KGI Securities’ analyst Ming-Chi Kuo says disappointing sales of the iPhone X will lead to the cancellation of the model “with production ceasing in the summer”. This would be the first time Apple has cancelled an iPhone model after just one generation since the iPhone 5C in 2014. Kuo, who has a long track record successfully revealing Apple’s plans, said disinterest in China is the main reason. In China big screens are king and the iPhone X’s polarising ‘notch’ is seen by Chinese consumers as removing too much usable space. Especially when the cheaper iPhone 8 Plus actually delivers slightly more.

The news also follows a new survey from Cowan which claims interest in new iPhones has hit an historic low. That said it is not all doom and gloom. While the iPhone X will not bring Apple the much anticipated sales ‘Super Cycle’, Kuo states Apple will see modest 5% growth in the first half of 2018. This comes from Apple having three premium models (iPhone 8, iPhone 8 Plus, iPhone X) on sale for the first time. Furthermore Kuo believes Apple will enjoy a better end to 2018 with 10% growth as the outgoing iPhone X will be replaced by a total of three new iPhone X-inspired designs: a second generation 5.8-inch iPhone X, 6.5-inch iPhone X Plus and a “$650-750” 6.1-inch iPhone SE replacement which will be fitted with Face ID. Apple hopes it will be the latter two which once again excite the Chinese market.

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Ecuador requires countries to stand with it.

Assange a ‘Problem’, ‘More Than a Nuisance’ – Ecuador President (Sp.)

In an interview the president of Ecuador, Lenin Moreno, stated that WikiLeaks founder Julian Assange is an “inherited problem” that has created “more than a nuisance” for his government. “We hope to have a positive result in the short term,” Lenin Moreno said in an interview with television networks. Ecuador wanted to resolve the Assange issue, so the Australian whistleblower was “granted Ecuadorian citizenship and a diplomatic rank so that he could leave the territory of the embassy” in London, Moreno said. “The problem persists,” the Ecuadorian president said, pointing out that the country’s Foreign Ministry intends to solve it “using the mediation of important people.” The head of state assured that their names will soon be made public.

The Ecuadorian government wants to see a “positive result” with Assange in a short time, Moreno added. Earlier, the Ministry of Foreign Affairs of Ecuador officially confirmed that the authorities granted citizenship to Julian Assange. According to El Universo, the number of his passport is listed in the relevant databases. This is confirmed on the website of the Internal Revenue Service, where the specified number corresponds to a person named Julian Paul Assange. According to the publication, citizenship was granted to him on December 21. Ecuador’s foreign minister, Maria Fernanda Espinosa, said that she fears that third party states may threaten Julian Assange’s life. She added that Assange won’t leave Ecuador’s Embassy in UK because there are no security guaranties.

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“The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly..”

Opioids: The Big Money Is In Chronic Pain, Which Is Endless (NDN)

Opioids affect us in complex and mysterious ways . They don’t stop sensation, like local anesthetics. Instead, these drugs work by activating natural opioid receptors in our brains. They change our experience of pain. They replace pain, in part, with pleasure. Pain thresholds are built into us for powerful evolutionary reasons. Opioids make us feel good in the short term, but they also distort essential mechanisms necessary for survival in a Darwinian world. Tolerance is the body’s natural attempt to restore those mechanisms. We become less sensitive to opioids, and need higher doses for the same effect. Tolerance is the first step toward physical addiction; the two are linked. As tolerance rises, the risk of overdose and death follows closely behind. The time it takes for this process to occur is the key to understanding the opioid epidemic. A week or two of opioids may cause euphoria and pleasure, but it will rarely create physical addiction. Given a few months, however, anyone can be made into an opioid addict.

[..] In 1996 a single company, Purdue Pharmaceuticals, introduced a patented new opioid compound into the market with FDA approval. They called it OxyContin, and marketed it as a new drug. OxyContin wasn’t a new drug. It was simply a new pill designed to release an old drug — oxycodone — more slowly. Oxycodone was first synthesized in 1916, and is closely related to heroin. Since it releases oxycodone more slowly, OxyContin doesn’t have to be taken as often to relieve pain. That slower release also allowed Purdue to put higher doses of oxycodone into each pill. Purdue Pharma used this distinction as a pretext for claims that OxyContin was safer and less addictive than other opioids and therefore should be widely prescribed for pain of all kinds.

The FDA enabled this assertion, and the FDA examiner who approved OxyContin’s initial application took a job with Purdue shortly thereafter. Once the FDA approved the drug, Purdue unleashed a fraudulent marketing campaign designed to generate as many new OxyContin consumers as possible. A critical element of their strategy was to expand the traditional indications for opioid prescriptions beyond acute pain into the far more controversial category of chronic pain. Chronic pain is so broadly defined that tens of millions of patients became potential customers. This was hugely consequential. When drugs are approved by the FDA, health insurance pays for them. The big money was not in acute pain, which goes away, or cancer pain, where patients die quickly, but in chronic pain, which is endless.

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Jan 182018
 
 January 18, 2018  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , , , ,  


Henry Matisse Bouquet of flowers for July 14 Oct 7 1919

 

Japan and Europe Start the Central Bank Reset (BBG)
The Bubble That Could Break the World (Rickards)
South Korea Considers Shutting Down Domestic Cryptocurrency Exchanges (R.)
Trump Reveals Winners Of Controversial ‘Fake News Awards’ (AFP)
Trump Considers Big ‘Fine’ Over China Intellectual Property Theft (R.)
China’s Communists Take More Stakes In Private Companies (BBG)
Apple Expects to Pay $38 Billion Tax on Repatriated Cash (BBG)
Apple May Not Hire 20,000 New Workers, or Bring Back Its Overseas Cash (MW)
Assange Keeps Warning Of AI Censorship (CJ)
Australia’s Household Debt-to-Income Ratio Reaches 200% (AFR)
Mario Draghi Told To Drop Membership Of Secretive Bankers’ Club (G.)
Global Air Traffic At New Record (AFP)
Europe’s Microwave Ovens Emit Nearly As Much CO2 As 7 Million Cars (G.)
1 Million Tonnes A Year: UK Supermarkets Shamed For Plastic Packaging (G.)
The Plastic-Free Stores Showing The Big Brands How To Do It (G.)

 

 

Coordinated efforts to crash the conomy. Ignore the recovery narrative.

Japan and Europe Start the Central Bank Reset (BBG)

This is going to be an exciting year for monetary policy. In fact, it already is, thanks to Europe and Japan. Investors were taken aback last week when the Bank of Japan bought fewer bonds and the ECB revealed – shock, horror – its language would have to evolve with the euro region’s economy. Both developments, and the reaction, were welcome. They say a lot about the strength of global growth and how it still surprises many people. First to Japan: Investors were wrong to interpret the reduced purchases as a sign that a policy shift is imminent. They were, however, right about the long-term direction of policy. It isn’t going to get looser. Will it remain accommodative as far as the eye can see? Yes.

With Japan’s economic sunny patch extending and inflation headed in the right direction – if still way too low – it’s not a stretch to see Governor Haruhiko Kuroda or his successor ease up a little on the stimulus. Just not right now. That was Jan. 9. Two days later, the fever struck in Europe. The proximate cause was the release of minutes from the ECB’s December meeting and the implication contained therein that communications would have to reflect a stronger growth terrain and improving, albeit still low, inflation. The euro jumped and German bond yields climbed. It feels like we just got through a big change from the ECB: the taper of bond purchases to 30 billion euros a month until September. (Remember when officials hated the word “taper”?) Now, here were policymakers flagging further revisions.

What’s the thread linking these two happenings? Despite all the data and pronouncements about a robust global economy and a synchronized upswing, people are still taken aback by signs that (a) it’s a reality and (b) policy is bound to react. I’m not saying policy is going to change overnight. But if you start with a global framework – we are in a global marketplace, are we not? – key to that framework really ought to be the direction of policy. Ask yourself: Are monetary chieftains going to make policy more easy or less easy, assuming the upswing in growth is sustainable? The answer has to be “less.”

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Because it’s by far the biggest, and it’s a debt bubble, not a gossip one.

The Bubble That Could Break the World (Rickards)

The credit-driven bubble has a different dynamic than a narrative-bubble. If professional investors and brokers can borrow money at 3%, invest in stocks earning 5%, and leverage 3-to-1, they can earn 6% returns on equity plus healthy capital gains that can boost the total return to 10% or higher. Even greater returns are possible using off-balance sheet derivatives. Credit bubbles don’t need a narrative or a good story. They just need easy money. A narrative bubble bursts when the story changes. It’s exactly like The Emperor’s New Clothes where loyal subjects go along with the pretense that the emperor is finely dressed until a little boy shouts out that the emperor is actually naked. Psychology and behavior change in an instant.

When investors realized in 2000 that Pets.com was not the next Amazon but just a sock-puppet mascot with negative cash flow, the stock crashed 98% in 9 months from IPO to bankruptcy. The sock-puppet had no clothes. A credit bubble bursts when the credit dries up. The Fed won’t raise interest rates just to pop a bubble — they would rather clean up the mess afterwards that try to guess when a bubble exists in the first place. But the Fed will raise rates for other reasons, including the illusory Phillips Curve that assumes a tradeoff between low unemployment and high inflation, currency wars, inflation or to move away from the zero bound before the next recession. It doesn’t matter. Higher rates are a case of “taking away the punch bowl” and can cause a credit bubble to burst.

The other leading cause of bursting credit bubbles is rising credit losses. Higher credit losses can emerge in junk bonds (1989), emerging markets (1998), or commercial real estate (2008). Credit crack-ups in one sector lead to tightening credit conditions in all sectors and lead in turn to recessions and stock market corrections. What type of bubble are we in now? What signs should investors look for to gauge when this bubble will burst? My starting hypothesis is that we are in a credit bubble, not a narrative bubble. There is no dominant story similar to the Nifty Fifty or dot.com days. Investors do look at traditional valuation metrics rather than invented substitutes contained in corporate press releases and Wall Street research. But even traditional valuation metrics can turn on a dime when the credit spigot is turned off.

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BTC recovered somewhat overnight.

South Korea Considers Shutting Down Domestic Cryptocurrency Exchanges (R.)

South Korean policymakers joined the global chorus of virtual-coin critics on Thursday, saying Seoul is considering shutting down domestic virtual currency exchanges as the new breed of market exposes users to speculative frenzy and crime. The country’s tough stance comes as policymakers from the United States to Germany struggle to come up with stricter regulation against money laundering and other crimes. Responding to questions in parliament, South Korea’s chief of the Financial Services Commission said: “(The government) is considering both shutting down all local virtual currency exchanges or just the ones who have been violating the law.” Separately, Bank of Korea Governor Lee Ju-yeol told a news conference that “cryptocurrency is not a legal currency and is not being used as such as of now.”

Regulators around the world are still debating how to address risks posed by cryptocurrencies, as bitcoin, the world’s most popular virtual currency, soared more than 1,700% last year. Prices have plummeted since South Korea announced last week it may ban domestic cryptocurrency exchanges. On Wednesday, bitcoin slid 18%. According to Bithumb, South Korea’s second-largest virtual currency exchange, the nation’s bitcoin trading price stood at 15,697,000 won ($14,690.69) as of 0314 GMT on Thursday. On the Luxembourg-based Bitstamp exchange, bitcoin was traded at $11,750. [..] On Thursday, the BOK governor said the central bank had begun looking into the market’s impact on the economy. “We have started looking at virtual currency from a long-term standpoint, as central banks could start issuing digital currencies in the future. This sort of research has begun at the Bank of International Settlements and we are part of that research.”

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“Studies have shown that over 90% of the media’s coverage of President Trump is negative…”

Trump Reveals Winners Of Controversial ‘Fake News Awards’ (AFP)

Donald Trump unveiled the winners of his much-touted “Fake News Awards” late Wednesday, escalating his already persistent attacks on a number of major US media outlets. The awards dropped hours after a senator from Trump’s own Republican party hurled a stinging rebuke at the president, accusing the US leader of undermining the free press with Stalinist language. The brash Republican president announced the ten “honorees” using his preferred medium of Twitter, linking to a list published on the Republican Party’s website that crashed minutes after his big reveal. The “winners” of the spoof awards included top networks and newspapers CNN, The New York Times and The Washington Post, all of which have been regular targets of Trump’s ire.

Nobel-prize winning economist Paul Krugman, who writes a regular opinion column for The New York Times, nabbed the number one spot. The administration said he merited the award for writing “on the day of President Trump’s historic, landslide victory that the economy would never recover.” Following the former reality star’s stunning rise to power, Krugman had written that Trump’s inexperience on economic policy and unpredictability risked further damaging the weak global economy. The list also pointed to a reporting error from ABC’s veteran reporter Brian Ross, who was suspended for four weeks without pay after he was forced to correct a bombshell report on ex-Trump aide Michael Flynn.

[..] 11. And last, but not least: “RUSSIA COLLUSION!” Russian collusion is perhaps the greatest hoax perpetrated on the American people. THERE IS NO COLLUSION!

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“We’re talking about big damages. We’re talking about numbers that you haven’t even thought about,” Trump said.”

Trump Considers Big ‘Fine’ Over China Intellectual Property Theft (R.)

President Donald Trump said on Wednesday the United States was considering a big “fine” as part of a probe into China’s alleged theft of intellectual property, the clearest indication yet that his administration will take retaliatory trade action against China. In an interview with Reuters, Trump and his economic adviser Gary Cohn said China had forced U.S. companies to transfer their intellectual property to China as a cost of doing business there. The United States has started a trade investigation into the issue, and Cohn said the United States Trade Representative would be making recommendations about it soon. “We have a very big intellectual property potential fine going, which is going to come out soon,” Trump said in the interview.

While Trump did not specify what he meant by a “fine” against China, the 1974 trade law that authorized an investigation into China’s alleged theft of U.S. intellectual property allows him to impose retaliatory tariffs on Chinese goods or other trade sanctions until China changes its policies. Trump said the damages could be high, without elaborating on how the numbers were reached or how the costs would be imposed. “We’re talking about big damages. We’re talking about numbers that you haven’t even thought about,” Trump said.

U.S. businesses say they lose hundreds of billions of dollars in technology and millions of jobs to Chinese firms which have stolen ideas and software or forced them to turn over intellectual property as part of the price of doing business in China. The president said he wanted the United States to have a good relationship with China, but Beijing needed to treat the United States fairly. Trump said he would be announcing some kind of action against China over trade and said he would discuss the issue during his State of the Union address to the U.S. Congress on Jan. 30. Asked about the potential for a trade war depending on U.S. action over steel, aluminum and solar panels, Trump said he hoped a trade war would not ensue. “I don’t think so, I hope not. But if there is, there is,” he said.

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This is not going to work. It’s a one way ticket back to Mao.

China’s Communists Take More Stakes In Private Companies (BBG)

After tightening the Communist Party’s grip on state-owned enterprises, President Xi Jinping’s administration is signaling an increasing presence in private companies. Xi has called state enterprises the “backbone” of China’s socialist economy. But most of the giants were founded before the boom in technology-driven industries over the past two decades. That’s created a large swathe of the economy that’s largely private – think tech and consumer champions like Alibaba, Tencent and Baidu, along with innovators in sectors from finance to automation. Now, SOEs are on track to take stakes in private companies. “China wants to maintain state control over every aspect of the national economy, and it needs to keep up with the changes in the economic structure,” said Chen Li at Credit Suisse.

“How can it overlook the most important industries to the future economy?” Much of the overhaul of state-owned enterprises under Xi has focused on a consolidation in the hundreds of sprawling units across the country, such as those that have reshaped the shipping and train-making industries. But a lesser-noticed part of the broad “mixed ownership” initiative features SOEs being encouraged to take stakes in private companies. This part of the initiative has yet to gather pace, though equity strategists anticipate moves to come. They would showcase how China continues to develop its own path toward developed-nation status – not entirely state dominated, but with more control by political authorities than in countries like France that have nurtured state champions.

The head of the Beijing agency that oversees China’s SOEs, Xiao Yaqing, reiterated the push in a People’s Daily article on state enterprise reforms Dec. 13. The private stakes will be acquired through various means, he and other top officials have said. The mechanism has already been applied in the case of the state’s crackdown on financier Xiao Jianhua’s Tomorrow Holding empire. The government ordered the holding company to divest from many of its financial assets, people with knowledge of the matter said this month. State-owned Citic Guoan Group Co. bought a $1.4 billion stake in Hengtou Securities – known as Hengtai on the mainland – with a large part of the purchase coming from Tomorrow Group. Investors applauded the move, in a sign of what could happen when the state invests elsewhere. Hengtou has jumped more than 20% this year after announcing the stake sale.

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More Trump success.

Apple Expects to Pay $38 Billion Tax on Repatriated Cash (BBG)

Apple said it will bring hundreds of billions of overseas dollars back to the U.S., pay about $38 billion in taxes on the money and invest tens of billions on domestic jobs, manufacturing and data centers in the coming years. The iPhone maker plans capital expenditures of $30 billion in the U.S. over five years and will create 20,000 new jobs at existing sites and a new campus it intends to open, the Cupertino, California-based company said Wednesday in a statement. “We are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,” Chief Executive Officer Tim Cook said in the statement, which alluded to unspecified plans by the company to accelerate education programs.

In its December approval of the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations — an unusual arrangement that allowed companies to defer U.S. income taxes on foreign earnings until they returned the income to the U.S. That “deferral” provision led companies to stockpile an estimated $3.1 trillion offshore. By switching to a new system that’s designed to focus on domestic economic activity, congressional tax writers also imposed a two-tiered levy on that accumulated foreign income: Cash will be taxed at 15.5%, less liquid assets at 8%. Companies can pay over eight years. Apple has the largest offshore cash reserves of any U.S. company, with about $252 billion in at the end of September, the most recently reported fiscal quarter.

The company, which opened a new headquarters in Cupertino last year, said it also plans to open another site in the U.S. focused initially on employees who provide technical support to Apple product users. Apple said it will announce the location of the new campus at a later date. The company already has a sprawling campus in Austin, Texas, for supply chain and technical support employees.

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Or maybe not.

Apple May Not Hire 20,000 New Workers, or Bring Back Its Overseas Cash (MW)

Apple announced a series of plans Wednesday that were celebrated as promises to hire thousands of workers and bring home billions of dollars in cash. Well, not necessarily. Apple said in its release that the company planned to “create over 20,000 new jobs through hiring at existing campuses and opening a new one.” The key word there is “create,” which Apple really likes to use when discussing jobs: The company even has a portion of its website dedicated to “job creation” that claims it is “responsible for 2 million jobs” in the United States, most of which are jobs “attributable to the App Store ecosystem.” Apple currently employs 84,000 people in the U.S., it said Wednesday, while an October filing with the Securities and Exchange Commission said that it has a total of 132,000 full-time employees worldwide, suggesting that about a third of its employees work abroad.

A quarter of the 2 million jobs Apple claims responsibility for are positions through Apple’s U.S.-based suppliers. “From the people who manufacture components for our products to the people who distribute and deliver them, Apple directly or indirectly supports hundreds of thousands of U.S. jobs,” Apple says on the page. [..] Many also took Apple’s promise to pay $38 billion in repatriation taxes as a promise that Apple would bring home more than a quarter-trillion dollars it currently has overseas. However, Apple does not have to bring home that money, and much of it is tied up in long-term investments that would make it unlikely. The company has to pay taxes on overseas earnings whether it brings the money back to the United States or not, so paying the tax does not mean the money is coming home.

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What I wrote about last week: “digital super states” like Facebook and Google have been working to “re-establish discourse control”.

Assange Keeps Warning Of AI Censorship (CJ)

In a statement that was recently read during the “Organising Resistance to Internet Censorship” webinar, sponsored by the World Socialist Web Site, Assange warned of how “digital super states” like Facebook and Google have been working to “re-establish discourse control”, giving authority over how ideas and information are shared back to those in power. Assange went on to say that the manipulative attempts of world power structures to regain control of discourse in the information age has been “operating at a scale, speed, and increasingly at a subtlety, that appears likely to eclipse human counter-measures.”

What this means is that using increasingly more advanced forms of artificial intelligence, power structures are becoming more and more capable of controlling the ideas and information that people are able to access and share with one another, hide information which goes against the interests of those power structures and elevate narratives which support those interests, all of course while maintaining the illusion of freedom and lively debate. In an appearance via video link at musician and activist M.I.A.’s Meltdown Festival last June, the WikiLeaks editor-in-chief expounded in far more detail about his thoughts on the potential for artificial intelligence to be used for controlling online information and discourse in a way human intelligence can’t hope to keep up with.

Pointing out how AI can already outmaneuver even the greatest chess players in the world, he describes how programs which can operate with exponentially more tactical intelligence than the human intellect can manipulate the field of available information so effectively and subtly that people won’t even know they are being manipulated. People will be living in a world that they think they understand and know about, but they’ll unknowingly be viewing only establishment-approved information. “When you have AI programs harvesting all the search queries and YouTube videos someone uploads it starts to lay out perceptual influence campaigns, twenty to thirty moves ahead,” Assange said. “This starts to become totally beneath the level of human perception.”

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Sell sell sell.

Australia’s Household Debt-to-Income Ratio Reaches 200% (AFR)

The closely tracked Australian household debt-to-income ratio has now reached the 200% level, and analysts at UBS are concerned about rising pressures among borrowers. The increase was because of the Australian Bureau of Statistics revision to include self-managed superannuation debt. That resulted in a 3% rise in household debt from “extremely elevated levels”, and pushed the ratio to income to 199.7%, “one of the highest in the world,” according to UBS. “With subdued growth in household income expected to continue, this implies household leverage is likely to rise further in the near term,” it said. “As a result we expect total household debt to disposable income to peak around 205% before the slow deleveraging process begins.”

High household debt levels will constrain further borrowing and weigh on prospects for earnings growth at the big banks, analysts Jonathan Mott and Rachel Bentvelzen said as they downgraded their forecasts for housing credit growth. House prices, which have begun to decline in Sydney, are expected to slide further as a result of tighter lending standards, the retreat of foreign buyers, lending limits imposed by regulators and concerns about proposed changes to negative gearing and capital gains tax that have been tabled by the Opposition. “Sentiment for investment into the housing market is waning, with the ‘fear of missing out’ euphoria fading quickly, especially in Sydney,” the analysts said in a note to clients.

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The insanity of today.

Mario Draghi Told To Drop Membership Of Secretive Bankers’ Club (G.)

The president of the European Central Bank has been told by the EU’s watchdog he should drop his membership of a secretive club of corporate bankers, after claims the group had been given an inside seat from which it could influence key policies. Following a year-long investigation, Mario Draghi was informed on Wednesday by the European ombudsman, Emily O’Reilly, that his close relationship with the Washington-based G30 group threatened the reputation of the bank, despite his assurances to the contrary. Members of the exclusive club, of which only two of the current 33 are women, are chosen by an anonymous board of trustees, it emerged during the ombudsman’s investigation. Only the identity of the chair of the trustees, Jacob A Frenkel, the chairman of JPMorgan Chase, has been made public.

O’Reilly noted the group’s secrecy and lack of transparency over the content of its meetings. She additionally called for a ban on all future presidents of the ECB taking up membership of the club, previously named the Consultative Group on International Economic and Monetary Affairs. The ruling followed a complaint by the Corporate Europe Observatory (CEO), a Brussels-based NGO, which claimed Draghi’s close relationship to G30 was in contravention of the ECB’s ethical code. During his presidency of the ECB, Draghi, an Italian economist who previously worked at Goldman Sachs, has attended four G30 meetings, in 2012, 2013 and twice in 2015.

O’Reilly said there was a danger that the bank’s independence could be perceived to have been compromised by Draghi’s involvement with the group, whose members include a number of central bank governors, private sector bankers and academics. The governor of the Bank of England, Mark Carney, is a member. But O’Reilly said there was no evidence of sensitive information being shared. The ombudsman said: “The ECB takes decisions that directly affect the lives of millions of citizens. In the aftermath of the financial crisis, and in consideration of the additional powers given to the ECB in recent years to supervise member state banks in the public interest, it is important to demonstrate to that public that there is a clear separation between the ECB as supervisor and the finance industry which is affected by its decisions.”

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Not one word about emissions. Not one. Oh wait, “continuous improvements to its safety, security, efficiency and environmental footprint “. Pants on fire.

Global Air Traffic At New Record (AFP)

Budget carriers continued to push global air traffic to new record levels last year, the International Civil Aviation Organization (ICAO) said on Wednesday. Scheduled air services carried “a new record” of 4.1 billion passengers in 2017, an increase of 7.1% over the previous year, ICAO said, citing preliminary data. The figure compares with 6% growth in 2016. “The sustainability of the tremendous growth in international civil air traffic is demonstrated by the continuous improvements to its safety, security, efficiency and environmental footprint,” ICAO Council president Olumuyiwa Benard Aliu said in a statement from the Montreal-based agency.

Early this month, two industry studies showed that last year was the safest for civil aviation since plane crash statistics were first compiled in 1946. A total of 10 crashes of civil passenger and cargo planes claimed 44 lives, said the Aviation Safety Network. A separate report from the To70 agency said no major airline crashed a plane in 2017. ICAO, a United Nations agency, said Wednesday that low-cost carriers flew an estimated 1.2 billion passengers or about 30% of the global total last year. The budget airline sector “consistently grew at a faster pace compared to the world average growth, and its market share continued to increase, specifically in emerging economies,” ICAO said.

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Missed opportunity: including the emissions of electric cars.

Europe’s Microwave Ovens Emit Nearly As Much CO2 As 7 Million Cars (G.)

Popping frozen peas into the microwave for a couple of minutes may seem utterly harmless, but Europe’s stock of these quick-cook ovens emit as much carbon as nearly 7m cars, a new study has found. And the problem is growing: with costs falling and kitchen appliances becoming “status” items, owners are throwing away microwaves after an average of eight years, pushing rising sales. A study by the University of Manchester worked out the emissions of carbon dioxide – the main greenhouse gas responsible for climate change – at every stage of microwaves, from manufacture to waste disposal. “It is electricity consumption by microwaves that has the biggest impact on the environment,” say the authors.

“Efforts to reduce consumption should focus on improving consumer awareness and behaviour to use appliances more efficiently. For example, electricity consumption by microwaves can be reduced by adjusting the time of cooking to the type of food.” Each year more microwaves are sold than any other type of oven in the EU: annual sales are expected to reach 135m by the end of the decade. David Reay, professor of carbon management at the University of Edinburgh, pointed out that the damage done by microwaves is still a fraction of that done by cars. “Yes, there are a lot of microwaves in the EU, and yes they use electricity,” he said.

“But their emissions are dwarfed by those from cars – there are around 30m cars in the UK alone and these emit way more than all the emissions from microwaves in the EU. Latest data show that passenger cars in the UK emitted 69m tonnes of CO2 equivalent in 2015. This is ten times the amount this new microwave oven study estimates for annual emissions for all the microwave ovens in the whole of the EU.” The energy used by microwaves is lower than any other form of cooking. uSwitch, the price comparison website, lists microwaves as the most energy efficient, followed by a hob and finally an oven, advising readers to buy a microwave if they don’t have one. However, they urge owners to switch them off at the wall after use, to avoid powering the clock.

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The Guardian can try to chest thump as much as it wants, but it too got triggered for real only through David Attenborough’s Blue Planet II, just like Theresa may et al.

1 Million Tonnes A Year: UK Supermarkets Shamed For Plastic Packaging (G.)

Britain’s leading supermarkets create more than 800,000 tonnes of plastic packaging waste every year, according to an investigation by the Guardian which reveals how top chains keep details of their plastic footprint secret. As concern over the scale of unnecessary plastic waste grows, the Guardian asked Britain’s eight leading supermarkets to explain how much plastic packaging they sell to consumers and whether they would commit to a plastic-free aisle in their stores. The chains have to declare the amount of plastic they put on the market annually under an EU directive. But the information is kept secret, and Tesco, Sainsbury’s, Morrisons, Waitrose, Asda and Lidl all refused the Guardian’s request, with most saying the information was “commercially sensitive”. None committed to setting up plastic-free aisles – something the prime minister called for last week.

Only two supermarkets, Aldi and the Co-op, were open about the amount of plastic packaging they put on to the market. Using their data, and other publicly available market share information, environmental consultants Eunomia estimated that the top supermarkets are creating a plastic waste problem of more than 800,000 tonnes each year – well over half of all annual UK household plastic waste of 1.5m tonnes. The 800,000 tonnes of waste from food and beverage products would fill enough large 10-yard skips to extend from London to Sydney, or cover the whole of Greater London to a depth of 2.5cm. The revelations will add to mounting public concern about the damage that plastic does to the natural world. The Guardian has already revealed the vertiginous growth in plastic production, and the heavy environmental toll it exacts.

Dominic Hogg, chairman of Eunomia, said the figures could be higher. “The data reported for plastic packaging put on the market as a whole is an underestimate in our view,” said Hogg. Supermarkets in the UK keep their plastic footprint secret with a confidentiality agreement signed with the agencies involved in the British recycling compliance scheme. It means the amount of plastic packaging created by each supermarket and the money they pay towards its recycling is kept out of the public domain. One leading supermarket manager is calling for the whole system to be made more transparent and targeted to make the irresponsible producers pay more. Iain Ferguson, head of sustainability at the Co-op, said Britain should adopt the French system of “bonus-malus”, where supermarkets are taxed more for using material which is not easily recyclable and less for sustainable and recyclable packaging.

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And it really is this simple.

The Plastic-Free Stores Showing The Big Brands How To Do It (G.)

In the past few weeks Richard Eckersley has noticed a change in the type of people who come into his shop. The former Manchester United footballer, who turned his back on the game to set up the the UK’s first “zero waste” store on Totnes high street in Devon, says it is no longer only committed environmentalists who pop in, looking for a cleaner way to shop. “We thought January might be a bit quieter but it has been crazy,” says Eckersley, who set up the Earth.Food.Love shop with his wife Nicola in March. “A lot of new people are coming in – people who have not necessarily been involved in green issues before … it really feels like this [concern about plastic waste] is starting to break out of the environmental bubble.”

Last week Theresa May put cutting plastic pollution at the heart of the government’s 25-year environmental plan, and although critics said it was short on detail she did call for supermarkets to introduce plastic-free aisles to offer customers more choice. But Eckersley says many consumers are already way ahead of politicians. He and his wife have helped people who are planning to set up similar stores in Wales, Birmingham and Bristol. “We are getting calls every week from around the country from people wanting to set up something similar in their towns … it feels like this has really tapped into something that is growing all the time.” More than 200 miles away, Ingrid Caldironi shares the enthusiasm. She set up the plastic-free Bulk Market in east London last year. It has proven so popular that it is now moving to bigger, permanent premises at the end of the month.

“We have had an amazing response, especially in the last couple of months,” she says. Eckersley and Caldironi are at the vanguard of a burgeoning anti-plastics movement in the UK that has been fuelled by newspaper investigations including the Guardian’s Bottling It series, the Blue Planet television series and a general alarm at the damage plastic is doing to the natural environment. But their enthusiasm is not shared by big supermarkets, which have thus far shown little inclination to reduce their plastic waste. “For a nation of shopkeepers we are lagging behind in this race,” says Sian Sutherland, founder of the campaign A Plastic Planet which led the calls for plastic-free aisles. “The most exciting thing is that politicians and industry are no longer claiming that we can recycle our way out of the plastic problem,” she added. “Banning the use of indestructible plastic packaging for food and drink products is the only answer.”

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Jan 102018
 
 January 10, 2018  Posted by at 10:19 am Finance Tagged with: , , , , , , , , , , , ,  


Ansel Adams The Tetons and the Snake River 1942

 

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)
Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)
Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)
People Have A Hard Time Even Imagining How The Market Could Decline (ZH)
World Bank Issues Warnings On Interest Rates And Inflation (G.)
South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)
Apple’s Privacy Feature Costs Ad Companies Millions (G.)
Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)
Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)
Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)
The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)
Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

 

 

The Last of the Mohicans. But does Japan really want to, and can it, carry the global financial system on its shoulders now the Fed and ECB no longer want to do their share?

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)

The Bank of Japan is seen as the last grown-up in the room actively filling the global liquidity punch bowl with both hands. That’s why a slight tweak to its bond-buying program caused a flurry across financial markets Tuesday, sparking speculation it was joining the Fed and ECB in cutting back on asset purchases, a move that could ultimately help drive up global interest rates. On Tuesday, the BOJ modestly trimmed its purchases of Japanese government bonds by about $10 billion in the 10- to 25-year maturities and another $10 billion in maturities of more than 25 years. The yen jumped about 0.5% to about 112.60 to the dollar, and bond yields rose. The U.S. 10-year yield also moved higher, breaking above the key 2.50% to as high as 2.55%. Meanwhile, the 10-year JGB yield moved in a range of about 0.16 and saw a high of 0.074%.

But some strategists say while the BOJ may have sent a powerful signal, it is just acting on a technicality that comes with changes it made to its bond purchase program back in 2016. Unlike the U.S. and Europe, where central banks have targeted the balance sheet size, the Japanese central bank is targeting interest rates and its purchases are based on prices. “I think it’s too early to proclaim the easy conditions in Japan are over. That said, I do think it’s constructive and it shows how sensitive the markets are to any potential change,” said Greg Peters, senior portfolio manager at PGIM Fixed Income. The Bank of Japan has been a poster child for central bank easing, taking its rates to negative levels and buying all types of assets, including stocks.

“They’re still buying ETFs, J-REITs, corporate paper. They changed how they’re easing, but they’re still easing,” said Marc Chandler, head of fixed-income strategy at Brown Brothers Harriman. “I think the market is overinterpreting this, partly because of their positions. They’re short yen. They’re long euros. They’re being squeezed on both legs today.” [..] While it’s last to leave the party, a change in BOJ policies would be the most symbolic move yet that the extreme policies adopted in the global financial crisis are finally coming to an end, and the juice that helped push risk assets higher is being slowly withdrawn. Chandler said the BOJ has made a point of saying it will continue to ease. “The BOJ says, ‘We’re going to be patient. We’re going to be the last one out.’ … [Prime Minister Shinzo] Abe told the Bank of Japan..

“If long rates continue to move higher, and the BOJ follows this with a continued reduction in the pace of the purchases, then we know we’re on to something. We’re on to a potential change in monetary policy in Japan,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “I think that is likely in 2018,” Boockvar said. “Whether this is the beginning of it, we’ll have to see. They have some cover too. They know what the Fed is going to do, and they know what the ECB is doing. Does the BOJ want to be the outlier of temporary insanity when every other central bank is pulling back? They are the epitome of extremity in terms of monetary policy.”

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Fed interference will go down in history as the uttermost of stupidities. Not yet though, the narrative of saving the economy can still be kept alive. But wait till things go south.

Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)

Federal Reserve officials puzzled by chronically-low US inflation seem to agree on at least one thing: They worry, almost universally, that they will lack the tools to fight the next recession, whenever it comes. Yet instead of focusing on tried and true policy measures like low interest rates and possibly bond buys, Fed officials current and former appear focused instead on broad shifts in the policy framework, including moving away from the current inflation targeting regime toward a potentially more aggressive approach. More importantly, the string of discordant ideas being offered up at a Brookings Institution conference by such high profile figures as former Fed Chairman Ben Bernanke, former White House economic advisor Lawrence Summers, and two current Fed members, does more to confuse the already muddled outlook for monetary policy than clarify it.

Boston Fed President Eric Rosengren suggested the Fed follow the model of the Bank of Canada, which periodically reviews its approach to maintaining price stability. He also called for the Fed to move toward an inflation target range, which he hinted might be from 1.5% to 3%, rather than the current 2% goal. John Williams, president of the San Francisco Fed, called for a system where the Fed would target the price level, meaning that it would compensate periods of undershooting the 2% inflation goal with periods of overshooting. US inflation has remained stubbornly below the Fed’s 2% target for much of the economic recovery, suggesting the labor market is not as healthy as the 17-year low unemployment rate of 4.1% suggests.

Shifting to a price-level target is “not nearly as scary as you might think” Williams told the audience of monetary economists, academics, and market participants. He worried about the “issue of credibility” that has resulted from persistently below-target inflation, which makes it look ” like the central bank is not committed to its goals.” Prolonged low inflation, which also reflects soft wage growth, can make monetary policy less effective because “it gets into inflation expectations and makes it harder to achieve 2% objective in good times.”

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Possible in theory, but with CB tightening not in practice.

Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)

Worried about higher interest rates putting a dent on the stock market’s rip-roaring rally? Fear not, a rise in rates will actually help stocks, according to legendary investor Bill Miller. “Those 10-year yields go through 2.6% and head towards 3%, I think we could have the kind of melt-up we had in 2013, where we had the market go up 30%,” Miller, the founder of Miller Value Partners, told CNBC’s “Closing Bell” on Tuesday. “If we can get the 10-year towards that 3% level, you’ll see the same thing.” “In 2013, people finally began to lose money in bonds. They took money out of bond funds and put it into equity funds,” Miller said. Miller is considered one of the best investors ever, after beating the market for 15 years in a row while working at Legg Mason. Stocks have been on a rip-roaring rally for more than a year, as economic data and corporate earnings have improved.

On Tuesday, they closed at fresh record highs. But some experts fear the improvements in the economy could force the Federal Reserve to tighten monetary policy faster than they forecast, thus pushing interest rates higher. The 10-year U.S. Treasury yield rose to 2.55% on Tuesday and hit its highest level since March.The yield has not traded above 3% since early 2014. It last traded above 2.6% last March. But Miller thinks the stock market could get another boost from lower corporate tax rates. President Donald Trump signed a bill in December that slashed the corporate tax rate to 21% from 35%. “The tax cuts are probably partly in the market, but maybe not wholly in the market because we’re seeing things like companies raising the minimum wage, giving bonuses,” he said. “The people that are getting those $1,000 bonuses probably have a marginal propensity to consume of 99%.”

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It’s high time for that decline then.

People Have A Hard Time Even Imagining How The Market Could Decline (ZH)

A calm complacency never before seen has fallen blanket-like over US equity markets. “The behavior of volatility has entirely changed since 2014,” noted BAML in a a recent note thanks to major central banks keeping interest rates near historic lows (and printed more money than ever before). As The Wall Street Journal points out, One sign of that: VIX closed below 10 more times last year than any others year in its history, and until today, closed below 10 for the first 5 days of 2018… And while correlation is not causation, there is a clear causal link between the conditioning now deeply embedded within investors’ minds and the endless expansion of central bank balance sheets…

As JPMorgan’s infamous quant guru Marko Kolanovic wrote, “the first four Fed hikes in a decade have failed to generate the revival of volatilities that many had expected at the end of last year,” and a wave of political uncertainty linked to U.S. tensions with North Korea and the new presidential administration also raised the prospect that market tumults could occur with greater frequency… but no… In fact worse still for The Fed, financial conditions eased as they tightened and vol collapsed to levels never seen before…

All of which has led, as The Wall Street Journal reports, to a number of investors abandoning defensive positions taken to protect against a market downturn, in the latest sign that many doubters are shedding caution as the long rally rolls on. “I haven’t seen hedging activity this light since the end of the financial crisis,” said Peter Cecchini, a New York-based chief market strategist at Cantor Fitzgerald. “It started in late 2016 and accelerated in the second half of the year.” But as Morgan Stanley warns in a recent note, what goes up (this fast) typically comes down… “Our team has observed a dramatic shift in sentiment since we initiated coverage in April. In April, it felt as if people were looking for a reason for the market to fail. Now, we have seen a total reversal with people having a hard time even imagining how the market could decline.”

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Recovery is just a story. Unless it has become viable to fight debt with more debt.

World Bank Issues Warnings On Interest Rates And Inflation (G.)

Financial markets are complacent about the risks of sharply higher interest rates that could be triggered by better than expected growth in the global economy this year, the World Bank has warned. The Washington-based organisation said that much of the rich west was running at full capacity as a result of a broad-based upswing in activity, but were now vulnerable to a period of rising inflation that would prompt action from central banks. Launching the Bank’s global economic prospects, the lead author Franziska Ohnsorge said: “There could be faster than expected inflation that would mean faster than expected interest rate hikes.” Ohnsorge added that stock markets were at levels similar to those seen before the Wall Street Crash of 1929, while bond markets were assuming that low inflation would keep official borrowing costs down.

“Financial markets are vulnerable to unforeseen negative news. They appear to be complacent,” she said, while announcing that the Bank has revised up its 2018 forecast for the global economy following a better than expected performance in the US, China, the eurozone and Japan in 2017. In its half-yearly assessment, the Bank said a recovery in manufacturing, investment and trade would mean global growth of 3.1% this year, up from the 2.9% pencilled in last June. But it warned the acceleration in growth would be temporary unless governments implemented structural reforms to raise long-term growth potential. “The broad-based recovery in global growth is encouraging, but this is no time for complacency,” said Jim Yong Kim, the World Bank’s president.

“This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries’ productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity.”

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They’re even planning to march in the Olympics opening ceremony together.

South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)

South Korean President Moon Jae-in credited U.S. President Donald Trump on Wednesday for helping to spark the first inter-Korean talks in more than two years, and warned that Pyongyang would face stronger sanctions if provocations continued. The talks were held on Tuesday on the South Korean side of the demilitarized zone, which has divided the two Koreas since 1953, after a prolonged period of tension on the Korean peninsula over the North’s missile and nuclear programs. North Korea ramped up its missile launches last year and also conducted its sixth and most powerful nuclear test, resulting in some of the strongest international sanctions yet. The latest sanctions sought to drastically cut the North’s access to refined petroleum imports and earnings from workers abroad. Pyongyang called the steps an “act of war”.

Seoul and Pyongyang agreed at Tuesday’s talks, the first since December 2015, to resolve all problems between them through dialogue and also to revive military consultations so that accidental conflict could be averted. “I think President Trump deserves big credit for bringing about the inter-Korean talks, I want to show my gratitude,” Moon told reporters at his New Year’s news conference. “It could be a resulting work of the U.S.-led sanctions and pressure.” Trump and North Korean leader Kim Jong Un exchanged threats and insults over the past year, raising fears of a new war on the peninsula. South Korea and the United States are technically still at war with the North after the 1950-53 Korean conflict ended with a truce, not a peace treaty.

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Ads are killing the experience. Most people by now have ad blockers. That whole industry needs drastic change.

Apple’s Privacy Feature Costs Ad Companies Millions (G.)

Internet advertising firms are losing hundreds of millions of dollars following the introduction of a new privacy feature from Apple that prevents users from being tracked around the web. Advertising technology firm Criteo, one of the largest in the industry, says that the Intelligent Tracking Prevention (ITP) feature for Safari, which holds 15% of the global browser market, is likely to cut its 2018 revenue by more than a fifth compared to projections made before ITP was announced. With annual revenue in 2016 topping $730m, the overall cost of the privacy feature on just one company is likely to be in the hundreds of millions of dollars. Dennis Buchheim, general manager of the Interactive Advertising Bureau’s Tech Lab, said that the feature would impact the industry widely.

“We expect a range of companies are facing similar negative impacts from Apple’s Safari tracking changes. Moreover, we anticipate that Apple will retain ITP and evolve it over time as they see fit,” Buchheim told the Guardian. “There will surely be some continued efforts to ‘outwit’ ITP, but we recommend more sustainable, responsible approaches in the short-term,” Buchheim added. “We also want to work across the industry (ideally including Apple) longer-term to address more robust, cross-device advertising targeting and measurement capabilities that are also consumer friendly.” ITP was announced in June 2017 and released for iPhones, iPads and Macs in September. The feature prevents Apple users from being tracked around the internet through careful management of “cookies”, small pieces of code that allow an advertising technology company to continually identify users as they browse.

Its launch sparked complaints from the advertising industry, which called ITP “sabotage”. An open letter signed by six advertising trade bodies called on Apple “to rethink its plan … [that risks] disrupting the valuable digital advertising ecosystem that funds much of today’s digital content and services.” It also accused the company of ignoring internet standards, which say that a cookie should remain on a computer until it expires naturally or is manually removed by a user. Instead, the industry said, Apple is replacing those standards “with an amorphous set of shifting rules that will hurt the user experience and sabotage the economic model for the internet”.

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We haven’t heard the last of this flaw which is actually a feature.

Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)

Microsoft’s workaround to protect Windows computers from the Intel processor security flaw dubbed Meltdown has revealed the rootkit-like nature of modern security tools. Some anti-malware packages are incompatible with Redmond’s Meltdown patch, released last week, because the tools make, according to Microsoft, “unsupported calls into Windows kernel memory,” crashing the system with a blue screen of death. In extreme cases, systems fail to boot up when antivirus packages clash with the patch. The problem arises because the Meltdown patch involves moving the kernel into its own private virtual memory address space. Usually, operating systems such as Windows and Linux map the kernel into the top region of every user process’s virtual memory space.

The kernel is marked invisible to the running programs, although due to the Meltdown design oversight in Intel’s modern chips, its memory can still be read by applications. This is bad because it means programs can siphon off passwords and other secrets held in protected kernel memory. Certain antivirus products drill deep into the kernel’s internals in order to keep tabs on the system and detect the presence of malware. These tools turn out to trash the computer if the kernel is moved out the way into a separate context. In other words, Microsoft went to shift its cookies out of its jar, and caught antivirus makers with their hands stuck in the pot. Thus, Microsoft asked anti-malware vendors to test whether or not their software is compatible with the security update, and set a specific Windows registry key to confirm all is well.

Only when the key is set will the operating system allow the Meltdown workaround to be installed and activated. Therefore, if an antivirus tool does not set the key, or the user does not set the key manually for some reason, the security fix is not applied. In fact, until this registry key is set, the user won’t be able to apply any Windows security updates – not just this month’s patches, but any of them in the future.

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UK and US will not give in any time soon.

Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)

Ecuador’s foreign minister has said Julian Assange’s five-and-a-half-year stay in her country’s London embassy is “untenable” and should be ended through international mediation. The WikiLeaks founder has been holed up in Knightsbridge since the summer of 2012, when he faced the prospect of extradition to Sweden over claims that he sexually assaulted two women. He denies the accusations. Swedish prosecutors last year unexpectedly dropped their investigation into the allegations, which included a claim of rape. But Assange still faces arrest for breaching bail conditions if he steps outside the embassy and WikiLeaks has voiced fears that the US will seek his extradition and that there is a sealed indictment ordering his arrest. [..] Jeff Sessions, said last May that Assange’s arrest was now a “priority”.

Ecuador’s foreign minister, María Fernanda Espinosa, said her country was now seeking a “third country or a personality” to mediate a final settlement with the UK to resolve the impasse and said it was “considering and exploring the possibility of mediation”. “No solution will be achieved without international cooperation and the cooperation of the United Kingdom, which has also shown interest in seeking a way out,” she told foreign correspondents in Quito, according to Agence France-Presse. Assange, who has received numerous visitors to his modest quarters in the embassy, ranging from Nigel Farage to Lady Gaga, has described the period since his initial arrest as a “terrible injustice”. Not being able to see his children grow up was “not something I can forgive”, he said.

[..] On Tuesday evening, a lawyer for Assange appeared to welcome Ecuador’s proposal. He said his client had a right to asylum and argued that the risk of him being persecuted in the US had “escalated further in recent months under the Trump administration’s war on WikiLeaks” and that the investigation in Sweden had twice been discontinued. “If the UK wishes to show that it is a nation that respects its human rights obligations and commitments to the United Nations, it is time for Mr Assange to be allowed to enjoy his right to liberty, and fundamental right to protection against persecution in the United States,” he said. A spokesperson for the UK government said: “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

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“Julian Assange isn’t hiding from justice, he’s hiding from injustice.”

Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)

Private Manning was tortured. As sure as if they’d strapped her down and set upon her flesh with fire and steel, she was tortured. United Nations special rapporteur on torture Juan E. Mendez stated unequivocally in 2012 that Manning’s treatment at the hands of the US government during her imprisonment was “cruel, inhuman and degrading,” after 295 legal scholars had already signed a letter in 2011 declaring that she was being “detained under degrading and inhumane conditions that are illegal and immoral.” Humans, like all primates, are evolutionarily programmed to be social animals, which is why solitary confinement causes our systems to become saturated in distress signals as real as pain or fear. Studies have shown that fifteen days of this draconian practice causes permanent psychological damage. Manning was in solitary confinement for nearly a year.

Manning attempted suicide in July of 2016. To punish her for her attempt to end her misery, they tortured her some more. She attempted suicide again three months later. The same sadistic regime which inflicted these horrors upon Manning has during the current administration prioritized the arrest of WikiLeaks editor-in-chief Julian Assange, and the international arms of the US power establishment have been working to facilitate that aim. The Guardian reports that Ecuador’s foreign minister is now saying Assange’s continued stay in the nation’s London embassy has become “untenable” and is seeking international mediation, to which a spokesman for the UK government has responded that “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

Justice. A government whose international operations are uniformly indistinct from America’s wants Assange to leave political asylum and trust his life to an international power establishment that tortures whistleblowers in the name of “justice”. Julian Assange isn’t hiding from justice, he’s hiding from injustice. What sane human being wouldn’t? Time after time after time we are shown that whistleblowers, leakers, and those who facilitate them are not shown anything remotely resembling justice by this depraved Orwellian establishment. Which is why Australia must intervene and protect him.

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The value of your life plunges along with that of others.

The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)

More than 15,000 civilians were killed by explosive weapons in 2017, a 42 percent increase on last year, while deaths by airstrikes increased by 82 percent, a new study by Action on Armed Violence has found. The research shows that, while official stats on civilian casualties are on the rise, they’re still modest in comparison to the “true figures.” “The US has a habit of assuming all fighting-aged men are, in fact, fighters…This is the hammer that the US uses to establish the truth in war,” the organization’s Executive Director Iain Overton told RT. Much of the increase is due to the battles to retake Islamic State strongholds in Mosul, Iraq and Raqqa, Syria. The Syrian conflict and the Saudi-led coalition bombing Yemen also accounted for a large proportion of civilian deaths.

The survey, found 8,932 civilians were killed by air-launched explosives in the first 11 months of 2017, compared to 4,902 during the same period in 2016. “At least 60 countries around the world saw explosive weapons being used last year,” Action on Armed Violence’s Executive Director Iain Overton told RT. “We have always acknowledged that our data would likely represent a lower figure of total civilians killed or injured than might actually be the case,” Overton said. “This is particularly true when there is a single fatality or wounding, and particularly in under-reporting of those injured by a bomb blast.” “When the fog of war descends casualty figures often fall short – both because they become highly politicized and because accurate reporting is often a casualty of war itself,” he added.

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Europe has no morals left.

Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

Survivors from a boat that foundered off Libya’s coast on Tuesday said about 50 people who had embarked with them were feared dead, while the coastguard said the number of missing might be as high as 100. Libyan coastguard vessels picked up nearly 300 migrants from three boats off the coast of the North African country on Tuesday, but one rubber boat was punctured and the coastguard only found 16 survivors clinging to its wreckage. “We found the migrant boat at about 10 o’clock this morning. It had sunk and we found 16 migrants. The rest were all missing and, unfortunately, we didn’t find any bodies or [other] survivors,” said Nasr al-Qamoudi, a coastguard commander.

Several of the survivors, who were brought back to a naval base in Tripoli, said there were originally about 70 people on board the boat when it set off near the town of Khoms, east of the capital. A coastguard statement later said that “at least 90-100” migrants were missing. The two other migrant boats were found off Zawiya, west of Tripoli. [..] Libya is the most common departure point for migrants trying to reach Europe from Africa by sea. More than 600,000 have crossed the central Mediterranean in the past four years, generally travelling in flimsy inflatable craft provided by smugglers that often break down or puncture. Under heavy pressure from Italy, some Libyan armed factions have blocked smuggling since last summer. Libya’s Italian-backed coastguard has also stepped up interceptions, returning migrants to Libya, where they are detained and often re-enter smuggling networks.

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Jan 092018
 
 January 9, 2018  Posted by at 10:26 am Finance Tagged with: , , , , , , , , , , , ,  


Thomas Abercrombie Beirut 1957

 

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)
US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)
Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)
The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)
Retail Investors Are Finally True Believers with Record Exposure (WS)
iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)
‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)
The Decline of Anti-Trumpism (David Brooks)
Cryptocurrencies Are Selling Off (BBG)
Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)
US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)
Fairy Tale (Jim Kunstler)
Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)
Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

 

 

A nation of expendables. To think how hard earlier generations fought for health care.

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)

As tax season approaches, some consumers are waiting for their refund checks to spend on a long-delayed purchase – a visit to the doctor or dentist. U.S. consumers boosted their out-of-pocket health spending by 60% in the week after they got a tax refund, according to new research from JPMorgan Chase, based on data from Chase customer accounts. Spending stayed high for about 2 1/2 months, with about two-thirds of the extra spending money going to in-person payments to doctors and dentists. Much of the rest was used to pay down past bills. Health insurers and employers have raised copays and deductibles for consumers, making them bear a larger portion of the cost of care when they go see a health-care provider.

As a result, patients sometimes lack the cash to get the care they may need, according to the report. “Cash-flow dynamics are a significant driver of out-of-pocket spending for health care,” the study found. “Even when consumers knew with near-certainty the size and source of a major cash infusion, they still waited until the infusion arrived before spending.” The researchers found that availability of cash had far less of an impact on health-spending decisions among those with credit cards, or who had higher bank-account balances.

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Until about 1970, the US had the lowest child mortality rates. Then something happened.

US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)

The United States has the worst child mortality rate among a group of 20 wealthy democracies, an analysis released Monday found. And despite overall improvement in the child mortality rate in the U.S. and those 19 other countries, the U.S. has persistently outpaced those nations in that grim metric for decades, the Health Affairs report said. “From 2001 to 2010, the risk of death in the US was 76% greater for infants and 57% greater for children age 1-19,” the report said. And during the same decade, children between the ages of 15 and 19 were 82 times more likely to die from gun-related homicide in the U.S. than in the comparison countries.

The authors of the Health Affairs report said that in the full 50-year period their study looked at, the U.S. had more than “600,000 excess deaths” among kids because of the country’s lagging performance in curbing child mortality. Those excess deaths have occurred even as the U.S. spends more money on health care for kids than the other countries. Among the countries looked at, “there has never been a better time to be born in any of these 20 countries,” the Health Affairs report said. “Despite this generalized trend, children are less likely to survive and transition into adulthood in the US than in other [countries examined],” the report said. “Persistently high poverty rates, poor educational outcomes, and a relatively weak social safety net have made the US the most dangerous of wealthy nations for a child to be born into.”

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Due to the tax law.

Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)

New Chapter 11 bankruptcies in the US more than doubled in December 2017 from a year ago to 699 filings. That jump of 362 filings from December 2016 was the largest year-over-year jump since the Financial Crisis. This chart shows Chapter 11 filings back to 2011, based on data from the American Bankruptcy Institute. I marked the prior five Decembers with red dots. Note how they’re near the low point of the seasonal swings. That makes the spike in December 2017 even more spectacular. A spike like this in Chapter 11 filings in a month of December is unheard of in normal times. Normally, bankruptcies jump during tax season, the first four or five months of the year, but not at the end of the year. But these are not normal times.

In December, Chapter 11 filings soared 61% from November. This is also highly unusual, as over the prior five years, presumably the “normal times,” the number of filings from November to December has fallen by an average 8.7%. The chart below shows the year-over-year change in Chapter 11 filings. I marked the prior Decembers in yellow. I circled the oil bust and the brick-and-mortar meltdown. But December 2017 was special.

I think companies and their owners and creditors know one thing: They can write off losses in 2017 under the old corporate tax rates, at 35%, thus getting the government to pick up 35% of the tab of their losses via lower taxes. In 2018, the new tax law applies and all kinds of uncertainties have yet to be ironed out, and these companies – the owners and creditors – are thinking (I assume) that it’s better to try to recognize the loss in 2017, support it with a Chapter 11 filing, and pull the write-off into 2017 against a tax rate of 35%, rather than 21% in 2018. A tax-law change of this drastic nature motivates people jump through all kinds of hoops to save some money – including waiting in line for hours to pay property taxes early, a hitherto unthinkable strategy. And I think this is the likely suspect for the spike.

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Wonderful history lesson about the robber barons. Go read.

The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)

The U.S. is now living through a second Gilded Age. Where once the robber barons were millionaires, today they’ve added a few zeros to their wealth and became billionaires. However, they act with no-less impunity, but a greater sense of entitlement. The Trump administration, together with the Republican-controlled Congress, are functional shills for the current generation of robber barons. As evident from the recently-passed tax bill, legislators jump when their big-money donors order them to deliver the goods — and they did. The U.S. economy has rebounded from the 2007-2009 “great recession,” with the stock market hitting new highs, unemployment the lowest in a generation and home prices recovering. But Americans still haven’t regained the wealth they lost, with incomes remaining stagnant and, on the whole, working Americans worse off than since the late-1990s.

The Federal Reserve’s most recent Survey of Consumer Finances finds that median net worth for all families (measured in 2016 dollars) dropped 8% since 1998. Most sobering, the poorer you are, the worst your fate – and this is compounded by race, education level, gender and age factors. America’s poorest, the bottom fifth, saw their net worth fall 22%; the broad working class, the second-lowest income tier, were the hardest hit with their net worth shrinking by more than a third (34%); and those dubbed “middle class,” with incomes from $43,501 to $69,500, were barely treading water, with their worth gaining a whopping 3.5%. Since 1998, the top 10% saw their worth rise 146%. The share of the nation’s wealth held by the top 1% rose to 38.6% while that portion controlled by the bottom 90% fell 22.8% (from 33.2% in ’89).

Looking at the nation’s income for the period of 2013 to 2016, the same phenomenon is evident: income going to the top 1% climbed to 23.8% (from 20.3%) while the share going to the bottom 90% slipped to about 50% (from 54%). And then there is debt, the lubricant of the U.S. post-WW-II “consumer revolution.” During the 2013 to 2016 period, those with the lowest income (below $25,300), saw their debt rise by 57%; for the lower-middle class (incomes between $25,301 and $43,500), debt increased 58%; and for the middle class (incomes from $43,501 to $69,500), debt rose by a modest 12.5%.

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What beaking points are made of.

Retail Investors Are Finally True Believers with Record Exposure (WS)

As far as the stock market is concerned, it took a while – in fact, it took eight years, but retail investors are finally all in, bristling with enthusiasm. TD Ameritrade’s Investor Movement Index rose to 8.59 in December, a new record. TDA’s clients were net buyers for the 11th month in a row, one of the longest buying streaks and ended up with more exposure to the stock market than ever before in the history of the index. This came after a blistering November, when the index had jumped 15%, “its largest single-month increase ever,” as TDA reported at the time, to 8.53, also a record:

Note how retail investors had been to varying degrees among the naysayers from the end of the Financial Crisis till the end of 2016, before they suddenly became true believers in February 2017. “I don’t think the investors who are engaging regularly are doing so in a dangerous fashion,” said TDA Chief Market Strategist JJ Kinahan in an interview. But he added, clients at the beginning of 2017 were “up to their knees in it and then up to their thighs, and now up to their chests.” The implication is that they could get in a little deeper before they’d drown. “As the year went on, people got more confident,” he said. And despite major geopolitical issues, “the market was never tested at all” last year. There was this “buy-the-dip mentality” every time the market dipped 1% or 2%.

But one of his “bigger fears” this year is this very buy-the-dip mentality, he said. People buy when the market goes down 1% or 2%, and “it goes down 5%, then it goes down 8% — and they turn into sellers, and then they get an exponential move to the downside.” In addition to some of the big names in the US – Amazon, Microsoft, Bank of America, etc. – TDA’s clients were “believers” in Chinese online retail and were big buyers of Alibaba and Tencent. But they were sellers of dividend stocks AT&T and Verizon as the yield of two-year Treasuries rose to nearly 2%, and offered a risk-free alternative at comparable yields. And he added, with an eye out for this year: “It’s hard to believe that the market can go up unchallenged.” This enthusiasm by retail investors confirms the surge in margin debt – a measure of stock market leverage and risk – which has been jumping from record to record, and hit a new high of $581 billion, up 16% from a year earlier.

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Duh!

iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)

Apple investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits. Hedge fund JANA Partners and the California State Teachers’ Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children’s developing brains, an issue that may harm the company’s long-term market value. But some investors said the habit-forming nature of gadgets and social media are one reason why companies like Apple, Google parent Alphabet Inc and Facebook Inc added $630 billion to their market value in 2017. “We invest in things that are addictive,” said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management.

He also owns stock in coffee retailer Starbucks Corp, casino operator MGM Resorts International and alcohol maker Constellation Brands Inc. “Addictive things are very profitable,” Gerber said. Still, the investment community is increasingly holding companies to higher social standards, and there is some concern that market-leading tech companies could draw attention from regulators much like alcohol, tobacco and gambling companies have in the past. Alphabet and Facebook could not immediately be reached for comment on Monday. Facebook has said social media can be beneficial if used appropriately. In a statement to Reuters, Apple said it has offered a range of controls on iPhones since 2008 that allow parents to restrict content, including apps, movies, websites, songs and books, as well as cellular data, password settings and other features.

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This leaves many questions about what the industry knew and what they did not. Hard to believe they were all entirely ignorant for 20 years.

‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)

It was late November and former Intel Corp. engineer Thomas Prescher was enjoying beers and burgers with friends in Dresden, Germany, when the conversation turned, ominously, to semiconductors. Months earlier, cybersecurity researcher Anders Fogh had posted a blog suggesting a possible way to hack into chips powering most of the world’s computers, and the friends spent part of the evening trying to make sense of it. The idea nagged at Prescher, so when he got home he fired up his desktop computer and set about putting the theory into practice. At 2 a.m., a breakthrough: he’d strung together code that reinforced Fogh’s idea and suggested there was something seriously wrong. “My immediate reaction was, ‘It can’t be true, it can’t be true,’” Prescher said.

Last week, his worst fears were proved right when Intel, one of the world’s largest chipmakers, said all modern processors can be attacked by techniques dubbed Meltdown and Spectre, exposing crucial data, such as passwords and encryption keys. The biggest technology companies, including Microsoft, Apple, Google and Amazon.com are rushing out fixes for PCs, smartphones and the servers that power the internet, and some have warned that their solutions may dent performance in some cases. Prescher was one of at least 10 researchers and engineers working around the globe – sometimes independently, sometimes together – who uncovered Meltdown and Spectre. Interviews with several of these experts reveal a chip industry that, while talking up efforts to secure computers, failed to spot that a common feature of their products had made machines so vulnerable.

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David Brooks exposes everything his paper -NYT- has done for well over a year: make it all up. A mea culpa between the lines.

The Decline of Anti-Trumpism (David Brooks)

Let me start with three inconvenient observations, based on dozens of conversations around Washington over the past year: First, people who go into the White House to have a meeting with President Trump usually leave pleasantly surprised. They find that Trump is not the raving madman they expected from his tweetstorms or the media coverage. They generally say that he is affable, if repetitive. He runs a normal, good meeting and seems well-informed enough to get by. Second, people who work in the Trump administration have wildly divergent views about their boss. Some think he is a deranged child, as Michael Wolff reported. But some think he is merely a distraction they can work around. Some think he is strange, but not impossible. Some genuinely admire Trump. Many filter out his crazy stuff and pretend it doesn’t exist.

My impression is that the Trump administration is an unhappy place to work, because there is a lot of infighting and often no direction from the top. But this is not an administration full of people itching to invoke the 25th Amendment. Third, the White House is getting more professional. Imagine if Trump didn’t tweet. The craziness of the past weeks would be out of the way, and we’d see a White House that is briskly pursuing its goals: the shift in our Pakistan policy, the shift in our offshore drilling policy, the fruition of our ISIS policy, the nomination for judgeships and the formation of policies on infrastructure, DACA, North Korea and trade. It’s almost as if there are two White Houses. There’s the Potemkin White House, which we tend to focus on: Trump berserk in front of the TV, the lawyers working the Russian investigation and the press operation.

Then there is the Invisible White House that you never hear about, which is getting more effective at managing around the distracted boss. I sometimes wonder if the Invisible White House has learned to use the Potemkin White House to deke us while it changes the country. I mention these inconvenient observations because the anti-Trump movement, of which I’m a proud member, seems to be getting dumber. It seems to be settling into a smug, fairy tale version of reality that filters out discordant information. More anti-Trumpers seem to be telling themselves a “Madness of King George” narrative: Trump is a semiliterate madman surrounded by sycophants who are morally, intellectually and psychologically inferior to people like us. I’d like to think it’s possible to be fervently anti-Trump while also not reducing everything to a fairy tale.

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Still up and down, but that will be a big problem at some point, not some quaint feature..

Cryptocurrencies Are Selling Off (BBG)

Bitcoin slumped, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the the world’s largest cryptocurrency. Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs. Coinmarketcap.com’s decision to exclude Korean pricing data for coins helped create the appearance of a large drop in prices, which some traders attributed as playing a part in the selloff. “News on the regulatory front is dragging down cryptos,” said Gabor Gurbacs at VanEck Associates.

“South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEC cracking down on illegal offerings.” Bitcoin slumped as much as 17% to $14,820, the most in more than two weeks. The rout in bitcoin is part of a broader selloff in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10%, according to Coinmarketcap.com. Cardano fell 16%, while litecoin slumped as much as 16% to as low as $230. Bitcoin is little changed this year after surging about 1,400% in 2017.

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Liquidity concerns.

Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)

Two U.S. companies shelved proposals to launch bitcoin exchange-traded funds, citing ongoing concerns by the Securities and Exchange Commission (SEC), filings showed on Monday. Staff at the regulatory agency “expressed concerns regarding the liquidity and valuation” of futures contracts based on the digital asset, according to one of the filings. The move adds a new hurdle to the bid by Wall Street firms to capitalize on investor interest in cryptocurrencies, and it opens a rare public divergence between two financial regulatory agencies over how to regulate them. Trusts controlled by Rafferty Asset Management and Exchange Traded Concepts each canceled plans to launch three bitcoin funds that could be traded by retail investors as easily as stocks. Neither firm could be reached for comment.

Fund managers thought the proposals had a chance at winning approval given the launch last month of futures contracts based on bitcoin on both the CME and the CBOE exchanges. Regulators have been scrambling to figure out how to deal with this relatively new asset, and no single one has control. The SEC has dominion over funds, while the Commodity Futures Trading Commission (CFTC) governs futures contracts. The CFTC has been under pressure to address concerns it did not fully assess the potential risks that bitcoin poses to the financial system. [..] The SEC’s decisions also face close scrutiny given its power to clear the way for products that could be among the more volatile traded in U.S. equity markets.

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It was always nonsense, and they know it.

US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)

The US energy watchdog terminated Monday a key proposal by President Donald Trump’s administration to subsidize coal and nuclear plants, finding it neither justified nor reasonable. The decision by the Federal Energy Regulatory Commission (FERC) was handed down in a unanimous verdict by its five members, a majority of whom belong to the president’s Republican Party. Energy Secretary Rick Perry had in September proposed providing federal aid to nuclear and coal power plants with at least 90 days’ worth of production capacity, arguing the move was necessary to make the national grid more resilient in case of extreme events.

Both sectors have seen their share of the energy market diminish in recent years, losing out to oil, natural gas and renewables – which had all opposed Perry’s plan. There are currently only two nuclear reactors under construction in the US, in addition to the 99 in service. Coal is also facing a crisis, and Trump made reversing its decline a major campaign pledge. In announcing its decision, FERC cited an existing department study’s findings that “changes in the generation mix, including the retirement of coal and nuclear generators, have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid.”

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Of the Oprah kind.

Fairy Tale (Jim Kunstler)

Oprah might be the Democratic Party’s last best hope before it collapses into the mausoleum of US political history, where the Whigs, Free Soilers, and Anti-Federalists lie a’moldering. Politics in this land has failed in its effort to become show business, while show business is succeeding wildly in its attempt to replace politics. All Washington can produce these days is a succession of tedious irresolvable soap operas. Hollywood is enacting a grand moral drama of clear-cut heroines and villains, victims and oppressors, sticking to archetypal story-line of our lifetime: the campaign for freedom, equality, and decency. Show business loves the desert sunshine; politics is mired in the Potomac swamp. Oprah even has better hair than the current occupant of 1600 Pennsylvania Avenue.

Oprah herself is an object lesson in the social and political themes that America dares not talk about: a person of humble origins who succeeded wildly in American life by signing onto a once-sturdy and now-fading common culture. In fact, Oprah probably embodies all that remains of American common culture, and the multitudes adore her for it. They are reassured to know that the binding verities still exist. She moves in a realm where blackness and whiteness are emphatically irrelevant — which is surely a relief to people of good will who are sick of race-hustling from all quarters. Though she has credibly acted plenty of sharecropper roles in the movies, Oprah speaks English beautifully and doesn’t apologize for moving up from the ghetto patois of her rough childhood. She may not write all her own material — such as Sunday’s Golden Globes speech that may live on like MLK’s I Have a Dream oration — but she delivers her message with conviction.

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Stumbling from failure to failure.

Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)

U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks. May’s office flagged Monday’s events as “a refresh” of her top team. But instead of the usual parade of lawmakers arriving at her office in quick succession to accept their new roles, things went off script. First Health Secretary Jeremy Hunt, then Education Secretary Justine Greening were locked in discussions with her after rejecting proposed moves. Hunt eventually won his argument to stay on, but Greening, who spent more than two hours in 10 Downing Street, quit rather than accept another job.

May was said to be “disappointed” at losing Greening, who opposed Brexit, and could now vote with pro-European Union rebels in the House of Commons. It was not the restart she wanted. There were echoes of her botched decision to call an election in her announcement of a reshuffle she didn’t have to carry out. In both instances May seemed to dissipate any political goodwill she recouped. She had begun the new year in a position of relative strength, having concluded a problematic first phase of talks over Brexit – still the issue that will define her political legacy and will only get more complicated this year. “She can’t have the government she would choose and has to select from a small group of people,” said Matt Beech, director of the Centre for British Politics at the University of Hull. “Even with a majority she’d be facing tough decisions because her party’s completely divided on Brexit.”

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Want to know when you’re being had? Look no further. The reasoning here is that the German economy is doing so well that climate targets can’t be met. But that’s an impossible contradiction. Because it tries to make you believe that the investments needed to meet the targets will be made when the economy is not doing so well. But they won’t, because by then the story will be that the money is needed to support the economy.

Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

Germany’s would-be coalition partners have agreed to drop plans to lower carbon dioxide emissions by 40% from 1990 levels by 2020, sources familiar with negotiations said on Monday – a potential embarrassment for Chancellor Angela Merkel. Due to strong economic growth and higher-than-expected immigration, Germany is likely to miss its national emissions target for 2020 without any additional measures. Negotiators for Merkel’s conservative bloc and the centre-left Social Democrats (SPD) told Reuters the parties had agreed in exploratory talks on forming a government that the targeted cut in emissions could no longer be achieved by 2020. Instead, they would aim to hit the 40% target in the early 2020s, the sources said, adding that both parties are still sticking to their goal of achieving a 55% cut in emissions by 2030.

The deal would represent something of a U-turn for Merkel, who has long presented herself as an advocate of climate protection policies on the international stage. Sources said both parties had also agreed that the share of renewable energy in Germany’s electricity consumption should rise to 65% by 2030 from roughly a third last year. Currently, the government plans to raise the renewable energy quota to between 45 and 55% by 2025. Negotiators also agreed to cut the tax on electricity in order to reduce energy costs, according to a document seen by Reuters. They also plan to tender an extra 4 gigawatts of solar energy as well as onshore and offshore wind-generating capacity.

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