Sep 082018
 
 September 8, 2018  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Rispal Restaurant at Asnieres 1887

 

Obama Claims Ownership Of US Economic Recovery (MW)
Trump Has Set Economic Growth On Fire. Here Is How He Did It (CNBC)
May Urged To Ignore ‘Three Stooges’ In Brexit Negotiations (G.)
Cohen Seeks To Vacate Hush-Money Deal With Stormy Daniels (Hill)
Papadopoulos Sentenced To 14 Days In Prison For Lying To FBI (ES)
Secret Grand Jury Proceedings Underway Against Andrew McCabe (ZH)
Apple Bans Alex Jones App For ‘Objectionable Content’ (R.)
Erdogan Legacy Construction Projects Stall In Turkish Financial Crisis (Ind.)
Slouching Toward Okeefenoke (Kunstler)
Russia Asks Britain For Help In Identifying Novichok Suspects (G.)
Nike Online Sales Jump 31% After Company Unveiled Kaepernick Campaign (MW)

 

 

I’d say be careful what you claim ownership of. Because you break it, you own it

Obama Claims Ownership Of US Economic Recovery (MW)

Former President Barack Obama on Friday used a speech at the University of Illinois to sharply criticize his successor as well as claim ownership of the U.S. economic recovery. Speaking in Urbana, Ill., where he received an award for ethics in government, Obama recalled that the U.S. economy was losing 800,000 jobs a month when he entered office. “We worked hard to end that crisis but also break some of these longer-term trends,” said Obama, who is planning a series of campaign trips ahead of the midterm elections in November. “By the time I left office, household income was near its all-time high, and the uninsured rate had hit an all-time low and wages were rising,” he said. “I mention all this so when you hear how great the economy is doing right now, let’s just remember when this recovery started.

“I’m glad it’s continued, but when you hear about this economic miracle that’s been going on … I have to kind of remind them, actually those job numbers are kind of the same as they were in 2015 and 2016.” On that, Obama is correct. U.S. job growth averaged 226,000 per month in 2015, 195,000 in 2016, 182,000 in 2017 and, so far this year, 207,000. Data also show a pickup in business and consumer confidence after Trump’s election. The U.S. is on track to grow more than 3% in 2018, a rate of economic expansion not recorded over the course of a full calendar year since the second term of the George W. Bush administration. At a North Dakota event, Trump responded. “Obama was trying to take credit for this incredible thing that’s happening,” Trump said.

“I have to say this to President Obama – if the Dems got in with their agenda in November of almost 2 years ago, instead of having 4.2 up, I believe honestly we’d have 4.2 down,” he said, referring to GDP growth of 4.2% in the second quarter. Obama meanwhile had a broader attack on Trump than just the economy. Mentioning Trump by name, Obama said political division is more manufactured than real. “Sometimes the backlash comes from people who are genuinely, if wrongly, fearful of change. More often it’s manufactured by the powerful and privileged who want to keep us divided and keep us angry and keep up cynical because it helps them maintain the status quo and keep their power and keep their privilege,” he said. “And you happen to be coming of age during one of those moments. It did not start with Donald Trump. He is a symptom, not the cause,” Obama said to applause.

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And these ownership claims are easy to argue.

Trump Has Set Economic Growth On Fire. Here Is How He Did It (CNBC)

President Donald Trump is more than 19 months into an administration engulfed in so much controversy that it may overshadow a tremendous achievement, namely an economic boom uniquely his. During his time in office, the economy has achieved feats most experts thought impossible. GDP is growing at a 3 percent-plus rate. The unemployment rate is near a 50-year low. Meanwhile, the stock market has jumped 27 percent amid a surge in corporate profits. Friday brought another round of good news: Nonfarm payrolls rose by a better-than-expected 201,000 and wages, the last missing piece of the economic recovery, increased by 2.9 percent year over year to the highest level since April 2009.

That made it the best gain since the recession ended in June 2009. His critics, a group that includes a legion of Wall Street economists, most Democrats and even some in his own Republican Party, don’t believe it will last. They figure the current boom will begin petering out as soon as mid-2019 and possibly end in recession in 2020. But even they acknowledge that the current numbers are a uniquely Trumpian achievement and not owed to policies already set in motion when he took office. “I still believe the big story this year is an economic boom that most folks thought impossible,” Larry Kudlow, director of the National Economic Council and a chief advisor to Trump, said in a recent interview with CNBC.com. “I understand that he’s been in for a year and a half, but when you look at those numbers, this is not going away.”

Indeed, the economy does seem to be on fire, and it’s fairly easy to draw a straight line from Trump’s policies to the current trends. Business confidence is soaring, in part thanks to a softer regulatory environment. Consumer sentiment by one measure is at its highest level in 18 years. Corporate profits, owed in good part to last year’s tax cuts, are coming close to setting records.

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May will have to bend a lot.

May Urged To Ignore ‘Three Stooges’ In Brexit Negotiations (G.)

An EU commissioner has likened Boris Johnson, Jacob Rees-Mogg and Nigel Farage to the “Three Stooges” and issued a stern warning to Theresa May that there would be no Brexit deal next March if she insisted on sticking to her Chequers proposal. In a speech in Ireland on Friday, Phil Hogan said the EU would fight to the end to preserve the union of nations that has stood for the past 60 years. He said Brussels would not allow the bloc to be damaged just to save the UK “from its own silliness” and reiterated the EU position that the four freedoms forming the bedrock of the union were not negotiable. He said the only room for a special deal on deviating from the four freedoms would be in relation to Northern Ireland.

“The EU’s first offer, reflexively rejected, was a significant departure from our internal market policy. And it was meant for Northern Ireland only. It was that Northern Ireland could remain in the single market with the EU27,” he said. Instead of accepting that offer, the UK’s reply, he said, was “‘Let’s restrict the single market to goods and generalise it for the whole UK.’ The EU’s answer has already been given: no. “If the UK attitude is Chequers and only Chequers, there will be no agreement before March next year on the future trade relationship,” he said. He said that if May could not progress the UK’s position then the EU’s offer on a future trade deal would be the one it put forward months ago, “essentially a Canada-type trade arrangement”. He added: “There is nothing new in this. Each time she is asked about her red lines, the prime minister repeats them, making a Canada-type trade deal more likely.

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Curious development. Trying to make it look like it never happened?

Cohen Seeks To Vacate Hush-Money Deal With Stormy Daniels (Hill)

Michael Cohen’s shell company has reportedly moved to vacate a 2016 nondisclosure agreement with adult-film star Stormy Daniels, requesting that she return the $130,000 she received as part of the deal. Cohen’s lawyer Brent Blakely said Friday that California law requires Daniels to return the money that Cohen paid her in 2016 to stay quiet about her alleged affair with President Trump in 2006, CNN reports. “Today, Essential Consultants LLC and Michael Cohen have effectively put an end to the lawsuits filed against them by Stephanie Clifford aka Stormy Daniels,” Blakely told CNN.

“The rescission of the Confidential Settlement Agreement will result in Ms. Clifford returning to Essential Consultants the $130,000 she received in consideration, as required by California law,” he added. A source familiar with Cohen’s thinking told the network that Cohen no longer benefits from Daniels’s promise to keep quiet about the affair. The existence of the deal, and Daniels’s alleged affair, were reported by The Wall Street Journal originally in January, while Daniels has been outspoken about her allegations since then. Michael Avenatti, the attorney representing Daniels in her defamation case against Cohen and Trump over their denials of the alleged affair, told CNN that the move was likely made in an attempt to protect Trump from being deposed.

“I haven’t had a chance to digest it, I just saw it on my email literally right before I came on,” Avenatti told CNN. “What they’re trying to do is they don’t want me to get a chance to depose Michael Cohen and Donald Trump,” he added. “This is a hail mary to try and avoid that, that’s my first guess.” Avenatti added in a tweet Friday night that Cohen “is back to playing games and trying to protect Donald Trump.” “He is now pulling a legal stunt to try and ‘fix it’ so that we can’t depose Trump and present evidence to the American people about what happened. He is not a hero nor a patriot. He deserves what he gets,” the attorney added.

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If Mueller et al had a sense of decency, they’d have let him go on “Time Served”. All they’ve proven is that Papadopoulos is indeed a nobody. BTW, rumor has it that Joseph Mifsud is dead.

Papadopoulos Sentenced To 14 Days In Prison For Lying To FBI (ES)

President Trump’s former campaign adviser George Papadopoulos has been sentenced to 14 days in prison for lying to the FBI. He is the first former campaign aide to be sentenced in special counsel Robert Mueller’s Russian investigation. In October 2017, he pled guilty to one count of lying to FBI agents about the nature of his interactions with “foreign nationals” who he thought had close connections to senior government officials. Mr Papadopoulos was a member of the campaign’s foreign policy team, but Trump aides have said he played a limited role in the campaign and had no access to the candidate.

Court papers revealed that Mr Papadopoulos was told about the Russians possessing “dirt” on Democrat Hillary Clinton in the form of “thousands of emails” on April 26 2016, well before it became public that the Democratic National Committee and Clinton campaign chairman John Podesta’s emails had been hacked. The interactions at the centre of the case included speaking with Russian intermediaries who were attempting to line up a meeting between Mr Trump and Russian President Vladimir Putin and offering “dirt” on Mrs Clinton. During the trial, Mr Papadopoulos apologised for his actions, telling a judge that he had made a “dreadful mistake” and was eager for redemption.

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See, Papadopoulos gets jailed for lying to the FBI (about nothing). Now, former FBI Deputy Director Andrew McCabe lied 4x, twide under oath, about leaking FBI info to the press. Which is worse? And if this concerns the FBI so much, how come Mueller, ex-FBI head, conducts the investigation?

Secret Grand Jury Proceedings Underway Against Andrew McCabe (ZH)

Federal prosecutors have been using a grand jury over the last several months to investigate former FBI Deputy Director Andrew McCabe, reports the Washington Post, citing two people familiar with the matter. What’s more, the grand jury has summoned at least two witnesses, and the case is ongoing according to WaPo’s sources. “The presence of the grand jury shows prosecutors are treating the matter seriously, locking in the accounts of witnesses who might later have to testify at a trial. But such panels are sometimes used only as investigative tools, and it remains unclear if McCabe will ultimately be charged.” -Washington Post

McCabe was fired on March 16 after Justice Department Inspector General Michael Horowitz issued a criminal referral following a months-long probe, which found that McCabe lied four times, including twice under oath, about authorizing a self-serving leak to the press. Horowitz found that McCabe “had made an unauthorized disclosure to the news media and lacked candor – including under oath – on multiple occasions.” Specifically, McCabe was fired for lying about authorizing an F.B.I. spokesman and attorney to tell Devlin Barrett of the Wall St. Journal – just days before the 2016 election, that the FBI had not put the brakes on a separate investigation into the Clinton Foundation, at a time in which McCabe was coming under fire for his wife taking a $467,500 campaign contribution from Clinton proxy pal, Terry McAuliffe.

In order to deal with his legal woes, McCabe set up a GoFundMe “legal defense fund” which stopped accepting donations, after support for the fired bureaucrat took in over half a million dollars – roughly $100,000 more than his wife’s campaign took from McAuliffe as McCabe’s office was investigating Clinton and her infamous charities.

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Let’s go through all the apps. And through all Twitter accounts. I understand Hamas and Ahmadinejad still operate.

Apple Bans Alex Jones App For ‘Objectionable Content’ (R.)

Apple said on Friday that it had banned from its App Store the Infowars app belonging to popular U.S. conspiracy theorist Alex Jones after finding that it had violated the company’s rules against “objectionable content”. The move makes Apple the latest tech company or social media platform to take action against Jones, a deeply controversial right-wing radio talk-show host who has suggested that the 2012 Sandy Hook massacre was a hoax, among other sensational claims. Apple said the guidelines Jones violated bar “defamatory, discriminatory, or mean-spirited content, including references or commentary about religion, race, sexual orientation, gender, national/ethnic origin, or other targeted groups, particularly if the app is likely to humiliate, intimidate, or place a targeted individual or group in harm’s way.”

Representatives for Jones could not immediately be reached for comment by Reuters on Friday evening. On Thursday, Twitter Inc permanently banned Jones and his website from its platform and Periscope, saying in a tweet that the accounts had violated its behavior policies. In a video posted on the Infowars website on Thursday, Jones said in response: “I was taken down not because we lied but because we tell the truth and because we were popular.” Last month, Twitter banned Jones and Infowars for seven days, citing tweets that it said violated the company’s rules against abusive behavior, which state that a user may not engage in targeted harassment of someone or incite other people to do so.

Apple said at the time that the Infowars app remained in its store because it had not been found to be in violation of any content policies, although it had removed access to some podcasts by Jones. The podcasts differ from the Infowars app by allowing access to an extensive list of previous episodes, subjecting all of those past episodes to Apple’s content rules.

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Oh well, just blame America.

Erdogan Legacy Construction Projects Stall In Turkish Financial Crisis (Ind.)

Turkey’s financial meltdown has brought the country’s years-long construction boom screeching to a halt, with even some of President Recep Tayyip Erdogan’s favourite projects being suspended or scaled back amid a cash crunch and debt woes. In recent weeks, worried murmurs about stalled projects among developers and ordinary Turks about dormant construction sites and half-finished buildings left untouched for months have reached a crescendo. This week local news outlets reported that a key transport project in Istanbul, the Kabatas ferry terminal connecting the city’s European and Asian sides of Turkey’s commercial capital, would be scaled back.

Across the country, experts say construction sites have gone dormant, projects suspended or delayed. The construction cranes remain in place, but the work has stopped. “The huge companies that do fancy infrastructure projects – they don’t have any money,” said one developer who is well-connected to official circles. “The government has a spending freeze. They’re going to reconsider all the projects and reprioritise.” Mr Erdogan, a former mayor of Istanbul, built his reputation and electoral popularity on undertaking gigantic public works projects like mosques, airports, and bridges, as well as facilitating big private sector projects that included showy housing complexes, glittery office towers, and shopping malls packed with Turkish and international retail brands.

But the miracle was built on cheap credit from abroad, which has now dried up in a climate of rising US interest rates and doubts about Turkey’s economic health. And financial experts, developers, and bankers say many of Turkey’s projects – including the 45km Istanbul canal connecting the Black Sea to the Sea of Marmara that even Mr Erdogan himself called “crazy” – are now in doubt. “The Istanbul Canal is almost impossible,” said Atilla Yesilada, an economist and consultant. “Because no one wants to lend to Turkey now.”

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A caravan of grand jury’s.

Slouching Toward Okeefenoke (Kunstler)

There is now a clear evidence trail about eight-lanes wide detailing Russian collusion of the Democratic Party, the Hillary Campaign, the FBI / DOJ, plus a caravan of Robert Mueller aides, adjuncts, colleagues and former trainees. They are all mixed up with a cavalcade of events weaving through more than one Clinton investigation (and its damage control operations), and they need to appear before grand juries too. Many, I suspect are criminally culpable and will end up in the slammer. Perhaps even ole Horse-face himself, grave and aseptic as he may seem.

I’ve caught two of Trump’s rallies the past week or so. His freestyling babble at the podium makes me wish I could wave a magic wand and just make him vanish in a cloud of orange vapor, or perhaps turn him into Richard Nixon. (Doesn’t all this make you nostalgic for ole Nixie?) He can’t shut up about the economic miracles that he has wrought with his mighty “stable genius” brain. Perhaps he has not noticed that the money system is crumbling all around the world at the margins. If he does not understand that this rot eventually must reach the center, then he has washed down too many cheeseburgers with his own Kool Aid.

Having taken ownership of all this lock, stock, and barrel, then he is perfectly situated to be blamed when the honey-wagon of algo trading robots turns south and whatever remains of the world’s hot money, including the US dollar, goes up in smoke. If it coincides even bluntly with the mid-term election, then we will find ourselves living through Civil War Two.

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2 Russian secret agents who make sure they get photographed by 5-6 different camera’s. Yeah.

Russia Asks Britain For Help In Identifying Novichok Suspects (G.)

Moscow has claimed it wants to ascertain as soon as possible the identities of the two men named by Britain as suspects in the nerve agent attack on a former Russian spy in Salisbury, and has asked London to help. “We need to establish who these people are, if these are [Russian] citizens or not,” said Maria Zakharova, the foreign ministry spokeswoman on Friday. “We want to do this with maximum haste and effectiveness, and so we are again appealing to Britain for help in ascertaining the identities of these people.” Britain announced charges in absentia on Wednesday against two men believed to be officers with Russia’s military intelligence service, known as the GRU.

Theresa May said the men flew into Britain in March to try to murder Sergei Skripal, a former GRU officer who sold secrets to MI6, and accused the Russian government of orchestrating the operation. Scotland Yard said the alleged secret agents travelled to Britain under the names of Alexander Petrov and Ruslan Boshirov, which were probably aliases. The Kremlin has described the allegations as unacceptable and denies that any Russian officials were involved. Zakharova also accused May of a “frank lie” over her claims that Russia had not offered Britain information after the nerve agent attack, and suggested that May had “selective access” to Russian media reports. Dmitry Peskov, a spokesman for Vladimir Putin, said on Thursday that Russia would not investigate the two suspects because it had not received a formal request for legal assistance from Britain.

Zakharova’s comments came as a purported ex-GRU officer claimed the attempted murder was too amateurish to have been the work of professional secret service agents. If GRU agents had wanted to target Skripal, they would have done it “quietly, without fuss, and brought him [to Russia] in a mail bag, and no one would have known where he had gone,” Ivan Tarasov told Russia’s Komsomolskaya Pravda newspaper. Tarasov also claimed the Skripals could have been targeted by a Russian crime gang, possibly over unpaid debts, and mocked reports that the suspects stayed in the same room in a cheap hotel near Salisbury. “That’s how bandits act, not professional secret service officers. GRU officers don’t stay in London hotels,” he said.

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I don’t care about Nike. But I do care about Kaepernick. See, if there’s one thing wrong here that proves him right, it’s that only black people come out in support of him. Where are his white colleagues, white athletes in general? Why only Tiger, Serena and LeBron?

The world he’s protesting is the one that is killing black kids. His protest started under the first black US president. So did Black Lives matter. So where is Obama on the issue? Why doesn’t he stand with Kaepernick?

Nike Online Sales Jump 31% After Company Unveiled Kaepernick Campaign (MW)

Talk of Nike Inc. sales taking a hit from the company’s decision to put ex–NFL player Colin Kaepernick at the center of its latest “Just Do It” campaign is looking overblown, based on data from a Silicon Valley digital commerce research company. After an initial dip immediately after the news broke, Nike’s online sales actually grew 31% from the Sunday of Labor Day weekend through Tuesday, as compared with a 17% gain recorded for the same period of 2017, according to San Francisco–based Edison Trends. “There was speculation that the Nike/Kaepernick campaign would lead to a drop in sales, but our data over the last week does not support that theory,” said Hetal Pandya, co-founder of Edison Trends.

Nike’s stock has also held up after its initial slump. The stock was up 1% on Friday and remains in the black for the month. It has gained 29% in 2018, while the Dow Jones Industrial Average DJIA, which since 2013 has counted Nike as a member, has gained 5%, as the S&P 500 index has risen about 8%. The news generated plenty of online buzz, with social engagement around Nike and Kaepernick rising sharply this week, according to 4C Insights, a marketing technology company. Mentions of and comments about Nike on social-media platforms rose 1,678% on Sunday and Monday, according to 4C data. Mentions of Kaepernick spiked 362,280%, the data showed.

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Aug 102018
 
 August 10, 2018  Posted by at 8:05 am Finance Tagged with: , , , , , , , , , , ,  


John French Sloan Sunset, West Twenty-Third Street 1905-6

 

The Myth Of Market Cap (Berversdorf)
The Looming Threat of a Yuan Depreciation (Magnus)
Russia Blasts New US Sanctions As ‘Theatre Of The Absurd’ (G.)
US Curbs On Russian Banks Would Be Act Of Economic War – Medvedev (R.)
US Must Turn to Russia to Contain China (Rickards)
Pakistan Is On The Brink Of Economic Disaster (CNBC)
Tesla Board Plans To Tell Elon Musk To Recuse Himself (CNBC)
US, EU Laying Groundwork For New Trade Deal (CNBC)
US Judge Orders Deportation Plane Turnaround (BBC)
Germany Inks Deal With Spain To Return Registered Migrants (AFP)
New Zealand To Ban Single-Use Plastic Bags (AFP)

 

 

Apple does record buybacks. Amazon invests in becoming a better company.

Hadn’t heard from Thad Beversdorf for quite a while. Good to see you, my friend!

The Myth Of Market Cap (Berversdorf)

Why do CEO’s distribute cash to secondary market speculators? These speculators haven’t provided any capital to the balance sheet and haven’t added to the income statement or cash flow statement of the companies they are speculating on. So why do CEO’s spend so much effort and capital appeasing them? Market cap is the benchmark by which a company distributes cash (i.e. div yield). But market cap, as determined in the secondary markets, is a theoretical asset that doesn’t generate revenue, profit or cash flow for the firm. Meaning cash payments are tied to an ‘asset’ that has no relevance to a firm’s operations. Paying dividends against an non-producing asset i.e. market cap that generates no return for the company is incredibly destructive.

There becomes a dangerous disconnect between the return on capital the company raised/invested and the cash distribution. In this sense, market cap is a massive hindrance to the firm’s capacity for productive investment as capital is eaten up paying out against an asset that hasn’t generated any return. The destructive force of this connect is exacerbated by the stock buy backs whose sole purpose is to drive market cap higher. And for what benefit? What does a higher market cap or a higher valuation do to improve the operation and long term success of the business? Historically market cap was a represenation of operational performance and expected future growth but it has now become the objective. Apple’s numbers are mediocre. But they are distributing $110 billion in cash this year so it doesn’t matter.

They hit a trillion dollar market cap. That puts its price-to-sales in line with Amazon, which has a 3 year revenue growth rate 7x higher than Apple’s (32% vs. 4.5%). Amazon’s growth rate continues to accelerate while Apple actually lost overall marketshare dropping from second largest to the third largest seller of smartphones, something that hasn’t ever happened. And so why would a firm that is losing marketshare not be putting its capital to work? The proof is in the pudding. Amazon doesn’t distribute cash to speculators. It attracts speculators by driving expected future growth. The rest of the market is attracting speculators by paying them cash. In effect, CEO’s are investing in market cap today rather than growth tomorrow. The result is that Amazon is in a league of its own, trouncing incumbants in any sector it enters because it invests in being better.

The moral of the story is that when market cap becomes the objective of capital rather than a representation of productive capital allocation, productive investment is replaced with financial investment. When market cap is being driven by something other than expected future growth derived from productive investment it is coming at the cost of expected future growth due to lack of productive investment. Read that again.

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The netire region depends on China to a huge degree.

The Looming Threat of a Yuan Depreciation (Magnus)

When the Asian financial crisis occurred 20 years ago, many nations in East and Southeast Asia succumbed because they were following inconsistent domestic and international economic and financial policies. But one trigger was the 50% fall in the Japanese yen against the dollar between the end of 1995 and the summer of 1998 amid the American stock market’s bull run that lasted until 2002. Fast forward to today, and the dollar is on a roll again, thanks to a strong economy and tensions between its fiscal and monetary policies. Higher U.S. interest rates and a stronger dollar are already raising debt interest costs for Asian borrowers, but this time the falling Chinese yuan looms as a proximate cause of trouble.

Asia’s vulnerability to developments in U.S. financial markets has been widely noted. It is true that unlike the Asian financial crisis of 1997-1998, most countries in the region have stronger foreign exchange reserves. They are better positioned when measured against important indicators such as months of import cover, short-term debt and foreign debt ratios. Most Asian countries have current account surpluses, and even those with deficits, such as India, Indonesia, Myanmar and the Philippines do not look overly challenged. But while the sensitivity to shocks is lower than it was 20 years ago, there is no cause for complacency. And there is still a potential spoiler, the yuan, which is now under downward pressure, but which was an agent of calm in the last Asian crisis.

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The US wants access to Russian facilities. Sure. They’re going to see OK, if we get access to yours.

Russia Blasts New US Sanctions As ‘Theatre Of The Absurd’ (G.)

Russian officials reacted with outrage and markets slumped on Thursday morning following the announcement of tough new US sanctions over Russia’s alleged use of a nerve agent in the Salisbury attack. President Vladimir Putin’s spokesman, Dmitry Peskov, said the sanctions were “absolutely unlawful and don’t conform to international law”, as politicians vowed to respond with countermeasures, which could include bans on the exports of rockets or resources for manufacturing. “The theatre of the absurd continues,” tweeted Dmitry Polyanskiy, first deputy permanent representative of Russia to the UN. “No proofs, no clues, no logic, no presumption of innocence, just highly-likelies. Only one rule: blame everything on Russia, no matter how absurd and fake it is. Let us welcome the United Sanctions of America!”

A member of the Duma’s foreign affairs committee, Leonid Slutsky, said Russia could block exports of RD-180 rocket engines to the US as a potential countermeasure, the RIA Novosti news agency reported. The United States announced on Wednesday that it would impose restrictions on the export of sensitive technology to Russia because of its use of a nerve agent in the attempted murder of a former Russian spy and his daughter in Britain. The State Department said the new sanctions would come into effect on 22 August and would be followed by much more sweeping measures, such as suspending diplomatic relations and revoking Aeroflot landing rights, if Russia did not take “remedial” action within 90 days.

Moscow is not expected to agree to the response required by US legislation, which includes opening up Russian scientific and security facilities to international inspections to assess whether it is producing chemical and biological weapons in violation of international law.

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Russia is losing patience.

US Curbs On Russian Banks Would Be Act Of Economic War – Medvedev (R.)

Russia would consider any U.S. move to curb the operations of Russian banks or their foreign currency dealings a declaration of economic war, Prime Minister Dmitry Medvedev said on Friday. The United States announced a new round of sanctions on Wednesday targeting Russia that pushed the rouble to two-year lows and sparked a wider sell-off over fears Russia was locked in a spiral of never-ending sanctions. Separate legislation introduced last week in draft form by Republican and Democratic senators proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar.

Medvedev said Moscow would take economic, political or other retaliatory measures against the United States if Washington targeted Russian banks. “I would not like to comment on talks about future sanctions, but I can say one thing: If some ban on banks’ operations or on their use of one or another currency follows, it would be possible to clearly call it a declaration of economic war,” said Medvedev. “And it would be necessary, it would be needed to react to this war economically, politically, or, if needed, by other means. And our American friends need to understand this,” he said, speaking on a trip to the Russian Far East.

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Someday people will recognize how well Russia is coping with all the nonsense.

US Must Turn to Russia to Contain China (Rickards)

Vladimir Putin stands accused in the media and global public opinion of rigging his recent reelection, imprisoning his political enemies, murdering Russian spies turned double-agent, meddling in Western elections, seizing Crimea, destabilizing Ukraine, supporting a murderous dictator in Syria and exporting arms to terrorist nations like Iran. At the same time, the country of Russia is more than Mr. Putin, despite his authoritarian and heavy-handed methods. Russia is the world’s 12th-largest economy, with a GDP in excess of $1.5 trillion, larger than many developed economies such as Australia (No. 13), Spain (No. 14) and the Netherlands (No. 18). Its export sector produces a positive balance of trade for Russia, currently running at over $16 billion per month.

Russia has not had a trade deficit in over 20 years. Russia is also the world’s largest oil producer, with output of 10.6 million barrels per day, larger than both Saudi Arabia and the United States. Russia has the largest landmass of any country in the world and a population of 144 million people, the ninth largest of any country. Russia is also the third-largest gold-producing nation in the world, with total production of 250 tons per year, about 8% of total global output and solidly ahead of the U.S., Canada and South Africa. Russia is highly competitive in the export of nuclear power plants, advanced weaponry, space technology, agricultural products and it has an educated workforce.

Russia’s government debt-to-GDP ratio is 12.6%, which is trivial compared with 253% for Japan, 105% for the United States and 68% for Germany. Russia’s external dollar-denominated debt is also quite low compared with the huge dollar-debt burdens of other emerging-market economies such as Turkey, Indonesia and China. Under the steady leadership of central bank head Elvira Nabiullina, the Central Bank of Russia has rebuilt its hard currency reserves after those reserves were severely depleted in 2015 following the collapse in oil prices that began in 2014. Total gold reserves rose from 1,275 tons in July 2015 to about 2,000 tons today. Russia’s gold-to-GDP ratio is the highest in the world and more than double those of the U.S. and China.

In short, Russia is a country to be reckoned with despite the intense dislike for its leader from Western powers. It can be disliked but it cannot be ignored. Russia is even more important geopolitically than these favorable metrics suggest. Russia and the U.S. are likely to improve relations and move closer together despite the current animosity over election meddling and the attempted murders of ex-Russian spies. The reason for this coming thaw has to do with the dynamics of global geopolitics. There are only three countries in the world that are rightly regarded as primary powers — the U.S., Russia and China. These three are the only superpowers. Some analysts may be surprised to see Russia on the superpower list, but the facts are indisputable.

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China exports the Silk Road. And creates dependencies that way.

Pakistan Is On The Brink Of Economic Disaster (CNBC)

Pakistan is on the brink of economic disaster, experts say. Foreign exchange reserves are at four-year lows, pressuring the local rupee and triggering worries that Islamabad may soon be unable to finance monthly import bills. The developing country is also awash in external debt, having taken on loans from China for the $62 billion China-Pakistan Economic Corridor. To avoid a full-blown balance of payments crisis, Islamabad needs outside help. It has two options: the IMF or Beijing. Neither, however, may solve its economic woes in the long run. The South Asian nation is no stranger to IMF bailouts — it has gone through 21 programs in total, with the most recent one ending two years ago.

If the administration of incoming Prime Minister Imran Khan seeks out another loan, estimated at $10 billion, the country will be subject to the IMF’s strict austerity measures that’re likely to hurt growth. It also wouldn’t bode well politically for Khan, who called on the campaign trail for Pakistan to become self-sufficient. The U.S., meanwhile, has taken issue with the idea of IMF funds going toward Pakistan’s Chinese debt obligations. “There’s no rationale for IMF tax dollars — and associated with that, American dollars that are part of the IMF funding — for those to go to bail out Chinese bondholders or China itself,” Secretary of State Mike Pompeo told CNBC last week.

In response, Pakistan’s finance ministry has refuted Pompeo’s linkage of IMF assistance with the China-Pakistan Economic Corridor. Alternatively, Khan’s government could turn to China for fresh loans. But that would mean Islamabad wading even deeper into the so-called “Chinese debt trap” — a frequent criticism of Beijing’s infrastructure spending spree that’s known as the Belt and Road Initiative, of which the CPEC is a part. Last month, the Asian giant loaned Pakistan $1 billion to boost its shrinking foreign currency reserves. For the current fiscal year thus far, China’s lending to Pakistan is set to exceed $5 billion, according to Reuters.

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They’ve never seen an actual plan.

Tesla Board Plans To Tell Elon Musk To Recuse Himself (CNBC)

The Tesla board of directors plans to meet with financial advisors next week to formalize a process to explore Elon Musk’s take-private proposal, according to people familiar with the matter. Musk announced via Twitter this week that he hopes to take the automaker private, in what would be one of the biggest such deals in history. The board is likely to tell Musk, the Tesla chairman and CEO, to recuse himself as the company prepares to review his take-private proposal, according to these people, who asked not to be named because the conversations are private. The board has told Musk that he needs his own separate set of advisors, one of the people said. Tesla’s board will likely develop a special committee of a smaller number of independent directors to review the buyout details, the people added.

Musk previously talked with Saudi Arabia’s sovereign wealth fund about a take-private deal, said one of the people. Saudi’s Public Investment Fund bought a 3% to 5% stake in the electric car maker, The Financial Times reported earlier this week. It isn’t yet known whether Saudi’s Public Investment Fund has agreed to commit money to the transaction. It also still isn’t clear if Tesla has committed financing. Musk tweeted he had “funding secured” on Tuesday when he said he was considering taking the company private at $420 per share. Tesla has declined to comment on funding for the transaction, leading to speculation Musk doesn’t have committed financing and drawing a request for more information from the SEC.

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US involvement in Nordstream 2?

US, EU Laying Groundwork For New Trade Deal (CNBC)

Two weeks after reaching a handshake agreement to calm trade talks and back off new tariffs, the United States and European Union are beginning to lay the formal groundwork underpinning any deal. On Tuesday, the State Department sent a cable to U.S. embassies across Europe, directing them to identify business areas ripe for lowering of tariffs or cutting of red tape, according to a readout of the cable provided to CNBC. The communication placed particular emphasis on deals that would increase U.S. energy and soybean exports, two areas highlighted in a joint statement the U.S. and the EU put out following the July 25 meeting.

One of the ideas that had been discussed is potential American involvement in a Russian natural gas pipeline into Germany that President Donald Trump had criticized. European Commission President Jean-Claude Juncker told Trump at the White House last month that “most” EU countries disagreed with German Chancellor Angela Merkel’s decision to broker the deal with Russia, according to a senior administration official. The State Department declined to comment, citing a policy not to confirm or deny internal communications. But the move represents an effort to source deliverables for talks set to take place when a delegation from the European Union visits Washington later this month.

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It’s a good idea to hold Sessions in contempt. But he’s the AG!.

US Judge Orders Deportation Plane Turnaround (BBC)

A federal judge has ordered a mother and her daughter be flown back to the United States, after learning they had been deported mid-appeal. The two were being represented in a lawsuit by the American Civil Liberties Union (ACLU), who said they had fled “extreme sexual and gang violence”. The judge said it was unacceptable they had been removed during their appeal. He reportedly also said Attorney General Jeff Sessions could be held in contempt of court for the deportation. The mother and daughter were part of a case filed by the ACLU and the Centre for Gender and Refugee Studies on behalf of 12 mothers and children who said they had fled violence, but were at risk of deportation.

A tightening of rules in June by Mr Sessions means victims of domestic abuse and gang violence no longer generally qualify for US asylum. The government had pledged not to deport anyone in the case before Friday at the earliest, ACLU said. But ACLU said they learned during Thursday’s emergency hearing that the mother and daughter had already been put on a flight back to El Salvador by US authorities. Washington DC District Court Judge Emmet Sullivan said that it was unacceptable that people claiming asylum had been removed while lawyers argued their case. He branded the situation “outrageous” and ordered the pair be returned immediately, according to reports. An official from the Department of Homeland Security told the Reuters agency that the agency worked to comply with the court’s order.

“Upon arrival in El Salvador, the plaintiffs did not disembark and are currently en route back to the United States,” the department said in an emailed statement. The mother and daughter are said to have arrived back in Texas, where they were being held, by Thursday night.

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It’s a market place. Supply and demand.

Germany Inks Deal With Spain To Return Registered Migrants (AFP)

Berlin has concluded a deal with Madrid for Spain to take back migrants who had been registered by Spanish authorities, a German interior ministry spokeswoman said Wednesday, as Germany seeks to curb new arrivals. Under the accord, which will enter in to force on Saturday August 11, the migrants “could be sent back to Spain within 48 hours,” said interior ministry spokeswoman Eleonore Petermann, adding that Madrid did not lay down any condition in exchange. The deal is part of a series of bilateral agreements that Germany is seeking with EU partners, after a broader accord for the bloc proved elusive.

Chancellor Angela Merkel has been under pressure to reduce the number of new arrivals after a record influx of a million asylum seekers between 2015 and 2016 unsettled Germany. Besides Spain, Greece – another key arrival country for migrants who had undertaken the perilous sea journey crossing the Mediterranean – has also in principle agreed to such a deal, Berlin said in June. Italy’s new right-wing government has been more reluctant, as it is putting its focus on boosting controls at the EU’s external borders. Discussions with both Athens and Rome are “not over,” said Petermann. But Interior Minister Horst Seehofer had said in an interview published Sunday that talks with his Italian and Greek colleagues were ongoing “in a good atmosphere”.

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“10 million plastic bags per minute.”

New Zealand To Ban Single-Use Plastic Bags (AFP)

New Zealand became the latest country Friday to outlaw single-use plastic shopping bags, with Prime Minister Jacinda Ardern saying they will be phased out over the next year as a “meaningful step” towards reducing pollution. New Zealand uses “hundreds of millions” of single-use plastic bags each year, many of which end up harming marine life, Ardern said. “We need to be far smarter in the way we manage waste and this is a good start,” she said. “We’re phasing-out single-use plastic bags so we can better look after our environment and safeguard New Zealand’s clean, green reputation.”

Ardern said her coalition government, which includes the Green Party, was facing up to environmental challenges and “just like climate change, we’re taking meaningful steps to reduce plastics pollution so we don’t pass this problem to future generations.” Single-use plastic bags are among the most common items found in coastal litter in New Zealand and the environmental group Greenpeace welcomed the decision to outlaw them. “This could be a major leap forward in turning the tide on ocean plastic pollution and an important first step in protecting marine life such as sea turtles and whales, from the growing plastic waste epidemic,” Greenpeace Oceans Campaigner Emily Hunter said. A United Nations report in June said up to five trillion grocery bags are used globally each year, which is nearly 10 million plastic bags per minute.

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Aug 032018
 
 August 3, 2018  Posted by at 7:36 am Finance Tagged with: , , , , , , , , , ,  


Ivan Aivazovsky The Galata tower by moonlight 1845

 

The Trump Administration Is Headed For A Gigantic Debt Headache (CNBC)
The First Company To Reach $1 Trillion In Market Value Was In China (CNBC)
Apple Becomes World’s First Trillion-Dollar Company (G.)
Ban Share Buybacks (Week)
Where Are the 17,000 Model 3 Cars Tesla “Produced” But Didn’t “Deliver”? (WS)
Middle-Class Americans Still Haven’t Recovered From Housing Bust (MW)
China Loses Spot As World’s No. 2 Stock Market to Japan (AFP)
Judge Rejects Suit Against Fox News Brought By Parents Of Seth Rich (NBC)
Saudi Arabia Planned To Invade Qatar Last Summer. Tillerson Intervened (IC)
Food Banks Appeal For Donations To Feed Children During School Holidays (G.)
Britain Heading Back To Pre-Victorian Days (G.)

 

 

Nobody seems to care much.

The Trump Administration Is Headed For A Gigantic Debt Headache (CNBC)

Swelling government debt levels are shaping up to be the biggest economic challenge for President Donald Trump, a problem that could spill into the stock market. This week’s Treasury Department announcement that it would have to increase the amount of bond auctions over the next three months was a low-key reminder that the government IOU is only getting bigger and will start influencing interest rates sooner rather than later. As more product comes to market, investors could be expected to demand higher yields to snap up all the supply. And those higher yields mean higher costs at a time when taxpayers already have shelled out nearly half a trillion dollars this year in debt service.

Put it all together and it raises questions about how long the spurt in economic growth will continue, what will happen the next time the economy falls into recession and what impact it all will have on financial markets. “We’re applauding strong growth — yet have no choice but to borrow the largest amount of money since the financial crisis a decade ago,” Bernard Baumohl, chief global economist at The Economic Outlook Group, said in a note. “And that’s just the start, the US will [be] running trillion dollar deficits as far as the eye can see.” The total U.S. debt just passed the $21.3 trillion mark, of which $15.6 trillion is owed by the public.

The Treasury announced Wednesday that it will be adding $1 billion each to auctions of 2-, 3- and 5-year debt over the next three months, and $1 billion each for 7- and 10-year note and 30-year bond auctions in August. In addition, the department is issuing a new two-month note to help assure liquidity in the fixed income market. The changes will add $30 billion to the debt issuance for the quarter. On the overall, the Treasury said it expects to borrow $769 billion in the second half of the year, a projected 63% increase from 2017.

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So much for Apple then.

The First Company To Reach $1 Trillion In Market Value Was In China (CNBC)

Before Apple hit $1 trillion in market value Thursday, there was Chinese oil giant PetroChina, which reached the milestone more than a decade ago. It did not fare too well after that. PetroChina’s market cap hit $1 trillion in 2007 following a successful debut on the Shanghai Stock Exchange on Nov. 5 of that year. The company’s Shanghai-listed shares nearly tripled at the open that day, with its Hong Kong-listed shares following them higher. (It had debuted on the Hong Kong exchange years earlier.) The rise gave the company a market cap of $1.1 trillion on both the Shanghai and Hong Kong exchanges.

According to Reuters, PetroChina’s opening price in Shanghai valued the company at 60 times analysts’ forecasts for its 2007 earnings per share, above the global average of 18 times for oil companys at the time. It was all downhill from there, however. PetroChina’s market value plummeted to less than $260 billion by the end of 2008, representing the largest destruction of shareholder wealth in world history, according to Bloomberg. Blame the financial crisis and a collapse in oil prices. When PetroChina made its debut in 2007 brent crude prices were at one point, above $140 a barrel. Today they are about half that.

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This piece cites PetroChina, but says not enough shares were outstanding. But Apple’s outstanding shares shrank a lot as well, because of buybacks.

Apple Becomes World’s First Trillion-Dollar Company (G.)

Apple became the world’s first trillion-dollar public company on Thursday, as a rise in its share price pushed it past the landmark valuation. The iMac to iPhone company, co-founded to sell personal computers by the late Steve Jobs in 1976, reached the historic milestone as its shares hit $207.05, the day after it posted strong financial results. Apple’s share price has grown 2,000% since Tim Cook replaced Jobs as chief executive in 2011. The company hit a $1tn market capitalisation 42 years after Apple was founded and 117 years after US Steel became the first company to be valued at $1bn in 1901. It means Apple’s stock market value is more than a third the size of the UK economy and larger than the economies of Turkey and Switzerland.

While energy company PetroChina was cited as the world’s first trillion-dollar company after its 2007 flotation, the valuation is considered unreliable because only 2% of the company was released for public trading. Saudi Arabia’s national oil company Saudi Aramco could be worth up to $2tn upon its planned stock market float but the value is yet to be tested. This week’s rise in Apple’s share price was powered by quarterly financial results released on Tuesday that were better than Wall Street had expected. The tech giant racked up profits of $11.5bn in three months on the back of record sales that hit $53.3bn, pushing shares of the iPhone giant higher and easing the value of the company up from $935bn towards $1tn (£770bn).

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Ryan Cooper focuses on lower wages as a result of buybacks. I would go for the death of price discovery. Apple may be ‘worth’ one trillion, but it has a $100 billion buybacks war chest. That’s 10%. So what is it really worth.

Ban Share Buybacks (Week)

American corporations are simply raking in profits. Some are so bloated and cash-rich they literally can’t figure out what to do with it all. Apple, for instance, is sitting on nearly a quarter of a trillion dollars — and that’s down a bit from earlier this year. Microsoft and Google, meanwhile, were sitting on “only” $132 billion and $63 billion respectively (as of March this year). However, American corporations in general are taking those profits and kicking them out to shareholders, mainly in the form of share buybacks. These are when a corporation uses profits, cash, or borrowed money to buy its own stock, thus increasing its price and the wealth of its shareholders. (Big Tech is doing this as well, just not fast enough to draw down their dragon hoards.)

As a new joint report from the Roosevelt Institute and the National Employment Law Project by Katy Milani and Irene Tung shows, from 2015 to 2017 corporations spent nearly 60% of their net profits on buybacks. This practice should be banned immediately, as it was before the Reagan administration. The most immediately objectionable consequence of share buybacks is they come at the expense of wages. Milani and Tung calculate that if buybacks spending had been funneled into wage increases, McDonald’s employees could get a raise of $4,000; those at Starbucks could get $8,000; and those at Lowes, Home Depot, and CVS could get an eye-popping $18,000.

Some economists are skeptical of this reasoning, arguing that wages are set according to labor market conditions. But if you set aside free market dogmatism, it is beyond obvious that this sort of behavior is coming at workers’ expense. Wall Street bloodsuckers are not at all subtle about it, screaming bloody murder and tanking stocks every time a public company proposes paying workers instead of shareholders. Indeed, it provides a highly convincing explanation for something that has been puzzling analysts for months: the situation of wages continuing to stagnate or decline while unemployment is at 4%. The answer is that wages are low in large part because the American corporate structure has been rigged in favor of shareholders and executives.

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And Tesla was up 16% yesterday?!

Where Are the 17,000 Model 3 Cars Tesla “Produced” But Didn’t “Deliver”? (WS)

Tesla never ceases to astound with its hype and promises and with its results that are just mindboggling, including today when it reported its Q2 “earnings” – meaning a net loss of $718 million, its largest net loss ever in its loss-drenched history spanning over a decade. It was more than double its record loss a year ago: The small solitary green bump in Q3 2016 wasn’t actually some kind of operational genius that suddenly set in for a brief period. No, Tesla sold $139 million in taxpayer-funded pollution credits to other companies, which allowed it to show a profit of $22 million. Tesla adheres strictly to a business model that is much appreciated by the stock market: The more it sells, the more money it loses.

Total revenues – automotive and energy combined – rose 43% year-over-year to $4.0 billion in Q2. This increase in revenues was bought with a 113% surge in net losses. When losses surge over twice as fast as revenues, it’s not the light at the end of the tunnel you’re seeing. In between the lines of its earnings report, Tesla also confirmed the veracity of the many videos and pictures circulating on the internet that show huge parking lots filled with thousands of brand-new, Model 3 vehicles, unsold, undelivered, perhaps unfinished, waiting for some sort of miracle, perhaps needing more work, more parts, or additional testing before they can be sold, if they can be sold.

But these thousands of vehicles were nevertheless “factory gated,” as Tesla said, to hit the 5,000 a week production goal. And so they’re unfinished and cannot be delivered but are outside the factory gate, and Tesla didn’t totally lie about its “production” numbers. Now it put a number on these “produced” but undelivered vehicles: 12,571 in Q2 on top of the 4,497 in Q1, for a total of 17,000 vehicles sitting in parking lots.

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Wealth transfer.

Middle-Class Americans Still Haven’t Recovered From Housing Bust (MW)

A new study by the Opportunity and Growth Institute at the Minneapolis Fed found that the housing boom and bust made middle-class Americans poorer but boosted wealth for the richest 10%, widening the income and wealth gap substantially. Authors of the paper examined the relationship between incomes and asset prices over the past 70 years, concluding that rising and falling housing and stock markets have been the main drivers of wealth inequality. In the simplest model, the authors wrote, how fast wealth accumulates should be a function of how fast incomes rise. But incomes played only a minor role in wealth distributions in postwar America. Instead, wealth accumulation for most Americans was driven by booming home prices over the past several decade until 2007.

[..] ..real incomes of middle-class Americans rose by a third between 1970 and 2007, or less than 1% a year, while incomes of the bottom half have been largely stagnant since about 1970. Incomes for the top 10%, meanwhile, have doubled over the same period. Incomes for the bottom 90% have stagnant over the past 10 years. On the wealth distribution side, however, the poor became poorer, while the rich became richer after the financial crisis. Up until 2007, middle class Americans saw their wealth increase at the same rate as their wealthy counterparts, rising 140% over 40 years. Incomes for households in the bottom half doubled from 1971 until 2007—all thanks to booming house prices.

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Perspective: “Chinese stocks were worth $6.09 trillion, compared with $6.17 trillion in Japan. The US market is worth $31 trillion.”

China Loses Spot As World’s No. 2 Stock Market to Japan (AFP)

China’s stock market has been overtaken as the world’s second-biggest by Japan’s, having been swiped this year by the threat of a trade war with the United States and slowing economic growth. Data from Bloomberg News in intra-day trade on Friday showed the value of equities on the mainland had slipped behind those in their neighbouring country for the first time since taking the number-two spot in 2014. The figures showed Chinese stocks were worth $6.09 trillion, compared with $6.17 trillion in Japan. The US market is worth $31 trillion. While global markets have been broadly hit by fears of a trade war between the world’s top two economies, Chinese equities are among the worst performers this year, with the benchmark Shanghai Composite Index slumping more than 16% since the start of January.

The pressure was ratcheted up this week when the White House said it was considering more than doubling threatened tariffs on a range of Chinese imports worth $200 billion. Washington has already imposed tariffs on $34 billion worth of goods and is considering hitting another $16 billion in the coming weeks. “Losing the ranking to Japan is the damage caused by the trade war,” Banny Lam, head of research at CEB International Investment in Hong Kong, told Bloomberg News. “The Japan equity gauge is relatively more stable around the current level but China’s market cap has slumped from its peak this year.”

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But what really happened? Julian Assange knows. Kim Dotcom knows.

Judge Rejects Suit Against Fox News Brought By Parents Of Seth Rich (NBC)

A New York judge has rejected a lawsuit brought against Fox News by the parents of a Democratic National Committee employee killed in 2016. In a ruling Thursday, U.S. District Judge George Daniels said he understood Joel and Mary Rich might feel that the tragic death of their son was exploited for political purposes, but that the lawsuit lacked specific instances of wrongdoing necessary to proceed to trial. In the March lawsuit, the parents said that Fox News turned the death of their son, Seth Rich, into a “political football” by claiming he had leaked DNC emails to Wikileaks during the presidential campaign. The 27-year-old Rich was killed in what Washington police believe was a random robbery attempt. The judge also dismissed a related suit by a private investigator.

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Nice twist.

Saudi Arabia Planned To Invade Qatar Last Summer. Tillerson Intervened (IC)

Thirteen hours before Secretary of State Rex Tillerson learned from the presidential Twitter feed that he was being fired, he did something that President Donald Trump had been unwilling to do. Following a phone call with his British counterpart, Tillerson condemned a deadly nerve agent attack in the U.K., saying that he had “full confidence in the U.K.’s investigation and its assessment that Russia was likely responsible.” White House Press Secretary Sarah Sanders had called the attack “reckless, indiscriminate, and irresponsible,” but stopped short of blaming Russia, leading numerous media outlets to speculate that Tillerson was fired for criticizing Russia.

But in the months that followed his departure, press reports strongly suggested that the countries lobbying hardest for Tillerson’s removal were Saudi Arabia and the United Arab Emirates, both of which were frustrated by Tillerson’s attempts to mediate and end their blockade of Qatar. One report in the New York Times even suggested that the UAE ambassador to Washington knew that Tillerson would be forced out three months before he was fired in March. The Intercept has learned of a previously unreported episode that stoked the UAE and Saudi Arabia’s anger at Tillerson and that may have played a key role in his removal. In the summer of 2017, several months before the Gulf allies started pushing for his ouster, Tillerson intervened to stop a secret Saudi-led, UAE-backed plan to invade and essentially conquer Qatar, according to one current member of the U.S. intelligence community and two former State Department officials, all of whom declined to be named, citing the sensitivity of the matter.

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A nation that refuses to feed its children.

Food Banks Appeal For Donations To Feed Children During School Holidays (G.)

Calls have been made for the public to donate to their local food bank during the summer holidays owing to increasing demand from families who rely on free school meals during term time. The Trussell Trust, an anti-poverty charity, said an increase in food bank use over the summer was driven by a rise in demand by children, as it released figures from its network of more than 420 food banks across the country. While the number of adults seeking supplies from food banks during the summer months decreased in 2017, the number of children needing support shot up. During July and August 2017, food banks provided more than 204,525 three-day emergency supplies, 74,011 of which went to children. In the preceding two months, 70,510 supplies went to children. The number of adults seeking help from food banks fell from 131,521 in May and June to 130,514 in July and August.

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“..a billionaire’s flat in Knightsbridge costs just £1,421 a year, while a shop on the floor below can pay £244,000 in business rates.”

Britain Heading Back To Pre-Victorian Days (G.)

Is Northamptonshire Britain’s first banana republic? This once lovely county, much of it now a waste of wind turbines and warehouses, is close to bankruptcy. It must sack staff, freeze pay, close two-thirds of its libraries and stop all bus subsidies. It faces default on its statutory duty to public health, children in care and the elderly. While much of this is due to mismanagement, the National Audit Office says that 15 other counties, believed to include Somerset and Surrey, are in similar straits. Years of austerity are coming home to roost – and where least expected, among the rich shires. What is going on? Local councils cannot do what central government can do, which is tax and borrow to meet need.

Each year Whitehall spends more. It can tip money into the NHS and triple-lock pensions – good causes both – as well as vanity projects such as aircraft carriers, high-speed trains and nuclear power stations. Councils have no such discretion. Since 2010 their spending has shrunk by over a third, with central government grants slashed by as much as NHS spending has risen. 95% of British taxation is controlled by the centre, against 60% in France and 50% in the US. Yet local spending must pick up the casualties of the welfare state – vulnerable children, elderly and infirm people. It must fund the day centres, youth clubs, care homes and visits to problem families. To do so, services that most modern communities expect from government must now be butchered, such as parks, libraries and museums.

Local, not national, austerity is sending Britain back to pre-Victorian days. The solution is swift and easy. The government should uncap local taxes, free local spending, and allow local people to pay for what they want. It was how local government ran, perfectly well, up to the early 1980s. In most other countries it is still regarded as a normal feature of democracy. At present Britain’s meagre local revenue derives from a regressive household tax fixed on 1991 property valuations, which no government (except in Wales) has had the guts to revalue. Thus a billionaire’s flat in Knightsbridge costs just £1,421 a year, while a shop on the floor below can pay £244,000 in business rates. It is no surprise that the former goes to the council, and much of the latter is paid to central government.

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Aug 012018
 
 August 1, 2018  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , ,  


Getty Marilyn Monroe in NY subway 1955

 

Apple Buybacks Eclipse Value Of Most S&P 500 Companies (R.)
A Record 18% Of China’s GDP Goes To Debt Service (ZH)
IMF Warns On Greek Debt Sustainability (ZH)
The Greatest Depression (Coppola)
EU’s Brexit Declaration Could Be Just ‘Four Or Five Pages’ Long (G.)
UK Government Accused Of Trying To Hide Devastating Impact Of Brexit (Ind.)
No UK Car Manufacturer Ready For Brexit (Ind.)
Seymour Hersh On Novichok, Russian Links To Donald Trump And 9/11 (Ind.)
Please Sign Letter To Pope Francis Seeking Help For Julian Assange (LACW)
Julian Assange And Lawyer Want Malcolm Turnbull To ‘Stand Up To US’ (N.)
As Long As Assange Is Silenced, Claims Against Him Are Illegitimate (CJ)
Italian Ship Violates International Law, Returns Rescued People To Libya (G.)

 

 

Why are Apple shares rising? We can’t know. This is not a market.

Apple Buybacks Eclipse Value Of Most S&P 500 Companies (R.)

Apple Inc said on Tuesday it handed its shareholders $20 billion through share buybacks in the June quarter, bringing its tally this year to a record $43 billion and helping push its stock price to an all-time high. With a mountain of overseas cash freed up by last year’s sweeping U.S. corporate tax cuts, Apple’s share repurchases in the first half of calendar 2018 exceed the stock market value of almost three quarters of the companies in the S&P 500, including Ford, Delta Air Lines and Twitter Inc. Apple’s share repurchases in the June quarter were only eclipsed in the history of the S&P 500 by Apple repurchasing $22.8 billion of its shares in the prior quarter, according to S&P Dow Jones Indices analyst Howard Silverblatt.

The recent pace of Apple’s buybacks, disclosed in a quarterly report that beat Wall Street’s expectations, could help support the iPhone maker’s stock as investors worry that some high-flying technology companies have become too expensive. Confidence in top-shelf technology and consumer stocks has been shaken in recent days following poor results from Facebook and Netflix. Apple said in May it was adding $100 billion to its budget for buybacks. Its stock is up 16% in 2018, compared with the S&P 500’s 5% rise. “I see the buybacks as a major determinant of near-term price appreciation,” said D.A. Davidson & Co analyst Thomas Forte.

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Effectively borrowing at an 18% interest rate?!

A Record 18% Of China’s GDP Goes To Debt Service (ZH)

Think China’s new “proactive” fiscal policy shigt will be sufficient to kick start the local economy, and boost global GDP? Think again. In the latest analysis from Vertical Group’s Gordon Johnson, the strategist writes “that China’s proactive fiscal policy pledge could fall short as servicing its existing credit stock absorbs an increasing share of GDP.” As a reminder, last week, China’s State Council said it will adopt a proactive fiscal policy, outlining ways to fund ¥1.4tn in bonds to local government for infrastructure & provide ¥1.1tn in tax cuts, among other actions (e.g., R&D tax credits), all while urging no broad-based stimulus.

In Johnson’s view, this is a narrative that is rather reminiscent of ‘14, when the gov’t unleashed a wave of “micro-stimulus” measures after a string of weak data points (i.e., 5 mos. of contracting real estate investment). Yet, as he notes, the most recent PBoC mini-stimulus is much smaller than ‘14, while key restrictions remain in place for real estate/shadow loans (historically growth-driving conduits), compounded by the law of diminishing returns, suggesting a smaller boost from a much larger base this time around.

Moreover, China’s total credit stock is markedly higher now than in ’14, implying more of every yuan in stimulus is going to service outstanding debt. How much? That may well be the critical question to gauge the flow through from any new fiscal policy. Here is Vertical Group’s answer: While China exited ’17 with an est. 266% of total credit to GDP, some economists put that ratio at >300% today. On trailing 12-mo. nominal GDP of ¥86.5tn, as of 2Q, this equates to >¥259.5tn in credit, which, assuming an avg. borrowing cost of 6%, means China’s annual debt service is ~¥14.3tn, or 18.0% of GDP – sensitizing interest & credit-to-GDP, to a respective range of 4-7% & 285-320%, puts China’s debt service at 14-22% of GDP.

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Insanity: “..Greece’s debt costs will “begin an uninterrupted rise” after 2038 — costing around 20% of the country’s GDP every year..”

IMF Warns On Greek Debt Sustainability (ZH)

As Greeks attempt to recover from the devastating and deadly wildfires, The IMF has decided to pile on the pain with a new report that raises questions about Greece’s debt sustainability, warning that the nation’s cash buffer is set to drop by half by end of 2022. IMF Mission Chief for Greece Peter Dohlman told reporters on conference call this morning that Greece’s cash buffer will rise to EU24b as a result of debt relief measures agreed by euro-area finance ministers in June, but that amount is set to drop by half to EU12b by end of 2022. Translating The IMF’s newspeak, it is explaining that without more generous debt relief measures, Greece “could struggle to maintain market access over the long run”, the fund said in its last economic assessment of the country before the end of its bailout on August 20.

The fund’s calculations find Greece’s debt costs will “begin an uninterrupted rise” after 2038 — costing around 20% of the country’s GDP every year. It is at this point that “additional relief would be needed to secure debt sustainability”, said the report. [..] Additionally, the fund suggests that Greek banks raise capital: “Stress tests results published by the ECB in May point to the resilience of the Greek banks in the baseline scenario but significant capital depletions in the adverse scenario,” IMF says in Art. IV report on the state of the Greek economy. IMF “staff estimates that if the three banks with lower CET1 were asked to maintain capital ratios under adverse conditions in line with a capital requirement of 7.5–8.0%, the related capital shortfall could be in the range of €1.3–1.9 billion”.

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Any recovery stories for Greece are bogus. Oh, and Zero Hedge is a ‘satirical blog’?

The Greatest Depression (Coppola)

The IMF has just released its latest review of the Greek economy. “Following a deep and protracted contraction,” it says in its press release, “growth has finally returned to Greece.” The green light has been given for Greece’s exit from its bailout program in August 2018. For many, this is welcome news. Greece has turned a corner. The dark days are behind it, and the future will be bright. But is this really the end of Greece’s troubles – or will there be more pain to come? The magnitude of Greece’s collapse over the last decade is extraordinary. Right at the start of the IMF’s review is this chart, which compares the fall in Greek output over the last 10 years with other major historical contractions, including the U.S.’s Great Depression:

The Greek people have just lived through a Depression as deep as the Great Depression and considerably longer. It is now the greatest recorded peacetime Depression. Fortunately, the Greatest Depression may now have run its course. The Greek economy grew by 1.4% in 2017, and the IMF projects that GDP growth will rise to 2% in 2018 and 2.4% in 2019. Of course, IMF growth forecasts for Greece need to be treated with considerable caution. As the Greek economy sank ever deeper into depression, the IMF continued to predict that growth would rebound “any day now.” The satirical blog ZeroHedge lampooned the IMF’s dire forecasting record as “hockey stick comedy.” But Greece did emerge from its long-running depression in 2017, and indications so far are that growth will be maintained this year.

[..] The legacy of the Greatest Depression, even with the doubtful benefit of those structural reforms, is a terribly weak and deeply damaged economy. Adult unemployment, which peaked at over 25% at the height of the Greatest Depression, is still over 20%, while youth unemployment is twice as high. In a footnote to its review, the IMF comments that structural unemployment (the average excess of people over jobs across the business cycle) was 15% in 2016 and is expected to fall only gradually “over the next two decades.” Many of Greece’s young people will be middle-aged by the time there is any work for them. Some may never work at all. An entire generation thrown on the scrap heap.

Despite all the pain the Greeks have endured to fix their country’s finances, Greece’s fiscal situation remains extremely precarious. The IMF staff predictions show absolutely no room for fiscal expansion, even though it is desperately needed, not least to relieve extremely high poverty levels. One in four people in Greece is living below the poverty line.

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The EU doesn’t think May will last much longer.

EU’s Brexit Declaration Could Be Just ‘Four Or Five Pages’ Long (G.)

The EU’s declaration on the trade and security relationship with the UK after Brexit will be just five to 30 pages long, reflecting a lack of time to have an internal debate and scepticism that Theresa May will remain in Downing Street to deliver it, officials in Brussels have disclosed. While the UK is seeking a “precise and substantive” document, to match the recently published 100-page white paper, officials in Brussels say the EU’s political declaration on the “future framework” has diminishing importance for them. Brussels is aware that the prime minister needs the document, due in the autumn, to be a “sweetener” to the main withdrawal agreement, which will commit the UK to pay a £39bn divorce bill and spell out whatever difficult deal is sealed on the issue of the Irish border.

The declaration will not be legally binding on either party but is designed to offer major economic actors some reassurance through a vision of the future trading and security relationship, and it will form part of the package on which the UK parliament and MEPs will ultimately vote in the new year. Given doubts in Brussels that May will get a deal through parliament, or remain in Downing Street for long if she manages it with the help of Labour votes, there will not be the high level of detail that the British government has been seeking, sources said.

A senior EU official told The Guardian that the paper could even be as short as “four or five pages”, the same length as the European council guidelines setting out the bloc’s headline objectives. “It can either be four five pages, or it could be a bit more elaborate but I think we are in the league of five to 25 to 35 pages. We have not time to thrash out the details,” the official said. “The more details you want the more advanced you should be in these negotiations.” The official added: “The reality is that, imagine after March next year the UK gets rid of May, the hard Brexiters take over and Boris says: ‘Too bad. I am not interested in all this. I want a basic free trade agreement, I want all my freedom.’ We have to adjust.

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And it will get a lot worse.

UK Government Accused Of Trying To Hide Devastating Impact Of Brexit (Ind.)

Ministers have been accused of misleading the public after denying that plans to “turn most of Kent into a giant lorry park” are because of Brexit. Work is underway to convert four lanes of a 13-mile stretch of the M20 motorway to allow hundreds of articulated lorries to park up if they are delayed in reaching the Port of Dover. The Department for Transport (DfT) claimed the work was simply an improvement on the existing Operation Stack, a way of managing traffic used many times to cope with “serious disruption to cross-channel transport”. But it has now emerged that the project has been renamed Operation Brock – which Kent County Council says stands for “Brexit Operations Across Kent”.

Vast extra space for lorries will be needed if the Brexit talks fail and, as Theresa May has threatened, the UK crashes out of the EU without a deal next year. There will be massive disruption if any extra checks are required in future – with one study warning of immediate 20-mile tailbacks at Dover if the time taken to clear customs merely doubles from the current two minutes. Virendra Sharma, a Labour MP and supporter of the anti-Brexit Best for Britain group, said: “The government is trying to hide the devastating impact of their Brexit policy. “Food will rot on the motorway and jobs are at risk as manufacturing supply chains are muddled and slowed by Brexit. We cannot let ministers use secrecy to railroad the concerns of councils about Brexit.”

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Nobody’s ready. If only because they don’t know what to be ready for.

No UK Car Manufacturer Ready For Brexit (Ind.)

The British motor industry has warned that “no one would confess to being Brexit ready” in their trade. Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), argues that his members are “increasingly concerned” about the prospects for the UK leaving the EU on World Trade Organisation (WTO) terms, in the light of developments since Theresa May published the government’s latest Brexit white paper, which he and the SMMT welcomed. Michel Barnier, the EU’s chief negotiator, has since expressed scepticism about the proposed Facilitated Customs Arrangement (FCA), which would have been of particular value to manufacturing and the automotive sector.

In the light of EU resistance, and growing UK political volatility, the chances of the UK going to a “no deal” exit are increasing, meaning that Britain would move to WTO terms, as opposed to staying in the Single Market, the customs union or the FCA. This would imply tariffs of up to 10% in UK-EU trade in cars and parts, and greater bureaucracy in both directions, which would only be partly mitigated by “stockpiling” in the short run, given the demands of “just in time” manufacturing techniques and integrated cross-border supply chains. There is a tail risk that factory production of models such as the Mini at BMW’s plant in Oxford could be disrupted if crucial car components become unavailable.

Mr Hawes added that the prospect of a “no deal” Brexit was something no-one wished to see and that industry leaders wished to see “all options open as long as possible”. Reflecting on the 1,100 trucks that enter the UK from Europe every day to feed its factories, he said that the eight months remaining until formal Brexit on 29 March 2019 were “a real challenge”. British car production for the home market almost halved in June, compared to the same month a year ago, due to what the industry calls “a perfect storm” of factors that resulted in a freakish result.

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“The day after 9/11 we should have gone to Russia. We did the one thing that George Kennan warned us never to do – to expand NATO too far..”

Seymour Hersh On Novichok, Russian Links To Donald Trump And 9/11 (Ind.)

Hersh is honest enough to admit that today he might not have made it. He worked during the heyday of American journalism – when he was paid handsomely for exposes and when media outlets had the financial muscle to fund serious writing. When he covered the Paris Peace Accords for The Times, he was put up at the world famous five-star deluxe Hotel de Crillon. It is not long before we discuss contemporaneous events including the alleged Russian hacking of the US presidential election. Hersh has vociferously strong opinions on the subject and smells a rat. He states that there is “a great deal of animosity towards Russia. All of that stuff about Russia hacking the election appears to be preposterous.” He has been researching the subject but is not ready to go public… yet.

Hersh quips that the last time he heard the US defence establishment have high confidence, it was regarding weapons of mass destruction in Iraq. He points out that the NSA only has moderate confidence in Russian hacking. It is a point that has been made before; there has been no national intelligence estimate in which all 17 US intelligence agencies would have to sign off. “When the intel community wants to say something they say it… High confidence effectively means that they don’t know.” Hersh is also on the record as stating that the official version of the Skripal poisoning does not stand up to scrutiny. He tells me: “The story of novichok poisoning has not held up very well. He [Skripal] was most likely talking to British intelligence services about Russian organised crime.”

The unfortunate turn of events with the contamination of other victims is suggestive, according to Hersh, of organised crime elements rather than state-sponsored actions – though this flies in the face of the UK government’s position. [..] He ends the Goldsmiths talk with an anecdote about having lunch with his sources in the wake of 9/11. He vents his anger at the agencies for not sharing information. One of his CIA sources fires back: “Sy you still don’t get it after all these years – the FBI catches bank robbers, the CIA robs banks.” It is a delicious, if cryptic aphorism.

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The Pope is not a bad idea.

Please Sign Letter To Pope Francis Seeking Help For Julian Assange (LACW)

Your Holiness,

In your first Papal visit outside of Rome only months after your election as Supreme Pontiff, you choose the Italian island of Lampedusa, a refuge for migrants and asylum seekers fleeing the prospect of death. You did so to express your closeness and love to suffering people, to promote their dignity, which was under threat at home and in jeopardy in the countries where they seek refuge. Your first act upon arrival was to lay a wreath in the sea in memory of all those who had lost their lives seeking refuge. We, the undersigned, write to you, Your Holiness, as a loving Father to those who lives are in imminent danger, begging and beseeching you to speak up for someone whose life is in imminent danger.

A life that can only be saved by your intervention. In order to lessen the possibility of us laying a wreath in the coming days, in memory of the stateless asylum seeker Julian Assange, we ask that you speak out on his behalf. Julian is possible moments or hours away but certainly days away from being abducted by a SAS squad from the Ecuadorian Embassy in London, where his asylum status is about to be revoked. Based on the precedent the risk of death is very high. Last time the SAS entered an Embassy in London they assassinated their targets after they had surrendered and were unarmed lying on the ground.

With all legal avenues exhausted and the British, American, Ecuadorian and Australian governments all arranging the imminent raid on Julian, we cry out to you, Holy Father and ask that you encourage nations to respect the life of Julian Assange and to cease his arbitrary detention (as cited by the United Nations) and grant him asylum status where he can continue his work as a journalist, telling the truth, that is the truth that respects the dignity of persons. Please, Holy Father speak up and defend this life which so many powerful nations want to end and whose life only you can plead for leniency in a manner which may be heeded by the powerful who seek to end him.

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Australia should honor its own laws. And that means protecting its citizens.

Julian Assange And Lawyer Want Malcolm Turnbull To ‘Stand Up To US’ (N.)

[..] new British Foreign Secretary Jeremy Hunt claimed Assange was facing “serious charges” from local police. But there is confusion about what they are, as he is only facing a minor charge for breaching bail. Jennifer Robinson, Assange’s lawyer in London, told news.com.au she was “obviously very concerned” about the speculation he could be forced from the embassy. “We are monitoring that really closely. From our point of view he requires ongoing protection (because) the risk of prosecution is as high as it has ever been.” The Times quoted a source familiar with the case who expected Assange would “lose his asylum status imminently. This means he will be expelled from the embassy. When this will happen is impossible to say.”

It was Ms Robinson’s view, and Assange’s, that Australia could help break the stalemate. “Julian is still an Australian citizen and they have an obligation — and I think a duty — to exercise rights of protection over an Australian citizen,” she said. “They could usefully engage in this to help solve the impasse.” Ms Robinson said Canberra had good relationships with both the UK and US, so it shouldn’t be a difficult matter. “For me as a fellow Australian citizen, it is disappointing the government has not done more — but that doesn’t preclude them from doing it now and I very much hope that they will.” She said it raised concerns about the Federal Government’s willingness to “stand up for Australians” when the US Government was involved.

[..] Ms Robinson was mystified as to what charges Mr Hunt was referring to. “Jeremy Hunt’s statement is curious in the sense that Mr Assange doesn’t face any charges whatsoever … A magistrate will have to decide whether to bring bail proceedings against him when he leaves the embassy.” [..] “So is Mr Hunt talking about an extradition request from the US where he would face serious charges?” asked Ms Robinson. “Has he misspoken and disclosed that?” She told news.com.au that would be a serious matter. Assange’s legal team had sought assurances from the UK there was no extradition request and had been met with a “standard, blanket will not confirm or deny”. “So if Mr Hunt is talking about serious charges … there are none on the public record, so of course, we are concerned about what that might be from the US.”

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“..prosecuting a journalist for publishing authentic documents would arguably constitute a greater leap in the direction of Orwellian dystopia than the Patriot Act.”

As Long As Assange Is Silenced, Claims Against Him Are Illegitimate (CJ)

As attempts to evict Julian Assange from the Ecuadorian embassy in London get more and more aggressive, we are seeing a proportionate increase in the establishment smear campaign against him and against WikiLeaks. This is not a coincidence. The planned campaign to remove Assange from political asylum and the greatly escalated smear campaign to destroy public support for Assange are both occurring at the same time that Assange has been cut off from the world without internet, phone calls or visitors, completely unable to defend himself from the smear campaign. This, also, is not a coincidence.

The ability to control the narrative about what is going on in the world is of unparalleled importance to the plutocrats who use governments as tools to advance their agendas. The agenda to make an example of a leak publisher with a massive platform who has repeatedly exposed the corruption of the establishment upon which western plutocrats have built their empires will require continuous narrative spin, since the precedent set by prosecuting a journalist for publishing authentic documents would arguably constitute a greater leap in the direction of Orwellian dystopia than the Patriot Act.

Among the latest components of this campaign has been a viral dump of Twitter DMs being promoted as a hot news item by outlets like Motherboard, The Hill, Forbes and Think Progress and across #Resistance Twitter. The fact that the juicy bits from those DMs had already been published months ago by The Intercept, and the fact that the smears and spin we’re seeing reruns of today were long ago ripped to shreds in journalist Suzie Dawson’s epic essay “Being Julian Assange” after the Intercept publication, has not dampened the orgiastic frenzy with which this non-story is being bandied about by establishment loyalists and defenders of power as evidence of Assange’s nefariousness.

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Are we ever going to have that UN Emergency Meeting?

Italian Ship Violates International Law, Returns Rescued People To Libya (G.)

A search and rescue charity has alleged that an Italian ship returned scores of people rescued from the Mediterranean to Libya, even though Libya is not regarded by Europe as a safe place under international law. In what would be an unprecedented case if confirmed, the Asso 28, an oil rig support vessel, allegedly saved 108 people from a dinghy and then took them to Tripoli. The allegation was made by Òscar Camps, the founder of Proactiva Open Arms, a Spanish sea search and rescue NGO. It is unclear whether the ship had received instructions from the Italian coastguard. “The Asso 28, with an Italian flag, rescued 108 people in international waters and is now deporting them to Libya, a country where human rights are not respected. No chance [for them] to get asylum or shelter,” Camps wrote on Twitter.

Camps’ allegation was supported by Nicola Fratoianni, an Italian politician with Free and Equal, a small leftwing party, who was on board the Proactiva rescue ship. “We don’t know yet if this operation was instructed by the Italian coastguard, but if so it would be a very serious precedent, a real collective rejection, which Italy and the captain of the ship would have to respond to in court,” Fratoianni said. Two weeks ago Italy assured Germany that it would continue to accept migrants rescued at sea until an EU-wide plan on redistributing people across the continent was established. The pledge came after high-profile moves by Matteo Salvini, the interior minister and leader of the far-right League, to block rescue ships from docking at Italian ports.

In a response to Camps’ allegation on Tuesday, Salvini made no mention of the alleged involvement of an Italian ship in the incident. He wrote on Twitter: “The Libyan coastguard has rescued and brought back 611 immigrants in recent hours. The NGOs protest and the traffickers lose business? Fine, we’ll continue in this direction!” In another post, on Facebook, he wrote: “The Italian Coast Guard has not coordinated and participated in any of these operations, as falsely declared by a foreign NGO and a poorly informed leftist MP.”

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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%.

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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.”

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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.

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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:

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“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.

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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.

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“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.”

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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.

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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.

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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.

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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.

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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).

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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.

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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.

Read more …

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.

Read more …

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.

Read more …

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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