Odilon Redon Street in Samois 1888
“UK economy suffers shock 0.2% contraction in second quarter..”
The UK economy shrank in the second quarter, its worst performance in six and a half years, as growth was held back by Brexit uncertainty and car factory shutdowns. A 0.2% contraction between April and June was the weakest since the fourth quarter of 2012, when the economy contracted by 0.2%, according to figures from the Office for National Statistics. It followed growth of 0.5% in the first three months of the year, when the economy received a boost from unprecedented stockpiling by manufacturers in the run-up to the initial Brexit deadline of 29 March.
The ONS data showed that all three main sectors of the economy – services, manufacturing and construction – struggled in the three months to June. The slowdown – which leaves the annual growth rate at 1.2% – was considerably worse than the Bank of England’s forecast in its quarterly inflation report. Early evidence has suggested slightly stronger activity at the start of the third quarter of 2019.
As our currency plummeted last week, politicians were remarkably quiet. In normal times, a catastrophic slide in the pound would send a shockwave through Westminster. An emergency cabinet meeting might have been called. The chancellor might have made an announcement, calming markets and reassuring the public. But these aren’t normal times. Over the past three years, politics has been increasingly blind to the concerns of ordinary people. The Brexit debate is stuck on abstract constitutional issues such as the backstop. While they are important matters, the relentless focus of public discourse on them means that we are in danger of forgetting about the lives of real people.
Westminster is gripped by a fanatical race towards a cliff-edge Brexit and nobody is stopping to think about the impact it would have on the everyday lives of the people we serve as politicians. The falling pound is a perfect example. Consider for a moment the situation we find ourselves in. Three years on from the referendum, and sterling has now fallen by 15% against the euro. On average, the pound is now weaker than it was at the height of the financial crisis. We cannot dismiss this as a trivial bump in the road. This matters, because a no-deal Brexit is now the number one threat to the value of our currency, a fundamental factor driving this nation’s prosperity. And as Paul Johnson, director of the Institute for Fiscal Studies, put it, a fall in the pound “makes those of us whose earnings or savings or investment income is in pounds poorer. Period.”
We simply cannot ignore the impact this is having on people in our country. August is the most popular month for Brits to go on holiday. This month, some 6 million people will go on a trip to a eurozone destination, during which they will spend an average of £574 per head, according to the Office for National Statistics. Whereas before the referendum, that would have bought a UK holidaymaker €740 on the continent, now the same spend is worth only €620. In other words, our politicians’ dangerous no-deal Brexit musings have cost travellers more than £100 per person already.
Oh well, at least the lawyers are happy. But even they don’t know what is legal and what is not.
Jeremy Corbyn has called on the UK’s most senior civil servant to intervene to stop Boris Johnson forcing a no-deal Brexit in the middle of an election campaign, amid rising signs the country is heading for the polls again this autumn. The Labour leader wrote to Sir Mark Sedwill, the cabinet secretary, accusing the prime minister of plotting an “unprecedented, unconstitutional and anti-democratic abuse of power”, after it emerged No 10 would be prepared to delay an election until immediately after 31 October if Johnson loses a no confidence vote among MPs. In his letter, Corbyn demanded urgent clarification of the rules around purdah, which are meant to prevent the government taking major policy decisions during an election campaign.
He asked Sedwill to confirm that if the UK is due to leave the EU without a deal during an election campaign, then the government must seek an extension to article 50 and allow an incoming administration to take a decision about Brexit on the basis of the result. “Forcing through no deal against a decision of parliament, and denying the choice to the voters in a general election already underway, would be an unprecedented, unconstitutional and anti-democratic abuse of power by a prime minister elected, not by the public, but by a small number of unrepresentative Conservative party members,” he said. “I am therefore writing to seek your urgent clarification on the proper application of ‘purdah’ rules in such a scenario and the constitutional implications of failing to abide by those rules.”
Corbyn released the letter as No 10 refused to rule out delaying an election until the immediate few days after Brexit on 31 October if one is triggered by MPs voting down Johnson’s government and failing to form another administration. Asked by the BBC on Thursday if he would resign if he lost a confidence vote, Johnson swerved the question, and stressed the need to leave the EU on 31 October. “I think that what MPs should do and what I think they’ve already voted to do, when triggering article 50 and reconfirmed several times, is honour the mandate of the people and leave the EU on 31 October,” he said. He also insisted there was “bags of time” for the EU to “show some flexibility” and agree to ditch the Irish backstop, which he claimed could make the UK into a “satellite state” of Brussels.
Former FBI chief Comey now communicates via The View?!
Former FBI Deputy Director Andrew McCabe – flush with cash after a GoFundMe campaign raised $540,000, is the second former high-ranking FBI official to sue the Justice Department and FBI this week for what he describes as a “politically motivated firing” just days before he was set to retire with full benefits. The lawsuit describes former Attorney General Jeff Sessions and FBI Director Christopher Wray as “Trump’s personal enforcers,” who catered “to Trump’s unlawful whims instead of honoring their oaths to uphold the Constitution.” McCabe was fired after the DOJ’s Inspector General issued a criminal referral based on findings that he “made an unauthorized disclosure to the news media and lacked candor – including under oath – on multiple occasions.”
Specifically, McCabe authorized 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. Then he lied about it to the inspector general four times. In his defense, McCabe said said that his boss – former FBI Director James Comey, knew about and authorized the leak. Comey, in response, called McCabe a liar on The View, after host Megan McCain asked how he thought the public was supposed to have “confidence” in the FBI amid revelations that McCabe lied about the leak.
“It’s not okay. The McCabe case illustrates what an organization committed to the truth looks like,” Comey said. “I ordered that investigation.” Comey then appeared to try and frame McCabe as a “good person” despite all the lying. “Good people lie. I think I’m a good person, where I have lied,” Comey said. “I still believe Andrew McCabe is a good person but the inspector general found he lied,” noting that there are “severe consequences” within the DOJ for doing so.
Child of the Fed’s policies.
Uber’s losses have been legendary for years, ever since they were being leaked to the public while it was still a privately held company. But this takes the cake. Uber reported this evening that it had lost $5.24 billion in the quarter through June 30. The thing is, Uber reported revenues of only $3.2 billion. In other words, its net loss exceeded revenue by $2 billion. That takes some doing. Its $5.24 billion loss came on top of its $878 million loss in the first quarter. Combined, during the first half of 2019, Uber lost $6.25 billion. Total revenue for the two quarters was $6.3 billion. The chart of Uber’s “Loss from operations” – which does not include interest expense ($368 million in the first half) and “other income (expense),” such as last year’s gain from the sale of its stakes in Grab and Yandex – shows the annual totals from 2014 through 2018 and first-half total for 2019:
Lyft, Uber’s biggest competitor in the US, reported yesterday that its Q2 revenues of $867 million had generated a loss of $644 million. And that over the first half, its revenues of $1.64 billion generated a loss of $1.78 billion. You see, this phenomenon of well-established global companies with thousands of employees generating as much or more in losses than they have in revenues causes my old-school thinking to short-circuit. Uber has been around for a decade, and it has already burned through many billions of dollars in investor money to get where it is today, and there is still no functioning business model in sight.
He’s following the polls closely.
Matteo Salvini, Italy’s deputy prime minister and the leader of the far-right League party, has called for a snap election, urging the prime minister to reconvene parliament to confirm that the coalition government is no longer viable. The dramatic move on Thursday came after months of fighting between the League and its coalition partners, the anti-establishement Five Star Movement (M5S). The cavernous differences between the parties were clearly exposed on Wednesday when parliament rejected a motion by M5S to block a high-speed rail project linking Italy and France. M5S has built most of its popularity on vehemently opposing the long-stalled project but was outvoted by the League and opposition parties. In a statement, Salvini, who is also Italy’s interior minister, said it was pointless continuing the government with all the quarrelling.
“Italians need certainty and a government that does things, not a ‘Mr No’,” he said. “We do not want extra seats or ministers, nor do we want reshuffles or technical governments. After this government (which has done so many good things), the only thing is elections.” Salvini said he told the prime minister, Giuseppe Conte, who does not belong to either party, to reconvene parliament straight away to “acknowledge that there is no longer a majority, as evidenced by the vote [on Wednesday] and the repeated insults against me.” Conte, who had held separate talks with Salvini and the country’s President Sergio Mattarella as the crisis deepened, said in a statement later that the interior minister doesn’t summon parliament and “it’s not up to him to dictate the steps of the political crisis.”
You know I don’t like using inflation and deflation in this way, but the idea is obvious.
On Friday, China’s National Bureau of Statistics reported that the Producer Price Index (PPI), i.e. factory prices, fell 0.3% in July from a year ago, missing the modest 0.1% decline expected by analysts. This was the first annual decline in China’s PPI in three years – since August 2016 – and just like back then, was largely the result of tumbling commodity prices which in turn depressed both manufacturing and raw material goods prices. And with oil sliding, and iron ore plunging, not to mention the whole trade war thing, it does not seem like a rebound is imminent at all.
Worse, since PPI is closely linked to corporate profitability, the decline suggests that China is badly lagging in the credit impulse arena despite having started off 2019 with a bang and some of the biggest increases in Total Social Financing on record. So what’s the big deal: China has always been able to boost inflation, all it had to do was turn on the credit spigot and inject a few trillion in new bank and shadow loans into the economy. Maybe that was the case in the past, but this time it will have a big headache, because even as PPI declined for the first time in three years, consumer prices jumped 2.8%, and coming in hotter than the 2.7% expected, were tied for the highest annual headline inflation since February 2018.
Before that one would have to go all the way to 2013 to find a hotter CPI print. A continuation of recent trends, the bulk of the inflation was the result of sharply higher food prices, which surged 9.1% Y/Y as China continues to battle the rapid spread of “pig ebola” which some expect will eradicate half of China’s entire pig population, leading to even higher prices. Sure enough, pork prices soared 27% in July from a year ago, the highest in three years, but that wasn’t even the worst of it: the prices of fresh fruit soared by 39%, the highest since 2006!
“It will be a peaceful protest as long as the police do not show up…”
Demonstrators have gathered at Hong Kong’s airport, marking the start of three days of unauthorised rallies in the Chinese territory. Activists dressed in black sat in the arrivals hall waving banners to raise awareness among international visitors. Protests have gripped Hong Kong for weeks, beginning with anger at an extradition bill and morphing into demands for greater freedoms. The former British colony is part of China but enjoys more autonomy. It has a free press and judicial independence under the “one country, two systems” approach – freedoms activists fear are being increasingly eroded.
They have called for an independent inquiry into alleged police brutality during the protests, the complete withdrawal of the controversial extradition bill, and the resignation of Hong Kong’s leader Carrie Lam. Beijing has warned demonstrators not to “play with fire” or to “underestimate the firm resolve [of] the central government”. Demonstrators plan to stay at the airport throughout the weekend. They are waving banners written in different languages denouncing Carrie Lam and the police, and handing out leaflets with artwork explaining the recent protests. Authorities are so far tolerating the peaceful rally, which have not overly disrupted passengers. There are as yet no police at the scene. “It will be a peaceful protest as long as the police do not show up,” one demonstrator told Reuters news agency.
Imagine the pressure the Malaysians must be under…
Malaysia filed criminal charges Friday against 17 current and former directors of three Goldman Sachs subsidiaries, piling further pressure on the Wall Street titan over the multi-billion dollar 1MDB scandal. Huge sums were looted from Malaysian sovereign wealth fund 1Malaysia Development Berhad in a globe-spanning fraud, which allegedly involved ex-leader Najib Razak and his inner circle. Goldman’s role has been under scrutiny as it helped arrange a series of bond issues worth $6.5 billion for the investment vehicle. Prime Minister Mahathir Mohamad re-opened investigations into the 1MDB affair last year after defeating Najib at the polls, in large part due to public anger at the scandal, and pressure has been steadily mounting on the bank since.
Announcing the latest charges, Attorney General Tommy Thomas said: “Custodial sentences and criminal fines will be sought against the accused… given the severity of the scheme to defraud and fraudulent misappropriation of billions in bond proceeds.” Goldman said in a statement it believed the charges were “misdirected” and would be “vigorously defended”. Thomas listed the names of the 17 accused, whom he said were directors of three Goldman subsidiaries in 2012 and 2013. In December, Malaysia filed charges against the units — Goldman Sachs International, Goldman Sachs (Asia), and Goldman Sachs (Singapore) — and two ex-employees.
Everybody gather in the basement!
One of the crucial insights in currency trading that many investors fail to grasp is that currencies don’t go to zero, and they don’t go through the roof. That’s a generalization, but an important one. Here are the qualifications: This observation applies to major currencies only — not to currencies of corrupt or incompetent countries like Venezuela or Zimbabwe. Those currencies do go to zero through hyperinflation. The observation also applies only in the short-to-intermediate run. In the long run, all fiat currencies also go to zero. Yet over a multiyear horizon, major currencies such as the dollar (USD), euro (EUR), yen (JPY), sterling (GBP) and the Swiss franc (CHF) retain value and do not go to extremes. Instead, they trade in ranges against each other.
That’s the key to successful foreign exchange trading. Trading profits are the result of catching the turning points. Stocks can go to zero when a company goes bankrupt. Enron, WorldCom and a host of dot-com stocks in the early 2000s are all good examples. Bonds can go to zero when a borrower defaults. That happened to Lehman Bros. and Bear Stearns. But major currencies do not go to zero. They move back and forth against each other like two kids on a seesaw moving up and down and not going anywhere in relation to the seesaw. The EUR/USD cross-rate is a good example. In the past 20 years, the value of the euro has been as low as $0.80 and as high as $1.60. There have been seven separate instances of moves of 20% or more in EUR/USD in that time period. But EUR/USD never goes to zero or to $100. The exchange rate stays in the range.
Bayer is proposing to pay as much as $8 billion to settle more than 18,000 U.S. lawsuits alleging its Roundup herbicide causes cancer, according to people familiar with the negotiations, Bloomberg News reports. Though such an agreement may be months away, if successful it would ease investor pressure over the German drug and chemical company’s massive litigation exposure. Bayer’s shares have fallen more than one-third in the 14 months since its $63 billion acquisition of the weedkiller’s maker, Monsanto Co.
Lawyers, PR firms, spin doctors. That’s Monsanto. Plus a handful of scientists.
As a journalist who has covered corporate America for more than 30 years, very little shocks me about the propaganda tactics companies often deploy. I know the pressure companies can and do bring to bear when trying to effect positive coverage and limit reporting they deem negative about their business practices and products. But when I recently received close to 50 pages of internal Monsanto communications about the company’s plans to target me and my reputation, I was shocked. I knew the company did not like the fact that in my 21 years of reporting on the agrochemical industry – mostly for Reuters – I wrote stories that quoted skeptics as well as fans of Monsanto’s genetically engineered seeds.
I knew the company didn’t like me reporting about growing unease in the scientific community regarding research that connected Monsanto herbicides to human and environmental health problems. And I knew the company did not welcome the 2017 release of my book, Whitewash – The Story of a Weed Killer, Cancer and the Corruption of Science, which revealed the company’s actions to suppress and manipulate the science surrounding its herbicide business. But I never dreamed I would warrant my own Monsanto action plan. The company records I’ve obtained show a range of actions. One Monsanto plan involved paying for web placement of a blogpost about me so that Monsanto-written information would pop up at the top of certain internet searches involving my name.
The correspondence also discussed a need to produce “third party talking points” about me. In addition, Monsanto produced a video to help it amplify company-engineered propaganda about me and my work. I even inspired a Monsanto spreadsheet: as part of “Project Spruce”, the “Carey Gillam Book plan” lists more than 20 items, including discussion of how the company might get third parties to post book reviews about Whitewash.