Jun 122018
 
 June 12, 2018  Posted by at 9:19 am Finance Tagged with: , , , , , , , , , ,  


Henri Matisse The pink studio 1911

 

Trump And Kim Sign “Comprehensive” Letter To End Historic Summit (ZH)
Dennis Rodman Cries As He Hails Trump-Kim Summit: ‘I’m So Happy’ (G.)
Trump, Kim Meet, But Body Language Shows Some Nerves (R.)
IMF’s Lagarde Says Global Economic Outlook Darkening By The Day (R.)
If Trump Wants To Blow Up The World Order, Who Will Stop Him? (Varoufakis)
World Wrassling Diplomacy (Jim Kunstler)
Twelve Tips For Making Sense Of The World (CJ)
ECB Set To Begin The Process Of Its Easy Money-Exit (CNBC)
Corporate Executives Cash In On Stock Buybacks (CNBC)
US Net Neutrality Rules Expire, Court Battle Looms (R.)
Stranded Migrant Rescue Boat Unable To Make Voyage To Spain (Ind.)
The Last Bat: The Mystery Of Britain’s Most Solitary Animal (G.)

 

 

Went exactly as expected. No big deal. But Trump’s reeled in Kim, who will now have to deliver.

Trump And Kim Sign “Comprehensive” Letter To End Historic Summit (ZH)

Donald Trump and North Korean Leader Kim Jong Un signed what the US president described as a “very important, comprehensive” document following the conclusion of their “really fantastic” whirlwind historic summit in Singapore, the first between a US president and North Korean leader that came after decades of hostility. “The letter that we are signing is very comprehensive, and I think both sides will be very impressed with the results,” Trump said as he sat alongside the North Korean leader at a large wooden table in front of a bank of U.S. and North Korean flags to endorse the document, which however produced no new specific commitments from Pyongyang to surrender its nuclear weapons aside from broad generalities.

Speaking through an interpreter, Kim said that the two countries would “leave the past behind” in signing the “historic”agreement and that “the world will see the major change,” adding that “I would like to express gratitude to President Trump for making this meeting happen.” Trump said more information would come out “in just a little while” and did not say what the agreement entailed, but some had already managed to extract the key contents from the letter Trump held up. The letter says that the U.S. and North Korea “will join their efforts to build a lasting and stable peace regime on the Korean Peninsula,” and that North Korea “commits to work toward complete denuclearization of the Korean Peninsula.”

The pair also agree to “establish new U.S.-DPRK relations, and the two leaders “have committed to cooperate for the development of new U.S.-DPRK relations and for the promotion of peace, prosperity and security of the Korean Peninsula and of the world.” Notably, the U.S. and N. Korea agree to follow-on negotiations led by Sec. of State Mike Pompeo and a DPRK counterpart. In other words this is just the first of many summits. Speaking to reporters, Trump also said the he would “absolutely” invite Kim to the White House to continue their talks, meanwhile Kim called the document “historic” and said it would lead to a new era in the U.S.-North Korea relationship. “We had a historic meeting and decided to leave the past behind, and we are about to sign a historic document,” he said through a translator. “The world will see a major change.”

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Perspective is everything.

Dennis Rodman Cries As He Hails Trump-Kim Summit: ‘I’m So Happy’ (G.)

Kim Jong-un and Donald Trump had barely exchanged pleasantries outside the Capella hotel when their mutual friend Dennis Rodman appeared on TV to provide a characteristically bizarre sideshow to the main event in Singapore. In a rambling interview with CNN’s Chris Cuomo from Singapore, a highly emotional Rodman claimed credit for predicting that today’s summit – which seemed unlikely just months ago – would happen. Wearing a Make America Great Again baseball cap and a T-shirt bearing the name of his sponsor Potcoin, Rodman sobbed as he described his feelings about the summit and recalled the abuse he had received over his controversial visits to Pyongyang to meet Kim. “I said to everybody, the door will open,” he said.

“It’s amazing, it’s amazing, it’s amazing. When I said those things, when I went back home, I got so many death threats … and I believed in North Korea, and I couldn’t even go home, I couldn’t even go home, I had to hide out for 30 days, I couldn’t even go home. “But I kept my head high, brother, I knew things were going to change … I knew it, I was the only one. I never had no one to hear me, I had no one to see me. But I took all those bullets, I took all at that … but I’m still standing. Today is a great day for everybody, Singapore, Tokyo, China, everybody … it’s a great day. I’m here to see it. I’m so happy.”

The former NBA star is one of the few westerners to have met Kim, with whom he struck up an unlikely friendship over their shared love of basketball. Describing his meetings with Kim, Rodman said: “He’s more like a big kid, even though he’s small. He wants to come to America. He wants to enjoy his life.” Rodman said he had tried to pass on what he heard from Kim to Barack Obama but was “brushed off”.

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Reuters has called in a body language expert. Stay tuned for Aunt Mille’s take on their astrological signs. June 14 is Trump’s 72nd birthday.

Trump, Kim Meet, But Body Language Shows Some Nerves (R.)

In their first moments of meeting each other, U.S. President Donald Trump and North Korean leader Kim Jong Un both sought to project a sense of command but displayed some anxiety at the start of their high-stakes summit in Singapore. Body language experts said that in the 13 seconds or so the U.S. president held on to the hand of Kim for the first time, he projected his usual dominance by reaching out first, and patting the North Korean leader’s shoulder. Not to be outdone, Kim firmly pumped Trump’s hand, looking him straight in the eye for the duration, before breaking off to face the media.

“It wasn’t a straight-out handshake,” said Allan Pease, an Australian body language expert and author of several books on the topic, including “The Definitive Guide to Body Language”. “It was up and down, there was an argy-bargy, each one was pulling the other closer. Each guy wasn’t letting the other get a dominant grip,” he told Reuters by telephone from Melbourne. Trump and Kim are meeting in Singapore for historic talks aimed at finding a way to end a nuclear standoff on the Korean peninsula. Should they succeed, it could bring lasting change to the security landscape of Northeast Asia, like the visit of former U.S. President Richard Nixon to China in 1972 led to the transformation of China.

Ahead of the meeting, Trump had said he would be able to work out within the first minute whether his North Korean counterpart was serious about making peace. Projecting authority comes easily to Trump, who as a global leader, businessman and former television personality is well-versed in using body language effectively. He also has a height advantage over Kim. While both men walked to the library where they held their first face-to-face meeting, Trump sought to ease any tension in the air by chatting to Kim, and letting him walk slightly ahead. Trump, however, maintained control over the chat by patting Kim, and using his hand to guide him, who is almost half his age, into the room. Kim also patted Trump, in an attempt to assert control. He mainly looked down, listening, as Trump spoke, but did look up at several times during the conversation.

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She doesn’t really think that, but needs a stab at Trump for upsetting the order that gave her the seat she has.

IMF’s Lagarde Says Global Economic Outlook Darkening By The Day (R.)

IMF chief Christine Lagarde led an attack by global economic organizations on U.S. President Donald Trump’s “America First” trade policy on Monday, warning that clouds over the global economy “are getting darker by the day”. Trump backed out of a joint communique agreed by Group of Seven leaders in Canada at the weekend that mentioned the need for “free, fair and mutually beneficial trade” and the importance of fighting protectionism. The U.S. president, who has imposed import tariffs on metals, is furious about the United States’ large trade deficit with key allies. “Fair trade is now to be called fool trade if it is not reciprocal,” he tweeted on Monday.

In response, Lagarde unleashed a thinly veiled attack on Trump’s trade policy, saying challenges to the way trade is conducted were damaging business confidence, which had soured even since the weekend G7 summit. The IMF is sticking to its forecast for global growth of 3.9% both this year and next, she said, before adding: “But the clouds on the horizon that we have signaled about six months ago are getting darker by the day, and I was going to say by the weekend.” “The biggest and darkest cloud that we see is the deterioration in confidence that is prompted by (an) attempt to challenge the way in which trade has been conducted, in which relationships have been handled and in which multilateral organizations have been operating,” Lagarde said.

[..] Earlier, Germany’s economy minister said Berlin saw no immediate solution to the trade row between the United States and other major economies but remained open to talks “among friends”, seeking to head off a full-blown global trade war. As Europe’s biggest exporter to the United States, and with more than one million German jobs at stake, Germany is desperate to avoid an EU trade war with the United States. “I believe a win-win situation is still possible,” Economy Minister Peter Altmaier, one of Merkel’s closest lieutenants, told broadcaster Deutschlandfunk. “At the moment, however, it seems that no solution is in sight, at least not in the short term.”

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I thought we agreed we didn’t like the world order.

If Trump Wants To Blow Up The World Order, Who Will Stop Him? (Varoufakis)

The Trump administration is building up a substantial economic momentum domestically. First, he passed income and corporate tax cuts that the establishment Republicans could not have imagined even in their wildest dreams a few years ago. But this was not all. Behind the scenes, Trump astonished Nancy Pelosi, the Democrat’s leader in the House of Representatives, by approving every single social program that she asked of him. As a result, the federal government is running the largest budget deficit in America’s history when the rate of unemployment is less than 4%. Whatever one thinks of this president, he is giving money away not only to the richest, who of course get the most, but also to many poor people.

With demonstrably strong employment, especially among African American workers, inflation under control and the stock market still buoyant, Donald Trump has his home front covered as he travels to foreign lands to confront friends and foes. The US anti-Trump establishment prays that markets will punish his profligacy. This is precisely what would have happened if America were any other country. With a fiscal deficit expected to reach $804bn 2018 and $981bn in 2019, and with the government expected to borrow $2.34tn in the next 18 months, the exchange rate would be crashing and interest rates would be going through the roof. Except that the US is not any other country. As its central bank, the Fed, winds down its quantitative easing program by selling off its stock of accumulated assets to the private sector, investors need dollars to buy them.

This causes the number of dollars available to investors to shrink by up to $50bn a month. Add to this the dollars German and Chinese capitalists need to buy US government bonds (in a bid to park their profits somewhere safe) and you begin to see why Trump believes he will not be punished by a run either on the dollar or on government bonds. Armed with the exorbitant privilege that owning the dollar presses affords him, Trump then takes a look at the trade flows with the rest of the G7 and comes to an inescapable conclusion: he cannot possibly lose a trade war against countries that have such high surpluses with the US (eg Germany, Italy, China), or which (like Canada) will catch pneumonia the moment the American economy catches the common cold.

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“..it is hard to imagine two characters less prepared by the rigors of reality than this pair.”

World Wrassling Diplomacy (Jim Kunstler)

I’m all for world peace, and I would like to attempt to take the Kim-Trump meeting seriously, but it is hard to imagine two characters less prepared by the rigors of reality than this pair. Each has been dwelling in a magic kingdom of his own life-long. Both exhibit behaviors typical of children: sulking, threats, bluster, and mysterious mood shifts. The supposedly serious adults around Mr. Trump must be going through the Xanax like Tic-Tacs. The military attachés around the inscrutable Kim might recall the 2016 execution of two NK ministers shot to death with anti-aircraft guns for displeasing the boss — one of them for merely falling asleep during a Kim speech. Who cleaned up that mess, I wonder.

Maybe something good can come out of this improbable set-up. I expect a kind of vaudeville act: a few moments of the two principals pretending that they understand what each is saying… a hopeful communiqué announcing the blooming of a million flowers, and a fateful blowup a few hours into the honeymoon when Kim, Trump, and all the spear-carriers on both sides realize that they had no idea what they were talking about. Then, on Thursday or thereabouts the long-awaited DOJ Inspector General’s report comes out, after a going-over by the very folks at the FBI whose conduct is the subject of that review. I expect a new layer in the mighty cake baked by the white knights of the Resistance. This one will be called Redacto-Gate.

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Things that should be obvious to every 5-year old, but are not:

2. Money rewards sociopathy.

3. Wealth kills empathy.

Twelve Tips For Making Sense Of The World (CJ)

In an environment that is saturated with mass media propaganda, it can be hard to figure out which way’s up, let alone get an accurate read on what’s going on in the world. Here are a few tips I’ve learned which have given me a lot of clarity in seeing through the haze of spin and confusion. Taken separately they don’t tell you a lot, but taken together they paint a very useful picture of the world and why it is the way it is.

1. It’s always ultimately about acquiring power.
In the quest to understand why governments move in such irrational ways, why expensive, senseless wars are fought while homeless people die of exposure on the streets, why millionaires and billionaires get richer and richer while everyone else struggles to pay rent, why we destroy the ecosystem we depend on for our survival, why one elected official tends to advance more or less the same harmful policies and agendas as his or her predecessor, people often come up with explanations which don’t really hold water.

The most common of these is probably the notion that all of these problems are due to the malignant influence of one of two mainstream political parties, and if the other party could just get in control of the situation all the problems would go away. Other explanations include the belief that humans are just intrinsically awful, blaming minorities like Jews or immigrants, blaming racism and white supremacy, or going all the way down wild and twisted rabbit holes into theories about reptilian secret societies and baby-eating pedophile cabals. But really all of mankind’s irrational behavior can be explained by the basic human impulse to amass power and influence over one’s fellow humans, combined with the fact that sociopaths tend to rise to positions of power.

Our evolutionary ancestors were pack animals, and the ability to rise in social standing in one’s pack determined crucial matters like whether one got first or last dibs on food or got to reproduce. This impulse to rise in our pack is hardwired deeply into our evolutionary heritage, but when left unchecked due to a lack of empathy, and when expanded into the globe-spanning 7.6 billion human pack we now find ourselves in due to ease of transportation and communication, it can lead to individuals who will keep amassing more and more power until they wield immense influence over entire clusters of nations.

2. Money rewards sociopathy.
The willingness to do anything to get ahead, to claw your way to the top, to betray whomever you need to, to throw anyone under the bus, to step on anyone to pass them in the rat race, will be rewarded in our current system. Being willing to underpay employees, cheat the legal system, and influence legislators will be rewarded exponentially more. People with a sense of empathy are often unwilling to do such things, whereas sociopaths and psychopaths are. About four percent of the population are sociopaths, and about one percent are psychopaths, with some five to fifteen percent falling somewhere along the borderline. The less empathy you have, the further you are willing to go, and the further up the ladder you can climb.

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Don’t hold your breath.

ECB Set To Begin The Process Of Its Easy Money-Exit (CNBC)

“We never pre-commit.” This was the rule broken last week by the European Central Bank’s Chief Economist Peter Praet, one of the more dovish members of the bank’s Governing Council, as he openly said it would start to discuss the gradual exit from of its quantitative easing (QE) program this week at its meeting in Riga, Latvia. What has changed? Recent headline inflation was stronger than expected and close to the ECB’s target, mainly due to the rise in oil prices. At the same time the situation in Italy has calmed down again. But there still are risks to the growth outlook from other issues such as the U.S.-EU trade spat.

“We think a ‘flexible tapering’ announcement is more likely than an unconditional commitment to an end date for QE,” said ECB watcher Frederik Ducrozet at Pictet Wealth Management in a note. “The ECB could say that there will be ‘no further large expansion of asset purchases’ barring an unwarranted tightening of financial conditions. The modalities of QE tapering could be decided in July.” Whether the details come in June or July, the overwhelming majority of economists polled by Reuters expect the purchases to end by the end of this year. “Irrespective of whether the exit announcement is in June or July, we expect QE to end in December after a taper in (the fourth quarter) and the first policy rate hike in June 2019,” said Mark Wall, the chief economist with Deutsche Bank, in a research note.

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And it’s legal!

Corporate Executives Cash In On Stock Buybacks (CNBC)

Corporate executives are using tax cuts and share buybacks to boost their own compensation, a top regulator said Monday. Companies have announced a record-breaking level of share buybacks since Congress passed the Republican-backed tax reduction in December. Critics of the $1.5 trillion measure had worried that it would lead to big rewards for shareholders and only limited benefit to the broader economy. Robert Jackson Jr., a member of the Securities and Exchange Commission, said corporate bigwigs have been selling their shares after the buyback announcements hit, cashing in from the stock price surge that often happens after a repurchase notice.

The rules exempting companies from securities law violations for the timing and pricing of buyback announcements need to change, said Jackson, who President Donald Trump appointed earlier this year to fill a designated Democratic SEC seat. Jackson pointed out that the Dodd-Frank banking reforms passed after the financial crisis included language aimed at keeping investors informed about how executives cash out their shares, but specific rules remain in limbo. “But it’s not just that the regulations haven’t been finalized. It’s that the problem itself keeps getting worse,” he said. “You see, the Trump tax bill has unleashed an unprecedented wave of buybacks, and I worry that lax SEC rules and corporate oversight are giving executives yet another chance to cash out at investor expense.”

Indeed, buybacks totaled $178 billion during the first quarter, hit a record $171.3 billion in May alone and have seen $51.1 billion announced so far in June, according to market data firm TrimTabs. At the same time, insider selling has totaled $23.6 billion. Wall Street analysts expect full-year buybacks to total as much as $800 billion, part of what UBS recently forecast to be a $2.5 trillion tsunami of cash pumped into repurchases, dividends, and mergers and acquisitions activity.

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Sometimes you wonder how much longer for the internet as we know it.

US Net Neutrality Rules Expire, Court Battle Looms (R.)

The U.S. open internet rules expired on Monday, handing sweeping new powers to internet providers to block, throttle or offer paid “fast lanes” for web traffic, but a court battle remains ahead. The Federal Communications Commission repealed the 2015 Obama administration’s landmark net neutrality rules in December by a 3-2 vote, sparking a firestorm of criticism on social media websites, opposition from internet firms like Facebook and Alphabet, and protests among Democrats in the Republican-controlled Congress. New regulations that took legal effect Monday give internet service providers (ISPs) sweeping power to slow, block or offer “paid prioritization” to some websites as long as they disclose the practices.

The 2015 order subjected internet providers to strict regulations by the FCC, arguing consumers needed protection from internet provider practices and said internet providers could engage in “just and reasonable conduct.” FCC Chairman Ajit Pai said last week the rollback will ensure more investment by providers and will ensure “better, faster, and cheaper Internet access and more broadband competition to the American people.” FCC Commissioner Jessica Rosenworcel, a Democrat who voted against the repeal, said Monday that the decision put the FCC “on the wrong side of history, the wrong side of the law, and the wrong side of the American public.”

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Rescue the poor souls already.

Stranded Migrant Rescue Boat Unable To Make Voyage To Spain (Ind.)

A rescue boat loaded with hundreds of refugees which has been stranded in the Mediterranean Sea after Italy and Malta refused to allow the boat to dock, is unable to make the journey to Spain where the government has said it can land. Bad weather in the area is forecast to get worse, making the three-to-five-day voyage dangerous, according to French humanitarian group SOS Meiterranee France. According to the organisation, 629 migrants have been taken on board the Aquarius rescue boat, including 123 unaccompanied minors and seven pregnant women. On Monday evening the group put out a message which read: “Reaching Spain would take several days. With 629 people on board and weather deteriorating, the situation could become critical.”

“Priority must remain the safety of all survivors. It is the responsibility of the Italian maritime authorities to find a safe and fast solution for the 629 people aboard the #Aquarius.” The boat was refused entry to Italian ports after Italy’s interior minister Matteo Salvini, who is also leader of far-right party Lega Nord (Northern League) said that all Italian ports were closed to the Aquarius. In a Facebook post he called on Malta to take in the vessel. [..][ the new Spanish prime minister, Pedro Sanchez, who took office just over a week ago, then said Spain would allow the rescue vessel to dock in the city of Valencia, where the rescued migrants and refugees could finally disembark. Despite the offer, it now looks unlikely the boat will attempt to reach Spain.

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What was it, one in every 3 mammals is a bat?!

The Last Bat: The Mystery Of Britain’s Most Solitary Animal (G.)

We cannot speak of its loneliness, but it must be Britain’s most solitary animal. For the last 16 years, every winter, a male greater mouse-eared bat has taken up residence 300 metres inside a disused and exceedingly damp railway tunnel in West Sussex. The greater mouse-eared bat has been all but extinct in this country for decades. This is the only remaining one we know of. The future of the species in Britain appears to rest with one long-lived and very distinctive individual. The greater mouse-eared bat is so large that observers who first discovered it in Britain likened one to a young rabbit hanging from a wall. In flight, its wings can stretch to nearly half a metre – an astonishing spectacle in a land where bats are generally closer to the size of the rodent that inspired their old name: flittermouse.

The bat has large, mouse-like ears and its feeding habits are as striking as its size. Rather than zig-zagging through darkening skies collecting flying insects, like most bats, Myotis myotis descends earthwards, flapping its wings very slowly as it covers the ground, picking up grasshoppers, crickets, dung beetles and other flightless insects as it goes. Often, it will flop on to the ground, wings outstretched to fold over its prey. The solitary individual who spends the winters in West Sussex has never been observed in flight. Where it goes each spring is not known, and what it does is not known, nor which other animals, if any, it encounters. All that is known is that each winter the bat faithfully returns to its dark tunnel, where it hangs, almost motionless, for five months.

[..] Bats have been evolving for so long, and with so many specialised attributes, from echolocation to drastically extended forelimbs, that the order of Chiroptera – “winged hands” in Latin – accounts for one in five species of mammal. They are supremely successful animals. As one expert puts it: when you have been evolving for so long, you’ve perfected the business of being a bat. That business is becoming tricker in a human-dominated world. In older times, they were feared and despised. Modern people may be more tolerant, but even beneficent parts of society – from harvesters of renewable energy to vicars – are often hostile to bats. Energy-efficient homes seal up roof spaces where bats once roosted.

New roads – and the planned route of the HS2 railway – block traditional foraging routes. LED lighting is particularly disturbing for bats. Wind farms chop them up: according to a study published in 2016, researchers using sniffer dogs to find and retrieve bat carcasses calculated that 29 onshore windfarms killed 194 dead bats per month – a kill-rate that would dispatch 80,000 bats a year across Britain, without accounting for migrating bats taken out by the rapidly expanding rows of offshore turbines.

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Jun 102018
 
 June 10, 2018  Posted by at 8:58 am Finance Tagged with: , , , , , , , , , , , , ,  


Paul Gauguin The Day of the God 1894

 

Is The Existing Banking System Coming To An End? (Ren.)
The Credit Cycle Will Be The EU’s Undoing (Macleod)
China is in Trouble (Mises)
How To Plan For Next Round Of Fed Interest Rate Hikes (Freep)
Trump Open To US Embassy In Pyongyang, North Korea (Axios)
Trump Backs Out Of Joint G7 Communique With Attack On Trudeau (Ind.)
One ‘Rant,’ Rough Talks Sour G7 Mood In Confrontations With Trump (R.)
China’s Xi Calls Out ‘Selfish, Short-Sighted’ Trade Policies (R.)
G7 Leaders Urge Russia To Stop Undermining Democracies (R.)
Iran’s Rouhani Criticizes US For Imposing Its Policies On Others (R.)
The Relationship Between Population And Consumption Is Not Straightforward (G.)
There Are No War Heroes. There Are Only War Victims. (CJ)
Our Plastic Pollution Crisis Is Too Big For Recycling To Fix (Leonard)

 

 

Well, not today. Support is low.

Is The Existing Banking System Coming To An End? (Ren.)

Today Switzerland is set to hold a referendum to decide whether to ban commercial banks from creating money. The aim of campaigners is to limit financial speculation by forcing banks to hold 100 per cent reserves against their deposits. If the referendum result goes the way of the campaign group, the Vollgeld Initiative and the concept known as the sovereign money initiative comes to fruition, Swiss banks will no longer be able to create money for themselves, rather they will only be allowed to lend money that they have accumulated from savers or other banks. The current fractional reserve banking system works like this: Banks lend money that they don’t actually have and then command interest on the non-existent money.

This is akin to x offering to loan y a sum of say, £100,000 that the former hasn’t got. The way around this conundrum is for x to then lodge the sum with another financial institution who happens to be in on the scam. Y then pays x interest on the money that x has never been in the position to lend in the first place. Consistent with the proposed Swiss model, the idea of limiting all money creation to central banks was first touted in the 1930s and supported by renowned US economist Irving Fisher as a way of preventing asset bubbles and curbing reckless spending. If the Vollgeld Initiative succeeds with its campaign on Sunday, the fractional reserve system will be replaced by a bill which will give the Swiss National Bank (SNB) a monopoly on physical and electronic money creation.

Since the establishment of the SNB in 1891, the bank has had exclusive powers to mint coins and issue Swiss bank notes. But over 90% of money in circulation in Switzerland (and arguably the world) currently exists in the form of electronic cash which is created out of nothing by private banks. In modern market economies central banks control the creation of bank notes and coins but not the creation of all money. The latter occurs when a commercial bank offers a line of credit. Iceland, whose bloated banking system collapsed in 2008, has also touted the abolition of private money creation and an end to a practice in which central banks accept deposits, make loans and investments and hold reserves that are a fraction of their deposit liabilities. Fractional banking means that money is effectively produced from thin air.

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The weakness of the euro. Largely self-induced.

The Credit Cycle Will Be The EU’s Undoing (Macleod)

It is a common misconception that the world has a business cycle: that merely puts the blame on the private sector for periodic booms and busts. The truth is every boom and bust has its origins in central bank monetary policy and fractional reserve banking. A central bank first attempts to stimulate the economy with low interest rates, having injected base money into the economy to rescue the banks from the previous crisis. The central bank continues to suppress interest rates, inflating assets and facilitating the financing of government deficits. This is followed by the expansion of bank credit as banks recognise that trading conditions in the non-financial economy have improved. Price inflation unexpectedly but inevitably increases, and interest rates have to rise.

They rise to the point where earlier malinvestments begin to be liquidated and a loan repayment crisis develops in financial markets. It is fundamentally a credit cycle, not a business one. Central bankers do not, with very few exceptions, understand they are the cause. And the few central bankers who do understand are unable to influence monetary policy by enough to change it. By not understanding that they create the crisis themselves, central bankers believe they can control all financial risks through regulation and intervention, which is why they are always taken by surprise when a credit crisis hits them. For these reasons we know it is only a matter of time before the world faces another credit crisis.

The next one is likely to be unprecedented in its violence, even exceeding that of the last one in 2008/09, because of the scale of additional monetary reflation that has taken place over the last ten years. The further accumulation of debt in the intervening period also means that a smaller increase in price inflation, and therefore a lower height for interest rates will trigger it. My current expectation is that a global debt liquidation and credit crisis is not far away and will occur by the end of Q1 in 2019, perhaps even by the end of this year. The problem is a global one and we know not where it will break. But once it does, the ECB and the euro will possibly face the most violent deflation in modern history, even exceeding the global slump of the 1930s.

We know in advance what the supposed solution will be: monetary hyperinflation to bail out the banks, governments and the indebted. The effects on prices in the Eurozone are unlikely to be as delayed as they have been in the current cycle, partly because of the sheer scale of the issuance of new money and credit required to stabilise the financial system, partly because the euro is subordinate to the dollar as a safe-haven currency, and partly because of its limited history as a medium of exchange.

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An exercise in large numbers.

China is in Trouble (Mises)

While the rulers of China have been able all along to hedge their plans over longer periods than their Western counterparts have, the new legal situation has extended this planning horizon even further.1 In comparison with those of Western economies, China’s countermeasures against the crisis in 2008 were significantly more drastic. While in the US the balance sheet total of the banking system increased by USD 4,000bn in the years after the global financial crisis, the balance sheet of the Chinese banking system expanded by USD 20,000bn in the same period. For reference: This is four times the Japanese GDP.

The following chart shows the expansion of the bank balance sheet total as compared to economic output. Did the Chinese authorities assume excessive risks in fighting the crisis? Neither the fact that China’s bank balance sheets amount to more than 600% of GDP nor the fact that they have doubled in terms of percentage of GDP in the past several years suggests a healthy development.

Our friends from Condor Capital expect NPL ratios to rise in China, which could translate into credit losses of USD 2,700 to 3,500bn for China’s banks, and this is under the assumption of no contagion (!). By comparison, the losses of the global banking system since the financial crisis have been almost moderate at USD 1,500bn The most recent crisis does teach us, however, that the Chinese are prepared to take drastic measures if necessary. China fought the financial crisis by flooding the credit markets: 35% credit growth in one year on the basis of a classic Keynesian spending program is no small matter.

Chinese money not only inflates a property bubble domestically but also around the globe (e.g. in Sydney and Vancouver). Further support for the global property markets is in question, given the measures China has recently launched. Due to financial problems, Chinese groups such as Anbang and HNA will have to swap the role of buyer for that of seller. The IMF has forecast a further doubling of total Chinese debt outstanding from USD 27,000bn in 2016 to USD 54,000bn in 2022. By comparison, in 2016 China’s GDP amounted to USD 11,200bn. This spells debt-induced growth at declining rates of marginal utility. From our point of view, this development – which we can also see in the West – is unsustainable.

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” Say good-bye to super-cheap cash.”

How To Plan For Next Round Of Fed Interest Rate Hikes (Freep)

The easy money officially ends Wednesday, as interest rates, much like summer temps, heat up once again. It’s a “slam-dunk” that the Federal Reserve will increase rates by a quarter point after its meeting this week, according to Mark Zandi, chief economist for Moody’s Analytics. And it’s likely we’re in for two more quarter-point hikes in September and December, he said. “If you are thinking about buying a car or home, sooner is better than later, but I wouldn’t rush into anything, as rates, while rising, are still very low,” Zandi said. The U.S. economy — with a national jobless rate at 3.8% in May, the lowest level in 18 years — has put the Great Recession in 2008-09 in the rear view mirror.

Consumers — as well as business leaders — are formulating strategies to cope with higher rates ahead. The Fed began gradually tightening money with the first quarter-point rate hike in December 2015 — then the first rate hike in nearly a decade. Since then, there have been another five rate hikes. The latest rate hike in March took the Fed’s benchmark rate to a target range of 1.5% to 1.75%. If the Fed raises rates as expected Wednesday, the overnight borrowing cost will be in line with the Fed’s inflation target of 2%. For the first time in almost a decade, the cost of borrowing will no longer be essentially free. Say good-bye to super-cheap cash.

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Carrot for Kim.

Trump Open To US Embassy In Pyongyang, North Korea (Axios)

President Trump is willing to consider establishing official relations with North Korea and even eventually putting an embassy in Pyongyang, according to two sources familiar with preparations for the Singapore summit. “It would all depend what he gets in return,” said a source close to the White House. “Denuclearization would have to be happening.” The sources stressed that this is one of many topics that could be discussed at the summit, and that certainly nothing like that has been decided or is necessarily expected to emerge from Trump’s historic mano a mano with North Korean leader Kim Jong-un.

But the U.S. and North Korean working groups — with engagements in New York, the DMZ and Singapore — have discussed establishing official relations between the two countries that would involve putting a U.S. embassy in Pyongyang. One of the sources, who is familiar with the president’s thinking, said Trump had made it a point not to reject any ideas headed into the summit: “It’s definitely been discussed,” the source said. “His view is: ‘We can discuss that: It’s on the table. Let’s see.’ Of course we would consider it. There’s almost nothing he’ll take off the table going in.” The source said North Korean officials have been wildly inconsistent in the pre-meetings, making it difficult to get any read on how the discussions might go.

The source close to the White House added: “POTUS will consider any idea anyone brings him if it delivers on denuclearization that is irreversible and verifiable. He won’t be played by Kim. But it is not his style to — on the front end — rule out possibilities of what could happen or may happen depending on how negotiations go.”

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Well, it wasn’t dull.

Trump Backs Out Of Joint G7 Communique With Attack On Trudeau (Ind.)

Donald Trump has rejected an agreement signed off by the leaders of countries at the G7 summit in Canada despite earlier having appeared to endorse the joint statement vowing to fight back against protectionism and pledging to follow established trade rules. The joint statement between the leaders of US, France, Germany, the UK, Japan, Italy, and Canada comes after US President Donald Trump refused to back down from his decision to impose international tariffs on goods including steel and aluminium imports as a part of his so-called “America First” strategy.

The communique had been confirmed by Canadian Prime Minster Justin Trudeau, who conceded that Mr Trump’s tough talk on trade showed there was a lot of work to be done between the countries, but nevertheless portrayed the joint statement as a positive step towards international cooperation. However, Mr Trump later tweeted that he had would not now endorse the communique due to “false statements” from the Canadian prime minister. He wrote: “Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive tariffs to our US farmers, workers and companies, I have instructed our US reps not to endorse the communique as we look at tariffs on automobiles flooding the US market!”

He added: “PM Justin Trudeau of Canada acted so meek and mild during our G7 meetings only to give a news conference after I left saying that, ‘US tariffs were kind of insulting’ and he ‘will not be pushed around.’ Very dishonest & weak. Our tariffs are in response to his of 270% on dairy!”

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These people see themselves as no.1, because that’s what they are where they come from. Being contradicted is then hard to take.

One ‘Rant,’ Rough Talks Sour G7 Mood In Confrontations With Trump (R.)

Trump gave “a long, frank rant”, the official said, repeating a position he carried through the 2016 U.S. election campaign into the White House that the United States had suffered at the hands of its trading partners, with French President Emmanuel Macron pushing back on the assertion and Japanese Prime Minister Shinzo Abe chiming in. It was a “a long litany of recriminations, somewhat bitter reports that the United States was treated unfairly,” said the French official, who spoke on condition of anonymity. “It was a difficult time, rough, very frank.” The U.S. president did not appear to be listening during some of the trade presentations, another G7 official familiar with the meeting said.

Trump himself told reporters on Saturday that the summit was not contentious and called his relationship with G7 allies a “10”. Despite smiles and jokes for the cameras, the tension among the leaders was clear. At one point, German Chancellor Angela Merkel was seen having a brief, intense one-sided conversation with a stony-faced Trump on Friday. On Saturday, Canadian Prime Minister Justin Trudeau sniped about “stragglers” after Trump was late to a breakfast session on gender equality. Trump left the summit early for Singapore, where he will meet North Korean leader Kim Jong Un next week.

One scene at the very beginning of the gathering of presidents and prime ministers of the biggest industrialized nations set the mood for facing the brash Trump. He arrived at La Malbaie, the scenic luxury resort on the banks of the St. Lawrence River in Quebec, as the four European leaders and the two EU heads were huddled together in a room to coordinate their strategy. The noise of Trump’s helicopter landing was so loud they had to stop talking for a while, in a scene one official compared to the opening from the U.S. television series M.A.S.H. “The EU understands that the only way with Trump is strength,” said one European official. “If you give in now, he will come back tomorrow for more.”

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All policies must benefit China.

China’s Xi Calls Out ‘Selfish, Short-Sighted’ Trade Policies (R.)

Chinese President Xi Jinping, whose country is locked in a high-stakes trade dispute with the United States, on Sunday said China rejects “selfish, shortsighted” trade policies, and called for building an open global economy. Xi did not mention the United States during a speech at a summit meeting of the Shanghai Cooperation Organisation (SCO), a regional security bloc led by China and Russia. “We reject selfish, shortsighted, closed, narrow policies, (we) uphold World Trade Organisation rules, support a multi-lateral trade system, and building an open world economy,” Xi said in a speech in the port city of Qingdao.

The United States and China have threatened tit-for-tat tariffs on goods worth up to $150 billion each, as President Donald Trump has pushed Beijing to open its economy further and address the United States’ large trade deficit with China. Xi spoke hours after Trump said he was backing out of the Group of Seven communique, thwarting what appeared to be a fragile consensus on a trade dispute between Washington and its top allies. “We must … discard Cold War thinking, group confrontation; we object to acts of getting one’s own absolute security at the cost of other countries’ security,” Xi said.

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Skripal and Crimea. It’s all they got.

G7 Leaders Urge Russia To Stop Undermining Democracies (R.)

Leaders of the Group of Seven countries urged Russia on Saturday to stop undermining democracies and said they were ready to step up sanctions against Moscow if necessary. The leaders of the United States, Canada, Japan, France, Germany, Italy and Britain made the strongly worded statement just hours after U.S. President Donald Trump, who is part of the G7, said he wanted Moscow re-invited to the group. “We urge Russia to cease its destabilizing behavior, to undermine democratic systems and its support of the Syrian regime,” the leaders said in a statement at the end of their two-day meeting in La Malbaie, Quebec.

The G7 leaders condemned an attack in Salisbury in Britain on a former Russian spy using a Russian-made military grade nerve agent, saying it was highly likely Moscow was responsible because there was no other plausible explanation. Russia denies having anything to do with the attack. The G7 leaders made a commitment on Friday, without naming Russia, to share information between themselves and work with internet service providers and social media companies to thwart foreign meddling in elections. The Kremlin has denied allegations by the United States and some European countries that Russia interfered in their elections. Earlier on Saturday, Trump told a news conference the issue of Russia’s return to the group was discussed. Russia was a member of the then G8 until it was expelled for annexing Crimea in 2014.

“I think it would be an asset to have Russia back in. I think it would be good for the world. I think it would be good for Russia. I think it would be good for the United States. I think it would be good for all of the countries of the current G7,” Trump said. Italy’s new Prime Minister Giuseppe Conti expressed similar sentiment. But the final communique struck a different note, saying western sanctions against Russia would continue as long as Moscow failed to meet its obligations in Ukraine under the Minsk accord it signed, and could even be stepped up. “We reiterate our condemnation of the illegal annexation of Crimea and reaffirm our enduring support for Ukrainian sovereignty, independence and territorial integrity within its internationally recognized borders,” the G7 statement said.

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World order.

Iran’s Rouhani Criticizes US For Imposing Its Policies On Others (R.)

Iranian President Hassan Rouhani on Sunday said that U.S. efforts to impose its policies on others are a threat to all, after Washington last month said it was withdrawing from the Iran nuclear deal and would reimpose economic sanctions. Rouhani, speaking at a summit of the Chinese and Russian-led security bloc the Shanghai Cooperation Organisation (SCO) in the port city of Qingdao, said he appreciated efforts by Beijing and Moscow to maintain the nuclear deal.

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“One believed in scientific ingenuity as the answer to our problems, the other was convinced that it only deepened the crisis.”

The Relationship Between Population And Consumption Is Not Straightforward (G.)

Charles C Mann is a science journalist, author and historian. His books 1491 and 1493, looking at the Americas before and after Columbus, were widely acclaimed. His new book, The Wizard and the Prophet, examines the highly influential and starkly contrasting environmental visions of Norman Borlaug (the Wizard) and William Vogt (the Prophet). Borlaug (1914-2009) was instrumental in the green revolution that vastly expanded the amount of food humanity has been able to cultivate. Vogt (1902-1968) was a pioneering ecologist who argued that humans had exceeded the Earth’s “carrying capacity” and were heading for cataclysm unless consumption was drastically reduced. One believed in scientific ingenuity as the answer to our problems, the other was convinced that it only deepened the crisis.

What made you frame this story of humanity’s future in terms of these two individuals?

It really started the night my daughter was born 19 years ago. I was standing in the parking lot at three in the morning and it suddenly popped into my head that when Amelia, my daughter, became my age there would be almost 10 billion people in the world. And I believe that centuries from now, when historians look back at the time when you and I have been alive, the big thing that they’ll say happened is that hundreds of millions of people in Asia and Latin America and Africa lifted themselves from destitution to something like the middle class. So not only will there be 10 billion people but all those people will want the same things you and I want – nice homes, nice car, nice clothes, the odd chunk of Toblerone, right?

And so I stood there in the parking lot and thought to myself: how are we meant to do this? I’m a science journalist, so when I was talking to researchers, I’d say: “How are we going to feed everybody, how are we going to get water for everybody, house everybody? What are we going to do about climate change?” After a while I realised that the answers I was getting fell into two broad categories, each of which had a name that kept being associated with it: one was Borlaug, the other Vogt.

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Caitlin Johnstone is a gem. I was thinking next Memorial Day make every American listen to With God On Our Side.

There Are No War Heroes. There Are Only War Victims. (CJ)

The US special operations soldier who was killed in Somalia (one of the “seven countries in five years” famously named in General Wesley Clark’s revelation of the US war machine’s plans for world domination) and the four others who were injured are not heroes. The US servicemen and women who have fought and died in America’s nonstop acts of military expansionism and wars of aggression are not heroes. They are victims. They are victims of a sociopathic power establishment which does not care about them, and never has. If what I just wrote bothered you, it is because you have been conditioned to oppose such ideas by generations of war propaganda.

If you believe that US soldiers are heroes, it means that you believe that they are fighting and dying for a noble cause; for your freedom, for democracy, for the good and the just. It turns the deaths of the fallen into a tragic but noble sacrifice in your eyes, which keeps you from realizing that they have actually been dying for the profit margins of war plutocrats, land and resource assets, and the neoconservative agenda to secure control of the planet. There is nothing heroic about being thrown into the gears of the war machine and having one’s body and mind ripped apart for the advancement of plutocratic interests. But if your rulers can trick you into thinking that dead US soldiers died for something worth dying for, you won’t turn around and lay the blame on the war profiteers and ambitious sociopaths who are truly responsible for their deaths.

So they lie to you. Constantly. People often counter this notion by pointing at World War 2, about which a case for the possibility of heroism in war can indeed be made. But the fact that this argument needs to reach back 73 years to the very brink of living memory in order to find a justifiable US war tells you everything you need to know about the weakness of that argument. Since 1945, when human civilization looked completely different and America itself was still an apartheid state, we have seen the US military spread around the globe, collapse nations, and butcher millions upon millions of people, all at the expense of the lives of US military personnel, and all without just cause. The people whose lives have been used like Kleenex and discarded by the US war machine did not die for a good cause.

They did not die fighting for freedom or democracy. They are not heroes. They are victims. We need to talk about this. The way we can be shamed into silence for saying such things is truly toxic, because it prevents us from addressing the very real problem that the United States starts unjust wars constantly and spends soldiers’ lives like pennies. It probably is nice for the families of war victims to tell themselves comforting stories about how their loved one died fighting to make the world a better place, and normally I’d be happy to let them harbor that personal fantasy without saying anything to disrupt it, but people are dying here.

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Annie Leonard is the boss at Greenpeace USA. And she has it upside down. You don’t ask multinationals if they would pretty please use less plastic. You ban them from using it.

Our Plastic Pollution Crisis Is Too Big For Recycling To Fix (Leonard)

Every minute, every single day, the equivalent of a truckload of plastic enters our oceans. In the name of profit and convenience, corporations are literally choking our planet with a substance that does not just “go away” when we toss it into a bin. Since the 1950s, some 8.3bn tons of plastic have been produced worldwide, and to date, only 9% of that has been recycled. Our oceans bear the brunt of our plastics epidemic – up to 12.7m tons of plastic end up in them every year. Just over a decade ago, I launched the Story of Stuff to help shine a light on the ways we produce, use and dispose of the stuff in our lives. The Story of Stuff is inextricably linked to the story of plastics – the packaging that goes along with those endless purchases.

We buy a soda, sip it for a few minutes, and toss its permanent packaging “away”. We eat potato chips, finish them, then throw their permanent packaging “away”. We buy produce, take it out of the unnecessary plastic wrap, then throw its permanent packaging “away”. The cycle is endless, and it happens countless times every single day. But here’s the catch – there is no “away”. As far as we try to toss a piece of plastic – whether it’s into a recycling bin or not – it does not disappear. Chances are, it ends up polluting our communities, oceans or waterways in some form. For years, we’ve been conned into thinking the problem of plastic packaging can be solved through better individual action. We’re told that if we simply recycle we’re doing our part.

We’re told that if we bring reusable bags to the grocery store, we’re saving the world. We think that if we drink from a reusable bottle, we’re making enough of a difference. But the truth is that we cannot recycle our way out of this mess. [..] We need corporations – those like Coca-Cola, Unilever, Starbucks and Nestlé that continue to churn out throwaway plastic bottles, cups, and straws – to step up and show real accountability for the mess they’ve created. Drink companies produce over 500bn single-use plastic bottles annually; there is no way that we can recycle our way out of a problem of that scale.

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May 142018
 
 May 14, 2018  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , , , ,  


Alfred Wertheimer Elvis 1956

 

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)
Why I Think the Stock Market Cannot Crash in 2018 (WS)
Italy’s Nascent Government Has Tough Economic Circles To Square (R.)
US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)
May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)
Shoppers Desert UK High Streets (G.)
UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)
UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)
Xi Might Join Trump And Kim In Singapore (MS)
Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)
Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)
Greece Considers Boosting Capacity Of Refugee Centers

 

 

“..there are some serious people out there saying some very serious things about the longevity of the cycle..”

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)

A reversion to the mean in U.S. stock prices could mean the market will fall by at least 20%, according to David Rosenberg of Gluskin Sheff and Associates, who gave his prediction at the Strategic Investment Conference 2018 in San Diego. Rosenberg, the chief economist and strategist at Toronto-based Gluskin Sheff, said this is one of the strangest securities-market rallies of all time. That’s because all asset classes have gone up, even ones that are inversely correlated. He thinks a breaking point is a year away, and so investors should start taking precautions now.

The beginning of this year started off great for investors. The S&P 500 Index hit record highs at around 2,750 points, and stocks had their best January since 1987. As if that was not enough, Rosenberg pointed out, many Wall Street strategists raised their target to 3,000. The media extrapolating record returns only added to the rise in investors’ unreasonable expectations. However, increasingly more hedge fund managers and billionaire investors who timed the previous crashes are backing out.

One of them is Sam Zell, a billionaire real estate investor, whom Rosenberg says is a “hero” of his. Zell predicted the 2008 financial crisis, eight months early. But, essentially, he was right. Today, his view is that valuations are at record highs. Then we have Howard Marks, a billionaire American investor who is the co-founder and co-chairman of Oaktree Capital Management. He seconds Zell’s view that valuations are unreasonably high and says the easy money has been made. “And I don’t always try to seek out corroborating evidence. But there are some serious people out there saying some very serious things about the longevity of the cycle,” said Rosenberg.

According to Rosenberg’s calculations, the S&P 500 should be at least 1,000 points lower than it is today based on economic growth. In spite of this, equity valuations sit at record highs. Another historically accurate indicator that predicts the end of bull cycles is household net worth’s share of personal disposable income. As you can see in the chart below, the last two peaks in this ratio almost perfectly coincided with the dot-com crash and the 2008 financial crisis.

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There is no market.

Why I Think the Stock Market Cannot Crash in 2018 (WS)

The 85% of S&P 500 companies that have reported earnings so far disclosed they’d bought back $158 billion of their own shares in Q1, according to the Wall Street Journal. The quarterly record of $164 billion was set in Q1 2016. If the current rate applies to all S&P 500 companies, they repurchased over $180 billion of their own shares in Q1, thus setting a new record. At this trend, including a couple of slower quarters, S&P 500 companies are likely to buy back between $650 billion and $700 billion of their owns shares in 2018. This would handily beat the prior annual record of $572 billion in 2007.

Here are the top buyback spenders in Q1: Apple: $22.8 billion, Amgen: $10.7 billion, Bank of America: $4.9 billion, JPMorgan Chase: $4.7 billion, Oracle: $4 billion, Microsoft: $3.8 billion, Phillips 66: $3.5 billion, Wells Fargo: $3.34 billion, Boeing: $3 billion, Citigroup: $2.9 billion. Buybacks pump up share prices in several ways. One is the pandemic hype and media razzmatazz around the announcements which cause investors and algos to pile into those shares and create buying pressure. Since May 1, when Apple announced mega-buybacks of $100 billion in the future, its shares have surged 11%. The magic words.

Other companies with big share buyback programs have also fared well: Microsoft shares are up 14% year-to-date. And if buybacks don’t push up shares, at least they keep them from falling: Amgen shares are flat year-to-date. Shares of the 20 biggest buyback spenders in Q1 are up over 5% on average year-to-date, according to the Wall Street Journal, though the S&P 500 has edged up only 2%.

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Basic income AND a parallel currency. How can this fit inside the eurozone?

Italy’s Nascent Government Has Tough Economic Circles To Square (R.)

The Italian coalition taking shape 10 weeks after March’s inconclusive election has made economic promises that seem incompatible with Europe’s fiscal rules and will be hard, if not impossible, to keep. These include slashing taxes for companies and individuals, boosting welfare provision, cancelling a scheduled increase in sales tax and dismantling a 2011 pension reform which sharply raised the retirement age.The marriage being sealed between the anti-establishment 5-Star Movement and the far-right League was seen as an unlikely and worrying prospect by most analysts before the March 4 election ended in a hung parliament.

The pre-election adversaries have spent the last few days trying to fuse their very different programs into a “contract” of mutually acceptable policy commitments. What they have in common is that they are extremely expensive. On the face of it their plans, which they say may also include a form of parallel currency, could push the budget deficit far above targets agreed with the EU, setting up a clash with the European Commission and Italy’s partners. “We will need to renegotiate EU agreements to stop Italy suffocating,” League leader Matteo Salvini said on Saturday after a day of talks with his 5-Star counterpart Luigi Di Maio.

5-Star’s flagship policy of a universal income for the poor has been costed at around 17 billion euros ($20 billion) per year. The League’s hallmark scheme, a flat tax rate of 15 percent for companies and individuals, is estimated to reduce tax revenues by 80 billion euros per year. Scrapping the unpopular pension reform would cost 15 billion euros, another 12.5 billion is needed to head off the planned hike in sales tax, and the parties are also considering printing a new, special-purpose currency to pay off state debts to firms. “If implemented, it would be the biggest shake-up of the Italian economic system in modern times,” said Wolfgang Munchau, head of the London-based Eurointelligence think-tank.

[..] olfango Piccoli, co-president of Teneo Intelligence, said taking on Brussels would be popular with Italian voters, and the new government had little to fear from a European Commission which “is very weak and on its way out”. The Commission, with just a year of its term remaining, “can’t really do much other than put Italy’s finances under greater scrutiny, and markets don’t care about that”, he said.

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Bolton.

US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)

Donald Trump is prepared to impose sanctions on European companies that do business in Iran following his withdrawal of the US from the international nuclear deal, his administration reiterated on Sunday. Trump’s most senior foreign policy aides signalled that the US would continue pressuring allies to follow Washington in backing out of the pact, which gave Tehran relief from sanctions in exchange for halting its nuclear programme. John Bolton, Trump’s national security adviser, predicted that “the Europeans will see that it’s in their interests to come along with us” rather than continue with the 2015 deal, under which major European corporations have signed billions of dollars of contracts in Iran.

Asked on CNN’s State of the Union whether that meant the Trump administration would impose sanctions against those firms, Bolton said: “It’s possible. It depends on the conduct of other governments.” US sanctions on Iran reimposed following Trump’s withdrawal not only block American firms from doing business in the country, but also bar foreign firms that do business there from accessing the entire US banking and financial system. Mike Pompeo, Trump’s secretary of state, said on Sunday wealth created in Iran under the terms of the nuclear deal “drove Iranian malign activity” in the region. He declined to rule out sanctions against European firms. “The sanctions regime that is in place now is very clear on what the requirements are,” Pompeo said on Fox News Sunday.

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Britain better get rid of her.

May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)

Theresa May faces deadlock over the key controversy of customs rules after Brexit, after senior politicians rubbished both of the options being studied by her warring cabinet. Michael Gove – picked by the prime minister to examine her preferred “customs partnership” model – warned there were “significant question marks over the deliverability of it”. Meanwhile, the Irish deputy prime minister insisted Dublin would block a Brexit withdrawal agreement if she pursued an alternative technology-based solution, saying: “It won’t work.” The warnings left Ms May with few apparent options to resolve the impasse, with a deadline set by the EU just six weeks away.

Two working groups of key ministers have been set up to study both the customs partnership – under which the UK would collect tariffs on behalf the EU – and the tech-based “max-fac” proposal. Mr Gove, the environment secretary, speaking on the BBC’s The Andrew Marr Show, declined to back Boris Johnson’s description of the partnership model as “crazy”. But he said: “Boris pointed out that because it’s novel, because no model like this exists, there have to be significant question marks over the deliverability of it on time.” Crucially, Mr Gove also suggested the proposal would break Ms May’s key promise – stated again today – to ‘take back control” of borders and laws.

“What the customs partnership requires the British government to do is in effect to act as the tax collector and very possibly the effective deliverer of regulation for the European Union,” he claimed. A proposal to seek EU agreement to keep the UK in the single market and customs union past the end of 2020, while a solution is found, was also stamped on by Mr Gove. “I don’t believe in an extension,” he said – arguing it was “critical to meet that deadline” of ending the post-Brexit transition period after 21 months.

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Slowly, people are starting to get very afraid of Brexit.

Shoppers Desert UK High Streets (G.)

Shoppers are deserting the high street in greater numbers than during the depths of the recession in 2009, creating a brutal climate that is putting thousands more retail jobs at risk. The coming days will be crucial to the future of a handful of household names, including Mothercare and Carpetright, which are trying to persuade investors to make vital cash injections so they can jettison unwanted stores. There is also the spectre of job losses at Poundworld, the struggling discount chain, which is being cut adrift by its American owners. Dwindling shopper numbers tally with weak spending figures for April, which show Britons slashed spending on gadgets, furniture and even nights out.

Consumer spending dropped 2% last month, according to Visa’s consumer spending index, which has recorded declines in 11 of the past 12 months. “With inflation beginning to fall and wages growing faster than expected in recent months, it would have been easy to assume we might be over the worst of the consumer squeeze,” Mark Antipof, the chief commercial officer at Visa, said. “Yet there has been no corresponding improvement in spending. It is clear that consumers remain in belt-tightening mode.” High street visits declined 3.3% in April, according to the BRC-Springboard monthly tracker, which also highlighted nearly one in 10 town centre shops are lying empty.

The drop in footfall came on the back of a disastrous performance in March, when shopper numbers declined by 6%. Taken together there has been an unprecedented 4.8% drop over the two months – a bigger decline than was recorded in the same months of 2009 when the UK was mired in recession. “Not since the depths of recession in 2009 has footfall over March and April declined to such a degree, and even then the drop was less severe at -3.8%,” said the Springboard analyst Diane Wehrle. “Much could be made of the adverse impact on April’s footfall of Easter shifting to March but even looking at March and April together still demonstrates that footfall has plummeted.”

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Priceless.

UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)

Facial recognition software used by the UK’s biggest police force has returned false positives in more than 98 per cent of alerts generated, The Independent can reveal, with the country’s biometrics regulator calling it “not yet fit for use”. The Metropolitan Police’s system has produced 104 alerts of which only two were later confirmed to be positive matches, a freedom of information request showed. In its response the force said it did not consider the inaccurate matches “false positives” because alerts were checked a second time after they occurred. Facial recognition technology scans people in a video feed and compares their images to pictures stored in a reference library or watch list. It has been used at large events like the Notting Hill Carnival and a Six Nations Rugby match.

The system used by another force, South Wales Police, has returned more than 2,400 false positives in 15 deployments since June 2017. The vast majority of those came during that month’s Uefa Champion’s League final in Cardiff, and overall only 234 alerts – fewer than 10 per cent – were correct matches. Both forces are trialling the software. The UK’s biometrics commissioner, Professor Paul Wiles, told The Independent that legislation to govern the technology was “urgently needed”. He said: “I have told both police forces that I consider such trials are only acceptable to fill gaps in knowledge and if the results of the trials are published and externally peer-reviewed. We ought to wait for the final report, but I am not surprised to hear that accuracy rates so far have been low as clearly the technology is not yet fit for use.

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Irony is dead.

UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)

The British government will host a summit encouraging six European countries to join the EU for the sake of their “security, stability and prosperity”, months before it is due to sign its own Brexit withdrawal deal with Brussels. London will in July play host to Western Balkans governments including Serbia and Albania, as well as existing EU member states, to discuss reforms to pave the way to future EU enlargement. The summit is part of the so-called Berlin Process – a series of meetings aimed at supporting the region towards joining the bloc and described by the European parliament’s research arm as “bringing a new perspective and impetus to the enlargement process”.

Critics said the UK government must have “a sense of humour” for hosting a conference on EU enlargement and extolling the benefits of accession as Britain itself headed towards the exit door. The leaders of EU candidate countries Albania, Montenegro, Macedonia, and Serbia will attend, as well as those of Bosnia and Herzegovina, and Kosovo – two states who have both expressed an interest in joining the bloc but have not yet been accepted as candidates. They will be joined by representatives of the governments of EU countries with an interest in the region such as Austria, Croatia, France, Germany, Italy, Poland, Slovenia and Bulgaria.

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Makes sense.

Xi Might Join Trump And Kim In Singapore (MS)

The prospect of China’s president Xi Jinping coming to Singapore on June 12, 2018 to meet with United States President Donald Trump and North Korea leader Kim Jong-un has been raised. This is according to mainstream media reports in Singapore on May 11, which re-reported a Japanese newspaper, Mainichi Shimbun, that cited American diplomatic sources. In the Friday report, Mainichi Shimbun quoted a senior international negotiator with the National Security Council saying that “there is a possibility” the leader of a third country may take part. It is understood that this leader is Xi. The suggestion that the three leaders will descend upon Singapore at the same time is not without merit.

On Tuesday, May 8, Trump spoke to Xi about Kim’s recent visit to China. The Chinese president and North Korean leader met Monday and Tuesday, May 7 and 8, in China again in a second meeting. This meeting followed Kim’s first visit to Beijing in March. However, as of Friday morning, there were no news reports on North Korean media outlets of the date and venue of Kim’s meeting with Trump, Japanese broadcaster NHK reported. Previously, Kim and South Korean president Moon Jae-in issued a joint declaration to say that both sides aim to realise complete denuclearisation for a nuclear-free Korean Peninsula, at the historic inter-Korea summit on April 27. They also agreed to pursue three-way talks involving the two Koreas and the US, or four-way talks involving the two Koreas, the US and China.

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People no longer have a right to know?

Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)


On Friday, the Victorian Department of Public Prosecutions lodged an application with the Country Court of Victoria for a ‘super injunction’ against media coverage of the trial of Cardinal George Pell, who is accused of a number of historical sexual offences. Cardinal Pell – the Vatican’s treasurer and the third highest ranked Catholic in the world – was committed to stand trial a fortnight ago. The orders being sought by the DPP, which will be decided on Wednesday morning in the County Court in Melbourne before Chief Judge Peter Kidd, are:

(1) Publication is prohibited of any report of the whole or any part of these proceedings and any information derived from this proceeding and any court documents associated with this proceeding. (2) The prohibition on publication applies within all States and Territories of Australia and on any website or other electronic or broadcast format accessible within Australia. (3) For the purpose of this order, ‘publication’ has the meaning attributed to it by s3 of the Open Courts Act, that is to say, it means the dissemination or provision of access to the public by any means including, publication in a book, newspaper, magazine or other written publication, or broadcast by radio or television; or public exhibition; or broadcast or electronic communication. (4) The order will expire upon a jury verdict in respect of the charges on the final indictment, or by further order of the court.

Ordinarily, an injunction against media reporting of a trial prevents outlets from reporting the details of the trial. But they can report the existence of the injunction and explain to readers why they’re not reporting the matter. The order that the DPP is seeking in the Pell matter is so broad that it will operate as a super injunction. The suppression order would be ‘any part of’ the proceedings, meaning the trial could not be reported, nor could media report the fact they’re not allowed to report. If Wednesday’s application for a super injunction is successful, this story will have to be removed from publication. [..] Cardinal Pell, aged 76, is the most senior Catholic charged with sexual offences anywhere in the world. Cardinal Pell has strongly denied the allegations levelled against him.

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We’re on a road to nowhere..

Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)

The planned pension cuts for people who have already retired and which will be implemented as of January 2019 will also affect pensions under 1,000 euros, Deputy Minister for Social Security Tasos Petropoulos admitted on Sunday. “In October we will see the exact cuts in pensions […] and will improve them,” he told broadcaster Skai. “We have seven months ahead.” Petropoulos said the 18 percent cut in pensions includes benefits, and estimated that about 25-30 percent of pensioners will be affected by the new reductions. He also pledged to pay all pending main pensions by August, “except in some particular cases.”

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Now Turkish citizens fleeing Erdogan are added.

Greece Considers Boosting Capacity Of Refugee Centers

The Migration Policy Ministry is reportedly considering increasing the capacity of existing refugee and migrant centers on the mainland as a first step in managing a recent spike in arrivals from neighboring Turkey, in a plan ministry sources say the European Union agrees with. “Practically, this means tents will be set up between the containers, exacerbating the already difficult situation for the residents,” a nongovernmental organization official said. Increasing capacity also means that the current logistics involved in running the camps will have to be adjusted. For example, if daily food costs are €3.50 per person per day (according to the specifications cited in official announcements), an additional 16,478 additional refugees will mean an extra €57,673 per day.

According to official data, 6,632 refugees crossed into Greece in April alone and 16,478 people in the first five months of the year, of whom 9,375 arrived on the islands and 7,103 from the Evros border in northeastern Greece. The government is also hoping to reduce arrivals and overcrowding on the islands by investing in diplomacy with Turkey and speeding up the asylum process through a bill which is being discussed in Parliament. At the same time, the reactions of residents on the islands that have borne the brunt of migration, even if they do not reflect the views of the entire population, show their patience is wearing thin. Authorities have also recorded increased arrivals of Turkish nationals from Evros. About 30 Turks have been arriving on a daily basis since Turkish President Recep Tayyip Erdogan called elections for next month, versus zero arrivals previously.

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May 022018
 


Brassaï The Sun King 1930

 

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

 

 

The trouble is in corporate bonds.

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

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

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

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

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

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

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

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

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Apple has become a capital allocation venture.

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

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

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

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

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

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

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

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

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Remember Japanese cars?

Nissan Shocks With 28% Sales Plunge (BBG)

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

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

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

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Perhaps.

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

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

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

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

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Very long essay from Hudson. Always good.

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

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

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

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

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

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

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

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

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

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Because the US will demand it strengthen it.

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

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

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Netanyahu plays games with his credibility.

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

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

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

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

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Britain better get rid of all these people.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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It’s about political control, not finance.

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

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

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

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

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

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

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

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

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

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

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

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

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Apr 292018
 


John Collier Lady Godiva c1897

 

The Stock Market That’s Never Satisfied (Forsyth)
Kim Pledges to Invite Media to Witness Nuclear Site Shutdown in May (BBG)
North Korea To Wind Clocks Forward By 30 Minutes (UPI)
Are European Companies Ready for Life Without Draghi? (DQ)
Millennial Housing Crisis Engulfs Britain (G.)
Twitter Sold Information To Researcher Behind Facebook Data Scandal (ZH)
Early Facebook Investor, Mentor: “They’ve Done Bupkis To Protect Us” (ZH)
Facebook’s Global Monopoly Poses A Deadly Threat In Developing Nations (G.)
Future Uncertain For Assange In Wake Of US-Ecuador Military Deal (DisM)
‘Caravan’ Migrants Weigh Staying In Mexico Or Risking US Expulsion (R.)
In The Opioid Epidemic, White Means Victim, Black Means Addict (G.)
Australia Pledges Half A Billion To Restore Great Barrier Reef (AFP)

 

 

Why own stocks?

The Stock Market That’s Never Satisfied (Forsyth)

If anything, the stock market is being extraordinarily critical of what it’s being served, notably earnings that are exceeding already high expectations. Take Caterpillar, which initially rallied Tuesday after reporting better-than-expected results. But on the post-earnings conference call, its chief financial officer called the first quarter the farm- and construction-equipment maker’s “high-water mark for the year.” So, if it doesn’t get any better than that, the stock market’s response isn’t to savor the moment, but to sell it. CAT ended up losing 6.2% in reaction to that comment, leading a massive retreat in industrial and material names that helped the Dow industrials shed over 400 points in the trading session.

That isn’t an entirely irrational response, given data that show growth is slowing, while inflation is picking up. To those late-cycle symptoms add rising rates, both the ones administered by the Federal Reserve and those set by the bond market. On the latter score, the benchmark Treasury 10-year note briefly peaked just over 3%, a psychologically significant but otherwise not terribly meaningful number. Arguably far more significant is that investors and savers can get 2% on six-month Treasury bills and almost 2.5% on a two-year note. Two years ago, dividend stocks provided investors a one-percentage point advantage over risk-free rates, says Danielle DiMartino Booth in her Money Strong missive. Now those places have been swapped.

Adds David Rosenberg, chief economist and strategist for Gluskin Sheff, this ability to get a “safe yield” for the first time in a decade, with no risk from falling stock or bond prices, represents a “seminal shift and a huge source of competition for the dividend allure of the stock market.” The prospect of higher rates may cheer savers, but poses greater risk to an economy never more dependent on debt, DiMartino Booth says. But that’s the direction the Fed is headed, given the rise in inflation and signs of slowing growth, an unpleasant combination that suggests stagflation; if not 1970s-style double-digit inflation and unemployment, then an economy expanding more slowly than prices are rising.

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He claims it’s all still intact.

Kim Pledges to Invite Media to Witness Nuclear Site Shutdown in May (BBG)

North Korea leader Kim Jong Un has promised to close his main nuclear weapons test site in May and said he will invite South Korean and American media to witness the shutdown. Ahead of an historic meeting with U.S. President Donald Trump expected within the next three to four weeks, Kim told South Korea’s president that two tunnels at the nuclear test site are still in good condition, playing down international speculation that the site was so badly damaged by nuclear explosions that it can no longer be used. Kim’s pledges to Moon at their historic summit on Friday were detailed in Seoul on Sunday by Moon’s chief communication official.

Kim told President Moon Jae-in on the disputed Korean border that Trump will learn at their meeting that North Korea has no intention of using its nuclear arsenal toward South or the Pacific or to target the U.S. The North had no reason to own nuclear weapons if it and the U.S. promise non-aggression against each other, he said, according the the Seoul briefing. Trump said Saturday night that he expects his historic meeting with Kim will take place “over the next three or four weeks.” “Strength is going to keep us out of nuclear war, not get us in,” Trump told a rally in Washington, Michigan. Earlier, he said details of the summit are being ironed out, and that he’d spoken with the leaders of South Korea and Japan about preparations for the meeting.

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Symbols are important.

North Korea To Wind Clocks Forward By 30 Minutes (UPI)

North Korea has decided to wind its clock forward half an hour to match its time with the South’s, two years and eight months after it decided to adopt its own standard time, News 1 reported. Seoul’s presidential official Yoon Young-chan told reporters Sunday that in talks between President Moon Jae-in and North Korean dictator Kim Jong Un, Kim said he would shift time in Pyongyang to Korea Standard Time (UTC+9:00) Accompanied by his wife Ri Sol-ju, Kim is said to have pointed to the two clocks hanging inside the Peace House, located on the South’s side of Panmunjom truce village, and said that this “pained his heart,” before suggesting to Moon that the South and North “first unify the time.”

Until 2015, Pyongyang used the same time (135 degrees East) as Seoul but adopted its own standard time which was thirty minutes behind KST. The North Korean leader said, as Pyongyang was the one that changed the time, it should be the one to make the adjustment again, JoongAng Ilbo reported. Yoon said this indicates Kim’s willingness to actively coordinate with the international community.

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A continent full of zombies.

Are European Companies Ready for Life Without Draghi? (DQ)

[..] there are signs that the ECB has quietly begun to taper its corporate-bond buying program. The rate of purchases under the Corporate Sector Purchase Programme dropped 50% in April to about €700 million per week, down from €1.4 billion during the first quarter, analysts at Deutsche Bank pointed out. That could mean the ECB is starting a “stealth taper” in order to wean the European bond market off the corporate debt purchases it began in June 2016, Deutsche Bank said. But are the companies that benefited from the ECB’s largesse ready for life without Draghi? There’s no doubting the ECB’s bond buying has exacerbated distortions in the corporate bond market — distortions that were first engendered by the central bank’s low interest rate policy. Yields came crashing down and spreads narrowed.

At the peak of ECB’s bond buying binge, the average yield of the Iboxx non-financials index fell as low as 0.69%. For German blue-chip companies such as BASF, Continental, Linde, SAP and Siemens, yields fell to less than 0.5%. France’s pharmaceutical company Sanofi and German consumer goods manufacturer Henkel even managed to issue bonds at slightly negative yields, effectively helping pay off their debts. But that was then. Now, the average yield of the Iboxx non-financials index is back above 1.10%. As Reuters reports, some of Europe’s biggest money managers are reducing their exposure to corporate bonds. Some are even shorting them, betting that stress is building in a market that was buoyed by years of rock-bottom borrowing costs. Some new bond issues have even struggled to find buyers, when not so long ago they were flying off shelves.

Bank of America guesstimated last year that as many as 50 of the euro zone’s 600 biggest companies deserve to be classified as “zombies,” as they pay far too much interest in relation to their profits. For these companies the ECB’s bond-buying program was a godsend, allowing them to continue refinancing their debt and stave off default. But interest rates are beginning to rise again. Whether or not the ECB has already begun to taper its corporate bond buying on the quiet, the program will likely be phased out later this year. And yields have already been rising ever so gradually in anticipation. That means that the companies that have benefited from the central bank’s monetary support are going to soon find themselves facing a whole new, more challenging reality. For some it’s unlikely to be a pleasant one.

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That’s what happens when you try and run an economy on a housing bubble.

Millennial Housing Crisis Engulfs Britain (G.)

Home ownership among young families has plummeted across every corner of Britain over the past 35 years, according to a devastating inquiry into the housing crisis facing millennials. The proportion of families headed by a 25- to 34-year-old that own their own home has more than halved in some regions, showing that the crisis goes far beyond London. Analysis conducted as part of a two-year investigation into intergenerational fairness in Britain, chaired by a former Tory minister, found that millennials are being forced into increasingly cramped and expensive rented properties that leave them with a longer commute and little chance of saving for a home. It also finds an increasing proportion of the young living in overcrowded housing.

The commission, which has been overseen by the Resolution Foundation thinktank and includes the former universities minister David Willetts, is expected to conclude that new taxes on property wealth may be the only way to restore fairness and prepare the country to pay the care and support costs of an ageing population. Ownership among 25- to 34-year-olds has plummeted in Greater Manchester from 53% in 1984 to 26% last year. It has fallen from 54% to 25% in south Yorkshire, from 45% to 20% in the West Midlands, from 50% to 28% in Wales and from 55% to 27% in the south-east. In outer London, the proportion has collapsed from 53% to just 16%. Out of 22 regions analysed by the commission, in only one – Strathclyde in Scotland – has home ownership among the young remained stable. It stood at 32% in 1984 and 33% last year, having peaked at 45% in 2002.

Ownership in London has fallen consistently over the past 30 years, whereas rates in some other parts of the country declined more slowly before the early 2000s, but very rapidly thereafter. Even favourable economic conditions are likely to result in millennials catching up with the home ownership levels of the previous cohort only by the age of 45. Fast-growing inheritances will help some, but nearly half of young non-homeowners have parents who do not own either.

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We need an overall ban on data harvesting for profit.

Twitter Sold Information To Researcher Behind Facebook Data Scandal (ZH)

Twitter has now also become embroiled in the Facebook data harvesting scandal – as the Sunday Telegraph reveals that the social media giant sold user data to Aleksandr Kogan, the Cambridge University researcher and director of Global Science Research (GSR), who created an app which harvested the data of millions of Facebook users’ without their consent before selling it to political data firm Cambridge Analytica. “Aleksandr Kogan, who created tools for Cambridge Analytica that allowed the political consultancy to psychologically profile and target voters, bought the data from the microblogging website in 2015, before the recent scandal came to light. -Sunday Telegraph”

Kogan says that the data was only used to generate “brand reports” and “survey extender tools” which were not in violation of Twitter’s data policies. While most tweets are public information and easy for anyone to access, Twitter charges companies and organizations for access to information in bulk – though Twitter bans companies which use the data for political purposes or to match with personal user information found elsewhere. A Twitter spokesman confirmed the ban and said: “Twitter has also made the policy decision to off-board advertising from all accounts owned and operated by Cambridge Analytica. This decision is based on our determination that Cambridge Analytica operates using a business model that inherently conflicts with acceptable Twitter Ads business practices.

The company said it does not allow “inferring or deriving sensitive information like race or political affiliation, or attempts to match a user’s Twitter information with other personal identifiers” and that it had staff in place to police this “rigorously”.-Sunday Telegraph Data licensing made up 13% of Twitter’s 2017 revenue at $333 million. In a March blog post, Citron Research said that Twitter’s 2018 data-licensing business will generate $400 million (analysts polled by FactSet say $387 million) and that it represents the fastest-growing segment of the company’s operations (which it is, according to FactSet).

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“..I feel like my baby has turned out to be something horrible, and these people I trusted and helped along have forgotten where they came from..”

Early Facebook Investor, Mentor: “They’ve Done Bupkis To Protect Us” (ZH)

Even if Facebook’s stellar Q1 earnings report hadn’t helped erase some of the losses that Facebook shares incurred in the aftermath of the Cambridge Analytica scandal, Facebook executives Mark Zuckerberg and Sheryl Sanderberg would still believe that the company’s troubles are largely behind them and that the company had essentially repaired the damage done to its reputation. That was the assessment delivered by early Facebook investor and one-time Zuckerberg mentor Roger McNamee, who warned during an appearance at an event organized by Quartz in Washington DC last week that the company’s leaders are deeply complacent and still haven’t accepted the fact that Facebook has badly mislead its users about how the company profits off their data.

Despite Zuckerberg’s warning, embedded in his opening statement to Congress earlier this month, that the company planned to make changes that could “significantly impact” profitability, McNamee believes it’s likely Facebook is “going to get away” with the bad things that it has done, which is “particularly dangerous” considering the 2018 midterm elections are only months away. McNamee said he’s deeply disappointed in how Zuckerberg and Sandberg have responded to the crisis by refusing to accept responsibility. During their post-crisis media tour, both executives insisted on blaming Cambridge Analytica for “misleading” Facebook, even though Facebook never bothered to alert users whose data had been affected. “They’ve done bupkis to protect us,” McNamee said.

The whole affair has left McNamee – who considers his involvement with Facebook during its early days to be the “highlight of a long career” – deeply saddened. “Every part of this has made me sadder and sadder and sadder. I feel like my baby has turned out to be something horrible, and these people I trusted and helped along have forgotten where they came from,” he said in a conversation with Kevin Delaney, Quartz’s editor-in-chief. McNamee has become an outspoken critic of the company, comparing its role in the 2016 US election to “the plot of a sci-fi novel” while at the same time admitting that he has “profited enormously” by backing Facebook early on. The organization he helped found, the Center for Humane Technology, has made it a mission to expose Facebook’s multiple flaws, and to try to fix them.

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Facebook facilitates ethnic cleansing. But profits are more important.

Facebook’s Global Monopoly Is A Deadly Problem In Developing Nations (G.)

[..] Facebook is a new kind of monopoly. We’re accustomed to the idea of companies becoming dominant in some jurisdictions. But we have never before encountered a corporation that has a global monopoly. Because wherever you go on the planet these days, Facebook is the only social-networking game in town. It has no serious competitors – anywhere. The implications of this are only now beginning to dawn on us. In the past two years, we have woken up to Facebook’s pernicious role in western democratic politics and are beginning to think about ways of addressing that problem in our bailiwicks. To date, the ideas about regulation that have surfaced seem ineffectual and so the damage continues.

But at least liberal democracies have some degree of immunity to the untruths disseminated by bad actors who exploit Facebook’s automated targeting systems – provided by a free press, parliamentary inquiries, independent judiciaries, public-service broadcasters, universities, professional bodies and so on. Other societies, particularly the developing countries now most assiduously targeted by Facebook, have few such institutions and it is there that the company has the capacity to wreak the most havoc. We’ve had intimations of this for a while, notably after it became clear that Facebook was a medium for anti-Muslim hysteria in Myanmar, hysteria that was subsequently translated into full-blown ethnic cleansing.

One of the key figures in all this was the ultra-nationalist Buddhist monk, Ashin Wirathu, who used Facebook to broadcast his views about the Rohingya after he was banned from preaching by the government. Wirathu compared Muslims to mad dogs and posted gruesome pictures of dead bodies that he claimed were killed by Muslims – with predictable consequences. United Nations officials now say that social media has had a “determining role” in anti-Rohingya Muslim violence in Myanmar, which the UN itself has called “ethnic cleansing”. For “social media”, read Facebook, because there’s no competition to it in Myanmar.

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Torture.

Future Uncertain For Assange In Wake Of US-Ecuador Military Deal (DisM)

Late yesterday, Telesur reported that Ecuador had signed a “security deal” with the United States, which is expected to result in a US military presence in that country. Telesur wrote: “Ecuador signed Wednesday a cooperation agreement with the United States to fight transnational organized crime and drug trafficking…. Moreno’s move is a further shift away from the policies of his left-wing predecessor and former ally, Rafael Correa, who has criticized and refused to participate in the U.S.-sponsored Plan Colombia, arguing peace is not obtained with helicopters and weapons but rather by promoting economic and social development.”

The news comes as a new blow to hopes that Ecuador’s President Lenin Moreno would heed calls from around the globe to end the solitary confinement of Julian Assange. Tomorrow, the arbitrarily confined journalist will have been totally isolated for one month. The latest news of a military agreement struck between Moreno’s government and the US comes as yet another major shift away from the policies of Ecuador’s prior administration. It is also a distinct pivot away from Ecuador’s decision, made just a few months prior, to confer citizenship and diplomatic status on the Wikileaks Editor-In-Chief.

This writer previously expressed the opinion that the ongoing solitary confinement of Assange by his own government constitutes torture. Disobedient Media has also reported consistently on the numerous online and physical vigils, petitions and other efforts to encourage Ecuador to return the Ecuadorian embassy in London to a place of refuge, as intended when the previous administration bravely granted Assange political asylum from the threats to his life and work emanating from the United States.

In our previous report, Disobedient Media noted that enforced isolation is not only torture in the opinions of those who have experienced it, but has also been labeled as such by the UN. Rick Raemisch wrote in an opinion piece published by The New York Times that, according to the Nelson Mandela rules, solitary confinement lasting more than 15 days constitutes torture. This means that the length of time for which Julian Assange has been cut off from the outside world would now have almost doubled the official benchmark for being considered torture.

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if the US would simply clean ita back yard, and stop stoking tensions there, it wouldn’t have these problems.

‘Caravan’ Migrants Weigh Staying In Mexico Or Risking US Expulsion (R.)

Hondurans, Guatemalans and Salvadorans who drew the wrath of President Donald Trump in a month-long caravan to the U.S. border will make hard decisions on Sunday whether to risk being deported all the way home by trying to cross, or to build a life in Mexico. After angry tweets from Trump, U.S. border authorities said some people associated with the caravan had been caught trying to slip through the fence, and encouraged the rest to hand themselves in to authorities. “We are a very welcoming country but just like your own house, we expect everyone to enter through our front door, and answer questions honestly,” San Diego Chief Patrol Agent Rodney S. Scott said in a statement.

Most of the group of about 400 travelers who arrived in border city Tijuana on buses over the past couple of days said they intended to legally seek asylum in San Diego later on Sunday, but lawyers advising the group gave them stark advice – not everyone will be successful. After the grueling journey, a somber mood took hold as the reality sank in that many of them would be separated from their families. Lovers and parents with slightly older sons and daughters could be forced to split up. At venues around the city, U.S. immigration lawyers working on a pro bono basis on Saturday listened to harrowing tales of life in the immigrants’ home countries.

Death threats from local gangs, the murder of family members, retaliatory rape, and political persecution back home prompted them to flee, the migrants and lawyers say. Many of the immigrants who spoke at length with Reuters at various points during their trip through Mexico had been short on knowledge of their legal rights, but at least 24 recounted detailed stories of facing death threats.

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How true.

In The Opioid Epidemic, White Means Victim, Black Means Addict (G.)

My cursor is hovering over the “unfriend” button, but I haven’t clicked it. Today, my relationship-severing finger is poised to get rid of Matt. Matt is a friend with whom I spent a lot of time about six years ago. We were close in rehab, but I haven’t seen him since. I entered Greenbriar treatment center in Washington, Pennsylvania, just a few days after he’d arrived, and he showed me the ropes. For the next few weeks, we were virtually inseparable. Rehab can be a frightening place when you first arrive. With any luck, you’ve already had some sort of “come to Jesus” moment with yourself and you’ve realized that you need to be there or else you’re going to die. I had had no such moment and was fully convinced that this was all a big mistake.

Once I got through the door into the facility, I heard it lock electronically with a loud buzz and a finality that shook my bones. I immediately regretted it. There is no lonelier feeling on this Earth than sitting there, abandoned and broken. You’ve burned all your bridges on the outside and your life feels as though it’s half a world away. This is the moment when you really need a guy like Matt to walk up to you, thrust out his hand and say: “Hi! I’m Matt! What’s your name?” Over the next few weeks, he and I attended group therapy sessions together and stayed up late talking about our problems, our addictions and our families. We ugly-cried in front of each other as we shared our darkest secrets, what we had done for drugs and how deeply unhappy we were.

Matt is a man who, in many ways, helped me to take my recovery seriously in rehab and, in the first few weeks after my release, he helped me to remain sober on the outside. And, today, I sit in front of my monitor poised to cancel him forever because whiteness is apparently more addictive than any drug could ever be. We sobered up in the same facility, but he was a victim. I was an addict. Matt is a Christian. I am not. Matt is a Republican. I am not. And, most significantly, Matt is white. I am not. And these facts make all the difference in America.

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First you destroy it, then you spend taxpayers’ money to restore it. It’s called a profit model.

Australia Pledges Half A Billion To Restore Great Barrier Reef (AFP)

Australia pledged half a billion dollars to restore and protect the Great Barrier Reef Sunday in what it said would be a game-changer for the embattled natural wonder, but conservationists were not convinced. The World Heritage-listed site, which attracts millions of tourists, is reeling from significant bouts of coral bleaching due to warming sea temperatures linked to climate change.It is also under threat from the coral-eating crown-of-thorns starfish, which has proliferated due to pollution and agricultural runoff.Prime Minister Malcolm Turnbull said more than Aus$500 million ($400 million) would go towards improving water quality, tackling predators, and expanding restoration efforts.

Turnbull said it was the “largest ever single investment — to protect the reef, secure its viability and the 64,000 jobs that rely on the reef”.”We want to ensure the reef’s future for the benefit of all Australians, particularly those whose livelihood depends on the reef,” he added.The reef is a critical national asset, contributing Aus$6.4 billion a year to the Australian economy.Canberra has previously committed more than Aus$2.0 billion to protect the site over the next decade, but has been criticised for backing a huge coal project by Indian mining giant Adani nearby.With its heavy use of coal-fired power and relatively small population, Australia is considered one of the world’s worst per-capita greenhouse gas polluters.

Canberra insists it is taking strong action to address the global threat of climate change, having set an ambitious target to reduce emissions by 26 to 28% from 2005 levels by 2030.

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Apr 282018
 
 April 28, 2018  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , , , ,  


Edgar Degas At the Milliner’s 1905-10

 

Happy New Universe Day (Caitlin Johnstone)
Counter-#Resistance? (Jim Kunstler)
North Korea Says Historic Summit Opens ‘New Era For Peace’ (AFP)
Jumping The Great White Shark Of Bubble Finance (David Stockman)
Structural Racism At Heart Of British Society, UN Human Rights Panel Says (G.)
Brexit Failure Looks More Likely Every Day (Ritholtz)
Mayday on May Day? Trump Steel Tariff Deadline Looms (R.)
Donald Trump and the Next Crash (Nomi Prins)
US Issues New Warning To China On Its Handling Of Intellectual Property (BBG)
China Is Bolstering Lenders Before A New Assault On Shadow Banking (BBG)
World’s Central Banks Just Can’t Quit on Currency Intervention (BBG)
Hawaii Takes Historic First Step Toward Creating ‘Utility of the Future’ (RE)
Fukushima is Now Officially Worse Than Chernobyl (CP)
EU Votes To Ban Bee-Killing Pesticides (AFP)
The Hills Are Alive With The Signs Of Plastic (G.)

 

 

Kanye brings hope.

Happy New Universe Day (Caitlin Johnstone)

I’m not sure what this is, but it’s definitely different. A bunch of tweets and videos by Mike Cernovich, Scott Adams and Kanye West have been dancing in an unexpected way that has conservatives now talking about a shift in consciousness transforming the way humanity functions in the near future. Liberals and leftists are scoffing at it of course, but it’s definitely a thing, and in my opinion it’s downright fascinating. The MAGA crowd has always impressed me with its ability to energetically and spontaneously unify behind a single theme as a group, like a flock of birds or school of fish changing direction together on a dime. There are certainly worse things they could pour their collaboration into than manifesting a spiritual revolution.

And who the hell am I to say they’re wrong about that? It’s not like we’ve got a choice anyway; either our species will change the way it functions or we’ll wipe ourselves out via nuclear holocaust or climate catastrophe within a few decades, no matter how loudly and smugly we scoff at the guys in MAGA hats. If humanity is going to take a last-ditch, evolve-or-die leap into the unknown and unprecedented, now would surely be the time to do it. If a bunch of right-wingers get it into their heads that humanity is undergoing a spiritual transformation, that certainty could be all it takes to tip us into the shift we all know we need to make anyway.

Could something big be in the works? Something which transcends all our little echo chamber walls and ideological boundaries, which comes not from the repetitive thought loops in our minds but from our deep evolutionary drive to survive? I hope so. And call me naive and deluded if you like, but right now I’m seeing plenty of reasons to hope.

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“Candace seems to have drive, guts, and stamina and there’s no sign that she’s going to shut up. Won’t some Ivy League university please invite her to speak, just to see what happens?”

Counter-#Resistance? (Jim Kunstler)

Who hit Kanye with that white privilege stick? The rapper / fashion maven / theologian / Kardashian arm candyman sent chills through the Twitterverse when he declared himself, somewhat elliptically, off-the-bus of the Progressive #Resistance movement and an admirer of the Golden One in the Oval Office. This came in his endorsement of YouTube blogger Candace Owen, who happens to not be down with the cause of the national victim lottery. Both Kanye and Candace have apparently crossed some boundary into a Twilight Zone of independent thought. Many probably wonder how they are able to get out of bed in the morning without instructions from Don Lemon.

Speaking as a white cis-hetero mammal, I’m not quite as dazzled by the president, but it’s a relief to see, at last, some small rebellion against the American Stasi who have turned the public arena into a giant holding pen for identity offenders — though it is but one corner of the triad-of-hysteria that also includes the Hate Russia campaign and the crusade against men. This nonsense has been going on long enough, while the country hurtles heedlessly into a long emergency of economic disarray. Next in line after Kanye and Candace, a popular Twitter critter name of Chance the Rapper endorsed Kanye endorsing Candace, more or less, by tweeting “black people don’t have to be Democrats.”

The horror this thought aroused! Slavery, these days, it turns out, has a lot of appeal — maybe not so much for laboring in the canefields under the noonday sun as for serving juleps in the DNC plantation house. It happened that Kanye’s mom was a college professor, Chance’s dad was an aide to Chicago Mayor Daley (Jr.), and later worked in Mr. Obama’s Department of Labor. Candace describes her childhood home in Stamford, CT, as “very poor,” but she rose far-and-fast out of college to become an executive on Wall Street in her twenties. What they seem to have in common is being tainted with bourgeois values, horror again!

[..] I dunno about the perpetually scowling Kanye, with his periodic mood problems and spotlight-stealing antics on stage, or Chance the Rapper’s artificial hood raptures, but Candace makes the argument for the value of a common culture that might bind us together as a nation of individuals, not hostile tribes, starting with a language that everybody can understand. Of course, the whole Kanye / Candace dust-up may be forgotten by the middle of next week, and the country can go back to gaslighting itself into either a new civil war or world war three. Candace seems to have drive, guts, and stamina and there’s no sign that she’s going to shut up. Won’t some Ivy League university please invite her to speak, just to see what happens?

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Yeah, we’ll have to wait and see. But Kim does what his people want, and more importantly what his father wanted.

North Korea Says Historic Summit Opens ‘New Era For Peace’ (AFP)

North Korea on Saturday hailed its summit with the South as a “historic meeting” that paved the way for the start of a new era, after the two leaders pledged to pursue denuclearisation and a permanent peace. The official KCNA news agency carried the text of the leaders’ Panmunjom Declaration in full and said the encounter opened the way “for national reconciliation and unity, peace and prosperity”. In the document, North Korean leader Kim Jong Un and the South’s President Moon Jae-in “confirmed the common goal of realising, through complete denuclearisation, a nuclear-free Korean Peninsula”. But the phrase is a diplomatic euphemism open to interpretation on both sides.

Pyongyang has long wanted to see an end to the US military presence and nuclear umbrella over the South, but it invaded its neighbour in 1950 and is the only one of the two Koreas to possess nuclear weapons. Analysts warn that previous displays of inter-Korean affection and pledges by the North ultimately came to naught. For years, Pyongyang insisted it would never give up the “treasured sword” of its nuclear arsenal, which it says it needs to defend itself against a possible US invasion. But it has offered to put it up for negotiation in exchange for security guarantees, according to Seoul – although Kim made no public reference to doing so at Friday’s spectacular summit. In a separate report, KCNA said the two leaders had a “candid and open-hearted exchange of views” on issues including “ensuring peace on the Korean Peninsula and the denuclearisation of the peninsula”.

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“..Fully 96% of Amazon’s $5.0 billion of LTM operating income was accounted for by its cloud services business..”

Jumping The Great White Shark Of Bubble Finance (David Stockman)

Wall Street has now truly jumped the shark – the one jockeyed by Jeff Bezos. Last night Amazon reported a whopping 41% plunge in free cash flow for the March 2018 LTM period compared to prior year. Yet it was promptly rewarded by a $50 billion surge in market cap – with $10 billion of that going to the guy riding topside on the Great White Shark of Bubble Finance. That’s right. Amazon’s relatively meager operating free cash flow for the March 2017 LTM period had printed at $9.0 billion, but in the most recent 12 months the number has slithered all the way down to just $5.3 billion. And that’s where the real insanity begins. A year ago Amazon’s market cap towered at $425 billion – meaning that it was being valued at a downright frisky 47X free cash flow.

But fast forward a year and we get $780 billion in the market cap column this morning and 146X for the free cash flow multiple. Folks, a company selling distilled water from the Fountain of Youth can’t be worth 146X free cash flow, but don’t tell the giddy lunatics on Wall Street because they are apparently just getting started. Already at the crack of dawn SunTrust was out with a $1900 price target – meaning an implied market cap of $970 billion and 180X on the free cash flow multiple. At this point, of course, you could say who’s counting and be done with it. But actually it’s worse – and for both Amazon and the US economy.

That’s because Amazon is both the leading edge of the most fantastic ever bubble on Wall Street and also a poster boy for the manner in which Bubble Finance is hammering growth, jobs, incomes and economic vitality on main street. Moreover, soon enough a collapsing Wall Street bubble will bring the already deeply impaired main street economy to its knees. So Amazon is a double-destroyer. [..] Fully 96% of Amazon’s $5.0 billion of LTM operating income was accounted for by its cloud services business (AWS). The e-Commerce juggernaut, by contrast, posted just $188 million of LTM operating income, which amounts to, well, 0.1% of sales on a computational basis. But we’d round that to zero – especially because Amazon’s e-Commerce business was already almost there in the year ago period when its margin on sales came in a tad higher at 0.6%!

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No kidding.

Structural Racism At Heart Of British Society, UN Human Rights Panel Says (G.)

The disproportionate number of deaths of black and brown people in incidents with the police shows that structural racism remains rooted in the fabric of British society, a panel of UN human rights experts has said. The panel cited data from the Metropolitan police showing a disproportionate number of minority ethnic people – particularly those of African or Caribbean descent – dying due to excessive use of force by the state. Noting that there had never been a successful prosecution of a police officer for a death in police custody, the panel said: “This points to the lack of accountability and the impunity with which law enforcement and state agencies operate.”

The warning from members of the UN human rights council comes before a 12-day visit to the UK by E Tendayi Achiume, the special rapporteur on racism, beginning on Monday. “The deaths reinforce the experiences of structural racism, over-policing and criminalisation of people of African descent and other minorities in the UK,” they said. “Failure to properly investigate and prosecute such deaths results in a lack of accountability for those individuals and state agencies responsible, as well as in the denial of adequate remedies and reparation for the families of the victims.” The panel pointed particularly to the disproportionate use of stun guns. People from black and minority ethnic backgrounds were three times more likely to be subjected to the use of such weapons by police, they said.

The members added: “People of African descent with psychosocial disabilities and those experiencing severe mental or emotional distress reportedly face multiple forms of discrimination and are particularly affected by excessive use of force.” A report last year by David Lammy, the Labour MP for Tottenham, found racial disparities across the criminal justice system. He has consistently said that young black men feel as though they are living in a police state and that a different standard of policing is applied to black youths, compared with whites.

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Me, I predict a giant mess.

Brexit Failure Looks More Likely Every Day (Ritholtz)

Today, I will violate one of my favorite principles, and hereby make this prediction: No Brexit! In other words, the U.K. will not exit the European Union. By 2023, we will look back at the entire ridiculous affair as if it were a rediscovered lost episode of “Fawlty Towers.” Soon after the referendum in which Brits unwisely voted to leave the EU, I suggested there was a 33% chance that Brexit wouldn’t occur. Now, I raise that to 75%, and with each passing day of incompetence shown by Prime Minister Theresa May’s administration, the probabilities move higher.

With that disclosure out of the way, I’d like to explain the thinking behind this not-so-bold forecast. From the very beginning, I have been a skeptic that a full Brexit would occur. The concept was simply so foolish and self-destructive that the reasonable expectation was cooler heads would prevail. But that was a modest assumption and didn’t anticipate the feckless May government making a bad situation even worse. There seem to be several ways this can, and probably will, fall apart. In order of likelihood (recognizing a combination of any and all of these is possible):

1) Doing nothing
2) Snap parliamentary election leading to a May loss
3) New referendum
4) Ireland/Scotland make it too complicated
5) Europe makes it impossible

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The EU is ready for a fight.

Mayday on May Day? Trump Steel Tariff Deadline Looms (R.)

While more than 100 countries take a day off for May Day, U.S. President Donald Trump will spend next Tuesday deciding whether to extend a largely U.S.-China trade standoff into a more global dispute. In a week featuring a Federal Reserve monetary policy meeting, U.S. monthly jobs data and first estimates on euro zone inflation and economic growth, Trump’s decision on metal tariffs may prove to the be biggest market mover. The United States set import tariffs of 25% on steel and 10% on aluminum a month ago, but granted temporary exemptions to the European Union, NAFTA partners Canada and Mexico, as well as Argentina, Brazil, Australia and South Korea. Those exemptions expire on May 1.

Korea secured a permanent exemption for steel within days of agreeing to a revision of its trade pact with the United States. Canada and Mexico may rely on advances in talks on North American Free Trade Agreement (NAFTA) for an extension. Continued exemptions for the other countries, and notably the European Union, remain in doubt. French President Emmanuel Macron and German Chancellor Angela Merkel were meeting Trump in Washington as part of EU lobbying effort in the past week, but German officials played down the chances of a breakthrough before Merkel’s Friday visit. “From today’s point of view, we must reckon that the tariffs will come on May 1,” one official said.

The European Commission, which oversees trade policy for the 28-member bloc, has insisted the United States grant it a permanent exemption without conditions. White House economic adviser Larry Kudlow said on Thursday that Trump wanted concessions on automobiles, for which import duties are higher into Europe than into the United States.

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The Fed as a cult.

Donald Trump and the Next Crash (Nomi Prins)

We have entered a landmark moment: no president since Woodrow Wilson (during whose administration the Federal Reserve was established) will have appointed as many board members to the Fed as Donald Trump. His fingerprints will, in other words, not just be on Supreme Court decisions, but no less significantly Fed policy-making for years to come — even though, like that court, it occupies a mandated position of political independence. The president’s latest two nominees to that institution’s Board of Governors exemplify this. He has nominated Richard Clarida, a former Treasury Department official from the days of President George W. Bush who later became a strategic adviser to investment goliath Pimco, to the Fed’s second most important slot, while giving the nod to Michelle Bowman, a Kansas bank commissioner, to represent community banks on that same board.

Like many other entities in Washington, the Fed’s Board of Governors has been operating with less than a full staff. If Clarida is approved, he will join Trump-appointed Fed Chairman Jerome Powell and incoming New York Federal Reserve Bank head John C. Williams — the New York Fed generally exists in a mind meld with Wall Street — as part of the most powerful trio at that institution. Williams served as president of the San Francisco Fed. Under his watch, the third largest U.S. bank, Wells Fargo, created about 3.5 million fake accounts, gave its CEO a whopping raise, and copped to a $1 billion fine for bilking its customers on auto and mortgage insurance contracts.

Not surprisingly, Wall Street has embraced Trump’s new Fed line-up because its members are so favorably disposed to loosening restrictions on financial institutions of every sort. Initially, the financial markets reflected concern that Chairman Powell might turn out to be a hawk on interest rates, meaning he’d raise them too quickly, but he’s proved to be anything but. As Trump stacks the deck in his favor, count on an economic impact that will be felt for years to come and could leave the world devastated. But rest assured, if the Fed can help Trump keep the stock market buoyant for a while by letting money stay cheap for Wall Street speculation and the dollar competitive for a trade war, it will.

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And Canada?!

US Issues New Warning To China On Its Handling Of Intellectual Property (BBG)

The U.S. issued a new warning to China on its handling of intellectual property as President Donald Trump prepares to dispatch senior advisers to the Asian nation to head off a trade dispute. The U.S. Trade Representative’s office kept China on its “priority watch list” of countries whose IP practices require monitoring. China has an “urgent need” to fix a range of IP-related concerns, including trade-secret theft, online piracy, and forced technology transfer, USTR said in its annual report on IP protection and enforcement. Escalating trade tensions between the world’s two-biggest economies have rattled markets and sparked fears of a trade war. Trump has proposed tariffs on as much as $150 billion of Chinese imports on the grounds of alleged IP theft, while Beijing has vowed to retaliate on everything from American soybeans to airplanes.

The annual list, which carries no immediate penalties, is supposed draw attention to the need for nations to address everything from copyright infringement to online piracy. Trump said this week Treasury Secretary Steven Mnuchin and other senior officials will visit China within days, adding that there’s a “very good chance” the two countries can reach a deal. U.S. Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow will also be part of the delegation. Kudlow said he expects serious negotiations on a range of trade irritants, including technology-related issues, and the U.S. will be looking for specific actions from China. Officials in Beijing in recent weeks have been announcing steps to further open up the economy, such as gradually scrapping foreign ownership caps on local vehicle companies.

The administration added Canada and Colombia to the highest priority watch list for IP challenges, and it dropped Thailand from the regular watch list. Canada is the only Group of Seven country on the monitoring list. The USTR said the country has failed to resolve “key longstanding deficiencies,” including poor border and law enforcement with respect to counterfeit and pirated goods, weak patent protection and pricing for pharmaceuticals, and inadequate copyright protection.

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It’s the shadow banks that have financed that 6.8% growth they miraculously achieve every single month and year.

China Is Bolstering Lenders Before A New Assault On Shadow Banking (BBG)

Investors who pushed up Chinese bank shares last week on news of lower reserve requirements may have been celebrating too soon. The subtext to Tuesday’s move is an effort to prepare the banks for a painful new phase in China’s campaign to reduce financial-sector risks, as regulators free up deposit rates and accelerate their crackdown on the nation’s $16 trillion shadow banking sector. “China is gearing up to crack a hard nut with deleveraging and financial reforms, and the central bank is offering some coordinated policies to ensure it will be a smooth transition,” said Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria in Hong Kong.

The People’s Bank of China’s decision to free up more liquidity for banks by slashing reserve ratio requirements, at a time when funding conditions are plentiful, shows the central bank is trying to insulate lenders for the next phase of reform, said Ming Ming, head of fixed-income research at Citic Securities. A key element of that reform process is a plan to give banks greater freedom to set interest rates, flagged by PBOC Governor Yi Gang at the Boao forum earlier this month. That will help banks better compete for deposits from Chinese savers and hasten the shift away from shadow instruments such as wealth management products.

Already, China Construction Bank, Bank of China and other large lenders have started trying to attract funding by rolling out certificates of deposit with sharply higher interest rates. But the move away from off balance sheet WMPs to on-balance sheet deposit funding is likely to be painful. Guosen Securities analyst Wang Jian described interest rate liberalization as like “throwing a bomb at banks” in an April 11 note, saying the need to offer higher deposit rates to attract funds could push them into riskier lending, to real estate for example, in order to protect profits.

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What are the little ones going to do?

World’s Central Banks Just Can’t Quit on Currency Intervention (BBG)

History shows that central banks rarely stem a currency’s long-term decline simply by spending foreign-exchange reserves. Yet not stepping in at all can prove far worse. That’s the argument used by authorities in Brazil, Indonesia and most recently Argentina to explain why it makes sense to shower billions of dollars on what looks like a losing bet. This week alone, Argentina spent about $3 billion, or 5% of its reserves, to bolster the peso after it plunged to a record low. Then, wielding another monetary cudgel, it unexpectedly goosed interest rates. In Buenos Aires, the combination worked – at least for today. The peso ended just a blip or two in the green after sliding 1.8% earlier. It’s still this year’s worst-performing major currency, nosing out Russia’s ruble and the Turkish lira.

“It was a success in the sense that it gave two signals to the market,” said Daniel Chodos, a strategist at Credit Suisse based in the Argentine capital. “One is that it can and will use all available instruments to conduct monetary policy, that is, interest-rate and FX interventions. The second signal is that because of the tool kit it has, it can intervene and cause some pain to markets.” Indonesia is a more cautionary tale. The southeast Asian nation’s central bank drained $6 billion of foreign reserves in February and March partly to stabilize the rupiah, and may have further eroded the $126 billion pile as it stepped up intervention this month. But the moves, coupled with a threat to hike rates, didn’t calm volatility. That led the central bank to say it’s preparing a second line of defense to ensure liquidity.

Brazil’s interventions in the foreign-exchange market, using currency swaps, became so regular between 2013 and 2015 that traders started likening them to “ração diária,” the moment each day set aside to feed your pets.

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“..for the first time they are going to charge based on factors including affordability, reliability, transparency, renewable energy integration, efficiency..”

Hawaii Takes Historic First Step Toward Creating ‘Utility of the Future’ (RE)

In what could be the beginning of the new way forward to utilities, on Tuesday, Hawaiian Gov. David Ige signed the Ratepayer Protection Act, a new law that directs utilities in Hawaii to change their business models and fully decouple revenue and capital expenditures. “This is the first jurisdiction that is doing this. It’s a concept that’s been discussed at some length among scholars and experts in the field but no one has actually implemented this so this was definitely a moonshot bill,” said State Sen. Stanley Chang in an interview. “Instead of charging what the market can bear or letting utilities charge on a cost-plus basis to recoup their costs, for the first time they are going to charge based on factors including affordability, reliability, transparency, renewable energy integration, efficiency,” he added.

“That’s a total change to the business model of these utilities.” Today, one of the only ways that utilities all across the world can generate revenue is by rate-basing capital expenditures. What that means in plain English is that the more utilities spend on infrastructure, such as upgrading transmission and distribution equipment (and building new generation plants in some territories), the more money they make because they are allowed to add those capital expenditures to their electric rates plus a healthy margin and recover their costs through ratepayer dollars.

As of July 1, 2020, this model will cease to exist in Hawaii. Under the new law Hawaiian utilities and the public utility commission (PUC) will need to come up with “performance incentives and penalty mechanisms that directly tie an electric utility revenues to that utility’s achievement on performance metrics and break the direct link between allowed revenues and investment levels,” according to the new law.

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“Contamination of soil, vegetation and water is so widespread in Japan that evacuating all the at-risk populations could collapse the economy..”

Fukushima is Now Officially Worse Than Chernobyl (CP)

The radiation dispersed into the environment by the three reactor meltdowns at Fukushima-Daiichi in Japan has exceeded that of the April 26, 1986 Chernobyl catastrophe, so we may stop calling it the “second worst” nuclear power disaster in history. Total atmospheric releases from Fukushima are estimated to be between 5.6 and 8.1 times that of Chernobyl, according to the 2013 World Nuclear Industry Status Report. Professor Komei Hosokawa, who wrote the report’s Fukushima section, told London’s Channel 4 News then, “Almost every day new things happen, and there is no sign that they will control the situation in the next few months or years.”

Tokyo Electric Power Co. has estimated that about 900 peta-becquerels have spewed from Fukushima, and the updated 2016 TORCH Report estimates that Chernobyl dispersed 110 peta-becquerels.[1](A Becquerel is one atomic disintegration per second. The “peta-becquerel” is a quadrillion, or a thousand trillion Becquerels.) Chernobyl’s reactor No. 4 in Ukraine suffered several explosions, blew apart and burned for 40 days, sending clouds of radioactive materials high into the atmosphere, and spreading fallout across the whole of the Northern Hemisphere — depositing cesium-137 in Minnesota’s milk.[2]

The likelihood of similar or worse reactor disasters was estimated by James Asselstine of the Nuclear Regulatory Commission (NRC), who testified to Congress in 1986: “We can expect to see a core meltdown accident within the next 20 years, and it … could result in off-site releases of radiation … as large as or larger than the releases … at Chernobyl.[3] Fukushima-Daiichi came 25 years later. Contamination of soil, vegetation and water is so widespread in Japan that evacuating all the at-risk populations could collapse the economy, much as Chernobyl did to the former Soviet Union. For this reason, the Japanese government standard for decontaminating soil there is far less stringent than the standard used in Ukraine after Chernobyl.

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75% of insects are gone in France and Germany and they make this only about the bees?

EU Votes To Ban Bee-Killing Pesticides (AFP)

European Union countries voted on Friday in favour of a near-total ban on neonicotinoid insecticides which are blamed for an alarming collapse in bee populations. The move comes after the European food safety agency said in February that most uses of the chemicals posed a risk to bees, prompting environmentalists to push the 28-nation EU to immediately outlaw them. Bees help pollinate 90% of the world’s major crops, but in recent years have been dying off from “colony collapse disorder,” a mysterious scourge blamed on mites, pesticides, virus, fungus, or a combination of these factors.

Campaigners dressed in black and yellow bee suits rallied outside the headquarters of the European Commission in Brussels ahead of the vote for a ban on three key pesticide chemicals. EU Environment Commissioner Vytenis Andriukaitis said he was “happy that member states voted in favour of our proposal” to restrict the chemicals and tweeted a picture of the activists.

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Time for a very large and thorough study into plastics in humans.

The Hills Are Alive With The Signs Of Plastic (G.)

Microplastic pollution contaminates soil across Switzerland, even in remote mountains, new research reveals. The scientists said the problem could be worse in other nations with poorer waste management and that research was urgently needed to see if microplastics get into food. In the first major study of microplastics in soil, the researchers analysed soil samples from 29 river flood plains in nature reserves across Switzerland. They found microplastics, fragments under 5mm in size, in 90% of the soils. The scientists believe the particles are carried across the country by the wind. Research on microplastic pollution to date has largely concentrated on the oceans, in which it is found across the globe, including the Arctic. The particles have been shown to harm marine life and can absorb toxins from the water.

Record levels of microplastics were revealed in rivers by research released in March and last year tap water around the world was found to contain plastic fibres. Other studies have found microplastics in bottled water, which prompted the World Health Organization to launch a review, as well as in beer, honey and salt. However, almost no research has yet been done on whether the particles end up being widely consumed by people and whether they are harmful. Michael Scheurer and Moritz Bigalke at the Geographical Institute of the University of Bern, conducted the new research, which is published in the journal Environmental Science and Technology. “These findings are alarming,” Scheurer said. “For example, new studies indicate that microplastics in the soil can be harmful to and even kill earthworms in the soil.”

Microplastics were found even in remote mountain regions that can only be reached by foot. “We were really surprised,” said Bigalke. “All the areas were in national parks. We thought we might find one or two plastic particles, but we found a lot.” [..] One of the very few studies into microplastics in food examined backyard chickens in Mexico. The researchers found 57 particles per gramme in the gizzards of the chickens. “Chicken gizzard is a specialty in the Mexican kitchen and the intake of the present plastics form a strong risk for human health,” the scientists said.

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Apr 272018
 
 April 27, 2018  Posted by at 7:57 am Finance Tagged with: , , , , , , , , , , ,  


Edward Curtis Red Hawk 1905

 

Moon and Kim’s Unprompted DMZ Dance (AFP)
Sophisticated North Korean Diplomacy Rewards Kim Jong-un (Pieraccini)
China Open To Trade Negotiations With United States – Li (R.)
BOJ Maintains Stimulus While Removing Language on Timing of 2% (BBG)
What’s The Most Important Chart For Investors? (MW)
A New Type Of Poverty Is Hurting The Middle Class (SMH)
Amazon Cloud Revenue Jumps 49% In First Quarter (CNBC)
Facebook Profits Soar 63% Despite Cambridge Analytica (Ind.)
EU Doesn’t Need The City Of London, Says Chief Brexit Negotiator (G.)
Turkey Crackdown Suffocates Society, Creates Climate Of Fear (Amnesty)
Greece’s Economic Crisis Is Over Only If You Don’t Live There (WaPo)
Greece: Economic Health In Grim State (EN)
Solar And Wind Really Do Increase Electricity Prices (F.)
EU Member States To Vote On Near-Total Neonicotinoids Ban (BBC)

 

 

Kim needs money.

Moon and Kim’s Unprompted DMZ Dance (AFP)

It was a historic handshake that Koreans had waited more than a decade to see — and it sparked a completely unscripted dance with the two leaders hopping back and forth over the border that divides their nations. Everything about the inter-Korean summit had been minutely choreographed and rehearsed but the North’s Kim Jong Un went off-script when he invited his southern counterpart Moon Jae-in to join him over the border. After a prolonged clasp lasting almost half a minute over the Military Demarcation Line that acts as the border, a beaming Moon invited his guest over to South Korea. They posed for pictures as Kim became the first Northern leader to set foot in the country since Korean War hostilities ceased in 1953.

Kim then beckoned Moon over to the other side. Moon seemed initially hesitant but the North’s jovial young leader was not taking “no” for an answer, grabbing his hand and accompanying him across the border before they warmly shook hands again. Grinning broadly, the pair then crossed back to the South hand-in-hand, to be presented with flowers by children from a village in the buffer area next to the Demilitarized Zone. It all went to show that even for a moment as carefully planned as the first inter-Korean summit in more than a decade, where the North’s nuclear arsenal will be high on the agenda, the best-laid preparations rarely run completely to schedule. South Korean officials had carried out a full dress rehearsal on the eve of the summit, including stand-ins for the two leaders. “We examined every single detail including lighting and flower decorations,” a Moon spokesman said.


You put your left foot in: Kim Jong Un and Moon Jae-in were engaged in a metaphorical and literal diplomatic dance on Friday when they met at the frontier (AFP Photo/Korea Summit Press Pool)

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Sanctions bite too. And “United States with its back against the wall” is perhaps not the right picture.

Sophisticated North Korean Diplomacy Rewards Kim Jong-un (Pieraccini)

[..] what appears to be emerging is very similar to a strategy cleverly developed by the North Korean leadership over a number of years. As Pyongyang needed to bring the United States to the negotiating table, while at the same time guaranteeing its survival, it pursued its nuclear-weapons program. Since Washington seems to have understood that a military solution is not practicable, especially given the pressure brought to bear by its allies all too cognizant of a nuclear-armed DPRK, Pyongyang is now willing to display its good will, deciding to surprise the world by embarking on negotiations, with the renunciation of its nuclear weapons as a major bargaining chip.

Under these conditions, Pyongyang is willing to cooperate, and South Korea welcomes the initiative with open arms, accelerating the meeting between the two leaders and paving the way for peace on the peninsula. The People’s Republic of China applauds the diplomatic efforts and encourages South Korea, and later America, in these diplomatic efforts. Seoul, Beijing and Pyongyang have every interest in reaching an all-encompassing deal, with or without Washington. The diplomatic ability of this trio has managed to leave the United States with its back against the wall, first of all obliging it to sit down at the negotiating table (something already revolutionary for reasons explained above), and then requiring it to ease sanctions considerably.

Otherwise, North Korea would be seen as the party that is willing to achieve peace, while Washington is left isolated and looking like the warmonger. North Korea finds itself in a win-win situation. If sanctions are eased and peace talks are managed in the right manner, then the process of socio-economic rebirth, which Kim Jong-un considers a priority, can begin. Should the rhetoric of war prevail in Washington, then Washington would find itself at odds with its main ally, Seoul. It is likely that China could even justifiably renounce its sanctions against the DPRK, blaming the US for not making any progress in the face of extraordinary offers by Kim Jong-un to renounce his nuclear weapons.

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Win win.

China Open To Trade Negotiations With United States – Li (R.)

China is open to negotiating with the United States to resolve trade tensions, Premier Li Keqiang was quoted as saying by state media late on Thursday, noting that the countries should manage their conflicts through dialogue. Li made the remarks at a meeting with U.S. Secretary of Transportation Elaine Chao, state broadcaster China Central Television (CCTV) said. U.S. Treasury Secretary Steven Mnuchin is due to lead a delegation to China for talks intended to ease trade tensions. President Donald Trump has threatened a new round of tariffs on $100 billion worth of Chinese products that could target mobile phones, computers and other consumer goods. China retaliated against an initial round of U.S. tariffs on $50 billion in Chinese exports.

“There is no winner in trade conflict, which will not only affect the recovery of the world economy but also the global industrial chain,” Li said in comments reported by the official Xinhua news agency. “It is also what the international community expects from our two countries,” he said. Larry Kudlow, Trump’s top economic adviser, who will join Mnuchin’s delegation in Beijing, said on Thursday he hoped the talks with China would yield progress but that resolving U.S. complaints would be “a long process.” Xinhua cited Li as saying he hoped the two countries would be able to “manage and control” their differences. Li added China would “unswervingly open further to the outside world”, reiterating President Xi Jinping’s assurances over about the country opening more widely to trade.

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Abenomics was all about inflation targeting. Silently forgotten.

BOJ Maintains Stimulus While Removing Language on Timing of 2% (BBG)

The Bank of Japan left its stimulus program unchanged on Friday, while removing language from its statement declaring that it would reach 2% inflation around fiscal 2019. The decision to maintain the yield-curve control program and asset purchases was forecast by all analysts surveyed by Bloomberg. As he enters his sixth year at the helm, Governor Haruhiko Kuroda has the BOJ pushing forward with stimulus even as other major central banks move further toward policy normalization, if at a more moderate pace. Though it removed the language on reaching its 2% target, indicating that more time may be needed, the BOJ left its inflation forecasts largely unchanged. It still forecasts core inflation, which excludes fresh food prices, to reach 1.8% in fiscal 2019.

Still, seven of nine board members said risks to that forecast were weighted to the downside. “The momentum for achieving the inflation target as early as possible is fading,” said Masamichi Adachi, senior economist at JPMorgan Chase. “I take the change as a positive because you can say that their communication is becoming realistic.” Kuroda is expected to reiterate his intention to carry on with the stimulus during his news conference later on Friday. Doing so would likely provide a tailwind for the yen to continue falling, as rising U.S. bond yields widens the gap between returns in the U.S. and Japan.

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Pick your favorite.

What’s The Most Important Chart For Investors? (MW)

Wolf Richter, the man behind the Wolf Street blog, had no trouble zeroing in on the theme for his pick for “chart of the century”: U.S. debt. He did have trouble choosing whether the chart should show ballooning student loans, or ballooning government debt. Either way, ballooning’s the key, as he predicts both narratives will continue to raise alarms. When push came to shove, he opted for the government debt chart.

[..] Spending and debt are also the theme of the chart selected by Lance Roberts, chief strategist for Clarity Financial. But his chart focuses on the consumer side of that picture. Visualized here is the widening gap between cost of living, and the income and credit Americans have at their disposal. Up until the late 1980s, disposable income, savings and debt funded the standard cost of living. Since then, however, this chart shows that hasn’t been the case — and the national personal savings rate has dropped from above 10% in the 1970s to below 4% today.

[..] While we’re on the topic of the dollar and rising rates, Tadas Viskanta of the Abnormal Returns blog says this chart tells “the most important story of the century”. “Central banks engineered 0% or in some cases negative yields on cash for the better part of the decade,” Tadas said. “We’re only now coming out of it. Investors may once again begin to think of cash as a viable investment option.”

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From Australia, but applicable anywhere. You’re not poor yet? Give us a minute.

A New Type Of Poverty Is Hurting The Middle Class (SMH)

The banking and finance royal commission has cast light on a new type of poverty to emerge in our society: middle class poverty. To understand it, we have to go back to an earlier government inquiry: the 1972 Commission of Inquiry into Poverty, conducted by Professor Ronald Henderson [which] gave prominence to the Henderson Poverty Index: a measure of consumption described by Henderson as so austere that it was unchallengeable. Updated versions of this index remain a standard benchmark of poverty. But more than 45 years on, the royal commission into finance is revealing that poverty is no longer just about low income.

The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty. This isn’t an accident: it is a strategic policy by banks. How much do banks think households need for daily living? According to the Australian Prudential Regulation Authority’s submission to the royal commission, banks “typically use the Household Expenditure Measure [a relative poverty measure] or the Henderson Poverty Index in loan calculators to estimate a borrower’s living expenses”. So measures designed to capture the impacts of low incomes are now targeting financially-enmeshed middle-income households, and not as a statement of social shame, but as strategic objects of bank policy.

This has caused embarrassment to APRA, the regulator charged with overseeing those bank practices. In response, it was permitted to make a supplementary submission to the royal commission in March. A consequence of APRA neglect is that “poverty” now goes significantly up the income scale, well into what we generally call the middle class. Middle income people are the cohort in greatest financial risk. They are highly leveraged: they spend more of their income on loan repayments than do people with higher incomes. Second, their assets are undiversified: they own labour market skills, some home equity and some superannuation. Third, these assets are illiquid (not easily sold): you can’t transfer your skills to another, houses are costly to sell and superannuation is generally inaccessible..

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The cloud is not a safe environment.

Amazon Cloud Revenue Jumps 49% In First Quarter (CNBC)

Amazon’s cloud business exceeded analyst estimates, with revenue climbing 49% in the first quarter. Amazon Web Services reported sales on Thursday of $5.44 billion, compared to the $5.26 billion average estimate of analysts surveyed by FactSet. AWS contributed about 11% of Amazon’s total revenue for the period, up from 8.5% in the prior quarter. AWS continues to be a big revenue driver and even larger profit engine for its parent company, which dominates the low-margin e-commerce market.

In cloud-computing infrastructure, Amazon has a substantial market share lead over Microsoft Azure, Google’s Cloud platform and IBM, as well as other players like Alibaba and Oracle. While AWS has maintained growth above 40%, Microsoft and Google are currently expanding much faster and picking up share. In the first quarter Microsoft’s Azure cloud grew 93%. AWS produced $1.4 billion in operating income in the first quarter. That accounted for 73% of Amazon’s $1.93 billion in operating income.

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How much of that comes from selling data?

Facebook Profits Soar 63% Despite Cambridge Analytica (Ind.)

Facebook profits soared 63% to $5bn (£3.6bn) in the first three months of the year despite the company being engulfed in a data privacy scandal that has angered millions of users. Allegations that up to 87 million Facebook users’ data was collected without their knowledge and then used by Cambridge Analytica to try to sway the US Presidential election and the Brexit vote, did little to slow the tech company’s rapid growth. Total revenues jumped 49% compared to the same three months last year, Facebook reported on Wednesday. Facebook has been scrambling to mollify angry politicians and reassure users that it will safeguard their personal information.

Amid the turmoil, observers were keenly watching the company’s user figures to assess the potential damage and see if the scandal would suppress Facebook’s growth. Despite high-profile social media campaigns calling users to boycott Facebook, user numbers kept in line with expectations. Those results again demonstrated the company’s ability to thrive amid controversy. It continued to grow over the last year despite a steady drumbeat of revelations that Russian-linked actors used the platform to try and fracture the electorate and promote Mr Trump ahead of the 2016 presidential election.

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But the CIty still has lots of political power.

EU Doesn’t Need The City Of London, Says Chief Brexit Negotiator (G.)

The EU does not need the City of London, and Theresa May’s “pleading” for a special deal for the UK’s financial services sector will not be rewarded, the EU’s chief negotiator, Michel Barnier, has said. In his toughest rebuff yet to the demands made by the British prime ministerin her landmark Mansion House speech, Barnier suggested the City would be granted nothing more generous than that enjoyed by Wall Street. “Some argue that the EU desperately needs the City of London, and that access to financing for EU27 business would be hampered – and economic growth undermined – without giving UK operators the same market access as today,” Barnier said at a meeting of finance ministers in Sofia, Bulgaria. “This is not what we hear from market participants, and it is not the analysis that we have made ourselves.”

May had argued in March, in a keynote speech spelling out her vision of a future UK-EU trading relationship, that failing to construct a special deal for the City would hurt economies on both sides. The City provided more than £1.1tn of cross-border lending to the rest of the EU in 2015 alone. May conceded in her speech that the current “passporting” regime, under which UK-based financial services would automatically have the right to operate across the EU, would not survive Brexit. However, she went on to suggest that a mutually agreed system would be necessary that would give the UK’s financial services sector greater assurances over future rules than the current “equivalence regime”.

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Our ‘leaders’ look the other way, they have other priorities.

Turkey Crackdown Suffocates Society, Creates Climate Of Fear (Amnesty)

The report reveals how few areas of Turkey’s once vibrant independent civil society have been left untouched by the ongoing state of emergency. A nationwide crackdown has resulted in mass arrests and dismissals, thehollowing out of the legal system and the silencing of human rights defenders through threats, harassment and imprisonment. “Whilst the jailing of journalists and activists may have hit the headlines, the profound impact that Turkey’s crackdown has had on wider society is harder to quantify but it is no less real,” said Amnesty International’s Europe Director, Gauri van Gulik. “Under the cloak of the state of emergency, Turkish authorities have deliberately and methodically set about dismantling civil society, locking up human rights defenders, shutting down organisations and creating a suffocating climate of fear.”

The state of emergency, declared in July 2016 as a temporary exceptional measure in the wake of the failed coup attempt, was renewed for a seventh time last week. Under its imposition, the rights to freedom of expression to liberty and security and to fair trials have been decimated. In so doing, the last line of defence for any healthy society – namely the work of human rights defenders – has been breached. Blanket bans on public gatherings in cities across Turkey have curtailed the right to assembly and association. Meanwhile more than 100,000 people have faced criminal investigations and at least 50,000 people have been imprisoned pending trial. More than 107,000 public sector employees have been summarily dismissed.

Many of the country’s most prominent journalists and human rights defenders, including Taner Kılıç, honorary chair of Amnesty International Turkey, have been jailed on baseless “terrorism” charges. But their arrests are merely the tip of the iceberg. Anti-terrorism laws and trumped-up coup related charges are used to target and silence peaceful, legitimate dissent. Prominent journalists, academics, human rights defenders and other civil society actors are subjected to arbitrary detention, prosecutions and, if found guilty in unfair trials, face long sentences.

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Greek recovery narrative is an insult.

Greece’s Economic Crisis Is Over Only If You Don’t Live There (WaPo)

Greece’s economic crisis is over only if you don’t live there. Everyone else, in other words, might have moved on because Greece isn’t threatening to knock over the other dominoes that are known as the global economy anymore, but its people are still stuck in what is the worst collapse a rich country has ever gone through. Indeed, if the International Monetary Fund’s latest projections are correct, it might be at least another 10 years before Greece is back to where it was in 2007. And that’s only if there isn’t another recession between now and then. Two lost decades, then, are something of a best-case scenario for Greece. The numbers are staggering. It’s not just that Greece’s economy shrank 26% in per capita terms between the middle of 2007 and the start of 2014.

That, as you can see below, might have put it on par with some of the biggest calamities in economic history — it was a little better than the United States had done in the 1930s, but a little worse than Argentina had done in the 2000s — but it didn’t distinguish it among them. No, it’s that Greece has grown only a total of 2.8% — again, adjusted for its population — in the first four years of what is supposedly a recovery. To give you an idea how miserable that is, 1930s America grew 30.2% and 2000s Argentina grew 26.9% during the first four years of theirs. The result is that, by this point of their recoveries, the United States was nearly all the way back to where it had been before its crash, and Argentina was actually 17.1% richer than it had been. Greece, meanwhile, is still 23.5% poorer than it was.

The IMF somewhat optimistically thinks that Greece will still be 12.8% poorer than it was in 2007 in 2023, which would put it on pace to get back to its pre-recession peak sometime around 2030 or so. They have made a desert, and called it a recovery.

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“..33% of Greeks now work for less than 380 euros a month. Gross, before tax…”

Greece: Economic Health In Grim State (EN)

In an extended interview in Lisbon, Greece’s former finance minister Yanis Varoufakis has given a very grim assessment of his country’s economic health. It came after European Commission President Jean-Claude Juncker said on Thursday, whilst on a visit to Athens, that Greece will become what he termed a “normal” country by the end of the summer. “Everyday is worse than the previous day. All talk of recovery, and of Greece having turned the corner, is to add insult on the injuries of the Greek people,” Varoufakis said. “We have a constant reduction in pensions, in wages. Do you know that 33% of Greeks now work for less than 380 euros a month? Gross, before tax.

“Already the government has committed, even legislated, to introduce pension cuts in January 2019, to introduce a further increase in taxation of the poorest families, after January 2019. They have comitted to escalate exponentially the evictions of poor families from their homes, repossessions. So, of course there will be no changes after the summer of 2018.” In 2016 Varoufakis formed the DiEM25, a pan-European left-wing party which is now asssembling a list of candidates for next’s year’s EU parliamentary elections.

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The only thing that counts is the energy that isn’t used.

Solar And Wind Really Do Increase Electricity Prices (F.)

In my last column I discussed an apparent paradox: why, if solar panels and wind turbines are so cheap, do they appear to be making electricity so expensive? One big reason seems to be their inherently unreliable nature, which requires expensive additions to the electrical grid in the form of natural gas plants, hydro-electric dams, batteries, or some other form of stand-by power. Several readers kindly pointed out that I had failed to mention a huge cost of adding renewables: new transmission lines. Transmission is much more expensive for solar and wind than other plants. This is true around the world — for physical reasons. Think of it this way. It would take 18 of California’s Ivanpah solar farms to produce the same amount of electricity that comes from our Diablo Canyon nuclear plant.

And where just one set of transmission lines are required to bring power from Diablo Canyon, 18 separate transmission lineswould be required to bring power from solar farms like Ivanpha. Moreover, these transmission lines are in most cases longer. That’s because our solar farms are far away in the desert, where it is sunny and land is cheap. By contrast, Diablo Canyon and San Onofre nuclear plants are on the coast right near where most Californians live. (The same is true for wind.) New transmission lines can make electricity cheaper, but not when they are used only part of the time and duplicate rather than replace current equipment. Other readers pointed to cases that appear to challenge the claim that increased solar and wind deployments increase electricity prices.

[..] What is most remarkable about U.S. states heavy in solar and wind is that electricity prices rose so much given the huge decline in natural gas prices. Had natural gas prices not plummeted at what was almost the exact same time as the beginning of the large-scale build-out of solar and wind in the United States, price increases in solar and wind heavy states would have been far larger. Around the world, from Germany and Denmark to Spain and South Australia, even modest penetrations of solar and wind, compared to what advocates claim we will need to decarbonize, lead to large price increases.

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It’s a step alright. But it’s far from total.

EU Member States To Vote On Near-Total Neonicotinoids Ban (BBC)

Member states will vote on Friday on an almost complete ban on the use of neonicotinoid insecticides across the EU. Scientific studies have linked their use to the decline of honeybees, wild bees and other pollinators. The move would represent a major extension of existing restrictions, in place since 2013. Manufacturers and some farming groups are opposed, saying the science remains uncertain. Neonicotinoids are the most widely used class of insecticides in the world, but concerns about their impact on bees have been reinforced by multiple research efforts, including so-called “real world” trial results published last year. Back in 2013 the European Union opted for a partial ban on the use of the three chemicals in this class: Imidacloprid, clothianidin and thiamethoxam.

The restrictions applied to crops including maize, wheat, barley, oats and oil seed rape. The new Commission proposal would go much further, meaning that almost all outdoor uses of the chemicals would be banned. The action has been driven by a recent report from the European Food Safety Authority (Efsa), which found that neonicotinoids posed a threat to many species of bees, no matter where or how they are used in the outdoor environment. Another key element that has pushed the Commission to hold a vote has been the UK’s change of heart on the use of these insecticides. Environment Secretary Michael Gove announced last November that the UK would now support further restrictions. “I think it has helped the dynamic,” Franziska Achterberg from Greenpeace told BBC News.

“It has helped sway Ireland definitely, and then lately, the Germans, the Austrians and the Dutch. I think the fact the UK had come around was a good signal for them as well, that they could not stay behind.” During the partial ban, some countries including the UK were given permission to use neonicotinoids for short periods. However, the EU Commission is now signalling that it is seemingly intent on pushing the proposal through as it stands. “Several countries have said they want exemptions on sugar beet for example,” said Sandra Bell from Friends of the Earth (FOE). “So far the Commission have been very strong on this, because they say the Efsa evidence backs the extension of the ban to sugar beet and therefore they are following the science and won’t put in an exemption for a compromise.”

Growers will be free to use neonicotinoids in greenhouses across the EU, despite some environmental groups having reservations about the chemicals leaching into water supplies. Other neonicotinoids including thiacloprid and sulfoxaflor will continue to be exempt from the ban.

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Mar 282018
 
 March 28, 2018  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , , , , ,  


Edvard Munch Spring in Johan Karl Street 1944

 

Steen Jakobsen Fears 30% Market Correction With Consumer ‘Maxed Out’ (CNBC)
China Says Kim Jong Un Agrees To Denuclearize Korean Peninsula (R.)
All The Personal Data That Facebook/Google Collect (Curran)
Mark Zuckerberg Agrees To Testify Before Congress Over Data Scandal (G.)
37 State Attorneys General Demand Answers From Zuckerberg (ZH)
Zuckerberg’s Refusal To Testify Before UK MPs ‘Absolutely Astonishing’ (G.)
Jimmy Carter: Trump Hiring Bolton ‘A Disaster For Our Country’ (USAT)
Brexit Referendum Won Through Fraud – Whistleblower (G.)
Austria Draws Scorn for Sitting Out Russian Diplomat Expulsions (BBG)
160 Countries Want To See Proof In Skripal Case – Russia’s UK Embassy (RT)
Tesla Just Months From A Total Collapse – Hedge Fund (MW)
The Missing Economic Measure: Wealth, not GDP (OWiD)

 

 

Goldilocks and Frankenstein.

Steen Jakobsen Fears 30% Market Correction With Consumer ‘Maxed Out’ (CNBC)

Stock markets could see a hefty fall in the coming months due to a slew of trends that point to a downturn in the global economy, one economist told CNBC. Steen Jakobsen, the often-bearish chief economist at Danish investment house Saxo Bank, cited several factors including growing credit loans, a widening fiscal deficit in the U.S., doubts over infrastructure spending plans and a potential trade war. “All the data we’ve seen over the last few weeks has basically been that the consumer is maxed out, we’ve seen that in credit card loans as well, so I think the consumer is done spending the money,” he told CNBC Tuesday. New data Tuesday showed that U.S. consumer confidence declined in March, falling below expectations and breaking a two month streak of gains.

“I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest,” he said. He added that in a scenario of a potential sudden economic recession, he sees a possible market correction of between 25 and 30%. Jakobsen highlighted a “Goldilocks” scenario that he feels traders are mistakenly pricing in to markets, where fresh economic data are either not too hot or not too cold. Overall, the global economy is currently experiencing lower levels of unemployment and higher growth. Looking at 2018 in particular, many analysts hoped for strong global growth on the back of higher inflation and higher investment, but according to Jakobsen, these drivers “aren’t actually materializing.”

Instead, Jakobsen made a reference to the novel “Frankenstein,” arguing that the economy had been skewed by central bankers, who have injected trillions of dollars into the global economy to boost growth and investment. The first quarter of 2018 “started at more than 5% expected GDP; we are now significantly less than 2% for the (first quarter) expected, so I don’t really see things happening in the growth area,” Jacobsen added. “We’ve been at 2% exactly since the financial crisis, I don’t think we’re going to deviate from that,” he said.

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Again, he says it’s what his father and grandfather wanted. Perfect way to save face.

China Says Kim Jong Un Agrees To Denuclearize Korean Peninsula (R.)

China said on Wednesday it won a pledge from North Korean leader Kim Jong Un to denuclearize the Korean peninsula during a meeting with President Xi Jinping, who pledged in return that China would uphold its friendship with its isolated neighbor. After two days of speculation, China announced on Wednesday that Kim had visited Beijing and met Xi during what the official Xinhua news agency called an unofficial visit from Sunday to Wednesday. The trip was Kim’s first known journey abroad since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the United States.

Beijing has traditionally been the closest ally of secretive North Korea, but ties have been frayed by North Korea’s pursuit of nuclear weapons and China’s backing of tough U.N. sanctions in response. Xinhua cited Kim as telling Xi that the situation on the Korean peninsula is starting to improve because North Korea has taken the initiative to ease tensions and put forward proposals for peace talks. “It is our consistent stand to be committed to denuclearisation on the peninsula, in accordance with the will of late President Kim Il Sung and late General Secretary Kim Jong Il,” Kim Jong Un said, according to Xinhua. North Korea is willing to talk with the United States and hold a summit between the two countries, he said.

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Zero Hedge with the entire Twitter thread by Dylan Curran. Does that wake you up?

All The Personal Data That Facebook/Google Collect (Curran)

The Cambridge Analytica scandal was never really about Cambridge Analytica. As we’ve pointed out, neither Facebook nor Cambridge Analytica have been accused of doing anything explicitly illegal (though one could be forgiven for believing they had, based on the number of lawsuits and official investigations that have been announced). Instead, the backlash to these revelations – which has been justifiably focused on Facebook – is so severe because the public has been forced to confront for the first time something that many had previously written off as an immutable certainty: That Facebook, Google and the rest of the tech behemoths store reams of personal data, essentially logging everything we do.

In response to demands for more transparency surrounding user data, Facebook and Google are offering users the option to view all of the metadata that Google and Facebook collect. And as Twitter user Dylan Curran pointed out in a comprehensive twitter thread examining his own data cache, the extent and bulk of the data collected and sorted by both companies is staggering. Google, Curran said, collected 5.5 gigabytes of data on him – equivalent to some 3 million Microsoft Word documents. Facebook, meanwhile, collected only 600 megabytes – equivalent to roughly 400,000 documents.

Another shocking revelation made by Curran: Even after deleting data like search history and revoking permissions for Google and Facebook applications, Curran still found a comprehensive log of his documents and other files stored on Google drive, his search history, chat logs and other sensitive data about his movements that he had expressly deleted. What’s worse, everything shown is the data cache of one individual. Just imagine how much data these companies hold in total.

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By now, shareholders may be his prime concern. Congress won’t hurt the CIA’s interests.

Mark Zuckerberg Agrees To Testify Before Congress Over Data Scandal (G.)

Facebook’s chief executive, Mark Zuckerberg, has agreed to testify before the United States Congress in the wake of a that has sent the company’s share price tumbling and prompted numerous investigations and lawsuits. Zuckerberg has accepted an invitation to testify before the House energy and commerce committee, according to an aide familiar with the discussions. A date has not yet been set, and the spokesperson for the House committee declined to confirm reports that the hearing was scheduled for 12 April. The Senate judiciary and commerce committees have also invited Zuckerberg to appear at hearings.

His decision to testify before the US Congress was first reported by CNN, and contrasts with his refusal to appear before members of parliament in the UK. The chair of a British committee of MPs on Tuesday said Zuckerberg’s decision to send other executives to the UK to answer questions on his behalf was “absolutely astonishing”. However, news of US congressional evidence paves the way for a major showdown for Zuckerberg, 33, who has come under increasing pressure from lawmakers and the general public to account for Facebook’s business practices since the company acknowledged last September that it had sold advertisements to Russian agents seeking to influence the US presidential election.

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Facebook took 30% of the loot. They sold their data perhaps thousands of times.

37 State Attorneys General Demand Answers From Zuckerberg (ZH)

37 “profoundly concerned” U.S. state and territory attorneys general fired off a letter to Facebook CEO Mark Zuckerberg on Monday, demanding answers over reports that personal user information from Facebook profiles was provided to third parties without the users’ knowledge or consent. “Most recently, we have learned from news reports that the business practices within the social media world have evolved to give multiple software developers access to personal information of Facebook users. These reports raise serious questions regarding consumer privacy”

The letter notes the 50 million Facebook profiles which may have been “misused and misappropriated by third-party software developers,” noting that Facebook “took as much as 30%” of payments made through applications used by Facebook users. “According to these reports, Facebook’s previous policies allowed developers to access the personal data of “friends” of people who used applications on the platform, without the knowledge or express consent of those “friends.” It has also been reported that while providing other developers access to personal Facebook user data, Facebook took as much as 30% of payments made through the developers’ applications by Facebook users.”

In other words – while a Facebook user may have agreed in the fine print to allowing the social media giant to hoover up their information – their “friends” did not. “These revelations raise many serious questions concerning Facebook’s policies and practices” reads the letter, which asks “were those terms of service clear and understandable, or buried in boilerplate where few users would even read them?”

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He’s just not that into you. Why talk to “the UK parliamentary committee investigating fake news” when he’s already agreed to speak to Congress?

Zuckerberg’s Refusal To Testify Before UK MPs ‘Absolutely Astonishing’ (G.)

Mark Zuckerberg has come under intense criticism from the UK parliamentary committee investigating fake news after the head of Facebook refused an invitation to testify in front of MPs for a third time. The chair, Damian Collins, said it had become more urgent the Facebook founder give evidence in person after oral evidence provided by the Cambridge Analytica whistleblower, Christopher Wylie. The MP said: “I think, given the extraordinary evidence we’ve heard so far today, it is absolutely astonishing that Mark Zuckerberg is not prepared to submit himself to questioning in front of a parliamentary or congressional hearing, given these are questions of fundamental importance and concern to his users, as well as to this inquiry.

“I would certainly urge him to think again if he has any care for people that use his company’s services.” Zuckerberg has been invited three times to speak to the committee, which is investigating the effects of fake news on UK democracy, but has always sent deputies to testify in his stead. MPs are likely to take a still dimmer view of his decision after he ultimately agreed to testify before Congress in the US. It was reported on Tuesday that the company is now considering strategy for his testimony. When the Commons committee travelled to Washington DC in February to obtain oral evidence from US companies, Facebook flew over its UK policy director rather than send a high-level executive to speak to the committee.

In response to the latest request, Facebook has suggested one of two executives could speak to parliament: Chris Cox, the company’ chief product officer, who is in charge of the Facebook news feed, or Mike Schroepfer, the chief technology officer, who heads up the developer platform. However, Theresa May declined to back Collins. Pressed by the committee chairman at the Commons liaison committee later in the day, the prime minister said “Mr Zuckerberg will decide for himself” whether to give evidence to parliament.

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The US has one sane person left. And he’s 93. Not that he’s the only one denouncing Bolton. But none of the rest do that nearly loud enough.

Jimmy Carter: Trump Hiring Bolton ‘A Disaster For Our Country’ (USAT)

Former president Jimmy Carter, one of the few U.S. officials who has traveled to North Korea and met with its leaders, expresses hope for the planned White House summit with Pyongyang but warns that President Trump may have made “one of the worst mistakes” of his tenure by naming John Bolton to the sensitive post of national security adviser. In an exclusive interview with USA TODAY, pegged to the publication of his new book titled Faith, Carter calls Bolton “a warlike figure” who backs policies the former president calls catastrophic. “Maybe one of the worst mistakes that President Trump has made since he’s been in office is his employment of John Bolton, who has been advocating a war with North Korea for a long time and even an attack on Iran, and who has been one of the leading figures on orchestrating the decision to invade Iraq,” Carter said. He called the appointment, announced last week, “a disaster for our country.”

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Perfect for Tony Blair et al. Maybe too perfect. Who cares about this guy’s views? Stick to the facts, please.

Brexit Referendum Won Through Fraud – Whistleblower (G.)

The EU referendum was won through fraud, the whistleblower Christopher Wylie has told MPs, accusing Vote Leave of improperly channelling money through a tech firm with links to Cambridge Analytica. Wylie told a select committee that the pro-Brexit campaign had a “common plan” to use the network of companies to get around election spending laws and said he thought there “could have been a different outcome had there not been, in my view, cheating”. “It makes me so angry, because a lot of people supported leave because they believe in the application of British law and British sovereignty. And to irrevocably alter the constitutional settlement of this country on fraud is a mutilation of the constitutional settlement of this country.”

Vote Leave has repeatedly denied allegations of collusion or deliberate overspending. When they , Boris Johnson, who fronted the campaign, said: “Vote Leave won fair and square – and legally. We are leaving the EU in a year and going global.” Wylie, who used to work for Cambridge Analytica, gave evidence in a nearly four-hour session before the digital, culture, media and sport select committee. He made a string of remarkable claims about Brexit and Cambridge Analytica, including that his predecessor, Dan Mursean, died mysteriously in a Kenyan hotel room in 2012 after a contract in the company turned sour. Wylie said it was striking that Vote Leave and three other pro-Brexit groups – ; Veterans for Britain, and Northern Ireland’s Democratic Unionist party – all used the services of the little-known firm Aggregate IQ (AIQ) to help target voters online.

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And Greece, Cyprus, Portugal, Bulgaria, Cyprus, Slovakia, Slovenia, Malta and Luxembourg. Belgium?!

Austria Draws Scorn for Sitting Out Russian Diplomat Expulsions (BBG)

Austria is drawing criticism from parts of the European Union for saying it couldn’t expel Russian diplomats on account of its neutrality. Chancellor Sebastian Kurz’s government, which includes nationalists that cooperate with Vladimir Putin’s party, declined to join the tough international response to a nerve-agent attack on a former Russian spy in England. Austria is a “builder of bridges between East and West” and wants to “keep channels open” to Moscow, it said. That position is “hardly compatible with EU membership” and there’s “a big difference between being part of the West and being a bridge between the West and the East,” former Swedish Foreign Minister Carl Bildt said Tuesday on Twitter.

Artis Pabriks, a former Latvian foreign minister who’s a member of the European Parliament, called Austria’s decision a “bad joke.” He asked: “Which other EU policies/decisions Kurz does not apply to Austria?” Kurz, whose People’s Party is part of the same political family as the parties of Bildt and Pabriks, said Monday that Austria backs the EU’s decision to pull its ambassador to Russia. In declining to take further measures, his government cited Austria’s neutrality, which the country adopted as a condition for ending its post-World War II occupation by the U.S., the Soviet Union, the U.K. and France in 1955.

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7 billion people do, too.

160 Countries Want To See Proof In Skripal Case – Russia’s UK Embassy (RT)

Scores of non-Western countries refuse to take the UK’s assertion that Russia was behind the incident in Salisbury at face value, demanding it present the evidence, Moscow’s embassy in London said. Some 160 states share that view. While many in the Western world, save several notable exceptions, united behind the UK as it accused Russia of poisoning the former spy with a military-grade toxic agent, many more countries have not been persuaded by the fiery rhetoric of British PM Theresa May, the spokesperson for Russia’s British embassy told Sputnik.

“Even if Mrs. May said that she was absolutely sure that Russia was responsible for the incident in Salisbury, she would have to present all evidence to Russia, the international community and the British public. This is the opinion of almost 160 countries which are not members of the Western bloc,” he said. “It is obvious that no one in the wider world would take British words for granted.” On Monday, following the lead of the UK, the US, 18 EU states and other European countries, Canada and Australia announced they would expel a number of Russian diplomats in solidarity with the UK. Washington alone ordered the expulsion of 60 diplomats, including 12 at the Russian mission to the UN, alleging they were covert intelligence operatives.

What became the largest collective expulsion of Russian diplomats in history was denounced by Moscow as an extremely unfriendly and unwarranted step. Still, there were voices in the West that refused to side with London until the evidence is laid out. Austria as well as Switzerland, both stressing their neutral country status, refused to follow suit. Cyprus, Portugal, Bulgaria, Cyprus, Slovakia, Slovenia, Malta and Luxembourg did not jump on the expulsion bandwagon either.

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Magic Muskroom.

Tesla Just Months From A Total Collapse – Hedge Fund (MW)

Unless Elon Musk “pulls a rabbit out of his hat,” Tesla will be bankrupt within four months, says John Thompson of Vilas Capital Management. “Companies eventually have to make a profit, and I don’t ever see that happening here,” he told MarketWatch. “This is one of the worst income statements I’ve ever seen and between the story and the financials, the financials will win out in this case.” Thompson manages $25 million and his Tesla short is the fund’s biggest position. To be fair, he’s been betting big against Tesla for years, which, of course, means he’s endured some brutal stretches. Last April, for instance, the stock hit a record high around the $300 mark, and Musk was right there to troll the Tesla bears.

From that point, the stock continued to break new ground, eventually topping out at $389.61. But despite Tesla’s strong performance in 2017, Thompson’s fund still managed to churn out a 65% gain for the year. Now, Tesla’s back to where it was when Musk fired off his “Shortville” tweet, and Thompson is confident his bet is about to pay off nicely. In fact, Thompson says if his prediction comes true, his fund could surge by another 50%. With that in mind, he says he’s investing $500,000 of his own money. “Tesla, without any doubt, is on the verge of bankruptcy,” he told clients in an email over the weekend.

He explained that funding will be hard to come by in the face of problems in delivering the Model 3, declining demand for the Model S and X, extreme valuation and a likely downgrade of its credit rating by Moody’s from B- to CCC. “As a reality check, Tesla is worth twice as much as Ford [estimate of the enterprise value of both companies], yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss,” Thompson said. “Further, Ford has $12 billion in cash held for ‘a rainy day’ while Tesla will likely run out of money in the next 3 months. I’ve never seen anything so absurd in my career.”

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Flows vs stocks. GDP is attractive if you want to make money with destruction.

The Missing Economic Measure: Wealth, not GDP (OWiD)

So, what is GDP? GDP is a measure of economic activity – in terms of market-based gross output – in a given period (often a year). This is of course useful in many ways. GDP growth, when captured accurately, has the potential to tell us about the pace of change and rising levels of consumption. Equally, a cessation of GDP growth can serve as an important red flag: stalling enterprises and increases in unemployed workers tend to imply hardship and losses in welfare. However, there are important changes that GDP does not shed light on, and indeed might give us incorrect signals about. Think about climate change, a critical issue that has been increasingly under the international spotlight. An economy can increase its CO2 emissions and drive up local pollutants – both clearly harmful to the long-term wellbeing of the population – while being rewarded with rising GDP figures.

Similarly, a natural disaster might harm people, destroy infrastructure, and require expensive emergency measures – yet thanks to a rise in spending, this too would temporarily register as an increase in GDP. On the flip side, beneficial endeavors such as attempting to stall the alarming rate of biodiversity loss or deforestation not only fail to register in our headline statistic; they might slow its growth. This is where wealth accounting comes in. Rather than measuring flows, as GDP does, wealth is an indicator of an economy’s underlying capital stocks. Wealth, if measured in detail, accounts for the assets such as natural capital, produced capital, and human capital that underpin growth and consumption possibilities, and in this way shows us viable development pathways.

In the event of a natural disaster or rising pollution, for example, while GDP might grow, wealth measures would alert us to the depletion of underlying physical and natural capital stocks and the need for targeted investment. A detailed enough balance sheet would thus theoretically allow for the sustainable management of an economy’s productive capital. Therefore, while GDP has little to say about whether a nation’s assets can sustain current consumption levels into the future, wealth measures can tell us exactly this. The relationship between wealth and GDP is analogous to company accounts: the balance sheet of a company describes the stock of useful assets owned by a company (akin to wealth), while the profit and loss statement describes the flows of revenue, costs, and net income that the company has been able to generate using those assets (akin to GDP).

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


Ernest R. Ashton Evening near the Pyramids 1898

 

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

 

 

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

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

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

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

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

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

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

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

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

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Zero interest rates?!

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

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

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

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

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

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

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

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

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

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

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

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

65% of Americans Save Little or Nothing (CNBC)

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

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

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

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How strong will this make the dollar?

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

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

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

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

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

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A few economies that have not done well.

Rising US Interest Rates May Damage Gulf Economies (MEE)

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

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

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

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That’s quite the statement.

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

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

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

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

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

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

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Yeah, Shinzo, the Russians did it.

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

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

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

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

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

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A different kind of protectionism.

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

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

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

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

Canadian Household Debt Hits Record $1.8 Trillion (CP)

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

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

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From Merkel’s own camp.

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

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

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

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Waterwars in waterworld.

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

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

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

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

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Mar 122018
 
 March 12, 2018  Posted by at 10:17 am Finance Tagged with: , , , , , , , , , , ,  


Lewis Wickes Hine Labourer on connector, Empire State Building, New York 1930-31

 

On The Bull Market’s Ninth Birthday (CNBC)
‘No Response’ Yet From North Korea On Trump Talks (BBC)
Kim Jong Un Wants a Peace Treaty From Trump (BBG)
China Banking Crisis Warning Signal Still Flashing – BIS (BBG)
Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)
Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)
Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)
Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)
London Property Prices Fall 15% (G.)
European Commissioner Tusk Double-Crossed Poland (GEFIRA)
Half Of US Arms Exports Go To The Middle East (G.)
Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)
America’s Troll Farm Media (CP)
Winston Churchill, Mass Murderer (WaPo)

 

 

John Rubino’s comment: “Emigrate while you still can..”

On The Bull Market’s Ninth Birthday (CNBC)

The bullish run in the Dow Jones industrial average — which celebrates its ninth birthday Friday — is the longest ever and the greatest percentage gain since World War II, according to Leuthold Group. The corresponding run by the S&P 500, notes LPL Financial, is that benchmark’s second-largest and second-longest bull market ever, with only the 1990s stock market run led by technology stocks in the way. Despite a more than 10% correction in equities last month following a burst of bullish activity, Leuthold’s Doug Ramsey doesn’t think the bull is done yet. “Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Ramsey, his firm’s chief investment officer.

“Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.” The Dow hit an all-time high of 26,616.71 on Jan. 26, the same day the S&P 500 clinched its own record of 2,872.87. The major indexes are off their record highs 6.4% and 4.6% respectively. This chart from Leuthold Group shows where the Dow bull market stacks up since 1900. It’s far and away the longest in modern financial times. In terms of percentage gains, it’s third behind two bull markets pre-WWII.

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I’d guess Kim didn’t expect the answer he got, as fast as he got it, and now isn’t quite sure what to say.

‘No Response’ Yet From North Korea On Trump Talks (BBC)

South Korea says it has not received a response from Pyongyang on a summit between North Korean leader Kim Jong-un and US President Donald Trump. In a surprise development, Mr Trump on Friday accepted North Korea’s invitation to direct talks. South Korean officials said Mr Kim was prepared to give up his nuclear weapons. Details on the planned talks remain vague, with no agreement yet on the location or agenda. Analysts are sceptical about what can be achieved through talks given the complexity of the issues involved. “We have not seen nor received an official response from the North Korean regime regarding the North Korea-US summit,” a spokesman for the South Korean Ministry of Unification said on Monday. “I feel they’re approaching this matter with caution and they need time to organise their stance.” South Korean officials who spoke to Trump are now on the way to China and Japan to brief the leaders of each country on the upcoming talks.

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He’s telling his people that’s what his father wanted. They also want to reunite with the south.

Kim Jong Un Wants a Peace Treaty From Trump (BBG)

Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime. Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided. Koh Yu-hwan, who teaches North Korean studies at Dongguk University in Seoul, said the regime has long sought a peace treaty to end the more than 60-year-old ceasefire between the two sides and help guarantee its safety.

“There were agreements between the U.S. and North Korea to open up discussion on a peace treaty, but they never materialized,” Koh said, saying the conditions were key. “The U.S. wants a peace treaty at the end of the denuclearization process, while for the North, it’s the precondition for its denuclearization.” Signing a peace treaty would require addressing issues regarding the U.S. military’s presence in South Korea and its transfer of wartime operational control to South Korea and United Nations forces in South Korea, Koh said.

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China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to BIS

China Banking Crisis Warning Signal Still Flashing – BIS (BBG)

China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements. Canada – whose economy grew last year at the fastest pace since 2011 – was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study. “The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday. The study offered some surprising results: for example, Italy wasn’t shown as being at risk, despite its struggles with a slow-growing economy and banks that are mired in bad debts.

While China was flagged, a key warning indicator known as the credit-to-gross domestic product “gap” showed an improvement, said the BIS, known as the central bank for central banks. This may suggest the government is making progress in its push to reduce financial-sector risk. The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming. In China, the gap fell to 16.7% in the third quarter of 2017, down from a peak of 28.9% in March 2016 and the lowest since 2012, the study showed.

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How does Xi tell his people he doesn’t have their backs? Oh well, he’s president for life.

Don’t Count On Beijing To Resolve Fallout From Any Debt Blowup (CNBC)

The belief in an “implicit guarantee” from the Chinese government on debt is a big problem, said a finance professor on Monday. “I’m concerned with what a lot of people believe, [that] the government is going to take care of investment losses. Under that impression, they are going to take up lot of leverage because they believe they will be bailed out if something does not work out,” said Zhu Ning, a professor of finance at Tsinghua University in Beijing. China has been battling high debt levels for years, but debt-to-GDP ratio is still about 260%, according to the Bank of International Settlements. While that absolute number is not alarming in itself, it is eyebrow-raising for the speed in rising to such levels, particularly in the last five years, Zhu said.

Since China’s economy is far bigger than two decades ago, the country has the size and resilience to overcome issues in the financial system, but Beijing is concerned about systemic risks that may roil the world’s second-largest economy. The key to solving any potential fallout from the ballooning debt is to remove the perception that Beijing will help solve any problems from a debt blowup, said Zhu. “This is a mentality that has taken decades to form so the government would have to do something aggressive and persistent to gradually remove this sense of implicit guarantee,” Zhu said. The Chinese government has been coming down hard on reining in systemic risks, using strong-arm tactics such as the recent state takeover of Anbang Insurance, which was aggressively expanding internationally.

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There’s the shadow banks again.

Asia’s Big Developers ‘More Vulnerable’ to Shocks – BIS (BBG)

Asia’s big developers are “more vulnerable” to shocks after their profitability waned from the boom years at the start of the decade, the Bank for International Settlements warned. The “sector’s deteriorating fundamentals give reason for concern,” said the Basel, Switzerland-based institution, which watches over global financial stability. Many firms’ returns on assets are below their costs of debt, the BIS said in a quarterly review, citing a study of developers in China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.

Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said. While easy money drove property booms worldwide after the global financial crisis, the BIS argues a tightening in the years ahead could force developers to sell off inventory – driving down prices – and lay off workers.

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“Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka..”

Japan PM Shinzo Abe’s Political Future On Cronyism Scandal (G.)

A spiralling cronyism scandal linked to the Japanese prime minister and his wife has reached fever pitch after the finance ministry admitted to tampering with records to remove references to the first lady. Shinzo Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a right-wing school operator in Osaka. The finance ministry admitted on Monday that it had altered official documents surrounding the decision to provide an 85% discount on the appraised value of the land. One document originally quoted the educational group Moritomo Gakuen as saying that Abe’s wife Akie had recommended the primary school project “move forward because it is a good plot of land”. However, this was removed in a version submitted to lawmakers investigating the sale. Kyodo News reported that the submitted papers also omitted an article in which Akie described being “moved to tears by the school’s education policy”.

Moritomo Gakuen’s existing kindergarten attracted attention for requiring its young pupils to bow before portraits of the imperial family, sing the national anthem daily, and learn the 1890 imperial rescript on education, which emphasises sacrifice for country. Akie was set to serve as honorary principal for the new primary school, but stepped down in February last year when questions were raised over the land deal. The government has previously denied claims that the first lady gave the school operator an envelope containing 1m yen (£6,775) on behalf of the prime minister during a visit she made to the existing kindergarten. The controversy fuelled a steep decline in Abe’s popularity last year but heappeared to ride out the scandal and won a snap lower house election in October. However, the forgery revelations have intensified political pressure on Abe and his long-serving finance minister, Taro Aso.

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Excellent piece by Nomi, which has two topics: Gary Cohn and steel tariffs. The latter a bit much on short term effects, but good read.

Trade Wars, Diminished Credibility and Gary Cohn (Nomi Prins)

[..] my former boss from my Goldman Sachs days—Gary Cohn—just resigned from his White House post as chief economic adviser to the Chaos Producer in Chief. This was ostensibly in protest against the president’s announcement about imposing steel and aluminum tariffs. The next day, Trump signed the order sealing that deal, citing his actions as a “matter of necessity for our security.” Along the way, he said there would be no exemptions to the tariffs, then said there would be—for Canada and Mexico. Trump glowed in the light of his new-found power grab over trade agreements, leaving himself room to decide which countries would be “in” and “out” with respect to these and other tariffs in the future. And that was the week that was in Trump World.

The timing of Cohn’s departure certainly put a wrench in his plans to convene executives dependent on steel and present their case against steel tariffs to Trump. Instead, Trump signed the tariffs order flanked by steel and aluminum workers supporting it. Speaking of steel, Cohn’s nerves were seemingly made of that metal. At Goldman, he was the man who regularly waded through deals without losing his cool (unlike Trump). On 9/11, I witnessed him directing traders to keep trading oil as shreds of debris and billows of smoke engulfed the windows of the Goldman trading floor, only a few blocks away from the World Trade Center. He became president (or number two) at Goldman, continually handling the less “cool” behavior of chairman and CEO Lloyd Blankfein, who remained above him in the pecking order for decades.

Cohn commanded daily activities at Goldman that led to the firm’s creation of shady financial instruments that were later at the core of the financial crisis. Under Cohn, Goldman was bailed out by U.S. taxpayers. The firm morphed, for government subsidy purposes, into a bank holding company, though it handled scant deposits from regular people. It did this to retain access to Federal Reserve support, as it has done, over the past decade. Cohn was also at Goldman when it reached a $5 billion settlement with the Department of Justice over its consistent misconduct regarding mortgage-related securities from 2005 to 2007. That type of conflict-meets-crisis readied him for his government service. When Cohn came up against Trump, the president’s flavor-of-the-minute trade policy hawk, Peter Navarro, met “Globalist Gary” head on. Then Cohn’s Trump administration career was over.

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Just peeping over the edge for now.

London Property Prices Fall 15% (G.)

House prices in parts of London that were once at the epicentre of the UK property boom have fallen as much as 15% over the past year in fresh evidence of the impact of the EU referendum. Figures from Your Move, one of the UK’s biggest estate agency chains, reveal that the average home in Wandsworth – which includes much of Clapham, Balham and Putney – fell by more than £100,000 in value over the last 12 months. But property prices have surged in the north-west of England, with Blackburn recording the highest growth rates in the UK. Homes in the London borough of Wandsworth were fetching an average of £805,000 in January 2017 but this has now fallen to £685,000.

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Selling out his country and Putin bashing. That’s Tusk. That’s how he got his EU job.

European Commissioner Tusk Double-Crossed Poland (GEFIRA)

The current President of the EU Council has a good reputation in the EU circles, but not in Poland: he had to flee from his home country to Brussels, completely compromised. After all, his government was a catastrophe: mass emigration of young Poles, tampering with the coffers of future pensioners, corruption and benefit scandals, the Amber Gold affair, the all-pervasive nepotism in his Civic Platform (PO) party, numerous sins of omission crowned by Nord Stream. Young unemployed people can light the torch of a revolution. If you want to secure your position in politics, you leave salaries low and open the borders. The discontented young unemployed emigrate and only those who have less motivation to take to the streets remain. In 2005 Donald Tusk made this trick, this intervention on his nation. He threw Poland into the arms of the EU: since then the population has fallen significantly due to the emigration of many young Poles.

Nigel Farage aptly commented on this when he turned to Tusk in the European Parliament: “Your debate is about emigration, and time and again you’ve promised the Polish voters that young poles would return to Poland, and at the same time Mr Cameron has promised the British people that fewer Poles would come to us. Well, it turns out that you’ve both been wrong and your country has been depopulated by 2 million people since you joined the European Union and the reason is obvious: it’s money, isn’t it? And you yourself prove the point. You are the newest Polish emigre and you’ve gone from a salary of 6,000 euros a year to a salary of 30,000 euros a year. So congratulations! You’ve hit the EU jackpot!”

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A picture of the world’s sickest people. Many of them are in your governments.

Half Of US Arms Exports Go To The Middle East (G.)

Nearly half of US arms exports over the past five years have gone to the war-stricken Middle East, with Saudi Arabia consolidating its place as the world’s second biggest importer, a report has shown. The Stockholm International Peace Research Institute (Sipri) said on Monday that global transfer of major weapons systems between 2013 and 2017 rose by 10% compared with the five-year period before that, in a continuation of an upward trend that began two decades ago. The US, which is the world’s biggest exporter, increased its sales between those two periods by 25%. It supplied arms to as many as 98 states worldwide, accounting for more than a third of global exports. Russia, the world’s second biggest exporter, saw a decrease of 7.1% in its overall volume of arms exports; US exports were 58% higher than those of Russia. France, Germany and China were also among the top five exporters. The UK is the sixth biggest weapons exporter.

“Based on deals signed during the Obama administration, US arms deliveries in 2013–17 reached their highest level since the late 1990s,” said Dr Aude Fleurant, the director of the Sipri’s arms and military expenditure programme. “These deals and further major contracts signed in 2017 will ensure that the USA remains the largest arms exporter in the coming years.” The Middle East, a region where in the past five years most countries have been involved in conflict, accounted for 32% of global imports of weapons. Arms imports to the region doubled between 2013 and 2017 and in the five-year period before that. The US, the UK, and France were the main supplier of arms to the region, while Saudi Arabia, Egypt and the UAE were the main recipient countries.

The UK, which rolled out a red carpet for the Saudi crown prince on his visit to London last week, exported nearly half of its arms to the Saudi Arabia, which has increased its imports by 225%. Sipri’s report noted that Saudi Arabia uses its imported weapons in large-scale combat operations, particularly in Yemen. The Saudi-led military intervention in Yemen, which has cost hundreds of civilian lives, was launched in 2015, aiming to counter the advances of Iran-backed Houthi rebels controlling the capital, Sana’a. Saudi Arabia’s shopping list included 78 combat aircraft, 72 combat helicopters and 328 tanks. “Widespread violent conflict in the Middle East and concerns about human rights have led to political debate in western Europe and North America about restricting arms sales,” said Pieter Wezeman, senior researcher at Sipri. Yet the USA and European states remain the main arms exporters to the region and supplied over 98% of weapons imported by Saudi Arabia.”

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How do you regulate global forces? That are part of secret intelligence services?

Tim Berners-Lee: Regulate Tech Firms To Prevent ‘Weaponised’ Web (G.)

Sir Tim Berners-Lee, inventor of the world wide web, has called for large technology firms to be regulated to prevent the web from being “weaponised at scale”. “In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data,” Berners-Lee wrote in an open letter marking the 29th anniversary of his invention. These problems have proliferated because of the concentration of power in the hands of a few platforms – including Facebook, Google, and Twitter – which “control which ideas and opinions are seen and shared”. “What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms,” said the 62-year-old British computer scientist.

These online gatekeepers can lock in their power by acquiring smaller rivals, buying up new innovations and hiring the industry’s top talent, making it harder for others to compete, he said. Google now accounts for about 87% of online searches worldwide. Facebook has more than 2.2 billion monthly active users – more than 20 times more than MySpace at its peak. Together, the two companies (including their subsidiaries Instagram and YouTube) slurp up more than 60% of digital advertising spend worldwide. Although the companies are aware of the problems and have made efforts to fix them – developing systems to tackle fake news, bots and influence operations – they have been built to “maximise profit more than maximise social good”. “A legal or regulatory framework that accounts for social objectives may help ease those tensions,” he said.

Aligning the incentives of the technology sector with those of users and society at large, he argued, will require consulting a diverse group of people from business, government, civil society, academia and the arts. Berners-Lee warned of “two myths” that “limit our collective imagination” when looking for solutions to the problems facing the web: “The myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points we need to be a little more creative,” he said. “I want the web to reflect our hopes and fulfil our dreams, rather than magnify our fears and deepen our divisions,” he said.

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Too many people still believe far too much of what they read and watch.

America’s Troll Farm Media (CP)

Despite all the smoke and mirrors, most Americans seem to see where the stenographers of corporate capitalism are taking us. A recent Gallup poll found that while 84% of Americans see media as “critical” or “very important” to democracy, only 28% see the corporatist mainstream news media (MSM) as actually supporting democracy. They’re right on both counts of course. The quality of a democracy is only as good as the information people have to make informed judgements about public policy and politicians. Even as the mainstream news media continue to lose street cred, they persist in a rumor-saturated full court press against the “Trump-Putin presidency,” which only further exposes their lack of professionalism and increasing vulgarity.

MSM management and their boardroom bosses have long understood that as long as they spice up their “nothing burger” news, ratings and advertising rates will keep them in business and please their commercial and government clients. Tabloid journalism, which can describe most American mainstream media these days, even when wrapped up as “all the news that’s fit to print,” is in constant search of sensation, scandal, gossip, and profit – and only occasionally in public-oriented investigative integrity. [..] 65% of Americans consider the so-called “free press” biased, obsessed with scandal, and full of “fake news” and therefore cannot be trusted. [..] trust in American institutions in general, that is, the government, business, NGOs, and the MSM, is going through the worst crisis in recorded history, according to the marketing firm Edelman in 2018.

[..] On January 27, 2018, the Washington Post editorial board issued this statement: “A foreign power interfered in the 2016 presidential election. U.S. law enforcement is trying to get to the bottom of that story. Congress should be doing everything possible to make sure the investigation can take place.” Obviously referring to Russia, the Post’s declaration, as the late investigative journalist Robert Parry and many other independent and respected writers have pointed out, was and remains without a shred of evidence. It’s WMD time all over again, only this time the propaganda is being trumpeted mainly by the Democrats. It would better serve the cause of democracy to investigate the Post for its covert coalition and collusion with the deep state and the Clinton (right) wing of the Democratic Party. The Post and the rest of their pack have constructed a wicked Russia foil in order to undermine Moscow’s presumed ally Trump and boost bigger Pentagon budgets.

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Britain is not strong on history. Surprising that this comes from the WaPo.

Winston Churchill, Mass Murderer (WaPo)

“History,” Winston Churchill said, “will be kind to me, for I intend to write it myself.” He needn’t have bothered. He was one of the great mass murderers of the 20th century, yet is the only one, unlike Hitler and Stalin, to have escaped historical odium in the West. He has been crowned with a Nobel Prize (for literature, no less), and now, an actor portraying him (Gary Oldman) has been awarded an Oscar. As Hollywood confirms, Churchill’s reputation (as what Harold Evans has called “the British Lionheart on the ramparts of civilization”) rests almost entirely on his stirring rhetoric and his talent for a fine phrase during World War II. “We shall not flag nor fail. We shall go on to the end. … We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets. … We shall never surrender.” (The revisionist British historian John Charmley dismissed this as “sublime nonsense.”)

Words, in the end, are all that Churchill admirers can point to. His actions are another matter altogether. During World War II, Churchill declared himself in favor of “terror bombing.” He wrote that he wanted “absolutely devastating, exterminating attacks by very heavy bombers.” Horrors such as the firebombing of Dresden were the result. In the fight for Irish independence, Churchill, in his capacity as secretary of state for war and air, was one of the few British officials in favor of bombing Irish protesters, suggesting in 1920 that airplanes should use “machine-gun fire or bombs” to scatter them. Dealing with unrest in Mesopotamia in 1921, as secretary of state for the colonies, Churchill acted as a war criminal: “I am strongly in favour of using poisoned gas against the uncivilised tribes; it would spread a lively terror.” He ordered large-scale bombing of Mesopotamia, with an entire village wiped out in 45 minutes.

In Afghanistan, Churchill declared that the Pashtuns “needed to recognise the superiority of [the British] race” and that “all who resist will be killed without quarter.” He wrote: “We proceeded systematically, village by village, and we destroyed the houses, filled up the wells, blew down the towers, cut down the great shady trees, burned the crops and broke the reservoirs in punitive devastation. … Every tribesman caught was speared or cut down at once.” In Kenya, Churchill either directed or was complicit in policies involving the forced relocation of local people from the fertile highlands to make way for white colonial settlers and the forcing of more than 150,000 people into concentration camps. Rape, castration, lit cigarettes on tender spots, and electric shocks were all used by the British authorities to torture Kenyans under Churchill’s rule.

But the principal victims of Winston Churchill were the Indians — “a beastly people with a beastly religion,” as he charmingly called them. He wanted to use chemical weapons in India but was shot down by his cabinet colleagues, whom he criticized for their “squeamishness,” declaring that “the objections of the India Office to the use of gas against natives are unreasonable.” [..] Thanks to Churchill, some 4 million Bengalis starved to death in a 1943 famine. Churchill ordered the diversion of food from starving Indian civilians to well-supplied British soldiers and even to top up European stockpiles in Greece and elsewhere. When reminded of the suffering of his Indian victims, his response was that the famine was their own fault, he said, for “breeding like rabbits.”

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