Oct 162018
 
 October 16, 2018  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , , ,  


M. C. Escher Doric columns 1945

 

Yemen On Brink Of ‘World’s Worst Famine In 100 Years’ (G.)
Humanity Is ‘Cutting Down The Tree Of Life’ (G.)
‘Hyperalarming’ Study Shows Massive Insect Loss (WaPo)
America’s Budget Deficit Jumps By 17% As Spending Surges (CNBC)
More Free Money: A Carry Trade in Liquidity (Mish)
Powell Has Lost His North Star, And The Fed Is Flying Blind (MW)
Facebook Paid £15.8 Million In UK Tax On £1.2 Billion In 2017 Revenues (BBC)
Ecuador To Assange: No Talking Politics, Pay Own Bills, Look After Cat (RT)
Brexit Deal Slipping To December Amid Deadlocked Talks (Ind.)
No-Deal Brexit Is ‘More Likely Than Ever Before’ – Tusk (Ind.)
Syria’s Chessboard (Hallinan)

 

 

As Stormy Daniels and Elizabeth Warren see their ‘cases’ blow up in their faces 3 weeks before the midterms, the best PR and legal teams that money can buy are framing a Khashoggi narrative nobody will be able to credibly deny. Or at least Erdogan is not showing his hand. But now that Pompeo’s in the region anyway, let’s put this on his agenda. 12 to 13 million at risk of starvation.

Yemen On Brink Of ‘World’s Worst Famine In 100 Years’ (G.)

Yemen could be facing the worst famine in 100 years if airstrikes by the Saudi-led coalition are not halted, the UN has warned. If war continues, famine could engulf the country in the next three months, with 12 to 13 million civilians at risk of starvation, according to Lise Grande, the agency’s humanitarian coordinator for Yemen. She told the BBC: “I think many of us felt as we went into the 21st century that it was unthinkable that we could see a famine like we saw in Ethiopia, that we saw in Bengal, that we saw in parts of the Soviet Union – that was just unacceptable. “Many of us had the confidence that would never happen again and yet the reality is that in Yemen that is precisely what we are looking at.”

Yemen has been in the grip of a bloody civil war for three years after Houthi rebels, backed by Iran, seized much of the country, including the capital, Sana’a. The Saudi-led coalition has been fighting the rebels since 2015 in support of the internationally recognised government. Thousands of civilians have been caught in the middle, trapped by minefields and barrages of mortars and airstrikes. The resulting humanitarian catastrophe has seen at least 10,000 people killed and millions displaced. Speaking on Sunday evening, Grande said: “There’s no question we should be ashamed, and we should, every day that we wake up, renew our commitment to do everything possible to help the people that are suffering and end the conflict.”

Read more …

And it’s not just people that we’re killing:

Humanity Is ‘Cutting Down The Tree Of Life’ (G.)

Humanity’s ongoing annihilation of wildlife is cutting down the tree of life, including the branch we are sitting on, according to a stark new analysis. More than 300 different mammal species have been eradicated by human activities. The new research calculates the total unique evolutionary history that has been lost as a result at a startling 2.5bn years. Furthermore, even if the destruction of wild areas, poaching and pollution were ended within 50 years and extinction rates fell back to natural levels, it would still take 5-7 million years for the natural world to recover. Many scientists think a sixth mass extinction of life on Earth has begun, propelled by human destruction of wildlife, and 83% of wild mammals have already gone.

The new work puts this in the context of the evolution and extinction of species that occurred for billions of years before modern humans arrived. “We are doing something that will last millions of years beyond us,” said Matt Davis at Aarhus University in Denmark, who led the new research. “It shows the severity of what we are in right now. We’re entering what could be an extinction on the scale of what killed the dinosaurs. “That is pretty scary. We are starting to cut down the whole tree [of life], including the branch we are sitting on right now.” Ecosystems around the world have already been significantly affected by the extermination of big animals such as mammoths, he said.

[..] Davis said each lost species had its own intrinsic value, but the loss of the most distinct creatures was most damaging: “Typically, if you have something that is off by itself, it does some job that no other species is doing.” The losses are already affecting ecosystems, he said, particularly the vanishing of “megafauna”. These huge creatures roamed much of Earth until humans arrived and included giant cats, deer, beavers and armadillos. “We are now living in a world without giants,” said Davis. “So the seeds of big fruit are not dispersed any more because we don’t have mammoths or gomphotheres or giant ground sloths eating those fruits.” Another example, he said, is the widespread loss of wolves. This means smaller predators like coyotes thrive and more birds are killed, radically changing food chains.

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“Between January 1977 and January 2013, the catch rate in the sticky ground traps fell 60-fold..”

“..our study indicates that climate warming is the driving force behind the collapse of the forest’s food web. ”

‘Hyperalarming’ Study Shows Massive Insect Loss (WaPo)

Insects around the world are in a crisis, according to a small but growing number of long-term studies showing dramatic declines in invertebrate populations. A new report suggests that the problem is more widespread than scientists realized. Huge numbers of bugs have been lost in a pristine national forest in Puerto Rico, the study found, and the forest’s insect-eating animals have gone missing, too. In 2014, an international team of biologists estimated that, in the past 35 years, the abundance of invertebrates such as beetles and bees had decreased by 45 percent. In places where long-term insect data are available, mainly in Europe, insect numbers are plummeting. A study last year showed a 76 percent decrease in flying insects in the past few decades in German nature preserves.

The latest report, published Monday in the Proceedings of the National Academy of Sciences, shows that this startling loss of insect abundance extends to the Americas. The study’s authors implicate climate change in the loss of tropical invertebrates. “This study in PNAS is a real wake-up call — a clarion call — that the phenomenon could be much, much bigger, and across many more ecosystems,” said David Wagner, an expert in invertebrate conservation at the University of Connecticut who was not involved with this research. He added: “This is one of the most disturbing articles I have ever read.”

[..] “We went down in ’76, ’77 expressly to measure the resources: the insects and the insectivores in the rain forest, the birds, the frogs, the lizards,” Lister said. He came back nearly 40 years later, with his colleague Andrés García, an ecologist at the National Autonomous University of Mexico. What the scientists did not see on their return troubled them. “Boy, it was immediately obvious when we went into that forest,” Lister said. Fewer birds flitted overhead. The butterflies, once abundant, had all but vanished. García and Lister once again measured the forest’s insects and other invertebrates, a group called arthropods that includes spiders and centipedes. The researchers trapped arthropods on the ground in plates covered in a sticky glue, and raised several more plates about three feet into the canopy.

The researchers also swept nets over the brush hundreds of times, collecting the critters that crawled through the vegetation. Each technique revealed the biomass (the dry weight of all the captured invertebrates) had significantly decreased from 1976 to the present day. The sweep sample biomass decreased to a fourth or an eighth of what it had been. Between January 1977 and January 2013, the catch rate in the sticky ground traps fell 60-fold. “Everything is dropping,” Lister said. The most common invertebrates in the rain forest — the moths, the butterflies, the grasshoppers, the spiders and others — are all far less abundant. “Holy crap,” Wagner said of the 60-fold loss.


Comparison of the average dry-weight biomass of arthropods caught per 12-h day in 10 ground (A) and canopy (B) traps within the same sampling area in the Luquillo rainforest.

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If there are no insects left, who cares about deficits? What’s the use?

America’s Budget Deficit Jumps By 17% As Spending Surges (CNBC)

The U.S. federal budget deficit rose in fiscal 2018 to the highest level in six years as spending climbed, the Trump administration said Monday. The deficit jumped to $779 billion, $113 billion or 17 percent higher than the previous fiscal period, according to a statement from Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney. It was larger than any year since 2012, when it topped $1 trillion. The budget shortfall rose to 3.9 percent of U.S. GDP. The deficit increased by $70 billion less than anticipated in a report published in July, according to the two officials.

Federal revenue rose only slightly, by $14 billion after Republicans chopped tax rates for corporations and most individuals. Outlays climbed by $127 billion, or 3.2 percent. A spike in defense spending, as well as increases for Medicaid, Social Security and disaster relief, contributed to the increase.

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“If the goal was to bail out the banks at public expense (and it was) it’s clear Bernanke had a far better plan than the ECB.”

More Free Money: A Carry Trade in Liquidity (Mish)

Not only do banks earn free money on excess reserves, they can borrow money and make guaranteed free money on that.

The Federal Reserve Bank of St. Louis discusses the Carry Trade in Liquidity: “The IOER [interest on excess reserves] has been the effective ceiling of other short-term interest rates. The figure above compares the IOER with overnight rates on deposits and repos. As we can see, the IOER has mostly remained above these two rates, implying that (at least some) banks have been able to borrow funds overnight, deposit them at the Fed and earn a spread, in essence engaging in carry trade in liquidity markets.”

How Much Free Money?

While the Fed has been busy giving banks free money by paying interest on excess reserves, banks in the EU have suffered with negative interest rates, essentially taking money from banks and making them more insolvent. If the goal was to bail out the banks at public expense (and it was), it’s clear Bernanke had a far better plan than the ECB.

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The Fed’s been flying blind at least since Bernanke talked about ‘entering uncharted territory’. That’s what that means.

Powell Has Lost His North Star, And The Fed Is Flying Blind (MW)

Federal Reserve Chairman Jerome Powell is in an unenviable position. Folks expect him to fine-tune interest rates to keep the economy going and inflation tame but he can’t make things much better — only worse. Growth is nearly 3% and unemployment is at its lowest level since 1969. What inflation we have above the Fed target of 2% is driven largely by oil prices and those by forces beyond the influence of U.S. economic conditions — OPEC politics, U.S. sanctions on Iran, and dystopian political forces in Venezuela and a few other garden spots. When the current turbulence in oil markets recedes, we are likely in for a period of headline inflation below 2%, just as those forces are now driving prices higher now.

Overall, long-term inflation has settled in at the Fed target of about 2%. The Fed should not obsess about it but keep a watchful eye. Amid all this, Powell’s inflation compass has gone missing. The Phillips curve, as he puts it, may not be dead but just resting. To my thinking, it’s in a coma if it was ever alive at all. That contraption is a shorthand equation sitting atop a pyramid of more fundamental behavioral relationships. Those include the supply and demand for domestic workers and in turn, an historically large contingent labor force of healthy prime-age adults sitting on the sidelines, the shifting skill requirements of a workplace transformed by artificial intelligence and robotics, import prices influenced by weak growth in Europe and China, and immigration.

Of course, Mariner Powell has his North Star — what economists affectionately call R* (R-Star), but it is no longer at a fixed position in Powell’s sky. R* is the federal funds rate that neither encourages the economy to speed up or slow down. However, with businesses needing much less capital to get started or grow these days and for decades China and Germany—the second and fourth largest economies globally—racking up current account surpluses and savings to invest abroad, it is no wonder the forces of supply and demand have been driving R* down to historically low levels.

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They use what they don’t pay in taxes, to spy on you.

Facebook Paid £15.8 Million In UK Tax On £1.2 Billion In 2017 Revenues (BBC)

Facebook’s UK tax bill has tripled to £15.8m – but the social media giant will see an immediate cut because of a tax credit. The final bill comes to £7.4m, since Facebook will see tax relief of £8.4m after awarding shares to employees. In 2016, Facebook’s tax bill rose to £5.1m, following a major overhaul of the social media firm’s tax structure. However, the company’s profits only climbed by £4m year-on-year from £58.4m to £62.7m in 2017. The company’s UK office provides marketing services and sales and engineering support to the company. Facebook’s revenue rose by a third year-on-year to £1.2bn in 2017, because of increased revenues from inter-company and advertising reseller services in 2017.

“We have changed the way we report tax so that revenue from customers supported by our UK teams is recorded in the UK and any taxable profit is subject to UK corporation tax,” said Facebook’s Northern Europe vice-president, Steve Hatch. [..] The publication of Facebook’s 2017 tax accounts follows extensive criticism from policymakers and the media over the last 12 months of how much tax tech giants typically pay in Europe. Large technology companies have been condemned for moving sales through other countries and paying modest amounts of tax in the UK.

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Hard to gauge what exactly this means, time must tell. Seems good that they talk of medical help. but will he be able to get it?

Ecuador To Assange: No Talking Politics, Pay Own Bills, Look After Cat (RT)

WikiLeaks supporters were thrilled to hear that Ecuador would restore Julian Assange’s internet connection. But his hosts – who have in some ways become his jailers – reportedly imposed a long list of restrictions on his behavior. While stating that he is allowed to exercise his “right of communication and freedom of expression,” a nine-page document already leaked online forbids the journalist from engaging in political activity or doing anything to interfere in the affairs of other states. The document expressly states that Ecuador cannot be held liable for the content of Assange’s communications, but nevertheless prohibits him from engaging in activities that might damage the relationship between Ecuador and other states.

Assange’s communications were cut seven months ago, after he criticized Spanish authorities’ treatment of voters during the Catalan independence referendum. Assange must pay for his own WiFi. He must use only his own devices, absent written government permission, and provide the embassy with serial number, model number, and brand name for those devices. He must also pay for his own medical evaluations, with the option of transferring to a hospital in case of an emergency – an option repeatedly denied him by UK authorities, who refused to guarantee safe passage without arrest in the event of such a transfer. Assange’s health has been the subject of much concern during his six-year confinement in the Embassy.

Visitors are also slapped with new restrictions. They must submit visit requests in writing to the embassy chief, giving their name, nationality, profession and place of work, reason for visiting, email and social media accounts, and even the serial numbers for phones and other devices they wish to bring inside. The new rules even mandate the collection of IMEIs, unique identification numbers specific to a phone handset. While repeat visitors receive a less restrictive screening process, they can have their access revoked at any time without an explanation. All visitor data will be turned over to the Ecuadorian Ministry of Foreign Affairs and other unspecified parties.

The restrictions include a threat to use UK police to arrest visitors or seize communications equipment should the journalist violate the lengthy list of rules. Adding insult to injury, the embassy threatened to remove Assange’s cat to a shelter should they decide he is not cleaning up after the animal properly.

Read more …

They lost two years doing nothing but fight amongst themselves. That time was always badly needed.

Brexit Deal Slipping To December Amid Deadlocked Talks (Ind.)

A Brexit deal now looks unlikely until just before Christmas after Theresa May admitted “weeks” may be needed to break the deadlock in talks with Brussels. The delay was also signalled by Ireland’s prime minister who warned of log-jammed negotiations dragging into December, increasing concern that stalled talks could simply collapse into a “disaster” no-deal situation. In a veiled swipe at Brexiteers, European Council President Donald Tusk said solving the vexed issue of the Irish border had proved “more complicated than some may have expected” and said no deal is now “more likely than ever”.

A further sign of slippage came when the EU confirmed it would take a decision this week on whether a special summit once proposed for November to publicly seal a Brexit deal, will be needed given the state of talks. But despite the deadlock, Ms May again came under intense pressure from Conservative Eurosceptics to refuse anything resembling the EU’s proposals, amid signs she is diluting her stance to secure a deal. The October summit was once supposed to be the moment a withdrawal deal was locked in, with expectations already having slipped to a potential specially arranged meeting in November – even under those circumstances the outline would have had to have been agreed at this week’s meeting.

Read more …

More likely by the day.

No-Deal Brexit Is ‘More Likely Than Ever Before’ – Tusk (Ind.)

A no-deal Brexit is “more likely than ever before”, the president of the European Council has warned, ahead of a make-or-break summit of EU leaders in Brussels. Donald Tusk, who has described this week’s top-level meeting as “the moment of truth”, said Brexit had “proven to be more complicated than some may have expected”. But he said that “that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible”.

Mr Tusk’s warning, made in a letter to EU leaders formally inviting them to the summit, comes a day after negotiations between the European Commission and UK Government hit a a wall over the question of how to prevent a hard border in Northern Ireland. Over dinner on Wednesday night the heads of state or government of the 27 remaining EU member states will decide whether there is any pointing holding a special Brexit summit in November – or whether the horse has already bolted. It is now confirmed that Theresa May will address the 27 leaders before the dinner in a last-ditch bid to win them over; though she will not be allowed into the main discussion itself.

Read more …

Russia and Assad delayed their final offensive to offer the jihadists a way out. But now these are refusing to leave.

Syria’s Chessboard (Hallinan)

The Syrian civil war has always been devilishly complex, with multiple actors following different scripts, but in the past few months it appeared to be winding down. The Damascus government now controls 60 percent of the country and the major population centers, the Islamic State has been routed, and the rebels opposed to Syrian President Bashar al-Assad are largely cornered in Idilb Province in the country’s northwest. But suddenly the Americans moved the goal posts—maybe—the Russians have fallen out with the Israelis, the Iranians are digging in their heels, and the Turks are trying to multi-task with a home front in disarray. So the devil is still very much at work in a war that has lasted more than seven years, claimed up to 500,000 lives, displaced millions of people, destabilized an already fragile Middle East, and is far from over.

There are at least three theaters in the Syrian war, each with its own complexities: Idilb in the north, the territory east of the Euphrates River, and the region that abuts the southern section of the Golan Heights. Just sorting out the antagonists is daunting. Turks, Iranians, Americans and Kurds are the key actors in the east. Russians, Turks, Kurds and Assad are in a temporary standoff in the north. And Iran, Assad and Israel are in a faceoff near Golan, a conflict that has suddenly drawn in Moscow. Assad’s goals are straightforward: reunite the country under the rule of Damascus and begin re-building Syria’s shattered cities. The major roadblock to this is Idilb, the last large concentration of anti-Assad groups, Jihadists linked with al-Qaeda, and a modest Turkish occupation force representing Operation Olive Branch. The province, which borders Turkey in the north, is mountainous and re-taking it promises to be difficult.

For the time being there is a stand down. The Russians cut a deal with Turkey to demilitarize the area around Idilb city, neutralize the jihadist groups, and re-open major roads. The agreement holds off a joint Assad-Russian assault on Idilb, which would have driven hundreds of thousands of refugees into Turkey and likely have resulted in large numbers of civilian casualties. But the agreement is temporary—about a month—because Russia is impatient to end the fighting and begin the reconstruction. However, it is hard to see how the Turks are going to get a handle on the bewildering number of groups packed into the province, some of which they have actively aided for years. Ankara could bring in more soldiers, but Turkey already has troops east of the Euphrates and is teetering on the edge of a major economic crisis.

Read more …

Oct 042018
 
 October 4, 2018  Posted by at 9:17 am Finance Tagged with: , , , , , , , , , ,  


Pablo Picasso Man with arms crossed 1909

 

World Economy At Risk Of Another Financial Crash – IMF (G.)
Soaring US dollar Threatens Trouble For Emerging Markets (G.)
Stocks To Plunge More Than 40% During Next Bear Market – Stovall (CNBC)
Powell Has Cost Stock-Market Investors $1.5 Trillion In 2018 – JPMorgan (MW)
Senate Sets Key Kavanaugh Nomination Vote For Friday (ZH)
White House Finds No Support in FBI Report for Claims Against Kavanaugh (WSJ)
Theresa May Pledges End To Austerity In Tory Conference Speech (G.)
India’s Rupee Sinks To Record Lows., Central Bank Won’t Save It (CNBC)
Amazon Cuts Bonuses And Stock Awards As Minimum Wage Increases (CNBC)
Estonia Says Over $1 Trillion Flowed Through The Country In 2008-2017 (R.)
Grizzly: The Canary in Our Coal Mine (CP)
Attenborough: ‘Population Growth Must Come To An End’ (BBC)
Humanity Is Waging A War Of Terror On Wildlife (G.)

 

 

Why? Lack of reforms. Yeah.

World Economy At Risk Of Another Financial Crash – IMF (G.)

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned. With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said. Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas”, the IMF said, adding, “supervisors must remain vigilant to these unfolding events”.

A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern. The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar. The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.

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There’s the US, which is booming, and then there’s everyone else, who are not.

Soaring US dollar Threatens Trouble For Emerging Markets (G.)

The US dollar continued to soar in value over Wednesday night, signalling the likelihood of more interest rate rises and spelling trouble for developing countries that have borrowed heavily in the greenback. With impressive service sector data published on Wednesday and strong jobs figures in the non-farm payrolls expected on Friday, the dollar hit an 11-month high against the yen and drove US treasury yields to their highest since mid-2011. The pound slipped below $1.30. Rising US bond yields indicate that the Federal Reserve, under its hawkish chairman Jerome Powell, is likely to keep raising interest rates from their current 2.25% well into 2019. They are also unfavourable for emerging markets as they tend to draw away much-needed foreign funds while pressuring local currencies.

The Australian dollar, which is seen as a proxy for emerging Asian markets, slipped below US$0.71 and seems set to dip further. The Indian rupee fell to an all-time low against the dollar on Thursday morning of 73.77 while the Indonesian rupiah has plunged to a 20-year low. China’s currency, which has suffered as the trade war with the US has intensified, was not immune. The offshore yuan rate reached above 6.9 to the dollar. “This is a perfect storm for the rising dollar,” said Chris Weston of the online trading firm Pepperstone in Melbourne. “Strong economic performance and the Fed seen [as] happy to take rates higher. “Lots of countries have issued dollar-denominated debt and as the dollar goes higher, debt levels are exaggerated.”

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What happens after bubbles.

Stocks To Plunge More Than 40% During Next Bear Market – Stovall (CNBC)

Wall Street veteran Sam Stovall is warning stock investors the longest bull market on record will end with an epic meltdown. According to the CFRA chief investment strategist, it’s a side effect of an unprecedented business cycle. “Three conditions: Very long, very high, very expensive,” Stovall said Tuesday on CNBC’s “Futures Now.” “History would imply that be careful because now we’re likely to fall into a very deep bear market when it does finally hit with the average decline being close to 40 percent plus.” His latest thoughts came as the Dow was hitting record highs. The blue chip index is now up more than 8 percent this year. The S&P 500 is performing a tad better — up more than 9 percent for 2018.

Since the bull market began on March 9, 2009, the Dow and S&P 500 have soared more than 300 percent each. For now, Stovall doesn’t see any near-term signs that the win streak is about to end. He remains confident stocks will see a fresh string of new highs in the final months of the year. Referring to history as a guide, Stovall noted that the fourth quarter is pretty strong during midterm election years, and seasonality points to more gains. He believes it will be easy for the S&P to grab another 80 points and break above 3,000 by year-end. However, 2019 may be where the troubles begin. “A lot of the euphoria, a lot of the optimism, is already built into share prices,” he said. “How much more [in earnings] can companies deliver? Expectations are for a 22 percent gain for the entire calendar year 2018. Then it slips to a 10 percent gain in 2019. Those optimistic numbers are already built into the market.”

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What nonsense. His policies blow a huge bubble, and his speeched deflate that bubble just a little bit.

Powell Has Cost Stock-Market Investors $1.5 Trillion In 2018 – JPMorgan (MW)

Federal Reserve Chairman Jerome Powell has exacted a mighty toll from stock market investors this year, according to analysts from JPMorgan Chase. According to researchers led by quantitative analyst Marko Kolanovic, stocks have suffered around $1.5 trillion in losses following speeches from the Fed’s top dog. Powell has hosted three news conferences this year following meetings of the rate-setting Federal Open Market Committee. Kolanovic & Co. said they were followed by an average decline of 0.44 percentage point in the S&P 500. Other talks and speeches have resulted in an average fall of 0.40 percentage point, with losses coming in five of the past nine prominent speeches or Congressional testimonies he has delivered. The JPMorgan Chase chart below illustrates the moves, with testimonies represented in red and FOMC news conferences in blue, before and after the start of Powell’s comments:

To be sure, the research team acknowledges that directly attributing a market reaction to Powell’s comments is folly—in other worlds, correlation doesn’t mean causality, as former Fed Chairwoman Janet Yellen was known for saying—but the researchers note that there is an uncanny relationship between Fed chief’s remarks and market action. “While we acknowledge that it is not possible to attribute the market impact of each speech with certainty, simple math indicates that ~$1.5 trillion of U.S. equity market value was lost this year following these speeches,” they wrote in the Wednesday research note.

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Confirmation or not, there will be mayhem.

Senate Sets Key Kavanaugh Nomination Vote For Friday (ZH)

Senate Majority Leader Mitch McConnell filed a cloture on the Supreme Court nomination of Brett Kavanaugh late Wednesday, paving the way for a Friday procedural vote and – if Kavanaugh clears the procedural hurdle – a final vote as early as Saturday. McConnell touched off the process late Wednesday and announced that sometime during the evening, the FBI would deliver to an anxious Senate the potentially fateful document on claims that Kavanaugh sexually abused women, according to the AP. With Republicans clinging to a razor-thin 51-49 majority and five senators — including three Republicans — still vacillating, the conservative jurist’s prospects of Senate confirmation remained in doubt and potentially dependent on the file’s contents, which are supposed to be kept secret.

“There will be plenty of time for Members to review and be briefed on this supplemental material before a Friday cloture vote. So I am filing cloture on Judge Kavanaugh’s nomination this evening so the process can move forward, as I indicated earlier this week,” McConnell said. So far, no Democrat has said they will support Kavanaugh though Sens. Heidi Heitkamp (N.D.) and Joe Manchin (W.Va.) remain undecided. Meanwhile, GOP Sens. Susan Collins (Maine) and Lisa Murkowski (Alaska) have yet to say how they will vote on Kavanaugh. Sen. Jeff Flake (R-Ariz.) previously said he would support Kavanaugh and absent new information from the FBI’s background investigation into several sexual misconduct allegations is expected to be a yes vote, although Flake may revised his initial contract and claim that the FBI probe was not exhaustive enough.

Republicans would need two of out of the three swing votes to support Kavanaugh if every Democrat opposes him in order to get the 50 votes needed to let Vice President Pence break a tie and confirm him.

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It’s not about the White House.

White House Finds No Support in FBI Report for Claims Against Kavanaugh (WSJ)

The White House has found no corroboration of the allegations of sexual misconduct against Supreme Court nominee Brett Kavanaugh after examining interview reports from the FBI’s latest probe into the judge’s background, according to people familiar with the matter. It was unclear whether the White House, which for weeks has raised doubts about the allegations, had completed its review of the FBI interview reports. Officials were expected to be sending the FBI report to the Senate Judiciary Committee late Wednesday. Still, the White House’s conclusions from the report are not definitive at this point in the confirmation process. Senators who will decide Mr. Kavanaugh’s fate are set to review the findings on Thursday, and some of them may draw different conclusions.

The result could leave senators in much the same position as last week—faced with two witnesses providing mutually exclusive accounts and forced to decide between them. The investigation, which concluded two days before its Friday deadline, has faced mounting criticism in recent days from Democrats who have said the probe wasn’t appropriately comprehensive. Investigators spoke to one of the three women who made accusations of sexual misconduct against Judge Kavanaugh. Raj Shah, spokesman for the White House, said in a statement early Thursday morning: “The White House has received the Federal Bureau of Investigation’s supplemental background investigation into Judge Kavanaugh, and it is being transmitted to the Senate.”

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A country in mortal moral decline. The level of cynical lying is astounding. The press doesn’t call her on it. The picture(s) say it all.

Theresa May Pledges End To Austerity In Tory Conference Speech (G.)

Theresa May has made a bold pledge to bring a decade of austerity to a close, as she appealed to the public over the heads of her squabbling party to back her to deliver a Brexit deal. Speaking in Birmingham on Wednesday at the end of the Conservatives’ annual conference, which was marred by repeated clashes over Europe, May cast aside the chancellor’s concerns about the health of the country’s finances and signalled Brexit would mark an end to public spending cuts. Despite widespread speculation about her future, May also made several domestic policy announcements in an attempt to show she has not been blown off course by Brexit or noisy critics led by Boris Johnson.

They include: • Lifting the cap on local authorities borrowing to build new council homes. • Setting new targets for early cancer detection as part of a new “cancer strategy”. • Freezing fuel duty for the ninth consecutive year. But her most eye-catching pledge was the promise to bring to an end the decade-long programme of spending cuts imposed after the banking bailouts. “When we’ve secured a good Brexit deal for Britain, at the spending review next year we will set out our approach for the future,” she said. “A decade after the financial crash, people need to know that the austerity it led to is over and that their hard work has paid off.

“There must be no return to the uncontrolled borrowing of the past. No undoing all the progress of the last eight years. No taking Britain back to square one. But the British people need to know that the end is in sight. And our message to them must be this: we get it.”

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India is a huge oil importer. Rupee sinks, oil prices rise.

India’s Rupee Sinks To Record Lows., Central Bank Won’t Save It (CNBC)

The rupee’s plunge into record-low territory this year is unlikely to slow — even if India’s central bank hikes its rate this week, according to experts carefully watching the Reserve Bank of India. Analysts largely expect India, Asia’s third-largest economy, to raise its benchmark rate by 25 basis points at its meeting this week, with more increases to come this and next year. But while an interest rate hike would normally be expected to support a currency, the rupee “is in for continued losses ahead,” according to Prakash Sakpal, VP of research at Dutch bank ING. “Even if it hikes by 25 (basis points) as expected that’s unlikely to help the currency … The RBI will have to do more, though that looks unlikely on the grounds of on-target inflation and stress in the financial sector,” he said. Sakpal predicted the central bank will merely match the three U.S. Federal Reserve rate hikes this year without giving the rupee any leeway to gain against the dollar.

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Many people end up worse off.

Amazon Cuts Bonuses And Stock Awards As Minimum Wage Increases (CNBC)

Amazon’s minimum-wage increase for its hourly workers comes with a trade-off: no more monthly bonuses and stock awards. Amazon confirmed in an email to CNBC that the company is getting rid of incentive pay and stock option awards as it increases the minimum wage to $15 per hour. The company, however, stressed that the wage increase “more than compensates” for the loss in other benefits. “The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and [restrictive stock units],” Amazon’s spokesperson said in an emailed statement.

“We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable.” Additionally, workers affected by the change will get a chance to review the new pay structures and share any concerns they might have with the company, according to a person familiar with the matter. The confirmation follows multiple reports on Wednesday that some of Amazon’s warehouse employees say they will make less as a result of this change.

The Guardian said warehouse workers currently receive one Amazon share (worth $1,959) at the end of every year, on top of another single share reward every five years. Yahoo News noted that warehouse workers can earn up to 8 percent of their monthly income every month, which could be as much as $3,000 a year for some workers. Workers were notified of the change on Wednesday, according to Bloomberg. Amazon disclosed in its announcement on Tuesday that it is replacing the stock awards program with the minimum-wage increase because employees prefer the “predictability and immediacy of cash” compared with stock awards. The company didn’t say anything about the monthly bonuses.

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Laundromat.

Estonia Says Over $1 Trillion Flowed Through The Country In 2008-2017 (R.)

Banks doing business in Estonia, which has been at the center of a money-laundering scandal involving Danske Bank, handled more than $1 trillion in cross-border flows between 2008 and 2017, according to the country’s central bank. The European Union member country of just 1.3 million people has been rocked by revelations that banks there laundered money from Russia, Moldova and Azerbaijan via non-resident bank accounts. The scandal has forced lenders in Estonia and neighboring Latvia to shut down. The data on cross-border flows, first reported by Bloomberg, suggests that the scale of the money laundering through the small Baltic country may have been larger then previously thought. The news sent Nordic banking shares sharply lower.

The central bank said that between 2008 and 2017, cross-border transactions totaled 1.1 trillion euros ($1.27 trillion). The number includes all flows, including resident and non-resident transactions, a spokesman said. Estonia’s entire economic output came to about $25 billion last year – roughly the same as that of Uganda or Nepal – suggesting that much of the money flow was not directly linked to economic activity in the country. The central bank did not say whether it considered any of the flows suspicious. Bloomberg on Wednesday reported figures from the central bank saying that Estonia handled about 900 billion euros in non-resident cross-border transactions between 2008 and 2015.

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“Far greater than the threat of human depredation on grizzlies, grim as it is, is the largely ignored imminent elimination of the habitat they must have to survive.”

Grizzly: The Canary in Our Coal Mine (CP)

The decision was of tremendous import and was not made quickly but it was made decisively. Judge Dana Christensen ruled against the U.S. Fish and Wildlife Service delisting of the Yellowstone Grizzly, and stopped the trophy hunt proposed by Wyoming and Idaho, those retro redneck havens of braindead racism, industrial serfdom, and furious, moron machismo. In shutting down this corrupt, deeply cynical piece of ecological crime on the part of the U.S. Fish and Wildlife Service targeting the Yellowstone grizzly population of 700 bears, the judge kept unerringly to existing law, and ruled narrowly to render his decision unassailable. The key point is that, by law, no delisting action may be taken on a subpopulation of a threatened or endangered species that does not consider the effects on the species as a whole.

In other words, no action can be mandated on one population that does not include all others. This ruling, while it does not prevent a hunt of the entire species should such a despicable act of depravity ever be mandated, does prevent the kind of fatal assault on bear viability that killing them piecemeal–as would have been the case had the Yellowstone hunt gone ahead–represents. Because those who back this sort of blind madness are both stupid and relentless in their twisted perversity, this decision may well be appealed, and when that appeal is lost, the same lunacy may be tested in the NCDE or Cabinet-Yaak, regardless of the dead certainty that it will fail in court. This is the kind of minds one confronts in the fight for ecological sanity.

Beyond the relief and satisfaction and, yes, sheer elation, this decision has evoked in those who care about the viability of the Griz, it is impossible to ignore the dark future that looms for this world iconic creature due directly to human inability to love and live in symbiosis with the natural world. Far greater than the threat of human depredation on grizzlies, grim as it is, is the largely ignored imminent elimination of the habitat they must have to survive. It’s not complicated: without vast, connected areas of truly wild country where all the fatally destructive apparatus of human organization is absent, the bear and all top predators will be swiftly driven to extinction. This is not news. It has been common scientific knowledge for decades. And yet the combination of the utter corruption of our Capitalist politics with obscenely complicit sham enviro outfits known in the trade as Gang Green, has prevented passage of sane, adequate, and sufficient habitat legislation.

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Not in his hands, not in ours.

Attenborough: ‘Population Growth Must Come To An End’ (BBC)

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End all trade in wildlife body parts.

Humanity Is Waging A War Of Terror On Wildlife (G.)

Humanity is waging a war of terror on wildlife across the globe, according to the head of a world-leading research institute who was previously a counter-terrorism expert for the UK government. Dominic Jermey, director general of the Zoological Society of London (ZSL), also spent years in Afghanistan supporting the fight against terror, until leaving his post of UK ambassador in 2017. “Coming to ZSL, I am in a front row seat on a different kind of war, this time on wildlife,” he said in an article for the Guardian. “[It is] a war with catastrophic impacts on people and animals.” “While war and terror atrocities make daily headlines, the terror being waged on wildlife slides under the radar,” said Jermey, ahead of a global summit on tackling the illegal wildlife trade in London in October.

Other leaders are urging rapid action, with Gabon’s president, Ali Bongo, calling the crisis “a blight on humanity” and UK environment secretary Michael Gove saying the “massive global problem” needs the same scale of international response being taken to fight climate change. Illegal hunting and the destruction of wild habitat has resulted in the start of what many scientists consider the sixth mass extinction of life to occur in the Earth’s four-billion-year history. Over 80% of all mammals and half of plants are thought to have been lost since the rise of human civilisation.

Wildlife crime harms both people and animals, said Jermey: “The annihilation of wildlife by organised criminal gangs is violent, bloody, corrupt and insidious. It robs communities of their resources, their opportunities and their dignity. And we are all losers as the creatures with which we share this planet are pillaged to extinction.” One hundred million sharks are killed every year, mostly for their fins, and 20,000 African elephants for their ivory, he said. Losses have been greatest in recent decades, Jermey said, with a 58% decline in wildlife since 1970: “That’s like losing the entire [human] population of Asia from the world.”

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Oct 032018
 
 October 3, 2018  Posted by at 9:30 am Finance Tagged with: , , , , , , , , , , , ,  


Paul Gauguin The ford 1901

 

Fed’s Powell Says US Outlook ‘Remarkably Positive’ (R.)
Another Market Volatility Surge Is Likely Ahead (Colombo)
White House Responds To “Misleading” NYTimes’ Trump Tax Fraud Story (ZH)
Italy Folds To Europe On Budget Deficit; Euro Surges (ZH)
Merkel’s End Could Spark EU Breakdown (Luongo)
Vancouver Home Sales Crash 44% As “For Sale” Inventory Soars (ZH)
Australia Banking Royal Commission Could Trigger House Price Collapse (ABC.au)
DMZ Demining Operations Lay Groundwork For Korean Peninsula Peace (YH)
Russia May Veto Greece-FYROM Name Deal at the UN (GR)
The Case For Paying Every American A Dividend On The Nation’s Wealth (MW)
Restaurants In Austin Banned From Throwing Away Food (Hill)
‘We Have Found Hell’: Trauma Runs Deep For Children At Dire Lesbos Camp (G.)

 

 

First, here’s Ted Koppel agreeing with me that Trump Sells Better Than Sex, and Stelter really doesn’t understand:

 

 

And then he closed the spigots…

Fed’s Powell Says US Outlook ‘Remarkably Positive’ (R.)

U.S. Federal Reserve Chairman Jerome Powell on Tuesday hailed a “remarkably positive outlook” for the U.S. economy that he feels is on the verge of a “historically rare” era of ultra-low unemployment and tame prices for the foreseeable future. It is a view, he said, based on how a changed economy is operating today, with businesses and households immunized by strong central bank policy from the inflationary psychology that caused unemployment, inflation and interest rates to swing wildly in the 1960s and 1970s. It is an outlook that includes an economic performance “unique in modern U.S. data,” with unemployment of below 4 percent expected for at least two more years and inflation remaining modest even as wages rise.

And it is an outlook he feels will even survive the Trump administration’s efforts to rewrite the global trading system, a policy shift Powell said may lead to one-time price hikes, but not to persistent changes in the annual rate of inflation going forward. “This forecast is not too good to be true,” Powell told the National Associate for Business Economics, but instead “is testament to the fact that we remain in extraordinary times.” “These developments amount to a better world for households and businesses which no longer experience or even fear the scourge of high and volatile inflation.”

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There can be no doubt.

Another Market Volatility Surge Is Likely Ahead (Colombo)

The U.S. stock market is climbing to record highs once again and volatility has calmed down dramatically from its panic-induced levels reached earlier this year. Traders have become complacent as they passively ride the stock market higher and bet on lower volatility again. While it may seem like all is well, several reliable indicators are warning that another powerful volatility surge is likely ahead.

The first indicator is the 10-year/2-year Treasury spread that is calculated by subtracting the 2-year Treasury note yield from the 10-year Treasury note yield. The 10-year/2-year Treasury spread is helpful for estimating when the next recession is likely to occur, as I explained in a recent Forbes piece. The chart below (which I recreated from a chart made by BofA’s Savita Subramanian) shows that the inverted 10-year/2-year Treasury spread leads the CBOE Volatility Index or VIX by approximately three years. If this historic relationship holds true, we are about to experience a whole lot more volatility over the next few years.

The next chart shows the positioning of the “smart money” and “dumb money” in the Volatility Index or VIX futures. The “smart money”, or commercial futures hedgers (who tend to be right at major market turning points), are building up another bullish position in VIX futures, just like they did one year ago ahead of the stock market correction and volatility spike. In addition, the “dumb money”, or large traders (who tend to be wrong at major turning points), have built up a large short position, like they did before the early-2018 volatility spike. The positioning of these groups of traders indicates that another volatility spike is likely ahead in the not-too-distant future.

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Decades old, started when Trump was a toddler, good luck. Of course they pay as little as they can, but once the IRS signs off on it…

White House Responds To “Misleading” NYTimes’ Trump Tax Fraud Story (ZH)

Update 2: The White House has finally responded to the NYTimes story…(via Sarah Sanders) “Fred Trump has been gone for nearly twenty years and it’s sad to witness this misleading attack against the Trump family by the failing New York Times. Many decades ago the IRS reviewed and signed off on these transactions. The New York Times’ and other media outlets’ credibility with the American people is at an all time low because they are consumed with attacking the president and his family 24/7 instead of reporting the news.

The truth is the market is at an all-time high, unemployment is at a fifty year low, taxes for families and businesses have been cut, wages are up, farmers and workers are empowered from better trade deals, and America’s military is stronger than ever, yet the New York Times can rarely find anything positive about the President and has tremendous record of success to report. Perhaps another apology from the New York Times, like the one they had to issue after they got the 2016 election so embarrassingly wrong, is in order.”

The NYT reported that Trump and his siblings set up a “sham” corporation to help disguise otherwise taxable income that came from gifts from their parents. The president also allegedly helped his father take improper tax deductions that amounted to millions of dollars and helped formulate strategy to undervalue his parents’ real estate holdings, with the Internal Revenue Service reportedly providing little pushback against the Trumps’ reported tactics. According to the leaked confidential filings, Trump’s parents left more than $1 billion to their children, which would have resulted in a roughly $550 million tax bill at the time.

However, the Trumps paid a total of $52.2 million on that source of income, according to the NYT report. To achieve this, the newspaper cited records that showed Trump helped undervalue his father’s real estate holdings, which led to a lower tax bill when he and his siblings inherited the properties. In total, Trump received the equivalent today of at least $413 million from his father’s real estate empire, based on questionable tax dealings starting when he was a toddler and continuing to this day. And, in what will attract the most attention, the newspaper wrote that Trump’s behavior amounted to fraud in some cases.

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I don’t think this one’s over yet.

Italy Folds To Europe On Budget Deficit; Euro Surges (ZH)

After two days of brutal punishment by the markets which sent Italian bond yields to 4 years highs and slammed the euro, the Italian government appears to have folded to pressure from Brussels (and the one place in the world where the bond vigilantes still operate, just ask Sylvio Berlusconi), and according to Corriere della Sera, Italy’s draft budget plan will pledge to cut the deficit to 2% in 2021, after Rome reversed a proposal to maintain a 2.4% shortfall in the face of pressure from the EU. As a result, while the 2019 deficit will still rise to 2.4% of GDP in 2019, it will decline by 0.2% to 2.2% in 2020, and another 0.2% the year after. In kneejerk reaction, futures lept to fresh session highs, Treasury yields jumped by 2bps to 3.07% and the EURUSD spiked 50 pips higher to 1.1590.

Italy is not out of the woods yet though: according to Mizuho, the sustainability of the euro’s rebound will depend on whether the EU sees Italy’s latest budget plan as appropriate. It could be that Italy has already made compromise with the EU, but hard to predict whether the euro’s rebound has more legs until we see a reaction from the EU: “It all boils down to the EU’s response”, and if the ongoing war of words is any indication, merely promising to trim the deficit in the next three years will hardly be smiled upon. Others were even more skeptical. According to bond fund manager Daintree Capital, “The euro’s definitely reacting to the headlines on Italian budget plans, and it will continue to do so for future headlines.” However, “anyone who believes a populist government is all of a sudden going to be particularly responsible in a fiscal sense, has a misguided view.”

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Merkel’s losing it.

Merkel’s End Could Spark EU Breakdown (Luongo)

I saw a recent poll from Die Welt which has Alternative for Germany (AfD) creep past Merkel’s Grand Coalition partner, the Social Democrats (SPD), and challenge the CDU itself. Because when you back out the Christian Social Union’s (CSU) total which runs between 8% and 9% AfD is now in a position to become the party with the highest backing in Germany. And this is happening on the eve of Bavarian State elections this month. [..] I’ve talked about AfD’s chances to achieve this result in the past in terms of them crossing the 16% Chasm. And it appears, that slowly, they are doing so. German politics, from what I understand, is not used to this kind of upheaval and certainly not these kinds of leadership challenges. Earlier this year Merkel barely survived a challenge by former CSU Leader Horst Seehofer over immigration.

So, where to things go from here? As Mercouris points out, Merkel has very skillfully gutted the landscape of the CDU to keep potential leaders from emerging within the party. The SPD is falling off a cliff having lost more than half of its support since the 2014 elections. And the CSU is primarily a Bavarian party so they don’t have the support of the entirety of Germany. This landscape is why we’ve seen the Greens rise to 15% as well as AfD’s rise. And that cannot be ignored. The hard left of German politics is now split and ineffectual. But, no party has emerged in this chaos to take the reins of power.

This is reminding me of Italy’s situation at the end of 2017 with no less than five parties polling in double digits. It’s a messy situation and it makes more sense in Germany that big shifts in voter preference would occur at a slower rate given the stability of German coalition governments since the modern state was founded after World War II. In other words Germans are loathe to make these kinds of changes. So, you know the situation must be bad if these numbers are changing this quickly. So, it shouldn’t be much of a surprise really to see this type of breakdown and the slow rise of AfD past the 16% chasm. It may be the riots in Chemnitz that finally begin pushing their poll numbers into the 20’s nationally.

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Glass half full: “”There’s more selection for home buyers to choose from today.”

Vancouver Home Sales Crash 44% As “For Sale” Inventory Soars (ZH)

What happens when prices rise so high that a chasm forms between bids and asks? The market grinds to a halt. That’s what happened in Vancouver housing in September, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 17.3% from August 2018, and a whopping 43.5% from one year ago. In fact, a total of only 1,595 transactions took place as both buyers and sellers continue to sit on their hands amid confusion whether the recent torrid price gains will continue or whether the housing bubble has burst. Sales of detached properties in July was just 508, a decrease of 40.4% from the 852 recorded in September 2017, and the 812 apartments sold was a 44% drop compared to the 1,451 sales in September 2017.

And no, it’s not seasonal: last month’s sales were a whopping 36.1% below the 10-year September sales average. The reason for the collapse in transactions: the formerly all too willing buyers, mostly Chinese oligarchs who would use Vancouver real estate as their offshore Swiss bank account, have disappeared. Meanwhile sellers are dumping properties in the market in hopes of a quick flip. “Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect said. “There’s more selection for home buyers to choose from today. Since spring, home listing totals have risen to levels we haven’t seen in our market in four years.”

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What would we do without our housing bubble?

Australia Banking Royal Commission Could Trigger House Price Collapse (ABC.au)

There is a lot riding on the policy recommendations from the banking royal commission, not least of which is the stability of the Australian property market, according to some respected analysts. Independent economist Saul Eslake said there was potential for the royal commission’s recommendations to have what economists refer to as “unintended consequences”. The unintended consequences Mr Eslake is referring to include a steep fall in house prices spurred on by a royal commission-inspired clampdown on bank lending. Capital Economics chief economist Paul Dales said while house price falls to date have been small, Australia could be in for a record housing decline, at least in its recent history.

“At the moment the trajectory is a bit worrying cause the house prices seem to be declining at a faster rate and, in our view at Capital Economics, this will eventually prove to be the largest downturn in Australia’s modern history,” he said. Mr Dales is forecasting a protracted slowdown in the housing market as a result of a crackdown in bank lending standards, the banking royal commission itself and rising interest rates. “There’s significant time delays with these things,” he said. “I would have thought over the next six to 12 months is where we would, if there was going to be a big pullback in lending, that’s when we would see it and then, thereafter as and when the royal commission makes any recommendations and the Government implements them, the next six to 12 months after that.

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Korea’s move on.

DMZ Demining Operations Lay Groundwork For Korean Peninsula Peace (YH)

After a 15-minute bumpy ride along a dusty, hilly path inside the Demilitarized Zone (DMZ), dozens of South Korean troops in full gear disembarked near a grisly site of intense battles during the 1950-53 Korean War. Accompanying them in the buffer zone separating the two Koreas was a phalanx of security guards, medical specialists and other personnel specializing in disposing of unidentified explosives and excavating war remains. They are part of the 120-member team tasked with removing landmines in the Arrowhead Ridge, or Hill 281 in Cheorwon, some 90 kilometers northeast of Seoul — a site that the two Koreas have designated for a joint project to retrieve war remains from April to October next year.

There were three key battles against communist forces on the notorious ridge from 1952-53. The remains of more than 200 South Korean soldiers and dozens of U.N. Command (UNC) forces, such as U.S. and French troops, are thought to be buried in it. “We have made preparations (for the landmine removal) for a long period and are well prepared now,” the commander in charge of the frontline areas told reporters on condition of anonymity on Tuesday, the second day of the demining work set to continue until Nov. 30. “We will not rush and will carry out our mission with the first and foremost priority placed on the safety of our troops,” he added.

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EU and NATO want to keep pushing, but how about democracy?

Russia May Veto Greece-FYROM Name Deal at the UN (GR)

Russia is implicitly threatening that it may block the Prespa agreement at the UN Security Council. In a statement on Monday, following the referendum in FYROM, the Russian foreign ministry says that the low turnout “means that the referendum cannot be recognised as valid.” It clearly indicates that the voters “chose to boycott the solutions imposed on Skopje and Athens.” The statement also blasts leading politicians from NATO and EU member states who participated in “large-scale propaganda campaign directly, freely interfering in the internal affairs of this Balkan state.” Despite the low turnout, Prime Minister Zoran Zaev vowed to push ahead with the name change on Monday.

The Russian foreign ministry condemned the move: “There is a clear drive to ensure Skopje’s entanglement in NATO despite the will of the Macedonian people.” Russia is traditionally wary of NATO’s enlargement in eastern Europe. The alliance’s 1999 bombings of its ally Serbia caused a major rift in Russia’s relations with the West at the time. Moscow says that a long-term solution can only be agreed upon by the two parties on their own, without any external interference, and only within the framework of the law and with broad public support.

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Inequality in Europe rises fast, too. Where are the breaking points?

The Case For Paying Every American A Dividend On The Nation’s Wealth (MW)

The newest research shows that unconditional cash transfers boost work productivity and quality of life, including better mental and physical health, and reduce crime. A study by the Roosevelt Institute in New York, a left-leaning think tank, concludes that giving $500 a month to every adult American could meaningfully grow the U.S. economy and address its widening wealth gap. (The top 1% of Americans now receive 20% of the national income, while those in the bottom 50% receive 13%; in 1980, the numbers were essentially reversed, at 11% and 20%, respectively, according to the 2018 World Inequality Report.)

Yet basic income in the U.S., characterized as a utopian solution by its true believers but as welfare, socialism or worse by its detractors, has gone nowhere. Basic income did enjoy a bit of a heyday in the U.S. in the 1960s and 1970s and was even embraced in conservative circles; free-market economist Milton Friedman went so far in 1962 as to propose a negative federal income tax that would guarantee a basic income to the poorest Americans while also incentivizing work. Other ideals of the era — the four-day workweek, the 30-hour workweek, the all but limitless vacation allotment — have fallen by the wayside, even as U.S. labor conditions have worsened.

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In France, this is a nation-wide law.

Restaurants In Austin Banned From Throwing Away Food (Hill)

Restaurants in Austin, Texas, will no longer be allowed to throw out food waste, the city announced this week. Under a new policy that began Monday, all food-permitted businesses in the city are required to keep organic material, such as food scraps and soiled paper products, from landfills. Businesses can dispose of their food waste by donating extra food, giving scraps to local farms for animals, or composting, the city government said in a press release announcing the policy.

The city’s Universal Recycling Ordinance also requires businesses to provide employees with training on organic waste diversion, and to post information about the plan. Official city data shows that 37 percent of material sent to landfills is organic and could have otherwise been donated or composted, the city said. Austin’s ordinance is the latest move by a major city to introduce eco-friendly policies. Dozens of cities and businesses nationwide have banned plastic straws and other single-use plastic items in an effort to cut down on waste.

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Welcome to Europe.

‘We Have Found Hell’: Trauma Runs Deep For Children At Dire Lesbos Camp (G.)

The drawings tell of trauma. Stormy seas dotted with terrified faces. Lifeless bodies of children floating among the waves. And planes dropping bombs, down on to homes and on to people. Eyes that weep blood. The pencil scrawls were made by children who are part of a growing phenomenon in the Moria refugee camp in Lesbos, Greece. All have attempted suicide or serious self-harm since they came to this place. Approximately 3,000 minors live in the Moria camp, which Médecins Sans Frontières (MSF) calls a giant open-air “mental asylum” owing to the overcrowding and dire sanitary conditions. Last Tuesday an adolescent attempted to hang himself from a pole. In August, a 10-year-old boy only just failed to take his own life.

The camp, among hills dotted with olive trees a few kilometres from the island’s capital town of Mytilene, is home to 9,000 asylum seekers living in a centre designed to hold one third of that number. Migrants live in groups of up to 30 people, crammed into tents or metal containers situated just centimetres apart. Rubbish, scattered everywhere, makes the air almost unbreathable. Most come from war-torn countries like Syria, Iraq and Afghanistan. They arrive in dinghies from the Turkish towns of Ayvalik or Canakkale. According to aid agencies, the controversial deal brokered between Brussels and Ankara aimed at stopping the flow of migrants to Europe via Turkey, combined with the refusal on the part of European countries to take in asylum seekers arriving in Greece, have transformed Lesbos into an Alcatraz, leaving people imprisoned on the island with no way out.

“Although the vast majority of migrants who arrive in Moria are traumatised, after having fled from violent conflicts in their home countries, conditions in the camp have exacerbated their trauma,” says Luca Fontana, field coordinator of MSF on the island. “After two years, some are still awaiting transferral, even if they know they could be deported to Turkey at a moment’s notice. I’ve worked in camps infested with Ebola in Sierra Leone and Guinea, but I guarantee you that this is the worst situation I’ve ever seen.”

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Aug 042018
 
 August 4, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , , ,  


John French Sloan Spring rain 1912

 

The Everything Bubble Has Found Its Pin. The Pin’s Name is Jerome Powell. (PC)
The Fed Accelerates its QE Unwind (WS)
US Gains Only 157,000 Jobs In July As Unemployment Falls To 3.9% (MW)
US Government Has No Idea How Many Gig Workers There Are (MW)
Mark Carney Says Risk Of A No-Deal Brexit Is ‘Uncomfortably High’ (G.)
The Conservatives Are In Crisis Over Austerity, Not Just Brexit (NS)
US Secret Service And The Guardian Face Off Over ‘Russian Spy’ (RT)
Russia Seeks US Help To Rebuild Syria (R.)
Judge Calls US Efforts To Reunite Deported Parents ‘Unacceptable’ (R.)
US Court Orders Trump Administration To Fully Reinstate DACA Program (R.)
Trump Administration Lifts GMO Crop Ban For US Wildlife Refuges (R.)

 

 

Error? Powell obviously wants a strong dollar. And yes, that has consequences.

The Everything Bubble Has Found Its Pin. The Pin’s Name is Jerome Powell. (PC)

The Powell Fed is playing with matches next to over $60 trillion in $USD-denominated debt. The $USD is the reserve currency of the world. As such it is the currency of choice if you are going to issue debt. As a result of this, entities around the globe, whether they be corporations or countries, will often choose to issue debt denominated in the $USD, even if the $USD is not a currency used in their economy. When you borrow money in the $USD… you are effectively SHORTING the $USD. You are betting/hopingthat the $USD will weaken, making your debt servicing/ future debt repayment, cheaper on a relative basis. In this environment, when the $USD strengthens, it becomes MORE DIFFICULT to service your debt.

This is true even for the US itself. The $20 trillion we owe in public debt is effectively one gigantic $20 trillion $USD short. Enter Jerome Powell. For whatever reason, the Powell Fed has decided to embark on the most aggressively hawkish monetary policy in Fed history. And the currency markets have taken note. The $USD is breaking out of downtrends in Every. Single. Currency. Pair. The day Jerome Powell became Fed chair is annotated buy the vertical blue line. Assuming Jerome Powell DOESN’T want to blow up the $60 trillion $USD-denominated debt bubble… the above chart SCREAMS “policy error.”

I’m not being dramatic here… the last time the $USD rallied like this against every major currency was in 2014. At that time the entire commodity complex imploded by over 60% and the Emerging Market came within a hair’s breadth of systemic collapse. Again, I’m not being dramatic here… within six months of the $USD’s rally in 2014, Brazil’s stock market was down nearly 70%. China’s was down nearly 50%. Emerging Markets across the board dropped over 30%. Oil fell from $105 to $30 and change. Etc. I don’t see any indication Powell is aware of this… which means… BUCKLE UP. THE EVERYTHING BUBBLE HAS FOUND ITS PIN. AND THE PIN’S NAME IS JEROME POWELL.

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And Powell is very clear on “balance sheet normalization” too.

The Fed Accelerates its QE Unwind (WS)

The Fed’s QE Unwind – “balance sheet normalization,” as it calls this – is accelerating toward cruising speed. The first 12 months of the QE unwind, which started in October 2017, are the ramp-up period – just like there was the “Taper” during the final 12 months of QE. The plan calls for shedding up to $420 billion in securities in 2018 and up to $600 billion a year in each of the following years until the balance sheet is sufficiently “normalized” – or until something big breaks. In July, the QE Unwind accelerated sharply. According to the plan, the Fed was supposed to shed up to $24 billion in Treasury Securities in July, up from $18 billion a month in the prior three months. And? The Fed released its weekly balance sheet Thursday afternoon. Over the four weeks ending August 1, the balance of Treasury securities fell by $23.5 billion to $2,337 billion, the lowest since April 16, 2014.

Since the beginning of the QE-Unwind, the Fed has shed $129 billion in Treasuries. The step-pattern in the chart is a result of how the Fed sheds Treasury securities. It doesn’t sell them outright but allows them to “roll off” when they mature. Treasuries only mature mid-month or at the end of the month. Hence the stair-steps. In mid-July, no Treasuries matured. But on July 31, $28.4 billion matured. The Fed replaced about $4 billion of them with new Treasury securities directly via its arrangement with the Treasury Department that cuts out Walls Street (its “primary dealers”) with which the Fed normally does business. Those $4 billion in securities, to use the jargon, were “rolled over.” But it did not replace about $24 billion of maturing Treasuries. They “rolled off.”

Total assets on the Fed’s balance sheet for the four weeks ending August 1 dropped by $34.1 billion. This brought the drop since October, when the QE unwind began, to $205 billion. At $4,256 billion, total assets are now at the lowest level since April 9, 2014, during the middle of the “taper.” It took the Fed about six years to pile on these securities, and now it’s going to take years to shed them:

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Trend is towards lower paid jobs.

US Gains Only 157,000 Jobs In July As Unemployment Falls To 3.9% (MW)

The U.S. posted another solid spurt in hiring in July, showing that companies are still able to find enough workers to meet the growing needs of a rapidly expanding U.S. economy. Some 157,000 new jobs were created last month despite widespread complaints among businesses about a shortage of skilled labor, the Labor Department said Friday. The increase in hiring fell below the 195,000 MarketWatch forecast, but job gains in May and June was stronger than previously reported. The smaller gain in employment was also a result of governments cutting jobs in education during the summer break and the closure of Toys R Us. Otherwise hiring may have topped 200,000.

Unemployment, meanwhile, slipped below 4% again, to 3.9%, as more people found work.The jobless rate is at a nearly two-decade low. Far-flung complaints about how hard it is to find good workers still aren’t inducing companies to jack up salaries and wages, however. Hourly pay rose 7 cents in July to $25.07, but the 12-month rate of wage gains was unchanged at 2.7%. And even those increases have been largely eaten up by rising inflation. Wages usually rise 3% to 4% a year when the labor market is as tight as it is now.

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Much more interesting than the jobs report. 75 million gig workers? And they’re all counted as ’employed’?

US Government Has No Idea How Many Gig Workers There Are (MW)

The BLS does not have an explicit definition for a gig worker, or a formal way of tracking them. It comes closest in a survey called the Contingent Worker Supplement, which studies “contingent workers” in temporary working arrangements that they don’t expect to last more than a year. But prior to last month, the BLS had not released the Contingent Worker Supplement since 2005 due in large part to a lack of funding. The most recent report found that 5.9 million people or 3.8% of all workers are contingent workers. “It’s not that the BLS doesn’t care about secondary work, they do,” said Demetra Nightingale at the Urban Institute, a think tank. But without adequate funding it is difficult for the BLS to study those workers, she said.

These workers come in many forms. They include side hustlers with regular jobs and freelancers who take on extra clients on their off-hours, according to Freelancing in America, a 2017 survey conducted in part by Freelancers Union. That survey estimated that 57.3 million Americans are freelancing, or 36% of the workforce. Other estimates say the gig economy is even larger than that. The Federal Reserve has a very broad definition of people working in the gig economy. The Fed says gig workers could be anyone from a babysitter to an Uber driver. According to that definition, there are as many as 75 million gig workers.

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My first thought when reading this: he’s trying to get himself fired. Brexit Britain doesn’t need some Canadian opinion.

Mark Carney Says Risk Of A No-Deal Brexit Is ‘Uncomfortably High’ (G.)

Mark Carney has warned that the possibility of a no-deal Brexit is “uncomfortably high” and will lead to higher prices, as Theresa May prepares to meet the French president, Emmanuel Macron, for talks. The Bank of England governor said both the UK and EU should “do all things to avoid” a no-deal scenario. He added that the banks had done the “stockpiling” and the country’s financial system was in a position to be able to withstand a shock that could result from the UK leaving the EU without an agreement. His remarks led to sterling falling sharply to just under $1.30. Carney told BBC Radio 4’s Today programme: “I think the possibility of a no-deal is uncomfortably high at this point.” Asked if no deal would be a disaster, he said: “It is highly undesirable. Parties should do all things to avoid it.”

Pushed on what no deal would mean, he said “disruption to trade as we know it”, before adding: “As a consequence of that, a disruption to the level of economic activity, higher prices for a period of time. “Our job at the Bank of England is to make sure those issues don’t happen in the financial system, so that people will have things to worry about in a no-deal Brexit, which is still a relatively unlikely possibility but it is a possibility, but what we don’t want to have is people worrying about their money in the bank, whether or not they can get a loan from the bank – whether for a mortgage or for a business idea – and we have put the banks through the wringer well in advance of this to make sure they have the capital.”

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An already completely gutted society. More to come. Local councils are being cut to the bone.

The Conservatives Are In Crisis Over Austerity, Not Just Brexit (NS)

The Conservative party is engaged in the bloodiest incarnation yet of its 30-year Europe war. After Theresa May’s Chequers deal succeeded in alienating almost everyone, Remainers are backing a “people’s vote”, while Leavers are embracing no deal. There is no obvious means by which the parliamentary deadlock can be broken. But the Brexit crisis is masking another one: over austerity. The Leave vote in 2016 and the loss of the Tories’ majority in 2017 were symptoms of voter discontent over spending cuts (a new study published this week suggested that austerity may have directly caused Brexit). As the New Statesman’s Crumbling Britain series has charted, eight years of austerity have enfeebled the public realm.

Rough sleeping, which fell by three-quarters under the last Labour government, has risen by 169 per cent since 2010. The NHS has been forced to cancel operations and even urgent surgery as it struggles to meet ever greater demand. Relative child poverty has increased for three consecutive years and now stands at 4.1 million, or 30 per cent of children. Nearly 1,000 Sure Start children’s centres and 478 libraries are estimated to have closed since 2010. Potholed roads and uncollected bins are evidence of the scale of austerity borne by councils (real-terms funding for local authorities has been cut by 49 per cent since David Cameron took office as prime minister). Northamptonshire Council, a Conservative flagship, has declared itself effectively bankrupt – and others may follow.

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The Guardian is up to some strange things.

US Secret Service And The Guardian Face Off Over ‘Russian Spy’ (RT)

US Secret Service has scolded the Guardian for “irresponsible and inaccurate” reporting on an alleged Russian spy at the US embassy in Moscow. Unfazed, the newspaper continued to spin the story calling it the ‘tip of the iceberg.’ The British newspaper, never one to pass up a good Russia scare story, published a fresh one on Friday, citing multiple intelligence analysts to reinforce the idea that its own anonymously-sourced revelations of a suspected spy with high-level security clearance having been embedded for a decade in the US embassy in Moscow,”could be just the tip of the iceberg.” The Secret Service, meanwhile, has been issuing repeated rebuttals to the Guardian’s reporting.

The security officials were quite emphatic in bashing the article as “wrought with irresponsible and inaccurate reporting based on the claims of “anonymous sources’.” In its press release on Thursday, the Secret Service specifically points out that before the publication came out, it had provided the Guardian with background to the story “clearly refuting unfounded information” in its statement to the editor. The Guardian did mention the agency’s response, bundling it in the middle of its article, while citing its unnamed “intelligence source” profusely, claiming that the Russian woman, the suspected mole, “had access to the most damaging database, which is the US Secret Service official mail system.”

This allegedly included “schedules of the president – current and past, vice-president and their spouses, including Hillary Clinton.” According to the Secret Service, the allegations that a mysterious foreign ‘femme fatale’ could have access to such sensitive information, are unfounded. “FSNs [Foreign Service Nationals] working under the direction of the U.S. Secret Service have never been provided or placed in a position to obtain, secret or classified information as erroneously reported.”

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You break it, you bought it.

Russia Seeks US Help To Rebuild Syria (R.)

Russia has used a closely guarded communications channel with America’s top general to propose the two former Cold War foes cooperate to rebuild Syria and repatriate refugees to the war-torn country, according to a U.S. government memo. The proposal was sent in a July 19 letter by Valery Gerasimov, the chief of the Russian military’s General Staff, to U.S. Marine General Joseph Dunford, chairman of the Joint Chiefs of Staff, according to the memo which was seen by Reuters. The Russian plan, which has not been previously reported, has received an icy reception in Washington. The memo said the U.S. policy was only to support such efforts if there were a political solution to end Syria’s seven-year-old civil war, including steps like U.N.-supervised elections.

The proposal illustrates how Russia, having helped turn the tide of the war in favor of President Bashar al-Assad, is now pressing Washington and others to aid the reconstruction of areas under his control. Such an effort would likely further cement Assad’s hold on power. “The proposal argues that the Syrian regime lacks the equipment, fuel, other material, and funding needed to rebuild the country in order to accept refugee returns,” according to the memo, which specified that the proposal related to Syrian government-held areas of the country. The United States in 2011 adopted a policy that Assad must leave power but then watched as his forces, backed by Iran and then Russia, clawed back territory and secure Assad’s position. The United States has drawn a line on reconstruction assistance, saying it should be tied to a process that includes U.N.-supervised elections and a political transition in Syria. It blames Assad for Syria’s devastation.

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But what can Sabraw do?

Judge Calls US Efforts To Reunite Deported Parents ‘Unacceptable’ (R.)

A federal judge on Friday described as “unacceptable” the U.S. government’s progress in reuniting immigrant children in the United States with deported parents and ordered the government to appoint a person to take charge of its efforts. “This is going to be a significant undertaking and it’s clear there has to be one person in charge,” said U.S. District Judge Dana Sabraw at a hearing in San Diego. Sabraw in June ordered the government to begin reuniting some 2,500 children that officials separated from their parents after they crossed the U.S.-Mexican border. The families were separated as part of a “zero tolerance” U.S. government policy toward illegal immigration that began in early May.

Many of them had crossed the border illegally, while others had sought asylum. About 1,900 children have since been reconnected with their parents or a sponsor. On Thursday, the government proposed that non-profit groups should take the lead in locating as many as 500 parents deported or removed from the United States without their children. At Friday’s hearing, Sabraw said it was it was “100 percent the responsibility of the administration” to reunite those families. Sabraw also noted that as few as 12 of the 500 parents in question have been located. “That is just unacceptable at this point,” he said. “The reality is that for every parent who is not located there will be a permanently orphaned child.”

The government’s lawyer, Scott Stewart, said that the agencies involved would consider appointing a point person or persons. Stewart said the government had proposed a plan with non-profit groups in a prominent role because it believed that was the quickest way to locate parents.

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Different judge. Legal opinions are sorely need in the US.

US Court Orders Trump Administration To Fully Reinstate DACA Program (R.)

A federal judge on Friday ruled that the Trump administration must fully restore a program that protects from deportation some young immigrants who were brought to the United States illegally as children, including accepting new applications for the program. U.S. District Judge John Bates in Washington, D.C., said he would stay Friday’s order, however, until August 23 to give the administration time to decide whether to appeal. Bates first issued a ruling in April ordering the federal government to continue the Deferred Action for Childhood Arrivals, or DACA, program, including taking applications. He stayed that ruling for 90 days to give the government time to better explain why the program should be ended.

On Friday Bates, who was appointed by former President George W. Bush, a Republican, said he would not revise his previous ruling because the arguments of President Donald Trump’s administration did not override his concerns. Under DACA, roughly 700,000 young adults, often referred to as “Dreamers”, were protected from deportation and given work permits for two-year periods, after which they must re-apply to the program.

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Better put this before a judge as well. But no surprise that Monsanto is powerful stateside.

Trump Administration Lifts GMO Crop Ban For US Wildlife Refuges (R.)

The Trump administration has rescinded an Obama-era ban on the use of pesticides linked to declining bee populations and the cultivation of genetically modified crops in dozens of national wildlife refuges where farming is permitted. Environmentalists, who had sued to bring about the 2-year-old ban, said on Friday that lifting the restriction poses a grave threat to pollinating insects and other sensitive creatures relying on toxic-free habitats afforded by wildlife refuges. “Industrial agriculture has no place on refuges dedicated to wildlife conservation and protection of some of the most vital and vulnerable species,” said Jenny Keating, federal lands policy analyst for the group Defenders of Wildlife.

Limited agricultural activity is authorized on some refuges by law, including cooperative agreements in which farmers are permitted to grow certain crops to produce more food or improve habitat for the wildlife there. The rollback, spelled out in a U.S. Fish and Wildlife Service memo, ends a policy that had prohibited farmers on refuges from planting biotech crops – such as soybeans and corn – engineered to resist insect pests and weed-controlling herbicides. That policy also had barred the use on wildlife refuges of neonicotinoid pesticides, or neonics, in conjunction with GMO crops. Neonics are a class of insecticides tied by research to declining populations of wild bees and other pollinating insects around the world.

Rather than continuing to impose a blanket ban on GMO crops and neonics on refuges, Fish and Wildlife Service Deputy Director Greg Sheehan said in Thursday’s memo that decisions about their use would be made on a case-by-case basis.

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Jun 152018
 
 June 15, 2018  Posted by at 8:10 am Finance Tagged with: , , , , , , , , , , , , ,  


OR LIGHT Compassion 2018

 

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)
ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)
Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)
Powell Orchestrates a Masterful Move (DDMB)
The Fed Creates Problems For Itself (Macleod)
The Art of the Deal Worked On Sentosa Island (AT)
Absence of “CVID” In Joint Statement? (Hani)
Optimism (Caitlin Johnstone)
Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)
‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)
Greeks Are Least Satisfied In The EU (K.)
Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)
Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)
A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

 

 

Money has left the building.

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)

Today the Argentina peso plunged another 5.5% against the US dollar. It now takes ARS 27.7 to buy $1. Over the past 16 years, the peso has gone through waves of collapses. This collapse began on April 20. The central bank of Argentina (BCRA) countered it by selling $1 billion per day of scarce foreign exchange reserves and buying pesos. The peso fell more quickly. The BCRA responded with three rate hikes, to finally 40%! On May 8, the government asked the IMF for a bailout. On May 16, after a chaotic plunge of the peso, the BCRA was able to refinance about $26 billion in maturing peso-denominated short-term debt (Lebacs) at an annual interest of 40%, and the peso bounced. It was a dead-cat bounce, however, and the peso plunged another 13% against the dollar through today.

Since April 20, the peso has plunged 27.5%. The annotated chart shows the daily moves of the collapse, and the various failed gyrations to halt it (the chart depicts the value of 1 ARS in USD). The collapse of the peso comes despite an endless series of measures to halt it. Just this week so far: On Tuesday, the BCRA decided to keep its key interest rate at 40%; and on Wednesday, the Ministry of Finance announced it would hold daily auctions to sell $7.5 billion in foreign exchange reserves and buy pesos, to prop up the peso. But it was apparently the only one buying pesos. With inflation at 25.5% and heading to 27% by year-end, according to government estimates, with a rising budget deficit, a surging current account deficit, soaring borrowing costs, and burned investors, what else is there to do?

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Not Draghi’s finest hour.

ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)

The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year. Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. The ECB is currently boosting the eurozone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of 2018.

The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75percentage points a year to the average 2.25% annual growth rate.

The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. “We decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path,” Draghi said.

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No, really, Abenomics is dead.

Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)

The Bank of Japan maintained its ultra-loose monetary policy on Friday and downgraded its view on inflation in a fresh blow to its long-held 2% price goal, further complicating the central bank’s path to rolling back its crisis-era stimulus. Markets are on the lookout for clues from BOJ Governor Haruhiko Kuroda’s post-meeting briefing on how long the central bank could hold off on whittling down stimulus given recent disappointingly weak price growth. As widely expected, the Bank of Japan kept its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero%.

The move contrasts with the European Central Bank’s decision to end its asset-purchase program this year and the U.S. Federal Reserve’s steady rate increases, which signaled a break from policies deployed to battle the 2007-2009 financial crisis. “Consumer price growth is in a range of 0.5 to 1%,” the BOJ said in a statement accompanying the decision. That was a slightly bleaker view than in the previous meeting in April, when the bank said inflation was moving around 1%. The BOJ stuck to its view the economy was expanding moderately, unfazed by a first-quarter contraction that many analysts blame on temporary factors like bad weather.

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He just likes the attention.

Powell Orchestrates a Masterful Move (DDMB)

Federal Reserve Chairman Jerome Powell has taken the first steps in remaking the central bank in his “plain-English” image, which can only be a good thing for financial markets. Earlier this week, news leaked that the central bank was considering holding a press conference following each Federal Open Market Committee meeting instead of after every other one like it does now. The reports set off a mini-storm. Speculation rose the Fed would implement this new policy immediately, which could mean the central bank was considering accelerating the pace of interest-rate increases as soon as August. After all, investors had become accustomed to the Fed only making a major policy move at meetings followed by a press conference. Now, every meeting would be “live.”

But in a masterful move, Chairman Jerome Powell managed to confirm the policy while also putting financial markets at ease. Rather than announcing the change in the official statement outlining the Fed’s plan to raise its target for the federal funds rate for the seventh time since December 2015, Powell waited until the start of his press conference to drop the bomb, noting that the policy wouldn’t start until January. Here’s Powell’s reasoning: “My colleagues and I meet eight times a year and take a fresh look each time at what is happening in the economy and consider whether our policy needs adjusting. We don’t put our interest rate decisions on auto-pilot because the economy can always evolve in unexpected ways.

History has shown that moving interest rates either too quickly or too slowly can lead to bad economic outcomes. We think the outcomes are likely to be better overall if we are as clear as possible about what we are likely to do and why. To that end, we try to give a sense of our expectations for how the economy will evolve and how our policy stance may change. As Chairman, I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. And one practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings. We’re going to do that beginning in January. That will give us more opportunities to explain our actions and to answer your questions.

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“..the unsustainable excesses of unprofitable debt created by suppressing interest rates..”

The Fed Creates Problems For Itself (Macleod)

Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates. Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis.

The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis. Previous peaks in the FFR coincided with the onset of economic downturns, because they exposed unsustainable business models. On the basis of simple extrapolation, the area between the two dotted lines, which roughly join these peaks, is where the current FFR cycle can be expected to peak. It is currently standing at about 2% after yesterday’s increase, and the Fed expects the FFR to average 3.1% in 2019. The chart tells us the Fed is already living dangerously with yesterday’s hike, and further rises will all but guarantee a credit crisis.

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The view from Asia Times. Many people in that part of the world don’t understand the criticism.

The Art of the Deal Worked On Sentosa Island (AT)

Some statesmen by their sheer force of personality and unorthodox ways of politicking arouse disdain among onlookers. US President Donald is perhaps the most famous figure of that kind in world politics today. No matter what he does, Trump attracts criticism. He evokes strong feelings of antipathy among a large and voluble swathe of opinion within half of America. The making of history in a virtual solo act on his part, which is the rarest of efforts, on Sentosa Island in Singapore on Tuesday and which the world watched with awe and disbelief, will be instinctively stonewalled. Half of America simply refuses to accept the positive tidings about him coming from Singapore.

The skeptics are all over social media pouring scorn, voicing skepticism, unable to accept that if the man has done something sensible and good for his country and for world peace, it deserves at the very least patient, courteous attention. The problem is about Trump – not so much the imperative need of North Korea’s denuclearization. But western detractors – ostensibly rooting for the “liberal international order” – will eventually lapse into silence because what emerges is that North Korean leader Kim Jong-un has enough to “bite” here in the deal that Trump is offering – broadly, a security guarantee from the US and the offer of a full-bodied relationship with an incremental end to sanctions plus a peace treaty.

Succinctly put, Trump has offered a deal that Kim simply cannot afford to reject. The ending of the US-ROK military exercises forthwith; Trump’s agenda of eventual withdrawal of troops from ROK; the lure of possible withdrawal of sanctions once 20% of the denuclearization process gets underway, or once the process becomes irreversible; Trump’s hint that he has sought assurances from Japan and the ROK that they will be “generous” in offering economic assistance to the reconstruction of North Korea; China’s involvement in the crucial process – these are tangibles.

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The view from South Korea.

Absence of “CVID” In Joint Statement? (Hani)

The absence of any reference to “complete, verifiable, and irreversible dismantlement” (CVID) of North Korea’s nuclear program in the joint statement reached at US President Donald Trump and North Korean leader Kim Jong-un’s June 12 summit in Singapore is being seen by some as a “negotiation failure” on the US’s part. But an analysis of Trump’s subsequent remarks – and a reading between the lines of the Pyongyang’s official announcement – suggests the US achieved practical gains in terms of a commitment from the North in exchange for the face-saving measure of avoiding use of the “CVID” term due to possible North Korean objections to it.

To begin with, the Singapore joint statement’s language marks a step forward from the Panmunjeom Declaration of Apr. 27 in terms of the final goal of denuclearizing the Korean Peninsula. The latest statement refers to Kim having “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.” While the Panmunjeom Declaration referred to “realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” the new statement includes the additional reference to a “firm and unwavering commitment.”

From the reference to Kim’s “firm and unwavering” commitment to denuclearization, some experts are suggesting North Korea may have agreed to verification in addition to denuclearization – in other words, that the language may be a substitute for the “verifiable” part of the CVID approach demanded by Washington. “You could see them as having used the term out of awareness of North Korea’s discomfort with the word ‘verification,’” Handong Global University professor Kim Joon-hyung said after a Korea Press Foundation debate at Singapore’s Swissotel on June 13. “It may be fair to say North Korea made a definite commitment on the implementation and verification issues,” Kim argued.

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“..while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter. ”

Optimism (Caitlin Johnstone)

Off the top of my head I have a hard time thinking of anything sleazier than smearing peace talks in order to gain partisan political points, but that has indeed been the theme of the last few days when it comes to the Singapore summit. Liberal pundits everywhere have been busily circulating the narrative that Kim Jong-Un “played” Trump by getting him to temporarily halt military drills in exchange for suspended nuclear testing. It was the most fundamental beginning of peace negotiations and a slight deescalation in tensions on the Korean Peninsula, but the way they talk about it you’d think Kim had taken off from Singapore in Air Force One with the keys to Fort Knox and Melania on his lap.

I’m not sure how far up the military-industrial complex’s ass one’s head needs to be to think that one single step toward peace is a gigantic take-all-the-chips win for the impoverished North Korea, but many of Trump’s political enemies are taking it even further. Senate Democrats have introduced a bill to make it more difficult for Trump to withdraw US troops from South Korea, because while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter.

Surprising no one, MSNBC’s cartoon children’s program The Rachel Maddow Show took home the trophy for jaw-dropping, shark-jumping ridiculousness with an eighteen-minute Alex Jones impression claiming that the chief architect of the Korean negotiations was none other than (and if you can’t guess whose name I’m going to write once we get out of these parentheses I deeply envy your ignorance on this matter) Vladimir Putin. [..] This president is facilitating acts of military violence and dangerous escalations around the world; anyone who isn’t relieved by the possibility of one powder keg being defused in that rampage actually has a lot more faith in Trump’s competence than they’re pretending to.

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Easy pickings.

Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)

Private equity firm Blackstone, the undisputed king of property funds, continues to bet big on global real estate. In the last week it raised $9.4 billion for Asian real estate. It was also given the green light to acquire Spain’s biggest real estate investment fund (REIT), Hispania, for €1.9 billion. The move, after its prior acquisitions, will cement its position as Spain’s biggest hotel owner and fully private landlord. Hispania’s 46 hotels, added to Blackstone’s other hotels, will turn the PE firm into Spain’s largest hotelier with almost 17,000 rooms, far ahead of Meliá (almost 11,000), H10 (more than 10,000) and Hoteles Globales (just over 9,000).

It took Blackstone just three moves to become market leader. First, it acquired the hotel group HI Partners from struggling Spanish lender Banco Sabadell for €630 million in October 2017. Then, a month ago, it bought 29.5% of the hotel chain NH Hoteles, which is currently in the hands of the Chinese conglomerate HNA. Now, by raising its stake in Hispania from 16.75% to 100%, it will take up a dominant position in one of the world’s biggest tourist markets. With this deal, it will also expand its residential property empire in Spain. Blackstone has over 100,000 real estate assets controlled via dozens of companies. Those assets include a huge portfolio of impaired real estate assets, including defaulted mortgages and real estate-owned assets (REOs).

Blackstone also owns 1,800 social housing units, which it acquired from Madrid City Hall in a controversial deal brokered by the son of former Spanish prime minister José María Aznar and former Madrid mayor Ana Botella. Blackstone paid €202 million for the apartments in 2013; they are now estimated to be worth €660 million — a 227% return in just five year! Since its purchase of the properties, Blackstone has hiked rents on the flats by 49%. Those who can’t pay have been evicted. Blackstone also played a starring role in one of the world’s biggest real estate operations of 2017, in which it payed €5.1 billion for the defaulted loans Banco Santander inherited from its shotgun-acquisition of Banco Popular.

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“..a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction.”

‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)

It has become a familiar scene: tourists in rented kimonos posing for photographs in front of a Shinto shrine in Kyoto. They and other visitors have brought valuable tourist dollars to the city and other locations across Japan. But now the country’s former capital is on the frontline of a battle against “tourism pollution” that has already turned locals against visitors in cities across the world such as Venice, Barcelona and Amsterdam. The increasingly fraught relationship between tourists and their Japanese hosts has spread to the short-stay rental market. On Friday a new law comes into effect that requires property owners to register with the government before they can legally make their homes available through Airbnb and other websites.

The restriction has caused the number of available properties to plummet and has cost the US-based company millions of dollars. Thanks to government campaigns, the number of foreign tourists visiting Japan has soared since the end of a flat period caused by a strong yen and radiation fears in the aftermath of the 2011 Fukushima disaster. A record 28.7 million people visited last year, an increase of 250% since 2012. Almost seven million were from China, with visitors from South Korea, Taiwan, Hong Kong Thailand and the US taking the next five spots. By 2020, the year Tokyo hosts the Olympic Games, the government hopes the number will have risen to 40 million.

[..] Under the new private lodging law, which was supposed to address a legal grey area surrounding short-term rentals – known as minpaku – properties can be rented out for a maximum of 180 days a year, and local authorities are permitted to impose additional restrictions. The result has been a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction. The legislation has forced the firm to cancel reservations for guests planning to stay in unregistered homes after Friday and to compensate clients to the tune of about $10m.


A sign in Kyoto cautions against touching geishas, taking selfies, littering, sitting on fences and eating and smoking on the street. Photograph: Justin McCurry for the Guardian

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Surprise!

Greeks Are Least Satisfied In The EU (K.)

Greece is the least satisfied nation in the European Union, according to a Eurobarometer survey published Thursday. More specifically, the survey, conducted between March 17 and 28, showed that just 52% of Greeks said they were satisfied with their lives, compared to a 83% average for the 28-member bloc. Only 35% of Greeks surveyed said they were satisfied with the financial situation of their households, compared to 71% across the EU. A staggering 98% said the state of the country’s economy is bad while one in two Greeks said the country’s financial crisis is not over yet and that it will deteriorate even further. As for the country’s general situation, 94% said it is negative. Just 6% said the general situation was positive compared to the 51% average for EU member-states.

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Even turkeys?!

Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)

With Greece featuring prominently in Turkey’s election campaigning, Turkish Foreign Minister Mevlut Cavusoglu raised the tension a notch again Thursday, warning that not even a bird will fly over the Aegean without Ankara’s permission. Responding to criticism by Turkish ultra-nationalists that 18 islands have been “lost” to Greece in recent years, Cavusoglu said that since the crisis over the Imia islets in 1996 there have been no changes in the legal status of the Aegean. “Not only during our own rule, but before that there has been no change in the status of the Aegean. We will not allow this. Even in the case of research we will not give permission, not even to a bird in the Aegean,” he said during an interview with a Turkish radio station.

He went on to say that Turkey will make no concessions in the Aegean and Cyprus, and that Ankara will also begin gas exploration “around” the Eastern Mediterranean island. “We also have a drill,” he said. Turkey has vowed to stop Cyprus from drilling for gas and oil in its exclusive economic zone (EEZ), insisting there can be no development of the island’s natural resources without the participation of the Turkish Cypriots in the island’s Turkish-occupied north. “In the last few months we have prevented drilling and we drove the Italians away. We will not allow anyone to take away the rights of Turkish Cypriots,” he said. Cyprus government spokesman Prodromos Prodromou said that Nicosia will not be dragged into the “climate of tension” that Turkey is cultivating. He cited international law and said that Cyprus has an established EEZ. Moreover, he said the US, Russia and the European Union have all backed Cyprus’s rights.

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Wonder what the fallout will be.

Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)

James Comey once described his position in the Clinton investigation as being the victim of a “500-year flood.” The point of the analogy was that he was unwittingly carried away by events rather than directly causing much of the damage to the FBI. His “500-year flood” just collided with the 500-page report of the Justice Department inspector general (IG) Michael Horowitz. The IG sinks Comey’s narrative with a finding that he “deviated” from Justice Department rules and acted in open insubordination. Rather than portraying Comey as carried away by his biblical flood, the report finds that he was the destructive force behind the controversy. The import of the report can be summed up in Comeyesque terms as the distinction between flotsam and jetsam.

Comey portrayed the broken rules as mere flotsam, or debris that floats away after a shipwreck. The IG report suggests that this was really a case of jetsam, or rules intentionally tossed over the side by Comey to lighten his load. Comey’s jetsam included rules protecting the integrity and professionalism of his agency, as represented by his public comments on the Clinton investigation. The IG report concludes, “While we did not find that these decisions were the result of political bias on Comey’s part, we nevertheless concluded that by departing so clearly and dramatically from FBI and department norms, the decisions negatively impacted the perception of the FBI and the department as fair administrators of justice.”

The report will leave many unsatisfied and undeterred. Comey went from a persona non grata to a patron saint for many Clinton supporters. Comey, who has made millions of dollars with a tell-all book portraying himself as the paragon of “ethical leadership,” continues to maintain that he would take precisely the same actions again. Ironically, Comey, fired FBI deputy director Andrew McCabe, former FBI agent Peter Strzok and others, by their actions, just made it more difficult for special counsel Robert Mueller to prosecute Trump for obstruction. There is now a comprehensive conclusion by career investigators that Comey violated core agency rules and undermined the integrity of the FBI. In other words, there was ample reason to fire James Comey.

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Many heads will roll at the Bureau.

A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

As we digest and unpack the DOJ Inspector General’s 500-page report on the FBI’s conduct during the Hillary Clinton email investigation “matter,” damning quotes from the OIG’s findings have begun to circulate, leaving many to wonder exactly how Inspector General Michael Horowitz was able to conclude: “We did not find documentary or testimonial evidence that improper considerations, including political bias, directly affected the specific investigative actions we reviewed” We’re sorry, that just doesn’t comport with reality whatsoever. And it really feels like the OIG report may have had a different conclusion at some point.

Just read IG Horowitz’s own assessment that “These texts are “Indicative of a biased state of mind but even more seriously, implies a willingness to take official action to impact the Presidential candidate’s electoral prospects.” Of course, today’s crown jewel is a previously undisclosed exchange between Peter Strzok and Lisa Page in which Page asks “(Trump’s) not ever going to become president, right? Right?!” to which Strzok replies “No. No he’s not. We’ll stop it.” Nevermind the fact that the FBI Director, who used personal emails for work purposes, tasked Strzok, who used personal emails for work purposes, to investigate Hillary Clinton’s use of personal emails for work purposes. Of course, we know it goes far deeper than that…

The Wall Street Journal’s Kimberley Strassel also had plenty to say in a Twitter thread:
1) Don’t believe anyone who claims Horowitz didn’t find bias. He very carefully says that he found no “documentary” evidence that bias produced “specific investigatory decisions.” That’s different
2) It means he didn’t catch anyone doing anything so dumb as writing down that they took a specific step to aid a candidate. You know, like: “Let’s give out this Combetta immunity deal so nothing comes out that will derail Hillary for President.”
3) But he in fact finds bias everywhere. The examples are shocking and concerning, and he devotes entire sections to them. And he very specifically says in the summary that they “cast a cloud” on the entire “investigation’s credibility.” That’s pretty damning.
4) Meanwhile this same cast of characters who the IG has now found to have made a hash of the Clinton investigation and who demonstrate such bias, seamlessly moved to the Trump investigation. And we’re supposed to think they got that one right?
5) Also don’t believe anyone who says this is just about Comey and his instances of insubordination. (Though they are bad enough.) This is an indictment broadly of an FBI culture that believes itself above the rules it imposes on others.
6) People failing to adhere to their recusals (Kadzik/McCabe). Lynch hanging with Bill. Staff helping Comey conceal details of presser from DOJ bosses. Use of personal email and laptops. Leaks. Accepting gifts from media. Agent affairs/relationships.
7)It also contains stunning examples of incompetence. Comey explains that he wasn’t aware the Weiner laptop was big deal because he didn’t know Weiner was married to Abedin? Then they sit on it a month, either cuz it fell through cracks (wow) or were more obsessed w/Trump
8) And I can still hear the echo of the howls from when Trump fired Comey. Still waiting to hear the apologies now that this report has backstopped the Rosenstein memo and the obvious grounds for dismissal.

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Mar 222018
 
 March 22, 2018  Posted by at 10:17 am Finance Tagged with: , , , , , , , , , , , ,  


Edward Hopper The Circle Theater, New York 1936

 

US Democrats Plan Crackdown On Booming Stock Buybacks (CNN)
‘Mother Of All Yield Shocks’ Is About To Crush Stocks – Stockman (MW)
Forget The Fed, Libor Is The Story Of The Year (ZH)
Fed’s Powell: Some Asset Prices Elevated, Overall Vulnerabilities ‘Moderate’ (MW)
Federal Reserve Raises Interest Rates Again Amid ‘Strong’ Jobs Market (G.)
Mark Zuckerberg Says He’s ‘Really Sorry’ (CNBC)
Facebook Shareholders Sue As Share Price Tumbles (Ind.)
App Developer Kogan Calls Facebook’s Side Of The Story A “Fabrication” (BBG)
Austrian Lawyer Took on Facebook in Europe. He’s Ready to Do It Again (BBG)
Dutch Referendum On Spy Agency Tapping Powers Result Too Close To Call (R.)
‘Scary’ That Boris Johnson Represents A Nuclear Power – Russia (RT)
Scale Of UK Problem Debt At ‘Epidemic Levels’ – Archbishop Of Canterbury (Ind.)
EU Approves Buyout Of Monsanto By German Chemical Firm Bayer (R.)

 

 

There goes the S&P 500.

US Democrats Plan Crackdown On Booming Stock Buybacks (CNN)

Democrats in Congress want to rain on Wall Street’s buyback parade. Senator Tammy Baldwin plans to introduce a bill on Thursday that would prohibit companies from repurchasing their shares on the open market, Baldwin told CNNMoney. While the legislation faces an uphill battle getting through Republican-controlled Congress, it demonstrates a growing backlash against companies using extra cash to reward shareholders instead of sharing it with workers. Buybacks, which boost stock prices by making shares scarcer, have exploded in 2018 thanks to the huge windfall created by President Trump’s new tax law. American companies like Pepsi and Cisco have announced a total of $229 billion of buybacks so far this year, according to research firm TrimTabs.

Companies are on track to buy back the largest number of shares in at least a decade. Critics say this trend is deepening the chasm between America’s rich and poor because affluent families own the vast majority of the stocks. They argue the money would be better spent by investing in the future, paying workers more or offering better benefits and retraining programs. “I fear that if we don’t act, the impact on our economy and growth is going to be horrendous,” Baldwin told CNNMoney Wednesday. “This very partisan corporate tax bill has fueled a surge in stock buybacks that is hurting economic growth and shared prosperity for workers.” The bill, which is co-sponsored by Democrats Elizabeth Warren and Brian Schatz, would explicitly “prohibit public companies from repurchasing their shares on the open market.”

It would also repeal a 1982 SEC rule that gave companies the green light to buy back vast amounts of their own stock. Since 2008, US companies have spent $5.1 trillion to buy back their own stock, according to Birinyi Associates. Between 2007 and 2016, companies in the S&P 500 devoted 54% of their profits to stock buybacks, according to research by University of Massachusetts Lowell professor William Lazonick, who advised Baldwin’s office on the legislation. “This was not good for the US economy,” said Lazonick. He called Baldwin’s proposed crackdown “hugely positive,” even for long-term shareholders who will benefit from companies investing in something “instead of simply propping up the stock price.”

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And Libor.

‘Mother Of All Yield Shocks’ Is About To Crush Stocks – Stockman (MW)

David Stockman, the so-called “Father of Reaganomics,” hasn’t been shy — or close to right — about his frantically bearish calls in recent years Just last summer, he warned of a “horrendous storm” that could take the S&P 500 index all the way down to 1,600. From there, he took it up a notch in September, saying stocks are headed for a retreat of up to 70%. Well, it’s still up at 2,700. But the market’s volatile behavior of late has emboldened some bears to refresh and even ramp up their doomsday scenarios. Stockman is one of them. “There is not a snowball’s chance in the hot place that the mother of all yield shocks can be avoided,” Stockman wrote on his blog this week.

He explains that we’re in a uniquely dangerous position, one that really couldn’t have even happened under previous administrations. “Had Lyndon Johnson, Tricky Dick, Jimmy Carter or even Ronald Reagan suggested that the Federal Reserve buy government debt at rates which exceeded annual issuance by the U.S. Treasury, as was the case during the peak years of QE, they would have been severely attacked — if not subjected to impeachment — for advocating rank financial fraud,” Stockman claimed. He said ever since former Federal Reserve Chairman Alan Greenspan “commenced the age of monetary central planning,” Wall Street has used deficits as a tool in Washington’s kit of “whatever it takes,” instead of something to be feared.

“Anything that could fuel even the appearance of short-term economic growth was embraced unthinkingly,” he said, “because ‘growth’ of any shape, form or quality became the predicate for endless increases in the stock market averages.” That’s a recipe for disaster, says Stockman.

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Whack-a-mole central bank style.

Forget The Fed, Libor Is The Story Of The Year (ZH)

We’ve been saying it for over a month: the most important, if widely underappreciated, factor for risk assets has been the surge in Libor and the blow out in the Libor-OIS spread, or short-term funding costs, which impacts everything from bank lending costs to the marginal cost of trillions in floating rate debt. Yesterday, Citi’s Matt King confirmed as much in a lengthy note explaining why the blowing out Libor, and Libor-OIS spread, are sending increasingly ominous signals: LIBOR is still the reference point for the majority of leveraged loans, interest-rate swaps and some mortgages. In addition to that direct effect, higher money market rates and weakness in risk assets are the two conditions most likely to contribute towards mutual fund outflows.

If those in turn created a further sell-off in markets, the negative impact on the economy through wealth effects could be greater even than the direct effect from interest rates. Now, another bank has joined the growing chorus of warnings over the soaring Libor and Libor-OIS. Jonathan Garner, Morgan Stanley’s Chief Strategist for Asia and Emerging Markets, told Bloomberg that the rising Libor rates is a bigger concern right now than a more hawkish Federal Reserve, and in fact, is “the story of the year.” As we have documented nearly daily, most recently yesterday, Libor has been rising since Feb. 7 for 31 consecutive sessions, reaching 2.2711% this morning, the highest since 2008. Meanwhile, its gap over risk-free rates, known as the Libor-OIS spread, has more than doubled since the end of January to 55.6 basis points, a level unseen since 2009.

“That’s a key reason why markets have struggled. The acceleration in the private borrowing market is the story of the year, not the Fed,” Garner told BloombergQuint. “What I think is really interesting is that in the private, LIBOR markets, the USD Libor has already moved far more aggressively than Fed Funds, so if you look at 6M USD Libor, it’s actually reached 2.375% whereas the Fed is likely to raise Fed Funds by a quarter of a point to 1.75%, so we’ve actually already for the interest rate that really determines corporate costs are experiencing a very significant increase in interest rates. So unless the Fed is in some ways super dovish, I think we’re already looking at a significant tightening of monetary policy in the US and in addition China is tightening monetary policy at the same time and this joint tightening is a key reason why we are so cautious on markets.”

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Jay Powell was hired to bore everyone to tears.

Fed’s Powell: Some Asset Prices Elevated, Overall Vulnerabilities ‘Moderate’ (MW)

Federal Reserve Chairman Jerome Powell on Wednesday said some asset prices are elevated but said there weren’t many risks from it to the financial system. While some asset prices are elevated, particularly “some” equity prices and pockets of commercial real estate, financial vulnerabilities are still not at extreme levels, Powell said. He didn’t identify where specifically in the stock market he saw elevated prices. “The current view of the [FOMC] is that financial stability vulnerabilities are moderate,” Powell said during his first press conference, in answer to a question from MarketWatch. It was “key,” Powell said, that the housing sector is not in bubble territory.

Powell said he was not worried about excess leverage in the financial sector. The banking sector and household balance sheets are in good shape, he said. While there are “relatively elevated levels of borrowing” in nonfinancial corporations, “nothing… suggests serious risks.” “Overall, if you put all that into a pie, what you have is moderate vulnerabilities in our view,” he added. Powell said the Fed had “some tools” to combat financial instability “and I think we certainly use them.”

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Time to quit Fed watching.

Federal Reserve Raises Interest Rates Again Amid ‘Strong’ Jobs Market (G.)

The Federal Reserve raised interest rates again on Wednesday, arguing that the US jobs market was “strong” and signalled it may accelerate the pace of increases next year. The quarter percentage point rise to a range of 1.5% to 1.75% was the sixth such increase since 2015 and comes as the Fed appears to be moving, slightly, more quickly to end an era of historically low interest rates that began during the last recession. The announcement came as the Fed chair, Jerome “Jay” Powell, gave his first press conference in the role he took over from his predecessor Janet Yellen in February. His surprise-free performance left US financial markets barely changed.

“The economic outlook has strengthened in recent months,” the Fed said in a statement. “Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate,” the Fed said in a statement. The rise, which was unanimously approved, comes after Congress passed two major bills that may spur the economy. In January Donald Trump signed off on a $1.5tn tax cut that reduces corporate and income tax rates. In February Congress agreed to a $300bn two-year increase in federal funding.

The Trump administration has claimed the tax cuts will fuel US economic growth above 3% next year, significantly above the 2.5% growth it achieved last year, but Powell said the Fed did not expect growth above 3% in the near future. “We have been through many years of growth rate around 2%,” said Powell. While there are elements in the tax cuts that could boost growth “we don’t know how big those effects will be”.

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Must have been some long sessions with the legal team. And people were asking “where’s Mark?”.

Mark Zuckerberg Says He’s ‘Really Sorry’ (CNBC)

Facebook CEO Mark Zuckerberg has explicitly apologized forthe Cambridge Analytica data scandal that’s been making headlines over the last several days. “This was a major breach of trust, and I’m really sorry that this happened,” Zuckerberg said on CNN Wednesday evening, elaborating on the statement he posted to his Facebook page earlier in the day. People had criticized Zuckerberg on social media for not explicitly apologizing in his earlier post. Zuckerberg was addressing bombshell reports by The Observer and The New York Times published over the weekend alleged that London-based firm Cambridge Analytica improperly gained access to the personal data of more than 50 million users.

Since the news broke, Facebook’s stock price has plummeted, U.K. officials have opened a probe, and U.S. lawmakers have called for Zuckerberg to appear before a panel to address its handling of user data. Zuckerberg told CNN that he would be willing to testify before Congress, though he avoided committing himself to an appearance. “What we try to do is send the person at Facebook who will have the most knowledge,” Zuckerberg said. “If that’s me, then I am happy to go.” One of the issues at the heart of the incident is whether or not Facebook has done enough to safeguard users’ personal information.

In 2013, Cambridge University researcher Aleksandr Kogan created an app called “thisisyourdigitallife” that harvested Facebook information from the roughly 300,000 people who used it as well as from their friends. Facebook changed its policies in 2014 to limit the data third-party apps could receive, but there were still tens of millions of people who would have had no idea that Kogan’s app had collected their data in the first place, or that it had ultimately been passed to Cambridge Analytica.

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If this ever comes before a real court, you get Pandora’s box. Expect Facebook to pay before a court date. And that will lower the shareholders’ shares even more.

Facebook Shareholders Sue As Share Price Tumbles (Ind.)

Facebook is being sued by US investors over the company’s tumbling share price after allegations that millions of users’ profile data had been harvested. A class-action lawsuit was filed in federal court in San Francisco on Tuesday after Facebook shares fell as much as 5.2% on Monday. By Wednesday the shares had crashed by 11%, wiping more than $57bn (£41bn) off the company’s value as it deals with the erupting privacy scandal. The undisclosed number of Facebook shareholders, led by Fan Yuan, say that they suffered losses after a whistleblower told The Observer that UK-based data company Cambridge Analytica had harvested and improperly used profile data of 50 million Facebook users.

“As a result of [Facebook’s] wrongful acts and omissions, and the precipitous decline in the market value of the company’s common shares, plaintiff and other class members have suffered significant losses and damages,” the lawsuit said. The legal action represents investors who bought Facebook shares between 3 February 2017 and 19 March 2018 – two days after news of the Cambridge Analytica scandal broke. It alleges that throughout the period, Facebook made “materially false and misleading statements regarding the company’s business, operational and compliance policies”.

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Not even that part of the narrative is true.

App Developer Kogan Calls Facebook’s Side Of The Story A “Fabrication” (BBG)

The app developer who surreptitiously gathered and shared 50 million Facebook user profiles says the company was officially notified of his actions but failed to stop it. Aleksandr Kogan, a research associate in the department of psychology at the University of Cambridge, turned over his Facebook-generated personality research to the political consulting firm Cambridge Analytica. In an email to university colleagues he called Facebook’s side of the story a “fabrication.” He said that in 2014 he used an official Facebook Inc. platform for developers to change the terms and conditions of his app from “research” to “commercial use,” and that at no point then did the social media company object.

Kogan’s position contradicts Facebook’s stance that Kogan violated the company’s terms and services and then lied about it. “We clearly stated that the users were granting us the right to use the data in broad scope, including selling and licensing the data,” Kogan wrote in a March 18 email obtained by Bloomberg. “These changes were all made on the Facebook app platform and thus they had full ability to review the nature of the app and raise issues.” [..] Kogan’s interpretation of events is potentially critical in better understanding what Facebook knew and when. [..] In the email, Kogan says that he hadn’t been interviewed by the FBI or any other law enforcement agencies, but would have no problem doing so.

He wrote that his app originally started as an academic project but turned to a commercial venture after being approached by the U.K. affiliate of Cambridge Analytica, SCL Group, around 2013. He then formed a company called Global Science Research Ltd, and changed the name of his app to GSRApp, while also modifying the privacy terms from academic to commercial.

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Sue the intelligence community. Much more effective.

Austrian Lawyer Took on Facebook in Europe. He’s Ready to Do It Again (BBG)

Seven years ago, Max Schrems took on Facebook, ultimately winning a court order that led to stricter rules on international data transfers for the social network and other American tech giants. If your company has any contact with residents of Europe, he has this message: You could be next. Regulatory changes coming this spring “open unprecedented doors,” says Schrems, a 30-year-old lawyer from Austria. “Companies looking to make extra money with people’s data are on my target list.” The EU measure, called the General Data Protection Regulation, permits mass lawsuits similar to class actions in the U.S., he says, allowing him to increase pressure on companies to protect consumer data.

Schrems founded a group called noyb—for none of your business—that he aims to use as a vehicle for lawsuits he’ll start filing as soon as the rules kick in on May 25. He set up a crowdfunding campaign for noyb that has raised more than €300,000 ($370,000) from 2,500 contributors as well as the city of Vienna, labor unions, and small tech companies—and he already has a stack of potential complaints sitting on his desk in the small office he’s rented around the corner from Vienna’s opera house. “We will look for the bigger cases, where we’ll have the greatest impact,” he says.

[..] Schrems examined how Facebook treats customer data and says he discovered that the company didn’t fully purge information users had deleted. Although he never submitted the assignment, his research became the core of 22 complaints to data protection authorities in Ireland, Facebook’s European base. Schrems created a website called europe-v-facebook.org—but insists he bears no grudge against the social network. The company is “more of a test case,” he says. “I thought I’d write up a few complaints. I never thought it would create such a media storm.”

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Almost half of them voted to be spied on.

Dutch Referendum On Spy Agency Tapping Powers Result Too Close To Call (R.)

Dutch voters were on track to narrowly reject a nonbinding referendum granting spy agencies the power to install bulk taps on Internet traffic. With 83% of the vote counted in the early hours of Thursday, the “no” vote was 48.9%, against 47.2% “yes.” An exit poll by national broadcaster NOS had showed the yes camp narrowly winning. Though the referendum is nonbinding, Prime Minister Mark Rutte had vowed to take the result seriously, without committing to abide by the result. The tapping law has already been approved by both houses of parliament.

Dubbed the “trawling law” by opponents, the legislation will let spy agencies install taps targeting an entire geographic region or avenue of communication, store information for up to three years, and share it with allied spy agencies. Digital rights group Bits of Freedom, which had advised a “No” vote, said the law is not all bad, given that taps must be approved beforehand by an independent panel. But the group said it still fears privacy violations and urged that the law be reconsidered. Before the vote, Rutte said the law was needed to prevent terrorist attacks. “It’s not that our country is unsafe, it’s that this law will make it safer,” he said.

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You don’t compare the country that suffered most in WWII, to those who caused that suffering.

‘Scary’ That Boris Johnson Represents A Nuclear Power – Russia (RT)

British foreign minister Boris Johnson is poisoned with hatred and anger so it is scary that he represents a nuclear power, Russia’s foreign ministry spokeswoman said on Wednesday. Maria Zakharova was commenting on Johnson’s earlier statement that compared Russia’s hosting of this year’s World Cup to the 1936 Olympics in Nazi Germany. “Any such parallels and comparisons between our country, that lost millions of lives in the fight against Nazism, fought with an enemy on its own territory, and then liberated Europe [and Nazi Germany] are absolutely unacceptable,” she said, in a statement published on Facebook.

The Russian ministry spokeswoman then added that such statements are “unworthy of a head of a European state’s diplomatic service … It is clear that [Boris Johnson] is poisoned with hatred and anger,” she said, also denouncing his words as “unprofessional” and “rude.” It is “scary” that “this man is a representative of a nuclear power that bears a special responsibility for its actions in the international arena as well as for the preservation of international peace,” Zakharova said. Now “it is beyond the shadow of a doubt that all London’s actions … were aimed at setting up a spectre of an enemy out of Russia, using any, even the most absurd reasons,” Zakharova said. She then added that British politicians are now apparently seeking to fully boycott the 2018 World Cup in Russia.

Earlier on Wednesday, Johnson once again blatantly accused Russia of being behind the poisoning of the former double agent Sergei Skripal and his daughter, as he was being quizzed by the Commons foreign affairs committee. He also said he believes the comparison between the World Cup and the 1936 Olympics “is certainly right” just because the sporting event would somehow “glorify” Putin, from his point of view.

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How will Britain not be like Greece in a few years time?

Scale Of UK Problem Debt At ‘Epidemic Levels’ – Archbishop Of Canterbury (Ind.)

The scale of problem debt is at “epidemic levels”, the Archbishop of Canterbury has said. The Most Rev Justin Welby made the comments in the foreword of a report compiled by debt help charity Christians Against Poverty (CAP). The report said, on average, CAP clients’ outstanding debt equates to 96% of annual household income when they seek help. Mr Welby, the charity’s patron, says in the report: “In 2017 we have seen warnings from many of our financial institutions about the scale of consumer borrowing. “Achieving economic stability together with economic justice for all is too easily overlooked.” He continues: “The scale of problem debt in our country is at epidemic levels.

“Jesus calls us to be hope-bringers and peace-givers. Where there are still lives filled with an oppressive hopelessness, where darkness has a grip, our mission is not done.” In 2013, the archbishop voiced concerns about energy price hikes and he also said in that year that the Church of England wanted to drive payday lenders out of business through the creation of credit unions. [..] The CAP report said that for people in severe financial hardship, a home may not be a place of refuge but rather a place without food in the cupboard, without heating, hot water or working household essentials. More than 1,000 CAP clients were asked about life before they got help from the charity. The research found nearly four in 10 (37%) clients were afraid to leave the home, 60% were afraid to answer the door and 73% were too scared to answer the phone.

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One day after the report about disappearing insects and birds in France, Brussels votes for more pesticides and GMOs. Nobody wants them.

EU Approves Buyout Of Monsanto By German Chemical Firm Bayer (R.)

German conglomerate Bayer won EU antitrust approval on Wednesday for its $62.5bn (£44.5bn) buy of US peer Monsanto, the latest in a trio of mega mergers that will reshape the agrochemicals industry. The tie-up is set to create a company with control of more than a quarter of the world’s seed and pesticides market. Driven by shifting weather patterns, competition in grain exports and a faltering global farm economy, Dow and Dupont, and ChemChina and Syngenta had earlier led a wave of consolidation in the sector. Both deals secured EU approval only after the companies offered substantial asset sales to boost rivals.

Environmental and farming groups have opposed all three deals, worried about their power and their advantage in digital farming data, which can tell farmers how and when to till, sow, spray, fertilise and pick crops based on algorithms. The European Commission said Bayer addressed its concerns with its offer to sell a swathe of assets to boost rival BASF [..] “Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger,” European Competition Commissioner Margrethe Vestager said in a statement. “In particular, we have made sure that the number of global players actively competing in these markets stays the same.”

[..] Vestager said the Commission, which received more than a million petitions concerning the deal, had been thorough by examining more than 2,000 different product markets and 2.7 million internal documents to produce a 1,285-page ruling. [..] Online campaigns group Avaaz criticised the EU approval. “This is a marriage made in hell. The Commission ignored a million people who called on them to block this deal, and caved in to lobbying to create a mega-corporation which will dominate our food supply,” Avaaz legal director Nick Flynn said.

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Mar 012018
 
 March 1, 2018  Posted by at 11:03 am Finance Tagged with: , , , , , , , , , , ,  


Paramount Theater, Times Square NYC 1956

 

Donald Trump Stuns Allies By Signalling Backing For Tighter Gun Control (G.)
Members of Congress Are Petrified of The NRA, Says Trump (Ind.)
Where Did The Republican Trump-Haters Go? (BBC)
This Has Predicted Every Market Crash in History (Bonner)
US January Pending Home Sales Crash Most Since 2010 (ZH)
Hawk Or Dove? Fed’s Powell Showed Markets Both Sides In Debut (R.)
Trump Says US Will Use “All Available Tools” To Pressure China On Trade (BBG)
South Korea Cuts 68-Hour Working Week (G.)
John Major Tears Into Theresa May’s ‘Grand Folly’ Brexit Strategy (Ind.)
Russia Says US Is Training Europe To Use Nuclear Weapons Against It (CNBC)
American Hellenic Institute Urges Trump To Condemn Turkish Aggression (K.)
Greece Loosens Capital Controls, Raises Cash Withdrawal Limit (R.)
Greek Jan-Feb 2018 Retail Sales Down 8.8% y-o-y (K.)

 

 

I don’t normally like to open Debt Rattles with politics, but this leads the news.

Trump’s stance here should be a huge opening for Democrats, but it can’t be: they‘re too far gone in their demonizing of him. So if nothing happens -again- you’re going to have to wonder whose fault that is.

Note: a first reaction to a school shooting is easy, but you are talking fiddling with about the US constitution here.

Donald Trump Stuns Allies By Signalling Backing For Tighter Gun Control (G.)

Donald Trump has repeatedly endorsed a series of gun control proposals that put the Republican president at odds with the National Rifle Association and stunned lawmakers within his own party. The president made the remarks during an extraordinary, hour-long White House meeting on Wednesday with congressional Republicans and Democrats who are under pressure to address gun violence in the aftermath of the massacre at a Florida high school earlier this month. During the meeting, Trump called for a “beautiful” comprehensive bill that would expand background checks on gun purchases, remove guns from the hands of the mentally ill, bolster security on school campuses and restrict young people from purchasing certain weapons.

Within hours of the meeting’s conclusion, conservatives and some Republicans turned on Trump, who was elected with broad support from the gun lobby and claimed on Wednesday that the National Rifle Association had “no bigger fan”. Breitbart, the far-right news organization that fanned the flames of Trump’s rise, denounced the president as a “gun grabber” who “cedes” to Democrats. [..] Trump, who ran the meeting like a boardroom CEO, pointing at lawmakers for updates on their legislation, called on Congress to be “very strong” on background checks, repeatedly offering his support for a plan that failed to pass the Senate in April 2013, months after a gunman killed 20 young children and six staff members at Sandy Hook elementary school.

“You have to be very, very powerful on background checks. Don’t be shy,” Trump said during the televised session. He added: “I’d rather have you come down on the strong side than the weak side. The weak side is easier to do.” Two senators, Democrat Joe Manchin and Republican Pat Toomey, both of whom attended the meeting, plan to reintroduce their bill that would have imposed universal background checks for commercial gun purchases, including at gun shows and over the internet. 84% of Americans favor such a law [..] In a surprising exchange with Toomey, Trump asked if his measure included a provision to raise the age to buy assault weapons from 18 to 21. Toomey replied that it did not, and Trump shot back: “You know why? Because you’re afraid of the NRA.”

Trump rejected a demand by conservatives in the House that this so-called Fix Nics bill be paired with controversial concealed carry legislation, which is favoured by the NRA and would loosen restrictions by enabling gun owners with concealed-carry permits in their home states to take their firearms across state lines. “If you add concealed carry to this, you’ll never get it passed,” Trump told Steve Scalise, the House majority whip, who was last summer by a gunman targeting a congressional baseball practice. “Let it be a separate thing.” Trump repeatedly berated his Republican colleagues, accusing them of being afraid of the NRA, and appeared to take pleasure in stating his willingness to take on the gun lobby. “Some of you people are petrified of the NRA. You can’t be petrified,” he said.

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And they get their funding there.

Members of Congress Are Petrified of The NRA, Says Trump (Ind.)

President Donald Trump has accused members of Congress of being afraid of the National Rifle Association (NRA), as he called for an increase in the minimum age for buying a rifle. “[The NRA] has great power,” Mr Trump said at a bipartisan meeting with members of Congress on school safety. “They have great power over you people. They have less power over me. I don’t need it. What do I need? But I’ll tell you, they are well-meaning … We have to do what is right.” Members of Congress have again been anxious to find a solution to prevent mass shootings after an alleged 19-year-old gunman on Valentine’s Day open fired at Marjorie Stoneman Douglas high school in Florida, killing 17 people.

On the first day students of the school resumed their lessons following the shooting, several legislators gathered at the White House to discuss school safety and legislation aimed at combatting gun violence. One such proposal, drafted by Republican Senator Pat Toomey and Democratic Senator Joe Manchin, is primarily focused on expanding background checks for gun purchases. Mr Trump asked Mr Toomey about a proposal to raise the age limit for purchasing assault weapons from 18 to 21, a measure the NRA does not support.

“Now, this is not a popular thing in terms of the NRA, but I’m saying it anyway,” Mr Trump said. “Right now, you have to wait to buy a handgun until you’re 21, but you can buy the type of weapon used in a school shooting at 18. I can say the NRA is opposed to it… These are great patriots, they love our country, but that doesn’t mean we have to agree on it.” Mr Toomey said the age issue is not addressed in his bill with Mr Manchin. “You know why, because you’re afraid of the NRA,” the President responded.

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This fits in nicely with the gun issue. Scott “Dilbert” Adams’ view on Twitter: “Persuasion Phase 1 is complete. He’s coming for Democrats next.”

Where Did The Republican Trump-Haters Go? (BBC)

Once upon a time there was an active, vocal resistance among conservatives to the prospect of Donald Trump’s presidency. One year in, and the signs of dissent are rapidly fading. On Friday morning at the Conservative Political Action Conference on the outskirts of Washington, DC, Donald Trump took the stage and reminded the packed hall just how far he’d come. “Remember when I first started running?” the president asked. “People said, ‘Are you sure he’s a conservative?’ I think I proved I’m a conservative.” Mr Trump then launched into nearly an hour and a half of his trademark campaign-style oratory, often acknowledging that he was deviating from his “boring” speech text. On script and off, however, it was clear his intended objective was to drive home the point that he has governed as a true conservative.

He boasted of his tax cuts, right-wing judicial nominations, regulatory rollbacks and defence of religious liberty. Those are the sort of accomplishments attendees of this annual conference of young Republicans, grassroots activists, party functionaries, conservative media pundits, assorted merchants and special interests longed for through eight years of the Obama presidency, and now they’re getting. That’s got to make them thrilled, right? Well, sort of. According to straw poll of conference attendees, 93% approve of the job Mr Trump is doing in the White House. It’s a number not too far from the 80% of Republicans across the US who continue to tell pollsters they support the president. That, as the president acknowledged, was not always the case.

In 2016 – at the beginning of his long march to the Republican nomination and the presidency, Mr Trump abruptly cancelled an appearance at Cpac when faced with the prospect of a walkout from “never-Trump” conservatives. [A 2015] straw poll had Mr Trump as the presidential pick of just 3.5% of attendees, in eighth place, far behind libertarian-leaning Senator Rand Paul’s 25.7%. Another Republican presidential hopeful at that conference, former Texas Governor Rick Perry, would just a handful of months later describe Mr Trump’s politics as “a toxic mix of demagoguery and mean-spiritedness and nonsense” and call his candidacy a “cancer on conservatism”. Last week, Mr Perry – now Mr Trump’s energy secretary – was back at Cpac, referring to himself as “footsoldier in the army”. Donald Trump’s army, that is.

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Should that say “predicted after the fact”? (From Bill Bonner, Mish and Semper Augustus)

This Has Predicted Every Market Crash in History (Bonner)

“Buy the dip” has worked for the last 38 years. And now, investors are more than 100% convinced that it will work again. But they are wrong. Semper Augustus: “Every major stock market decline and every recession in the last 100 years was preceded by the Federal Reserve raising short-term interest rates by enough to provide the pin to prick the balloon. Note the emphasis on every. Yes, there have been periods where the Fed raised rates and a recession didn’t ensue. Everyone knows the famous saying about the stock market having predicted nine of the past five recessions! That may be true, that rising rates don’t necessarily cause a recession. But as an investor, you must be aware that every major stock market decline occurred on the heels of a tightening phase by the Fed. More importantly, there have been no substantive Fed tightening phases that did not end with a stock market decline”.


Going back to 1950, every U.S. recession (gray shaded area) has been preceded by the Fed hiking interest rates

A little debt may be a good thing; a lot of it is not. At a certain point, you have more than “too much debt,” and it becomes toxic. Where exactly in the cycle we are, we don’t know. But our guess is we are already way beyond the place where we are fully indebted. This is an economy built on debt. The whole capital structure – stocks, bonds, and real estate – now depends on excess debt… and more of it. In a correction, the only way to stop stock prices from falling and the economy from shrinking is to bring in some more debt. But when you do that a few times, you are soon beyond Peak Debt… which is to say, you’re way over the legal limit.

Debt has been growing three to six times faster than income for more than an entire generation. This makes the old 1.5-to-1 ratio of debt to income seem quaint. It is now 3.5-to-1 nationwide. Which is why deficits still matter. Every penny in debt that we add now is a penny that cannot be repaid, not by any plausible combination of economic projections. Because there is no way to “grow your way out of debt” when your income is falling while your debt is still increasing. Instead, you have to suffer the indignities of a correction, including a major reset in the stock market. That’s what happens when stocks that are more than fully priced meet a debt load that is beyond 100% of capacity.

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As noted earlier, new home sales were down 33.3% in the northeast. Pending home sales feel by 9% there.

US January Pending Home Sales Crash Most Since 2010 (ZH)

After New- and Existing-Home-Sales have already disappointed, Pending Home-Sales just collapsed too (to the lowest since Oct 2014) to confirm January was a bloodbath for the real estate market. Pending Home Sales plunged 4.7% in January (massively below the 0.5% expected rise in sales) – this is the biggest drop since May 2010. Year-over-year Pending home sales are down 1.7%. Purchases fell 9% in the Northeast, 6.6% in the Midwest, 3.9% in the South and 1.2% in the West.

NAR is desperate to convince home-buyers and sellers that this is nothing but an inventory issue, but it is affordability that is the real driver here. “There’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. “With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment.” So, will higher rates break housing market momentum? The following chart suggest ‘yes’ – that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses…

And Homebuilder stocks are starting to look a lot less invincible…

As Bloomberg notes, economists consider pending sales a leading indicator because they track contract signings; purchases of existing homes are tabulated when a deal closes, typically a month or two later.

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Something for everyone. Useless.

Hawk Or Dove? Fed’s Powell Showed Markets Both Sides In Debut (R.)

Financial markets barely batted an eye on Tuesday when Jerome Powell’s first public statement as Federal Reserve chief saw daylight, interpreting it as a steady-handed commitment to the U.S. central bank’s policy of gradual interest rate increases. The calm evaporated about a couple of hours later, at 10:42 a.m. EST, when Powell, testifying before a U.S. House of Representatives committee, struck a bullish, and personal, tone on the strength of the economy. U.S. bond yields jumped as investors raised their bets for four rate increases this year, rather than the three that Fed policymakers projected in late December, and began asking one key question: Is a hawk or a dove now running the Fed?

“The message coming from the written portion of the testimony did not signal any change,” analysts from Barclays wrote on Tuesday, drawing a contrast with Powell’s live remarks that “point to a risk of a steeper policy rate path.” Fed policymakers consider their public statements an important tool in shaping public perceptions and, in doing so, making monetary policy more effective. Fed chiefs try to avoid off-the-cuff remarks that cause impromptu repricing, preferring to hew close to their job of representing the views of the Fed’s rate-setting committee and avoiding disclosing much about their personal opinions. Veteran Fed analysts were split over whether Powell had broken that unwritten rule in his remarks, which came just weeks after he took over from Janet Yellen.

“The tone of the testimony was definitely NOT hawkish,” said Cornerstone Macro economist and former Fed staffer Roberto Perli, who emphasized Powell’s written comments might be read as a willingness to allow the economy to run hot in order to boost inflation to the Fed’s 2% target on a sustained basis. “Powell more confident on growth, putting 2018 dots in play,” is how JP Morgan’s Michael Feroli summed up the day, referring to the quarterly “dot plot” of projected interest rates that Fed policymakers submit. Feroli argued that Powell’s “modestly hawkish” appearance in Congress strengthened the chance that policymakers’ rate outlook would rise when the central bank issues its next set of economic projections next month.

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Xi advocating against protectionism is a keeper.

Trump Says US Will Use “All Available Tools” To Pressure China On Trade (BBG)

President Donald Trump is warning the U.S. will use “all available tools” to prevent China’s state-driven economic model from undermining global competition, the latest warning to Beijing as America readies a host of trade actions. China hasn’t lived up to the promises of economic reforms it made when it joined the World Trade Organization in 2001, and actually appears to be moving further away from “market principles” in recent years, according to the president’s annual report to Congress on his trade-policy agenda. China’s “statist” policies are causing a “dramatic misallocation” of global resources that is leaving all countries poorer than they should be, said the report. Chinese President Xi Jinping has dispatched one of his top economic advisers, Liu He, this week to Washington to meet with senior administration officials amid signs of growing tension between the world’s two biggest economies.

“China is free to pursue whatever trade policy it prefers. But the United States, as a sovereign nation, is free to respond,” according to the report, which is prepared by the U.S. Trade Representative’s office. Xi has called for countries to avoid protectionism and stick to the current path of globalization. At the same time, Chinese officials are weighing raising tariffs on U.S. soybeans as tensions escalate. Trump’s warning comes as his administration considers a range of actions either directly aimed at China, or that could impact the Asian power. The president is weighing several options for curbing imports of steel and aluminum, and Trump has told confidants he’s considering a global tariff on steel of 24%, the most punitive alternative recommended by his officials. The administration is ready to act unilaterally if necessary to fight unfair trading practices, according to trade report.

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Well, it did get them the Olympics…

South Korea Cuts 68-Hour Working Week (G.)

Employees in one of the most overworked countries in Asia are about to get a break after South Korea passed a bill to reduce the typical work week in an effort to improve quality of life and boost employment. South Korea’s National Assembly overwhelmingly passed the law which cut the maximum weekly work hours to 52, down from 68. The law comes into force in July and will apply to large companies before being rolled out to smaller businesses. The cut was a campaign promise by President Moon Jae-in, who also secured a 16% increase in the minimum wage this year. The law faced opposition from businesses but was seen as necessary to improve living standards, create more jobs and boost productivity. It is also aimed at increasing the country’s birth rate, which hit record lows last year.

As South Korea’s economy boomed in the 80s and 90s, a workaholic culture took hold and the birth rate plummeted. Chung Hyun-back, the gender equality and family minister, has called the country’s working hours “inhumanely long” and said they were a factor in the South’s rapidly ageing society. South Koreans workers have some of the longest weeks in the developing world, behind only Mexico, according to data from the Organisation for Economic Co-operation and Development. The group of mostly developed economies does not include countries such as China and India, and developing countries tend to work more. But South Koreans still work about 400 more hours a year compared with workers in the UK and Australia, about 10 additional standard work weeks, despite having relatively similar average incomes.

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Just as she tries to strike a defiant pose…

John Major Tears Into Theresa May’s ‘Grand Folly’ Brexit Strategy (Ind.)

Former Conservative leader John Major has launched a devastating attack on Theresa May’s approach to Brexit, just 48 hours before the Prime Minister sets out her plans for future relations with the EU. In a significant intervention, Mr Major tore into Ms May’s negotiating red lines as “bad politics” and “grand folly” dictated by “ultra Brexiteers”. He demanded MPs be freed from the party whip and allowed to vote with their conscience on her final deal, and said Britain may need a second referendum to avoid years of damaging rows over Brexit. His explosive speech sparked a ferocious backlash from Tories that back hard Brexit, with one saying his arguments were “grubbing around in the weeds”.

The surgically timed intervention comes as Ms May prepares to reveal the final text of her next big Brexit speech to the Cabinet, before meeting European Council president Donald Tusk in Downing Street on Thursday. Mr Major’s intervention also appears to have been choreographed with another speech from ex-prime minister Tony Blair in Brussels on Thursday, in which the ex-Labour leader will address European politicians on Brexit. When the ex-Tory leader stood to make his speech on Wednesday, Ms May had already locked horns with Brussels negotiators who had in the morning published what she called an “unacceptable” draft withdrawal agreement.

Despite Ms May having repeatedly claimed she settled the withdrawal agreement last year, she argued in the Commons that a new draft had crossed her Brexit red lines. It was those very “red lines” that Mr Major took aim at when he began talking in London minutes later, claiming they had “boxed” Ms May in. He said: “They are so tilted to ultra-Brexit opinion, even the Cabinet cannot agree them – and a majority in both Houses of Parliament oppose them. “If maintained in full, it will be impossible to reach a favourable trade outcome.”

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The western press will simply continue to claim that Russia’s the aggressor, not NATO or the US. Case solved.

Russia Says US Is Training Europe To Use Nuclear Weapons Against It (CNBC)

Russian Foreign Minister Sergei Lavrov said Wednesday that the U.S. was still deploying “strategic arms” in Europe and was training European countries to use nuclear weapons, violating a major nuclear arms agreement called the Non-Proliferation Treaty (NPT). Lavrov said that nuclear disarmament was impossible without taking into account factors which destabilize “strategic stability and international security today,” including, he said, “the deployment of a global anti-missile system” and “the deployment of U.S. strategic arms in Europe and the continuing destabilizing practice of ‘joint nuclear missions,’ as they call them.” “As we all know, these nuclear missions violate the Non-Proliferation Treaty and non-nuclear states plan and take part in the U.S. exercises and learn how to use the nuclear weapons,” he said.

For its part, he said Russia had reduced its nuclear arsenal by 85% compared to the Cold War era. The Russian Foreign Ministry has complained about what it calls “joint nuclear missions” and says the U.S. has many nuclear weapons located in Europe. It also says the U.S. is training European countries to use these weapons. Last April, the foreign ministry issued a statement in which it said that “Washington’s approach to compliance with its obligations under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) is still of great concern. The U.S. and its non-nuclear NATO allies continue their nuclear skill training as part of the so-called “nuclear sharing”,” it said.

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But Merkel wants her refugee treaty. Or she’s done.

American Hellenic Institute Urges Trump To Condemn Turkish Aggression (K.)

The American Hellenic Institute (AHI) sent a letter to US President Donald J. Trump in the wake of acts of Turkish provocation and aggression in the eastern Mediterranean and broader region that have dire implications to American security interests. In the February 27 letter, AHI President Nick Larigakis requests President Trump to condemn strongly Turkish aggression and acts of provocations that have been directed at the United States, Greece, Cyprus, and international oil and gas companies – all of which have occurred in the month of February.

Larigakis cites: a Turkish coastguard vessel colliding with a stationary Greek coastguard vessel, the harassment of Italian oil company Eni’s surveying vessel by Turkish warships, which threatened to sink Eni’s surveying vessel because it was on its way to survey for energy resources in the exclusive economic zone of Cyprus; and Turkish President Erdogan’s threat of an “Ottoman slap” to United States military forces if they continued to partner with Syrian Kurds in Syria.

In addition, Larigakis raised the concern among NATO allies about Turkey’s purchase of four divisions of S-400 missiles from Russia and how it potentially subjects Turkey to US sanctions. “Turkey’s aggressive and provocative actions directed at the United States and U.S. allies, Greece and Cyprus, are overt, egregious and dangerous. I urge the administration to act to uphold the rule of law and to call on Turkey, the provocateur of these tensions, to cease and desist with its aggressive actions that are a threat to peace and stability and are not in the best interests of the United States,” Larigakis concludes.

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Just about nobody has that kind of cash to withdraw anymore. Thanks a lot.

Greece Loosens Capital Controls, Raises Cash Withdrawal Limit (R.)

Greece on Wednesday moved to ease capital restrictions imposed since the summer of 2015, raising the monthly limit of cash that can be withdrawn from bank accounts by 28%. Athens first imposed capital controls in July 2015 to stem a flight of cash from its banks at the height of a debt crisis which led to its third financial bailout since 2010. Based on a finance ministry decree published in the government’s gazette, individuals will be allowed to withdraw lump sums of up to 2,300 euros in cash per month from bank accounts from 1,800 euros currently, effective from March 1.

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Just imagine the added job losses that come with this. And still, as I keep on saying, things can still only get worse from here.

Greek Jan-Feb 2018 Retail Sales Down 8.8% y-o-y, Up To 20% In Cities (K.)

Retail sales in the first two months of the year were down some half a billion euros on the same period in 2017, as households were left with less spending money after their Christmas shopping and purchases made during the Black Friday promotional event at the end of November. According to a survey conducted by the Hellenic Confederation of Commerce and Enterprises (ESEE), retail turnover declined this past January and February by 8.8% compared to 2017. In absolute figures, this reduction translates into the loss of 484 million euros, with turnover up until Wednesday amounting to 5.02 billion, against 5.5 billion in January-February 2017.

In certain areas of the country the drop in sales turnover in the first two months of the year reached up to 40%, while out of Greece’s 65 traders’ associations, only one reported an increase from last year. In the cities of Athens and Thessaloniki, sales declined between 11 and 20% year-on-year. The ESEE survey showed that one in three enterprises offered discounts of between 21 and 40%, while two out of five offered discounts in excess of 40%.

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Feb 282018
 
 February 28, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Le moulin de la galette 1886

 

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)
The Albatross Of Debt Part 4 (David Stockman)
Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)
Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)
EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)
People in Sweden at Risk of Losing Access to Cash Altogether (BBG)
May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)
“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)
Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)
World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)
Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

 

 

The news about Powel’s first speech is as boring as the man himself. “We’re doing so well I just gotta wear shades..”

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)

Federal Reserve Chairman Jerome Powell played down concerns about recent market volatility, arguing Tuesday that the dramatic swings do not weigh heavily on his outlook for the economy and maintaining his expectation for further gradual increases in interest rates. In Capitol Hill testimony, Powell emphasized that the job market remains robust, consumer spending is solid and wage growth is accelerating. He also highlighted gains in U.S. exports and stimulative fiscal policy as new “tailwinds” for the economy. “After easing substantially during 2017, financial conditions in the United States have reversed some of that easing,” he said in prepared remarks. “At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation. Indeed, the economic outlook remains strong.”

Powell’s appearance before the House Financial Services committee was his first as the powerful chairman of the world’s most influential central bank. The Fed has been aiming to boost inflation to 2%, but the recent pickup in monthly readings has spooked some investors who worry the central bank might overshoot its target. Instead, Powell’s remarks suggested the firmer data give Fed officials confidence they will actually hit a goal that has long proved elusive. He characterized inflation as “low and stable.” “Despite the recent volatility, financial conditions remain accommodative. At the same time, inflation remains below our 2% longer-run objective. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”

Read more …

Stockman has the best assessment of Powell. A longtime and clueless Fed puppet with no opinion of his own.

The Albatross Of Debt Part 4 (David Stockman)

Donald Trump is all about delusional and so are the casino punters. They keep buying what the robo-machines are buying, which, in turn, persist in feasting on the dip because it’s there and because it’s worked like a charm for nine years running. So doing, the punters have become downright reckless. After all, the market was already sky high last January – trading at 23X earnings on the S&P 500 and resting precariously on a record $554 billion of margin debt . Yet in order to load up on even more of these ultra risky shares, punters have since added $112 billion to their already staggering margin accounts, thereby helping to propel the S&P index to a truly ludicrous 27X by the end of January 2018.

And therein lies the true danger of the Fed’s 30-year long regime of Bubble Finance and the $67 trillion of debt it has piled upon the US economy. To wit, it has completely unmoored Wall Street from the main street economy, meaning that the speculative momentum and internals of the casino are operating in free flight: They will just keep levitating financial asset prices higher until some powerful shock triggers another meltdown of the type experienced during 2008, 2000 and 1987.

We happen to believe strongly that a bond market “yield shock” will be the crash-trigger this time around and for a self-evident reason. The central banks of the world have unleashed a credit monster – $67 trillion in the US, $40 trillion or more in China and $230 trillion on a global basis—and know they must finally stop the relentless monetization of existing debt and other assets. The leadership for that task falls to the new Fed Chairman, Jerome Powell, who is a dyed-in-the-wool Keynesian and lifetime crony capitalist bubble rider. Indeed, during the 45 meetings during which he served as a member of the Bernanke-Yellen Fed, he did not dissent a single time.

So he now owns the epic bubble generated by that madcap regime of massive money printing and drastic interest rate repression, but through his Keynesian beer goggles Powell is thoroughly clueless about the resulting giant disconnect between main street and Wall Street. Accordingly, he seems to think that there is a strong full-employment economy on main street, when it’s nothing of the kind; and a reformed, prudently regulated banking system at the center of Wall Street, when in fact it’s teeming with the fruits of relentless speculation – FANGS, leveraged ETFs, options gambling, risk parity trades, structured finance deals loaded with hidden risk and debt and countless more.`

In other words, the Fed’s new chairman avers that there is smooth sailing ahead, even suggesting to Congress today that the US economy is blessed with considerable tailwinds – including exports and fiscal policy! We will address that tommyrot below, but what’s ahead is tumult, not smooth. That’s because the disconnect between a flat-lining main street economy and Wall Street’s bubble ridden financial house of cards is blatantly unstable and unsustainable. Indeed, this fraught condition, which Powell and his Keynesian posse fail to see, will soon give rise to a thundering upheaval triggered by the Fed’s own action.

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And Draghi too just keeps claiming the economy is doing great, and it’s due to him.

Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)

A third month of slowing inflation in the euro-area has given European Central Bank President Mario Draghi ammunition to ward off the hawks a little while longer. The rate of price growth slowed to 1.2% this month from 1.3%, dropping to its weakest since 2016. The core measure was unchanged at 1%. The figures follow a series of releases that have checked the economy’s thundering momentum at the start of 2018, which had emboldened policy makers who want a faster unwinding of the central bank’s crisis-era monetary stimulus. Draghi emphasized to European lawmakers this week that an expansionary policy is still warranted even as the economic situation is “improving constantly.”

At the same time, he’s more confident that declining unemployment will boost pay and inflation eventually, even if the rate remains below the ECB’s target of just under 2% for now. The ECB’s Governing Council meets next week and is likely to discuss a change in its policy language to pave the way for an end of quantitative easing. Executive Board member Benoit Coeure – an architect of the program who has more recently taken a hawkish turn – said last week that the ECB can afford to slow bond purchases, as long as it gives clear guidance on the path of interest rates. Bundesbank President Jens Weidmann, who has long argued in favor of unwinding stimulus, chimed in on Tuesday, saying in a Bloomberg TV interview that the ECB’s guidance on interest rates is “rather vague” and could be strengthened as the end of bond buying approaches.

The European Commission said on Tuesday euro-area economic sentiment slipped for a second month in February after touching a 17-year high in December. Data last week showed business confidence in Germany and manufacturing and services activity in the euro area all weakened more than economists forecast. Such bumps along the road of Europe’s recovery from the ravages of its debt crisis underscore why Draghi is not yet ready to pare back support for the euro area.

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You mean the ones we bailed out, right?

Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)

Banks have the “right” to do the leveraged lending they want as long as it does not impair their “safety and soundness,” Joseph Otting, Comptroller of the Currency, said on Tuesday. Otting was speaking to an audience at the ABS Vegas conference co-hosted by SFIG, in response to a question from the audience about whether the OCC would be more lenient with banks about leveraged lending. The Government Accounting Office, the investigative arm of the US Congress, said last October that US bank guidelines on leveraged lending are subject to Congressional review, clearing the way for them to possibly be overturned. The GAO said the guidelines, which critics said have hampered the leveraged debt market, are under the purview of the Congressional Review Act of 1996, which they would not be if the GAO had deemed them to be less formal instruments of policy.

“As long as banks have the capital, I am supportive of banks doing leveraged lending,” said Otting. That stands even if leveraged lending activities transgresses guidelines, he said. “When (the idea of the) guidance came out – it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators,” Otting said. “But you have the right to do what you want as long as it does not impair safety and soundness. It’s not our position to challenge that.” US regulators said they are open to revising restrictions on leveraged lending, offering an olive branch to a Republican-controlled Congress keen to roll back banking regulations. The response from regulators indicated a desire to avoid a protracted battle with a Congress.

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Trump the anti-globalist. That should appeal to some people.

EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)

As the Trump administration considers what action to take on trade tariffs on steel and aluminum, EU and Chinese officials are considering taking aim at politically strategic products made in the U.S., such as bourbon and motorcycles. Of the options laid out by Commerce Secretary Wilbur Ross, the administration is considering the most wide-reaching penalty: slapping tariffs on all steel and aluminum imported into the U.S., not just imports from specific countries. The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands. Potentially in the EU’s sights: items such as Harley-Davidson motorcycles, whose corporate headquarters is in House Speaker Paul Ryan’s home state of Wisconsin.

Bourbon is another target, having enjoyed a surge in exports to the EU. Senate Majority Leader Mitch McConnell’s home state of Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission. Agriculture products such as cheese, orange juice, tomatoes and potatoes are also targets for retaliation. “The EU stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the U.S.,” a European Commission source tells CNBC. The counterpunch from China could land harder because of the scale of trade between the two countries and the reliance of American farmers on China as an export destination. China’s Ministry of Commerce is already investigating whether to limit imports of U.S. sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.

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NOW they find out: “Cash is important in a crisis situation…”

People in Sweden at Risk of Losing Access to Cash Altogether (BBG)

People living in the world’s most cashless society may soon lose their access to notes and coins. To avoid that extreme scenario, Swedish cash-handling provider Loomis wants authorities to force banks and retailers to continue accepting cash. The warning follows similar calls from the Swedish central bank, which is worried that the rapid disappearance of cash will ultimately lead to the disintegration of the infrastructure needed to use notes and coins and undermine its task to promote a safe and efficient payment system. “We have to have cars, vaults and all that, and in order to maintain the infrastructure we also need a base volume,” Loomis CEO Patrik Andersson said in an interview. He says Sweden’s more remotely populated areas in the north are most at risk of losing access to cash.

Such a scenario would be worrying in the event of natural disaster or a technological breakdown, with Swedes potentially unable to buy the basics needed to survive. “Cash is important in a crisis situation,” Andersson said. “Swedes don’t maybe have the insight to understand the effects of such a crisis, that it pervades the whole community.” A parliament committee reviewing the broader framework for the Riksbank plans to publish a special report this summer looking at the challenges posed by declines in cash usage. Riksbank Governor Stefan Ingves this week called for legal changes to safeguard the central bank’s governance of the payment system amid the rapid decrease in the use of cash. [..] The amount of cash in circulation in Sweden last year dropped to the lowest level since 1990 and is now more than 40% below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

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Much as you may wish this were to vanish from the news, it’ll drag on for a very long time.

May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)

Prime Minister Theresa May is preparing to reject the EU’s draft Brexit deal when it’s published Wednesday, a senior official said, as her government steps up its fight with the bloc over the terms of Britain’s departure. With just three weeks left to agree on the Brexit transition phase, the EU will unveil a legal text that’s likely to infuriate euroskeptics in May’s Conservative government, piling further pressure on the premier at a critical time. According to the senior official, May will take on the EU over two of its key proposals that are unacceptable to her government. These are allowing the European Court of Justice to oversee the final deal, and arranging a separate trading regime for Northern Ireland – which, although it could avoid a “hard border” with Ireland, would impose new barriers with mainland Britain.

Almost a year in since May triggered the U.K.’s withdrawal from the 28-nation club, talks have yet to begin on what kind of trade accord will follow. Time is running out to limit the damage this ongoing uncertainty will cause to British businesses, who want a status quo transitional phase to be agreed by the end of March at the latest, to help them prepare and adapt when Britain leaves in March 2019. Yet key conflicts remain unresolved between the U.K. and the EU negotiating teams. “I maintain the evaluation that I gave you three weeks ago, which is that in light of these divergences, that we haven’t achieved the transition,” EU chief negotiator Michel Barnier said Tuesday. His remarks raise the prospect that the deal will miss its crucial end-March deadline.

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Caitlin Johnstone has it right. It’s out leadership that has turned Syria into such a mess (like Lybia, Iraq), not Assad or Putin.

“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)

Arguing that the western war machine is a good way to bring about peace and justice is like arguing that a bulldozer is a useful tool for brain surgery. Arguing that the western war machine is a good way to bring about peace and justice in Syria is like arguing that the gasoline which was used to start a house fire can also be used to extinguish it. The cutesy fairy tale you will hear from empire loyalists is that what started out as peaceful protests slowly morphed into a battle between the Syrian government and various terrorist factions, with the west only backing the terrorists later on in the conflict. This is false. [..] This has never been about “saving children”; this is about money, power, and resources, which are all of course ultimately the same thing as far as the empire is concerned.

Longtime US rival Russia has recently been awarded exclusive rights to oil and gas production in Syria in return for its efforts in helping its longtime ally stop the regime change, a predictable step in the fight for fossil fuel dominance in the region. Syria’s border dispute with Israel over the Golan Heights means that Israel has every reason to want to keep Syria destabilized, not only because the Golan Heights contains oil but because it provides a third of Israel’s water supply. Bashar al-Assad also launched what he called his “Five Seas Vision” in 2004, a strategy to use Syria’s supreme geographic location to become an economic superpower. Such a plan wouldn’t sit well with the US hegemon, which can only maintain its dominance by keeping other nations down.

“Once the economic space between Syria, Turkey, Iraq and Iran becomes integrated, linking the Mediterranean, the Caspian Sea, the Black Sea and the Arabian Gulf, will not only be important in the Middle East,” Assad once famously said in 2009. “When these seas are connected, we will become the inevitable intersection of the whole world in investment, transportation, and more.” It’s not hard to imagine how the imperialists would suddenly accelerate the urgency of removing Assad once he began speaking like that. Go try and find anything damning about Bashar al-Assad in the western mainstream media prior to 2009. You’ll find a bunch of positive expressions, including a nomination for honorary knighthood in 2002 by British Prime Minister Tony Blair. Interesting how he then suddenly transformed overnight into a bloodthirsty sexual sadist who gets off on gassing children to death for no reason.

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The name dispute continues. Came upon a map recently (below), which explains quite well why Greeks don’t want FYROM to call itself Macedonia: 90% of former Macedonia is in Greece.

Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)

Several thousand protesters rallied in Skopje, the capital of the Former Yugoslav Republic of Macedonia (FYROM), late Tuesday for the government to call off talks with Greece aimed at settling a decades-long name dispute. The protesters marched peacefully from the main Orthodox cathedral in Skopje past the European Union office, chanting “Macedonia! Macedonia!” and waving national flags. Prime Minister Zoran Zaev’s 9-month-old center-left government has opened negotiations with Greece to resolve the dispute over the country’s name. Greece says the country’s name in its current form implies a territorial claim against its own region of Macedonia. Zaev has said he is willing to support a modified name. But the head of the so-called “World Macedonian Congress” group, Todor Petrov, told the protesters that changing the country’s name would be tantamount to committing treason.

“Our country has a name….To change it would mean that the Macedonian identity would be permanently lost,” he said. The rally was organized by several hard-line nationalist associations. The rally ended peacefully, but a Greek flag was burned during the march. Greeks also held a large rally in Athens earlier this month to reject a proposed compromise. Zaev has said he could accept a “geographical qualifier” in Macedonia’s name – such as “new”, “upper” or “north” – to forge a compromise, but insisted the new name must “respect the dignity” of people in both countries. Greece is also seeking changes in FYROM’s Constitution to eliminate what Athens considers tacit territorial claims. FYROM insists constitutional amendments made in 1995 already addressed Greek concerns.

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1) It’s crazy that we find this so special.

2) Shops have had plastic free aisles for many years, and in many places. Just not your supermarket.

3) That unfortunate photo makes it look as if everything is wrapped in plastic.

World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)

Shoppers in the Netherlands will get the chance to visit Europe’s first plastic-free supermarket aisle on Wednesday in what campaigners claim is an turning point in the war on plastic pollution. The store in Amsterdam will open its doors at 11am when shoppers will be able to choose from more than 700 plastic-free products, all available in one aisle. The move comes amid growing global concern about the damage plastic waste is having on oceans, habitats and food chains. Scientists warn plastic pollution is now so widespread it risks permanent contamination of the natural world. [..] Sian Sutherland, co-founder of A Plastic Planet, the group behind the campaign, said the opening represented “a landmark moment for the global fight against plastic pollution”.

“For decades shoppers have been sold the lie that we can’t live without plastic in food and drink. A plastic-free aisle dispels all that. Finally we can see a future where the public have a choice about whether to buy plastic or plastic-free. Right now we have no choice.” The aisle will open in the Amsterdam branch of the Dutch supermarket chain Ekoplaza. The company says it will roll out similar aisles in all of its 74 branches by the end of the year. Ekoplaza chief executive, Erik Does, has been working with the campaign for the past month and said the initiative was “an important stepping stone to a brighter future for food and drink”. “We know that our customers are sick to death of products laden in layer after layer of thick plastic packaging. Plastic-free aisles are a really innovative way of testing the compostable biomaterials that offer a more environmentally friendly alternative to plastic packaging.”

The aisle will have more than 700 plastic-free products including meat, rice, sauces, dairy, chocolate, cereals, yogurt, snacks, fresh fruit and vegetables. Campaigners say the products will not be anymore expensive than plastic-wrapped goods and will be “scalable and convenient”, using alternative biodegradable packing where necessary rather than ditching packaging altogether. They add the aisles will be a “testbed for innovative new compostable bio-materials as well as traditional materials such as glass, metal and cardboard.” Sutherland said: “There is absolutely no logic in wrapping something as fleeting as food in something as indestructible as plastic. Plastic food and drink packaging remains useful for a matter of days yet remains a destructive presence on the Earth for centuries afterwards.”

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Really? ‘Alarmed’? ‘Crazy’? They knew weeks ago the polar vortex was about to split. And still don’t know why that is. Keep it real.

Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

An alarming heatwave in the sunless winter Arctic is causing blizzards in Europe and forcing scientists to reconsider even their most pessimistic forecasts of climate change. Although it could yet prove to be a freak event, the primary concern is that global warming is eroding the polar vortex, the powerful winds that once insulated the frozen north. The north pole gets no sunlight until March, but an influx of warm air has pushed temperatures in Siberia up by as much as 35C above historical averages this month. Greenland has already experienced 61 hours above freezing in 2018 – more than three times as many hours as in any previous year. Seasoned observers have described what is happening as “crazy,” “weird,” and “simply shocking”.

“This is an anomaly among anomalies. It is far enough outside the historical range that it is worrying – it is a suggestion that there are further surprises in store as we continue to poke the angry beast that is our climate,” said Michael Mann, director of the Earth System Science Center at Pennsylvania State University. “The Arctic has always been regarded as a bellwether because of the vicious circle that amplify human-caused warming in that particular region. And it is sending out a clear warning.” Although most of the media headlines in recent days have focused on Europe’s unusually cold weather in a jolly tone, the concern is that this is not so much a reassuring return to winters as normal, but rather a displacement of what ought to be happening farther north.

At the world’s most northerly land weather station – Cape Morris Jesup at the northern tip of Greenland – recent temperatures have been, at times, warmer than London and Zurich, which are thousands of miles to the south. Although the recent peak of 6.1C on Sunday was not quite a record, but on the previous two occasions (2011 and 2017) the highs lasted just a few hours before returning closer to the historical average. Last week there were 10 days above freezing for at least part of the day at this weather station, just 440 miles from the north pole.


Snowstorm nears London Photo: NPAS

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Feb 242018
 
 February 24, 2018  Posted by at 11:21 am Finance Tagged with: , , , , , , , , , ,  


Arthur Rothstein Rear of interstate truck. Elko, Nevada 1940

 

Debt On Track To Destroy The American Middle Class (GoldT)
The Only Thing That Can Save Stocks Is QE (ZH)
Fed ‘Quite Likely’ To Require Large-Scale QE Again (ZH)
VIX Funds Face Fresh Scrutiny From US Regulators (BBG)
Xi Confidant Emerges As Front Runner To Head China’s Central Bank (R.)
Brexit To End London House Price Boom (Ind.)
UK Post-Brexit Plans Based On A “Pure Illusion”- EU (G.)
Ecuador Blames UK As Assange Talks Break Down (G.)
Europe to Wind Down Latvian Bank Targeted by U.S. Over Sanctions (BBG)
After New Incident Off Cyprus, EU Calls On Turkey To Stop Naval Aggression (K.)

 

 

Going down down down.

Debt On Track To Destroy The American Middle Class (GoldT)

Economists report the household debt to be at its highest in decades. Yet, at the same time, we are being told that the economy is doing great. Does anyone see a serious contradiction? In fact, the current economy only favors the wealthy owing to their flourishing financial assets such as stocks and bonds. Owing to the lack of real assets such as property and commodities, the middle and lower classes are becoming overwhelmed due to the serious consequences of the spending/debt cycle. American consumers have a collective outstanding household debt of about $13.15 trillion of which nearly $1 trillion is the credit card debt alone, households are truly on a debt binge. These figures should be a wake-up call to all the Americans. The convulsive household debt has surpassed the bubble of 2008 and is still escalating. The economy may not be doing so great, after all.

Compared to 2008, the automobile credit balances have increased to $367 billion whereas the outstanding student loans are around $671 billion. Moreover, 67% of household debts belong to consumer mortgages. In 2016, 25% of all the Americans purchased a new or used vehicle and two-thirds of them are repaying through high-interest, long-term loans. In fact, the consumer debt has exceeded their income for majority of the Americans. Consumers have become accustomed using easy credit to maintain a lifestyle unaffordable for them otherwise. If this trend continues, and facts indicate that it will, we will be facing a monumental credit crisis in the near future. A huge portion of credit card debt is the interest. Credit cards are a convenience and consumers readily pay for the privilege.

[..] The decline in automobile sales is already an indication of the future consumer debt crisis. If lenders continue to provide easy access to credit regardless of its looming default and delinquent potential, retail purchase will face a sharp decline in 2018. This will have serious consequences on the overall economy. The Federal Reserve and other global lenders are a significant contribution to the problem. They allow printing of trillions of dollars and yens for the lenders to distribute to the borrowing consumers at a high interest, leading to a worldwide inflation. All this printed wealth is merely an illusion yet it is raising the cost of living. Prices are rising at an alamingly faster rate compared to the consumer income. There is no increase in real assets. All this is but a mere mushrooming of debt.

The consequences of federal policy will be inescapable unless reversed and there are no signs of any reversal in near or distant future. At this rate, the consumers will soon face a critical financial bubble. Financial assets, such as stocks and bonds, risk losing substantial value. The wealthy can absorb the losses but the poor and middle class will face financial ruin. Consumers need to seriously consider the need to increase their “real” assets, such as real estate and commodities to prevent a long-term financial nightmare. The chart below shows how the real assets have curved to an all-time low.

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Gee, what a surprise.

The Only Thing That Can Save Stocks Is QE (ZH)

In the last 45 years, there have been seven periods of persistent US dollar and Treasury bond weakness and as BofAML notes, during six of those periods, stocks have been pressured significantly lower.

This could be a problem, as it’s happening again… and stocks are beginning to wake up to it…

There has only been one period in history when falling dollar and bond prices did not lead to slumping stocks…And that was when QE was expanded drastically in March 2009.

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Tightening and then not.

Fed ‘Quite Likely’ To Require Large-Scale QE Again (ZH)

Ahead of Fed Chair Powell’s first semi-annual monetary policy report to Congress next week (brought forward to 2/27), The Fed has released his prepared remarks warning that “valuations are still elevated across a range of asset classes” and fears “signs of rising non-financial leverage.” To wit: Looking at the key topic of inflation, and the labor market, the Fed found that U.S. labor market is “near or a little beyond” full employment in early 2018, and that while the pace of wage growth has been modest, “serious labor shortages” would probably give it an upward push. Ironically, and paradoxically for an “economy beyond full employment”, the Fed observes that “the pace of wage gains has been moderate; while wage gains have likely been held down by the sluggish pace of productivity growth in recent years.”

Regardless, the Fed clearly is concerned about labor supply-demand imbalances, and has even added a new word: serious, as in “serious labor shortages would probably bring about larger increases than have been observed thus far.” In a separate special section on financial stability, the Fed notes that overall vulnerabilities in the U.S. financial system remain moderate, while noting some spots where things are warming up. These include signs of increased leverage to the nonbank sector, noting greater provision of margin credit to equity investors such as hedge funds. Looking at financial imbalances, the Fed warns that “leverage in the nonfinancial business sector has remained high, and net issuance of risky debt has climbed in recent months. In contrast, leverage in the household sector has remained at a relatively low level, and household debt in recent years has expanded only about in line with nominal income.”

[..] Curiously, before Powell’s remarks were dropped, both Dudley and Rosengren were on the tape this morning talking super dovish about QE as “useful to have in the toolkit for those times when the short-term interest rate tool may not be available,” adding that The Fed is “quite likely” to require large-scale asset purchases again because real rates will remain low due to slow productivity and labor-force growth.

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Horse has left that barn ages ago.

VIX Funds Face Fresh Scrutiny From US Regulators (BBG)

U.S. regulators are scrutinizing this month’s implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse and other firms, several people familiar with the matter said. The Securities and Exchange Commission and the Commodity Futures Trading Commission have been conducting a broad review of trading since Feb. 5, when volatility spiked and investors lost billions of dollars, the people said. Among those looking into what happened are lawyers in the SEC’s enforcement division, which investigates firms for potential misconduct and fines them if it finds violations of securities laws, two of the people said. There is no indication thus far that specific companies, including Credit Suisse, are being probed.

The scrutiny puts a spotlight on a small corner of the $3.4 trillion exchange-traded fund industry that lets everyone from hedge funds to mom-and-pop investors engage in complex trading strategies. With losses now piling up, allegations of market manipulation are getting more attention and government watchdogs face questions about why small-time investors were permitted to buy such products in the first place. “The values of these exchange-traded products are based on a combination of futures, options and three indices. Quite the maze,” Democratic SEC Commissioner Kara Stein said Friday in a speech at a conference in Washington. “What troubles me is that oftentimes complex products fall into the hands of people who don’t fully understand them.”

SEC Chairman Jay Clayton told reporters at the same event Friday that he wasn’t concerned about how the market functioned during the steep decline in equities on Feb. 5 and in the two weeks since. He said it would be appropriate, however, to review which types of more complex investments are widely available to average investors. “The portfolio of products available to retail investors has changed dramatically and it’s worth taking a look at,” Clayton said.

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Tough job. Xi sets rates all by himself.

Xi Confidant Emerges As Front Runner To Head China’s Central Bank (R.)

Liu He, a Harvard-trained economist who is a trusted confidant of Chinese President Xi Jinping, has emerged as the front runner to be the next governor of the People’s Bank of China (PBOC), according to three sources with knowledge of the situation. Liu may be in a position to become one of China’s most powerful economic and financial officials ever, as he is already top adviser to Xi on economic policy and is also expected to become vice premier overseeing the economy. Liu would replace current PBOC chief, 70-year-old Zhou Xiaochuan, who is China’s longest-running head of the central bank, having taken the job in 2002. Zhou is expected to retire around the time of the annual session of parliament in March, sources previously told Reuters.

The change would be part of a wider government reshuffle following the 19th Communist Party Congress in October last year, during which Xi laid out his vision for China’s long-term development, and elevated his key allies. Speculation has been rife for months over the choice of the next central bank governor. Xi will have the final say, and the sources noted that while Liu is clearly the frontrunner he is not yet certain to get the job. Just before last October’s Congress, sources told Reuters that China’s banking regulator head Guo Shuqing and veteran banker Jiang Chaoliang were leading contenders for the PBOC job. But at the congress, the influence of the 66-year-old Liu continued to grow. He was elected into the 25-member Politburo, the second-highest tier in Beijing’s political power structure after the seven-member Politburo Standing Committee.

Sources previously told Reuters that Liu, a fluent English speaker, is set to become one of China’s four vice premiers and would oversee the economy and financial sector. Two of the sources said that Liu could serve concurrently as vice premier and head of the central bank.

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Brexit is not all bad.

Brexit To End London House Price Boom (Ind.)

UK inflation will outstrip gains in house prices this year and next, particularly in the capital, as uncertainty over Brexit and weak consumer spending power hits demand, a Reuters poll found on Friday. According to the latest quarterly Reuters poll of 33 housing market specialists, taken in the past week, property prices will rise 2.0% this year, much slower than the predicted 2.5% rise in general costs in the economy. In London – long the hotbed for foreign investors behind a decade of skyrocketing prices – the difference will be even starker: the average price is expected to fall 0.5% this year. Next year, house prices will rise 0.9% in London and 2.0 nationally, still both below the 2.1% expected inflation rate. In 2020, London prices will increase 2.0% and by 2.3% nationally. “A significant effect of Brexit is subdued investment confidence,” said Rod Lockhart at online mortgage lender LendInvest.

“Would-be sellers are holding onto assets for longer and buyers are being a little more diligent before committing to significant expenditures, all this against a backdrop of inflation-surpassing wage growth.” Most respondents in the poll said the Brexit vote had been negative for both turnover and prices in London but were split over whether it had been negative or had no impact nationally. Sterling is over 6% weaker than before the June 2016 vote to leave the EU, something that should make properties more attractive to foreign investors, who can take advantage of cheaper prices. But uncertainty over how Brexit divorce talks will pan out has deterred overseas buyers. “Foreigners get more pounds in their pockets, but the nation and its capital has lost some of its allure,” said Tony Williams at property consultancy Building Value.

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May the masochist.

UK Post-Brexit Plans Based On A “Pure Illusion”- EU (G.)

Theresa May’s reported agreement with her cabinet on a future trading relationship with the EU has been criticised as based on “pure illusion” by the European council president, Donald Tusk, as frustration with the UK erupted in Brussels. Reports that May’s inner cabinet had agreed on a policy of “managed divergence” during eight hours of talks at an awayday in Chequers were met with incredulity by EU leaders. Tusk told reporters on Friday: “I am glad the UK government seems to be moving towards a more detailed position. “However, if the media reports are correct, I am afraid the UK position today is based on pure illusion. It looks like the cake [and eat it] philosophy is still alive. “From the very start it has been a set principle of the EU27 that there cannot be any cherrypicking of single market à la carte. This will continue to be a key principle, I have no doubt.”

Speaking at a summit of EU27 member states in Brussels, to discuss the EU’s budget and leadership post-Brexit, Leo Varadkar, the Irish taoiseach, also insisted that the single market was “not à la carte”. It is believed the British government is seeking to maintain frictionless trade in some sectors by staying in lock-step alignment with EU regulation, while opening up the prospect of diverging in other areas in order to gain a competitive advantage in the international marketplace. “It is not possible for UK to be aligned to EU when it suits and not when it doesn’t,” Varadkar said. “The UK position needs to be backed up with real detail that can be written into a legal treaty with the EU. We are well beyond the point of aspirations and principle. We need detail.”

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Britain should be taken to The Hague for its involvement.

Ecuador Blames UK As Assange Talks Break Down (G.)

Talks between the UK and Ecuador over the future of Julian Assange at its London embassy have broken down, the South American country’s foreign minister has said. Maria Fernanda Espinosa suggested British officials had been unwilling to negotiate over the Wikileaks founder’s potential release. Earlier this month, a judge upheld an arrest warrant issued when Assange skipped bail as he fought extradition to Sweden in 2012. The 46-year-old has been at the embassy ever since because he fears extradition to the United States for questioning over the activities of WikiLeaks if he leaves. Espinosa said of the failed talks: “To mediate you need two parties, Ecuador is willing, but not necessarily the other party.”

Ecuador said it would continue to protect Assange’s rights, however there was a risk to his physical and psychological wellbeing after spending nearly six years in the building as a “refugee”. The country has assessed more than 30 similar cases in a bid to break the deadlock, including that of British-Iranian citizen Nazanin Zaghari-Ratcliffe, who is in prison in Iran accused of spying. This included options for granting diplomatic immunity, although Ecuador said it would continue to respect the UK’s laws. In November, Espinosa said Assange had been granted Ecuadorian citizenship. The foreign minister said Ecuador was trying to make Assange a member of its diplomatic team, which would grant him additional rights under the Vienna Convention on Diplomatic Relations – including special legal immunity and safe passage.

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All because of North Korea?!

Europe to Wind Down Latvian Bank Targeted by U.S. Over Sanctions (BBG)

European authorities moved to liquidate Latvia’s ABLV Bank after clients pulled assets from the lender following U.S. accusations that it laundered money. The ECB, which had already placed a freeze on payments by the lender, said that ABLV was failing or likely to fail, handing it over to Europe’s Single Resolution Board. That authority said a resolution of the bank, which generally means a sale or restructuring, isn’t in the public interest because neither ABLV nor its Luxembourg-based subsidiary provide “critical functions” and their failure won’t have a “significant adverse impact” on financial stability. ABLV was plunged into crisis after the U.S. Treasury this month proposed to ban it from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program.

The bank responded by saying the allegations are wrong and misleading and that it was working to provide information to the Treasury that would help to overturn the proposal. “The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said in a statement on Saturday in Frankfurt. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit-guarantee fund starts.” ABLV took a different view, saying it accumulated more than €1.36 billion over four business days to strengthen its liquidity and ensure 86% of its demand deposits. “The bank considers that it has fulfilled all requirements of the regulator in order to resume operation,” ABLV said. “It was absolutely sufficient for the bank to resume executing payments and meet all obligations toward its clients, yet due to political considerations the bank was not given a chance to do it.”

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Turkey threatens to fire on an Italian ship.

After New Incident Off Cyprus, EU Calls On Turkey To Stop Naval Aggression (K.)

Just a day after it said it won’t allow Cyprus to conduct a “unilateral” gas search off the Eastern Mediterranean island’s coast if Turkish Cypriots don’t also reap the benefits, Ankara ratcheted up tensions with Nicosia Friday when its warships threatened to use force against a drillship contracted to Italian energy giant Eni as it tried, again, to reach an area in Cyprus’s exclusive economic zone (EEZ) to commence exploratory gas drilling. Turkey has been obstructing the Saipem 12000 drillship from approaching an area in Block 3 of Cyprus’s EEZ since February 9, citing naval exercises. This week it announced it is reserving the area until March 10. Earlier in the month a Turkish gunboat rammed a Hellenic Coast Guard vessel near the eastern Aegean islet of Imia. Turkey’s aggression was raised by Greek Premier Alexis Tsipras and Cypriot President Nicos Anastasiades at the informal summit of EU leaders in Brussels Friday.

European Council President Donald Tusk told reporters after the meeting that the bloc was calling on Turkey to stop activities that have led to recent incidents in Greece and Cyprus, stressing that both countries have the “sovereign right” to explore for resources. He also said the EU will assess during March’s European Council meeting whether the conditions are ripe for a high-level meeting with Turkey in Varna on March 26. The drillship left the area after the incident and headed west for the city of Limassol, where it is expected to remain for a few days before sailing to Morocco. “Unfortunately, the drillship was halted by five Turkish warships and after threats of violence and the threat of a collision, it was compelled to return back,” said Cypriot government spokesman Victoras Papadopoulos, who stressed, however, that the postponement of the scheduled drilling does not mean that the island’s energy plans will change.

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Feb 042018
 
 February 4, 2018  Posted by at 11:17 am Finance Tagged with: , , , , , , , , , , ,  


John William Waterhouse Hylas and the Nymphs 1896

 

A Tale Of Two Americas (Axios)
Today’s Market Is Biding Its Time Until It Becomes Normal Again (Bonner)
The Market System Is Tight In All Directions (Fas.)
Bond Market’s Debt-Ceiling Alarm Bell Is Ringing Loud and Clear (BBG)
Yellen: “I Don’t Want To Label What We’re Seeing As A Bubble” (ZH)
The Fed’s Dilemma Isn’t Going Away Under Powell (Shilling)
Theresa May Says Brexit Transition Deal Will Be Agreed In Seven Weeks (R.)
Tory Former Attorney General Says “Time is Now” To Reverse Brexit (Ind.)
Anger Over Glut Of ‘Posh Ghost Towers’ Planned For London (G.)
‘We Made The Finest Steel In The World – Now We Make Lattes’ (G.)
Illicit Foreign Casino Cash Often Goes Straight Into Vancouver Housing (VSun)
Greece On Edge For ‘Macedonia’ Protest In Athens (K.)

 

 

As I said yesterday: the divisions it causes are much bigger than the memo itself. It’s what happens in echo chambers.

A Tale Of Two Americas (Axios)

On MSNBC, Rachel Maddow was literally laughing. Over on Fox News, Sean Hannity put up his dukes. At 9 last night, Axios points out that you could just flip between the two and see an encapsulation of our two Americas – total dismissal of the memo’s import, versus the assertion that it’s “only about 15 percent of what’s coming.”

So, Rachel, how was your day? “This thing?! This was two weeks of: This memo is going to end everything. This memo, have you heard about the memo? Hashtag: Release the memo! This memo will make Donald Trump innocent. This memo will put Robert Mueller in jail. It will abolish the FBI. The Justice Department will have to rename itself the Donald J. Trump & Family Private Security Task Force.” “I mean, I can’t believe this is it.” “I don’t really believe in the whole Cable News Wars idea. I know people who work across the street at the Fox News Channel. I’ve got friends that work there. I think we’re all doing our own thing in our own way best we can.”

“But, oh my God, right? … [T]his … hyping and huffing and puffing and working their audience up into a frenzy for two solid weeks.” “And apparently, despite all of that, … they either didn’t know or they didn’t notice that this thing they have been clamoring for and hyping for two solid weeks, … it actually disproves their whole point.” “They release this memo to prove that the dossier started everything. The memo says the dossier didn’t actually start anything.”

What’s up, Sean? “[W]hen you put all this information together, here’s what it all means. The FBI misled and purposely deceived a federal court while using an unverified, completely phony opposition research bought and paid for by Hillary Clinton.” “We have never, ever in history seen anything like this, and it was spearheaded not by rank-and-file members of the FBI intelligence community and Department of Justice. No. High-ranking officials: James Comey, Andrew McCabe, Rod Rosenstein, Peter Strzok, Lisa Page, likely Loretta Lynch.”

“But here’s the bottom line: Crimes have been committed. There is no way that they did not know that the FBI was lying to a FISA court in order to spy on an opposition campaign during an election year. They have aided and abetted what is a massive constitutional violation.” “Comey, McCabe, Rosenstein and others all need to be investigated and, in many cases, prosecuted to the fullest extent of the law.” “Now, of course, Comey is running scared. He’s out of his mind right now, now that he is exposed with this memo.” “[T]he special counsel must be disbanded immediately.” “And, by the way — nobody else will say this — all charges against Paul Manafort and General Michael Flynn need to be dropped. It’s that simple.” “This scandal is only in Phase 1. … Stay tuned! Tick tock! “

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“..when something is not normal… it is just biding its time until it becomes normal again.”

Today’s Market Is Biding Its Time Until It Becomes Normal Again (Bonner)

On Planet Earth, we can find our direction by reference to the Magnetic North. For investing, we use the most reliable force in finance – the relentless return to “normal” – to get our bearings. And searching for normal, we may have stumbled upon what could be the Trade of the Century. More on that later… As economists describe it, reversion to the mean is merely a recognition of the tendency for things to stay in a range that we recognize as “normal.” Trees do not grow 1,000 feet high. People don’t run 100 mph. You don’t get something for nothing. Normal exists because things tend to follow certain familiar patterns, shapes, and routines. When people go out in the morning, they know, generally, whether to wear a winter coat or a pair of shorts.

The temperature is not 100 degrees one day and zero the next. Occasionally, of course, odd things happen. And sometimes, things change in a fundamental way. But usually, when people say “this time is different”… it’s time to bet on normal. This phenomenon – reversion to the mean – has been thoroughly tested and studied in the investment world. It seems to apply to just about everything – stocks, bonds, strategies, markets, sectors… you name it. But let’s push on. What is unusual in the chart below? What is so abnormal that the mean is likely to revert against it? You will note that global debt was only $30 trillion in 1994. Now it is $230 trillion. That $200 trillion in extra credit is probably the whirlwind that sent equities spinning up to the top right.

Those gusts blew stock and other asset prices up to heights never seen before. The Dow reached over 26,000. Houses went on the market for more than $100 million. Gold rose above $1,900. But while stocks and bonds may have the wind at their backs, it seems to blow in the economy’s face… making forward progress almost impossible. The real economy – as depicted by GDP at the bottom of the chart – has grown in a rather normal way, but at a slower and slower rate. Its steady, plodding increase gives no hint of the chaos going on above it. The real economy and the financial world are as different as the eye of a hurricane and the swirling clouds and storms around it. Another thing you notice is that until the mid-’90s… and again between 2008 and 2012… the average investor got essentially no benefit in exchange for the added risk of putting his money into equities (the chart above includes dividends). He might just as well have left his money in U.S. Treasury bonds.

[..] there is a time to be in stocks… and a time to be out of them. Without knowing the future, you can still know when something is not normal. And when something is not normal… it is just biding its time until it becomes normal again.

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Who or what can restore flexibility when everything’s maxed out to the point of bursting?

The Market System Is Tight In All Directions (Fas.)

The Four Pillars Holding Markets Up Are Strained, All At The Same Time. Viewed as a combination of intertwined components, each component is showing growing signs of pressure and seem to be running out of road for further advancing. The synchronicity of them, more than any single component taken independently, is what should draw attention, as it compounds systemic risk. Here are the four components, characterizing the basin of chaotic attraction for markets nowadays:

What happens when the system is tight in its key possible directions of expansion? That it expands no more. Stochastically, on one of the components a tipping point is reached, which jumpstarts the autolytic effect, spreading back through the vectors of the complex system, and snapping the unstable equilibrium into an alternative stable state. That is our thesis. In [a] recent interview, we discuss the impending tipping points for markets due to a synchronicity of excess valuations, excess indebtedness, excessively low cash balances and a drawback in excessive public flows. Let’s give a cursory look across the four components. Again, the list is by no means exhaustive, but rather a work-in-progress (seemingly endless) collecting of data points, following on to our previous work of ‘a long list of anomalies’

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In a country so divided it doesn’t take much to let things get out of hand.

Bond Market’s Debt-Ceiling Alarm Bell Is Ringing Loud and Clear (BBG)

In the $2 trillion Treasury-bill market, where the U.S. government turns for short-term funding, investors are showing they’re plenty nervous about the approaching deadline to raise the nation’s debt ceiling. With Treasury expected to exhaust its borrowing authority as early as the first half of March, a four-week bill sale on Tuesday will serve as the latest gauge of investor anxiety. There’s growing concern that the impasse over the debt limit will become entangled with efforts to keep the government open. Current federal funding expires Feb. 8, and the Republican-led Congress has been working on a stopgap measure to extend that into late March.

Treasury has deployed extraordinary measures to stay under the debt cap since it was reinstated in early December, but investors are wary. The new securities mature March 8, around when the Congressional Budget Office expects Treasury to run out of room. Traders are asking for higher yields to own previously issued bills maturing March 8. What’s more, an auction last week of bills due March 1 drew the weakest demand since May. “People are kind of getting skeptical of March 8 bills,” said Joseph Abate at Barclays Capital in New York. “You might argue that the March 1 bill isn’t necessarily vulnerable to payment delay because the Treasury probably has sufficient resources to meet outflows and thus might be able to last until” March 5.

Treasury has placed the drop-dead date around the end of February. But investors are leaning toward the projection from the nonpartisan CBO, which said last week that the U.S. may run the risk of default without a debt-ceiling increase in the first half of March. After the Jan. 30 auction of bills maturing March 1, the rate on those securities was higher than debt due a week later. Since then, the rate on debt expiring March 8 has climbed to 1.40%, exceeding that on bills due a week later.

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In a country where 70% of people live paycheck to paycheck, the best the central bank president can muster is “they should diversify their investments..” And people are praising her for doing such a good job.

Yellen: “I Don’t Want To Label What We’re Seeing As A Bubble” (ZH)

While her term ended – for all practical purposes – with the conclusion of this week’s January FOMC meeting, former Fed Chairwoman Janet Yellen’s last official day at the helm of the world’s most important central bank was marked by an explosion of volatility in the Dow, with the blue chips recording their worst single-day selloff since the collapse of Lehman brothers. And even though it’s tempting to suspect Friday’s selloff might foreshadow what’s to come during the Powell era, Yellen admitted during an interview with PBS Newshour that she was disappointed to not be reappointed for a second term by President Trump – and that, if she had her druthers, she would’ve opted to stay. “I would have liked to serve an additional term and I did make that clear, so I will say I was disappointed not to be reappointed,” Yellen said Friday. “I think things are looking very strong.”

Despite the volatility of the past week and the first nascent signs of wage growth in years – which should worry a central bank whose primary responsibility is to put a floor under plunging markets – Yellen says she expects interest rate hikes to proceed as planned. “The Federal Reserve has been on a path of gradual rate increases and if conditions continue as they have been, that process is likely to continue,” she said. “And as it happens we would expect long rates to move up.” Unlike fellow former Fed chairman Alan Greenspan – who this week declared that both stocks and bond valuations are in bubble territory – Yellen was careful not to use such strident language. “I don’t want to label what we’re seeing as a bubble.”

“But I would say that asset valuations are generally elevated…for the stock market, the ratio of price to earnings…is near the high end of its historical range. If we look at for example commercial real estate and other assets, we’re seeing high valuations.” But should Americans be worried about the markets? “They should be careful and I would say diversified in their investments. What we look at is the likely resilience of the economy and the financial system… In that regard, we have a banking system that is much stronger and better capitalized and better able to withstand a shock than prior to the financial crisis.” Stlll, Yellen is refusing to rule out another selloff. “Asset valuations could change I’m not predicting that that would happen and I wouldn’t rule that out,” she said.

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Powelll will be cleaning up Bernanke and Yellen’s shit.

The Fed’s Dilemma Isn’t Going Away Under Powell (Shilling)

[..] the Fed is confronted with a serious dilemma: Inflation and wage increases continue to undershoot its expectations at the same time the central bank confronts forces pressuring it toward credit tightening. The new chairman, Jerome Powell, who isn’t a trained economist, may change the central bank’s tone, but his soon-to-be predecessor Janet Yellen and the other academic economists who have dominated monetary policy, believe fervently in the theoretical Phillips Curve. It posits that a declining unemployment rate should spur inflation, despite evidence to the contrary. Rather than increase as the unemployment rate declined since the recession, the rate of inflation has largely stayed the same.

Nevertheless, the Fed wants to tighten credit slowly due to chronic low inflation and memories of the May 2013 “taper tantrum,” when a mere mention by then-Chairman Ben Bernanke of reducing the Fed’s rate of asset purchases sent financial markets into tailspins as interest rates leaped. Another reason for the Fed to tighten is to keep commercial banks from lending out the more than $2 trillion in excess reserves the Fed has given them through quantitative easing. These are simply an asset of the banks and a liability on the Fed balance sheet with little financial or economic consequences. But as economic growth picks up as a result of the tax cuts followed by likely massive fiscal stimulus, creditworthy borrowers will want to borrow, banks will be happy to lend, and these excess reserves could turn into tons of money that would threaten major inflation.

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Fat chance.

Theresa May Says Brexit Transition Deal Will Be Agreed In Seven Weeks (R.)

British Prime Minister Theresa May said on Friday that a Brexit transition period will be agreed with the European Union in seven weeks as she tries to ease concerns that a deal may take longer to reach. The EU has offered Britain a status quo transition until the end of 2020 after Brexit. Both sides are aiming to reach a transition agreement by the end of March that will form part of the final withdrawal treaty to be agreed later this year. But there is disagreement inside May’s Conservative Party over some details such as the status of EU citizens during the transition and the scope of European Court of Justice jurisdiction. Many businesses and banks are concerned a battle over the terms of a transition could delay or even sink an agreement just months before Britain exits the EU on March 29, 2019.

“In seven weeks time, we will have an agreement with the European Union, that is the timetable they have said on an implementation period,” May told the BBC in an interview in China. “What the British people voted for is for us to take back control of our money, our borders and our laws and that’s exactly what we are going to do,” May said of Brexit. The EU and Britain hope to hammer out a deal on Britain’s exit and the outline of a trade package by October 2018. But some EU officials have begun to voice concern that a plan to have the leaders endorse negotiating guidelines for a new phase of talks to begin in April on a future trade agreement may be in danger of slipping if May does not spell out what Britain’s demands are for that trade pact.

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Britain is as divided as the US is.

Tory Former Attorney General Says “Time is Now” To Reverse Brexit (Ind.)

Dominic Grieve has warned the public it is running out of time to change its mind on Brexit, saying the next few months are “decision time”.The former Attorney General told The Independent it would soon be too late to reverse the decision to leave the EU, and urged people to make their minds up in the next six months.“The six months we have between now and the autumn are so important,” he said. “It is going to be decision time. And decision time in the sense of what happens in the next six months being a final decision.“If people do want to change their mind, and they could if they wanted to, the time is now. It cannot be after 29 March 2019, and frankly it cannot be after the end of the autumn of this year.”

While he did not endorse calls for a second EU referendum, Mr Grieve said it was important to give people the chance to change their minds on Brexit. “I’m not calling for a second referendum,” he said. “But we should not exclude the possibility that people’s opinion may change. And to start from an opinion on an issue that was expressed 18 months ago, where people are bound to have had their opinion influenced since, we must be very careful to listen about what it is they want.”He continued: “It the most extraordinary conundrum. We have an instruction from the electorate, by a small but significant majority, to do something that many of us [in Parliament] think is going to be very hard to achieve without serious damage to the wellbeing of every citizen in this country. It is an ethical conundrum and it is a practical conundrum.”

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And here is why the country is so divided.

Anger Over Glut Of ‘Posh Ghost Towers’ Planned For London (G.)

London councils have granted property developers planning permission to build more than 26,000 luxury flats priced at more than £1m each, despite fears that there are already too many half-empty “posh ghost towers” in the capital. Builders are currently constructing towers containing 7,749 homes priced between £1m and £10m, and have planning rights to build another 18,712 high-end apartments and townhouses, the Observer can reveal. Politicians and housing campaigners said the figures show councils are prioritising the needs of the super-rich over those of hardworking young Londoners. The boom in developments of luxury flats, which often include private cinemas, gyms, swimming pools and concierge facilities, comes as the capital faces a growing crisis in the availability of affordable housing, with nurses, police officers and other essential workers struggling to get on to the housing ladder.

Research shows that a fifth of aspiring first-time buyers have moved in with their parents to save money, and a quarter of them will need to stay there for at least five years to amass enough for a deposit. The proportion of English first-time buyers who rely on help from families and friends for their deposit has increased from 22% in 1996 to 29% in 2016, according to the government’s English Housing Survey. Anne Baxendale of Shelter said: “The UK is in the grip of a housing crisis and nowhere is this more apparent than in the capital – and these luxury developments are certainly not the types of homes most Londoners need. The government must close loopholes which make it easy for developers to build high-priced homes that are way out of reach of ordinary families, rather than the affordable ones most people actually need and can afford.”

David Lammy, the Labour MP for Tottenham, said the figures “reveal a travesty being played against the working class and young Londoners”. “The public keep being told we are building more affordable housing, and people can see cranes up all over London,” he said. “But this shows that councils are prioritising the fancies of overseas millionaires and billionaires before the needs of hardworking young Londoners.” Just 6,423 affordable homes were built in London during the 2016-2017 financial year (the latest figures available), a 5% decline on the previous year and a big drop from the 19,622 built in 2014-15.

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Plus, of course, Britain suffers from what brought Trump to power. Where globalization goes to die.

‘We Made The Finest Steel In The World – Now We Make Lattes’ (G.)

Wearing a T-shirt with the slogan “Fighting for the community” underneath an image of Redcar’s mothballed steelworks, Frankie Wales is preparing to take a training session at the town’s boxing club. Young men are sparring in the rings; others are hitting punchbags. “Nothing gets you fit like boxing,” says one, exhausted from the ring. Wales, who set up the club 20 years ago and funds it on a shoestring with various small grants, is proud to be doing his bit for Redcar’s young people. He is a livewire in a community struggling to get off the floor after a series of near knockout blows. The local steelworks ceased production in 2015 with the loss of 3,000 jobs. Someone, he insists, has to help them. “It is incredibly sad,” he says. “Not long ago they would go and work in the steelworks after school.

Men round here made the finest steel in the world. Now they are making lattes and sandwiches on zero-hours contracts. We have lots of entrepreneurial kids, but the only entrepreneurial activity going on around here is selling fags and drugs.” Few young people care what those who are supposed to run their country – politicians and civic and business leaders – say any more because they feel so let down. “We have lost the steel industry, lost the local shipbuilding, lost the coal. What’s the point? There is nothing left,” says Wales. “We just have to make the best of what we have got and get on with it ourselves.” Like many communities in England’s north-east, the people of this North Yorkshire town, which bears the scars of industrial decline, and has a youth unemployment rate more than double the national average, made their unhappiness known in June 2016.

They fought back. In Redcar, there was a hefty 66% vote for Brexit, similar to that in areas further north up the coast, from Teesside to Tyneside. “We have to get our country back to where it needs to be,” says Geoff Holding, a caretaker at a government office in the town who voted Leave and whose brother lost his job at the steelworks. He wants an end to cheap imports of foreign goods, like the Chinese steel that did for the local plant. There is a still a thriving chemicals sector in Redcar, but not enough manufacturing. “We need to bring things back in-house, get industry back on its own feet, make things ourselves.”

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“Staggering volumes of dirty cash, including hundreds of thousands of dollars worth of $20-dollar bills stuffed in hockey bags..”

Illicit Foreign Casino Cash Often Goes Straight Into Vancouver Housing (VSun)

It’s almost hard to believe the dismaying stories that Postmedia investigative reporter Sam Cooper has been producing about the laundering of hundreds of millions of dollars of East Asian cash through Metro Vancouver casinos and the funnelling of much of it into the city’s pricey real estate. Yet Cooper continues to clearly map out, using impeccable high-level sources, the trans-national connections between Chinese drug traffickers, B.C. casinos and the city’s housing market. He has been so effective that NDP Attorney General David Eby ended years of B.C. Liberal inaction on casino fraud to launch an investigation by money-laundering specialist Peter German. Global intelligence agents have come to call the Asian-Pacific network of corruption, drugs, tax avoidance and real estate that Cooper is exposing “The Vancouver Model.”

Metro’s casinos have become infamous for the way B.C.’s former Liberal government allowed them to be exploited to help make possibly billions of dollars in “dirty” money appear “clean” – particularly by injecting it into residential housing and condo development. Cooper says his sources “took a lot of risks” to unveil how high-stakes Chinese gamblers, called “whales,” have been funnelling illicit cash into gambling chips, especially at Richmond’s River Rock Casino. Using freedom-of-information law, Cooper obtained reports in which an official with the B.C. Lottery Commission noted that 97 of its 100 top rollers were East Asian. Cooper also dug up reports suggesting one out of four of China’s major 100 alleged financial fugitives were living in Canada, with many of them believed to be in B.C.

One Metro Vancouver gambler was accused Lai Changxing, alleged mastermind of a billion-dollar drug-smuggling operation in China, who owned property in Richmond. An audit of 800 “VIP” gamblers at River Rock Casino found their most common profession was “real estate.” Almost half their $53 million worth of transactions in one year were flagged as “suspicious.” The second and third most common professions among the biggest gamblers were “business owner” and “construction.” Many high-stakes gamblers at River Rock also declared themselves as “housewife” or “student” – with one youth forking over $819,000 in cash to buy casino chips. Investigators believe housewives and offspring are often used as fake “nominees” to hide the true source of wealth in money-laundering and real-estate schemes. Staggering volumes of dirty cash, including hundreds of thousands of dollars worth of $20-dollar bills stuffed in hockey bags, have been flowing through Metro casinos and then been shifted into real-estate.

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A major and undoubtedly heated protest today. Topic: A former Yugoslav province wants to call itself Macedonia. But there already is a Greek province called macedonia. So Greece has refused to accept that name for a foreign country, and has for years halted access for that country to international organizations. The legacy of Alexander the Great plays a big role too. There are negotiations ongoing, but 70% of Greeks want no referral to Macedonia in the country’s eventual name. So no New Macedonia etc. Just call it the Republic of Skopje.

Greece On Edge For ‘Macedonia’ Protest In Athens (K.)

With United Nations-mediated negotiations aimed at resolving a dispute between Greece and the Former Yugoslav Republic of Macedonia (FYROM) over the latter’s name at a sensitive juncture, the government is bracing for Sunday’s Athens rally protesting the use of the term “Macedonia” in a solution amid signs that the turnout will be significant. Around 1,500 buses have been chartered to bring demonstrators from the provinces to the capital where the rally is to begin at Syntagma Square at 2 p.m. Most conservative New Democracy MPs are expected to attend. ND leader Kyriakos Mitsotakis said the party respects both those who do choose to attend and those who do not.

“We respect all choices,” he said. Former conservative premier Antonis Samaras endorsed the demo, saying Sunday will be “a great day for the country.” The main speaker will be veteran Greek composer Mikis Theodorakis, who is to address the crowd in person rather than sending a video message as originally planned. Speeches will also be delivered by three clerics representing the Church of Greece, which has backed the rally following initial reservations by Archbishop Ieronymos. The Greek Police plans to erect barriers to keep demonstrators at Syntagma apart from anarchists who are to stage their own counter-rally, starting at noon outside Athens University.

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