Oct 312018
 
 October 31, 2018  Posted by at 9:59 am Finance Tagged with: , , , , , , , , , , ,  


Francisco Goya Witches’ Sabbath 1798

 

US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)
Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)
Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)
China Debt Bomb Ready to Explode (Rickards)
China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)
Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)
The Monster Mash (Kunstler)
No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)
Welcome to the Jungle (Escobar)
After Germany’s Merkel Comes Chaos (John Rubino)
Ocean Shock (Reuters)

 

 

Both Mattis and Pompeo, a coordinated effort. 30 days seems ambitious, but MbS doesn‘t have much leverage left.

US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)

The United States called Tuesday for a ceasefire and peace talks in Yemen, as the Saudi-led military coalition sent more than 10,000 new troops toward a vital rebel-held port city ahead of a new assault. Pentagon chief Jim Mattis said the US had been watching the conflict “for long enough,” adding that Saudi Arabia and the United Arab Emirates, which are in a US-backed coalition fighting Shiite Huthi rebels, are ready for talks. “We have got to move toward a peace effort here, and we can’t say we are going to do it some time in the future,” Mattis said at the US Institute of Peace in Washington. “We need to be doing this in the next 30 days.”

He said the US is calling for all warring parties to meet with United Nations special envoy Martin Griffiths in Sweden in November and “come to a solution.” US-Saudi ties have cooled in recent weeks after the murder of journalist Jamal Khashoggi, a prominent critic of the conservative kingdom, that has also tarnished the image of Crown Prince Mohammed bin Salman. Saudi Arabia and its allies intervened in the conflict between embattled Yemeni President Abedrabbo Mansour Hadi, whose government is recognized by the United Nations, and the Huthis in 2015. Nearly 10,000 people have since been killed and the country now stands at the brink of famine, with more than 22 million Yemenis — three quarters of the population — in need of humanitarian assistance.

[..] US Secretary of State Mike Pompeo called for an end to all coalition air strikes in Yemen’s populated areas. “The time is now for the cessation of hostilities, including missile and UAV (drone) strikes from Huthi-controlled areas into the Kingdom of Saudi Arabia and the United Arab Emirates,” Pompeo said in a statement. “Subsequently, coalition air strikes must cease in all populated areas in Yemen.”

Read more …

Body still not found.

Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)

Turkish President Recep Tayyip Erdogan on Tuesday called on Saudi Arabia’s chief prosecutor to find out who ordered the murder of journalist Jamal Khashoggi, and not spare “certain people” in his investigation. “Who sent these 15 people? As Saudi public prosecutor, you have to ask that question, so you can reveal it,” Erdogan said, referring to the 15-man team suspected of being behind the hit. “Now we have to solve this case. No need to prevaricate, it makes no sense to try to save certain people,” he told reporters in Ankara. Khashoggi was killed after entering the Saudi consulate in Istanbul on October 2 to obtain paperwork ahead of his upcoming wedding. His body has not yet been found.

[..] Erdogan said that during the talks Fidan requested the 18 suspects be sent to Turkey for trial, as the killing took place in Istanbul. The Istanbul prosecutor’s office last week prepared a written request for the extradition of the 18 suspects “involved in the premeditated murder”, the justice ministry said, but Riyadh rejected Ankara’s request. Erdogan also urged Saudi Foreign Minister Adel al-Jubeir to explain who the “local co-conspirators” were that were reportedly given Khashoggi’s body after his death. “Again either the Saudi foreign minister or the 18 suspects must explain who the local co-conspirators are. Let’s know who this co-conspirator is, we can shed further light. We cannot let this subject end mid-way.”

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Only this time it’s global.

Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)

Famed housing-watcher Robert Shiller said Tuesday that the weakening housing market reminded him of the last market top, just before the subprime housing bubble burst, slashing prices by nearly a third and costing millions of Americans their homes. Home price gains moderated again in the most recent version of the closely-watched housing index that bears his name, which was released Tuesday, and Shiller, a Nobel Prize-winning economist, told Yahoo Finance that such data shows “a sign of weakness.” Housing pivots take more time than those in the stock market, Shiller said. Still, “the housing market does have a momentum component and we’re seeing a clipping of momentum at this time.”

When a startled reporter reminded Shiller that 2006 predated the greatest financial crisis in a lifetime, the Yale economist acknowledged that any correction would likely be far less severe. “The drop in home prices in the financial crisis was the most severe drop in the U.S. market since my data begin in 1890,” Shiller said. “It could be that we’re primed to repeat it because it’s in our memory and we’re thinking about it but still I wouldn’t expect something as severe as the Great Financial Crisis coming on right now. There could be a significant correction or bear market, but I’m waiting and seeing now.”

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Foreign reserves runnning out.

China Debt Bomb Ready to Explode (Rickards)

The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure. That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue. China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.

In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing. But doesn’t China have over $1 trillion of reserves to prop up its financial system? On paper, that’s true. But in reality, China is “short” U.S. dollars. The Chinese may have $1.4 trillion of U.S. Treasury securities in its reserve position, but they need those assets possibly to bail out their banking system or defend the yuan. Meanwhile, the Chinese banking sector, which in many ways is an extension of the state, owes $318 billion in U.S. dollar-denominated deposits of commercial paper.

From a bank’s perspective, borrowing in dollars is going short dollars because you need dollar assets to back up those liabilities if the original lenders want their money back. For the most part, the banks don’t have those assets because they converted the dollar to yuan to prop up local real estate Ponzis and local corporations. There’s not much left over to bail out the corporate, individual and real estate sectors. This is all part of a global “dollar shortage” attributable to Fed tightening, both in the forms of higher rates but also a reduction in base money. A dollar shortage seems implausible in a world where the Fed printed $4.4 trillion. But while the Fed was printing, the world borrowed over $70 trillion (on top of prior loans), so the dollar shortage is real. The math is inescapable.

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Everyone’s going to call on Beijing to come to the rescue.

China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)

China’s manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from an intensifying trade war with the United States. Anxiety about China’s cooling growth and its likely drag on the global economy have vexed financial markets recently, and Wednesday’s official Purchasing Managers’ Index (PMI) indicates more stress for investors through coming months. The official PMI – which gives global investors their first look at business conditions in China at the start of the last quarter of the year – fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September.

It was a touch above the 50-point mark that separates growth from contraction for a 27th straight month, but undershot the 50.6 forecast in a Reuters poll. The latest reading suggests a further loss of momentum in the world’s second-biggest economy, and the deteriorating environment for businesses could prompt more policy support from Beijing on top of a raft of recent initiatives. “All the numbers from China’s PMI release today confirm a broad-based decline in economic activity,” said Raymond Yeung, chief economist for China at ANZ in a client note, adding that conditions for the private sector is “much worse” than headline data suggested. “Besides an expected reserve requirement ratio (RRR) cut next January, we expect future supportive policy actions to be measured. The government’s priority is to avoid a financial blow-up.”

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Not hard to be better than The Oracle, Bernanke and Yellen. But where was Volcker when these three went off the rails?

Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)

Those weighty words of praise were tweeted out Tuesday by Ray Dalio, founder of hedge-fund behemoth Bridgewater Associates. Dalio’s social-media nod to the former Fed chair coincides with the release of Volcker’s memoir, “Keeping at It: The Quest for Sound Money and Good Government.”

In his new book, Volcker says he’s worried about the impact of money in politics and argues that the U.S. is devolving into a plutocracy. “We face a huge challenge in this country to restore a sense of public purpose and of trust in government,” he wrote in the book. “It will require critically needed reforms in our political processes and leaders who can restore and preserve a consensus upon which our great democracy can depend.” Volcker, 91, served as Fed chair from 1979 until 1987, and he’s widely credited for stopping runaway inflation during that time. He was also chairman of the Economic Recovery Advisory Board under Obama from 2009 to 2011.

Dalio wasn’t the only one to give Volcker some love in light of his memoir. Martin Wolf of the Financial Times is also a big fan, saying that he’s “the greatest man I have known,” because “he is endowed to the highest degree with what the Romans called virtus (virtue): moral courage, integrity, sagacity, prudence and devotion to the service of country.” Wolf said “the pinnacle of Volcker’s career” was when he achieved something many thought impossible: he slew inflation. “Great credit is due to Jimmy Carter, who appointed him, and Ronald Reagan, who supported him. But Volcker did it, despite great criticism,” Wolf explained. “The costs were huge. But he was right: it had to be done.”

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“And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?”

The Monster Mash (Kunstler)

The Democratic Party war on white people and their dastardly privilege has been the theme all year long, with its flanking movement against white men especially and super-especially the hetero-normative white male villains who rape and oppress everybody else. Anyway, that’s the strategy du jour. I’m not persuaded that it’s going to work so well in the coming election. The party could not have issued a clearer message than “white men not welcome here.” Very well, then, they’ll vote somewhere else for somebody else. And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?

For one thing, a lot of people get indicted, especially former top officers from various glades of the Intel swamp. It shouldn’t be a surprise, given the numbers of them already called before grand juries and fingered by inspectors general. But it may be shocking how high up the indictments go, and how serious the charges may be: sedition… treason…? These midterm election may bring the moment when the Democratic Party finally blows up, at least enough to sweep away the current coterie of desperate idiots running it. It’s time to shove the crybabies offstage and allow a few clear-eyed adults to take the room, including men, yes even white men. And let all the shrieking, clamoring, marginal freaks return to the margins, where they belong.

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That recession is now certain, deal or not. Even in case of a deal, 1000s of documents must be signed. A deal will not mean a return to BAU.

No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)

Britain’s economy will suffer rising unemployment and falling household incomes that would trigger a recession should Theresa May fail to secure a deal to prevent the UK crashing out of the European Union next year, according to analysis by the global rating agency Standard & Poor’s. Property prices would slump and inflation would spike to more than 5% in a scenario that S&P said had become more likely in recent months following deadlock with Brussels over a post-Brexit deal. In a warning that included a possible downgrade to the UK’s credit rating, which would bring with it an increase in the Treasury’s borrowing costs, S&P said it still expected both sides in the Brexit talks to come to an agreement before next March, when the UK is scheduled to leave the European Union.

But it warned that the chance of a “no-deal” Brexit had risen in recent months to such an extent that it needed to warn international investors about the potential challenges ahead. [..] S&P Global Ratings credit analyst Paul Watters, said: “Our base-case scenario is that the UK and the EU will agree and ratify a Brexit deal, leading to a transition phase lasting through 2020, followed by a free trade agreement. “But we believe the risk of no deal has increased sufficiently to become a relevant rating consideration. This reflects the inability thus far of the UK and EU to reach agreement on the Northern Irish border issue, the critical outstanding component of the proposed withdrawal treaty.”

Coming only a day after the chancellor said the failure to secure a deal would force him to hold an emergency budget, S&P’s analysis joins a welter of independent reports that forecast that a split from the EU without a deal will deal a serious blow to the prospects of the UK economy. Last month rival agency Moody’s said the risks to the British economy had “risen materially” in recent months.

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If you think Trump’s scary, this guy’s in a league of his own.

Welcome to the Jungle (Escobar)

It’s darkness at the break of (tropical) high noon. Jean Baudrillard once defined Brazil as “the chlorophyll of our planet”. And yet a land vastly associated worldwide with the soft power of creative joie de vivre has elected a fascist for president. Brazil is a land torn apart. Former paratrooper Jair Bolsonaro was elected with 55.63 percent of votes. Yet a record 31 million votes were ruled absent or null and void. No less than 46 million Brazilians voted for the Workers’ Party’s candidate, Fernando Haddad; a professor and former mayor of Sao Paulo, one of the crucial megalopolises of the Global South. The key startling fact is that over 76 million Brazilians did not vote for Bolsonaro. His first speech as president exuded the feeling of a trashy jihad by a fundamentalist sect laced with omnipresent vulgarity and the exhortation of a God-given dictatorship as the path towards a new Brazilian Golden Age.

French-Brazilian sociologist Michael Lowy has described the Bolsonaro phenomenon as “pathological politics on a large scale”. His ascension was facilitated by an unprecedented conjunction of toxic factors such as the massive social impact of crime in Brazil, leading to a widespread belief in violent repression as the only solution; the concerted rejection of the Workers’ Party, catalyzed by financial capital, rentiers, agribusiness and oligarchic interests; an evangelical tsunami; a “justice” system historically favoring the upper classes and embedded in State Department-funded “training” of judges and prosecutors, including the notorious Sergio Moro, whose single-minded goal during the alleged anti-corruption Car Wash investigation was to send Lula to prison; and the absolute aversion to democracy by vast sectors of the Brazilian ruling classes.

That is about to coalesce into a radically anti-popular, God-given, rolling neoliberal shock; paraphrasing Lenin, a case of fascism as the highest stage of neoliberalism. After all, when a fascist sells a “free market” agenda, all his sins are forgiven.

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My old buddy John Rubino is right, but the story’s bigger than this. Merkel’s been given far too much power.

After Germany’s Merkel Comes Chaos (John Rubino)

After a long, initially-successful run promoting European integration and mass immigration, German Chancellor Angela Merkel saw the bottom fall out of her political fortunes this year. This week she stepped down as leader of the formerly-dominant Christian Democrat party and promised not run again when her term as Chancellor ends in 2021. What happens next is almost certain to be chaotic, as the following chart (courtesy of this morning’s Wall Street Journal) makes clear. Note that in August of 2017 the two least popular parties were the far right Alternative for Germany (blue line) and the far left Greens (green line). In the ensuing 14 or so months AfG’s support rose from single digits to around 17% while the Greens rocketed from the bottom of the pack to 20%.

If you didn’t know what these two parties stood for you might think, “Fine, they’re new and interesting, so let them form a coalition and govern for a while.” Unfortunately they’re more likely to kill each other in street fights than work together, since the former want closed borders and free markets while the latter want increased regulation and unlimited immigration. The alternative to an AfG/Green coalition then becomes some combination of the remaining, more centrist (by European standards at least) parties. But the biggest of those parties – Merkel’s Christian Democrats and their coalition partner Social Democrats – are in freefall, precisely because of what they’ve done while in power. So there appears to be no way to put these puzzle pieces together to produce a stable government.

And – here’s where things get truly scary – a stable Germany under Merkel’s bland but firm hand has been the only thing holding the European Union and eurozone together. If Germany descends into internal turmoil without a coherent government to push the Italys and Hungarys around, European populists/nationalists will fill the resulting vacuum. Borders will be re-imposed within and without the EU, national government budgets – already above EU deficit limits in many cases – will explode. Already-debilitating debts will keep rising, and the ECB will be forced to bail out Italy for sure and probably several other member states after that.

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Intro to an elaborate series of reports by Reuters, kudos for the effort. Fish have moved north and deeper, leaving entire communities without their proteins.

Ocean Shock (Reuters)

To stand at the edge of an ocean is to face an eternity of waves and water, a shroud covering seven-tenths of the Earth. Hidden below are mountain ranges and canyons that rival anything on land. There you will find the Earth’s largest habitat, home to billions of plants and animals – the vast majority of the living things on the planet. In this little-seen world, swirling super-highway currents move warm water thousands of miles north and south from the tropics to cooler latitudes, while cold water pumps from the poles to warmer climes. It is a system that we take for granted as much as we do the circulation of our own blood. It substantially regulates the Earth’s temperature, and it has been mitigating the recent spike in atmospheric temperatures, soaking up much of human-generated heat and carbon dioxide.

Without these ocean gyres to moderate temperatures, the Earth would be uninhabitable. In the last few decades, however, the oceans have undergone unprecedented warming. Currents have shifted. These changes are for the most part invisible from land, but this hidden climate change has had a disturbing impact on marine life – in effect, creating an epic underwater refugee crisis. Reuters has discovered that from the waters off the East Coast of the United States to the coasts of West Africa, marine creatures are fleeing for their lives, and the communities that depend on them are facing disruption as a result. As waters warm, fish and other sea life are migrating poleward, seeking to maintain the even temperatures they need to thrive and breed.

The number of creatures involved in this massive diaspora may well dwarf any climate impacts yet seen on land. In the U.S. North Atlantic, for example, fisheries data show that in recent years, at least 85 percent of the nearly 70 federally tracked species have shifted north or deeper, or both, when compared to the norm over the past half-century. And the most dramatic of species shifts have occurred in the last 10 or 15 years. Fish have always followed changing conditions, sometimes with devastating effects for people, as the starvation that beset Norwegian fishing villages in past centuries when the herring failed to appear one season will attest. But what is happening today is different: The accelerating rise in sea temperatures, which scientists primarily attribute to the burning of fossil fuels, is causing a lasting shift in fisheries.

Read more …

Oct 292018
 
 October 29, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Roofs of Paris 1886

 

Volcker Rebukes Bernanke and Yellen Feds (Whalen)
China Takes Delivery Of Massive Amount Of Gold From London, New York (Greyerz)
Getting Out: A Godfather Story (Ben Hunt)
Why Do Investors Hate Everything? Maybe Paranoia (BBG)
Desperate IBM Buys Red Hat For $34 Billion In Largest Ever Acquisition (ZH)
The IMF Has Learned Nothing From The Greek Crisis (Coppola)
Greece Reiterates €288 Billion Claim For Damages Under Nazi Occupation (G.)
There Aren’t Enough Lifeboats For Everyone (CHS)
Thousands Of Ships Could Dump Pollutants At Sea To Avoid Dirty Fuel Ban (G.)
Big Food’s Poisonous Propaganda (Lustig)
EU Air Pollution Improves, Causes Only 500,000 Early Deaths A Year (AFP)
Race Doesn’t Come Into It (LRB)

 

 

There goes Yellen’s reputation.

“By pulling tomorrow’s home sales and other economic activity forward via various policy manipulations, tomorrow is now light in terms of growth..”

Volcker Rebukes Bernanke and Yellen Feds (Whalen)

Yellen worries that the rhetorical attacks on the central bank by President Donald Trump is “whittling away the legitimacy and stature of institutions the public has traditionally had some confidence in. I feel it ultimately undermines social and economic stability.” She then goes on to say that “Trump has the potential to undermine confidence in the Fed.” Former Chairman Alan Greenspan, the most politically astute Fed chief in half a century, puts such worries in perspective: “I don’t know a single President, and I worked for a lot of them, who don’t want lower interest rates. Now, obviously that’s not possible. You keep lowering them down to zero, where do you go from there?”

Like Yellen, many observers worry that criticism of the Fed will make it difficult for the central bank to act when necessary. The dual, conflicted political mandate of full employment and price stability created by the Humphrey Hawkins law is not possible to achieve in practice, thus the FOMC lurches from one extreme to the other, causing enormous collateral damage. Consider the effects of QE and Operation Twist on housing. Think about the thousands of people in the mortgage industry, for example, that have lost their livelihoods because the boom and bust policies followed by the Fed since 2008 and even before. Think about the millions of American families today that cannot afford to buy a home because asset prices have skyrocketed over the past five years.

By pulling tomorrow’s home sales and other economic activity forward via various policy manipulations, tomorrow is now light in terms of growth. Tomorrow also carries hidden market and credit risks caused by the Fed’s past actions. As we watch mortgage lending and home building volumes fall next year and thereafter thanks to the property price inflation created by the FOMC under Bernanke and Yellen, remember that Fed policy was explicitly meant to “help” the housing sector.

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“..in normal times, the gold used to stay in London and New York. Now that gold is going via Switzerland to China and India and it will never come back.”

China Takes Delivery Of Massive Amount Of Gold From London, New York (Greyerz)

“They’re all into gold. Absolutely. Yes, virtually all of them own gold. That’s what’s so interesting. The Chinese buying is continuously going up and up and up without stopping. The Chinese know what is happening. They know it and they will continue to buy gold. And one day that’s going to have a major influence on the gold price. And when the paper market breaks, and China dominates the gold market, it’s going to be very interesting because I really look forward to the West failing in their manipulation of the gold price through the various paper markets and through the interbank market. Again last month we saw imports of gold into Switzerland and then exports to Asia and India. Last month, over 70% of the gold import figures (into Switzerland) came from London and the United States.

We again see that Switzerland is buying the 400 ounce bars from the UK and US bullion banks and converting them into 1 kilo bars and then shipping them on to Asia. Last month there was hardly any buying from the mines. It all came out of London and New York. And that proves again, Eric, that central banks are either leasing their physical gold into the market or selling it covertly. And that gold that’s coming into the market in London and New York, before it used to stay in London and stay in New York and it would be traded between the various banks, these banks now get the gold from the central banks and then they give the central bank an IOU. Again, in normal times, the gold used to stay in London and New York. Now that gold is going via Switzerland to China and India and it will never come back. China is never going to send it back, nor is India.

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One of my fave themes: of all the people who say they made so much money over the past 10 years, the very vast majority will be too late to get out.

Getting Out: A Godfather Story (Ben Hunt)

“Just when I thought I was out, they pull me back in!” It’s one of the most famous quotes in movies, as Michael Corleone rages in Godfather III over the assassination he narrowly avoided and his inability to steer the family into legit businesses. Michael is what I like to call a coyote, someone who is VERY smart and VERY strategic. Actually, too smart and too strategic for his own good, what a Brit would call too clever by half. That’s in sharp contrast to his father, Vito Corleone, who is no less smart and no less strategic, but is somehow far less conniving and far more beloved. You see this difference in character most clearly in the deaths of Vito and Michael. How does Vito Corleone die? Playing in his vegetable garden with his grandson. At home. Surrounded by life and laughter and plenty of bottles of Chianti.

Vito got out. How does Michael Corleone die? Sitting in a stony Sicilian courtyard as two skinny dogs scurry around. Struggling to peel an orange. All dressed up and no place to go. Alone. Utterly alone. For all his smarts and strategy and cleverness, Michael NEVER got out. How did Vito get out, while Michael failed? I think it’s the whole too-clever-by-half coyote thing. Michael never trusted ANYONE in the way that Vito did. Michael was obsessed with finding the Answer, an impossibility in the game of organized crime. Or the game of markets. Michael was a maximizer. Which is another way of saying that, like most coyotes, he wasn’t very good at the metagame. Do you want OUT from the game of markets? I do.

Am I good at the game? Yeah. Do I enjoy it? Not really. I used to. But ever since Lehman it’s been mostly a drag. And that’s okay! The game of markets is a means to an end. It’s a really big, important game, but it’s only one of several big important games within the larger metagame of life and doing. My goal in doing is to have a happy ending. I want the Vito ending, not the Michael ending. How do we get there? We keep our eye on the prize – the happy ending – and we work backwards. We maintain our vision on the metagame and its outcome even while we play the immediate game. My goal as an investor is NOT to maximize my investment returns or to maximize my personal wealth. That’s myopic thinking. That’s coyote thinking. That’s the sort of thinking that ruined Michael.

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Remember: we don’t have functioning markets.

Why Do Investors Hate Everything? Maybe Paranoia (BBG)

Only during the 1970s stagflation period and the global financial crisis have so many asset classes had negative returns in a year. The latter may have a lot to do with why it’s happening again. Investors now overreact to even modest changes late in cycles after not foreseeing the financial crisis, JPMorgan Chase & Co. strategists led by John Normand wrote in a note Friday. Other plausible explanations could be that the global economy and earnings have reached a turning point, or that the Federal Reserve is committing a policy error, they added. “The percentage of asset classes that has generated positive returns this year is only 20 percent, a share that has never been so low outside of 1970s stagflation episodes and the Global Financial Crisis,” the strategists wrote.

“Every market but the Nasdaq, Commodities and U.S. Leveraged Loans has underperformed USD cash in 2018.” The strategists have “no argument with the obvious statement” that markets are tumbling because global growth and U.S. earnings are peaking. However, they said slower growth on those fronts, at least if it remains around long-term-average levels, usually hasn’t been a sufficient condition for investors to turn defensive. “We had expected outperformance for another two to three quarters given near-neutral Fed policy, record share buybacks and significant deleveraging” by some equity investors before earnings season began, the strategists wrote. “This month markets clearly don’t share our time-limited optimism, perhaps given growing fear that the Fed is committing a policy mistake by tightening to restrictive levels eventually.”

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When dinosaurs invest.

Desperate IBM Buys Red Hat For $34 Billion In Largest Ever Acquisition (ZH)

The bad news is that in its desperation for growth at what amounts to be any price, IBM is almost certainly overpaying for Red Hat. This was confirmed by Rometty’s preemptive defense, telling Bloomberg that IBM “paid a very fair price. This is a premium company. If you look underneath, this is strong revenue growth, strong profit strong free cash flow” she said, adding that IBM will not cut jobs as a result of the deal: “this is an acquisition for revenue growth, this is not for cost synergies.” Perhaps, but the bigger question is what the deal means for IBM’s balance sheet. In the press release, IBM said that “the company has ample cash, credit and bridge lines to secure the transaction financing. The company intends to close the transaction through a combination of cash and debt.” In other words, no IBM stock, which is already at the lowest level this decade.

So let’s do the math: IBM ended Q3 with cash of $14.7 billion, and a record $46.9 billion in debt. Which means that IBM will likely incur at least $20 billion in additional debt, and as a result IBM’s already shaky A+/A1 rating could soon be downgraded to BBB. So what is IBM buying for this $34 billion and $20 billion in debt? According to its LTM financials, Red Hat has $3.2BN in revenue and $603MM in EBITDA. These numbers are expected to grow to $3.9BN by 2020, when EBITDA will hit $1 billion. In other words, on an EV basis, IBM is paying roughly 31x (net of $2.2BN in cash) Red Hat’s 2020 forward EBITDA.

Of course, if one assumes continued EBITDA growth for the foreseeable future, this acquisition could make sense. The problem is that between the threat of a recession in the next few years, and aggressive competition from Amazon, Microsoft and others for cloud market share, this is a very aggressive assumption. Meanwhile, in exchange for this $1 billion in EBITDA, IBM’s net debt will grow from $32.5 billion currently to $52 billion, almost doubling IBM’s net leverage from 1.7x level to a whopping 3.2x, and well on its way to a BBB rating if not worse. Which is why IBM promise that it will “target a leverage profile consistent with a mid to high single A credit rating” is, with all due respect, laughable.

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“Harsh adjustment programs do not make unsustainable debt sustainable. They just create misery for the population while making the debt burden even worse.”

The IMF Has Learned Nothing From The Greek Crisis (Coppola)

The IMF has just published a new review of Argentina’s economy. It is grim reading. Argentina is in trouble: economic conditions have worsened considerably since the last IMF review, back in June 2018. But the review also reveals that the IMF could be in even bigger trouble. It is repeating the same mistakes it made in the Greek crisis – but with a much larger amount of money at stake. Argentina has been struggling all year. A drought has severely curtailed agricultural production, widening the current account deficit and triggering a mild recession. Concurrently, Fed interest rate rises and a booming U.S. economy have driven up the U.S. dollar, making it ever more expensive for Argentina to obtain the dollars needed to pay interest on its massive dollar-denominated debt pile.

The central bank has been printing money to finance the government’s growing deficit, but this has helped to fuel inflation that now runs at over 40%. In June, the IMF agreed a standby credit arrangement of $50 billion with Argentina, the largest in the Fund’s history. $15 billion would be drawn immediately and the remainder would be made available as needed over the next three years. Half of the $15 billion would be used for government budget support. But it quickly became apparent that, enormous though this financing agreement was, it would be nowhere near enough. In September, as the peso crashed and Argentina stared default in the face, the IMF hastily agreed to front-load the credit arrangement, so that the Argentine government could immediately draw an additional $13.4 billion (making a total of $28.4 billion).

A further $22.8 billion would be drawn in 2019 and $5.9 billion in 2020-21. This is no longer a “standby” arrangement. It is a full financing agreement. Argentina has now become dependent on IMF funding – and the IMF has committed to lend by far the largest amount of money in its history. [..] The fundamental problem that the IMF made in Greece was lending to an insolvent country. Harsh adjustment programs do not make unsustainable debt sustainable. They simply create misery for the population while making the debt burden even worse. The IMF should not have lent to Greece at all. It should have faced down Greece’s creditors and insisted on orderly debt restructuring right from the start.

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Greece wants over 1000 times what Germany has paid.

Greece Reiterates €288 Billion Claim For Damages Under Nazi Occupation (G.)

Greece says it will pursue its quest for second world war damages and repayment of a loan forcibly extracted during Nazi occupation with renewed zest, despite Germany openly rejecting the claims. Less than two weeks after German president, Frank-Walter Steinmeier, used a state visit to apologise for atrocities committed by his forefathers, Athens vowed to relaunch the campaign while hailing the onset of a new era in bilateral ties. “This is an issue that psychologically still rankles, and as a government we are absolutely determined to raise it,” said Costas Douzinas, who heads the Greek parliament’s defence and foreign relations committee.

“Obviously Greece couldn’t do that when it was in a [bailout] programme receiving loans from the EU and Berlin. It would have been totally contradictory.” The leftist-led government is expected to press ahead with the claims after MPs debate what has been described as the first all-inclusive parliamentary inquiry into the damage wrought under Nazi occupation. The report, compiled by a cross-party committee over several years, estimates that compensation of €288bn (£256bn) remains outstanding for the destruction Greece sustained between 1941 and 1944, the years the country was subject to Third Reich rule. It also calculates that a further €11bn is owed for a 476m Reichsmark loan Hitler’s forces seized from the Greek central bank in 1943.

[..] Greeks put up heroic resistance to their German occupiers, but the price was heavy. Tens of thousands were killed in reprisals for a guerrilla campaign against the Wehrmacht, and at least 300,000 died of famine. About 40,000 people are thought to have starved to death in the first year of occupation alone, and Greece’s Jewish community was almost entirely wiped out. “Germany has never properly assumed its historical responsibility for the wholesale destruction of the country,” said Stelios Koulouglou, who represents Greece’s governing Syriza party in the European parliament. “It was a catastrophe that was so complete it played a major part in delaying our country’s development as a modern European state.”

[..] The German government strenuously rejects charges that it owes anything to Greece, or Poland which also suffered greatly, for the wartime horrors. It says the chapter was closed in 1960 when it paid Athens 115m deutschmarks, roughly equivalent to £205m today.

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Ain’t that the truth.

There Aren’t Enough Lifeboats For Everyone (CHS)

[..] the status quo is fragile, and everyone’s grip on the crumbling cliff-edge of “prosperity” is precarious–and we all sense it. The security we all took for granted is turning to sand as the system breaks down. Job security–you’re joking, right? Pension security–you take us for chumps? Sure, your bank account is guaranteed by the FDIC, but nobody’s guaranteeing your income, your purchasing power or the security of your grasp on the good life. Everyone knows the markets are as precarious as the rest of the status quo, and the rational response is to limit exposure to risk by selling at the first signs that the herd is nervous.

Switching metaphors, we all know the global economy scraped alongside an iceberg in 2008, and those who look beneath the reassuring rah-rah know that the hull of the global economy was sliced open just like the Titanic’s. Central banks have created the illusion that the damage was limited by printing money and using the freshly created currency to buy bonds and stocks to prop up the markets.

But even the passengers who accept the authorities’ reassurances sense something is wrong with the ship. The bow is slowly sinking, the engines are straining to power the pumps, the First Class passengers are either already in lifeboats or huddling nervously by the davits, and the ship’s officers are openly wielding pistols to control panic. Nobody dares discuss it openly for fear of triggering a panic, but there aren’t enough lifeboats for everyone. A great many passengers are going to find themselves in the icy waters when the great global economic ship finally founders, and humanity’s finely tuned instinct is alerting us to the restless nervousness of the herd.

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A fully adequate picture of my faith in mankind. It costs $2-4 million per ship to cheat the system, and it’s worth it.

Thousands Of Ships Could Dump Pollutants At Sea To Avoid Dirty Fuel Ban (G.)

Thousands of ships are set to install “emissions cheat” systems that pump pollutants into the ocean to beat new international rules banning dirty fuel. The global shipping fleet is rushing to meet a 2020 deadline imposed by the International Maritime Organization (IMO) to reduce air pollution by forcing vessels to use cleaner fuel with a lower sulphur content of 0.5%, compared with 3.5% as currently used. The move comes after growing concerns about the health impacts of shipping emissions. A report in Nature this year said 400,000 premature deaths a year are caused by emissions from dirty shipping fuel, which also account for 14 million childhood asthma cases per year. But the move to cleaner fuel could see harmful pollutants increasingly dumped at sea.

According to industry analysis seen by the Guardian, between 2,300 and 4,500 ships are likely to install an exhaust gas cleaning system known as a scrubber to meet the regulations on low-sulphur fuel instead of buying the more expensive clean fuel. The scrubbers allow ship owners to continue buying cheaper high-sulphur fuel, which is washed onboard in the scrubber. In the case of the most used system, known as open loop, the waste water is discharged into the ocean. Although expensive at around $2-4m per ship fitting, the cost of buying and fitting a scrubber would be recovered in the first year, the industry analysis says. Cleaner low-sulphur fuel is likely to cost between $300 and $500 more a tonne, according to analysts.

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Sugar addiction.

Big Food’s Poisonous Propaganda (Lustig)

Human brain scans demonstrate that glucose activates the cerebral cortex (the “cognitive” part of our brains), while fructose suppresses that signal and instead lights up the limbic system (your “lizard” brain). Moreover, while sugar does not exhibit classic withdrawal symptoms, it does lead to tolerance and dependence that can cause bingeing, craving, and cross-sensitization to narcotics. These are some of the reasons why the World Health Organization and the US Department of Agriculture recommend that people reduce the amount of sugar in their diets. The addictive qualities of sugar are embedded in its economics. Like coffee, sugar is price-inelastic, meaning that when costs increase, consumption remains relatively constant.

Purchases of soft drinks and other sweetened foods are not dramatically affected by taxes or fluctuating prices. Not everyone who is exposed to sugar becomes addicted; but, as with alcohol, many do. While refined sugar is the same compound found in fruit, it lacks fiber and has been crystallized for purity. It is this process that turns sugar from a “food” into a “drug,” allowing the food industry to “hook” unsuspecting consumers. The evidence is visible in every aisle of every grocery store, where a staggering 74% of all food items are spiked with added sugar. In fact, sugar’s allure is a big reason why the processed food industry’s current profit margin is 5% (up from 1%), and why so many of us are sick, fat, stupid, broke, depressed, and just plain miserable.

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One queston: why?

EU Air Pollution Improves, Causes Only 500,000 Early Deaths A Year (AFP)

Air pollution is slowly easing in EU countries but still causes nearly half a million early deaths each year, the European Environment Agency (EEA) said in its annual report published Monday. Although pollution levels dropped slightly in 2015, they remain far higher than standards set by both the EU and the World Health Organization, the report said. The findings come just weeks after an EU watchdog said most member states fail to meet the bloc’s air quality targets, warning that the toll on health in eastern European countries was even worse than in China and India. The EEA said on Monday that exposure to fine pollution particles known as PM2.5 was responsible for around 391,000 premature deaths in the 28-nation bloc in 2015.

The report also found that 76,000 early deaths were linked to nitrogen dioxide and some 16,400 to ground-level ozone in EU countries in the same year. Fine pollution particles have been linked to respiratory illnesses and heart problems, with PM2.5, the smallest, posing the greatest health risks as they can penetrate deep into the lungs. The EEA said a wider assessment included in the report found that early deaths each yer due to PM 2.5 have been cut “by about half a million” since 1990.

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Book review. How much do you know about genes?

Race Doesn’t Come Into It (LRB)

Before I got pregnant, I thought I understood how DNA works: parents pass on some combination of their DNA, which codes for various heritable traits, to their children, who pass on some combination to their children, and so on down the neat branching lines of the genealogical tree. What I didn’t know was that women can also receive DNA from their children. During pregnancy, foetal cells get into the mother’s bloodstream, mixing freely with her own cells and resulting in what scientists call a ‘microchimera, a single organism harbouring a small number of cells from another individual. Microchimerism is the reason doctors can use my blood to do genetic testing that looks for markers of disease in the DNA of the growing foetus.

And while the number of foetal cells in my bloodstream will drop after birth, some could stay there for decades, even for the rest of my life. These foetal cells may even sense the tissues around them and develop into the same types of cell, becoming an integral part of my body, which may have both positive and negative effects on my health – a sort of backwards inheritance. Foetal cells have been shown to regenerate a mother’s diseased thyroid gland and to help her body fight breast cancer. If a virus enters her body, even years after pregnancy, cells from the foetus may be among the first to attack it. But they may also make her more vulnerable to autoimmune diseases such as arthritis and scleroderma.

And this DNA transfer works both ways: a pregnant woman’s cells – with her complete set of DNA – can enter the foetus, eventually becoming part of her child’s body and living on long after her own death. With a second pregnancy, foetal cells from the first could colonise the new foetus, turning the second infant who emerges blinking into the sharp light of a new day into a microchimera of mother, father and sibling. So much for the neat branching lines of vertical heredity.

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Oct 242018
 
 October 24, 2018  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , , ,  


Paul Gauguin Fatata te Miti (By the sea) 1892

 

The Stock Market Faces ‘Unlimited Downside Risk,’ Warns Veteran Trader (MW)
Former Fed Chairman Paul Volcker Thinks ‘We’re In A Hell Of A Mess’ (CNBC)
Trump Says Saudi Crown Prince Could Have Been Involved In Khashoggi Killing (G.)
How Congress Can Force Trump’s Hand On Saudi Sanctions (CNBC)
Trump Has “Strongest Negotiating Position Ever” With China – Kyle Bass (ZH)
China Talks Up Stock Market Amid Concerns About Share-Backed Loans (CNBC)
A “Blue Wave” in Midterm Elections? Not So Fast (Rickards)
It’s Too Late To Prepare UK Borders For No-Deal Brexit – Watchdog (Ind.)
UK Could Be Forced To Charter Ships To Bring In Food And Supplies (Ind.)
Ecuador Likely To Turn Assange Over To US – Ex-President Correa (RT)
Ecuador Won’t Help Assange Leave UK Embassy Safely – Foreign Minister (RT)

 

 

In the absence of price discovery you get unlimited.

The Stock Market Faces ‘Unlimited Downside Risk,’ Warns Veteran Trader (MW)

The stock market opened with a resounding thud on Tuesday morning, as the Dow Jones, at one point, had shed more than 500 points. The S&P 500 and the Nasdaq Composite endured even harder hits, down more than 2% each. So, you must positioning yourself for that tasty bounce we’ve grown accustomed to over the course of this stubborn bull market. Well, don’t, warns J.C. Parets, the technical analyst behind the All Star Charts blog. “There is unlimited downside risk in the market right now and I don’t think it’s being respected,” he wrote. “It’s not until afterwards that they ask, ‘what happened?’” When the bottom falls out, that’s when the blaming begins.

“The Fed, the Trump, the ebola, or whatever excuse du jour is being regurgitated on the various media outlets,” Parets wrote. “The only one to blame is ourselves.” He pointed to several divergences that should make clear to investors just how precarious the market situation is at these current levels. The first one is what we’re seeing in this chart of the S&P vs. the rest of the world. “The divergence is telling,” Parets explained in his blog post. “The last time we saw this was at the 2015 market top.”

Another divergence we haven’t seen since the 2015 top, and, before that, the 2007 top, is the relationship between consumer staples and the broader market. “When stocks fall, staples get a sympathy bid and outperform due to that very same lower beta and their defensive qualities,” Parets said. “With new highs in stocks, bulls want to see new lows in relative strength for staples. That’s a normal environment. It’s when they diverge that it is evidence of something changing.”

And finally, Parets took a look at what Dow Theory is telling us. This idea here is that when either industrial or transportation stocks make new highs, it’s important for the other to follow. When that confirmation doesn’t come, there’s cause for concern. “We saw these divergences lead to collapses in 2000, 2007 and more recently a severe selloff in 2015,” Parets wrote. “You can see that with new highs in the Dow this month, transports put in a lower high, typical behavior at market tops.”

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Mostly critical of the Fed, of which he was the chair.

Former Fed Chairman Paul Volcker Thinks ‘We’re In A Hell Of A Mess’ (CNBC)

Former Federal Reserve Chairman Paul Volcker, who has reached legend status in the world of central banking, isn’t optimistic about current conditions. When Volcker looks around now, he sees “a hell of a mess in every direction,” including a lack of basic respect for government institutions, a current Fed that seems to be following a completely arbitrary benchmark and a “swamp” in Washington run by plutocrats. “At least the military still has all the respect. But I don’t know, how can you run a democracy when nobody believes in the leadership of the country?” Volcker asks New York Times columnist and CNBC “Squawk Box” co-anchor Andrew Ross Sorkin in a column for the newspaper’s DealBook section.

“Tall Paul” is most known for willfully taking the country into recession in the early 1980s to finally defeat the inflation that had been strangling the economy. Since then, he’s lent his name to the “Volcker rule” part of banking reform legislation that restricts risk-taking at big Wall Street institutions. In a book set for release Oct. 30, Volcker laments the current state of conditions, particularly the monied interests eating away at the system of governing. “There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process,” he writes, according to Sorkin.

Volcker, in ailing health but not short of opinions, also seems unhappy with the Fed itself. Though it’s unusual for former chairmen to comment on Fed matters, Volcker said there appears to be no “theoretical justification” for its 2 percent inflation target. He said the Fed is just one of the institutions in which people have lost confidence. And he also dispels with the myth that presidents historically haven’t tried to influence interest rates. Recounting a 1984 meeting he had with former President Ronald Reagan, then-chief of staff James Baker flatly told Volcker, “The president is ordering you not to raise interest rates before the election.” “I was stunned,” Volcker said.

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Developing as I expected. Adapting as evidence comes in.

Trump Says Saudi Crown Prince Could Have Been Involved In Khashoggi Killing (G.)

Donald Trump has said for the first time that Saudi crown prince Mohammed bin Salman could have been involved in the operation to kill dissident journalist Jamal Khashoggi noting that “the prince is running things over there” in Riyadh. The comments, in an interview with the Wall Street Journal, appeared to mark a shift in the president’s view of Khashoggi’s murder on 2 October in the Saudi consulate in Istanbul. He has hitherto appeared to take Saudi royal denials of involvement at face value. But on a day the state department announced it would sanction Saudi officials implicated in the writer’s death, the president appeared to give the benefit of the doubt to King Salman but not necessarily to his powerful son.

Asked about the crown prince’s possible involvement, Trump said: “Well, the prince is running things over there more so at this stage. He’s running things and so if anybody were going to be, it would be him.” Trump told the Wall Street Journal he had closely questioned Prince Mohammed about Khashoggi’s murder, posing questions repeatedly and “in a couple of different ways”. “My first question to him was, ‘Did you know anything about it in terms of the initial planning’,” Trump said. Prince Mohammed replied that he didn’t, Trump said. “I said, ‘Where did it start?’ And he said it started at lower levels.” Asked if he believed the denials, the president paused for several seconds. “I want to believe them. I really want to believe them,” he said.

Twenty-one Saudis will have their US visas revoked or be made ineligible for US visas over the journalist’s killing, the state department announced, as the Trump administration struggled to regain the initiative amid the uproar over a murder that has thrown the US-Saudi alliance into question. Mike Pompeo, the US secretary of state, said other measures were being considered, including sanctions: “These penalties will not be the last word on the matter from the United States. “We’re making very clear that the United States does not tolerate this kind of ruthless action to silence Mr Khashoggi, a journalist, through violence,” Pompeo said. “Neither the President nor I am happy with this situation.”

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For now, they’re in no position to force anything. They’re in recess. By the time they come back the situation will have changed a lot.

How Congress Can Force Trump’s Hand On Saudi Sanctions (CNBC)

As the world awaits the truth, or something close to it, about Saudi journalist Jamal Khashoggi’s killing inside the Saudi consulate in Istanbul, one of the Gulf’s most stalwart security relationships hangs in a precarious position. Congress and the White House have sharply different views on how to approach the diplomatic crisis, now in its third week. Legislators are loudly calling for sanctions on weapons sales on Saudi Arabia and a robust response if the government in Riyadh is proven to have been behind Khashoggi’s death. But while President Donald Trump has expressed his desire to get to the bottom of the case, he’s appeared more reluctant to punish his allies in the kingdom, whose support is vital in carrying out his agenda to isolate Iran and keep oil prices stable ahead of the November midterm elections.

[..] a former U.S. national security official with extensive experience in the Gulf, who preferred to remain anonymous due to the sensitivity of the situation, warned that after the midterm elections, the mood toward the Saudis would be much more aggressive than in the past. Whatever the election’s outcome, “I think either way there will be a more skeptical — if not hostile — relationship with Saudi Arabia in the legislature,” the former official said. “And the relatively free hand that the administration gave is going to be a little more constrained. “The Saudis are very lucky that Congress is in recess for campaigning — if Congress were in session there would be hearings, and they would not be good hearings.”

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“$40 trillion worth of credit, somewhere between 40 and 50, no one knows, in a system with only a couple trillion dollars’ worth of equity..”

Trump Has “Strongest Negotiating Position Ever” With China – Kyle Bass (ZH)

The Trump administration needs to level the playing field on trade, Bass said, and “it looks like they are doing so.” And it certainly helps that Trump’s trade push, while initially reviled by globalists in both parties, has since won the reluctant support of both Democrats and Republicans as the US economy has largely escaped any serious repercussions so far. But ultimately, the arbiter of government money and influence over the domestic economy is the yuan-dollar exchange rate. And as the yuan sinks, foreign ownership of Chinese assets is falling as the PBOC runs “a structural and more permanent” current-account deficit with the rest of the world as the US continues to institute trade barriers.

“So they can change a lot of things domestically, but their – the arbiter of the Chinese plan is their cross rate or their exchange rate with the rest of the world. China Inc.’s working capital account is now going South because they’re running what we believe to be a structural and more permanent deficit on the current account. And so, ie, their working capital, their dollar balance whether it’s dollars, euros, yen or pounds, it’s mostly dollars.” All of this instability risks toppling the mountain of bad debt upon which China’s economic growth in recent years has depended. Already, corporate defaults have surged in 2018 to the highest level on record.

With all of these factors at play, China is running what Bass described as “the largest financial experiment the world has ever seen.” “And they’ve got, you know, $40 trillion worth of credit, somewhere between 40 and 50, no one knows, in a system with only a couple trillion dollars’ worth of equity. And so China is running the largest financial experiment the world has ever seen. And the economic tides have turned negative for them. If you notice the narrative amongst the United States, it’s actually a bipartisan narrative whereby you’re seeing both sides of the aisle pushing back on China taking advantage of the US.”

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Financial innovation.

China Talks Up Stock Market Amid Concerns About Share-Backed Loans (CNBC)

A flurry of comments from Chinese officials over the last few days have been aimed at pledging support for private businesses with financing problems, as Beijing seeks to ease fears of a sell-off in stocks. The worry is that a drop in stock prices would force the selling of shares used as collateral, and lead to further market declines in China. In one of Beijing’s latest interventions, the Securities Association of China announced Monday night that 11 securities firms will form a $100 billion yuan ($14.5 billion) asset management plan to take some pressure off “share pledges” for companies with good development prospects.

In share pledge financing, companies use a percentage of their equities as collateral to obtain loans. If the stock price falls far below a level that was agreed upon, the lender will sell the shares to obtain funds, leading to the destabilization of equity markets. Despite Beijing’s latest move and other recent measures to support local businesses, stocks closed sharply lower Tuesday, giving back some gains from the rally in the previous two sessions. [..] The prevalence of share pledges is partly the result of Beijing’s own actions. Chinese banks prefer to lend to state-owned enterprises, while the government continues to crack down on shadow banking — the primary alternative for private businesses. As a result, many Chinese companies, especially small and mid-sized businesses, have turned to share pledges.

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I don’t see it either. And Rickards is right about media coverage of Trump.

A “Blue Wave” in Midterm Elections? Not So Fast (Rickards)

Tuesday, Nov. 6, is the date of the U.S. midterm elections that will determine control of the U.S. House of Representatives and U.S. Senate. The outcome of those contests will determine whether Trump is allowed to finish his term or not (see below for more on that, and which outcome is most likely). Let’s dive in… Whatever you think of Trump personally, we all know how the mainstream media treat Donald Trump. The coverage from The Washington Post, The New York Times, NBC and other outlets is relentlessly and exclusively negative. The media campaign against Trump is not normal bias; it’s more like a political jihad. Trump gets no credit for reducing unemployment, cutting taxes, boosting growth, achieving a breakthrough with North Korea, defeating ISIS and standing up to the dictators in Syria and Venezuela.

Meanwhile, Trump is hammered continually on the bogus Russia collusion story while Robert Mueller is cheered on in his fishing expedition into Trump’s personal finances and unrelated problems of Trump associates. The mainstream pundits are predicting a “blue wave” that will put the Democrats in control of the House of Representatives and lead directly to impeachment proceedings early in 2019. That’s been the mainstream narrative for months. Basically, the idea is that Democratic voters are more motivated than Republican voters because their hatred of Trump is more powerful than support for Trump among Republican voters. The Kavanaugh confirmation process only inflamed Democratic passions even further and should help the turnout.

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It’s too late for many things.

It’s Too Late To Prepare UK Borders For No-Deal Brexit – Watchdog (Ind.)

Britain has left it too late to prepare its borders for a no-deal Brexit, which would be a gift for organised criminals and chaotic for traders, the UK’s spending watchdog warns Theresa May today. Only one of 12 new “critical systems” is likely to be ready after planning was undermined by “political uncertainty and delays in negotiations”, the National Audit Office (NAO) has concluded. The failure would open up “weaknesses or gaps in the enforcement regime” which “organised criminals and others are likely to be quick to exploit”, its highly-critical report says. And the problem will be made worse by the UK losing full access to EU security databases after Brexit, which police chiefs have already warned will weaken the fight against crime.

Meanwhile, firms would be hit with delays for goods crossing the border while rogue operators would escape tax and regulatory checks, the report predicts. Diane Abbott, Labour’s shadow home secretary, seized on the findings as “painting a damning picture on the government’s lack of security preparation for Brexit”. She said: “The British people will never forgive this government if its in-fighting and political jockeying led them to neglect border security and the international co-operation needed to tackle serious, organised crime and terrorism.” And the Federation of Small Businesses said ministers were living in “dreamland” if they believed the ability to track and examine goods at the border would be in place for leaving the EU next March.

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No-deal Brexit will be disastrous, much more than anyone realizes. Everything still looks normal, after all.

UK Could Be Forced To Charter Ships To Bring In Food And Supplies (Ind.)

The UK could be forced to charter ships to bring in supplies in the event of a no-deal Brexit, ministers have been warned. The cabinet was briefed on plans for alternatives if new customs controls in France block the Dover-Calais route, potentially causing chaos in the English Channel, according to the Financial Times. Transport secretary Chris Grayling reportedly discussed the possibility of hiring entire ships, or securing cargo space in vessels, to bring food, medicines and other supplies in through alternative ports. David Lidington, the cabinet office minister, told his colleagues the Dover-Calais route could only run at a maximum of 25 per cent of its capacity under a no-deal scenario.

A department for transport spokesperson said: “We remain confident of reaching an agreement with the EU, but it is only sensible for government and industry to prepare for a range of scenarios. “We are continuing to work closely with partners on contingency plans to ensure that trade can continue to move as freely as possible between the UK and Europe.” Labour MP David Lammy, who is pushing for Britain to stay in the European Union, said: “Brexit has become like a declaration of war on ourselves. Emergency ships will be chartered for food and medicine if we leave the EU with no deal. “But at least when we’re using ration books and running out of drugs, we’ll have taken back control.”

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Not the first time Correa says this.

Ecuador Likely To Turn Assange Over To US – Ex-President Correa (RT)

The Ecuadorian government might eventually hand the Wikileaks co-founder Julian Assange to Washington even though it is legally obliged to protect him, former Ecuadorian president Rafael Correa told RT. “I believe they are going to turn over Assange to the US government,” Correa, who was leading the Latin American country at the time when it granted the Wikileaks co-founder asylum, told RT, calling the policy of the current Ecuadorian government “a shame.” “The Ecuadorian state has to protect Assange’s rights, he is not just an asylum [seeker]; he is a citizen,” Correa said. Granted Ecuadorian citizenship back in 2017, Assange is now supposed to be protected by the Ecuadorian constitution. But the current government is too desperate for Washington’s favor, Correa believes.

The Wikileaks co-founder might be a bargaining chip in an agreement between the Ecuadorian authorities and US Vice President Mike Pence, who visited the Latin American country and met with President Lenin Moreno earlier this year. Quito’s behavior shows that it has “absolutely submitted” to Washington without actually earning any favor, Correa said. His comments came a week after two US lawmakers called on Moreno to “hand Assange over to the proper authorities,” calling him “a dangerous criminal and a threat to global security.” In the letter, representatives Eliot Engel (D-NY) and Ileana Ros-Lehtinen (R-FL) spoke about the US willingness “to move forward in collaborating” with Moreno’s government, mulling enhanced economic cooperation and development aid from the US. They portrayed Assange as an obstacle on the way to a bright future together for the two nations.

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Wondering why his lawyers sued Ecuador. Who sues their host? Looks like they know something’s afoot.

Ecuador Won’t Help Assange Leave UK Embassy Safely – Foreign Minister (RT)

Ecuador will not help Julian Assange leave the UK, the country’s foreign minister said, claiming its only duty was to look after the WikiLeaks founder’s “well-being” after Assange sued them for restricting his rights and freedoms. Ecuadorian FM Jose Valencia told Reuters that Ecuador was not responsible for helping Assange leave the London embassy safely, even though the Inter-American Court on Human Rights recently found them responsible for protecting him from US extradition. UK authorities are poised to apprehend Assange should he step outside the building. Assange accused the Ecuadorian government of violating his rights after they drew up a “Special Protocol” barring him from speaking about politics or involving himself in the political affairs of other countries.

The list of restrictions runs to nine pages and permits authorities to confiscate the property of visitors, who must be approved in advance, submit their social media profiles, and turn over the make, model, serial and IMEI numbers of their mobile devices. The conditions added insult to injury with a threat to turn Assange’s cat over to a shelter if he fails to clean up after it adequately. The cat has been Assange’s only companion during nearly seven months in which the Ecuadorian government has kept him cut off from the outside world, jamming his phone lines, scrambling wifi signals, and banning almost all visitors. The “Special Protocol” also states that Ecuador will cease paying for Assange’s food, medical care, laundry, and all but the most basic needs on December 1.

Between this deadline, the limitations on his speech, and the Foreign Minister’s statement, the government appears to be stepping up the pressure to force Assange to leave on his own. In July, the Inter-American Court on Human Rights ruled that Ecuador must protect Assange from US extradition. The ruling came just weeks after a meeting between Ecuadorian President Lenin Moreno and US VP Mike Pence during which they were rumored to have reached an agreement regarding handing over the WikiLeaks founder.

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Oct 222016
 
 October 22, 2016  Posted by at 11:03 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 22 2016


NPC Fire at S. Kanns warehouse, Washington, DC 1908

Why Corporate America’s Debt Is a ‘Major Risk’ (BBG)
Ignoring the Debt Problem (Volcker/Peterson)
Bank of England Says Authorities Mustn’t Fine Banks Because Groaf (Bill Black)
Think Canada is a Progressive Paradise? That’s Mooseshit (G.)
No, Hillary, 17 US Intel Agencies Did Not Say Russia Hacked Dem E-mails (NR)
Rigged Elections Are An American Tradition (Paul Craig Roberts)
EU Parliament Chief, Canada Minister In Bid To Save CETA Trade Deal (AFP)
Greek Union Files EU Human Rights Case Against Austerity (COE)
Gove Says Criticizing Carney or BoE Policy ‘Equivalent Of A Thought Crime’ (DM)
Up To 25 Feared Dead In Attack On Migrant Boat Off Libya (AFP)

 

 

You guessed it: interest rates.

Why Corporate America’s Debt Is a ‘Major Risk’ (BBG)

Are investors in denial about how dim the outlook is for American businesses? That’s the question Société Générale’s Andrew Lapthorne, global head of quantitative strategy, posed to his bank’s clients. “Asset valuations are extreme; returns are poor, the probability of losses is high and the ability to recover any losses quickly is low,” he writes. In particular, the strategist sounded an alarm over the state of corporate America’s balance sheet. Company spending exceeds cash flow by a near-record amount—a fundamentally unsustainable situation—as net debt continues to increase at a rapid pace.

In many cases, companies have used debt to repurchase their own stock, flattering their bottom-line financial performance. While not all buybacks are financed by debt, Lapthorne did note a correlation between net repurchases and the change in corporate indebtedness. “U.S. corporate balance sheets are a major risk going forward,” he says. “U.S. corporates are massively overspending.” To be fair, servicing this debt load isn’t as onerous as it might appear, because of low interest rates. And despite the recent steepening of corporations’ yield curve, companies have continued to extend duration, which offers them more certainty about what their interest payments will be over the long term. “For corporate credit, there’s very little concern about short-term coverage from the market,” write analysts at Bespoke Investment Group. “We note that maturities continue to creep up slowly; despite higher spread costs, corporates are generally borrowing further out the curve and ‘locking’ low rates.”

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As Steve Keen observes, ironically, it’s Volcker and Peterson themselves who ignore the biggest debt problem: private debt. Which is much higher:

Ignoring the Debt Problem (Volcker/Peterson)

Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one. Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy. Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75% of GDP, a ratio not seen since 1950, after the budget ballooned during World War II.

Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140% of GDP, far above that in any previous era, even in times of war. Unfortunately, despite a brief discussion during the final presidential debate, neither candidate has put forward a convincing plan to restrain the growth of the national debt in the decades to come. Throughout the campaign, Donald J. Trump has called for a combination of deep tax cuts that appear to far exceed proposed spending reductions, at the clear risk of substantially increasing the ratio of debt to GDP. Hillary Clinton has set out more balanced and detailed proposals, but they would still fail to stabilize and reduce our debt burden.

Whoever wins, the new president will eventually face fiscal realities that force him or her to develop strategies for decreasing the national debt as a share of the economy over the long term. Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support. [..] we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the “kindness of strangers” who may not be so kind as the I.O.U.s mount up.

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Always good to read Bill.

Bank of England Says Authorities Mustn’t Fine Banks Because Groaf (Bill Black)

Elite bankers and the pathetic economists who serve as apologists for their frauds specialize in proving our family saying that it is impossible to compete with unintentional self-parody. The subtitle of the WSJ article providing the latest proof is “Fines on banks translate into $5 trillion of ‘reduced lending capacity,’ bank says.” The “bank” referred to is the Bank of England, which is supposed to be the UK’s primary bank regulator. To be kind, the “study” by BOE is so embarrassing that a better descriptor of the BOE would be “fraud enabler.” “The roughly $275 billion in legal costs for global banks since 2008 translates into more than $5 trillion of reduced lending capacity to the real economy,” Minouche Shafik, a deputy governor of the BoE, told a New York conference of regulators and bankers Thursday.

BOE’s methodology and “logic” (which it did not make public) are easy to guess. It is not sufficient that elite banksters are able to become wealthy from leading the worlds’ most destructive financial frauds with impunity from prosecution, civil suits, and enforcement actions. It is vital that the banks no longer be fined for conducting these massive frauds. When banks are fined they lose some of their profits from these epidemics of frauds, bid-rigging cartels, predatory lending, aiding and abetting elite tax fraud, and money laundering for terrorists and violent drug cartels. For the sake of brevity, I will call these collectively “fraud proceeds.” Banks remain highly leveraged despite modest increases in capital requirements, so the BOE’s staff is assuming that each dollar of fraud proceeds that the banks lose to fines reduces total bank size by $18.18. They are assuming that the typical bank has a miserably inadequate capital requirement of slightly over five percent.

There are a number of fatal problems with BOE’s “logic” and (unstated) methodology. First, under the BOE’s “logic” the more profitable banks become by defrauding their customers the faster the economy will grow. The bank CEOs who led the three most destructive epidemics of financial fraud in history were apparently Soviet-style (pun intended) “Heroes of Capitalism.” Except, of course, what they actually drove was a massive financial bubble that produced the Great Recession. The projected loss of GDP in the U.S. due to the Great Recession is $24.3 trillion – and the loss of eurozone GDP is far larger because their economic losses have occurred over a far longer time and have been far deeper than in the United States. Only central bank economists would be so dogmatically divorced from reality and so moral challenged that they would think that allowing banksters to keep their fraud proceeds and avoid all accountability for their crimes would be good for the economy.

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“When your next-door neighbour is a billionaire celebrity genius with automatic weapons and an undying need for attention, you can get away with all sorts of stuff.”

Think Canada is a Progressive Paradise? That’s Mooseshit (G.)

Quick – picture Canada. What comes to mind? A progressive wonderland of polite manners and majestic moose? What America might be if it evolved a little? That place you’ll move to if Trump wins? If that’s what you think, that’s fine by us. In fact, it’s our brand: not America. The nice guys. Dull, kind and harmless. That’s how we like to be thought of. But it’s mooseshit. We are not the country you think we are. We never have been. The first prime minister and founding father of Canada, John A Macdonald, was a raging alcoholic. He spent entire campaigns fabulously drunk and once vomited on stage during a stump speech. When his rival pointed it out, Macdonald shot back that he hadn’t puked because of booze, but because he had been “forced to listen to the ranting of my honourable opponent”.

It was a deflection worthy of Trump. Macdonald handily won the election. The reason the Royal Canadian Mounted Police (our “Mounties”) ride horses is because during the labour movement of the 30s, horseback was the best way to trample protesting immigrants and miners. By the 60s, the horses were mostly just for show and the Mounties’ regular activities included subjecting suspected homosexuals to the “Fruit Machine”, a device designed to measure erotic responses to gay porn. These days, Canada is the third-largest arms dealer in the world. Our Alberta oil sands produce more carbon emissions each year than the entire state of California. Our intelligence agency is allowed to act on information obtained through torture. And a lot of French Canadians are into blackface comedy.

Little of this is widely known, because we happen to share a border with America. When your next-door neighbour is a billionaire celebrity genius with automatic weapons and an undying need for attention, you can get away with all sorts of stuff. It’s nice to be thought of as the world’s nice guys. And it’s useful – it obscures a lot of dirt.

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When I first hears her make that claim, I was thinking Russia must have been real eager to get caught. Why Trump didn’t jump on it, I can’t tell. Take a look for yourself which agencies are included:

No, Hillary, 17 US Intel Agencies Did Not Say Russia Hacked Dem E-mails (NR)

Hillary Clinton in last night’s presidential debate tried to avoid talking about the substance of the damaging WikiLeaks disclosures of DNC and Clinton campaign officials by claiming 17 U.S. intelligence agencies determined that Russia was responsible for this. After Clinton made this claim, she scolded Trump for challenging U.S. intelligence professionals who have taken an oath to help defend this country. What Clinton said was false and misleading. First of all, only two intelligence entities – the Office of the Director of National Intelligence (DNI) and the Department of Homeland Security (DHS) – have weighed in on this issue, not 17 intelligence agencies. And what they said was ambiguous about Russian involvement. An unclassified October 7, 2016 joint DNI-DHS statement on this issue said the hacks

. . . are consistent with the methods and motivations of Russian-directed efforts. These thefts and disclosures are intended to interfere with the US election process. Such activity is not new to Moscow — the Russians have used similar tactics and techniques across Europa and Eurasia, for example, to influence public opinion there. We believe, based on the scope and sensitivity of these efforts, that only Russia’s senior-most officials could have authorized these activities.

Saying we think the hacks “are consistent with the methods and motivations of Russian-directed efforts” is far short of saying we have evidence that Russia has been responsible for the hacks. Maybe high-level officials would have authorized them if Russian hackers were responsible, but the DNI and DHS statement did NOT say there was evidence Russia was responsible. My problem with the DNI/DHS unclassified statement is that it appeared to be another effort by the Obama administration to politicize U.S. intelligence. Make no mistake, U.S. intelligence agencies issued this unprecedented unclassified statement a month before a presidential election that was so useful to one party because the Clinton campaign asked for it.

The Obama administration was happy to comply. Clinton tried to defend the DNI/DHS statement by repeating the myth that U.S. intelligence officers are completely insulated from politics. She must think Americans will forget how the CIA crafted the politicized Benghazi talking points in 2011 and how SOUTHCOM intelligence analysts were pressured to distort their analysis of ISIS and Syria to support Obama foreign policy. And that’s just under the Obama administration.

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PCR could have done a tad more research, I’m thinking.

Rigged Elections Are An American Tradition (Paul Craig Roberts)

Do Americans have a memory? I sometimes wonder. It is an obvious fact that the oligarchic One Percent have anointed Hillary, despite her myriad problems to be President of the US. There are reports that her staff are already moving into their White House offices. This much confidence before the vote does suggest that the skids have been greased. The current cause celebre against Trump is his conditional statement that he might not accept the election results if they appear to have been rigged. The presstitutes immediately jumped on him for “discrediting American democracy” and for “breaking American tradition of accepting the people’s will.” What nonsense! Stolen elections are the American tradition. Elections are stolen at every level—state, local, and federal.

Chicago Mayor Richard J. Daley’s theft of the Chicago and, thereby, Illinois vote for John F. Kennedy is legendary. The Republican US Supreme Court’s theft of the 2000 presidential election from Al Gore by preventing the Florida vote recount is another legendary example. The discrepancies between exit polls and the vote count of the secretly programmed electronic voting machines that have no paper trails are also legendary. So what’s the big deal about Trump’s suspicion of election rigging? The black civil rights movement has fought vote rigging for decades. The rigging takes place in a number of ways. Blacks simply can’t get registered to vote. If they do get registered, there are few polling places in their districts. And so on. After decades of struggle it is impossible that there any blacks who are not aware of how hard it can be for them to vote.

Yet, I heard on the presstitute radio network, NPR, Hillary’s Uncle Toms saying how awful it was that Trump had cast aspersion on the credibility of American election results. I also heard a NPR announcer suggest that Russia had not only hacked Hillary’s emails, but also had altered them in order to make incriminating documents out of harmless emails. The presstitutes have gone all out to demonize both Trump and any mention of election rigging, because they know for a fact that the election will be stolen and that they will have the job of covering up the theft. [..] Don’t vote early. The purpose of early voting is to show the One Percent how the vote is shaping up. From this information, the oligarchs learn how to program the electronic machines in order to elect the candidate that they want.

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Well, it certainly dies hard. How many hours has Obama spent on the phone for this malt minute turn?

EU Parliament Chief, Canada Minister In Bid To Save CETA Trade Deal (AFP)

EU parliament head Martin Schulz and Canada’s trade minister Chrystia Freeland were meeting Saturday, saying they hoped to revive a trade deal threatened by the refusal of a Belgian region to sign on. Schulz wrote on Twitter he would also meet with Wallonia’s socialist government head Paul Magnette, who has moved to stop the bloc’s 28 nations from signing the accord. The meetings in Brussels are aimed at “reviving CETA talks. We can’t stop at the last mile,” Schulz wrote, referring to the agreement’s name. On arriving at the parliament building, Freeland said: “The ball is in Europe’s court. We hope that it is possible to find a solution,” according to the Belga news agency.

Canada blasted the European Union on Friday as incapable of signing international agreements, as the talks to persuade Wallonia to sign up to the huge trade deal broke down. Freeland appeared on the verge of tears after walking out of negotiations with the head of the French-speaking Belgian region on the deal that has been seven years in the making. Canadian Prime Minister Justin Trudeau had planned to travel to Brussels next week to sign the deal but that visit looks almost certain to be called off.

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May I suggest they get good lawyers.

Greek Union Files EU Human Rights Case Against Austerity (COE)

A public hearing of the European Committee of Social Rights today focused on how austerity in Greece has affected social rights under the guidelines of the European Social Charter. The committee granted the hearing request, which was made by the complainant organisation, the Greek General Confederation of Labour (GSEE) v. Greece.

The complaint alleges that some laws enacted in Greece as part of the austerity programme affect workers’ rights in a manner that is contrary to Article 1 (the right to work); Article 2 (the right to just conditions of work); Article 4 (the right to a fair remuneration); and Article 7 (the right of children and young persons to protection) of the 1961 Social Charter; as well as of Article 3 of the 1988 Additional Protocol (the right to take part in the determination and improvement of working conditions and working environment). Greece’s Minister for Labour, Social Security and Social Solidarity George Katrougalos and GSEE president Yannis Panagopoulos attended the hearing. The Committee, which monitors commitments to the European Social Charter, is expected to issue its decision to the public by mid-2017.

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Brits are funny even if they don’t mean to. Ming dynasty was 14th-17th century.

Gove Says Criticizing Carney or BoE Policy ‘Equivalent Of A Thought Crime’ (DM)

Michael Gove has launched a scathing attack on the Governor of the Bank of England, comparing his arrogance to that of the cruel Ming emperors. The former justice secretary said that like the rulers of medieval China, the pro-EU Mark Carney believed his judgments had ‘near-divine’ status and that he was infallible in his actions. But in reality, many of his policies – such as printing money and cutting interest rates – had been shown to have created significant economic problems, he said. Mr Gove said the Canadian banker should show more humility – as it was technocrats like him who had brought the ‘disaster’ of the euro and failed to predict the 2008 crash. He said Mr Carney should ‘ponder the fate of the Chinese emperors’ who were finally overthrown because they could not bear any criticism.

The attack by Mr Gove, a senior figure in the Leave campaign, echoes his criticism before the referendum of ‘experts’ who predicted a slump if we left the EU. In an article for The Times, he wrote: ‘At different eras in world history there have been sacred figures who, while apparently of flesh and blood, have been elevated to inhabit a special realm of near-divinity above the rest of fallible mankind. In medieval China, they had the Ming Emperor, Lord of Ten Thousand Years, who employed the Mandate of Heaven to decide the fate of millions. ‘His person was held to be inviolable and without imperfections. ‘Those who dared to question his rule were flayed alive, their skin left hanging from a hook to emphasise the emperor would brook no challenge to his authority.

In contemporary Britain we have Mark Carney, the Governor of the Bank of England, who employs control over interest rates to decide the fate of millions. ‘His position is held to be independent and without any error. ‘And so any criticism of his actions is regarded as a thought crime – and those who dare to question his rule are flayed in the press with dire warnings left hanging in the air to emphasise the Governor will brook no challenge to his authority.’

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Yeah, it wasn’t crazy enough yet.

Up To 25 Feared Dead In Attack On Migrant Boat Off Libya (AFP)

Up to 25 people were missing, feared drowned, Friday after men on a Libyan coastguard speedboat attacked a packed migrant dinghy during a rescue operation off the north African state. German NGO Sea-Watch, which is taking part in the multinational search and rescue operation in the Mediterranean, said the tragedy happened after its boat Sea-Watch 2 and a passing oil tanker were sent to help the distressed dinghy in the early hours. As the rescue operation proceeded just beyond Libyan territorial waters north of the port of Sabrata, a speedboat bearing the Libyan coastguard insignia arrived and tried to steal the dinghy’s outboard engine, spokesman Ruben Neugebauer told AFP.

The men, who spoke Arabic, beat some of the migrants with sticks and some clambered onto the dinghy, causing panic which resulted in one side of the boat deflating and most of the passengers ending up in the sea. After the assailants left, Sea-Watch said it rescued 120 people and recovered four corpses from the water. Other bodies were seen floating but could not be recovered and it was estimated that between 15 and 25 of the people who had been on the board were unaccounted for. Sea-Watch said in a statement that its two speedboats had been “hassled in an aggressive way” during the attack, “preventing our crew from providing life vests and medical aid to the people in need.” “All of these deaths could have been avoided but for this intervention,” Neugebauer added.

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